NEWS RELEASE
PROVIDENT BANKSHARES ANNOUNCES SOLID RESULTS AND
RECORD ROA FOR SECOND QUARTER 2006
EARNINGS UP 8% FOR THE YEAR
BALTIMORE: (July 20, 2006) - Provident Bankshares Corporation (NASDAQ: PBKS),
the parent company of Provident Bank, reported net income of $20 million, or
$0.60 per diluted share, for the second quarter of 2006.
The results for the second quarter of 2006 reflect the Company's continued
improvement in financial fundamentals through the consistent execution of the
Bank's strategic priorities and transition of the balance sheet from wholesale
to core banking activities. As a result, return on assets was 1.26%, and the net
interest margin improved to 3.74%, compared to 3.48% in the second quarter of
2005. Strong lending activity provided the Company with the ability to reduce
average investment securities by 9% from the same period of 2005. In addition,
strong growth in commercial deposit accounts contributed to a $134 million
increase in average total deposit balances. Asset quality remained strong in the
second quarter of 2006, with the ratio of net loan charge-offs to average loans
declining to 0.09%, compared to 0.14% for the same period last year.
SECOND QUARTER FINANCIAL HIGHLIGHTS
Results for the second quarter of 2006 compared to the second quarter of 2005:
o Return on assets increased to 1.26% from 1.25%
o Net interest margin improved to 3.74% from 3.48%
o Average home equity and real estate construction loans increased 22% and
38%, respectively
o Average total deposits increased 3% to $4.1 billion
o Service charge income increased 10% to $23.9 million
o Net charge-offs as a percentage of average loans improved to 9 basis points
from 14 basis points
o Capital ratios remained strong with a leverage ratio of 8.53% and a total
risk-based capital ratio of 11.98%
"The consistent execution of our key strategies and the opportunity provided by
the Greater Baltimore, Greater Washington and Central Virginia regions has
resulted in another quarter of solid performance," said Chairman and CEO Gary N.
Geisel.
DIVIDEND DECLARED
Provident Bankshares announced today that its Board of Directors has declared an
increased quarterly cash dividend of $0.295 per share. This is the fifty-first
consecutive quarterly dividend increase. The quarterly cash dividend will be
paid on August 11, 2006 to stockholders of record at the close of business on
July 31, 2006.
SECOND QUARTER RESULTS
Provident Bankshares reported net income of $20 million, or $0.60 per diluted
earnings per share, for the second quarter of 2006, compared to net income of
$20 million and $0.60 per diluted earnings per share in the same period a year
ago. However, the composition of revenue differed from the second quarter of
2005; that quarter included $3.9 million of derivative valuation gains versus
the current quarter, which had $554 thousand in valuation losses. These non-cash
amounts represent the change in the value of certain derivatives that are used
to mitigate the impact of changing interest rates. The changes in the value of
these derivatives are required to be reflected in earnings; and this non-cash
adjustment has and will continue to produce fluctuations in reported earnings.
As a result of the favorable growth in consumer and commercial loans and
deposits, net interest income grew by 6% from the corresponding period of 2005;
this led to an improvement in the net interest margin from 3.48% to 3.74%.
Non-interest income from service charges on deposit accounts, commissions and
fees increased 11% from the second quarter of 2005, to $25.6 million in second
quarter 2006. Non-interest expense increased 6% in the second quarter of 2006,
driven primarily by compensation and healthcare cost increases.
2006 YEAR TO DATE HIGHLIGHTS
Diluted earnings per share for the six months ended June 30, 2006 are 8% higher
than the corresponding period a year ago. Net interest income growth of 6% and
the 12% increase in fee based services has led to an increase in total revenue
of $9.4 million excluding total gains (losses) over the first six months of
2005. The increase in net interest income can be attributed to the beneficial
changes in the mix of earning assets, which more than offset increased funding
costs. Average consumer home equity average loan balances have grown by 24%, and
real estate construction loan balances have increased by 39% year to date
compared to the same period of 2005.
EXECUTION OF KEY BUSINESS STRATEGIES
In addition to the focus on improving financial fundamentals, the Bank has four
strategic priorities.
o Maximize Provident's position as the right size bank in the marketplace
o Consistently execute a high-performance, customer relationship-focused
sales culture
o Profitably grow and deepen customer relationships in all four key
market segments: commercial, commercial real estate, consumer and small
business
o Sustain a culture that attracts and retains employees who provide the
differentiating "Provident Way" customer experience.
During the second quarter of 2006, significant progress was made in all of these
areas. The Bank's recent expansion of the ATM surcharge free network by joining
the MoneyPass network in June 2006 is a notable example of a recent initiative
that was completed in support of several key strategies. By providing customers
with free access to more than 11,000 ATMs nationwide, the Bank is able to
deliver on its promise of being the right sized bank, while also growing and
retaining customer relationships.
The Company's experience and expertise in real estate lending resulted in second
quarter 2006 growth in average home equity loans of $174 million, or 22%, and
growth in average real estate construction loans of $223 million, or 38%, from
second quarter of 2005. The growth in these loan types offset planned reductions
in average originated and acquired residential loans and investments of $201
million and $196 million, respectively, from second quarter of 2005.
Commercial deposits accounted for much of the $62 million in average customer
deposit growth in the second quarter of 2006. Commercial clients in the Greater
Washington and Central Virginia regions were a particularly strong source of the
year over year deposit growth, contributing $38 million of net average deposit
growth.
OUTLOOK FOR THE FUTURE
Commenting on the future for Provident Bankshares, Chairman and CEO Gary N.
Geisel added, "I am pleased with our progress and am proud of the management
team especially considering the challenges in the operating environment for the
banking industry."
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 154 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 second quarter earnings teleconference will
be webcast at 10 a.m. ET on Thursday, July 20, 2006. The conference call will
include a discussion of the Company's second quarter 2006 results of operations
and may include forward-looking information. The conference call will be
simultaneously webcast at www.provbank.com and archived through August 4, 2006.
To listen to the conference call, please go to the Company's website to
register, download and install any necessary software. When in the Company's
website, follow these links:
o About Provident
o Investor Relations
o Upcoming Events
o Provident Bankshares Corporation Second Quarter 2006 Results
Audio Webcast
An audio replay of the teleconference will be available through August 4, 2006
by dialing 1-888-286-8010, passcode 71688990; the international dial-in number
is 617-801-6888.
FORWARD-LOOKING STATEMENTS
THIS PRESS RELEASE, AS WELL AS OTHER WRITTEN COMMUNICATIONS MADE FROM TIME TO
TIME BY PROVIDENT BANKSHARES CORPORATION AND ITS SUBSIDIARIES (THE "COMPANY")
(INCLUDING, WITHOUT LIMITATION, THE COMPANY'S 2005 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 USING U.S. GENERALLY ACCEPTED ACCOUNTING PRINCIPLES
("GAAP"); REVENUE GROWTH IN RETAIL 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 YEAR ENDED DECEMBER 31,
2005 UNDER THE HEADINGS "FORWARD-LOOKING STATEMENTS" AND "ITEM 1A. RISK
FACTORS," PREVAILING ECONOMIC CONDITIONS, EITHER NATIONALLY OR LOCALLY IN SOME
OR ALL AREAS IN WHICH THE COMPANY CONDUCTS BUSINESS OR CONDITIONS IN THE
SECURITIES MARKETS OR THE BANKING INDUSTRY; CHANGES IN INTEREST RATES, DEPOSIT
FLOWS, 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 THE QUALITY OR COMPOSITION OF THE LOAN OR INVESTMENT PORTFOLIOS; THE
COMPANY'S ABILITY TO SUCCESSFULLY INTEGRATE ANY ASSETS, LIABILITIES, CUSTOMERS,
SYSTEMS AND MANAGEMENT PERSONNEL THE COMPANY MAY ACQUIRE INTO ITS OPERATIONS AND
ITS ABILITY TO REALIZE RELATED REVENUE SYNERGIES AND COST SAVINGS WITHIN
EXPECTED TIME FRAMES; THE COMPANY'S TIMELY DEVELOPMENT OF NEW AND COMPETITIVE
PRODUCTS OR SERVICES IN A CHANGING ENVIRONMENT, AND THE ACCEPTANCE OF SUCH
PRODUCTS OR SERVICES BY CUSTOMERS; OPERATIONAL ISSUES AND/OR CAPITAL SPENDING
NECESSITATED BY THE POTENTIAL NEED TO ADAPT TO INDUSTRY CHANGES IN INFORMATION
TECHNOLOGY SYSTEMS, ON WHICH IT IS HIGHLY DEPENDENT; 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 MERGERS 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.
TABLES FOLLOW
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Three Months Ended Three Months Ended
June 30, March 31,
---------------------------------------- --------------------------
2006 2005 % Change 2006 % Change
------------- ------------- ---------- ------------- -----------
SUMMARY INCOME STATEMENTS:
Net interest income $ 52,387 $ 49,393 6.1 % $ 51,248 2.2 %
Provision for loan losses 824 2,222 (62.9) 318 159.1
Non-interest income 31,405 33,184 (5.4) 28,225 11.3
Net gains (losses) 203 706 (71.2) 540 (62.4)
Derivative gains (losses) (554) 3,921 (114.1) (603) (8.1)
Non-interest income, excluding total gains (losses) 31,756 28,557 11.2 28,288 12.3
Total revenue, excluding total gains (losses) 84,143 77,950 7.9 79,536 5.8
Non-interest expense 53,795 50,957 5.6 52,791 1.9
Income tax expense 9,150 9,421 (2.9) 8,106 12.9
Net income 20,023 19,977 0.2 18,258 9.7
SHARE DATA:
Basic earnings per share $ 0.61 $ 0.61 0.0 % $ 0.55 10.9 %
Diluted earnings per share 0.60 0.60 0.0 0.55 9.1
Cash dividends paid per share 0.290 0.270 7.4 0.285 1.8
Book value per share 19.03 19.09 (0.3) 19.11 (0.4)
Weighted average shares - basic 32,785,258 32,938,762 (0.5) 32,948,119 (0.5)
Weighted average shares - diluted 33,133,175 33,524,779 (1.2) 33,364,813 (0.7)
Common shares outstanding 32,789,289 32,865,817 (0.2) 32,974,784 (0.6)
SELECTED RATIOS:
Return on average assets 1.26 % 1.25 % 1.17 %
Return on average equity 12.83 12.94 11.71
Return on average common equity 12.32 12.84 11.40
Net yield on average earning assets (t/e basis) 3.74 3.48 3.72
Efficiency ratio 63.57 63.89 66.01
Leverage ratio 8.53 8.00 8.54
Tier I risk-based capital ratio 11.03 11.01 11.35
Total risk-based capital ratio 11.98 12.06 12.34
Tangible common equity ratio 6.41 5.89 6.41
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,898,055 $ 2,058,074 (7.8)% $ 1,916,653 (1.0)%
Total loans 3,759,295 3,623,791 3.7 3,713,169 1.2
Assets 6,409,226 6,407,115 - 6,372,434 0.6
Deposits 4,150,570 4,035,705 2.8 4,162,439 (0.3)
Stockholders' equity 624,119 627,339 (0.5) 630,196 (1.0)
Common stockholders' equity 658,334 629,396 4.6 656,770 0.2
AVERAGE BALANCES:
Investment securities portfolio $ 1,922,792 $ 2,119,140 (9.3)% $ 1,921,879 - %
Loans:
Originated and acquired residential mortgage 403,284 603,975 (33.2) 439,513 (8.2)
Home equity 946,382 772,558 22.5 914,182 3.5
Other consumer 421,042 462,751 (9.0) 437,227 (3.7)
Commercial real estate 1,265,622 1,058,669 19.5 1,232,269 2.7
Commercial business 692,819 676,863 2.4 677,346 2.3
Total loans 3,729,149 3,574,816 4.3 3,700,537 0.8
Earning assets 5,670,512 5,709,796 (0.7) 5,638,368 0.6
Assets 6,372,448 6,428,933 (0.9) 6,337,658 0.5
Deposits:
Noninterest-bearing 800,183 817,408 (2.1) 791,615 1.1
Interest-bearing 3,262,110 3,111,039 4.9 3,222,234 1.2
Total deposits 4,062,293 3,928,447 3.4 4,013,849 1.2
Stockholders' equity 625,998 619,137 1.1 632,515 (1.0)
Common stockholders' equity 651,939 623,865 4.5 649,280 0.4
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Six Months Ended
June 30,
------------------------------------------
2006 2005 % Change
------------- ------------- ----------
SUMMARY INCOME STATEMENTS:
Net interest income $ 103,635 $ 98,109 5.6 %
Provision for loan losses 1,142 3,797 (69.9)
Non-interest income 59,630 56,228 6.1
Net gains (losses) 743 (70) -
Derivative gains (losses) (1,157) 101 -
Non-interest income, excluding total gains (losses) 60,044 56,197 6.8
Total revenue, excluding total gains (losses) 163,679 154,306 6.1
Non-interest expense 106,586 98,431 8.3
Income tax expense 17,256 16,382 5.3
Net income 38,281 35,727 7.1
SHARE DATA:
Basic earnings per share $ 1.16 $ 1.08 7.4 %
Diluted earnings per share 1.15 1.06 8.5
Cash dividends paid per share 0.575 0.535 7.5
Book value per share 19.03 19.09 (0.3)
Weighted average shares - basic 32,863,255 32,984,013 (0.4)
Weighted average shares - diluted 33,233,941 33,616,247 (1.1)
Common shares outstanding 32,789,289 32,865,817 (0.2)
SELECTED RATIOS:
Return on average assets 1.21 % 1.12 %
Return on average equity 12.27 11.64
Return on average common equity 11.87 11.60
Net yield on average earning assets (t/e basis) 3.73 3.47
Efficiency ratio 64.75 62.96
Leverage ratio 8.53 8.00
Tier I risk-based capital ratio 11.03 11.01
Total risk-based capital ratio 11.98 12.06
Tangible common equity ratio 6.41 5.89
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,898,055 $ 2,058,074 (7.8)%
Total loans 3,759,295 3,623,791 3.7
Assets 6,409,226 6,407,115 -
Deposits 4,150,570 4,035,705 2.8
Stockholders' equity 624,119 627,339 (0.5)
Common stockholders' equity 658,334 629,396 4.6
AVERAGE BALANCES:
Investment securities portfolio $ 1,922,338 $ 2,144,419 (10.4)%
Loans:
Originated and acquired residential mortgage 421,298 621,811 (32.2)
Home equity 930,371 748,772 24.3
Other consumer 429,090 466,923 (8.1)
Commercial real estate 1,249,039 1,042,492 19.8
Commercial business 685,124 677,519 1.1
Total loans 3,714,922 3,557,517 4.4
Earning assets 5,654,529 5,717,241 (1.1)
Assets 6,355,149 6,430,941 (1.2)
Deposits:
Noninterest-bearing 795,923 800,634 (0.6)
Interest-bearing 3,242,282 3,042,069 6.6
Total deposits 4,038,205 3,842,703 5.1
Stockholders' equity 629,239 618,878 1.7
Common stockholders' equity 650,617 621,331 4.7