Provident Bankshares Corp. in Baltimore is expected to report a fourth-quarter loss Thursday as a result of a large writedown in its real estate investment trust portfolio and weakness in its real estate loan portfolio.
The $6.3 billion-asset company said Friday that it would take a $28.9 million charge for writing down the value of eight pooled REIT trust-preferred securities backed by residential and commercial mortgages. It opted to take the charge, which would come to 91 cents a share, after Fitch Ratings on Dec. 21 severely downgraded a large segment of the national pooled REIT trust-preferred securities market.
Also, Provident is taking a $3.6 million loan-loss provision that it said would lower earnings by an additional 11 cents a share. Analysts polled by Thomson Financial had estimated on average that Provident would report per-share earnings of 51 cents for the quarter.
Provident is the largest commercial banking company based in Maryland. Gary N. Geisel, its chairman and chief executive, said it is raising its loss provision because it expects its home equity, small-business, and residential development loan portfolios to weaken in 2008.
"The housing markets … are being pretty challenged," he said in an interview Friday. "We feel that the prudent thing is take the right steps now to position ourselves, and put this behind us and focus on the business of banking."
The company's REIT portfolio, once valued at $66 million, has been revalued at $18.6 million.
Lawrence J. Beyer, Provident's treasurer, said it does not intend to sell the portfolio. "It really wouldn't make sense to sell the securities" in the current market, he said. "They have a much greater intrinsic value than that."
Jeff K. Davis, an analyst with First Horizon National Corp.'s FTN Midwest Corp., said Provident would make money for the year despite the fourth-quarter loss.
Provident should be able to recoup two-thirds of the writedown in the REIT portfolio in two years, Mr. Davis said. Commenting on Friday's announcement, he said that "the more significant issue is the need to increase reserves and the deterioration in the northern Virginia, Maryland residential corridor."
Provident's shares fell 11.4% Friday to close at $16.81.
