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CONTACT:
Media - Lillian Kilroy (410) 277-2833
Investment Community - Patricia Ferrick (703) 352-2583
PROVIDENT BANKSHARES CORPORATION ANNOUNCES
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33% EARNINGS GROWTH FOR FOURTH QUARTER
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AND 17% FOR 2004 YEAR
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CORE BANKING GROWTH AND SOUTHERN FINANCIAL MERGER
LEAD TO RECORD EARNINGS
BALTIMORE: (January 20, 2005) - Provident Bankshares Corporation (NASDAQ:PBKS),
the parent company of Provident Bank, today reported $18.9 million in net income
or $0.56 per diluted share for the fourth quarter of 2004. Full year net income
was $60.3 million, or $1.95 per diluted share. The basis for financial
comparison includes the impact of the Southern Financial Bancorp, Inc. merger
for the fourth quarter and eight months of the 2004 year.
Provident's core banking growth in the key markets of Baltimore, Washington and
Richmond led to record earnings for the quarter and the year. Consumer banking
growth included increases in loans and deposits of 10% and 13%, respectively,
over the fourth quarter of 2003. Commercial loans and deposits also posted
strong growth of 58% and 60%, respectively, over the same period. Net interest
margin increased to 3.53% for the 2004 fourth quarter, a 32 basis point increase
over the prior year's quarter. Asset quality remained strong as non-performing
assets to loans were 0.77% and charge-offs to average loans were 0.28% for the
quarter. The 2004 strategic merger of Southern Financial Bancorp, Inc.
facilitated core banking growth, particularly in the commercial segments. The
merger also added 30 branches in the Northern Virginia, Richmond,
Charlottesville and Washington D.C. areas.
FOURTH QUARTER FINANCIAL HIGHLIGHTS
o Net income increased 33%, to $18.9 million, over the 2003 fourth quarter
o Net interest margin improved to 3.53%, from 3.21% for the 2003 fourth
quarter
o Return on assets increased to 1.16%, up from 1.10% for the 2003 fourth
quarter
o Return on common equity continues to recover from our acquisition to 12.26%
o Asset quality remained strong as net charge-offs as a percentage of average
loans were 28 basis points, compared to 26 basis points last year
o Capital ratios remained strong, with a leverage ratio of 8.23% and total
risk based capital ratio of 12.81%
o Average loans increased $773 million, or 28%, from the 2003 fourth quarter
o Average deposits increased $710 million, or 23%, from the 2003 fourth
quarter
o Non-interest income grew 9% from the comparable period in 2003
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FOURTH QUARTER RESULTS
During the quarter, Provident's franchise growth and continued strong credit
quality produced record net income for the quarter. Provident Bankshares
reported net income for the quarter ending December 31, 2004 of $18.9 million,
an increase of 33% over the fourth quarter of 2003. Higher net interest income
and non-interest income, and a lower provision for loan losses, drove the
earnings increase, which was partially offset by increases in non-interest
expenses and the provision for taxes over the prior year. Earnings per diluted
share were $0.56 for both the 2004 and 2003 fourth quarters. Earnings of $0.56
per diluted share for the 2004 fourth quarter recognized costs of $0.02 per
share for professional services relating to Sarbanes-Oxley compliance. Further,
weighted average diluted shares outstanding increased by 8.7 million over the
prior year quarter, primarily due to the Southern Financial merger.
Average loans increased 28% over the fourth quarter of 2003, representing growth
in both consumer and commercial loans of 10% and 58%, respectively. Average home
equity loans increased $190 million, or 39%, and continued to drive consumer
lending growth. Average commercial real estate loans increased $307 million, or
45%, while commercial business loans increased $303 million, or 84%. The
addition of loans acquired from the Southern Financial merger contributed to the
growth in the commercial segments.
Average deposits increased $710 million, or 23%, over the same quarter last
year. Demand accounts represented the largest increase of $331 million, or 34%.
Average money market, savings, and time deposits accounts represented the
remaining increase over the prior year's quarter. Average brokered deposits also
increased over the 2003 fourth quarter, driven by an increase in callable
brokered deposits acquired in the merger, as well as brokered deposits issued
during the year as an alternative funding source to borrowings. Reported deposit
growth for the quarter included a $203 million decline resulting from the sale
of three Norfolk/Tidewater branches and a partial interest in a loan
sub-servicing company acquired in the Southern Financial merger.
The net interest margin on a tax equivalent basis improved to 3.53%, a 32 basis
point increase over the fourth quarter 2003 level of 3.21%. The increase in net
interest margin was primarily attributable to a 21% increase in earning assets
to $5.8 billion, driven primarily by loan growth. The margin was also positively
impacted by a post-merger restructuring of the combined balance sheets, which
eliminated over $400 million in low-margin securities coincident with the merger
and, to a lesser extent, by the increase in interest rates during the year.
Non-interest income grew 9% to $26.9 million, up from $24.8 million in the
fourth quarter 2003, primarily due to growth in deposit service fee income.
Total deposit service fees increased 4% over the 2003 fourth quarter, driven by
growth in MasterMoney and commercial deposit fees.
Total non-performing loans at December 31, 2004 were $25.7 million, compared
with $22.3 million for the same quarter a year ago. Net charge-offs increased to
$2.5 million, up from $1.8 million for the 2003 fourth quarter, and the
allowance for loan losses, at 1.30% of period-end loans, was 180% of
non-performing loans.
Capital ratios continue to be strong, with a leverage ratio of 8.23% and a total
risk-based capital ratio of 12.81% at December 31, 2004. These compare to 8.49%
and 15.32%, respectively, at December 31, 2003. During the quarter, the Bank
repurchased 116,900 common shares as part of its share repurchase plan.
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DIVIDEND DECLARED
Provident Bankshares announced today that its Board of Directors has declared a
quarterly cash dividend of $0.265 per share. This is the forty-fifth consecutive
quarterly dividend increase. The quarterly cash dividend will be paid on
February 11, 2005 to stockholders of record at the close of business on January
31, 2005.
MANAGEMENT COMMENT
Commenting on the Company's fourth quarter performance, Chairman and CEO, Gary
N. Geisel said, "I'm pleased by the results of the quarter and our overall
progress as we continue to build a strong regional bank dedicated to consumer,
small business and commercial customers."
2004 FULL YEAR RESULTS
Provident's core banking growth, including the Southern Financial merger,
translated to record earnings for the year. For the full year ended December 31,
2004, net income totaled $60.3 million; a 17% increase over 2003. The net
interest margin improved to 3.39%, up from 3.21%, and the efficiency ratio was
62.79%, compared to 64.90% for the prior year. The leverage and total risk-based
capital ratios were 8.23% and 12.81%, compared to 8.49% and 15.32%,
respectively, for 2003. Asset quality remained strong for the year. The ratio of
non-performing assets to loans improved to 0.77% in 2004, down from 0.92% in
2003. Net charge-offs increased slightly to $9.0 million, up from $8.7 million,
for 2004 and 2003, respectively, and the ratio of allowance for loan losses to
loans was 1.30% at December 31, 2004.
Diluted earnings per share were $1.95 and $2.05 for 2004 and 2003, respectively.
Earnings for 2004 included the impacts of $0.18 per share in net securities
losses associated with the balance sheet restructure, $0.07 per share of merger
costs and $0.02 per share of costs related to professional services associated
with Sarbanes-Oxley compliance.
VIRGINIA FRANCHISE
Provident's Virginia franchise is a significant component of its core banking
activity as reflected in the 2004 results. For the year, consumer and commercial
deposits in the Washington metropolitan and Virginia markets increased 51% and
106%, representing increases in consumer and commercial checking, money market,
savings and certificate of deposit accounts. The 30 branches added from the
Southern Financial merger facilitated the growth in deposits for the year. The
growth in the Virginia franchise resulted in 83 branches, or 56% of total
branches, in the key metropolitan urban markets of Washington and Richmond.
Average consumer loan balances increased 83% and commercial loan balances more
than doubled over 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 as well as the benefits of the merger.
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EXECUTION OF KEY BUSINESS STRATEGIES
The Company's focus on its recently modified key business strategies, including
the strategic merger with Southern Financial and the related balance sheet
restructuring, continued to drive results for the year:
o MAXIMIZE PROVIDENT'S POSITION AS THE RIGHT SIZE BANK IN THE MARKETPLACE
Provident's position as one of the largest banks headquartered in Maryland
and Virginia provides a unique opportunity as the "right size" bank in its
footprint. The Company provides the service of a small institution
combined with the convenience and wide array of products and services that
a strong regional bank offers. Provident currently has 149 branches
concentrated in the Baltimore-Washington corridor and beyond to Richmond,
Virginia. The distribution of branches in Provident's footprint reflects
the Company's focus on growth in this marketplace.
o GROW AND DEEPEN CONSUMER AND SMALL BUSINESS RELATIONSHIPS IN MARYLAND
AND VIRGINIA
Consumer banking operations continued to contribute to Provident's positive
results for the year. Average consumer loan balances increased $209
million, or 13%, over the 2003 year. Home equity lending continues to lead
consumer loan growth with an increase of 43% over the prior year.
Provident's expertise in home equity lending resulted in average balances
during 2004 of $600 million, compared to $421 million during 2003.
Year over year, total average consumer deposits increased 11%. Average
consumer demand account balances increased 19%, from $623 million in 2003,
to $739 million in 2004. Average consumer money market deposits and savings
deposits combined increased 9%. Small business loans and deposits, one of
Provident's new initiatives, increased significantly from 2003 and are
included in the commercial banking totals.
o GROW AND DEEPEN COMMERCIAL AND REAL ESTATE RELATIONSHIPS IN MARYLAND
AND VIRGINIA
Average commercial and real estate loan growth remained strong with
Provident increasing its average commercial portfolio by 48%, or $480
million, from 2003. This increase represented growth of 42% commercial real
estate and 59% commercial business loans. Commercial deposits increased 54%
over the prior year with average demand account balances and money market
balances representing the areas of growth at 43% and 89%, respectively. The
increase in the commercial loan and deposit portfolios also reflects the
benefits derived from Southern Financial's focus on commercial banking.
o MOVE FROM A PRODUCT DRIVEN ORGANIZATION TO A CUSTOMER RELATIONSHIP
FOCUSED SALES CULTURE
The Company's evolution from a product driven culture to a customer
relationship driven strategy requires deepening relationships through cross
sell and the continuing emphasis on retention of valued customers. The
Company has segmented its customers to better understand and anticipate
their financial needs and provide Provident's sales force with a targeted
approach to customers and prospects. The successful execution of this
strategy will be centered on the right size bank commitment - providing the
service of a small institution combined with the convenience and wide array
of products and services that a strong regional bank offers.
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o CREATE A HIGH PERFORMANCE CULTURE THAT FOCUSES ON EMPLOYEE DEVELOPMENT
AND RETENTION
Provident has always placed a high priority on its employees. Their
development is viewed as a critical part of executing its strategy as the
right size bank and transforming the Company's sales culture. The focus is
on the employee's development and their approach with Provident's
customers.
OUTLOOK FOR THE FUTURE
Commenting on the future for Provident Bankshares, Chairman and CEO Gary N.
Geisel added, "2005 will be a year where we continue to execute against our key
strategies and invest for the longer term while improving short term results."
Provident Bankshares Corporation is the holding company for Provident Bank, the
second largest independent commercial bank headquartered in Maryland. With $6.6
billion in assets, Provident serves individuals and businesses in the key urban
areas of Baltimore, Washington and Richmond 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.
SPECIAL NOTE: Provident Bankshares Corporation's fourth quarter earnings
teleconference will be webcast at 10:00 a.m. (ET) on Thursday, January 20, 2005.
The webcast can be accessed on the Provident website at 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 January 27,
2005. An audio replay of the webcast will also be available during the same
period, at 1-888-203-1112, passcode ID 418424. 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.
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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
December 31, September 30,
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2004 2003 % Change 2004 % Change
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SUMMARY OF OPERATIONS:
Net income $ 18,898 $ 14,167 33.4 % $ 18,052 4.7 %
Net interest income 50,971 38,417 32.7 50,312 1.3
Provision for loan losses 1,505 2,341 (35.7) 2,107 (28.6)
Non-interest income 26,923 24,799 8.6 26,985 (0.2)
Net gains (losses) 824 520 58.5 464 77.6
Non-interest income, excluding net gains (losses) 26,099 24,279 7.5 26,521 (1.6)
Non-interest expense 48,951 39,401 24.2 48,007 2.0
Merger expense 275 - - 1,110 (75.2)
Non-interest expense, excluding merger expense 48,676 39,401 23.5 46,897 3.8
Income tax expense 8,540 7,307 16.9 9,131 (6.5)
SHARE DATA:
Basic earnings per share $ 0.57 $ 0.58 (1.7)% $ 0.55 3.6 %
Diluted earnings per share 0.56 0.56 0.0 0.54 3.7
Cash dividends paid per share 0.26 0.24 8.3 0.26 2.0
Book value per share 18.65 13.22 41.1 18.39 1.4
Weighted average shares - basic 33,161,703 24,530,346 35.2 33,037,793 0.4
Weighted average shares - diluted 33,941,261 25,227,584 34.5 33,663,248 0.8
Common shares outstanding 33,102,385 24,562,273 34.8 33,076,217 0.1
END OF PERIOD BALANCES:
Investment securities portfolio $ 2,301,066 $ 2,086,510 10.3 % $ 2,194,401 4.9 %
Total loans 3,559,880 2,784,546 27.8 3,520,266 1.1
Assets 6,572,160 5,207,848 26.2 6,396,815 2.7
Deposits 3,782,000 3,079,549 22.8 3,897,258 (3.0)
Stockholders' equity 617,439 324,765 90.1 608,242 1.5
Common stockholders' equity 618,403 331,354 86.6 608,702 1.6
AVERAGE BALANCES:
Investment securities portfolio $ 2,245,879 $ 2,028,690 10.7 % $ 2,176,770 3.2 %
Loans:
Residential real estate 1,365,614 1,173,949 16.3 1,381,676 (1.2)
Other consumer 482,613 511,832 (5.7) 493,569 (2.2)
Commercial real estate 992,584 685,273 44.8 973,138 2.0
Commercial business 663,491 360,408 84.1 682,948 (2.8)
Total loans 3,504,302 2,731,462 28.3 3,531,331 (0.8)
Earning assets 5,765,688 4,769,095 20.9 5,724,978 0.7
Assets 6,452,924 5,097,202 26.6 6,403,264 0.8
Deposits:
Noninterest-bearing 804,657 550,496 46.2 797,625 0.9
Interest-bearing 2,966,376 2,510,314 18.2 3,162,298 (6.2)
Total deposits 3,771,033 3,060,810 23.2 3,959,923 (4.8)
Stockholders' equity 615,101 311,838 97.3 596,316 3.2
Common stockholders' equity 613,219 321,249 90.9 599,233 2.3
SELECTED RATIOS:
Return on average assets 1.16 % 1.10 % 1.12 %
Return on average equity 12.22 18.02 12.04
Return on average common equity 12.26 17.50 11.98
Net yield on average earning assets (t/e basis) 3.53 3.21 3.51
Efficiency ratio 63.01 62.69 60.89
Leverage ratio 8.23 8.49 8.25
Tier I risk-based capital ratio 11.74 13.28 12.21
Total risk-based capital ratio 12.81 15.32 13.36
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PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Twelve Months Ended
December 31,
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2004 2003 % Change
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SUMMARY OF OPERATIONS:
Net income $ 60,325 $ 51,455 17.2 %
Net interest income 185,355 148,880 24.5
Provision for loan losses 7,534 11,122 (32.3)
Non-interest income 95,067 88,373 7.6
Net gains (losses) (5,773) (4,379) 31.8
Non-interest income, excluding net gains (losses) 100,840 92,752 8.7
Non-interest expense 183,728 157,261 16.8
Merger expense 3,541 - -
Non-interest expense, excluding merger expense 180,187 157,261 14.6
Income tax expense 28,835 17,415 65.6
SHARE DATA:
Basic earnings per share $ 1.99 $ 2.10 (5.2)%
Diluted earnings per share 1.95 2.05 (4.9)
Cash dividends paid per share 1.01 0.93 8.6
Book value per share 18.65 13.22 41.1
Weighted average shares - basic 30,299,243 24,494,659 23.7
Weighted average shares - diluted 30,971,104 25,142,075 23.2
Common shares outstanding 33,102,385 24,562,273 34.8
END OF PERIOD BALANCES:
Investment securities portfolio $ 2,301,066 $ 2,086,510 10.3 %
Total loans 3,559,880 2,784,546 27.8
Assets 6,572,160 5,207,848 26.2
Deposits 3,782,000 3,079,549 22.8
Stockholders' equity 617,439 324,765 90.1
Common stockholders' equity 618,403 331,354 86.6
AVERAGE BALANCES:
Investment securities portfolio $ 2,185,124 $ 2,050,774 6.6 %
Loans:
Residential real estate 1,313,163 1,091,194 20.3
Other consumer 495,854 508,463 (2.5)
Commercial real estate 892,350 628,385 42.0
Commercial business 584,707 368,260 58.8
Total loans 3,286,074 2,596,302 26.6
Earning assets 5,486,723 4,659,491 17.8
Assets 6,052,292 4,991,775 21.2
Deposits:
Noninterest-bearing 730,889 533,724 36.9
Interest-bearing 2,925,636 2,609,320 12.1
Total deposits 3,656,525 3,143,044 16.3
Stockholders' equity 511,029 314,490 62.5
Common stockholders' equity 513,952 312,371 64.5
SELECTED RATIOS:
Return on average assets 1.00 % 1.03 %
Return on average equity 11.80 16.36
Return on average common equity 11.74 16.47
Net yield on average earning assets (t/e basis) 3.39 3.21
Efficiency ratio 62.79 64.90
Leverage ratio 8.23 8.49
Tier I risk-based capital ratio 11.74 13.28
Total risk-based capital ratio 12.81 15.32