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EXHIBIT 99.1
CONTACT:
Media - Vicki Cox (410) 277-2063
Investment Community - Melissa Kelly (410) 277-2080
PROVIDENT BANKSHARES CORPORATION REPORTS
EXCELLENT EARNINGS GROWTH FOR 2005 SECOND QUARTER
MOMENTUM OF CORE BUSINESSES PRODUCES STRONG RESULTS
BALTIMORE: (July 21, 2005) - Provident Bankshares Corporation (NASDAQ:PBKS), the
parent company of Provident Bank, today reported $18.4 million in net income or
$0.55 per diluted share, for the second quarter of 2005.
Results for the quarter included a one-time after-tax adjustment of $699,000, or
$0.02 per diluted share, to reflect the cumulative impact of a modification of
the Company's accounting practices related to leased facilities. Like many other
publicly-traded companies that have a significant number of leased facilities,
the Company is conforming its method of accounting for rent expense for leases
that contain fixed escalations in rent payments, in order to be consistent with
accounting guidance. While the lease accounting adjustment accelerates rent
expense from future periods, it does not affect historical or future cash flows
or the timing or amounts of rent payments.
Provident's continued focus on financial fundamentals produced strong results
for the quarter. Net interest margin was 3.58%, as compared to 3.31% for the
same quarter last year. Return on assets was 1.15%, and return on common equity
was 11.82%. The efficiency ratio improved to 62.2% for the quarter. Excluding
the impact of the lease accounting adjustment, return on assets would have been
1.20%, and return on common equity would have been 12.27%. Asset quality
remained strong, as non-performing assets to loans were 0.67% and charge-offs to
average loans were 0.14% for the quarter. The financial results reflect the
continued balance sheet transition toward growing loans and deposits in core
business segments.
The basis for financial comparison includes the impact of the Southern Financial
Bancorp, Inc. merger for two months of the second quarter of 2004 and the entire
second quarter of 2005.
SECOND QUARTER FINANCIAL HIGHLIGHTS
o Net income increased 76%, to $18.4 million, over the 2004 second quarter
o Net interest margin was 3.58%, up from 3.31% the same quarter of last year
o Return on assets increased to 1.15%, up from 0.69% for the 2004 second
quarter
o Return on common equity was 11.82%, as compared 8.30% for the same quarter
of last year
o Non-interest income, excluding net gains (losses), grew 8% from the
comparable period in 2004
o Average loans increased $282 million, or 9%, from the 2004 second quarter
o Average deposits increased $113 million, or 3%, from the 2004 second quarter
o Asset quality remained strong as net charge-offs as a percentage of average
loans were 14 basis points, compared to 25 basis points last year
o Capital ratios remained strong with a leverage ratio of 7.98% and total
risk-based capital ratio of 12.02%
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SECOND QUARTER RESULTS
Provident Bankshares reported net income for the quarter ending June 30, 2005 of
$18.4 million, a 76% increase over the second quarter of 2004. Earnings per
diluted share were $0.55, an increase of 62% over the 2004 second quarter.
Average total loans increased 9%, or $282 million, over the second quarter of
2004. This total included a planned decline in purchased residential loans.
Average home equity loans increased $199.8 million, or 35%, as compared to the
same quarter last year, more than offsetting planned reductions in marine loans
of $22 million and reductions in other consumer loans of $14 million. Average
commercial business and real estate loans increased $248 million, or 17%.
Average deposits increased $113 million, or 3%, over the same quarter last year.
This growth comprised balance increases in consumer money market and demand
deposit accounts and in commercial demand deposit accounts. Overall, demand
deposit accounts grew by 11% with an increase of $139 million over the second
quarter of 2004.
The execution of the Bank's plan to focus on loans and deposits from core
business segments resulted in a $5.4 million increase in net interest income, a
12% improvement over the same quarter of 2004.
Non-interest income, excluding gains, grew 8% to $27 million, up from $25
million in the second quarter of 2004, due to increases in deposit service fees,
loan fees and commissions.
Total non-performing loans at June 30, 2005 fell to $22.5 million, compared with
$29.7 million at June 30, 2004. Net charge-offs declined by 38% to $1.3 million,
from $2.1 million for the 2004 second quarter. The allowance for loan losses, at
1.29% of period-end loans, was a 2.07 multiple of non-performing loans.
Capital ratios continue to be strong, with a leverage ratio of 7.98% and a total
risk-based capital ratio of 12.02% at June 30, 2005. These compare to 8.50% and
13.23% respectively, at June 30, 2004. The difference in capital levels is due
to the planned reduction in trust preferred securities which were called in
accordance with their terms in the first and second quarters.
DIVIDEND DECLARED
Provident Bankshares announced today that its Board of Directors has declared a
quarterly cash dividend of $0.275 per share. This is the forty-seventh
consecutive quarterly dividend increase. The quarterly cash dividend will be
paid on August 12, 2005 to stockholders of record at the close of business on
August 1, 2005.
MANAGEMENT COMMENT
Commenting on the Company's performance, Chairman and CEO Gary N. Geisel said,
"Despite the accounting adjustment for property leases, we are very pleased with
the results of the quarter. Our current growth across all business lines is
proof that Provident is meeting and exceeding the expectations of consumers and
businesses every day in the Baltimore, Washington and Richmond metropolitan
areas."
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EXECUTION OF KEY BUSINESS STRATEGIES
Provident's key business strategies provide the Company with a unique
opportunity in its marketplace. An overview of the strategies for the year and
some accomplishments to date are discussed below:
o MAXIMIZE PROVIDENT'S POSITION AS THE RIGHT SIZE BANK IN THE MARKETPLACE
Provident's position as the second largest bank headquartered in Maryland
provides a unique opportunity as the "right size" bank in its footprint.
The Company provides the service of a community bank combined with the
convenience and wide array of products and services that a strong regional
bank offers. This is evident in the feedback received in the Bank's regular
customer surveys and focus groups. In addition, the 62 in-store branches
throughout its footprint reinforce its right size strategy through
convenient extended and weekend hours of more than 60 per week and full
product service. Provident currently has 152 branches concentrated in the
Baltimore-Washington corridor, extending to Richmond, Virginia.
o GROW AND DEEPEN CONSUMER AND SMALL BUSINESS RELATIONSHIPS IN MARYLAND AND
VIRGINIA
The Bank is continually expanding consumer and small business market and
wallet share. Customers are open to expanding their relationships with the
Bank, because they value the high level of personal service they receive at
Provident. Consumers also understand and appreciate the convenience of
Provident's products, as shown by debit card usage trends. In the second
quarter of 2005, MasterMoney purchases increased by 15% over the same
period of last year, and Business Debit Card purchases increased by 18%.
Home equity lending was also an area of significant growth during the
second quarter. Provident experienced a 35% increase in average home equity
balances for the quarter as compared to the second quarter of 2004.
The Bank's small business activities are gaining momentum due to the strong
partnership between the Small Business Group, the branch network and the
Bank's sales call center, Provident Direct. The Bank's small business
customers have available a number of specialists ready to assist them
on-site at the business, in the branch office or on the telephone.
o GROW AND DEEPEN COMMERCIAL AND REAL ESTATE RELATIONSHIPS IN MARYLAND
AND VIRGINIA
In addition to providing customized banking solutions to commercial
entities, Provident is an established and steady presence in the real
estate lending arena. The satisfaction of our current clients leads to
expanded relationships and often opens the doors of prospective customers.
For the quarter, commercial deposits in the Baltimore metropolitan /
Maryland area grew 8%, and commercial deposits in the Washington
metropolitan and Virginia markets increased 5% over the second quarter of
2004, due to growth in savings and demand deposit account categories. As
compared to the 2004 second quarter, commercial loan balances grew 12% in
the Baltimore region, and by 21% in the Virginia/Washington metro area due
to robust activity in both commercial business and real estate lending.
o MOVE FROM A PRODUCT DRIVEN ORGANIZATION TO A CUSTOMER RELATIONSHIP
FOCUSED SALES CULTURE
The Company's transition to a customer relationship driven sales culture
requires deepening relationships through cross-selling and 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
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execution of this strategy will be centered on the right size bank
commitment - providing the service of a community bank combined with the
convenience and wide array of products and services that a strong regional
bank offers.
o CREATE A HIGH PERFORMANCE CULTURE THAT FOCUSES ON EMPLOYEE DEVELOPMENT
AND RETENTION
Provident has always placed a high priority on its employees and is
approaching employee development and training with renewed emphasis.
Employee development is viewed as a critical part of executing Provident's
strategy as the right size bank and transforming the Company's sales
culture.
OUTLOOK FOR THE FUTURE
Commenting on the future for Provident Bankshares, Chairman and CEO Gary N.
Geisel added, "Given the continued momentum of our consumer and commercial lines
of business, we are right on track for our expectations for 2005. The key to our
success is providing our retail, small business, commercial and real estate
customers with a wide array of services, coupled with the personal service that
they deserve and expect. That is what our right size bank strategy is all
about."
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 key urban
areas of Baltimore, Washington and Richmond through a network of 152 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 second quarter earnings
teleconference will be webcast at 10:00 AM ET on Thursday, July 21, 2005. The
conference call will include a discussion of the Company's second quarter 2005
results of operations and may include forward-looking information. The
conference call will be simultaneously webcast at www.provbank.com and archived
through July 28, 2005. To listen to the conference call, please go to the
Company's website at least 15 minutes early to register, download, and install
any necessary software. When in the Company's website, click on the link to
"About Provident" and "Investor Relations" and look under "Upcoming Events" and
then click on the link to "Provident Bankshares Corporation Second Quarter 2005
Results" audio webcast and download Real Player or Media Player as necessary. An
audio replay of the teleconference will be available through July 28, 2005 by
dialing 1-888-286-8010, passcode 20949121.
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 2004 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
EARNINGS GROWTH DETERMINED BY USING U.S. GENERALLY ACCEPTED ACCOUNTING
PRINCIPLES ("GAAP"); 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
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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: THE
FACTORS IDENTIFIED IN THE COMPANY'S FORM 10-K FOR THE FISCAL YEAR ENDED DECEMBER
31, 2004 UNDER THE HEADINGS "FORWARD-LOOKING STATEMENTS" AND "RISK FACTORS";
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. READERS ARE CAUTIONED NOT TO PLACE UNDUE RELIANCE ON THESE
FORWARD-LOOKING STATEMENTS WHICH 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
June 30, March 31,
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2005 2004 % Change 2005 % Change
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SUMMARY INCOME STATEMENTS:
Net interest income $ 50,755 $ 45,349 11.9 $ 50,321 0.9%
Provision for loan losses 2,222 1,530 45.2 1,575 41.1
Non-interest income 28,189 17,576 60.4 25,285 11.5
Net gains (losses) 706 (7,877) (109.0) (776) (191.0)
Non-interest income, excluding net gains (losses) 27,483 25,453 8.0 26,061 5.5
Non-interest expense 49,826 46,161 7.9 47,474 5.0
Merger expense - 1,972 - - -
Non-interest expense, excluding merger expense 49,826 44,189 12.8 47,474 5.0
Income tax expense 8,458 4,734 78.7 8,449 0.1
Net income 18,438 10,500 75.6 18,108 1.8
SHARE DATA:
Basic earnings per share $ 0.56 $ 0.35 60.0% $ 0.55 1.8%
Diluted earnings per share 0.55 0.34 61.8 0.54 1.9
Cash dividends paid per share 0.270 0.250 8.0 0.265 1.9
Book value per share 19.06 17.66 7.9 18.55 2.8
Weighted average shares - basic 32,938,762 30,263,438 8.8 33,029,444 (0.3)
Weighted average shares - diluted 33,524,779 30,812,528 8.8 33,720,433 (0.6)
Common shares outstanding 32,865,817 32,997,873 (0.4) 33,062,288 (0.6)
SELECTED RATIOS:
Return on average assets 1.15% 0.69% 1.14
Return on average equity 11.91 8.46 11.89
Return on average common equity 11.82 8.30 11.87
Net yield on average earning assets (t/e basis) 3.58 3.31 3.58
Efficiency ratio 62.21 62.24 62.00
Leverage ratio 7.98 8.50 7.93
Tier I risk-based capital ratio 10.98 12.07 11.25
Total risk-based capital ratio 12.02 13.23 12.31
END OF PERIOD BALANCES:
Investment securities portfolio $2,058,074 $2,175,961 (5.4)% $2,145,381 (4.1)%
Total loans 3,623,791 3,519,519 3.0 3,541,175 2.3
Assets 6,407,388 6,423,052 (0.2) 6,423,685 (0.3)
Deposits 4,037,828 4,130,502 (2.2) 3,927,077 2.8
Stockholders' equity 626,546 582,877 7.5 613,379 2.1
Common stockholders' equity 628,036 597,052 5.2 624,840 0.5
AVERAGE BALANCES:
Investment securities portfolio $2,119,140 $2,223,952 (4.7)% $2,169,979 (2.3)%
Loans:
Residential real estate 1,376,516 1,306,016 5.4 1,364,566 0.9
Other consumer 462,768 499,341 (7.3) 471,141 (1.8)
Commercial real estate 1,059,130 893,331 18.6 1,026,306 3.2
Commercial business 676,863 594,828 13.8 678,183 (0.2)
Total loans 3,575,277 3,293,516 8.6 3,540,196 1.0
Earning assets 5,710,257 5,541,428 3.0 5,724,939 (0.3)
Assets 6,421,046 6,113,920 5.0 6,425,748 (0.1)
Deposits:
Noninterest-bearing 817,408 752,198 8.7 783,673 4.3
Interest-bearing 3,114,806 3,067,141 1.6 2,978,489 4.6
Total deposits 3,932,214 3,819,339 3.0 3,762,162 4.5
Stockholders' equity 620,951 499,078 24.4 617,664 0.5
Common stockholders' equity 625,693 508,892 23.0 618,799 1.1
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PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Six Months Ended
June 30,
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2005 2004 % Change
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SUMMARY INCOME STATEMENTS:
Net interest income $ 101,076 $ 84,072 20.2 %
Provision for loan losses 3,797 3,922 (3.2)
Non-interest income 53,474 41,159 29.9
Net gains (losses) (70) (7,061) (99.0)
Non-interest income, excluding net gains (losses) 53,544 48,220 11.0
Non-interest expense 97,300 86,770 12.1
Merger expense - 2,156 -
Non-interest expense, excluding merger expense 97,300 84,614 15.0
Income tax expense 16,907 11,164 51.4
Net income 36,546 23,375 56.3
SHARE DATA:
Basic earnings per share $ 1.11 $ 0.85 30.6 %
Diluted earnings per share 1.09 0.83 31.3
Cash dividends paid per share 0.535 0.495 8.1
Book value per share 19.06 17.66 7.9
Weighted average shares - basic 32,984,013 27,465,996 20.1
Weighted average shares - diluted 33,616,247 28,086,337 19.7
Common shares outstanding 32,865,817 32,997,873 (0.4)
SELECTED RATIOS:
Return on average assets 1.15 % 0.83
Return on average equity 11.90 11.32
Return on average common equity 11.84 11.17
Net yield on average earning assets (t/e basis) 3.58 3.25
Efficiency ratio 62.11 63.77
Leverage ratio 7.98 8.50
Tier I risk-based capital ratio 10.98 12.07
Total risk-based capital ratio 12.02 13.23
END OF PERIOD BALANCES:
Investment securities portfolio $2,058,074 $2,175,961 (5.4)%
Total loans 3,623,791 3,519,519 3.0
Assets 6,407,388 6,423,052 (0.2)
Deposits 4,037,828 4,130,502 (2.2)
Stockholders' equity 626,546 582,877 7.5
Common stockholders' equity 628,036 597,052 5.2
AVERAGE BALANCES:
Investment securities portfolio $2,144,419 $2,158,635 (0.7)%
Loans:
Residential real estate 1,370,575 1,252,016 9.5
Other consumer 466,931 503,703 (7.3)
Commercial real estate 1,042,808 800,845 30.2
Commercial business 677,519 495,221 36.8
Total loans 3,557,833 3,051,785 16.6
Earning assets 5,717,557 5,225,271 9.4
Assets 6,423,384 5,672,355 13.2
Deposits:
Noninterest-bearing 800,634 659,865 21.3
Interest-bearing 3,047,023 2,785,410 9.4
Total deposits 3,847,657 3,445,275 11.7
Stockholders' equity 619,317 415,310 49.1
Common stockholders' equity 622,265 420,660 47.9