Southern Financial Merger and
Financial Fundamentals Drive Results
BALTIMORE, Oct. 21 /PRNewswire-FirstCall/ -- Provident Bankshares
Corporation (Nasdaq: PBKS), the parent company of Provident Bank, today
reported $18.1 million in net income or $0.54 per diluted share, for the third
quarter of 2004.
The Company continued its execution of key strategies to grow its customer
base and regional banking business in the key urban metropolitan areas of
Baltimore, Washington and Richmond while maintaining strong asset quality.
Improved financial fundamentals mark the Company's solid performance for the
quarter with improved return on average assets, net interest margin,
efficiency ratio and credit quality measures. During the quarter, which
includes the first full quarter of the consolidation of Southern Financial,
average loans increased $891 million or 34% over the 2003 third quarter and
net interest margin improved to 3.51%. Asset quality remained strong, with
the ratio of net loan charge-offs to average loans declining to 25 basis
points, or 17% below the same period last year. Average deposits, including
Southern Financial, increased 26%, led by increases in demand accounts of 30%.
Third Quarter Financial Highlights
-- Net interest margin improved to 3.51% from 3.26% for the 2003 third
quarter
-- Non-interest income (excluding net gains) grew 11% from the
comparable period in 2003
-- Asset quality remained strong as net charge-offs as a percentage of
average loans declined 17% to 25 basis points compared to 30 basis
points last year
-- Average loans increased $891 million, or 34%, from the 2003 third
quarter, of which $262 million, or 10%, represented growth not
associated with the merger
-- Average deposits, excluding brokered deposits, increased $750
million, from the 2003 third quarter, of which $102 million
represented growth not associated with the merger
Third Quarter Results
Provident Bankshares reported net income for the quarter ending September
30, 2004 of $18.1 million, an increase of 36% over the third quarter of 2003.
This represents earnings of $0.54 per diluted share compared with $0.53 per
diluted share for the 2003 third quarter. Included in earnings of $0.54 per
diluted share were $0.02 of merger costs associated with the Southern
Financial merger. Increased net interest income and fee income and a lower
provision for loan losses positively impacted the earnings for the quarter
compared to the same quarter a year ago. Conversely, non-interest expenses,
including merger costs and income tax expense increased over the prior year.
Average loans increased 34% over the third quarter of 2003, driven by
activity in both the commercial and consumer business segments and the recent
Southern Financial merger. Average commercial real estate loans increased
$326 million, or 50%, while commercial business loans increased $313 million,
or 85%. The increase in the commercial loan portfolio also reflects the
benefits derived from Southern Financial's emphasis on commercial lending.
Average consumer loans rose $252 million, or 16%, with home equity loans and
lines representing 78% of the increase.
Average deposits increased $808 million, or 26%, over the same quarter
last year. Demand accounts showed increases of $302 million while money
market accounts increased $199 million, respectively, through organic deposit
growth and the addition of Southern Financial deposits. While traditional
average brokered deposits declined $158 million from the prior year, callable
brokered deposits increased $216 million primarily due to the Southern
Financial merger.
The net interest margin on a tax equivalent basis improved to 3.51%,
compared to 3.26% for the third quarter 2003. The higher ratio of average
loans to investment securities and the benefits derived from combining the two
companies' balance sheets contributed to the improved margin. Further, the
margin was positively impacted by the balance sheet restructuring, which
eliminated over $400 million in low margin securities coincident with the
merger.
Non-interest income, excluding net gains, grew 11% to $26.5 million, up
from $23.9 million in the third quarter 2003 as the Company continued to post
solid fee income growth. Total deposit service fees increased $2.1 million,
or 11%, over the 2003 third 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 September 30, 2004 were $27.4 million
compared with $20.3 million the same quarter a year ago. The increase
includes loans acquired from the Southern Financial merger. The level of non-
performing loans at September 30, 2004 is consistent with historical trends of
the two companies on a combined basis. Net charge-offs of $2.2 million were
slightly higher than the $2.0 million 2003 third quarter, and the allowance
for loan losses, at 1.34% of period-end loans, was 172% of non-performing
loans.
Capital ratios remained sound. The leverage ratio was 8.30%, compared to
7.61% in the third quarter of 2003. Total risk-based capital increased to
13.47%, up from 13.11% at third quarter end 2003.
Dividend Declared
Provident Bankshares announced today that its Board of Directors has
declared a quarterly cash dividend of $0.26 per share. This is the forty-
fourth consecutive quarterly dividend increase. The quarterly cash dividend
will be paid on November 12, 2004 to stockholders of record at the close of
business on November 1, 2004.
Other News
On October 15, 2004, Provident Bankshares closed on the transaction to
sell three Norfolk/Tidewater area branches acquired in the merger, because
these branches were outside of the Company's strategic footprint.
Management Comment
Commenting on the Company's third quarter performance, Chairman and CEO
Gary N. Geisel said, "I am pleased that the execution of our strategies is
translating into improved financial fundamentals. Our net interest margin
improved to 3.51%, the efficiency ratio declined to 61%, and return on assets
is 1.12% for the quarter. With key locations in the Baltimore, Washington and
Richmond metropolitan areas we now operate in three of the best markets in the
country. We are clearly making progress in our transformation to a stronger
regional bank."
Continued Focus on Key Business Strategies
The Company remained focused on execution of key business strategies,
which include expanding the commercial and consumer banking segments,
including small business, in the key urban metropolitan markets of Baltimore,
Washington and Richmond.
Provident's key business strategies are:
-- Broaden presence and customer base in the Virginia and Washington
metropolitan markets
Provident currently has 83 branches, or 56% of its total branches, in
the key metropolitan urban markets of Washington and Richmond. Year
over year, average commercial and consumer deposits in these markets
increased 119% and 81%, respectively. Average consumer transaction
account balances increased 74% from $139 million in the third quarter
of last year to $242 million in the current quarter. Average
consumer money market deposits and savings deposits increased 66%.
The addition of 30 branches from the Southern Financial merger
contributed to the growth in these markets.
In the current quarter, average consumer loan balances increased 94%
and commercial loan balances more than doubled over the third quarter
of 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.
-- Grow commercial business in Maryland and Virginia
Commercial deposits increased 63% over the prior year with average
demand account balances and money market balances representing the
areas of growth at 41% and 151%, respectively. Average commercial
loan demand remained strong with Provident growing its average
commercial portfolio by 63%. Small business loans and deposits are
included in the commercial banking totals and increased significantly
from the 2003 third quarter, respectively. 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 $252 million, or
16%, over the 2003 third quarter. Home equity lending continues to
lead the consumer loan growth with an increase of 45% over the prior
year quarter. Provident's expertise in home equity lending resulted
in average balances during the 2004 third quarter of $629 million.
Average commercial loans also increased during the quarter, up $639
million, from the 2003 third quarter. This increase represented
growth of 50% commercial real estate and 85% commercial business
loans. The addition of Southern Financial commercial loans
represents $522 million in average commercial loans, emphasizing
Southern Financial's focus on its commercial customer base.
Total average deposits increased 26%, or $808 million, representing
increases in every deposit category, with the strongest increase in
transaction account balances of 30%. The Company's focus on its core
business lines is further reflected in the mix of consumer and
commercial average deposits of 77% and 23%, compared to 82% and 18%
for the 2004 and 2003 third quarters, respectively. Average
deposits, excluding brokered deposits, represent 91% of total
deposits for the 2004 third quarter.
-- Improve financial fundamentals
The leverage and total risk-based capital ratios were 8.30% and
13.47%, up from 7.61% and 13.11%, respectively, for the third quarter
2003. Net interest margin improved to 3.51% from 3.26% for the same
quarter last year. Return on average assets improved to 1.12% from
1.06% and the efficiency ratio, which excludes non-recurring merger
costs, also showed improvement, down to 61% from 63% for the
respective periods.
Asset quality remained strong, despite the increase in non-performing
loans. The ratio of non-performing assets to loans improved to 0.84%
from 0.90% for the 2004 and 2003 third quarters, respectively. Net
charge-offs remained stable at $2.2 million and $2.0 million, for the
2004 and 2003 third quarters, respectively and the ratio of allowance
for loan losses to loans was 1.34% at September 30, 2004.
Outlook for the Future
Commenting on the future for Provident Bankshares, Chairman and CEO Gary
N. Geisel added,
"We are encouraged by the momentum in our consumer and small business
groups and we are optimistic about our future commercial loan growth as we
move into 2005. Not unlike others in our industry, our immediate challenge
centers on consistent commercial loan growth. While we are pleased with our
commercial pipeline, increased repayments resulted in slowed loan growth for
the quarter. We remain confident in meeting the consensus estimates for the
fourth quarter and the year."
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
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 third quarter earnings
teleconference will be webcast at 10:00 a.m. (ET) on Thursday, October 21,
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 October 29, 2004. An audio replay of the webcast will also
be available until 11:59 p.m. October 28, 2004 at 1-888-203-1112, passcode ID
989437. 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
September 30,
2004 2003 % Change
SUMMARY OF OPERATIONS:
Net income $18,052 $13,308 35.6 %
Net interest income 50,312 38,037 32.3
Provision for loan losses 1,723 2,950 (41.6)
Non-interest income 26,985 24,623 9.6
Net gains (losses) 464 746 (37.8)
Non-interest income, excluding net
gains (losses) 26,521 23,877 11.1
Non-interest expense 48,391 39,330 23.0
Merger expense 1,110 - -
Non-interest expense, excluding
merger expense 47,281 39,330 20.2
Income tax expense 9,131 7,072 29.1
SHARE DATA:
Basic earnings per share $0.55 $0.54 1.9 %
Diluted earnings per share 0.54 0.53 1.9
Cash dividends paid per share 0.255 0.235 8.5
Book value per share 18.39 12.93 42.2
Weighted average shares - basic 33,037,793 24,555,675 34.5
Weighted average shares - diluted 33,663,248 25,205,315 33.6
Common shares outstanding 33,076,217 24,483,143 35.1
END OF PERIOD BALANCES:
Investment securities portfolio $2,194,401 $1,970,618 11.4 %
Total loans 3,520,266 2,702,255 30.3
Assets 6,396,815 4,985,445 28.3
Deposits 3,897,258 3,087,906 26.2
Stockholders' equity 608,242 316,661 92.1
Common stockholders' equity 608,702 321,350 89.4
AVERAGE BALANCES:
Investment securities portfolio $2,176,770 $1,993,040 9.2 %
Loans:
Residential real estate 1,381,676 1,107,745 24.7
Other consumer 493,569 515,622 (4.3)
Commercial real estate 973,138 646,939 50.4
Commercial business 682,948 369,657 84.8
Total loans 3,531,331 2,639,963 33.8
Earning assets 5,724,978 4,648,407 23.2
Assets 6,403,309 4,984,959 28.5
Deposits:
Noninterest-bearing 797,625 574,611 38.8
Interest-bearing 3,162,298 2,577,522 22.7
Total deposits 3,959,923 3,152,133 25.6
Stockholders' equity 596,316 303,702 96.3
Common stockholders' equity 599,233 317,578 88.7
SELECTED RATIOS:
Return on average assets 1.12 % 1.06 %
Return on average equity 12.04 17.38
Return on average common equity 11.98 16.63
Net yield on average earning assets
(t/e basis) 3.51 3.26
Efficiency ratio 61.38 63.35
Leverage ratio 8.30 7.61
Tier I risk-based capital ratio 12.32 11.99
Total risk-based capital ratio 13.47 13.11
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per
share data) Three Months Ended
June 30,
2004 % Change
SUMMARY OF OPERATIONS:
Net income $10,500 71.9 %
Net interest income 45,349 10.9
Provision for loan losses 1,215 41.8
Non-interest income 17,576 53.5
Net gains (losses) (7,877) (105.9)
Non-interest income, excluding net
gains (losses) 25,453 4.2
Non-interest expense 46,476 4.1
Merger expense 1,972 (43.7)
Non-interest expense, excluding
merger expense 44,504 6.2
Income tax expense 4,734 92.9
SHARE DATA:
Basic earnings per share $0.35 57.1 %
Diluted earnings per share 0.34 58.8
Cash dividends paid per share 0.250 2.0
Book value per share 17.66 4.1
Weighted average shares - basic 30,263,438 9.2
Weighted average shares - diluted 30,812,528 9.3
Common shares outstanding 32,997,873 0.2
END OF PERIOD BALANCES:
Investment securities portfolio $2,175,961 0.8 %
Total loans 3,519,519 -
Assets 6,423,052 (0.4)
Deposits 4,130,502 (5.6)
Stockholders' equity 582,877 4.4
Common stockholders' equity 597,052 2.0
AVERAGE BALANCES:
Investment securities portfolio $2,223,952 (2.1)%
Loans:
Residential real estate 1,306,016 5.8
Other consumer 499,341 (1.2)
Commercial real estate 893,331 8.9
Commercial business 594,828 14.8
Total loans 3,293,516 7.2
Earning assets 5,541,428 3.3
Assets 6,113,920 4.7
Deposits:
Noninterest-bearing 752,198 6.0
Interest-bearing 3,067,141 3.1
Total deposits 3,819,339 3.7
Stockholders' equity 499,078 19.5
Common stockholders' equity 508,892 17.8
SELECTED RATIOS:
Return on average assets 0.69 %
Return on average equity 8.46
Return on average common equity 8.30
Net yield on average earning assets
(t/e basis) 3.31
Efficiency ratio 62.68
Leverage ratio 8.50
Tier I risk-based capital ratio 12.08
Total risk-based capital ratio 13.25
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data) Nine Months Ended
September 30,
2004 2003 % Change
SUMMARY OF OPERATIONS:
Net income $41,427 $37,288 11.1 %
Net interest income 134,384 110,463 21.7
Provision for loan losses 5,112 7,961 (35.8)
Non-interest income 68,144 63,574 7.2
Net gains (losses) (6,597) (4,899) 34.7
Non-interest income, excluding net
gains (losses) 74,741 68,473 9.2
Non-interest expense 135,694 118,680 14.3
Merger expense 3,266 - -
Non-interest expense, excluding merger
expense 132,428 118,680 11.6
Income tax expense 20,295 10,108 100.8
SHARE DATA:
Basic earnings per share $1.41 $1.52 (7.2)%
Diluted earnings per share 1.38 1.48 (6.8)
Cash dividends paid per share 0.750 0.690 8.7
Book value per share 18.39 12.93 42.2
Weighted average shares - basic 29,338,683 24,482,641 19.8
Weighted average shares - diluted 29,960,728 25,112,217 19.3
Common shares outstanding 33,076,217 24,483,143 35.1
END OF PERIOD BALANCES:
Investment securities portfolio $2,194,401 $1,970,618 11.4 %
Total loans 3,520,266 2,702,255 30.3
Assets 6,396,815 4,985,445 28.3
Deposits 3,897,258 3,087,906 26.2
Stockholders' equity 608,242 316,661 92.1
Common stockholders' equity 608,702 321,350 89.4
AVERAGE BALANCES:
Investment securities portfolio $2,164,723 $2,058,217 5.2 %
Loans:
Residential real estate 1,295,552 1,063,308 21.8
Other consumer 500,300 507,325 (1.4)
Commercial real estate 858,695 609,215 41.0
Commercial business 558,253 370,906 50.5
Total loans 3,212,800 2,550,754 26.0
Earning assets 5,393,054 4,622,554 16.7
Assets 5,917,784 4,956,246 19.4
Deposits:
Noninterest-bearing 706,120 528,071 33.7
Interest-bearing 2,911,957 2,642,688 10.2
Total deposits 3,618,077 3,170,759 14.1
Stockholders' equity 476,084 315,962 50.7
Common stockholders' equity 480,617 309,378 55.3
SELECTED RATIOS:
Return on average assets 0.94 % 0.99 %
Return on average equity 11.62 15.78
Return on average common equity 11.51 16.11
Net yield on average earning assets
(t/e basis) 3.34 3.21
Efficiency ratio 63.15 66.13
Leverage ratio 8.30 7.61
Tier I risk-based capital ratio 12.32 11.99
Total risk-based capital ratio 13.47 13.11
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 Corporation
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