CONTACT:
Media - Lillian Kilroy (410) 277-2833
Investment Community - Melissa Kelly (410) 277-2080
PROVIDENT BANKSHARES CORPORATION REPORTS
RECORD 2005 EARNINGS
CONSUMER AND COMMERCIAL LOAN AND DEPOSIT GROWTH LEADS TO 18% RISE IN EARNINGS
BALTIMORE: (January 19, 2006) - Provident Bankshares Corporation (NASDAQ: PBKS),
the parent company of Provident Bank, reported a record $73 million in net
income, or $2.17 per diluted share, for 2005. The Company reported $19 million
in net income, or $0.57 per diluted share, for the fourth quarter of 2005.
In the fourth quarter of 2005, Provident demonstrated consistent progress in
improving the quality as well as the level of earnings. This was achieved by
continuing the transition of the Bank's balance sheet from wholesale to core
banking activities and maintaining a consistent level of fee-based revenues.
Despite the challenges presented by a flattening yield curve, the Company
continued to produce quarterly improvement in the net interest margin. Net
income increased on a lower level of assets and a higher level of capital.
Credit conditions were ideal and contributed to the Company's continued decline
in loan charge-off rates.
"I am pleased with our solid results in the fourth quarter and throughout 2005.
Our success was driven by consistent execution of our corporate strategies,
which resulted in balanced accomplishments across our various markets and lines
of business," said Kevin G. Byrnes, President and Chief Operating Officer.
DIVIDEND DECLARED
Provident Bankshares announced today that its Board of Directors has declared a
quarterly cash dividend of $0.285 per share. This is the forty-ninth consecutive
quarterly dividend increase. The quarterly cash dividend will be paid on
February 10, 2006 to stockholders of record at the close of business on January
30, 2006.
FOURTH QUARTER FINANCIAL HIGHLIGHTS
Results for the fourth quarter 2005 compared to fourth quarter 2004:
o Net income increased .6% to $19 million
o Net interest margin improved to 3.59% from 3.40%
o Return on assets increased to 1.19% from 1.16%
o Home equity and commercial real estate average loans increased 30% and 22%,
respectively
o Average total deposits increased 6.7% and reached a record high $4 billion
o Net charge-offs as a percentage of average loans improved to 9 basis points
from 28 basis points
o Capital ratios remained strong with a leverage ratio of 8.40% and total
risk-based capital ratio of 11.93%.
FOURTH QUARTER RESULTS
Provident Bankshares reported net income for the quarter ending December 31,
2005 of $19 million, or $0.57 per diluted share. The financial results reflect
the Company's continued improvement in financial fundamentals through the
transition of the balance sheet.
Provident's experience and expertise in real estate lending resulted in fourth
quarter 2005 growth in average home equity loans of $203 million, or 30%, and
growth in average commercial real estate loans of $218 million, or 22%, from
fourth quarter 2004. The growth in real estate loans offset planned reductions
in average originated and acquired residential loans and investments of $209
million and $318 million, respectively, from fourth quarter 2004.
Average deposit balances increased $252 million, or 7%, to a record high $4
billion in fourth quarter 2005. Growth in average deposits from consumer and
commercial customers comprised $165 million of the increase, reflecting the
benefit of the Bank's expansion into new markets in recent years. Commercial
customers in the Virginia region were a particularly strong source of the
deposit growth from fourth quarter 2004 to fourth quarter 2005, contributing $88
million of net deposit growth, primarily in demand accounts.
Service charges on deposit accounts, commissions and other fee income increased
14% from fourth quarter 2004, to $25 million in fourth quarter 2005.
Non-interest expense increased $2.7 million in fourth quarter 2005.
Non-recurring charges relating to the Company's benefit plans accounted for
approximately $1 million of the increase. The remainder of the increase was
associated with higher costs of regulatory compliance and costs to maintain
support for the Bank's expanded franchise.
2005 FULL YEAR RESULTS
Provident's core banking growth, including the positive impact of the 2004
merger with Southern Financial, translated into record 2005 earnings. For the
full year ended December 31, 2005, net income totaled $73 million, an 18%
increase over 2004. Diluted earnings per share of $2.17 grew 8% from the 2004
level. Solid loan and deposit growth in the Bank's expanded franchise, combined
with reductions in its wholesale assets and liabilities, resulted in
improvements in key financial measures. The net interest margin improved 18
basis points in 2005, growing to 3.52% for the year. Return on assets improved
from 1.02% in 2004 to 1.14% in 2005. Growth in total revenue of 10% was evenly
balanced between growth in net interest income of 9% and growth in fees and
other non-interest income of 11% over 2004 levels.
Net charge-offs declined by $3.4 million, or 38%, to a record low of $5.5
million, or 0.15% of average loans in 2005. Strong asset quality within the loan
portfolio is a reflection of management's credit policies and strategy of
shifting the balance sheet to core loan portfolios. In addition, credit
conditions remained favorable during 2005. The allowance for loan losses, at
1.24% of period-end loans, was a 1.77 multiple of non-performing loans, which
remained stable at $25.7 million at December 31, 2005.
Capital ratios continued to be strong, with a leverage ratio of 8.40% and a
total risk-based capital ratio of 11.93% at December 31, 2005. The Corporation's
tangible common equity ratio of 6.28% at December 31, 2005 reflected a return to
levels prior to the merger with Southern Financial.
EXECUTION OF KEY BUSINESS STRATEGIES
The Bank's current business strategies are listed below:
o Maximize Provident's position as the right size bank in the marketplace
o Grow and deepen consumer and small business relationships in Maryland
and Virginia
o Grow and deepen commercial and real estate relationships in Maryland and
Virginia
o Move from a product driven organization to a customer relationship focused
sales culture
o Create a high performance culture that focuses on employee development and
retention
Much was achieved in support of these key strategies during 2005. Three
highlights of the year's performance are the introduction of Benefit Banking,
home equity lending, and real estate lending.
In line with the organization's strategy of moving from a product driven
organization to a customer relationship focused sales culture, Benefit Banking
was introduced in 2005. This program rewards the Bank's retail customers who
choose Provident to be their primary bank by providing them with special
privileges to make the most of their money.
Home equity lending is a key component of Provident's strategy to grow and
deepen consumer relationships in Maryland and Virginia. In 2005, home equity
loan balances and new business production reached record levels. The strong
housing market and focused selling efforts drove the size of individual average
loan/line commitments up 22% over 2004.
In support of the Bank's strategy to grow and deepen commercial and real estate
relationships in Maryland and Virginia, the real estate lending area continues
to attract and retain the region's established and well-known builders and
developers. Performance in both the Virginia and Maryland markets was strong,
with average loan balances up 54% and 66%, respectively. Real estate lending has
also been expanded into Delaware to better support current clients and to take
advantage of new opportunities.
OUTLOOK FOR THE FUTURE
Commenting on the future for Provident Bankshares, Chairman and CEO Gary N.
Geisel added, "Consumers, small businesses and large companies in the Baltimore,
Washington and Richmond corridor consistently tell us that they value the
personalized service, convenience and full array of products we provide. We
operate in markets with tremendous growth, and the economic outlook for our
region is positive. We are well positioned to capitalize on this opportunity and
are comfortable with the consensus estimate for 2006."
ABOUT PROVIDENT BANKSHARES CORPORATION
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.
WEBCAST INFORMATION
Provident Bankshares Corporation's fourth quarter earnings teleconference will
be webcast at 10:00 AM ET on Thursday, January 19, 2006. The conference call
will include a discussion of the Company's fourth 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 February 3,
2006, 5:00 PM. 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 Fourth Quarter 2005
Results" audio webcast and download Real Player or Media Player as necessary. An
audio replay of the teleconference will be available through February 3, 2006,
5:00 PM by dialing 1-888-286-8010, passcode 57300884.
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 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; CONDITIONS IN THE SECURITIES MARKETS OR THE BANKING INDUSTRY;
CHANGES IN THE QUALITY OR COMPOSITION OF THE INVESTMENT PORTFOLIO; LITIGATION
LIABILITIES, INCLUDING COSTS, EXPENSES, SETTLEMENTS AND JUDGMENTS; OR THE
OUTCOME OF OTHER MATTERS BEFORE REGULATORY AGENCIES, WHETHER PENDING OR
COMMENCING IN THE FUTURE; AND OTHER ECONOMIC, COMPETITIVE, GOVERNMENTAL,
REGULATORY AND TECHNOLOGICAL FACTORS AFFECTING THE COMPANY'S OPERATIONS,
PRICING, PRODUCTS AND SERVICES. ADDITIONALLY, THE TIMING AND OCCURRENCE OR
NON-OCCURRENCE OF EVENTS MAY BE SUBJECT TO CIRCUMSTANCES BEYOND THE COMPANY'S
CONTROL. 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.
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Three Months Ended Three Months Ended
December 31, September 30,
----------------------------------------- -------------------------
2005 2004 % Change 2005 % Change
------------- ------------- ---------- ------------- ----------
SUMMARY INCOME STATEMENTS:
Net interest income $ 50,508 $ 49,038 3.0 % $ 50,093 0.8 %
Provision for loan losses 400 1,505 (73.4) 826 (51.6)
Non-interest income 28,544 28,790 (0.9) 27,737 2.9
Net gains (losses) 478 824 (42.0) 884 (45.9)
Derivative gains (losses) (1,261) (204) - (3,207) (60.7)
Non-interest income, excluding total gains (losses) 29,327 28,170 4.1 30,060 (2.4)
Total revenue, excluding total gains (losses) 79,835 77,208 3.4 80,153 (0.4)
Non-interest expense 51,657 48,951 5.5 50,649 2.0
Merger expense - 275 - - -
Non-interest expense, excluding merger expense 51,657 48,676 6.1 50,649 2.0
Income tax expense 8,025 8,519 (5.8) 8,102 (1.0)
Net income 18,970 18,853 0.6 18,253 3.9
SHARE DATA:
Basic earnings per share $ 0.58 $ 0.57 1.8 % $ 0.55 5.5 %
Diluted earnings per share 0.57 0.56 1.8 0.54 5.6
Cash dividends paid per share 0.280 0.260 7.7 0.275 1.8
Book value per share 19.14 18.68 2.5 19.05 0.5
Weighted average shares - basic 32,904,879 33,161,703 (0.8) 32,939,059 (0.1)
Weighted average shares - diluted 33,560,110 33,941,261 (1.1) 33,640,029 (0.2)
Common shares outstanding 32,933,118 33,102,385 (0.5) 32,963,053 (0.1)
SELECTED RATIOS:
Return on average assets 1.19 % 1.16 % 1.14 %
Return on average equity 12.06 12.16 11.47
Return on average common equity 11.77 12.23 11.41
Net yield on average earning assets (t/e basis) 3.59 3.40 3.55
Efficiency ratio 64.51 62.89 63.08
Leverage ratio 8.40 8.29 8.24
Tier I risk-based capital ratio 10.94 11.82 10.85
Total risk-based capital ratio 11.93 12.89 11.86
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,905,355 $ 2,301,066 (17.2)% $ 1,941,014 (1.8)%
Total loans 3,695,381 3,559,880 3.8 3,666,758 0.8
Assets 6,354,952 6,571,416 (3.3) 6,405,013 (0.8)
Deposits 4,124,467 3,779,987 9.1 3,979,656 3.6
Stockholders' equity 630,326 618,423 1.9 627,972 0.4
Common stockholders' equity 647,778 620,058 4.5 639,854 1.2
AVERAGE BALANCES:
Investment securities portfolio $ 1,927,955 $ 2,245,879 (14.2)% $ 1,964,137 (1.8)%
Loans:
Originated and acquired residential mortgage 479,884 689,445 (30.4) 541,096 (11.3)
Home equity 879,598 676,169 30.1 831,987 5.7
Other consumer 450,264 482,613 (6.7) 460,956 (2.3)
Commercial real estate 1,210,952 992,934 22.0 1,138,972 6.3
Commercial business 649,191 663,491 (2.2) 662,337 (2.0)
Total loans 3,669,889 3,504,652 4.7 3,635,348 1.0
Earning assets 5,614,502 5,766,038 (2.6) 5,611,818 0.0
Assets 6,330,442 6,463,566 (2.1) 6,334,883 (0.1)
Deposits:
Noninterest-bearing 816,635 804,657 1.5 814,400 0.3
Interest-bearing 3,200,304 2,960,711 8.1 3,090,705 3.5
Total deposits 4,016,939 3,765,368 6.7 3,905,105 2.9
Stockholders' equity 623,954 616,616 1.2 631,422 (1.2)
Common stockholders' equity 639,588 613,328 4.3 634,905 0.7
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Twelve Months Ended
December 31,
------------------------------------------
2005 2004 % Change
------------- ------------- ----------
SUMMARY INCOME STATEMENTS:
Net interest income $ 198,710 $ 182,213 9.1 %
Provision for loan losses 5,023 7,534 (33.3)
Non-interest income 112,509 100,968 11.4
Net gains (losses) 1,292 (5,773) (122.4)
Derivative gains (losses) (4,367) 2,432 -
Non-interest income, excluding total gains (losses) 115,584 104,309 10.8
Total revenue, excluding total gains (losses) 314,294 286,522 9.7
Non-interest expense 200,737 183,728 9.3
Merger expense - 3,541 -
Non-interest expense, excluding merger expense 200,737 180,187 11.4
Income tax expense 32,509 29,939 8.6
Net income 72,950 61,980 17.7
SHARE DATA:
Basic earnings per share $ 2.21 $ 2.05 7.8 %
Diluted earnings per share 2.17 2.00 8.5
Cash dividends paid per share 1.09 1.01 7.9
Book value per share 19.14 18.68 2.5
Weighted average shares - basic 32,956,055 30,299,243 8.8
Weighted average shares - diluted 33,655,673 30,971,104 8.7
Common shares outstanding 32,933,118 33,102,385 (0.5)
SELECTED RATIOS:
Return on average assets 1.14 % 1.02 %
Return on average equity 11.70 12.12
Return on average common equity 11.59 12.09
Net yield on average earning assets (t/e basis) 3.52 3.34
Efficiency ratio 63.39 62.72
Leverage ratio 8.40 8.29
Tier I risk-based capital ratio 10.94 11.82
Total risk-based capital ratio 11.93 12.89
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,905,355 $ 2,301,066 (17.2)%
Total loans 3,695,381 3,559,880 3.8
Assets 6,354,952 6,571,416 (3.3)
Deposits 4,124,467 3,779,987 9.1
Stockholders' equity 630,326 618,423 1.9
Common stockholders' equity 647,778 620,058 4.5
AVERAGE BALANCES:
Investment securities portfolio $ 2,044,417 $ 2,185,124 (6.4)%
Loans:
Originated and acquired residential mortgage 565,693 713,648 (20.7)
Home equity 802,723 599,515 33.9
Other consumer 461,219 495,854 (7.0)
Commercial real estate 1,109,272 892,204 24.3
Commercial business 666,552 584,707 14.0
Total loans 3,605,459 3,285,928 9.7
Earning assets 5,664,773 5,486,577 3.2
Assets 6,381,398 6,061,611 5.3
Deposits:
Noninterest-bearing 808,137 730,889 10.6
Interest-bearing 3,094,212 2,922,376 5.9
Total deposits 3,902,349 3,653,265 6.8
Stockholders' equity 623,319 511,383 21.9
Common stockholders' equity 629,354 512,853 22.7