BALTIMORE, July 22 /PRNewswire-FirstCall/ -- Provident Bankshares
Corporation (Nasdaq: PBKS), the parent company of Provident Bank, today
reported $10.5 million in net income or $0.34 per diluted share, for the
second quarter of 2004.
The Company remained focused on key strategies to grow its regional
banking business and continued to expand its territory and customer base while
maintaining strong asset quality. During the quarter, the Company closed on
its merger with Southern Financial Bancorp, Inc. Consequently, the balance
sheet growth during the second quarter 2004 was driven to a large extent by
this merger. Successful execution of key business strategies drove total
average loans for the quarter up $782 million, or 31%, over the second quarter
2003. Asset quality remained strong, with net loan charge-offs as a percentage
of average loans declining 25%, to 21 basis points. Deposit growth was also
solid with average demand and money market deposit balances increasing 29% and
34%, respectively.
Second Quarter Financial Highlights
-- Net interest margin improved to 3.31% from 3.18% for the 2003 second
quarter
-- Non-interest income (excluding net losses) grew 9% from the
comparable period in 2003
-- Asset quality remained strong as net charge-offs as a percentage of
average loans declined 25% to 21 basis points from 28 basis points
last year
-- Average loans increased $782 million, or 31%, from the 2003 second
quarter, of which $324 million represented organic Provident growth
-- Average deposits, excluding brokered time deposits, increased $625
million, or 22%, from the 2003 second quarter, of which $146 million
represented organic Provident growth
Second Quarter Results
Provident Bankshares reported net income for the quarter ending June 30,
2004 of $10.5 million, a decrease of 14% over the second quarter of 2003. This
represents earnings of $0.34 per diluted share compared with $0.49 per diluted
share for the 2003 second quarter. This decline was the result of planned
balance sheet restructuring coincident with the Southern Financial merger.
During the quarter, the Company recognized an $8 million pre-tax net loss on
securities, or $0.18 per diluted share, from these restructuring activities.
The merger provided the Company with a unique opportunity to decrease the size
of the investment portfolio in relation to total assets.
Average loans increased 31% over the second quarter of 2003, driven by
strong loan demand in both the commercial and consumer business segments.
Average commercial real estate loans grew $298 million, or 50%, while
commercial business loans grew $220 million, or 59%. The increase in the
commercial loan portfolio also reflects the benefits derived from Southern
Financial's emphasis on commercial lending. Average consumer loans rose $264
million, or 17%, with home equity loans and lines representing 70% of the
increase.
Average deposits increased $606 million, or 19%, over the same quarter
last year. Demand and money market deposits showed increases of $282 million
and $154 million, respectively, through organic deposit growth and the
addition of Southern Financial deposits. Average brokered deposits declined
$19 million. While Provident's average brokered deposits declined $163
million from the 2003 second quarter; the merger with Southern Financial added
$144 million in callable time deposits during the quarter.
The net interest margin on a tax equivalent basis improved to 3.31%,
compared to 3.18% for the second quarter 2003. The improvement in net
interest margin is the result of combining the two companies' balance sheets
during the quarter. The execution of the restructuring, which eliminated over
$400 million in low margin securities, should further improve the margin in
future quarters.
Non-interest income, excluding net losses, grew 9% to $25.5 million, up
from $23.3 million in the second quarter 2003. Provident also continued to
post solid fee income growth. Total deposit service fees increased $1.8
million, or 9%, over the 2003 second quarter, driven by growth in commercial
and consumer deposit accounts and transaction volume in both the Baltimore and
Washington metropolitan markets.
Total non-performing loans at June 30, 2004 were $29.7 million compared
with $19.4 million the same quarter a year ago. This increase represents
loans acquired from the Southern Financial merger. The level of non-
performing loans at June 30, 2004 is consistent with historical trends of the
two companies on a combined basis. Net charge-offs of $1.7 million were
consistent with the 2003 second quarter amount, and the allowance for loan
losses, at 1.35% of period-end loans, was approximately 161% of non-performing
loans.
Capital ratios remained sound. The leverage ratio was 8.50%, compared to
7.51% in the second quarter of 2003. Total risk-based capital increased to
13.25%, up from 13.10% at second quarter end 2003.
Southern Financial Bancorp Inc. Merger
Following the merger between Provident Bankshares and Southern Financial
on April 30, 2004, the Company successfully completed the conversion of the
Southern Financial deposit and loan customers to Provident's core processing
system on May 31, 2004, meeting its targeted "Customer Day One" of June 1,
2004. This strategic merger will strengthen Provident's commercial banking
market position in Virginia and metropolitan Washington, and provide the
opportunity to expand the Company's consumer banking presence into central and
eastern Virginia. Also, during the second quarter, the Company signed a
definitive agreement to sell three Norfolk/Tidewater area branches acquired in
the merger, because these branches were outside of the Company's strategic
footprint. The transaction is expected to close in the fourth quarter of 2004.
Dividend Declared
Provident Bankshares announced today that its Board of Directors has
declared a quarterly cash dividend of $0.255 per share. This is the forty-
third consecutive quarterly dividend increase. The quarterly cash dividend
will be paid on August 13, 2004 to stockholders of record at the close of
business on August 2, 2004.
Management Comment
Commenting on the Company's second quarter performance, Chairman and CEO
Gary N. Geisel said, "I am pleased with our performance during the second
quarter of 2004. We continued to focus on our key strategies and we saw
steady growth in both the consumer and commercial business lines. Our
successful closing and integration of our merger with Southern Financial and
the completion of our balance sheet repositioning also accelerated progress
toward our strategic goals, including improving our financial fundamentals.
We believe the combined Provident-Southern franchise, what I call `The New
Provident,' will become a regional banking powerhouse that encompasses
Virginia and Maryland and the three major metropolitan markets of Baltimore,
Washington and Richmond. This is a franchise that can respond equally well to
the needs of both consumer and commercial customers. As a larger, more
geographically diverse organization, Provident will continue to provide the
products and services of our largest competitors, while delivering the level
of service found in only the best community banks."
Key Business Strategies Continue to Drive Results
Continued commitment to its key business strategies enabled Provident to
post positive results in the second quarter, despite economic and geopolitical
uncertainty. The Bank is well positioned for solid performance for the
remainder of 2004.
Provident's key business strategies are:
-- Broaden presence and customer base in the Virginia and Washington
metropolitan markets
Provident continued to increase its production from these key
expansion areas. The Southern Financial merger accelerated this
expansion with the addition of thirty branches, based primarily in
the Northern Virginia and Richmond metropolitan markets. The
acquisition drove much of the balance increases in this market
during the quarter. Average commercial and consumer deposits
increased 125% and 59%, respectively. Average consumer transaction
account balances increased 51% from $133 million in the second
quarter of last year to $202 million in the current quarter. Average
money market deposits increased 50% while savings deposits increased
66%.
In the current quarter, Provident more than doubled average consumer
loan balances over the second quarter of 2003 in the
Virginia/Washington metro markets, evidencing its ability to capture
consumer loan demand in this market and the benefits of the Southern
Financial merger.
-- Grow commercial business in Maryland and Virginia
Strong commercial deposit growth occurred with average transaction
account balances growing 49%, and money market balances growing
122%. Average commercial loan demand remained strong with Provident
growing its average commercial portfolio by 56%. The increase in the
commercial loan and deposit portfolios also reflects the benefits
derived from Southern Financial's emphasis in commercial lending.
-- Focus resources on growth in core business lines
Core banking operations continued to drive Provident's positive
results. Average consumer loan balances increased $264 million, or
17%, over the 2003 second quarter. Provident's expertise in home
equity lending resulted in an increase of 46% over the same quarter
last year. Average commercial loans also increased during the
quarter, up 56%, or $521 million, from the 2003 second quarter.
This increase represented 56% commercial real estate and 44%
commercial business loans. The addition of Southern Financial
commercial loans represents $376 million, or 40% of the total
increase, and reflects Southern Financial's focus on its commercial
customer base.
Total average deposits increased 19%, or $606 million, representing
gains in demand, money market, savings and direct time deposits,
with the strongest growth in money market and demand accounts of 34%
and 29%, respectively. Brokered time deposits declined $19 million
to $338 million, or 9% of total deposits, in the 2004 second
quarter. Average deposits, excluding brokered time deposits, now
represent 91% of total deposits, up from 89% in the second quarter
2003.
-- Improve financial fundamentals
The leverage and total risk-based capital ratios were 8.50% and
13.25%, up from 7.51% and 13.10%, respectively for the second
quarter 2003. Net interest margin improved to 3.31% from 3.18% for
the same quarter last year. The efficiency ratio also showed
improvement, down to 65% from 67% for the respective periods.
Asset quality remained strong, despite the increase in non-
performing loans. Net charge-offs remained stable at $1.7 million.
The current allowance for loan losses represents 6.4 times the
quarter's annualized charge-off rate to average loans.
Outlook for the Future
Commenting on the future for Provident Bankshares, Chairman and CEO Gary
N. Geisel added, "We are excited about the opportunities the Southern
Financial merger provides us. On the financial side, we will accelerate our
transition to a balance sheet that is more reflective of our core strategies,
with the financial fundamentals improvement that will follow. On the business
side, we will continue Southern's emphasis on commercial and small business
customers in Southern's market area."
Provident Bankshares Corporation is the holding company for Provident
Bank, the second largest independent commercial bank headquartered in
Maryland. With $6.4 billion in assets, Provident serves individuals and
businesses in the dynamic Baltimore-Washington corridor through a network of
146 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 second quarter earnings
teleconference will be webcast at 10:00 a.m. (EDT) on Thursday, July 22, 2004.
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 July 30, 2004. An audio replay of the webcast will also be
available until 11:59 p.m. July 29, 2004 at 1-800-428-6051, passcode ID
361709. 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.
TABLES FOLLOW
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Three Months Ended Three Months Ended
June 30, March 31,
2004 2003 % Change 2004 % Change
SUMMARY OF
OPERATIONS:
Net income $10,500 $12,195 (13.9)% $12,875 (18.4)%
Net interest
income 45,349 36,799 23.2 38,723 17.1
Provision for
loan losses 1,215 3,251 (62.6) 2,174 (44.1)
Non-interest
income 17,576 16,360 7.4 23,583 (25.5)
Net gains
(losses) (7,877) (6,892) 14.3 816 --
Non-interest
income, excluding
net gains
(losses) 25,453 23,252 9.5 22,767 11.8
Non-interest
expense 46,476 40,300 15.3 40,827 13.8
Income tax
expense 4,734 (2,587) (283.0) 6,430 (26.4)
SHARE DATA:
Basic earnings
per share $0.35 $0.50 (30.0)% $0.52 (32.7)%
Diluted
earnings per
share 0.34 0.49 (30.6) 0.51 (33.3)
Cash dividends
paid per
share 0.250 0.230 8.7 0.245 2.0
Book value
per share 17.66 13.47 31.1 13.91 27.0
Weighted average
shares -
basic 30,263,438 24,500,552 23.5 24,664,213 22.7
Weighted average
shares -
diluted 30,812,528 25,085,553 22.8 25,350,116 21.5
Common shares
outstanding 32,997,873 24,565,237 34.3 24,759,037 33.3
END OF PERIOD BALANCES:
Investment
securities
portfolio $2,175,961 $2,126,758 2.3% $2,127,047 2.3%
Total loans 3,519,519 2,579,365 36.4 2,829,936 24.4
Assets 6,417,977 5,096,296 25.9 5,268,743 21.8
Deposits 4,130,502 3,347,974 23.4 3,202,318 29.0
Stockholders'
equity 582,877 330,816 76.2 344,470 69.2
Common
stockholders'
equity 597,052 317,926 87.8 342,511 74.3
AVERAGE BALANCES:
Investment
securities
portfolio $2,223,952 $2,132,288 4.3% $2,093,314 6.2%
Loans:
Residential real
estate 1,306,016 1,037,912 25.8 1,198,015 9.0
Other
consumer 499,341 503,258 (0.8) 508,067 (1.7)
Commercial
real estate 893,331 595,641 50.0 708,358 26.1
Commercial
business 594,828 374,400 58.9 395,614 50.4
Total loans 3,293,516 2,511,211 31.2 2,810,054 17.2
Earning
assets 5,541,428 4,657,849 19.0 4,909,109 12.9
Assets 6,113,920 4,998,848 22.3 5,230,786 16.9
Deposits:
Noninterest-
bearing 752,198 538,774 39.6 567,530 32.5
Interest-
bearing 3,067,141 2,674,138 14.7 2,503,680 22.5
Total
deposits 3,819,339 3,212,912 18.9 3,071,210 24.4
Stockholders'
equity 499,078 325,435 53.4 331,538 50.5
Common
stockholders'
equity 508,892 308,020 65.2 332,423 53.1
SELECTED RATIOS:
Return on
average
assets 0.69% 0.98% 0.99%
Return on
average
equity 8.46 15.03 15.62
Return on
average
common
equity 8.30 15.88 15.58
Net yield on
average
earning
assets
(t/e basis) 3.31 3.18 3.19
Efficiency
ratio 65.46 66.92 66.18
Leverage
ratio 8.50 7.51 8.56
Tier I risk-
based capital
ratio 12.08 12.01 13.47
Total risk-
based capital
ratio 13.25 13.10 15.38
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Six Months Ended
June 30,
2004 2003 % Change
SUMMARY OF OPERATIONS:
Net income $23,375 $23,980 (2.5)%
Net interest income 84,072 72,426 16.1
Provision for loan losses 3,389 5,011 (32.4)
Non-interest income 41,159 38,951 5.7
Net gains (losses) (7,061) (5,645) 25.1
Non-interest income, excluding net
gains (losses) 48,220 44,596 8.1
Non-interest expense 87,303 79,350 10.0
Income tax expense 11,164 3,036 267.7
SHARE DATA:
Basic earnings per share $0.85 $0.98 (13.3)%
Diluted earnings per share 0.83 0.96 (13.5)
Cash dividends paid per share 0.495 0.455 8.8
Book value per share 17.66 13.47 31.1
Weighted average shares - basic 27,465,996 24,443,021 12.4
Weighted average shares - diluted 28,086,337 25,067,005 12.0
Common shares outstanding 32,997,873 24,565,237 34.3
END OF PERIOD BALANCES:
Investment securities portfolio $2,175,961 $2,126,758 2.3 %
Total loans 3,519,519 2,579,365 36.4
Assets 6,417,977 5,096,296 25.9
Deposits 4,130,502 3,347,974 23.4
Stockholders' equity 582,877 330,816 76.2
Common stockholders' equity 597,052 317,926 87.8
AVERAGE BALANCES:
Investment securities portfolio $2,158,633 $2,091,344 3.2 %
Loans:
Residential real estate 1,252,017 1,040,721 20.3
Other consumer 503,703 503,108 0.1
Commercial real estate 800,845 590,039 35.7
Commercial business 495,221 371,541 33.3
Total loans 3,051,786 2,505,409 21.8
Earning assets 5,225,269 4,609,411 13.4
Assets 5,672,354 4,941,650 14.8
Deposits:
Noninterest-bearing 659,864 504,418 30.8
Interest-bearing 2,785,410 2,675,807 4.1
Total deposits 3,445,274 3,180,225 8.3
Stockholders' equity 415,308 321,795 29.1
Common stockholders' equity 420,658 305,201 37.8
SELECTED RATIOS:
Return on average assets 0.83 % 0.98 %
Return on average equity 11.32 15.03
Return on average common equity 11.17 15.84
Net yield on average earning assets
(t/e basis) 3.25 3.18
Efficiency ratio 65.79 67.61
Leverage ratio 8.50 7.51
Tier I risk-based capital ratio 12.08 12.01
Total risk-based capital ratio 13.25 13.10
SOURCE Provident Bankshares Corporation
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Related links:
http://www.provbank.com
Company News On-Call:
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 of
Provident Bankshares
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