BALTIMORE, April 11 /PRNewswire-FirstCall/ -- Provident Bankshares
Corporation (Nasdaq: PBKS), the parent company of Provident Bank, today
announced a multi-tiered plan to strengthen the Company's capital base. It
includes the issuance of $65 million in equity securities and a
subordinated debt offering of $50 million for a total of $115 million of
new capital. Also included in the plan is the realignment of the dividend
payment that will save approximately $29 million annually in retained
earnings.
This capital offering is expected to be completed during the week of
April 14th and will mitigate the previously announced and expected
write-downs in the Bank's investment portfolio. The plan positions the Bank
to have a prudent response to future economic uncertainty in its market.
These initiatives will further improve the Bank's capital ratios, which
already exceed the regulatory definition of "well capitalized."
In addition, management will engage an independent, knowledgeable and
well-known capital markets advisory firm to undertake a comprehensive
review of the Bank's investment policies and risk control procedures
regarding the investment portfolio.
"This initiative provides us the capital to bolster our balance sheet
in this challenging and uncertain operating environment at the same time
providing a financial foundation to support the growth expectation of our
business franchise," said Gary Geisel, Chief Executive Officer. "While
reducing the dividend to peer bank levels was a difficult decision, we
believe all these actions emphasize our commitment to build long term
shareholder value."
The Company's initiative includes the following:
1) Capital Issuance: The Company has priced approximately $65 million of
equity securities to be issued in private placements, primarily to
various institutional accredited investors, in two forms: $13.5
million of the Company's common equity and $51.2 million of a newly
created series of mandatory convertible preferred equity. Terms of
each security are outlined later in this release.
2) Provident Bank also expects to issue up to an additional $50 million in
subordinated debt to institutional investors during the week of April
14, 2008.
3) Dividend Realignment: The Company's dividend will be reduced to $0.44
per share on an annualized basis. This will allow the Company to
preserve approximately $29 million annually in retained capital. The
dividend reduction is expected to commence with the dividend payable in
May 2008.
The equity raised in the private placement and the equity preserved
from the dividend reduction will increase the Company's pro-forma tangible
equity base at December 31, 2008 from $250 million to $332 million;
improving the pro-forma tangible equity to assets ratio from 3.82% to
5.11%, and the pro- forma total regulatory capital ratio from 10.17% to
11.77%.
The issuance of the subordinated debt will further increase the
pro-forma total regulatory capital ratio, from 11.77% to 12.69% at December
31, 2008.
Capital Terms:
1) The company will issue 1,422,110 shares of the Company's common stock
at $9.50 per share ($10.80 to officers and directors).
2) The company will issue 51,215 shares of the Company's mandatory
convertible preferred non-cumulative stock at a purchase price and
liquidation value of $1,000 per share. The mandatory convertible
preferred securities are convertible three years from the date of issue
into 4.9 million common shares and were priced with a fixed conversion
price of $10.50 per share. The securities will bear a dividend rate of
10.0% for the three year term prior to mandatory conversion into common
equity. In total, the shares to be issued in connection with the
combined offerings consist of approximately 6.3 million fully diluted
common shares and represent 17% of pro forma shares outstanding.
Sandler O'Neill + Partners, L.P. served as Provident's financial
advisor for the offerings. Investors in the offering included
Baltimore-based T. Rowe Price Associates, Inc., on behalf of certain
clients, Sandler O'Neill Asset Management, Philadelphia Financial
Management, Jefferies Dakota Fund and the Directors and Executive Officers
of Provident Bankshares, among others.
"Provident's first quarter earnings, to be officially announced next
week, will show overall financial results consistent with the press release
dated February 26, 2008. Net income for the quarter was impacted by the
anticipated investment securities impairment write-downs we previously
announced. Our credit quality, including charge-offs and non-performing
loans, was largely unchanged from the prior period," said Chairman Geisel.
"The capital plan we announce today, combined with the continued solid
performance of our core banking operations, will provide Provident the
foundation to manage and grow our banking franchise through this
challenging economic environment."
This press release is neither an offer to sell nor a solicitation of an
offer to buy subordinated debt of Provident Bank. Provident Bank's offer of
subordinated debt will be made only by means of the written offering
memorandum.
On Thursday, April 17, 2008, at 7:00 a.m. Provident will release their
First Quarter Results.
Forward-looking Statements
This press release, as well as other written communications made from
time to time by Provident Bankshares Corporation and its subsidiaries (the
"Company") 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 earnings growth, revenue
growth in retail 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. No forward-looking
statement can be guaranteed, and actual results may differ from those
projected. The Company undertakes no obligation to publicly update any
forward-looking statement, whether as a result of new information, future
events or otherwise. Forward-looking statements in this release should be
evaluated together with the uncertainties that affect the Company's
business, particularly those mentioned under the headings "Forward -Looking
Statements" and "Item 1A. Risk Factors" in the Company's Form 10-K for the
year ended December 31, 2007, and its reports on Forms 10-Q and 8-K, which
the Company incorporates by reference.
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.
SOURCE Provident Bankshares Corporation
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Related links:
http://www.provbank.com
http://www.prnewswire.com/comp/721938.html/
CONTACT:
Media: Vicki Cox, +1-410-277-2063; or
Investment Community: Cheryl B. Ursida, +1-410-277-2080, both of
Provident Bankshares Corporation
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