By Jeff McKinney
The Cincinnati Enquirer

Costs associated with its $2.1 billion merger with National City Corp. cut into first-quarter profits at Provident Financial Group Inc.

In what likely will be its last quarterly financial report, the parent of Provident Bank said that its 2004 first-quarter results included a 5 cent expense against earnings per share tied to a rising stock price after National City offered to buy Cincinnati's second-largest bank.

Provident said Wednesday that it made $28.5 million, or 56 cents a share, versus $25.8 million, or 51 cents a share, in first quarter 2003, excluding merger costs.

With that expense - basically for Provident stock options and preferred stock affected by National City's buyout offer in February - Provident earned $27.1 million, or 51 cents a share, in this year's first quarter.

Provident, which agreed to sell to National City for a 15 percent premium above its stock price at the time, has operated in Cincinnati for 102 years.

National City expects to close on the Provident acquisition by July and it will rename Provident's branches by January.

The results that Provident posted Wednesday showed that its operations are fundamentally stronger than in recent years. For the last couple of years, Provident had to set aside money, mainly to cover problem business loans that hurt its profits and stock price.

Provident, with assets of $16.7 billion and 65 branches mostly in Greater Cincinnati, reported improved credit quality, a cut in nonperforming assets such as loans and larger net interest margin.

It said consumer and commercial deposit account balances rose 20 percent over 2003's first quarter, excluding higher-cost certificates of deposits.

Shares at Provident Financial Group closed at $39, down 22 cents.

E-mail jmckinney@enquirer.com