PROVIDENT BANKSHARES CORPORATION
SunTrust Robinson Humphrey September 9, 2004
FORWARD-LOOKING STATEMENTS AND RISK FACTORS
This presentation, and other written materials and oral statements made by management, may contain certain forward-looking statements, including those regarding the Company’s prospective performance, plans, strategies and expectations, 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 harbor provisions.
Forward-looking statements, which are based on certain assumptions and describe future events, 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 performance, plans, strategies and expectations, including those with respect to its merger with Southern Financial Bancorp, Inc., 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 presentation: the ability to successfully integrate the companies following the merger, including the retention of key personnel; the ability to effect the proposed capital recovery and optimization plan; 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.
Factors that could have a material adverse effect on the operations of the Company and its subsidiaries include, but are not limited to: changes in general economic conditions, interest rates, deposit flows, loan demand, real estate values, competition, and the demand for financial services and loan, deposit, and investment products in the Company’s local markets; changes in the quality or composition of the loan or investment portfolios; inability to successfully carry out marketing and/or expansion plans; changes in accounting principles, policies, or guidelines; changes in legislation and regulation; changes in the monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Federal Reserve Board; war or terrorist activities; and other economic, competitive, governmental, regulatory, geopolitical, and technological factors affecting the Company’s 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.
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AGENDA
HISTORY ‘THE NEW PROVIDENT’ KEY STRATEGIES
INVESTMENT ATTRIBUTES
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HISTORY
1886 - Founded
1987 - Converted to Commercial Bank
1993 - Totally Free Checking/In-Store Branches 1997 – Citizen’s Savings Bank Merger 2004 – Southern Financial Merger
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PROVIDENT BANKSHARES
CORPORATION
THE NEW PROVIDENT
430,000 Customers 2000 Employees 148 Branches $4.1B Total Deposits $3.5B Total Loans
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PROVIDENT BANKSHARES
CORPORATION
THE NEW PROVIDENT FRANCHISE
Branches located in Maryland and Virginia’s best markets
County Demographics
PBKS Branches 4—8% Projected Growth +8% Projected Growth
County Demographics
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STRATEGY STATEMENT
Provident is a regional bank serving Maryland and Virginia with emphasis in the key urban markets of Baltimore, Washington, and Richmond.
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.
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PROVIDENT BANKSHARES
CORPORATION
KEY STRATEGIES
Broaden Presence and Customer Base in Washington Metro and Virginia Grow Commercial Banking Market Share in the Maryland and Virginia Markets Focus Resources on Growth in Core Business Lines Improve Financial Fundamentals
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PROVIDENT BANKSHARES
CORPORATION
BROADEN PRESENCE AND
CUSTOMER BASE IN WASHINGTON METRO AND
VIRGINIA
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PROVIDENT BANKSHARES
CORPORATION
VIRGINIA AND WASHINGTON
METRO EXPANSION
BRANCH NETWORK
83
98
100
109
118
148
59
66
65
66
67
70
24
32
35
43
51
78
1999 2000 2001 2002 2003 2Q04
VA/Wash Metro Baltimore
TOTAL AWARENESS
100 90 80 70 60 50 40 30
2Q 00 2Q 01 2Q 02 2Q 03 2Q04
Baltimore Sub MD Virginia
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CHECKING BALANCE GROWTH
VA/WASHINGTON METRO
CONSUMER
$81 $106 $134 $202
2001 2002 2003 2Q04
Average Balances (millions)
COMMERCIAL
$49 $100 $160 $302
2001 2002 2003 2Q04
CAGR Consumer 2001-2Q04* 14% CAGR Commercial 2001-2Q04* 61%
* Includes SFFB in 2001 base
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GROW COMMERCIAL BANKING
MARKET SHARE IN THE MARYLAND AND VIRGINIA
MARKETS
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PROVIDENT BANKSHARES
CORPORATION
DEFINITIONS
Core Loans
Originated by Provident; participations in our defined market area Core Consumer includes home equity loans and lines, marine, other installment loans Core Commercial includes real estate, commercial loans 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
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CORE COMMERCIAL LOAN AND
DEPOSIT/REPO GROWTH
LOANS
$961 $791 $856 $1,429
2001 2002 2003 2Q04
Baltimore VA/Wash
Average Balances (millions)
DEPOSIT/REPO
$680 $579 $426 $1,006
2001 2002 2003 2Q04
CAGR 2001-2Q04* Loans 14% CAGR 2001-2Q04* Deposits 32%
*includes SFFB in 2001 base
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FOCUS RESOURCES ON GROWTH IN CORE BUSINESS
LINES
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PROVIDENT BANKSHARES
CORPORATION
CORE LOAN AND DEPOSIT GROWTH
CORE LOANS VS
TOTAL LOANS
$1.5 $3.1 $1.7 $2.7 $1.9 $2.6 $2.5 $3.3
47%
62%
72%
77%
2001 2002 2003 2Q04
Core Total
Average Balances (billions)
CORE DEPOSITS VS
TOTAL DEPOSITS
$2.5 $3.6 $2.7 $3.3 $2.8 $3.1 $3.5 $3.8
71%
82%
90%
91%
2001 2002 2003 2Q04
CAGR Core Loans 2001-2Q04* 15% CAGR Core Deposits 2001-2Q04* 9%
* Includes SFFB in 2001 base
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PROVIDENT’S IN-STORE
DIFFERENCE
*PEOPLE* *PARTNERS *PRODUCT* *PROGRAM
PROVIDENT BANK NETWORK
TRADITIONAL/IN-STORE
BRANCH SIZE
$89.8 $23.3 $45.8 $10.8
Traditional In-Store
Average Deposits Largest Branch
(At 6/30/04)
DDA BALANCE AS % OF
TOTAL DEPOSITS
31%
41%
Traditional In-Store
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CONSUMER DDA FEES
ANNUAL FEES PER ACCOUNT
300,000 250,000 200,000 150,000 100,000 50,000 0 $230 $210 $217 $188 $131 $250 $200 $150 $100 $50 $0
2000 2001 2002 2003 2Q04
Accounts on Hand Average Fee Income Per Consumer DDA
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IMPROVE FINANCIAL
FUNDAMENTALS
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PROVIDENT BANKSHARES
CORPORATION
THE NEW PROVIDENT
TRANSFORMED BALANCE SHEET HIGHER ABSOLUTE EARNINGS IMPROVED EARNINGS QUALITY
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COMPONENT OF EARNING ASSET
2001
36%
30%
34%
2Q04
40%
46%
14%
Investment Securities Core Loans Non-Core Loans
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CORE LOANS TO TOTAL LOANS
2001
Commercial Loans CAGR 14%* Consumer Loans CAGR 15%*
2Q04
53%
26%
21%
24%
32%
44%
Non-Core Commercial Consumer
*Includes SFFB in 2001 base
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FUNDING TO EARNING ASSETS
2001
53%
25%
22%
2Q04
62%
32%
6%
Core Dep Brokered Dep Borrowings
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CORE DEPOSIT GROWTH
(in millions)
Total Deposits
Core Deposits
CAGR 9%*
$3,819 $3,591 $3,481
$2,548
2001 2Q04 2001 2Q04
*Includes SFFB in 2001 base
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ASSET QUALITY
NON PERFORMING LOANS
TO LOANS
Period End
NET CHARGE OFFS TO AVERAGE LOANS
Annualized
1.04% $28.8
0.83% $21.1
0.80% $22.3
0.84% $29.7
0.68% $21.0
0.41% $11.0
0.29% $7.6
0.21% $1.7
2001 2002 2003 2Q04
2001 2002 2003 2Q04 $ in millions
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EARNINGS PER SHARE $2.05 $1.88 $1.56 $0.49 $0.51 $0.52
2001 2002 2003 2Q03 1Q04 2Q04*
* Excludes $8 million pre-tax loss on securities or $.18 diluted EPS; GAAP diluted EPS for 2Q04 was $.34
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DIVIDEND TRENDS
$1.20
$1.00
$0.80
$0.60
$0.40
$0.20
$0.00
3.6% 3.3%
3.5%
3.5%
6.00%
5.25%
4.50%
3.75%
3.00%
2.25%
1.50%
0.75%
0.00%
2001 2002 2003 2004
Cash Dividend Dividend Yield
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EQUITY SUMMARY TOTAL RETURN COMPARISON
31.00%
79.93%
28.63%
41.92%
42.23%
48.18%
6.13%
10.49%
Since 12/31/00 Since 12/31/01 Since 12/31/02 Since 12/31/03
SNL Bank PBKS
Through 8/31/04
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MEASURES OF SUCCESS
2001 2Q04
EFFICIENCY RATIO 68% 65% NET INTEREST MARGIN 2.89% 3.31% RETURN ON ASSETS83% 1.05%* CAPITAL LEVEL 7.13% 8.48%
Excludes $8 million pre-tax loss on securities or $.18 diluted EPS; GAAP return on assets for 2Q04 was .69%
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INVESTMENT ATTRIBUTES
Core balance sheet momentum
Effective expansion strategy
Growing market share in attractive markets Stable and improving credit quality Experienced management team
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PROVIDENT BANKSHARES
CORPORATION
PROVIDENT BANKSHARES CORPORATION
(www.provbank.com)
Contact:
Media: Lillian Kilroy: (410) 277-2833
Investment Community: Tricia Ferrick: (703) 352-2583
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PROVIDENT BANKSHARES
CORPORATION
