Balance Sheet Remains Strong with Healthy Capital and Liquidity Positions
Company Declares Quarterly Common Stock Dividend of $0.11 Per Share
BALTIMORE, Oct. 27 /PRNewswire-FirstCall/ -- Provident Bankshares
Corporation (Nasdaq: PBKS), the parent company of Provident Bank, today
reported financial results for the third quarter of 2008.
The Company recorded a net loss of $5.4 million, or ($0.21) per diluted
share, for the third quarter of 2008, compared with net income of $16.0
million, or $0.50 per diluted share, for the same period of the prior year.
The decline in earnings per share is primarily due to a $24.6 million
pre-tax non-cash accounting charge for other than temporary impairment
("OTTI") of certain investment securities.
"The turmoil in the financial markets resulted in a further decline in
the value of certain securities in our investment portfolio during the
third quarter," said Gary N. Geisel, Chairman and CEO of Provident
Bankshares. "The stability of our core banking operations, as well as the
capital we raised earlier this year, has enabled Provident to withstand the
lower values recorded in our securities portfolio without it having a
material impact on the health of our Bank. In addition, we were pleased to
be recently informed by the U.S. Treasury that Provident has been granted
preliminary approval to participate in its new TARP Capital Purchase
Program. Our participation will be subject to the execution of the
Program's required procedures and approval by Provident's Board of
Directors."
"In the current environment, our top priority is maintaining the
strength of our balance sheet. We were successful in this regard during the
third quarter as both loans and deposits increased over the prior quarter,
while our capital levels and liquidity position remained healthy. We did
see an increase in non-performing loans during the quarter, primarily
related to weakness in the performance of the residential construction
industry which management had expected. We believe any losses that
materialize will be manageable," said Mr. Geisel.
Regional Economic Highlights
While economic conditions in Provident's regional markets weakened
during the third quarter of 2008, they continued to be stronger than
national averages. Unemployment rates for August 2008 were 4.8% in
Baltimore, 5.0% in the Richmond area, and 4.1% for the
Washington-Arlington-Alexandria area. These levels were well below the
national unemployment rate of 6.1%. Average unsold housing inventories in
the Baltimore-Washington region declined slightly during the third quarter
of 2008.
Income Statement
The Company's net interest income for the third quarter of 2008 was
$43.8 million, compared with $47.8 million in the same period of the prior
year. Despite an increase in average total earning assets from the prior
year, net interest income declined due to a 36 basis point reduction in net
interest margin.
On a sequential quarter basis, the net interest margin declined to
3.09% in the third quarter of 2008 from 3.28% in the second quarter of
2008. This decline was primarily the result of management's proactive
decision to enhance the Company's longer-term liquidity position by adding
brokered certificates of deposit with longer durations. During the third
quarter of 2008, the Company utilized the increased liquidity provided by
the increase in brokered certificates of deposit to reduce its reliance on
short-term borrowings.
Non-interest income was $4.6 million in the third quarter of 2008,
compared to $35.3 million in the same period of the prior year. Excluding
the $24.6 million OTTI charge, non-interest income was $29.1 million in the
third quarter of 2008. In addition to the OTTI charge, the year-over-year
decline in non-interest income was primarily attributable to a one-time
gain of $4.9 million in 2007 relating to the sale of deposits and
facilities of six branches in the third quarter of 2007. Adjusted for this
gain and the OTTI charge, year-over-year non-interest income declined $2.2
million, primarily due to a decrease in transaction based deposit fees.
Non-interest expense remained relatively flat, increasing slightly to
$53.2 million in the third quarter of 2008, compared to $52.7 million in
the same period of the prior year.
Balance Sheet
Total average loans remained flat at $4.2 billion in the third quarter
of 2008, compared with the second quarter of 2008. Growth in the commercial
business and commercial mortgage loan portfolios was offset by a decline in
residential real estate construction loans.
Total average deposits were $4.5 billion in the third quarter of 2008,
an increase from $4.3 billion in the second quarter of 2008. The increase
was primarily attributable to higher balances of brokered certificates of
deposit, offset by the seasonal declines in the other deposit categories.
In each of the past three years, the Company has experienced declines in
most deposit categories from the second quarter to the third quarter.
Investment Portfolio
During the third quarter of 2008, the Company recorded other-than-
temporary-impairment of $24.6 million pre-tax, or $(0.45) per diluted
share. This impairment occurred primarily as a result of continued weakness
in the residential real estate markets and the resulting decline in
expected future cash flows for the affected investments. The table below
reflects the write- downs by the associated portfolio type and their
current balances as of September 30, 2008.
(dollars in thousands) Third Quarter
Fair Amortized 2008
Portfolio Value Cost Write-downs
Pooled Trups - REITs $15,092 $22,671 $(619)
Non-agency mortgage backed securities 67,773 77,037 (19,790)
Pooled Trups - Banks and Insurance 238,125 404,087 (4,161)
Totals $320,990 $503,795 $(24,570)
A detailed breakdown of the investment portfolio is included in the
financial tables at the end of this press release.
Asset Quality and Capital Ratios
In the third quarter of 2008, the Company recorded a provision for loan
losses of $6.6 million. The level of provision reflects an increase in net
charge-offs and non-performing loans given the weakened economic
conditions.
Total non-performing loans as a percentage of total loans was 0.95% at
September 30, 2008, an increase from 0.59% at June 30, 2008. The increase
is primarily due to two residential construction loans totaling
approximately $15.8 million that were placed on non-performing status
during the third quarter. Non-performing loans in the other loan portfolios
either remained stable or increased modestly from the prior quarter,
consistent with the decline in general economic conditions.
Loan delinquencies greater than 90 days as a percentage of total loans
were 0.27% at September 30, 2008, compared to 0.17% at June 30, 2008. Net
charge-offs as a percentage of average loans were 0.48% for the third
quarter of 2008, an increase from 0.33% in the second quarter of 2008. The
increase in net charge-offs was primarily attributable to higher net
charge-offs in the home equity and commercial business portfolios. The
increase in non- performing loans and loan delinquencies was in line with
management's previously communicated expectations.
Total allowance for loan losses to total loans was 1.40% at September
30, 2008, an increase from 1.38% at June 30, 2008. Total allowance for loan
losses to non-performing loans was 148% at September 30, 2008, a decline
from 236% at June 30, 2008. The Company believes that the decline in the
total allowance to non-performing loans ratio is acceptable, given the
strong collateral underlying the loans that were placed on non-performing
status during the third quarter of 2008, which results in minimal reserves
required against these loans.
Capital
At September 30, 2008, all of the Company's regulatory capital ratios
exceeded the guidelines required to be considered a "well capitalized
institution" as established by the Company's primary banking regulators.
These levels are considered to be at least 5.00% for the leverage ratio and
10.00% for the total capital ratio. At September 30, 2008, the Company's
leverage ratio was 8.39% and the total capital ratio was 12.29%.
US government agencies have initiated a number of actions designed to
provide or improve stability to the financial system. One such action is
the US Treasury's Troubled Asset Relief Program Capital Purchase Program.
Provident's capital levels are well above the minimum required for
regulatory status as a "well capitalized" institution. This program offers
all qualifying banks the opportunity to issue and sell preferred stock,
along with warrants to purchase common stock to the US Treasury on what
appears to be attractive terms. While Provident has been granted
preliminary approval by the US Treasury to participate, the Company has not
finalized its decision at this time.
Outlook
Mr. Geisel commented on the outlook for Provident Bankshares, "For the
next few quarters, we expect modest loan growth, stable non-interest
income, a further decline in our net interest margin, and a flat or
downward trend in our expense levels. We also believe that continued
economic weakness will most likely result in elevated credit costs. Given
our strong capital ratios, stable deposit base and significant reserve
levels, we believe we are well positioned from a capital and liquidity
standpoint to effectively manage through this challenging period."
Dividend Declared
Provident Bankshares previously announced that on October 15, 2008, its
Board of Directors declared a quarterly cash dividend of $0.11 per share.
The quarterly cash dividend will be paid on November 7, 2008, to common
stockholders of record at the close of business on October 27, 2008.
The Board of Directors also declared a quarterly dividend of $25.00 per
share on its convertible preferred stock. This dividend will be paid on
November 3, 2008, to preferred stockholders of record at the close of
business on October 27, 2008.
About Provident Bankshares Corporation
Provident Bankshares Corporation is the holding company for Provident
Bank, the largest independent commercial bank headquartered in Maryland.
With $6.4 billion in assets, Provident serves individuals and businesses in
the key metropolitan areas of Baltimore, Washington and Richmond through a
current branch network of 142 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 Company and leases through Court Square Leasing. Visit
Provident on the Web at http://www.provbank.com.
Webcast Information
Provident Bankshares Corporation's third quarter earnings
teleconference will be webcast at 2 p.m. ET on October 27, 2008. The
conference call will include a discussion of the Company's third quarter
2008 results of operations and may include forward-looking information. The
conference call will be simultaneously webcast at http://www.provbank.com and
archived through November 10, 2008. To listen to the conference call,
please go to the Company's website and follow these links:
-- About Provident
-- Investor Relations
-- Upcoming Events
-- Provident Bankshares Corporation Third Quarter 2008 Results
Audio Webcast
An audio replay of the teleconference will be available October 27,
2008 at 4:00 p.m. through November 10, 2008 by dialing 1-888-286-8010,
passcode 60402016; the international dial-in number is 617-801-6888.
The Company has posted additional supplemental financial tables on its
website at http://www.provbank.com in the Investor Relations section.
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.
TABLES FOLLOW
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Three Months Ended Three Months Ended
September 30, June 30,
% %
2008 2007 Change 2008 Change
SUMMARY NON-GAAP
INCOME STATEMENTS:
Net interest income $43,832 $47,837 (8.4)% $46,003 (4.7)%
Provision for loan
losses 6,571 7,494 (12.3) 6,400 2.7
Non-interest income 4,553 35,303 (87.1) 16,317 (72.1)
Impairment on
investment
securities (24,570) - - (20,748) 18.4
Net gains 947 4,902 (80.7) 8,151 (88.4)
Non-interest income,
excluding total
gains 28,176 30,401 (7.3) 28,914 (2.6)
Total revenue,
excluding total
gains 72,008 78,238 (8.0) 74,917 (3.9)
Non-interest expense 53,193 52,685 1.0 50,373 5.6
Restructuring
activities 5 111 (95.5) (34) (114.7)
Non-interest
expense, excluding
restructuring 53,188 52,574 1.2 50,407 5.5
Income tax expense
(benefit) (5,987) 6,993 (185.6) (4,677) 28.0
Net income (loss) (5,392) 15,968 (133.8) 10,224 (152.7)
Beneficial
conversion feature
- preferred stock - - - 1,463 -
Dividends -
preferred stock 1,523 - - - -
Net income (loss)
available to
common
stockholders (6,915) 15,968 (143.3) 8,761 (178.9)
SHARE DATA:
Basic earnings
(loss) per share $(0.21) $0.50 (142.0)% $0.27 (177.8)%
Diluted earnings
(loss) per share (0.21) 0.50 (142.0) 0.27 (177.8)
Cash dividends
paid per common
share 0.110 0.315 (65.1) 0.110 -
Cash dividends
paid per
preferred share 29.72 - - - -
Book value per
common share 14.73 19.10 (22.9) 15.73 (6.4)
Weighted average
shares - basic 32,993,033 31,931,837 3.3 32,789,883 0.6
Weighted average
shares - diluted 32,993,033 32,091,566 2.8 32,894,508 0.3
Common shares
outstanding 33,338,972 31,974,520 4.3 33,172,640 0.5
SELECTED RATIOS:
Return on average
assets (0.34)% 1.01% 0.65%
Return on average
equity (3.78) 10.27 7.21
Return on average
common equity (4.50) 9.82 5.77
Net yield on
average earning
assets
(t/e basis) 3.09 3.45 3.28
Efficiency ratio
(excludes
restructuring
activities) 73.05 66.50 66.57
Leverage ratio 8.39 8.74 8.67
Tier I risk-based
capital ratio 10.13 10.76 10.59
Total risk-based
capital ratio 12.29 11.82 12.75
Tangible common
equity ratio 5.65 6.50 5.81
END OF PERIOD
BALANCES:
Investment
securities
portfolio $1,328,223 $1,559,599 (14.8)% $1,380,946 (3.8)%
Total loans 4,264,201 4,047,715 5.3 4,202,407 1.5
Assets 6,410,476 6,364,010 0.7 6,382,055 0.4
Deposits 4,595,393 4,206,741 9.2 4,360,480 5.4
Stockholders'
equity 542,464 610,721 (11.2) 573,166 (5.4)
Common
stockholders'
equity 604,793 657,286 (8.0) 615,004 (1.7)
AVERAGE BALANCES:
Investment
securities
portfolio $1,511,735 $1,609,766 (6.1)% $1,535,106 (1.5)%
Loans:
Originated and
acquired
residential
mortgage 262,372 298,019 (12.0) 274,357 (4.4)
Home equity 1,117,718 1,050,442 6.4 1,089,914 2.6
Other consumer 382,691 386,750 (1.0) 383,194 (0.1)
Commercial
real estate 1,510,880 1,434,997 5.3 1,533,109 (1.4)
Commercial
business 946,563 803,537 17.8 917,765 3.1
Total loans 4,220,224 3,973,745 6.2 4,198,339 0.5
Earning assets 5,740,574 5,596,734 2.6 5,746,389 (0.1)
Assets 6,444,096 6,279,353 2.6 6,436,068 0.1
Deposits:
Noninterest-
bearing 653,428 709,492 (7.9) 665,638 (1.8)
Interest-bearing 3,821,708 3,375,739 13.2 3,642,386 4.9
Total deposits 4,475,136 4,085,231 9.5 4,308,024 3.9
Stockholders'
equity 567,377 617,043 (8.0) 570,245 (0.5)
Common
stockholders'
equity 611,396 644,896 (5.2) 610,430 0.2
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Nine Months Ended
September 30,
2008 2007 % Change
SUMMARY NON-GAAP INCOME STATEMENTS:
Net interest income $134,824 $145,320 (7.2)%
Provision for loan losses 16,085 13,338 20.6
Non-interest income 5,746 96,257 (94.0)
Impairment on investment securities (87,973) - -
Net gains 8,907 6,525 36.5
Non-interest income, excluding total
gains 84,812 89,732 (5.5)
Total revenue, excluding total gains 219,636 235,052 (6.6)
Non-interest expense 154,997 160,081 (3.2)
Restructuring activities 45 1,459 (96.9)
Non-interest expense, excluding
restructuring 154,952 158,622 (2.3)
Income tax expense (benefit) (17,722) 20,554 (186.2)
Net income (loss) (12,790) 47,604 (126.9)
Beneficial conversion feature -
preferred stock 1,463 - -
Dividends - preferred stock 1,523 - -
Net income (loss) available to common
stockholders (15,776) 47,604 (133.1)
SHARE DATA:
Basic earnings (loss) per share $(0.49) $1.48 (133.1)%
Diluted earnings (loss) per share (0.49) 1.48 (133.1)
Cash dividends paid per common share 0.545 0.930 (41.4)
Cash dividends paid per preferred
share 29.72 - -
Book value per common share 14.73 19.10 (22.9)
Weighted average shares - basic 32,442,812 32,063,333 1.2
Weighted average shares - diluted 32,442,812 32,259,491 0.6
Common shares outstanding 33,338,972 31,974,520 4.3
SELECTED RATIOS:
Return on average assets (0.27)% 1.02%
Return on average equity (3.03) 10.14
Return on average common equity (3.43) 9.90
Net yield on average earning assets
(t/e basis) 3.18 3.55
Efficiency ratio
(excludes restructuring activities) 69.74 66.88
Leverage ratio 8.39 8.74
Tier I risk-based capital ratio 10.13 10.76
Total risk-based capital ratio 12.29 11.82
Tangible common equity ratio 5.65 6.50
END OF PERIOD BALANCES:
Investment securities portfolio $1,328,223 $1,559,599 (14.8)%
Total loans 4,264,201 4,047,715 5.3
Assets 6,410,476 6,364,010 0.7
Deposits 4,595,393 4,206,741 9.2
Stockholders' equity 542,464 610,721 (11.2)
Common stockholders' equity 604,793 657,286 (8.0)
AVERAGE BALANCES:
Investment securities portfolio $1,542,116 $1,627,388 (5.2)%
Loans:
Originated and acquired residential
mortgage 275,559 311,406 (11.5)
Home equity 1,098,104 1,020,822 7.6
Other consumer 382,700 394,051 (2.9)
Commercial real estate 1,526,098 1,416,920 7.7
Commercial business 933,800 773,392 20.7
Total loans 4,216,261 3,916,591 7.7
Earning assets 5,769,729 5,558,459 3.8
Assets 6,463,759 6,243,179 3.5
Deposits:
Noninterest-bearing 654,073 725,771 (9.9)
Interest-bearing 3,685,061 3,390,757 8.7
Total deposits 4,339,134 4,116,528 5.4
Stockholders' equity 564,760 627,408 (10.0)
Common stockholders' equity 613,902 643,008 (4.5)
Investment Securities Portfolio
September 30, 2008 Unrealized
($ in thousands) Gains/(Losses)
Par Fair Amortized Recognized Cumulative
Value Value Cost in OCI OTTI
Available For Sale
Treasuries $7,000 $6,947 $6,936 $11 $-
Sovereign 400 400 400 - -
FHLB Stock $38,369 $38,369 $38,369 $- $-
Agency MBS/ARM 623,101 626,085 628,662 (2,577) -
Municipals
AAA 73,425 71,213 73,759 (2,546) -
AA 58,655 56,162 58,894 (2,732) -
A 18,690 17,886 18,755 (869) -
Total 150,770 145,261 151,408 (6,147) -
Pooled Trups -
Banks &
Insurance
AAA 74,717 43,085 74,722 (31,637) -
AA 41,899 19,463 41,912 (22,449) -
A 20,673 10,277 20,687 (10,410) -
Total 137,289 72,825 137,321 (64,496) -
Pooled Trups -
REITs
AA 15,000 4,905 11,340 (6,435) (3,653)
A 14,000 2,678 4,096 (1,418) (9,908)
BBB 14,000 2,674 2,436 238 (11,610)
BB 42,760 3,913 3,521 392 (38,479)
B 20,671 922 1,278 (356) (18,714)
Total 106,431 15,092 22,671 (7,579) (82,364)
Non-Agency MBS
AAA 59,708 51,589 57,337 (5,748) (2,085)
AA 12,453 5,392 8,328 (2,936) (3,796)
A 20,290 5,273 5,273 - (15,110)
BBB 6,729 3,156 3,156 - (3,574)
BB 9,445 889 1,367 (478) (8,095)
B 7,859 689 703 (14) (7,181)
CCC 9,815 785 873 (88) (9,095)
Total 126,299 67,773 77,037 (9,264) (48,936)
Single Issuer
Bank Trups
A 38,750 30,332 36,403 (6,071) -
BBB 17,003 13,333 16,641 (3,308) -
Total 55,753 43,665 53,044 (9,379) -
Total Available
For Sale $1,245,412 $1,016,417 $1,115,848 $(99,431) $(131,300)
Held-To-Maturity
Pooled Trups -
Banks &
Insurance
AA 10,000 4,485 9,727 (273) -
A 238,093 115,323 183,712 (51,238) (3,143)
BBB 97,608 45,492 73,327 (23,263) (1,018)
Total 345,701 165,300 266,766 (74,774) (4,161)
Single Issuer
Bank Trups
AA 3,498 2,198 3,002 - -
A 34,000 29,305 34,393 38 -
BBB 2,100 2,164 1,957 - -
BB 5,000 3,630 5,098 - -
NR (Not Rated) 700 736 590 - -
Total 45,298 38,033 45,040 38 -
Total Held-To-
Maturity $390,999 $203,333 $311,806 $(74,736) $(4,161)
Total Investment
Portfolio $1,636,411 $1,219,750 $1,427,654 $(174,167) $(135,461)
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; Investment
Community: Dennis Starliper, +1-410-277-2080, both of Provident
Bankshares Corporation
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