Efficiency Improvement Program on Schedule
BALTIMORE, July 19 /PRNewswire-FirstCall/ -- Provident Bankshares
Corporation (Nasdaq: PBKS), the parent company of Provident Bank, reported
$15.5 million in net income, or $0.48 per diluted share, for the quarter
ended June 30, 2007. Also, the Board of Directors of Provident Bankshares
has declared the fifty-fifth consecutive quarterly dividend increase.
The second quarter included a $3.5 million charge-off of a commercial
business loan, which reduced the loan loss reserve. Management increased
the provision for loan losses, maintaining an allowance of loan losses to
total loans of 1.17%. The effect of these actions was $0.07 per diluted
share. The charged-off loan was made to a government contractor and had
been previously classified as non-performing. Overall, credit quality is
considered sound as evidenced by low levels of delinquencies and an
allowance for loan losses to total loans of 1.17%. Capital levels improved
during the current quarter as the leverage and tangible common equity
ratios rose to 8.85% and 6.63%, respectively.
The Bank continued to move forward with its corporate efficiency
program, "Winning the Provident Way" (WPW). WPW has already produced a 4%
decrease in non-interest expense from the first quarter of 2007 and a
decrease of 2% from the prior year's quarter.
Provident continues to maintain a strong focus on business development
throughout the metropolitan areas of Baltimore, Maryland; Washington, DC;
and Richmond, Virginia. Average customer deposits grew by $66.9 million, or
2%, compared to the second quarter of 2006. In the second quarter of 2007,
average home equity loans increased by 7%, average commercial business
loans by 12% and average commercial real estate loans by 11% compared to
the same quarter a year ago.
"We had a fundamentally positive second quarter which should not be
overshadowed by the resolution of one long-standing problem credit, and we
remain confident in overall credit quality," said Gary N. Geisel, Chairman
and CEO. "Our sales force continues to do a great job of identifying
opportunities as demonstrated by our results with consumer loans,
commercial loans, insurance and investment products."
Second Quarter Results Compared to Same Period of 2006
Net income for the quarter ending June 30, 2007 was $15.5 million, or
$0.48 per diluted share, compared to $20.0 million in net income, or $0.60
per diluted share, for the quarter ended June 30, 2006. Total revenues
declined over 5% as, industry-wide, depositors rationalized their cash
balances and moved deposits to higher yielding products. This had the
effect of reducing the Bank's net interest income. Also, the persistence of
flat and inverted yield curve environments over the period has led to
sluggish deposit growth. Non-interest income, excluding gains, declined
approximately 1%. Deposit service fees and commissions increased by 3% and
was offset by a non-recurring insurance claim item realized in the same
period last year. Pre-tax earnings for the quarter were reduced by the
increase in the provision driven by the loan charge-off previously
discussed.
Despite the challenging operating environment, the Bank's strategy of
acquiring, expanding and retaining customer relationships is evident in the
second quarter's growth in average deposit and loan balances. Growth in
consumer and commercial deposit accounts resulted in $3.7 billion in
average customer deposits, an increase of 2%. Average total loan balances
grew by 5%, or $174.4 million due to the Bank's lending expertise and focus
on its premier loan programs - home equity, commercial real estate and
commercial business. Home equity, commercial real estate and commercial
business loans demonstrated strong average loan growth of 7%, 11% and 12%,
respectively.
Earnings for the quarter are beginning to reflect the results of the
WPW program, as the Bank's business processes are re-engineered. The
efficiency improvement program has contributed to a decline in compensation
and benefits of $469 thousand, or 2%, and non-interest expense has declined
$1.2 million, or 2% over the same period a year ago.
Year to Date Performance Compared to Same Period of 2006
Net income for the six months ending June 30, 2007 was $31.6 million,
or $0.98 per diluted share, compared to net income of $38.3 million, or
$1.15 per diluted share, for the six months ending June 30, 2006. The
decline in year over year net income was due to 1) lower net interest
income resulting from the change in deposit mix, and 2) the additional
provision for loan losses driven by the loan charge-off discussed
previously.
Total average loans grew by 5%, led by strong loan growth in the home
equity, commercial real estate and commercial business loan portfolios.
Deposit service fees and commissions for the six months ending June 30,
2007 increased by $1.1 million or 2% to $50.2 million.
During the past six months, management has been successful in
controlling non-interest expenses. Non-interest expense for the six months
ending June 30, 2007 has increased less than 1% over the same period a year
ago. The current year expenses reflect restructuring costs of $1.3 million
and consulting costs of $1.5 million related to the WPW initiative, while
the prior year included a $1.3 million legal settlement.
The initial phase of the WPW program was an exhaustive branch
rationalization program to review the branch network for consolidation or
sale of branch locations that were not meeting the Bank's objectives for
profitability or future growth. In March 2007, seven locations were closed;
and those customer accounts were transferred to the nearby Provident
branches. In May 2007, the Bank announced the sale of an additional six
branches, and that transaction is expected to close by early September
2007, with an anticipated gain.
As a result of the branch rationalization program, the Bank's branch
network is becoming more efficient and more productive. Since most of the
branches consolidated or sold were in Virginia, the results are especially
notable in that region. The branches that will remain in Virginia after the
consolidation and completion of sale have produced significant increases in
new accounts year to date compared to the first six months of 2006.
Despite the industry-wide challenges in generating new checking
accounts, these Virginia branches have opened 8% more retail checking
accounts and 3% more commercial checking accounts this year compared to
January through June 2006. In addition, loan originations in these branches
have been extremely strong. Consumer loans have increased by 44% this year,
and small business loans have grown by 43%.
Second Quarter Results Compared to First Quarter of 2007
Second quarter earnings of $15.5 million in net income, or $0.48 per
diluted share, was 4% lower than the first quarter 2007 earnings which
totaled $16.1 million, or $0.50. As previously discussed, the second
quarter earnings included an increased provision driven by a loan
charge-off.
Despite the competitive pressures on loans and deposits, the net
interest margin was stable with just a slight decline, from 3.62% in the
first quarter 2007 to 3.57% in the second quarter 2007. In the second
quarter of 2007, deposit service fees and commissions increased by $2.5
million or 11% to $26.3 million. Non-interest expense was reduced by 4% to
$52.6 million from the first to second quarter of 2007. Much of the decline
in non-interest expense was due to a $1.2 million reduction in compensation
and benefit costs.
Consistent with Provident's strategy, the Bank succeeded in reducing
investment securities, wholesale funding and acquired loans while
simultaneously expanding loans and deposit relationships within the region
during the second quarter. Average customer deposits increased by $100
million, or 3%, due to growth in checking, money market and certificate of
deposit accounts. Average total loans increased by $32 million, or 1% on a
linked quarter basis, with much of the improvement due to commercial
business loan growth.
Outlook for the Future
"As with our peer banks, we are challenged by the shift of balances to
higher cost deposits and by extremely competitive pricing for deposits and
loans," said Geisel. "To counter the effects of this difficult operating
environment and the resulting earnings impact, we launched WPW in late
2006. Since then, we have made significant progress controlling expenses,
and I am confident that we will achieve our 2007 goals for the WPW program.
In addition, we continue to execute our long term key strategies that focus
on building our core banking business."
Dividend Declared
Provident Bankshares announced today that its Board of Directors has
declared an increased quarterly cash dividend of $0.315 per share. This is
the fifty-fifth consecutive quarterly dividend increase. The quarterly cash
dividend will be paid on August 10, 2007 to stockholders of record at the
close of business on July 30, 2007.
About Provident Bankshares Corporation
Provident Bankshares Corporation is the holding company for Provident
Bank, the largest independent commercial bank headquartered in Maryland.
With $6.3 billion in assets, Provident serves individuals and businesses in
the key metropolitan areas of Baltimore, Washington and Richmond through a
current branch network of 149 offices in Maryland, Virginia, and southern
York County, Pennsylvania. 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. Visit
Provident on the web at http://www.provbank.com.
Webcast Information
Provident Bankshares Corporation's second quarter earnings
teleconference will be webcast at 10 a.m. ET on July 19, 2007. The
conference call will include a discussion of the Company's second quarter
2007 results of operations and may include forward-looking information. The
conference call will be simultaneously webcast at http://www.provbank.com and
archived through August 2, 2007. To listen to the conference call, please
go to the Company's website to register, download and install any necessary
software. When in the Company's website, follow these links:
- About Provident
- Investor Relations
- Upcoming Events
- Provident Bankshares Corporation Second Quarter 2007 Results Audio
Webcast
An audio replay of the teleconference will be available through August
2, 2007 by dialing 1-888-286-8010, passcode 29314602; the international
dial-in number is 617-801-6888.
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, 2006, 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.
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Three Months Ended
June 30,
2007 2006 % Change
SUMMARY INCOME STATEMENTS:
Net interest income $48,548 $52,490 (7.5)%
Provision for loan losses 4,792 824 -
Non-interest income 31,085 31,302 (0.7)
Net gains 420 203 106.9
Derivative losses (557) (554) 0.5
Non-interest income, excluding total
gains (losses) 31,222 31,653 (1.4)
Total revenue, excluding total gains
(losses) 79,770 84,143 (5.2)
Non-interest expense 52,628 53,795 (2.2)
Restructuring activities 481 - -
Non-interest expense, excluding
restructuring 52,147 53,795 (3.1)
Income tax expense 6,691 9,150 (26.9)
Net income 15,522 20,023 (22.5)
SHARE DATA:
Basic earnings per share $0.48 $0.61 (21.3)%
Diluted earnings per share 0.48 0.60 (20.0)
Cash dividends paid per share 0.310 0.290 6.9
Book value per share 19.34 19.03 1.6
Weighted average shares - basic 32,128,061 32,785,258 (2.0)
Weighted average shares - diluted 32,396,244 33,133,175 (2.2)
Common shares outstanding 32,268,128 32,789,289 (1.6)
SELECTED RATIOS:
Return on average assets 1.00% 1.26%
Return on average equity 9.80 12.83
Return on average common equity 9.66 12.32
Net yield on average earning assets
(t/e basis) 3.57 3.75
Efficiency ratio (excludes
restructuring activities) 64.84 63.57
Leverage ratio 8.85 8.53
Tier I risk-based capital ratio 11.06 11.03
Total risk-based capital ratio 12.03 11.98
Tangible common equity ratio 6.63 6.41
END OF PERIOD BALANCES:
Investment securities portfolio $1,580,508 $1,898,055 (16.7)%
Total loans 3,928,086 3,759,295 4.5
Assets 6,263,379 6,409,226 (2.3)
Deposits 4,188,288 4,150,570 0.9
Stockholders' equity 624,167 624,119 -
Common stockholders' equity 659,852 658,334 0.2
AVERAGE BALANCES:
Investment securities portfolio $1,609,654 $1,922,792 (16.3)%
Loans:
Originated and acquired residential
mortgage 311,122 403,284 (22.9)
Home equity 1,014,915 946,382 7.2
Other consumer 394,611 421,042 (6.3)
Commercial real estate 1,407,768 1,265,622 11.2
Commercial business 775,142 692,819 11.9
Total loans 3,903,558 3,729,149 4.7
Earning assets 5,528,392 5,670,512 (2.5)
Assets 6,215,193 6,372,448 (2.5)
Deposits:
Noninterest-bearing 743,185 800,183 (7.1)
Interest-bearing 3,425,771 3,262,110 5.0
Total deposits 4,168,956 4,062,293 2.6
Stockholders' equity 635,352 625,998 1.5
Common stockholders' equity 644,237 651,939 (1.2)
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Three Months Ended
March 31,
2007 % Change
SUMMARY INCOME STATEMENTS:
Net interest income $48,935 (0.8)%
Provision for loan losses 1,052 -
Non-interest income 29,869 4.1
Net gains 1,203 (65.1)
Derivative losses (63) -
Non-interest income, excluding total
gains (losses) 28,729 8.7
Total revenue, excluding total gains
(losses) 77,664 2.7
Non-interest expense 54,768 (3.9)
Restructuring activities 867 (44.5)
Non-interest expense, excluding
restructuring 53,901 (3.3)
Income tax expense 6,870 (2.6)
Net income 16,114 (3.7)
SHARE DATA:
Basic earnings per share $0.50 (4.0)%
Diluted earnings per share 0.50 (4.0)
Cash dividends paid per share 0.305 1.6
Book value per share 19.72 (1.9)
Weighted average shares - basic 32,196,432 (0.2)
Weighted average shares - diluted 32,496,168 (0.3)
Common shares outstanding 32,243,534 0.1
SELECTED RATIOS:
Return on average assets 1.05%
Return on average equity 10.37
Return on average common equity 10.21
Net yield on average earning assets
(t/e basis) 3.62
Efficiency ratio (excludes
restructuring activities) 68.83
Leverage ratio 8.71
Tier I risk-based capital ratio 10.95
Total risk-based capital ratio 11.92
Tangible common equity ratio 6.55
END OF PERIOD BALANCES:
Investment securities portfolio $1,638,183 (3.5)%
Total loans 3,890,421 1.0
Assets 6,234,692 0.5
Deposits 4,282,400 (2.2)
Stockholders' equity 635,797 (1.8)
Common stockholders' equity 653,583 1.0
AVERAGE BALANCES:
Investment securities portfolio $1,663,335 (3.2)%
Loans:
Originated and acquired residential
mortgage 325,377 (4.4)
Home equity 996,519 1.8
Other consumer 400,949 (1.6)
Commercial real estate 1,407,691 -
Commercial business 740,810 4.6
Total loans 3,871,346 0.8
Earning assets 5,549,736 (0.4)
Assets 6,234,498 (0.3)
Deposits:
Noninterest-bearing 724,805 2.5
Interest-bearing 3,370,707 1.6
Total deposits 4,095,512 1.8
Stockholders' equity 629,971 0.9
Common stockholders' equity 639,836 0.7
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Six Months Ended
June 30,
2007 2006 % Change
SUMMARY INCOME STATEMENTS:
Net interest income $97,483 $103,821 (6.1)%
Provision for loan losses 5,844 1,142 -
Non-interest income 60,954 59,444 2.5
Net gains 1,623 743 118.4
Derivative losses (620) (1,157) (46.4)
Non-interest income, excluding total
gains (losses) 59,951 59,858 0.2
Total revenue, excluding total gains
(losses) 157,434 163,679 (3.8)
Non-interest expense 107,396 106,586 0.8
Restructuring activities 1,348 - -
Non-interest expense, excluding
restructuring 106,048 106,586 (0.5)
Income tax expense 13,561 17,256 (21.4)
Net income 31,636 38,281 (17.4)
SHARE DATA:
Basic earnings per share $0.98 $1.16 (15.5)%
Diluted earnings per share 0.98 1.15 (14.8)
Cash dividends paid per share 0.615 0.575 7.0
Book value per share 19.34 19.03 1.6
Weighted average shares - basic 32,163,803 32,863,255 (2.1)
Weighted average shares - diluted 32,440,326 33,233,941 (2.4)
Common shares outstanding 32,268,128 32,789,289 (1.6)
SELECTED RATIOS:
Return on average assets 1.02% 1.21%
Return on average equity 10.08 12.27
Return on average common equity 9.94 11.87
Net yield on average earning assets
(t/e basis) 3.60 3.74
Efficiency ratio (excludes
restructuring activities) 66.81 64.75
Leverage ratio 8.85 8.53
Tier I risk-based capital ratio 11.06 11.03
Total risk-based capital ratio 12.03 11.98
Tangible common equity ratio 6.63 6.41
END OF PERIOD BALANCES:
Investment securities portfolio $1,580,508 $1,898,055 (16.7)%
Total loans 3,928,086 3,759,295 4.5
Assets 6,263,379 6,409,226 (2.3)
Deposits 4,188,288 4,150,570 0.9
Stockholders' equity 624,167 624,119 -
Common stockholders' equity 659,852 658,334 0.2
AVERAGE BALANCES:
Investment securities portfolio $1,636,346 $1,922,338 (14.9)%
Loans:
Originated and acquired residential
mortgage 318,211 421,298 (24.5)
Home equity 1,005,768 930,371 8.1
Other consumer 397,762 429,090 (7.3)
Commercial real estate 1,407,729 1,249,039 12.7
Commercial business 758,071 685,124 10.6
Total loans 3,887,541 3,714,922 4.6
Earning assets 5,539,005 5,654,529 (2.0)
Assets 6,224,792 6,355,149 (2.1)
Deposits:
Noninterest-bearing 734,046 795,923 (7.8)
Interest-bearing 3,398,391 3,242,282 4.8
Total deposits 4,132,437 4,038,205 2.3
Stockholders' equity 632,677 629,239 0.5
Common stockholders' equity 642,049 650,617 (1.3)
SOURCE Provident Bankshares Corporation
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Related links:
http://www.provbank.com/
http://www.prnewswire.com/comp/721938.html /
CONTACT:
Media, Lillian Kilroy, +1-410-277-2833, or
investment community, Melissa P. Kelly, +1-410-277-2080
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