EXHIBIT 99.1
NEWS RELEASE
CONTACT:
MEDIA: Lillian Kilroy (410) 277-2833
INVESTMENT COMMUNITY: Melissa P. Kelly (410) 277-2080
PROVIDENT BANKSHARES ANNOUNCES 12% INCREASE IN
NET INCOME FOR THIRD QUARTER 2006
BALTIMORE: (October 19, 2006) - Provident Bankshares Corporation (NASDAQ: PBKS),
the parent company of Provident Bank, reported net income of $20.4 million, or
$0.62 per diluted share, for the third quarter of 2006.
The Company continues to have success as the right size bank for consumers and
businesses in the Greater Baltimore, Greater Washington and Central Virginia
market despite the challenging operating environment. Provident's emphasis on
loan growth in its target markets continues to show sound results. Relationship
based average loans(1) grew by $306.8 million or 9.9%. This growth has enabled
the Company to strengthen the balance sheet, improve the net interest margin to
3.60% from 3.55%, and increase return on assets to 1.26% from 1.14%, from the
third quarter of 2005. In addition, asset quality continues to remain strong in
the third quarter of 2006, with the ratio of net loan charge-offs to average
loans declining to 0.10%, from 0.15% in the same period of last year.
THIRD QUARTER FINANCIAL HIGHLIGHTS
Results for the third quarter of 2006 compared to the third quarter of 2005:
o Return on assets increased to 1.26% from 1.14%
o Net interest margin improved to 3.60% from 3.55%
o Average home equity and residential construction loans increased 18% and 54%,
respectively
o Average total deposits increased 3% to $4.0 billion
o Service charge income increased 3% to $24.6 million
o Net charge-offs as a percentage of average loans improved to 0.10% from 0.15%
o Capital ratios remained strong with a leverage ratio of 8.58% and a total
risk-based capital ratio of 12.13%
"Despite the current rate environment and the intense level of competition for
deposits, our focus on deepening customer relationships is evident in our solid
financial performance in the third quarter," said Chairman and CEO Gary N.
Geisel.
THIRD QUARTER RESULTS
Provident Bankshares reported net income of $20.4 million, or $0.62 per diluted
share, for the third quarter of 2006, compared to net income of $18.3 million
and $0.54 per diluted share in the same period a year ago. Net interest income
grew by 2% from the corresponding period of 2005; this resulted from an
improvement in the net interest margin from 3.55% to 3.60% and average loan
growth of 4%. Average deposit growth of $119.0 million, or 3% was due to
significant growth in certificate of deposit balances. Customer deposit balances
have been shifting from lower yielding checking and savings accounts towards
higher yielding certificates of deposit over the past six months due to the
current interest rate environment. In addition to this change in mix, there is
intense competition for deposits within and outside the banking industry.
Total average loans to consumers, businesses and developers increased by 4% or
$139.3 million. Average home equity balances grew by $151.3 million, while
originated and acquired residential, marine and other categories of consumer
loans declined by $206.4 million. This resulted in a 3% decline in total average
consumer loans. Total commercial loan average balances grew by $194.4 million or
11%; this growth primarily consisted of increased average balances in
residential construction of $188.2 million and commercial business of $41.2
million. These results illustrate the effectiveness of the Company's strategy to
profitably grow and deepen customer relationships in all four key market
segments: commercial, commercial real estate, consumer and small business.
Non-interest income from service charges on accounts, commissions and fees
increased 4% from the third quarter of 2005, to $26.0 million in third quarter
2006. Non-interest expense increased 4% in the third quarter of 2006, driven
primarily by higher compensation and healthcare costs.
DIVIDEND DECLARED
Provident Bankshares announced today that its Board of Directors has declared an
increased quarterly cash dividend of $0.30 per share. This is the fifty-second
consecutive quarterly dividend increase. The quarterly cash dividend will be
paid on November 10, 2006 to stockholders of record at the close of business on
October 30, 2006.
2006 YEAR TO DATE HIGHLIGHTS
Results of year to date 2006 compared to year to date 2005:
o Net income grew 8.8% while diluted earnings per share increased $0.17 per
diluted share or 10.6%
o Net interest income grew 4.4%
o Net interest margin increased from 3.50% to 3.68%
o Service charge income increased 8.6% to $70.6 million
o Return on assets increased from 1.13% to 1.23%
o Average customer deposits increased $62.4 million or 1.8%
o Average residential construction loans increased $199.1 million or 66.7%
o Average consumer home equity loans increased $171.4 million or 22.1%
o Net charge-offs as a percentage of average loans improved to 0.11% from 0.18%
o Allowance to non-performing loans remained strong at 189.4%
OUTLOOK FOR THE FUTURE
Commenting on the future for Provident Bankshares, Chairman and CEO Gary N.
Geisel added, "To address the current deposit challenges, we are taking a number
of actions that we expect to be successful. While we still anticipate earnings
to be within the range of analysts' estimates, the lower end of the range
appears to be more realistic given the increasing pressure on margins."
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 153 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 third quarter earnings teleconference will be
webcast at 10 a.m. ET on Thursday, October 19, 2006. The conference call will
include a discussion of the Company's third 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 November 2,
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 Third Quarter 2006 Results
Audio Webcast
An audio replay of the teleconference will be available through November 2, 2006
by dialing 1-888-286-8010, passcode 29577185; 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.
(1) Total loans less originated and acquired residential mortgages
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Three Months Ended Three Months Ended
September 30, June 30,
---------------------------------------- --------------------------
2006 2005 % Change 2006 % Change
------------- ------------- ---------- ------------- -----------
SUMMARY INCOME STATEMENTS:
Net interest income $ 51,088 $ 50,093 2.0 % $ 52,387 (2.5)%
Provision for loan losses 954 826 15.5 824 15.8
Non-interest income 31,626 27,737 14.0 31,405 0.7
Net gains (losses) 373 884 (57.8) 203 83.7
Derivative gains (losses) 643 (3,207) (120.0) (554) (216.1)
Non-interest income, excluding total gains (losses) 30,610 30,060 1.8 31,756 (3.6)
Total revenue, excluding total gains (losses) 81,698 80,153 1.9 84,143 (2.9)
Non-interest expense 52,614 50,649 3.9 53,795 (2.2)
Income tax expense 8,707 8,102 7.5 9,150 (4.8)
Net income 20,439 18,253 12.0 20,023 2.1
SHARE DATA:
Basic earnings per share $ 0.63 $ 0.55 14.5 % $ 0.61 3.3 %
Diluted earnings per share 0.62 0.54 14.8 0.60 3.3
Cash dividends paid per share 0.295 0.275 7.3 0.290 1.7
Book value per share 19.79 19.05 3.9 19.03 4.0
Weighted average shares - basic 32,632,516 32,939,059 (0.9) 32,785,258 (0.5)
Weighted average shares - diluted 33,037,479 33,640,029 (1.8) 33,133,175 (0.3)
Common shares outstanding 32,680,266 32,963,053 (0.9) 32,789,289 (0.3)
SELECTED RATIOS:
Return on average assets 1.26 % 1.14 % 1.26 %
Return on average equity 12.81 11.47 12.83
Return on average common equity 12.34 11.41 12.32
Net yield on average earning assets (t/e basis) 3.60 3.55 3.74
Efficiency ratio 63.93 63.08 63.57
Leverage ratio 8.58 8.24 8.53
Tier I risk-based capital ratio 11.18 10.85 11.03
Total risk-based capital ratio 12.13 11.86 11.98
Tangible common equity ratio 6.50 6.08 6.41
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,889,954 $ 1,941,014 (2.6)% $ 1,898,055 (0.4)%
Total loans 3,768,027 3,666,758 2.8 3,759,295 0.2
Assets 6,410,291 6,405,013 0.1 6,409,226 -
Deposits 4,131,702 3,979,656 3.8 4,150,570 (0.5)
Stockholders' equity 646,886 627,972 3.0 624,119 3.6
Common stockholders' equity 663,758 639,854 3.7 658,334 0.8
AVERAGE BALANCES:
Investment securities portfolio $ 1,908,566 $ 1,964,137 (2.8)% $ 1,922,792 (0.7)%
Loans:
Originated and acquired residential mortgage 373,568 541,096 (31.0) 403,284 (7.4)
Home equity 983,288 831,987 18.2 946,382 3.9
Other consumer 422,094 460,956 (8.4) 421,042 0.2
Commercial real estate 1,292,143 1,138,972 13.4 1,265,622 2.1
Commercial business 703,523 662,337 6.2 692,819 1.5
Total loans 3,774,616 3,635,348 3.8 3,729,149 1.2
Earning assets 5,701,946 5,611,818 1.6 5,670,512 0.6
Assets 6,406,772 6,334,883 1.1 6,372,448 0.5
Deposits:
Noninterest-bearing 759,874 814,400 (6.7) 800,183 (5.0)
Interest-bearing 3,264,255 3,090,705 5.6 3,262,110 0.1
Total deposits 4,024,129 3,905,105 3.0 4,062,293 (0.9)
Stockholders' equity 632,886 631,422 0.2 625,998 1.1
Common stockholders' equity 657,158 634,905 3.5 651,939 0.8
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS,EXCEPT PER SHARE DATA) Nine Months Ended
September 30,
---------------------------------------------
2006 2005 % Change
------------- ------------- -------------
SUMMARY INCOME STATEMENTS:
Net interest income $ 154,723 $ 148,202 4.4 %
Provision for loan losses 2,096 4,623 (54.7)
Non-interest income 91,256 83,965 8.7
Net gains (losses) 1,116 814 37.1
Derivative gains (losses) (514) (3,106) (83.5)
Non-interest income, excluding total gains (losses) 90,654 86,257 5.1
Total revenue, excluding total gains (losses) 245,377 234,459 4.7
Non-interest expense 159,200 149,080 6.8
Income tax expense 25,963 24,484 6.0
Net income 58,720 53,980 8.8
SHARE DATA:
Basic earnings per share $ 1.79 $ 1.64 9.1 %
Diluted earnings per share 1.77 1.60 10.6
Cash dividends paid per share 0.870 0.810 7.4
Book value per share 19.79 19.05 3.9
Weighted average shares - basic 32,791,209 32,971,081 (0.5)
Weighted average shares - diluted 33,194,655 33,662,348 (1.4)
Common shares outstanding 32,680,266 32,963,053 (0.9)
SELECTED RATIOS:
Return on average assets 1.23 % 1.13 %
Return on average equity 12.45 11.58
Return on average common equity 12.03 11.53
Net yield on average earning assets (t/e basis) 3.68 3.50
Efficiency ratio 64.48 63.01
Leverage ratio 8.58 8.24
Tier I risk-based capital ratio 11.18 10.85
Total risk-based capital ratio 12.13 11.86
Tangible common equity ratio 6.50 6.08
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,889,954 $ 1,941,014 (2.6)%
Total loans 3,768,027 3,666,758 2.8
Assets 6,410,291 6,405,013 0.1
Deposits 4,131,702 3,979,656 3.8
Stockholders' equity 646,886 627,972 3.0
Common stockholders' equity 663,758 639,854 3.7
AVERAGE BALANCES:
Investment securities portfolio $ 1,917,697 $ 2,083,665 (8.0)%
Loans:
Originated and acquired residential mortgage 405,214 594,610 (31.9)
Home equity 948,202 776,815 22.1
Other consumer 426,734 464,911 (8.2)
Commercial real estate 1,263,564 1,075,007 17.5
Commercial business 691,325 672,403 2.8
Total loans 3,735,039 3,583,746 4.2
Earning assets 5,670,509 5,681,714 (0.2)
Assets 6,372,546 6,398,570 (0.4)
Deposits:
Noninterest-bearing 783,774 805,273 (2.7)
Interest-bearing 3,249,687 3,058,459 6.3
Total deposits 4,033,461 3,863,732 4.4
Stockholders' equity 630,468 623,105 1.2
Common stockholders' equity 652,821 625,905 4.3