PROVIDENT BANKSHARES
CORPORATION
--------------------------------
NEWS RELEASE CONTACT
MEDIA: Vicki Cox (410) 277-2063
INVESTMENT COMMUNITY: Cheryl B. Ursida (410) 277-2080
PROVIDENT BANKSHARES CORPORATION ANTICIPATES ADDITIONAL WRITE-DOWNS
IN INVESTMENT PORTFOLIO
COMPANY TO HOST CONFERENCE CALL ON FEBRUARY 27, 2008 AT 9:00 A.M.
BALTIMORE, MD: (February 26, 2008) - Provident Bankshares Corporation
(NASDAQ:PBKS), the parent company of Provident Bank, announced today that it
anticipates additional write downs on its REIT trust preferred securities
portfolio. As previously reported, the Corporation recorded a $47.5 million
pre-tax write down relating to the REIT portfolio as a result of declines in
dealer price quotes and a downgrade in the securities by the rating agencies.
Based upon newly available information, continued deterioration in market prices
subsequent to year-end and its continuing analysis of the REIT portfolio, the
Company may realize additional impairment charges on some or all of the
remaining $32.8 million of the REIT portfolio at the end of the first quarter.
These anticipated write downs result from the Company's analysis of the
individual securities'credit risk surrounding the residential mortgage and
homebuilding industries and the risk with respect to collection of future
interest or principal payments on the securities.
In addition, based upon the ongoing credit analysis of the Company's non-agency
mortgage backed securities portfolio, the Company may realize additional
impairment charges on some or all of $14.9 million of that portfolio at the end
of the first quarter due to increased delinquency levels in the loans underlying
these securities.
At this time, there have been no other securities in the investment portfolio
identified as other than temporarily impaired. The determination of actual
impairment charges will be made at the end of the first quarter based upon
information available to management at that time.
"We felt it important to get this updated information regarding our investment
portfolio out as soon as it came to our attention and to be as transparent as
possible," said Gary N. Geisel, Chairman and Chief Executive Officer. "While the
news is disappointing, these developments result in no direct customer impact.
The Bank's core businesses remain profitable and the Bank remains
well-capitalized for regulatory purposes."
The following seven tables reflect the Company's current analysis of the
investment portfolio. Table one presents the composition of the entire
portfolio. Tables two, three and four present information on the trust preferred
portfolio. Tables five, six and seven present information on the non-agency
mortgage backed securities portfolio.
The Company will conduct a conference call for analysts at 9 A.M. Eastern Time
on February 27, 2008 to discuss this information. The conference call will be
simultaneously webcast at www.provbank.com and archived through March 5, 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:
-- About Provident
-- Investor Relations
-- Upcoming Events
-- Provident Bankshares Corporation Conference Call
An audio replay of the teleconference will be available through March 5, 2008 by
dialing 1-888-286-8010, passcode 15679173; 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.
TABLE 1
INVESTMENT PORTFOLIO COMPOSITION
January 31, 2008 Book Values
($000)
Description % Amount
- --------------------------------------------------------------------------------
U.S. Treasury & Agency MBS 39% $ 622,707
Pooled Trust Preferred Stock 34% $ 547,393
G.O. Municipals 10% $ 152,858
Non Agency 8% $ 131,331
Corporate Bonds 9% $ 142,845
------------------------------------------------
100% $ 1,597,134
================================================
TABLE 2
POOLED TRUST PREFERRED PORTFOLIO
Description % Amount
- --------------------------------------------------------------------------------
Banks 75% $ 410,430
REITs 11% $ 57,551
Insurance 15% $ 79,412
------------------------------------------------
100% $ 547,393
================================================
TABLE 3
REIT TRUST PREFERRED
Description % Amount
- --------------------------------------------------------------------------------
Senior Securities
(AAA S&P / A+ to BBB + Fitch) 43% $24,747
Mezzanine Securities
(A to BB- S&P / BBB to B Fitch) 57% $32,804
---------------------------------------
Remaining REIT Trust Preferred
Portfolio 100% $57,551
=======================================
TABLE 4
REIT CREDIT COMPOSITION
($000)
Mezzanine Senior
Securities Securities
------------- -------------
Securities "Other than temporarily impaired" on Dec 31 $18,698
Mezzanine Securities (A- AA S&P, BBB Fitch)
At-Risk Securities 14,106
-------------
Senior Securities (AAA S&P, BBB+ to A+ Fitch) $32,804
============= -------------
Senior Securities (AAA S&P, BBB+ to A+ Fitch) $24,747
=============
CREDIT QUALITY: DEFAULTS AND CREDIT SUPPORT
Current Default Level 11.7% 10.9%
Average Credit Support Level*
For Interest Payments 25% 40%
For Principal Payments 35% 56%
* Credit Support Level represents the % of issues in default required before
the securitiy suffers permanent loss of interest or principal payments.
TABLE 5
NON-AGENCY MBS PORTFOLIO
- ------------------------------------------
AAA 51% $ 66,979
AA 49% 64,352
---------------
$ 131,331
TABLE 6
AAA AVERAGES AA AVERAGES
- --------------------------------------------------------------------------------
# of Issues 13 # of Issues 16
FICO 733 FICO 731
LTV 64% LTV 70%
Avg. Loan Size $ 514,000 Avg. Loan Size $ 371,000
Delinquency + 60 Day 1.84% Delinquency + 60 Day 3.79%
TABLE 7
Non-Agency MBS
Credit Composition
POTENTIAL CURRENT POTENTIAL
60+ DAYS LOSSES (35% CREDIT REMAINING AVG AVG
BOOK VALUE DELINQUENCY SEVERITY) SUPPORT SUPPORT FICO LTV
-------------- -------------- ----------- --------- --------- ------ -------
NON-AGENCY MBS
AT RISK
AA-rated Mezzanine ----------
securities $ 14,932 9.18% 3.21% 4.11% 0.90% 707 74%
----------
REMAINING
AA-RATED MEZZANINE
NON-AGENCY MBS
1st Quartile 12,578 4.63% 1.62% 3.53% 1.91% 714 71%
2nd Quartile 9,591 2.69% 0.94% 3.08% 2.14% 720 69%
3rd Quartile 12,455 1.21% 0.42% 2.24% 1.82% 742 70%
4th Quartile 14,795 0.55% 0.19% 1.92% 1.73% 745 71%
----------
$ 49,420
----------
AAA-RATED
NON-AGENCY MBS
AAA-rated Senior
securities -
2 positions 8,946 10.26% 3.59% 6.30% 2.71% 707 72%
Remaining
AAA-rated
Senior
Securities 58,034 0.54% 0.19% 4.28% 4.09% 737 63%
----------
$ 66,979
----------
TOTAL NON-AGENCY
MBS $131,331
==========