Provident Bankshares Corp. in Baltimore on Thursday attributed a 22% drop in its third-quarter net income, to $16 million, to an increase in its loan-loss provision and a reduction in total revenues.
The company's 50-cent profit per share for the quarter was down 21% and missed the average of analysts' estimates by two cents, according to Thomson Financial.
The loan-loss provision was $7.5 million, which was higher than a year earlier, due largely to a $4.1 million commercial loan that Provident recently placed on nonaccrual status after the federal criminal indictment of the borrower's chief executive.
The provision for loan losses was also increased because of overall loan growth, executives said.
Net interest income was down 6.6%, at $47.8 million, as customers continued to switch checking and savings deposits into higher-yielding certificates of deposit.
By midday Thursday, Provident's shares had dropped 7.36%, to $27.43.
Joseph Fenech, an analyst at Sandler O'Neill & Partners LP, wrote in a Thursday note that asset quality is the bank's "main wild card."
"Asset-quality indicators were mixed," he wrote. "On the one hand, we note that this is the second consecutive quarter that the company has missed our estimate due to a credit-related hiccup. Thus, we are less inclined to dismiss the higher provision related to the aforementioned large commercial loan as 'one-off.' "
