Core Banking Growth and Southern Financial Merger Lead to Record Earnings
BALTIMORE, Jan. 20 /PRNewswire-FirstCall/ -- Provident Bankshares
Corporation (Nasdaq: PBKS), the parent company of Provident Bank, today
reported $18.9 million in net income or $0.56 per diluted share for the fourth
quarter of 2004. Full year net income was $60.3 million, or $1.95 per diluted
share. The basis for financial comparison includes the impact of the Southern
Financial Bancorp, Inc. merger for the fourth quarter and eight months of the
2004 year.
Provident's core banking growth in the key markets of Baltimore,
Washington and Richmond led to record earnings for the quarter and the year.
Consumer banking growth included increases in loans and deposits of 10% and
13%, respectively, over the fourth quarter of 2003. Commercial loans and
deposits also posted strong growth of 58% and 60%, respectively, over the same
period. Net interest margin increased to 3.53% for the 2004 fourth quarter, a
32 basis point increase over the prior year's quarter. Asset quality remained
strong as non-performing assets to loans were 0.77% and charge-offs to average
loans were 0.28% for the quarter. The 2004 strategic merger of Southern
Financial Bancorp, Inc. facilitated core banking growth, particularly in the
commercial segments. The merger also added 30 branches in the Northern
Virginia, Richmond, Charlottesville and Washington, D.C. areas.
Fourth Quarter Financial Highlights
-- Net income increased 33%, to $18.9 million, over the 2003 fourth
quarter
-- Net interest margin improved to 3.53%, from 3.21% for the 2003 fourth
quarter
-- Return on assets increased to 1.16%, up from 1.10% for the 2003 fourth
quarter
-- Return on common equity continues to recover from our acquisition to
12.26%
-- Asset quality remained strong as net charge-offs as a percentage of
average loans were 28 basis points, compared to 26 basis points last
year
-- Capital ratios remained strong, with a leverage ratio of 8.23% and
total risk based capital ratio of 12.81%
-- Average loans increased $773 million, or 28%, from the 2003 fourth
quarter
-- Average deposits increased $710 million, or 23%, from the 2003 fourth
quarter
-- Non-interest income grew 9% from the comparable period in 2003
Fourth Quarter Results
During the quarter, Provident's franchise growth and continued strong
credit quality produced record net income for the quarter. Provident
Bankshares reported net income for the quarter ending December 31, 2004 of
$18.9 million, an increase of 33% over the fourth quarter of 2003. Higher net
interest income and non-interest income, and a lower provision for loan
losses, drove the earnings increase, which was partially offset by increases
in non-interest expenses and the provision for taxes over the prior year.
Earnings per diluted share were $0.56 for both the 2004 and 2003 fourth
quarters. Earnings of $0.56 per diluted share for the 2004 fourth quarter
recognized costs of $0.02 per share for professional services relating to
Sarbanes-Oxley compliance. Further, weighted average diluted shares
outstanding increased by 8.7 million over the prior year quarter, primarily
due to the Southern Financial merger.
Average loans increased 28% over the fourth quarter of 2003, representing
growth in both consumer and commercial loans of 10% and 58%, respectively.
Average home equity loans increased $190 million, or 39%, and continued to
drive consumer lending growth. Average commercial real estate loans increased
$307 million, or 45%, while commercial business loans increased $303 million,
or 84%. The addition of loans acquired from the Southern Financial merger
contributed to the growth in the commercial segments.
Average deposits increased $710 million, or 23%, over the same quarter
last year. Demand accounts represented the largest increase of $331 million,
or 34%. Average money market, savings, and time deposits accounts represented
the remaining increase over the prior year's quarter. Average brokered
deposits also increased over the 2003 fourth quarter, driven by an increase in
callable brokered deposits acquired in the merger, as well as brokered
deposits issued during the year as an alternative funding source to
borrowings. Reported deposit growth for the quarter included a $203 million
decline resulting from the sale of three Norfolk/Tidewater branches and a
partial interest in a loan sub-servicing company acquired in the Southern
Financial merger.
The net interest margin on a tax equivalent basis improved to 3.53%, a 32
basis point increase over the fourth quarter 2003 level of 3.21%. The
increase in net interest margin was primarily attributable to a 21% increase
in earning assets to $5.8 billion, driven primarily by loan growth. The margin
was also positively impacted by a post-merger restructuring of the combined
balance sheets, which eliminated over $400 million in low-margin securities
coincident with the merger and, to a lesser extent, by the increase in
interest rates during the year.
Non-interest income grew 9% to $26.9 million, up from $24.8 million in the
fourth quarter 2003, primarily due to growth in deposit service fee income.
Total deposit service fees increased 4% over the 2003 fourth quarter, driven
by growth in MasterMoney and commercial deposit fees.
Total non-performing loans at December 31, 2004 were $25.7 million,
compared with $22.3 million for the same quarter a year ago. Net charge-offs
increased to $2.5 million, up from $1.8 million for the 2003 fourth quarter,
and the allowance for loan losses, at 1.30% of period-end loans, was 180% of
non-performing loans.
Capital ratios continue to be strong, with a leverage ratio of 8.23% and a
total risk-based capital ratio of 12.81% at December 31, 2004. These compare
to 8.49% and 15.32%, respectively, at December 31, 2003. During the quarter,
the Bank repurchased 116,900 common shares as part of its share repurchase
plan.
Dividend Declared
Provident Bankshares announced today that its Board of Directors has
declared a quarterly cash dividend of $0.265 per share. This is the forty-
fifth consecutive quarterly dividend increase. The quarterly cash dividend
will be paid on February 11, 2005 to stockholders of record at the close of
business on January 31, 2005.
Management Comment
Commenting on the Company's fourth quarter performance, Chairman and CEO
Gary N. Geisel said, "I'm pleased by the results of the quarter and our
overall progress as we continue to build a strong regional bank dedicated to
consumer, small business and commercial customers."
2004 Full Year Results
Provident's core banking growth, including the Southern Financial merger,
translated to record earnings for the year. For the full year ended December
31, 2004, net income totaled $60.3 million; a 17% increase over 2003. The net
interest margin improved to 3.39%, up from 3.21%, and the efficiency ratio was
62.79%, compared to 64.90% for the prior year. The leverage and total risk-
based capital ratios were 8.23% and 12.81%, compared to 8.49% and 15.32%,
respectively, for 2003. Asset quality remained strong for the year. The ratio
of non-performing assets to loans improved to 0.77% in 2004, down from 0.92%
in 2003. Net charge-offs increased slightly to $9.0 million, up from $8.7
million, for 2004 and 2003, respectively, and the ratio of allowance for loan
losses to loans was 1.30% at December 31, 2004.
Diluted earnings per share were $1.95 and $2.05 for 2004 and 2003,
respectively. Earnings for 2004 included the impacts of $0.18 per share in net
securities losses associated with the balance sheet restructure, $0.07 per
share of merger costs and $0.02 per share of costs related to professional
services associated with Sarbanes-Oxley compliance.
Virginia Franchise
Provident's Virginia franchise is a significant component of its core
banking activity as reflected in the 2004 results. For the year, consumer and
commercial deposits in the Washington metropolitan and Virginia markets
increased 51% and 106%, representing increases in consumer and commercial
checking, money market, savings and certificate of deposit accounts. The 30
branches added from the Southern Financial merger facilitated the growth in
deposits for the year. The growth in the Virginia franchise resulted in 83
branches, or 56% of total branches, in the key metropolitan urban markets of
Washington and Richmond.
Average consumer loan balances increased 83% and commercial loan balances
more than doubled over 2003 in the Virginia/Washington metro markets. This
growth evidences the Company's ability to capture consumer loan demand and
commercial business in this market as well as the benefits of the merger.
Execution of Key Business Strategies
The Company's focus on its recently modified key business strategies,
including the strategic merger with Southern Financial and the related balance
sheet restructuring, continued to drive results for the year:
-- Maximize Provident's position as the right size bank in the
marketplace
Provident's position as one of the largest banks headquartered in
Maryland and Virginia provides a unique opportunity as the "right
size" bank in its footprint. The Company provides the service of a
small institution combined with the convenience and wide array of
products and services that a strong regional bank offers. Provident
currently has 149 branches concentrated in the Baltimore-Washington
corridor and beyond to Richmond, Virginia. The distribution of
branches in Provident's footprint reflects the Company's focus on
growth in this marketplace.
-- Grow and deepen consumer and small business relationships in Maryland
and Virginia
Consumer banking operations continued to contribute to Provident's
positive results for the year. Average consumer loan balances
increased $209 million, or 13%, over the 2003 year. Home equity
lending continues to lead consumer loan growth with an increase of
43% over the prior year. Provident's expertise in home equity
lending resulted in average balances during 2004 of $600 million,
compared to $421 million during 2003.
Year over year, total average consumer deposits increased 11%.
Average consumer demand account balances increased 19%, from $623
million in 2003 to $739 million in 2004. Average consumer money
market deposits and savings deposits combined increased 9%. Small
business loans and deposits, one of Provident's new initiatives,
increased significantly from 2003 and are included in the commercial
banking totals.
-- Grow and deepen commercial and real estate relationships in Maryland
and Virginia
Average commercial and real estate loan growth remained strong with
Provident increasing its average commercial portfolio by 48%, or
$480 million, from 2003. This increase represented growth of 42%
commercial real estate and 59% commercial business loans. Commercial
deposits increased 54% over the prior year with average demand
account balances and money market balances representing the areas of
growth at 43% and 89%, respectively. The increase in the commercial
loan and deposit portfolios also reflects the benefits derived from
Southern Financial's focus on commercial banking.
-- Move from a product-driven organization to a customer-relationship-
focused sales culture
The Company's evolution from a product-driven culture to a customer-
relationship-driven strategy requires deepening relationships
through cross sell and the continuing emphasis on retention of
valued customers. The Company has segmented its customers to better
understand and anticipate their financial needs and provide
Provident's sales force with a targeted approach to customers and
prospects. The successful execution of this strategy will be
centered on the right-size bank commitment - providing the service
of a small institution combined with the convenience and wide array
of products and services that a strong regional bank offers.
-- Create a high-performance culture that focuses on employee development
and retention
Provident has always placed a high priority on its employees. Their
development is viewed as a critical part of executing its strategy
as the right-size bank and transforming the Company's sales culture.
The focus is on the employee's development and their approach with
Provident's customers.
Outlook for the Future
Commenting on the future for Provident Bankshares, Chairman and CEO Gary
N. Geisel added, "2005 will be a year where we continue to execute against our
key strategies and invest for the longer term while improving short-term
results."
Provident Bankshares Corporation is the holding company for Provident
Bank, the second largest independent commercial bank headquartered in
Maryland. With $6.6 billion in assets, Provident serves individuals and
businesses in the key urban areas of Baltimore, Washington and Richmond
through a network of 149 offices in Maryland, Virginia, and southern York
County, PA. Provident Bank also offers related financial services through
wholly owned subsidiaries. Securities brokerage, investment management and
related insurance services are available through Provident Investment Center
and leases through Court Square Leasing and Provident Lease Corp. Visit
Provident on the web at http://www.provbank.com.
Special Note: Provident Bankshares Corporation's fourth quarter earnings
teleconference will be webcast at 10:00 a.m. (ET) on Thursday, January 20,
2005. The webcast can be accessed on the Provident website at
http://www.provbank.com. The webcast will include discussions of the most
recent quarter's results of operations and may include forward-looking
information such as guidance on future results. A replay of the webcast will
be available until January 27, 2005. An audio replay of the webcast will also
be available during the same period, at 1-888-203-1112, passcode ID 418424.
Supplemental financial information will be posted on the Provident website
today in conjunction with the webcast and can be accessed by selecting the
link to Corporate Information and Investor Relations and then selecting the
link to Financial Reports.
This Press Release, as well as other written communications made from time
to time by Provident Bankshares Corporation and subsidiaries (the "Company")
(including, without limitation, the Company's 2003 Annual Report to
Stockholders) and oral communications made from time to time by authorized
officers of the Company, may contain statements relating to the future results
of the Company (including certain projections and business trends) that are
considered "forward-looking statements" as defined in the Private Securities
Litigation Reform Act of 1995 (the PSLRA). Such forward-looking statements may
be identified by the use of such words as "believe," "expect," "anticipate,"
"should," "planned," "estimated," "intend" and "potential." Examples of
forward-looking statements include, but are not limited to, possible or
assumed estimates with respect to the financial condition, expected or
anticipated revenue, and results of operations and business of the Company,
including with respect to earnings growth; revenue growth in consumer banking,
lending and other areas; origination volume in the Company's consumer,
commercial and other lending businesses; asset quality and levels of non-
performing assets; current and future capital management programs; non-
interest income levels, including fees from services and product sales;
tangible capital generation; market share; expense levels; and other business
operations and strategies. For these statements, the Company claims the
protection of the safe harbor for forward-looking statements contained in the
PSLRA.
The Company cautions you that a number of important factors could cause
actual results to differ materially from those currently anticipated in any
forward-looking statement. Such factors include, but are not limited to:
prevailing economic and geopolitical conditions; changes in interest rates,
loan demand, real estate values and competition, which can materially affect,
among other things, consumer banking revenues, revenues from sales on non-
deposit investment products, origination levels in the Company's lending
businesses and the level of defaults, losses and prepayments on loans made by
the Company, whether held in portfolio or sold in the secondary markets;
changes in accounting principles, policies, and guidelines; changes in any
applicable law, rule, regulation or practice with respect to tax or legal
issues; risks and uncertainties related to acquisitions and related
integration and restructuring activities; and other economic, competitive,
governmental, regulatory and technological factors affecting the Company's
operations, pricing, products and services. The forward-looking statements are
made as of the date of this report, and, except as may be required by
applicable law or regulation, the Company assumes no obligation to update the
forward-looking statements or to update the reasons why actual results could
differ from those projected in the forward-looking statements.
In the event that any non-GAAP financial information is described in any
written communication, including this press release, or in our teleconference,
please refer to the supplemental financial tables included with this release
and on our website for the GAAP reconciliation of this information.
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per
share data) Three Months Ended
December 31,
2004 2003 % Change
SUMMARY OF OPERATIONS:
Net income $18,898 $14,167 33.4%
Net interest income 50,971 38,417 32.7
Provision for loan losses 1,505 2,341 (35.7)
Non-interest income 26,923 24,799 8.6
Net gains (losses) 824 520 58.5
Non-interest income, excluding net
gains (losses) 26,099 24,279 7.5
Non-interest expense 48,951 39,401 24.2
Merger expense 275 - -
Non-interest expense, excluding
merger expense 48,676 39,401 23.5
Income tax expense 8,540 7,307 16.9
SHARE DATA:
Basic earnings per share $0.57 $0.58 (1.7)%
Diluted earnings per share 0.56 0.56 0.0
Cash dividends paid per share 0.26 0.24 8.3
Book value per share 18.65 13.22 41.1
Weighted average shares - basic 33,161,703 24,530,346 35.2
Weighted average shares - diluted 33,941,261 25,227,584 34.5
Common shares outstanding 33,102,385 24,562,273 34.8
END OF PERIOD BALANCES:
Investment securities portfolio $2,301,066 $2,086,510 10.3%
Total loans 3,559,880 2,784,546 27.8
Assets 6,572,160 5,207,848 26.2
Deposits 3,782,000 3,079,549 22.8
Stockholders' equity 617,439 324,765 90.1
Common stockholders' equity 618,403 331,354 86.6
AVERAGE BALANCES:
Investment securities portfolio $2,245,879 $2,028,690 10.7%
Loans:
Residential real estate 1,365,614 1,173,949 16.3
Other consumer 482,613 511,832 (5.7)
Commercial real estate 992,584 685,273 44.8
Commercial business 663,491 360,408 84.1
Total loans 3,504,302 2,731,462 28.3
Earning assets 5,765,688 4,769,095 20.9
Assets 6,452,924 5,097,202 26.6
Deposits:
Noninterest-bearing 804,657 550,496 46.2
Interest-bearing 2,966,376 2,510,314 18.2
Total deposits 3,771,033 3,060,810 23.2
Stockholders' equity 615,101 311,838 97.3
Common stockholders' equity 613,219 321,249 90.9
SELECTED RATIOS:
Return on average assets 1.16% 1.10%
Return on average equity 12.22 18.02
Return on average common equity 12.26 17.50
Net yield on average earning assets
(t/e basis) 3.53 3.21
Efficiency ratio 63.01 62.69
Leverage ratio 8.23 8.49
Tier I risk-based capital ratio 11.74 13.28
Total risk-based capital ratio 12.81 15.32
Three Months Ended
September 30,
2004 % Change
SUMMARY OF OPERATIONS:
Net income $18,052 4.7%
Net interest income 50,312 1.3
Provision for loan losses 2,107 (28.6)
Non-interest income 26,985 (0.2)
Net gains (losses) 464 77.6
Non-interest income, excluding net
gains (losses) 26,521 (1.6)
Non-interest expense 48,007 2.0
Merger expense 1,110 (75.2)
Non-interest expense, excluding merger expense 46,897 3.8
Income tax expense 9,131 (6.5)
SHARE DATA:
Basic earnings per share $0.55 3.6%
Diluted earnings per share 0.54 3.7
Cash dividends paid per share 0.26 2.0
Book value per share 18.39 1.4
Weighted average shares - basic 33,037,793 0.4
Weighted average shares - diluted 33,663,248 0.8
Common shares outstanding 33,076,217 0.1
END OF PERIOD BALANCES:
Investment securities portfolio $2,194,401 4.9%
Total loans 3,520,266 1.1
Assets 6,396,815 2.7
Deposits 3,897,258 (3.0)
Stockholders' equity 608,242 1.5
Common stockholders' equity 608,702 1.6
AVERAGE BALANCES:
Investment securities portfolio $2,176,770 3.2%
Loans:
Residential real estate 1,381,676 (1.2)
Other consumer 493,569 (2.2)
Commercial real estate 973,138 2.0
Commercial business 682,948 (2.8)
Total loans 3,531,331 (0.8)
Earning assets 5,724,978 0.7
Assets 6,403,264 0.8
Deposits:
Noninterest-bearing 797,625 0.9
Interest-bearing 3,162,298 (6.2)
Total deposits 3,959,923 (4.8)
Stockholders' equity 596,316 3.2
Common stockholders' equity 599,233 2.3
SELECTED RATIOS:
Return on average assets 1.12%
Return on average equity 12.04
Return on average common equity 11.98
Net yield on average earning assets
(t/e basis) 3.51
Efficiency ratio 60.89
Leverage ratio 8.25
Tier I risk-based capital ratio 12.21
Total risk-based capital ratio 13.36
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share
data) Twelve Months Ended
December 31,
2004 2003 % Change
SUMMARY OF OPERATIONS:
Net income $60,325 $51,455 17.2%
Net interest income 185,355 148,880 24.5
Provision for loan losses 7,534 11,122 (32.3)
Non-interest income 95,067 88,373 7.6
Net gains (losses) (5,773) (4,379) 31.8
Non-interest income, excluding net
gains (losses) 100,840 92,752 8.7
Non-interest expense 183,728 157,261 16.8
Merger expense 3,541 - -
Non-interest expense, excluding merger
expense 180,187 157,261 14.6
Income tax expense 28,835 17,415 65.6
SHARE DATA:
Basic earnings per share $1.99 $2.10 (5.2)%
Diluted earnings per share 1.95 2.05 (4.9)
Cash dividends paid per share 1.01 0.93 8.6
Book value per share 18.65 13.22 41.1
Weighted average shares - basic 30,299,243 24,494,659 23.7
Weighted average shares - diluted 30,971,104 25,142,075 23.2
Common shares outstanding 33,102,385 24,562,273 34.8
END OF PERIOD BALANCES:
Investment securities portfolio $2,301,066 $2,086,510 10.3%
Total loans 3,559,880 2,784,546 27.8
Assets 6,572,160 5,207,848 26.2
Deposits 3,782,000 3,079,549 22.8
Stockholders' equity 617,439 324,765 90.1
Common stockholders' equity 618,403 331,354 86.6
AVERAGE BALANCES:
Investment securities portfolio $2,185,124 $2,050,774 6.6%
Loans:
Residential real estate 1,313,163 1,091,194 20.3
Other consumer 495,854 508,463 (2.5)
Commercial real estate 892,350 628,385 42.0
Commercial business 584,707 368,260 58.8
Total loans 3,286,074 2,596,302 26.6
Earning assets 5,486,723 4,659,491 17.8
Assets 6,052,292 4,991,775 21.2
Deposits:
Noninterest-bearing 730,889 533,724 36.9
Interest-bearing 2,925,636 2,609,320 12.1
Total deposits 3,656,525 3,143,044 16.3
Stockholders' equity 511,029 314,490 62.5
Common stockholders' equity 513,952 312,371 64.5
SELECTED RATIOS:
Return on average assets 1.00% 1.03%
Return on average equity 11.80 16.36
Return on average common equity 11.74 16.47
Net yield on average earning assets
(t/e basis) 3.39 3.21
Efficiency ratio 62.79 64.90
Leverage ratio 8.23 8.49
Tier I risk-based capital ratio 11.74 13.28
Total risk-based capital ratio 12.81 15.32
SOURCE Provident Bankshares Corporation
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http://www.provbank.com
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http://www.prnewswire.com/comp/721938.html
CONTACT:
Media - Lillian Kilroy, +1-410-277-2833 or
Investment Community - Patricia Ferrick, +1-703-352-2583, both
for Provident Bankshares Corporation
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