EXHIBIT 99.1
PROVIDENT BANKSHARES
--------------------
CORPORATION
NEWS RELEASE CONTACT
Media - Vicki Cox (410) 277-2063
Investment Community - Cheryl B. Ursida (410) 277-2080
Provident Bankshares Reports Fourth Quarter Results
Core Banking Results Offset by Investment Write-Down
and Increased Loan Provision
BALTIMORE: (January 16, 2008) - Provident Bankshares Corporation (NASDAQ: PBKS),
the parent company of Provident Bank, reported a net loss of $15.5 million, or
$(0.49) per diluted share, for the quarter ending December 31, 2007, compared to
net income of $11.3 million, or $0.34 per diluted share, for the same period a
year ago. The Company reported $32.1 million in net income, or $1.00 per diluted
share, for 2007 compared to $70.0 million in net income, or $2.12 per diluted
share, for 2006.
The decline in net income for the quarter and for the year ending December 31,
2007 is mainly the result of a write-down of a significant portion of the
Company's $95 million REIT trust preferred securities portfolio, an increase in
the provision for loan losses to reflect the inherent risk in its real estate
loan portfolios and a one-time reduction of income tax expense associated with
new Maryland state income tax laws. The financial impacts to net income and
diluted earnings per share are summarized in the following table.
(dollars in thousands, except per share data)
THREE MONTHS ENDED DECEMBER 31, 2007 NET INCOME EPS
-------------------------
Totals - GAAP $ (15,474) $ (0.49)
Add Back:
Investment Portfolio Write-down 28,919 0.91
Incremental Loan Loss Provision 3,654 0.12
State Income Tax (1,269) (0.04)
-------------------------
Adjusted Totals - Non GAAP $ 15,830 $ 0.50
-------------------------
Subsequent to all of the adjustments, Provident will not realize a material
change in its capital ratios at December 31, 2007, compared the same period a
year ago and will continue to exceed all regulatory capital requirements and
remain "well capitalized."
"We took these prudent steps with our investment portfolio even though the
securities that are being written down are performing," said Gary N. Geisel,
Chairman and Chief Executive Officer. "Given their lack of market liquidity and
recent credit rating decline, this was a prudent decision based on a rational
analysis of the national housing and residential mortgage industries. In terms
of our loan portfolio, we found that the weakening regional housing market also
increased the risk of inherent losses in our commercial and consumer real estate
loans. This led us to correspondingly increase reserves for these loan
portfolios."
FOURTH QUARTER RESULTS COMPARED TO SAME PERIOD OF 2006
Net income for the fourth quarter of 2007 adjusted for the significant items
discussed above would have been $15.8 million, or $0.50 per share, compared to
net income of $16.3 million, or $0.49 per diluted share for the fourth quarter
of 2006, after adjusting for a $5.0 million, or $0.15 per diluted share,
non-recurring after-tax charge associated with a securities and debt
restructuring transaction.
Despite the significant items discussed above, the Bank was able to continue to
expand customer loan relationships and to maintain consumer deposits in a
fiercely competitive deposit market. In the fourth quarter of 2007, average
loans grew $291.3 million, or 8%, over the same period a year ago. Average home
equity loans increased $80.4 million, or 8%, while commercial real estate loans
grew $155.7 million, or 12%, and average commercial business loans grew $129.7
million, or 18%. Average consumer deposits of $2.7 billion reflected slight
growth after adjusting for a sale of six branches in the third quarter of 2007.
Average commercial deposits of $753.4 million in the fourth quarter of 2007 had
a decline of $64.1 million from the same period a year ago. The decline was a
result of a significant drop in real estate title company activity and
commercial customers investing more of their available deposits into alternative
investments.
During the fourth quarter of 2007, net interest income declined $3.5 million, or
7%, from the same period a year ago primarily as a result of the Bank's
customers continuing to shift their deposits to higher yielding deposit
products. The change in deposit mix, along with competitive pressures to keep
deposit rates high despite recent Fed actions reducing key benchmark rates, had
a negative effect on the Bank's net interest income.
The fourth quarter reflected the Bank's success with its corporate efficiency
program, "Winning the Provident Way ("WPW")." These efforts led to a decline in
overall non-interest expense of $4.4 million, or 8% over the same period a year
ago. Salaries and benefits expense declined $3.1 million, or 10% from the same
period a year ago. This reflected a decrease in average staffing levels over the
past twelve months of approximately 300 positions as a result of the
implementation of actions generated by WPW.
Deposit service fees increased by $777 thousand, or 3%, reflecting changes in
the Company's product suite.
2007 FULL YEAR RESULTS
Net income for the year ended December 31, 2007 was $32.1 million, or $1.00 per
diluted share, compared to $70 million, or $2.12 per diluted share, in 2006. The
decline in net income was mainly due to the $47.5 million pre-tax write-down of
the securities portfolio and the decline in net interest income of $13.2 million
along with the increase in the loan loss provision of $19.4 million over 2006.
The increase in the provision for loan losses was due to overall loan growth,
higher net charge-offs and the additional provision for loan losses that was
recorded in the second half of 2007. Partially offsetting these earnings
declines in 2007 was a reduction of $3.5 million in non-interest expense and an
increase in deposit service fees of $1.1 million. Excluding expenses in 2007
that were incurred to facilitate the "Winning the Provident Way" program,
non-interest expense would have declined by $7.2 million, or 3.4%. In 2007,
income tax expense declined by $24.6 million when compared to 2006, as a result
of the significant decline in pre-tax income for the year and from the impact
associated with the change in Maryland state income tax laws.
In a challenging banking environment, the Company was successful in growing its
loan portfolio to a record level $4.2 billion at December 31, 2007. The
continued expansion of customer loan relationships led to growth in average
loans of $209.2 million, or 6%, for 2007. Average home equity loans increased
$74.6 million, or 8%, while average commercial real estate loans grew $154.0
million, or 12%, and average commercial business loans grew $94.1 million, or
13%. Total consumer deposits remained flat while commercial deposits declined
$66.7 million from the same period a year ago.
OUTLOOK FOR THE FUTURE
"As the year begins, the industry will need to navigate through challenges not
faced for quite some time. For 2008, Provident's order of priorities will be
focused on capital, liquidity and earnings in order to achieve our long term
objectives for earnings growth," said Gary N. Geisel, Chairman and Chief
Executive Officer.
DIVIDEND DECLARED
Provident Bankshares announced today that its Board of Directors has declared an
increased quarterly cash dividend of $0.325 per share. This is the fifty-seventh
consecutive quarterly dividend increase. The quarterly cash dividend will be
paid on February 8, 2008 to stockholders of record at the close of business on
January 28, 2008.
ANNUAL MEETING ANNOUNCED
Provident Bankshares announced today that the Company's annual meeting of
stockholders will be held on April 16, 2008.
ABOUT PROVIDENT BANKSHARES CORPORATION
Provident Bankshares Corporation is the holding company for Provident Bank,
currently the largest independent commercial bank headquartered in Maryland.
With $6.5 billion in assets, Provident serves individuals and businesses in the
key metropolitan areas of Baltimore, Washington and Richmond through a network
of 142 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. Visit Provident on the web at www.provbank.com.
WEBCAST INFORMATION
Provident Bankshares Corporation's fourth quarter earnings teleconference will
be webcast at 10 a.m. ET on Thursday, January 17, 2008. The conference call will
include a discussion of the Company's fourth quarter 2007 results of operations
and may include forward-looking information. The conference call will be
simultaneously webcast at www.provbank.com and archived through February 1,
2008. 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 Fourth Quarter 2007 Results
Audio Webcast
An audio replay of the teleconference will be available through February 1, 2008
by dialing 1-888-286-8010, passcode 52497713; 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") 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, 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. NO FORWARD-LOOKING STATEMENT CAN BE GUARANTEED, AND ACTUAL RESULTS MAY
DIFFER FROM THOSE PROJECTED. THE COMPANY UNDERTAKES NO OBLIGATION TO PUBLICLY
UPDATE ANY FORWARD-LOOKING STATEMENT, WHETHER AS A RESULT OF NEW INFORMATION,
FUTURE EVENTS OR OTHERWISE. FORWARD-LOOKING STATEMENTS IN THIS RELEASE SHOULD BE
EVALUATED TOGETHER WITH THE UNCERTAINTIES THAT AFFECT THE COMPANY'S BUSINESS,
PARTICULARLY THOSE MENTIONED UNDER THE HEADINGS "FORWARD -LOOKING STATEMENTS"
AND "ITEM 1A. RISK FACTORS" IN THE COMPANY'S FORM 10-K FOR THE YEAR ENDED
DECEMBER 31, 2006, AND ITS REPORTS ON FORMS 10-Q AND 8-K, WHICH THE COMPANY
INCORPORATES BY REFERENCE.
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,
--------------------------------------- -------------------------
2007 2006 % Change 2007 % Change
------------ ------------- ---------- ------------- ----------
SUMMARY INCOME STATEMENTS:
Net interest income $ 45,912 $ 49,376 (7.0)% $ 47,837 (4.0)%
Provision for loan losses 10,027 1,877 - 7,494 33.8
Non-interest income (loss) (16,338) 22,318 (173.2) 35,303 (146.3)
Impairment on investment securities (47,488) - - - -
Net gains (losses) 405 (7,542) (105.4) 4,902 (91.7)
Net derivative activities 240 170 41.2 397 (39.5)
Non-interest income, excluding total gains (losses) 30,505 29,690 2.7 30,004 1.7
Total revenue, excluding total gains (losses) 76,417 79,066 (3.4) 77,841 (1.8)
Non-interest expense 51,008 55,379 (7.9) 52,685 (3.2)
Restructuring activities 78 - - 111 (29.7)
Non-interest expense, excluding restructuring 50,930 55,379 (8.0) 52,574 (3.1)
Income tax expense (benefit) (15,987) 3,155 - 6,993 -
Net income (loss) (15,474) 11,283 (237.1) 15,968 (196.9)
SHARE DATA:
Basic earnings per share $ (0.49) $ 0.35 (240.0)% $ 0.50 (198.0)%
Diluted earnings per share (0.49) 0.34 (244.1) 0.50 (198.0)
Cash dividends paid per share 0.320 0.300 6.7 0.315 1.6
Book value per share 17.56 19.54 (10.1) 19.10 (8.1)
Weighted average shares - basic 31,635,109 32,573,415 (2.9) 31,931,837 (0.9)
Weighted average shares - diluted 31,773,779 32,887,017 (3.4) 32,091,566 (1.0)
Common shares outstanding 31,621,956 32,433,387 (2.5) 31,974,520 (1.1)
SELECTED RATIOS:
Return on average assets (0.95)% 0.70 % 1.00 %
Return on average equity (10.16) 6.89 10.27
Return on average common equity (9.49) 6.78 9.82
Net yield on average earning assets (t/e basis) 3.24 3.50 3.45
Efficiency ratio (excludes restructuring activities) 65.88 69.49 66.84
Leverage ratio 7.89 8.53 8.74
Tier I risk-based capital ratio 9.59 10.90 10.76
Total risk-based capital ratio 10.85 11.85 11.82
Tangible common equity ratio 5.86 6.50 6.50
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,468,564 $ 1,684,603 (12.8)% $ 1,559,599 (5.8)%
Total loans 4,215,326 3,865,492 9.1 4,047,715 4.1
Assets 6,464,889 6,295,893 2.7 6,364,010 1.6
Deposits 4,179,520 4,140,112 1.0 4,206,741 (0.6)
Stockholders' equity 555,428 633,631 (12.3) 610,721 (9.1)
Common stockholders' equity 623,948 655,738 (4.8) 657,286 (5.1)
AVERAGE BALANCES:
Investment securities portfolio $ 1,612,245 $ 1,833,442 (12.1)% $ 1,609,766 0.2 %
Loans:
Originated and acquired residential mortgage 297,801 344,201 (13.5) 298,019 (0.1)
Home equity 1,074,345 993,942 8.1 1,050,442 2.3
Other consumer 381,306 409,401 (6.9) 386,750 (1.4)
Commercial real estate 1,504,025 1,348,307 11.5 1,434,997 4.8
Commercial business 843,727 714,037 18.2 803,537 5.0
Total loans 4,101,204 3,809,888 7.6 3,973,745 3.2
Earning assets 5,725,165 5,663,261 1.1 5,596,734 2.3
Assets 6,405,735 6,372,157 0.5 6,279,353 2.0
Deposits:
Noninterest-bearing 660,576 742,494 (11.0) 709,492 (6.9)
Interest-bearing 3,484,415 3,337,785 4.4 3,375,739 3.2
Total deposits 4,144,991 4,080,279 1.6 4,085,231 1.5
Stockholders' equity 604,360 649,865 (7.0) 617,043 (2.1)
Common stockholders' equity 646,931 660,350 (2.0) 644,896 0.3
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL SUMMARY
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) Twelve Months Ended
December 31,
------------------------------------------
2007 2006 % Change
------------ ------------ ------------
SUMMARY INCOME STATEMENTS:
Net interest income $ 191,232 $ 204,411 (6.4)%
Provision for loan losses 23,365 3,973 -
Non-interest income (loss) 79,919 113,262 (29.4)
Impairment on investment securities (47,488) - -
Net gains (losses) 6,930 (6,426) (207.8)
Net derivative activities 423 370 14.3
Non-interest income, excluding total gains (losses) 120,054 119,318 0.6
Total revenue, excluding total gains (losses) 311,286 323,729 (3.8)
Non-interest expense 211,089 214,579 (1.6)
Restructuring activities 1,537 - -
Non-interest expense, excluding restructuring 209,552 214,579 (2.3)
Income tax expense (benefit) 4,567 29,118 (84.3)
Net income 32,130 70,003 (54.1)
SHARE DATA:
Basic earnings per share $ 1.00 $ 2.14 (53.3)%
Diluted earnings per share 1.00 2.12 (52.8)
Cash dividends paid per share 1.250 1.170 6.8
Book value per share 17.56 19.54 (10.1)
Weighted average shares - basic 31,972,056 32,727,420 (2.3)
Weighted average shares - diluted 32,194,785 33,082,089 (2.7)
Common shares outstanding 31,621,956 32,433,387 (2.5)
SELECTED RATIOS:
Return on average assets 0.51 % 1.09 %
Return on average equity 5.17 11.02
Return on average common equity 4.99 10.71
Net yield on average earning assets (t/e basis) 3.47 3.64
Efficiency ratio (excludes restructuring activities) 66.67 65.85
Leverage ratio 7.89 8.53
Tier I risk-based capital ratio 9.59 10.90
Total risk-based capital ratio 10.85 11.85
Tangible common equity ratio 5.86 6.50
END OF PERIOD BALANCES:
Investment securities portfolio $ 1,468,564 $ 1,684,603 (12.8)%
Total loans 4,215,326 3,865,492 9.1
Assets 6,464,889 6,295,893 2.7
Deposits 4,179,520 4,140,112 1.0
Stockholders' equity 555,428 633,631 (12.3)
Common stockholders' equity 623,948 655,738 (4.8)
AVERAGE BALANCES:
Investment securities portfolio $ 1,623,571 $ 1,896,460 (14.4)%
Loans:
Originated and acquired residential mortgage 307,977 389,836 (21.0)
Home equity 1,034,312 959,731 7.8
Other consumer 390,840 422,364 (7.5)
Commercial real estate 1,438,874 1,284,924 12.0
Commercial business 791,121 697,050 13.5
Total loans 3,963,124 3,753,905 5.6
Earning assets 5,600,478 5,668,682 (1.2)
Assets 6,284,152 6,375,182 (1.4)
Deposits:
Noninterest-bearing 709,339 773,369 (8.3)
Interest-bearing 3,414,364 3,271,892 4.4
Total deposits 4,123,703 4,045,261 1.9
Stockholders' equity 621,599 635,357 (2.2)
Common stockholders' equity 643,997 653,824 (1.5)