Filed by Provident Bankshares Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Southern Financial Bancorp, Inc.
Commission File No.: 0-22836
The following is a presentation by Provident Bankshares Corporation presented on February 4-5, 2004:
Filed by Provident Bankshares Corporation
Pursuant to Rule 425 under the Securities Act of 1933
and deemed filed pursuant to Rule 14a-12
of the Securities Exchange Act of 1934
Subject Company: Southern Financial Bancorp, Inc.
Commission File No.: 0-22836
The following is a presentation by Provident Bankshares Corporation presented on February 4-5, 2004:
PROVIDENT BANKSHARES
CORPORATION
2003 SUMMARY
Provident Bankshares Corporation and Southern Financial Bancorp, Inc. will be filing a joint proxy statement/prospectus and other relevant documents concerning the merger with the United States Securities and Exchange Commission (the “SEC”).
WE URGE INVESTORS TO READ THE JOINT PROXY STATEMENT/PROSPECTUS AND ANY OTHER RELEVANT DOCUMENTS TO BE FILED WITH THE SEC, BECAUSE THEY CONTAIN IMPORTANT INFORMATION.
Investors will be able to obtain these documents free of charge at the SEC’s web site (www.sec.gov). In addition, documents filed with the SEC by Provident Bankshares Corporation will be available free of charge from the Investor Relations Department at Provident Bankshares Corporation, 114 East Lexington Street, Baltimore, Maryland 21202. Documents filed with the SEC by Southern Financial Bancorp, Inc. will be available free of charge from the Investor Relations Department at Southern Financial Bancorp, Inc., 37 East Main Street, Warrenton, Virginia 20186.
The directors, executive officers, and certain other members of management of Provident Bankshares Corporation and Southern Financial Bancorp, Inc. may be soliciting proxies in favor of the merger from the companies’ respective shareholders. For information about these directors, executive officers, and members of management, shareholders are asked to refer to the most recent proxy statements issued by the respective companies, which are available on their web sites and at the addresses provided in the preceding paragraph.
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK FACTORS
This release, and the associated conference call, web cast, other written materials, and statements management may make, may contain certain forward-looking statements regarding the Company’s prospective performance and strategies within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. The Company intends such forward-looking statements to be covered by the safe harbor provisions for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995, and is including this statement for purposes of said safe harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe future plans, strategies, and expectations of the Company, are generally identified by use of the words “plan,” “believe,” “expect,” “intend,” “anticipate,” “estimate,” “project,” or other similar expressions. The Company’s ability to predict results or the actual effects of its plans and strategies is inherently uncertain. Accordingly, actual results
may differ materially from anticipated results.
The following factors, among others, could cause the actual results of the merger to differ materially from the expectations stated in this release and the associated conference call and web cast: the ability of the companies to obtain the required shareholder or regulatory approvals of the merger; the ability of the companies to consummate the merger; the ability of Southern Financial to timely complete its acquisition of Essex Bancorp, Inc.; the ability to successfully integrate the companies following the merger; a materially adverse change in the financial condition of either company; the ability to fully realize the expected cost savings and revenues; and the ability to realize the expected cost savings and revenues on a timely basis.
Other factors that could cause the actual results of the merger to differ materially from current expectations include a change in economic conditions; changes in interest rates, deposit flows, loan demand, real estate values, and competition; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; and other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the companies’ operations, pricing, and services.
The Company undertakes no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
###
HISTORY
THE PROVIDENT DISTINCTION
KEY STRATEGIES SOUTHERN FINANCIAL MERGER
IMPROVE FINANCIAL FUNDAMENTALS
HISTORY
• 1886—Founded
• 1987—Converted to Commercial Bank
• 1993—Totally Free Checking/In-Store Branches
• 1997—CSB Acquisition
• 2003—Announcement of SFFB Acquisition
PROVIDENT BANKSHARES
CORPORATION
THE PROVIDENT
DISTINCTION
UNIQUE BY WHAT WE ARE
• $5.2 Billion in Assets
– “Right size bank” to know and serve our primary region
– Access to Executive Management
• Targeted to specific customers
– “Middle America” Consumer customer
– Small Business and Middle Market
– Sophisticated niche businesses (RE & Marine)
• Value-oriented products and delivery
– Convenient access
– Depth and breadth of products and services
PROVIDENT BANKSHARES
CORPORATION
KEY STRATEGIES
• |
| Build on Consumer Banking Success |
• |
| Grow Market Share and Expand in the Washington Metro and Virginia Markets |
• |
| Grow Commercial Banking Market Share in the Maryland and Virginia Markets |
• |
| Improve Financial Fundamentals |
PROVIDENT BANKSHARES
CORPORATION
BUILD ON CONSUMER BANKING
SUCCESS
PROVIDENT BANKSHARES
CORPORATION
PROVIDENT TRADE AREA
Baltimore City/Baltimore County
• |
| Homeowners—72% |
• |
| Average Income—$51,500 |
• |
| Average Age—40.78 Years |
Va/Washington Metro
• |
| Homeowners—75% |
• |
| Average Income—$73,700 |
• |
| Average Age—39.59 |
DEFINITIONS
• |
| Core Loans |
– |
| Originated by Provident; participations in our definedmarket area |
– |
| Core Consumer includes home equity loans and lines, marine, other installment loans |
– |
| Core Commercial includes real estate, commercialloans and lines and leases |
• |
| Non-Core Loans |
– |
| Purchased loans; participations outside our defined market area; discontinued product lines |
• |
| Core Deposits |
– |
| All deposits except brokered deposits |
CORE CONSUMER LOAN AND DEPOSIT GROWTH
LOANS
DEPOSITS
(excluding CD/IRA’s)
Average Balances ($ millions)
CAGR 2000-2003 Loans 17.32%
CAGR 2000-2003 Deposits 8.88%
PROVIDENT BANK NETWORK
TRADITIONAL/IN-STORE
(At 9/30/03)
PROVIDENT’S IN-STORE DIFFERENCE *PEOPLE* *PARTNERS
*PRODUCT* *PROGRAM*
PROVIDENT BANK NETWORK
TRADITIONAL/IN-STORE
BRANCH SIZE
DDA BALANCE AS % OF
TOTAL DEPOSITS
(At 12/31/03)
CONSUMER DDA FEES
ANNUAL FEES PER ACCOUNT
(Inc Master Money)
GROW MARKET SHARE AND EXPAND IN THE WASHINGTON
METRO AND VIRGINIA
MARKETS
PROVIDENT BANKSHARES
CORPORATION
VIRGINIA AND WASHINGTON METRO EXPANSION
BRANCH NETWORK
TOTAL AWARENESS
CHECKING BALANCE GROWTH VA/WASHINGTON METRO
CONSUMER
COMMERCIAL
CAGR Consumer 2000-2003 28.60%
CAGR Commercial 2000-2003 61.48%
GROW COMMERCIAL BANKINGMARKET SHARE IN THE MARYLAND AND VIRGINIA MARKETS
PROVIDENT BANKSHARES
CORPORATION
CORE COMMERCIAL LOAN AND DEPOSIT/REPO GROWTH
LOANS
DEPOSIT/REPO
CAGR Loans 2000-2003 12.78%
CAGR Dep/Repo 2000-2003 25.26%
Average Balances ($ millions)
STRATEGIC MERGER
Southern Financial Bank
SOUTHERN FINANCIALBANCORP, INC
• |
| Founded in 1986 |
• |
| Headquartered in Warrenton, Virginia |
• |
| $1.5 Billion Assets* |
• |
| 33 Branches* |
• |
| Middle Market and Small Business focus; Leading SBA lender |
*Upon completion of Essex acquisition
TRANSACTION STRENGTHS
Strategic Fit
Cultural Compatibility
Financial Opportunity
STRATEGIC FIT
Continues Provident’s market share expansion in the high growth markets of Virginia
VIRGINIA:
STRONG BANKING MARKET
• Population: 7.4 million (12th
largest state)
• Projected Population Growth: 6.5% (14th highest
(‘03-’08) growth rate in
the nation)
• Median Household Income: $51,923 (13th highest
in the nation and
10% above the
national average)
• Median Household Income Growth: 14.4% (11th highest
(‘03-’08) growth rate in
the nation)
PRO FORMA FRANCHISE
Branches located in Maryland and Virginia’s best markets
PBKS Branches SFFB Branches* 4—8% Projected Growth +8% Projected Growth
County Demographics
STRATEGIC FIT
Adds significant competitive advantage for business banking companies with a powerful
integrated suite of online banking services
PRO FORMA FINANCIAL IMPACT LOAN MIX
$2.6 Billion
$0.6 Billion
$3.2 Billion
PRO FORMA FINANCIAL IMPACT DEPOSIT MIX
$3.3 Billion
$0.9 Billion
$4.2 Billion
CULTURAL COMPATABILITY
Customer oriented
Employee focused
Community supporter
Excellent credit quality
FINANCIAL OPPORTUNITY
• |
| Accretive to GAAP and cash EPS in first full year of combined operations |
• |
| Identified, achievable cost savings |
• |
| Combined loan composition well-balanced |
• |
| Significant potential for retail loan and deposit growth |
DEAL STRUCTURE
• |
| Shares Issued: 8,065,000 |
• |
| Seller Ownership: 29.9% |
• |
| Goodwill: $261 Million |
• |
| Cost Savings: 24.6% |
DEAL STRUCTURE
PBKS/ SFFB(2) Mid-Atlantic Comps (1)
Premium to Market: 19.4% 37.3%
Price / LTM Reported EPS: 22.9x 20.4x
Price / Estimated EPS: 19.0x 19.0x
Price / Book Value: 2.72x 2.88x
Price / Tangible Book Value: 3.40x 3.04x
Source: SNL Financial, Company Filings, Press Releases & KBW
Comparable Transactions include bank transactions greater than $50 million since 1/1/2002
(1) Includes selling companies headquartered in MD, NC, NJ, PA, SC or VA
(2) Southern Financial Bancorp, Inc. is pro forma for the pending acquisition of Essex Bancorp
PRO FORMA RESULTS
At Closing At First Year
Assets $6.7 Billion $6.7 Billion
Deposits $4.5 Billion $4.9 Billion
Core Loans $2.6 Billion $2.9 Billion
Tangible Capital 5.19% 6.23%
Leverage Ratio 7.34% 8.39%
PROVIDENT
TRANSACTION INTEGRATION EXPERIENCE
• |
| Three prior acquisitions |
• |
| At the time of acquisition, First Citizens Financial represented 25% of Provident assets; Southern Financial Bancorp represents 29% of Provident assets today |
Company Employees Accounts
First Citizens Financial 188 56,400
Southern Financial Bancorp(1) 216 47,414
• |
| Provident has more than sufficient systems capacity to accommodate Southern Financial’s customers |
(1) Southern Financial Bancorp, Inc. is pro forma for the pending acquisition of Essex Bancorp
IMPROVE FINANCIAL FUNDAMENTALS
PROVIDENT BANKSHARES
CORPORATION
IMPROVE FINANCIALFUNDAMENTALS
CORE LOANS VS
TOTAL LOANS
CORE DEPOSITS VS
TOTAL DEPOSITS
CAGR Total Loans 2000-2003 (6.27%)
CAGR Core Loans 2000-2003 16.55%
CAGR Total Deposits 2000-2003 (7.37%)
CAGR Core Deposits 2000-2003 6.78%
Average Balances ( $ Billions)
IMPROVE FINANCIALFUNDAMENTALS
NON PERFORMING LOANS
(Period End)
NET CHARGE OFFS
% of loans; $Millions
IMPROVE FINANCIAL FUNDAMENTALS
NET INTEREST MARGIN
EFFICIENCY RATIO
IMPROVE FINANCIAL FUNDAMENTALS
RETURN ON AVERAGE ASSETS
RETURN ON AVERAGE COMMON EQUITY
00-02 Compound Annual Growth Rate 17%
IMPROVE FINANCIAL FUNDAMENTALS
LEVERAGE
TOTAL RISK-BASED CAPITAL
IMPROVE FINANCIAL FUNDAMENTALS
DILUTED EARNINGS PER SHARE
CASH DIVIDEND
Equity Summary Total Return Comparison
Through 12/31/03
INVESTMENT ATTRIBUTES
• |
| Core balance sheet momentum |
• |
| Effective expansion strategy |
• |
| Growing market share in attractive markets |
• |
| Stable and improving credit quality |
• |
| Experienced management team |
PROVIDENT BANKSHARES
CORPORATION
PROVIDENT BANKSHARES
CORPORATION
(www.provbank.com)
Contact:
Media: Lillian Kilroy: (410) 277-2833
Investment Community: Dennis Starliper: (410) 277-2889
PROVIDENT BANKSHARES
CORPORATION