Core Banking Business Continues Strong Performance;
Company Addresses Previously Announced Acquired Loan Portfolio Losses
BALTIMORE, Aug. 6 /PRNewswire/ --
Provident Bankshares Corporation (Nasdaq: PBKS), the parent company of
Provident Bank, today reported operating results for the quarter ending
June 30, 2001. The Company's core banking businesses continued to produce
strong growth and performance. During the quarter, core deposits, in-market
originated loans and fee income categories all posted double-digit increases.
Provident also took action to deal with the losses identified by the Company's
previously announced review of its acquired second mortgage loan portfolio.
Acquired Loan Portfolio
In its Press Release on July 16, the Company reported that it was
conducting an internal review of its $1.6 billion acquired second mortgage
loan portfolio. The review, when completed, discovered previously
unidentified losses in that portfolio of $13.8 million ($8.9 million after
tax) through June 30, 2001. At that time, the Company also reported that it
was working with its independent public accountants to determine the
appropriate accounting treatment for its findings. Presented below is a
summary of these findings and the impact by accounting period:
Prior Period Restatements
First Second
(dollars in Quarter Quarter
thousands) 1999 2000 2001 2001 Total
Increase to the
provision for
loan losses - $6,000 $1,000 $2,845 $9,845
Reversal of accrued
but uncollected
interest and write-off
of loan purchase
premiums for acquired
second mortgages - 1,854 (389) 561 2,026
Increase in the existing
recourse reserve for
securities resulting
from securitization of
acquired second
mortgages - - - 1,886 1,886
Total decrease in
pre-tax income $7,854 $611 $5,292 $13,757
Total decrease in
after-tax income $5,105 $400 $3,440 $8,945
Charge-offs $3,335 $4,951 $2,239 $2,180 $12,705
The Company will amend and refile certain 2000 financial statement filings
on Forms 10-K and 10Q, as well as its first quarter 2001 financial statements
on Form 10-Q. Presented below is a summary of selected financial data:
(dollars in thousands, March 31,
except per share data) 1999 2000 2001
Net Income
As Reported $44,810 $10,565
As Restated $39,705 $10,165
Earnings Per Share - Basic (A)
As Reported $1.63 $0.40
As Restated $1.44 $0.39
Earnings Per Share - Diluted (A)
As Reported $1.60 $0.39
As Restated $1.41 $0.37
Loan Charge-offs
As Reported $14,557 $24,249 $5,391
As Restated $17,892 $29,200 $7,630
Reserve for Loan Losses
- Period End
As Reported $39,780 $40,660 $42,832
As Restated $36,445 $38,374 $39,307
Reserve for Loans/Period
End Loans
As Reported 1.25% 1.21% 1.29%
As Restated 1.15% 1.14% 1.19%
(A) Earnings per share give effect to the 5% stock dividend paid in May
2001
Second Quarter Results
The following results reflect the revised financial information as stated
above.
Net income for the quarter ended June 30, 2001 was $8.0 million or
$.30 per share on a diluted basis. This is a net income decrease of 11.3%
from the $9.1 million, or $.32 per diluted share, in the 2000 comparable
quarter.
Return on average common equity was 11.16% for second quarter 2001,
compared to 11.50% for the same quarter last year. Return on average assets
was .63% for the quarter, compared to .67% for the comparable period one year
ago.
Stockholders' equity at June 30, 2001 was $286 million. The leverage
ratio was 6.90% and book value per share was $11.13.
Solid Second Quarter Results from Core Business Operations
Banking operations continued to show solid revenue growth driven by
Provident's strength in attracting and retaining customers, acquiring core
deposits and loans and generating fee income.
Average core loans and deposits showed strong growth during the second
quarter. Average core loans increased $309 million or 10% compared to second
quarter 2000. Led by a 15% increase in non-interest bearing demand deposits,
average core deposits increased 12% from the same quarter last year.
The Company continued to shrink the wholesale segment of its balance sheet
during the quarter. Investment securities, as well as syndicated and acquired
loans, were reduced along with their wholesale funding source, brokered
deposits. Provident securitized approximately $239 million of acquired second
mortgages. The resulting FNMA securities were then transferred to the
Company's investment portfolio. Brokered deposits have been reduced by
$298 million from the same quarter last year.
As a result, average loans were down $269 million and average deposits
were down $87 million from the same quarter last year. This de-leveraging
activity is consistent with Provident's strategic focus on asset growth from
core banking sources.
Net interest income for the 2001 second quarter was down $3.3 million or
8.6% from one year ago. The net interest margin for the quarter was 2.89%,
down from 2.90% in the same quarter last year.
Asset quality within the commercial and real estate portfolios remains
solid. At June 30, 2001, total non-performing loans were $28.1 million, up
from $27.5 million or 2.3% from the same quarter last year. During the
quarter, Provident wrote down its last remaining non-performing health care
credit. The Company has obtained a contract of sale on the nursing home
related to this loan and expects to exit the credit without any additional
losses.
Non-interest income from banking operations was up 14.6% and comprised 36%
of Provident's total revenue for the quarter (net of securities gains). This
increase was driven by Provident's strong retail and commercial checking
account growth, with income from retail deposit fees up 22.1%, commercial
deposit service fees up more than 52% and assessed cash management fees up 45%
from one year ago. Total non-interest income (excluding securities gains) was
up $2.4 million or 14.6% for the second quarter of 2001. There were
$1.6 million in securities gains during the 2001 second quarter compared with
$7.8 million in the same period a year ago.
Excluding the $1.9 million increase to the existing recourse reserve,
non-interest expense was $36.7 million in the second quarter of 2001, up just
3.5% from the same quarter last year. These results reflect the Company's
continued focus on operating expense control and anticipated expense
reductions from lines of business exited last year.
Six Month Results
For the six months ended June 30, 2001, net income totaled $18.2 million,
down from $20.2 million for the 2000 period. Diluted earnings per share were
$.67, down from the $.72 for the same six months last year. Revenues from
core business operations continued strong growth, with an 18.4% increase in
core non-interest income from the same six-month period last year.
Dividend Declared
Provident Bankshares also announced today that its Board of Directors has
declared a quarterly cash dividend of $0.195 per share. This quarterly cash
dividend will be paid on August 23, 2001 to stockholders of record at the
close of business on August 16, 2001.
Core Business Units Continue on Track with Strong Revenue Momentum
-- Provident posted strong consumer loan volume in the second quarter
of 2001. The Bank booked over $128 million in new consumer loans
and lines during the second quarter of 2001, a 133% increase over
second quarter 2000. Application volume was up 67% compared to
second quarter 2000. A retooled home equity product line generated
over $52 million in loans and lines during the quarter, an 89%
increase over the same quarter last year.
-- Commercial loans also showed strong increases in second quarter
2001. Commercial loans were up 11.8% over second quarter 2000.
Commercial real estate loans grew $105 million or 25% over second
quarter 2000. This growth was in loans to home and apartment
builders, and in commercial projects such as office buildings,
flex-space and regional shopping centers.
-- Core deposits grew 12% from the second quarter of 2000, with
non-interest bearing demand deposits up by 15%.
-- An enhanced business checking product line was introduced in April
to complement Provident's new Small Business Center. During the
quarter, the Bank opened over 1,900 new business checking accounts.
This reflects a 51% increase in new account production over the same
period last year.
-- Provident's expansion branches helped fuel the growth of core
deposits in the second quarter of 2001. The Company opened more
than 20,000 retail checking accounts during the quarter, with
expansion branches accounting for 43% of this growth.
-- Fee income was also up 20.9%, fueled by deposit service fees that
grew by 22.2% compared to second quarter 2000. Commercial deposit
fees increased 52.4% and assessed cash management fees rose 45% over
the second quarter of last year. Loan fees were up 35% compared to
the same period last year.
Management Comment
Commenting on the Company's performance, Provident Bankshares Chairman and
Chief Executive Officer Peter M. Martin said, "The acquired loan portfolio
losses were a disappointing setback - especially when contrasted against the
strong performance of our core business operations. That said, we have
addressed the issue and taken appropriate action.
"Provident management remains focused on growing core product businesses,
sustaining revenue momentum from retail and commercial units and controlling
the operating expense growth rate. Continued positive results from these
strategies and the success of our network expansion efforts will provide
momentum toward our planned fourth quarter financial targets."
Provident Bankshares Corporation is the holding company for Provident
Bank, the second largest independent commercial bank headquartered in
Maryland. With $5.2 billion in assets, Provident serves individuals and
businesses in the dynamic Baltimore-Washington corridor through a network of
99 offices in Maryland, Northern Virginia, and southern York County, PA.
Provident Bank also offers related financial services through wholly owned
subsidiaries. Mutual funds, annuities and insurance products 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. on Tuesday, August 7, 2001. Log
on to 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.
Statements contained in this Press Release that are not historical facts
are forward-looking statements, as the term is defined in the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements are
subject to risks and uncertainties which could cause actual results to differ
materially from those currently anticipated due to a number of factors, which
include, but are not limited to, factors discussed in documents filed by the
Company with the Securities and Exchange Commission from time to time.
PROVIDENT BANKSHARES CORPORATION
FINANCIAL SUMMARY
(dollars in thousands, except per
share data) Three Months Ended June 30,
(tax-equivalent basis) 2001 2000 % Change
SUMMARY OF OPERATIONS
Interest Income $89,067 $101,791 (12.5)%
Interest Expense 54,313 63,760 (14.8)
Net Interest Income 34,754 38,031 (8.6)
Provision for Loan Losses 4,895 13,035 (62.4)
Net Interest Income after Provision
for Loan Losses 29,859 24,996 19.5
Non-Interest Income 20,638 24,379 (15.3)
Non-Interest Expense 38,577 35,459 8.8
Income Before Income Taxes 11,920 13,916 (14.3)
Income Tax Expense 3,640 4,610 (21.0)
Less: Tax-Equivalent Adjustment 245 246 (0.4)
Income Before Extraordinary Item and
Cumulative Effect of Change in
Accounting Principle 8,035 9,060 (11.3)
Extraordinary Item -- Gain on Debt
Extinguishment, Net - - -
Cumulative Effect of Change
in Accounting Principle, Net* - - -
Net Income $8,035 $9,060 (11.3)
PER SHARE
Basic
Income Before Extraordinary Item
and Cumulative Effect of Change
in Accounting Principle $0.31 $0.33
Net Income 0.31 0.33
Diluted
Income Before Extraordinary Item
and Cumulative Effect of Change
in Accounting Principle 0.30 0.32
Net Income 0.30 0.32
Cash Dividends Paid 0.181 0.154
Stockholders' Equity
Market Value (closing sales price as
reported on the Nasdaq Stock Market)
Common Shares Outstanding
Weighted Average Shares -- Basic 25,545,605 27,482,988
Weighted Average Shares -- Diluted 26,507,162 28,007,570
PROFITABILITY RATIOS**
Return on Average Assets 0.63 % 0.67 %
Return on Average Equity 11.41 13.75
Return on Average Common Equity 11.16 11.50
Net Yield on Average Earning Assets
(t/e basis) 2.89 2.90
CAPITAL RATIOS AT JUNE 30
Leverage Ratio
Risk-Based Capital Ratios:
Tier I Capital Ratio
Total Capital Ratio
ASSET QUALITY
Non-Performing Loans
Loans Past Due 90 Days or More
Allowance for Loan Losses
Net Charge-offs $8,202 $8,502 (3.5)%
Non-Performing Loans to Loans
Allowance for Loan Losses to Loans
Net Charge-Offs to Average Loans 1.03 % 0.99 %
Allowance for Loan Losses to
Non-Performing Loans
AVERAGE BALANCES
Investment Securities Portfolio $1,634,303 $1,798,740 (9.1)%
Loans 3,178,995 3,448,400 (7.8)
Earning Assets 4,826,416 5,285,569 (8.7)
Assets 5,125,315 5,458,710 (6.1)
Deposits 3,690,825 3,777,830 (2.3)
Stockholders' Equity 282,418 264,974 6.6
Common Equity 288,814 316,804 (8.8)
SELECTED FINANCIAL DATA AT PERIOD END
Investment Securities Portfolio
Loans
Earning Assets
Assets
Deposits
Stockholders' Equity
Common Equity
(dollars in thousands, except per share
data) Six Months Ended June 30,
(tax-equivalent basis) 2001 2000 % Change
SUMMARY OF OPERATIONS
Interest Income $187,216 $199,274 (6.1)%
Interest Expense 114,967 122,339 (6.0)
Net Interest Income 72,249 76,935 (6.1)
Provision for Loan Losses 13,070 17,335 (24.6)
Net Interest Income after Provision
for Loan Losses 59,179 59,600 (0.7)
Non-Interest Income 44,175 38,748 14.0
Non-Interest Expense 74,455 69,504 7.1
Income Before Income Taxes 28,899 28,844 0.2
Income Tax Expense 9,039 8,932 1.2
Less: Tax-Equivalent Adjustment 500 487 2.7
Income Before Extraordinary Item and
Cumulative Effect of Change in
Accounting Principle 19,360 19,425 (0.3)
Extraordinary Item -- Gain on Debt
Extinguishment, Net - 770 -
Cumulative Effect of Change
in Accounting Principle, Net* (1,160) - -
Net Income $18,200 $20,195 (9.9)
PER SHARE
Basic
Income Before Extraordinary Item and
Cumulative Effect of Change in
Accounting Principle $0.74 $0.70
Net Income 0.70 0.73
Diluted
Income Before Extraordinary Item and
Cumulative Effect of Change in
Accounting Principle 0.71 0.69
Net Income 0.67 0.72
Cash Dividends Paid 0.357 0.304
Stockholders' Equity 11.13 10.38
Market Value (closing sales price as
reported on the Nasdaq Stock Market) 24.94 12.86
Common Shares Outstanding 25,672,753 25,540,913
Weighted Average Shares -- Basic 25,989,507 27,628,756
Weighted Average Shares -- Diluted 26,990,150 28,167,973
PROFITABILITY RATIOS**
Return on Average Assets 0.74 % 0.77 %
Return on Average Equity 13.44 15.19
Return on Average Common Equity 13.15 12.80
Net Yield on Average Earning Assets
(t/e basis) 2.92 2.99
CAPITAL RATIOS AT JUNE 30
Leverage Ratio 6.90 % 7.00 %
Risk-Based Capital Ratios:
Tier I Capital Ratio 9.22 9.18
Total Capital Ratio 10.14 10.17
ASSET QUALITY
Non-Performing Loans $28,107 $27,470 2.3 %
Loans Past Due 90 Days or More 11,193 17,074 (34.4)
Allowance for Loan Losses 35,310 41,102 (14.1)
Net Charge-offs 15,444 12,678 21.8
Non-Performing Loans to Loans 0.95 % 0.78 %
Allowance for Loan Losses to Loans 1.19 1.17
Net Charge-Offs to Average Loans 0.95 0.76
Allowance for Loan Losses to
Non-Performing Loans 125.63 149.63
AVERAGE BALANCES
Investment Securities Portfolio $1,699,597 $1,768,563 (3.9)%
Loans 3,279,912 3,360,220 (2.4)
Earning Assets 4,992,670 5,171,248 (3.5)
Assets 5,250,682 5,343,065 (1.7)
Deposits 3,766,297 3,784,804 (0.5)
Stockholders' Equity 290,426 267,354 8.6
Common Equity 296,830 317,239 (6.4)
SELECTED FINANCIAL DATA AT PERIOD END
Investment Securities Portfolio $1,803,242 $1,711,987 5.3 %
Loans 2,971,093 3,504,739 (15.2)
Earning Assets 4,786,825 5,233,377 (8.5)
Assets 5,170,670 5,482,191 (5.7)
Deposits 3,580,802 3,920,356 (8.7)
Stockholders' Equity 285,755 265,103 7.8
Common Equity 293,003 312,269 (6.2)
* Effective January 1, 2001, the Corporation adopted SFAS No. 133,
"Accounting for Derivative Instruments and Hedging Activities"
** Exclusive of cumulative effect of change in accounting principle
SOURCE Provident Bankshares Corporation
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Related links:
http://www.provbank.com
Company News On-Call:
http://www.prnewswire.com/gh/cnoc/comp/721938.html
CONTACT:
Media: Lillian Kilroy, +1-410-277-2833, or
Investment Community: Ellen Grossman, +1-410-277-2889, both of
Provident Bankshares
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