Provident Bankshares Corp. of Baltimore swung to a $17.6 million loss in the first quarter, as it took a $42.7 million charge on its investment securities, but investors did not seem to mind.
In heavy trading Thursday, the company's shares rose 13.6%, to $12.67, perhaps because investors had been expecting the earnings news to be worse after Provident said last week that it planned to raise $115 million of fresh capital.
Gary Geisel, the company's chief executive officer, came under criticism at its annual meeting Wednesday for the decision to raise the capital through private placements. Some shareholders were upset that they did not have an opportunity to purchase the discounted shares, according to a story Wednesday in the Washington Business Journal.
Mr. Geisel was quoted in the story as saying he chose a private placement because as other banking companies reported large earnings hits and writedowns, "they were deluging Wall Street with requests for new investments."
Thomas Alonso, an analyst at Fox-Pitt Kelton Cochran Caronia Waller, attributed the stock surge to a net interest margin and credit quality that were better than expected. Also, the investment securities writedown was about $5 million below what the company had forecast.
First-quarter net loan chargeoffs fell about 48% from the fourth quarter, to about $3 million. The ratio of net loan chargeoffs to average loans fell 28 basis points, to 0.3%.
Its net interest margin fell 45 basis points from a year earlier but only 7 basis points from a quarter earlier, to 3.17%.
Still, Mr. Alonso wrote that the margin "will remain under pressure as the proceeds from the preferred stock and trust preferred put upward pressure on liability yields."
The $6.4 billion-asset parent of Provident Bank earned $16 million, or 50 cents per share, in the first quarter of last year.
