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EXHIBIT 99.1
CONTACT:
Media - Lillian Kilroy (410) 277-2833
Investment Community - Patricia Ferrick (703) 352-2583
PROVIDENT BANKSHARES CORPORATION ANNOUNCES
36% EARNINGS GROWTH FOR THIRD QUARTER 2004
SOUTHERN FINANCIAL MERGER AND
FINANCIAL FUNDAMENTALS DRIVE RESULTS
BALTIMORE: (October 21, 2004) - 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
o Net interest margin improved to 3.51% from 3.26% for the 2003 third quarter
o Non-interest income (excluding net gains) grew 11% from the comparable
period in 2003
o 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
o 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
o 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.
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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.
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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:
o 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.
o 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.
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o 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.
o 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 www.provbank.com.
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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 www.provbank.com. The
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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.
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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
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PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA)
Three Months Ended Three Months Ended
September 30, June 30,
----------------------------------------- --------------------------
2004 2003 % Change 2004 % Change
------------- ------------- ---------- ------------- -----------
SUMMARY OF OPERATIONS:
Net income $ 18,052 $ 13,308 35.6 % $ 10,500 71.9 %
Net interest income 50,312 38,037 32.3 45,349 10.9
Provision for loan losses 1,723 2,950 (41.6) 1,215 41.8
Non-interest income 26,985 24,623 9.6 17,576 53.5
Net gains (losses) 464 746 (37.8) (7,877) (105.9)
Non-interest income, excluding net gains (losses) 26,521 23,877 11.1 25,453 4.2
Non-interest expense 48,391 39,330 23.0 46,476 4.1
Merger expense 1,110 - - 1,972 (43.7)
Non-interest expense, excluding merger expense 47,281 39,330 20.2 44,504 6.2
Income tax expense 9,131 7,072 29.1 4,734 92.9
SHARE DATA:
Basic earnings per share $ 0.55 $ 0.54 1.9 % $ 0.35 57.1 %
Diluted earnings per share 0.54 0.53 1.9 0.34 58.8
Cash dividends paid per share 0.255 0.235 8.5 0.250 2.0
Book value per share 18.39 12.93 42.2 17.66 4.1
Weighted average shares - basic 33,037,793 24,555,675 34.5 30,263,438 9.2
Weighted average shares - diluted 33,663,248 25,205,315 33.6 30,812,528 9.3
Common shares outstanding 33,076,217 24,483,143 35.1 32,997,873 0.2
END OF PERIOD BALANCES:
Investment securities portfolio $ 2,194,401 $ 1,970,618 11.4 % $ 2,175,961 0.8 %
Total loans 3,520,266 2,702,255 30.3 3,519,519 -
Assets 6,396,815 4,985,445 28.3 6,423,052 (0.4)
Deposits 3,897,258 3,087,906 26.2 4,130,502 (5.6)
Stockholders' equity 608,242 316,661 92.1 582,877 4.4
Common stockholders' equity 608,702 321,350 89.4 597,052 2.0
AVERAGE BALANCES:
Investment securities portfolio $ 2,176,770 $ 1,993,040 9.2 % $ 2,223,952 (2.1)%
Loans:
Residential real estate 1,381,676 1,107,745 24.7 1,306,016 5.8
Other consumer 493,569 515,622 (4.3) 499,341 (1.2)
Commercial real estate 973,138 646,939 50.4 893,331 8.9
Commercial business 682,948 369,657 84.8 594,828 14.8
Total loans 3,531,331 2,639,963 33.8 3,293,516 7.2
Earning assets 5,724,978 4,648,407 23.2 5,541,428 3.3
Assets 6,403,309 4,984,959 28.5 6,113,920 4.7
Deposits:
Noninterest-bearing 797,625 574,611 38.8 752,198 6.0
Interest-bearing 3,162,298 2,577,522 22.7 3,067,141 3.1
Total deposits 3,959,923 3,152,133 25.6 3,819,339 3.7
Stockholders' equity 596,316 303,702 96.3 499,078 19.5
Common stockholders' equity 599,233 317,578 88.7 508,892 17.8
SELECTED RATIOS:
Return on average assets 1.12 % 1.06 % 0.69 %
Return on average equity 12.04 17.38 8.46
Return on average common equity 11.98 16.63 8.30
Net yield on average earning assets (t/e basis) 3.51 3.26 3.31
Efficiency ratio 61.38 63.35 62.68
Leverage ratio 8.30 7.61 8.50
Tier I risk-based capital ratio 12.32 11.99 12.08
Total risk-based capital ratio 13.47 13.11 13.25
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PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA)
Nine Months Ended
September 30,
------------------------------------------
2004 2003 % Change
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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