Filed by Provident Financial Group, Inc. pursuant to
Rule 425 under the Securities Act of 1933 and
deemed filed pursuant to Rule 14a-12 under
the Securities Exchange Act of 1934
Subject Company: Provident Financial Group, Inc.
Commission File Number: 001-08019
This filing contains forward-looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. Such statements include, but
are not limited to, statements about the benefits of the merger between National
City Corporation and Provident Financial Group, Inc., including future financial
and operating results, the combined company's plans, objectives, expectations
and intentions and other statements that are not historical facts. Such
statements are based upon the current beliefs and expectations of National
City's and Provident's management and are subject to significant risks and
uncertainties. Actual results may differ from those set forth in the
forward-looking statements.
The following factors, among others, could cause actual results to differ from
those set forth in the forward-looking statements: the ability to obtain
governmental approvals of the merger on the proposed terms and schedule; the
failure Provident stockholders to approve the merger; the risk that the
businesses will not be integrated successfully; the risk that the cost savings
and any other synergies from the merger may not be fully realized or may take
longer to realize than expected; disruption from the merger making it more
difficult to maintain relationships with clients, employees or suppliers;
increased competition and its effect on pricing, spending, third-party
relationships and revenues; the risk of new and changing regulation in the U.S.
and internationally. Additional factors that could cause National City's and
Provident's results to differ materially from those described in the
forward-looking statements can be found in the 2004 Quarterly Reports on Form
10-Q, as they are filed, and the 2003 Annual Report on Form 10-K of National
City and Provident filed with the SEC and available at the SEC's Internet site
(http://www.sec.gov).
STOCKHOLDERS ARE URGED TO READ THE JOINT PROXY STATEMENT/PROSPECTUS REGARDING
THE PROPOSED TRANSACTION WHEN IT BECOMES AVAILABLE, BECAUSE IT WILL CONTAIN
IMPORTANT INFORMATION. Stockholders will be able to obtain a free copy of the
joint proxy statement/prospectus, as well as other filings containing
information about National City and Provident, without charge, at the SEC's
Internet site (http://www.sec.gov). Copies of the joint proxy
statement/prospectus and the filings with the SEC that will be incorporated by
reference in the joint proxy statement/prospectus can also be obtained, without
charge, by directing a request to National City Corporation, National City
Center, 1900 East Ninth Street, Cleveland, Ohio 44114-3484, Attention: Office of
the Secretary (216-222-2000), or to Provident Financial Group, Inc., One East
Fourth Street, Cincinnati, Ohio 45202, Attention: Secretary (513-579-2861).
The respective directors and executive officers of National City and Provident
and other persons may be deemed to be participants in the solicitation of
proxies in respect of the proposed merger. Information regarding National City's
directors and executive officers is available in its proxy statement filed with
the SEC by National City on March 11, 2004, and information regarding
Provident's directors and executive officers is available in its Form 10-K filed
with the SEC by Provident on March 15, 2004. Other information regarding the
participants in the proxy solicitation and a description of their direct and
indirect interests, by security holdings or otherwise, will be contained the
joint proxy statement/prospectus and other relevant materials to be filed with
the SEC when they become available.
**********
(PROVIDENT LOGO)
One East Fourth Street
Cincinnati, Ohio 45202
NEWS RELEASE
PROVIDENT FINANCIAL GROUP, INC. ANNOUNCES FIRST QUARTER 2004 FINANCIAL RESULTS
Cincinnati, April 21, 2004 - Provident Financial Group, Inc. announced first
quarter 2004 financial results today. For the quarter ended March 31, 2004, net
income was $27.1 million or 51 cents per share compared with $25.8 million or 51
cents per share reported in 2003's first quarter. First quarter 2004 returns on
average equity and assets were 11.68 percent and 0.65 percent, compared with
11.76 percent and 0.59 percent in last year's first quarter.
On February 17, 2004, Provident Financial Group and National City Corporation
announced that they had signed a definitive agreement for National City to
acquire Provident. First quarter 2004 results include a 5 cent net impact to
earnings per share that is directly related to the increase in Provident's share
price as a result of the acquisition announcement. Excluding this impact, first
quarter 2004 earnings per share were 56 cents. The table below shows a
reconciliation of these items.
Earnings Per Share (EPS) Impact of Items Related to Share Price Increase
as a Result of Pending Merger with National City Corporation
Reported EPS $ 0.51
EPS impact related to higher expenses
associated with discontinued variable stock based
compensation plan 0.03
EPS impact related to increased common stock
equivalents for stock options and PRIDES
securities 0.02
--------
Adjusted EPS $ 0.56
========
Robert L. Hoverson, Provident's President and Chief Executive Officer,
commented, "Excluding the earnings per share impact of the items associated with
our pending merger with National City Corporation, first quarter earnings were
within the range of our expectations and slightly above market consensus. Our
financial results benefited primarily from significantly improved credit
quality. Net charge-offs, non-performing assets and the loan loss provision were
well below the levels of prior years. The composition of our deposit portfolio
also continues to improve. Excluding the managed runoff of higher-cost CDs,
average retail and commercial deposit account balances increased 20 percent over
last year's first quarter, as sales associates continued to establish new
customer relationships. Throughout the quarter, over 13,000 new lower-cost
deposit accounts were opened, an increase of 12 percent over the number of new
accounts opened last quarter. Additionally, we also realized a 15 basis point
increase in the net interest margin over last quarter."
"We look forward to joining forces with National City Corporation. Our customers
will benefit by having access to more branches and ATMs, as well as an expanded
menu of products and services. We are committed to exceeding customer
expectations and are working closely with National City to ensure a seamless
transition throughout the entire merger process."
-1-
LOANS & ASSET QUALITY
Average loans and leases for 2004's first quarter were $8.8 billion compared
with $9.1 billion in last year's first quarter. Total loans and leases
outstanding on March 31, 2004 were $8.9 billion compared with $9.2 billion on
March 31, 2003.
Key asset quality indicators:
- - The first quarter 2004 provision for loan and lease losses was $10.0
million compared with $16.5 million for 2003's first quarter.
- - The first quarter 2004 annualized net charge-offs to average total loans
and leases were 0.45 percent compared with 0.73 percent for 2003's first
quarter.
- - The reserve for loan and lease losses on March 31, 2004 was $160.0 million
compared with $201.0 million on March 31, 2003. The reserve for loan and
lease losses on March 31, 2004 was 1.80 percent of total loans and leases
compared with 2.20 percent on March 31, 2003. The reserve for loan and
lease losses on March 31, 2004 was 200 percent of non-performing assets
compared with 99 percent on March 31, 2003.
- - Non-performing assets were $80.0 million on March 31, 2004, compared with
$84.2 million on December 31, 2003, and $203.4 million on March 31, 2003.
Non-performing assets were 0.90 percent of total loans, leases and other
non-performing assets on March 31, 2004, compared with 0.95 percent on
December 31, 2003, and 2.22 percent on March 31, 2003.
REVENUE & EXPENSES
First quarter 2004 net interest income was $76.0 million compared with $83.0
million in last year's first quarter. The net interest margin was 2.17 percent
compared with 2.02 percent last quarter and 2.37 percent in last year's first
quarter. The decline in the net interest margin from 2003's first quarter was
primarily due to $471.0 million of subprime loans that were sold during the
second quarter of 2003. Non-interest income was $168.1 million compared with
$193.3 million in last year's first quarter. Revenue, comprised of net interest
income and non-interest income, was $244.1 million compared with $276.2 million
in last year's first quarter. First quarter 2004 non-interest expenses were
$194.1 million compared with $221.2 million in last year's first quarter.
DEPOSITS
Average retail and commercial deposits for 2004's first quarter were $6.3
billion, an increase of 5 percent from $6.0 billion in 2003's first quarter.
Excluding the managed run-off of higher-cost CDs, the average balances of
transactional deposit accounts were up 20 percent. For the period ended March
31, 2004, retail and commercial deposits were $6.2 billion, an increase of 4
percent from $6.0 billion on March 31, 2003.
CAPITAL POSITION
Common shareholders' equity was $924.0 million or $18.70 per share on March 31,
2004 compared with $892.1 million or $18.19 per share on December 31, 2003. On
March 31, 2004, tier 1 capital and total capital as a percentage of risk
adjusted assets were 11.03 percent and 12.83 percent respectively, and the tier
1 leverage ratio was 8.73 percent.
CONFERENCE CALL & WEBCAST
Due to the impending acquisition of Provident Financial Group by National City
Corporation, the company will not be hosting a conference call or webcast this
quarter.
-2-
FORWARD-LOOKING STATEMENTS
This document may contain certain forward-looking statements that are subject to
numerous assumptions, risks or uncertainties. The Private Securities Litigation
Reform Act of 1995 provides a safe harbor for forward-looking statements.
Forward-looking statements may be identified by words such as estimates,
anticipates, projects, plans, expects, intends, believes, should and similar
expressions and by the context in which they are used. Such statements are based
upon current expectations of the company and speak only as of the date made.
Actual results could differ materially from those contained in or implied by
such forward-looking statements for a variety of factors including: sharp and/or
rapid changes in interest rates; significant changes in the anticipated economic
scenario which could materially change anticipated credit quality trends; the
ability to generate loans and leases; significant cost, delay in, or ability to
execute strategic initiatives designed to grow revenues and/or manage expenses;
consummation of significant business combinations or divestitures; and
significant changes in accounting, tax, or regulatory practices or requirements
and factors noted in connection with forward-looking statements. Additionally,
borrowers could suffer unanticipated losses without regard to general economic
conditions. The results of these and other factors could cause differences from
expectations in the level of defaults, changes in the risk characteristics of
the loan and lease portfolio, and changes in the provision for loan and lease
losses. Provident undertakes no obligations to update any forward-looking
statements to reflect events or circumstances arising after the date on which
they are made.
ABOUT PROVIDENT FINANCIAL GROUP, INC.
Provident Financial Group, Inc. (Nasdaq: PFGI) is a bank holding company located
in Cincinnati, Ohio. Its main subsidiary, The Provident Bank, provides a diverse
line of banking and financial products, services and solutions through retail
banking offices located in Southwestern Ohio and Northern Kentucky, and through
commercial lending offices located throughout Ohio and surrounding states.
Customers have access to banking services 24-hours a day through Provident's
extensive network of ATMs, Telebank, a telephone customer service center, and
the internet at http://www.providentbank.com. At March 31, 2004, Provident
Financial Group had $8.9 billion in loans outstanding, $9.9 billion in deposits,
and assets of $16.7 billion. On February 17, 2004, Provident Financial Group and
National City Corporation (NYSE: NCC) announced that they had signed a
definitive agreement for National City to acquire Provident. The transaction is
expected to close by the end of the second quarter.
FOR FURTHER INFORMATION, PLEASE CONTACT:
Christopher J. Carey
Executive Vice President & Chief Financial Officer
1-513-639-4644 / 1-800-851-9521
e-mail: IR@provident-financial.com
Stockholders are urged to read the joint proxy statement/prospectus which
contains important information regarding the proposed transaction. Stockholders
can obtain a free copy of the joint proxy statement/prospectus, as well as other
filings containing information about National City Corporation and Provident
Financial Group, Inc., without charge, at the SEC's Internet site
(http://www.sec.gov). Copies of the joint proxy statement/prospectus and the
filings with the SEC incorporated by reference in the joint proxy
statement/prospectus can also be obtained, without charge, by directing a
request to National City Corporation, National City Center, 1900 East Ninth
Street, Cleveland, Ohio 44114-3484 Attention: Office of the Secretary
(216-222-2000), or to Provident Financial Group, Inc., One East Fourth Street,
Cincinnati, Ohio 45202 Attention: Secretary (513-579-2861). The respective
directors and executive officers of National City and Provident and other
persons may be deemed to be participants in the solicitation of proxies in
respect of the proposed merger. Information regarding National City's directors
and executive officers is available in its proxy statement filed with the SEC by
National City on March 11, 2003, and information regarding Provident's directors
and executive officers is available in its Form 10-K filed with the SEC by
Provident on March 15, 2004. Other information regarding the participants in the
proxy solicitation and a description of their direct and indirect interests, by
security holdings or otherwise, is contained in the joint proxy
statement/prospectus and other relevant materials filed with the SEC as they
become available.
-3-
(PROVIDENT LOGO)
Selected Consolidated Financial Information
March 31, 2004
(unaudited)
CONTENTS PAGE
- -------- ----
Consolidated Financial Highlights ...................................... 5
Consolidated Statements of Income ...................................... 6
Consolidated Quarterly Statements of Income ............................ 7
Consolidated Period End Balance Sheets ................................. 8
Consolidated Credit Loss Experience .................................... 9
Consolidated Nonperforming Assets ...................................... 10
Consolidated Average Balances and Rates ................................ 11
Consolidated Capital Data .............................................. 12
Supplementary Data ..................................................... 13
-4-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL HIGHLIGHTS
(UNAUDITED)
Three Months
----------------------------------------------
FOR THE PERIOD ENDED MARCH 31 2004 2003 % Change
---------- ---------- --------
Net Income
Basic ................................................ .55 .52 5.8%
Diluted .............................................. .51 .51 0.0%
Dividends ................................................. .24 .24 0.0%
Book Value ................................................ 18.70 17.88 4.6%
RESULTS OF OPERATIONS: (IN MILLIONS)
Net Interest Income ..................................... $ 76.0 $ 83.0 (8.4)%
Provision for Loan and Lease Losses ..................... 10.0 16.5 (39.7)%
Net Income .............................................. 27.1 25.8 4.8%
FINANCIAL RATIOS:
Performance Ratios:
Return on Average Assets ............................ 0.65% 0.59%
Return on Average Shareholders' Equity .............. 11.68 11.76
Average Shareholders' Equity to Average Assets ...... 5.58 5.01
Net Interest Margin ................................. 2.17 2.37
Capital Adequacy Ratios (Period End):
Shareholders' Equity to Total Assets ................ 5.56 4.96
Tier I Leverage Ratio ............................... 8.73 7.76
Risk-Based Capital Ratio - Tier I Capital ........... 11.03 9.78
Risk-Based Capital Ratio - Total Capital ............ 12.83 11.65
(Current Period Regulatory Ratios are Estimated)
ASSET QUALITY RATIOS:
Reserve for Loan and Lease Losses to:
Total Loans and Leases ............................... 1.80% 2.20%
Nonaccrual Loans ..................................... 208.46 110.91
Nonperforming Assets to:
Total Loans, Leases and Other Nonperforming Assets ... .90 2.22
Total Assets ......................................... .48 1.15
Net Charge-Off's to
Average Total Loans and Leases (Annualized) .......... .45 .73
AVERAGE BALANCES: (IN MILLIONS)
Total Loans and Leases .................................. $ 8,826 $ 9,085 (2.9)%
Earning Assets .......................................... 14,078 14,194 (0.8)%
Leased Equipment ........................................ 1,551 2,242 (30.8)%
Assets .................................................. 16,613 17,534 (5.3)%
Deposits ................................................ 10,191 10,107 0.8%
Interest Bearing Liabilities ............................ 13,633 14,978 (9.0)%
Shareholders' Equity .................................... 927 878 5.6%
PERIOD END BALANCES: (IN MILLIONS)
Total Loans and Leases .................................. $ 8,890 $ 9,152 (2.9)%
Leased Equipment ........................................ 1,470 2,182 (32.6)%
Assets .................................................. 16,738 17,726 (5.6)%
Deposits ................................................ 9,909 10,665 (7.1)%
Shareholders' Equity .................................... 931 879 5.9%
OFF-BALANCE SHEET SECURITIZED LOANS AND LEASES: (IN MILLIONS)
Residential Mortgage .................................... $ 1,054 $ 1,619 (34.9)%
Home Equity ............................................. 106 178 (40.4)%
Direct Finance Leasing .................................. 31 80 (61.3)%
---------- ----------
Total Off-Balance Sheet Securitized Loans and Leases .... $ 1,191 $ 1,877 (36.5)%
(See Investment in Variable Interest Entities Note to Consolidated Financial
Statements within the Company's Form 10-K for further discussion of these
off-balance sheet assets.)
-5-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(UNAUDITED)
Three Months Ended
March 31,
--------------------------------------
2004 2003 % Change
---- ---- --------
Net Interest Income $ 76,011 $ 82,959 (8.4)%
Provision for Loan and Lease Losses 9,962 16,521 (39.7)%
Noninterest Income:
Service Charges on Deposit Accounts 11,493 12,332 (6.8)%
Loan Servicing Fees 10,569 10,660 (0.9)%
Commercial Mortgage Banking Revenue 11,300 10,297 9.7%
Other Service Charges and Fees 11,766 11,736 0.3%
Leasing Income 104,089 137,974 (24.6)%
Cash Gain on Sale of Loans 8,702 4,942 76.1%
Warrant Gains 549 328 67.4%
Net Securities Gains / (Losses) 272 1,500 (81.9)%
Other 9,392 3,518 167.0%
-------- ------
Total Noninterest Income 168,132 193,287 (13.0)%
Noninterest Expense:
Salaries, Wages and Benefits 65,008 61,984 4.9%
Charges and Fees 6,168 7,822 (21.1)%
Occupancy 6,279 6,228 0.8%
Leasing Expense 75,755 95,169 (20.4)%
Equipment Expense 6,086 6,949 (12.4)%
Professional Services 5,800 8,398 (30.9)%
Minority Interest Expense 3,197 3,197 0.0%
Other 25,814 31,449 (17.9)%
-------- ------
Total Noninterest Expense 194,107 221,196 (12.2)%
-------- ------
Income Before Income Taxes 40,074 38,529 4.0%
Income Taxes 13,024 12,715 2.4%
-------- ------
Net Income $ 27,050 $ 25,814 4.8%
======== ========
Other Data:
Basic Earnings Per Common Share (GAAP) $ 0.55 $ 0.52 5.8%
Diluted Earnings Per Common Share (GAAP) $ 0.51 $ 0.51 0.0%
Adjustments (1):
Impact for additional expense related to discontinued
variable stock based compensation plan 0.03 --
Impact for additional common stock equivalents 0.02 --
-------- ------
Adjusted Diluted Earnings Per Common Share (Non-GAAP) $ 0.56 $ 0.51 9.8%
Dividends Paid Per Common Share $ 0.24 $ 0.24 0.0%
Return on Assets 0.65% 0.59%
Return on Equity 11.68% 11.76%
Net Interest Margin (FTE) 2.17% 2.37%
Full-Time Equivalent Employees 3,237 3,333
(1) On February 17, 2004, Provident announced that it had signed a definitive
agreement to merge with National City Corporation. As a result, the market
value of Provident's stock increased causing a higher calculation of common
stock equivalents for both its stock options and PRIDES securities
outstanding. Additionally, Provident incurred additional expense related to
a discontinued variable stock based compensation plan which is directly
impacted by the market price of its stock. Therefore, the increase in stock
price lowered Provident's diluted earnings per share. The company believes
presenting diluted earnings per share excluding the impact of the high
stock price might be beneficial to the reader as it provides data that is
more comparable to other periods contained within this document.
-6-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED QUARTERLY STATEMENTS OF INCOME
(UNAUDITED)
2004 2003
--------- -----------------------------------------------------------
First Fourth Third Second First Full
Quarter Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- --------- ---------
Net Interest Income $ 76,011 $ 74,216 $ 74,123 $ 84,494 $ 82,959 $ 315,792
Provision for Loan and Lease Losses 9,962 35,070 11,919 52,469 16,521 115,979
Noninterest Income:
Service Charges on Deposit Accounts 11,493 12,367 12,933 12,391 12,332 50,023
Loan Servicing Fees 10,569 13,150 6,925 9,428 10,660 40,163
Commercial Mortgage Banking Revenue 11,300 13,550 10,095 10,849 10,297 44,791
Other Service Charges and Fees 11,766 12,758 13,520 12,921 11,736 50,935
Leasing Income 104,089 114,484 126,192 131,459 137,974 510,109
Cash Gain on Sale of Loans 8,702 3,714 4,553 7,124 4,942 20,333
Warrant Gains 549 -- -- 1,308 328 1,636
Net Securities Gains / (Losses) 272 (1,128) 5,077 858 1,500 6,307
Net Gain on Florida Assets and Liabilities -- 74,998 -- -- -- 74,998
Net Gain on Merchant Services Business -- -- -- 19,000 -- 19,000
Other 9,392 9,664 6,176 7,636 3,518 26,994
--------- --------- --------- --------- --------- ---------
Total Noninterest Income 168,132 253,557 185,471 212,974 193,287 845,289
Noninterest Expense:
Salaries, Wages and Benefits 65,008 64,855 60,737 65,823 61,984 253,399
Charges and Fees 6,168 9,059 7,404 7,867 7,822 32,152
Occupancy 6,279 6,449 6,224 6,464 6,228 25,365
Leasing Expense 75,755 88,412 89,047 92,780 95,169 365,408
Equipment Expense 6,086 6,114 6,398 6,824 6,949 26,285
Professional Services 5,800 7,945 7,906 8,418 8,398 32,667
Minority Interest Expense 3,197 3,197 3,197 3,197 3,197 12,788
Debt Retirement Charge -- 25,584 -- -- -- 25,584
Disposition Cost of Subprime Loans -- -- -- 6,914 -- 6,914
Other 25,814 34,659 26,378 27,007 31,449 119,493
--------- --------- --------- --------- --------- ---------
Total Noninterest Expense 194,107 246,274 207,291 225,294 221,196 900,055
--------- --------- --------- --------- --------- ---------
Income Before Income Taxes and Cumulative
Effect of Changes in Accounting Principles 40,074 46,429 40,384 19,705 38,529 145,047
Income Taxes 13,024 15,005 12,923 6,502 12,715 47,145
--------- --------- --------- --------- --------- ---------
Income Before Cumulative Effect of
Changes in Accounting Principles 27,050 31,424 27,461 13,203 25,814 97,902
Cumulative Effect of Changes in
Accounting Principles -- (1,202) -- -- -- (1,202)
--------- --------- --------- --------- --------- ---------
Net Income $ 27,050 $ 30,222 $ 27,461 $ 13,203 $ 25,814 $ 96,700
========= ========= ========= ========= ========= =========
Other Data:
Before Cumulative Effect of Changes in
Accounting Principles:
Basic Earnings Per Common Share $ 0.55 $ 0.63 $ 0.56 $ 0.27 $ 0.52 $ 1.99
Diluted Earnings Per Common Share $ 0.51 $ 0.61 $ 0.54 $ 0.26 $ 0.51 $ 1.92
After Cumulative Effect of Changes in
Accounting Principles:
Basic Earnings Per Common Share $ 0.55 $ 0.61 $ 0.56 $ 0.27 $ 0.52 $ 1.96
Diluted Earnings Per Common Share $ 0.51 $ 0.59 $ 0.54 $ 0.26 $ 0.51 $ 1.90
Dividends Paid Per Common Share $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.24 $ 0.96
Return on Assets 0.65% 0.70% 0.62% 0.30% 0.59% 0.55%
Return on Equity 11.68% 13.51% 12.91% 5.85% 11.76% 10.97%
Net Interest Margin (FTE) 2.17% 2.02% 2.01% 2.32% 2.37% 2.18%
Full-Time Equivalent Employees 3,237 3,177 3,345 3,355 3,333
-7-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED PERIOD END BALANCE SHEETS
(UNAUDITED)
2004 2003
------------ ---------------------------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
------------ ------------ ------------ ------------ ------------
ASSETS
Cash and Due From Banks $ 276,538 $ 273,299 $ 288,176 $ 352,241 $ 340,141
Federal Funds Sold and
Reverse Repurchase Agreements 167,069 253,273 341,833 337,006 561,446
Trading Account Securities 130,787 119,646 142,660 105,877 111,516
Loans and Leases Held For Sale 255,968 595,505 494,804 447,039 255,593
Investment Securities Available for Sale 4,544,536 4,527,912 4,731,323 4,760,894 4,320,723
Investment Securities Held to Maturity 199,889 -- -- -- --
Loans and Leases:
Corporate Lending:
Commercial 4,109,379 4,038,545 4,288,451 4,459,612 4,515,888
Mortgage 949,765 961,939 992,619 1,017,061 947,205
Construction 424,444 452,581 504,071 516,348 528,824
Lease Financing 1,277,158 1,275,255 1,304,659 1,253,851 1,233,533
------------ ------------ ------------ ------------ ------------
Total Corporate Lending 6,760,746 6,728,320 7,089,800 7,246,872 7,225,450
Consumer Lending:
Installment 1,548,898 1,670,667 1,573,782 1,424,207 1,362,896
Residential 36,272 36,241 26,812 37,741 519,632
Lease Financing 544,190 460,302 320,866 155,577 43,522
------------ ------------ ------------ ------------ ------------
Total Consumer Lending 2,129,360 2,167,210 1,921,460 1,617,525 1,926,050
------------ ------------ ------------ ------------ ------------
Total Loans and Leases 8,890,106 8,895,530 9,011,260 8,864,397 9,151,500
Reserve for Loan and Lease Losses (160,000) (160,000) (184,160) (185,019) (201,020)
------------ ------------ ------------ ------------ ------------
Net Loans and Leases 8,730,106 8,735,530 8,827,100 8,679,378 8,950,480
Leased Equipment 1,469,955 1,653,264 1,825,721 2,006,999 2,181,823
Premises and Equipment 91,884 92,837 99,561 97,070 98,853
Goodwill 83,798 81,801 84,269 83,979 82,651
Other Assets 787,101 684,438 772,186 923,516 823,194
------------ ------------ ------------ ------------ ------------
$ 16,737,631 $ 17,017,505 $ 17,607,633 $ 17,793,999 $ 17,726,420
============ ============ ============ ============ ============
LIABILITIES AND
SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest Bearing $ 1,484,560 $ 1,491,473 $ 1,412,183 $ 1,357,468 $ 1,163,209
Interest Bearing 8,424,208 8,844,245 9,359,919 9,598,344 9,502,086
------------ ------------ ------------ ------------ ------------
Total Deposits 9,908,768 10,335,718 10,772,102 10,955,812 10,665,295
Short-Term Debt 1,790,944 1,443,438 1,403,012 1,268,198 1,506,797
Long-Term Debt 3,067,893 3,298,930 3,476,460 3,624,262 3,661,219
Junior Subordinated Debentures 465,904 465,799 -- -- --
Guaranteed Preferred Beneficial Interests in
Junior Subordinated Debentures -- -- 451,389 451,284 451,179
Minority Interest 160,966 160,966 160,966 160,966 160,966
Accrued Interest and Other Liabilities 412,195 413,600 451,294 442,883 401,981
------------ ------------ ------------ ------------ ------------
Total Liabilities 15,806,670 16,118,451 16,715,223 16,903,405 16,847,437
Shareholders' Equity:
Preferred Stock 7,000 7,000 7,000 7,000 7,000
Common Stock 14,646 14,538 14,492 14,461 14,454
Capital Surplus 316,432 305,632 301,737 298,838 298,498
Retained Earnings 667,047 652,206 634,018 618,712 619,444
Accumulated Other
Comprehensive Income (74,164) (80,322) (64,837) (48,417) (60,413)
------------ ------------ ------------ ------------ ------------
Total Shareholders' Equity 930,961 899,054 892,410 890,594 878,983
------------ ------------ ------------ ------------ ------------
$ 16,737,631 $ 17,017,505 $ 17,607,633 $ 17,793,999 $ 17,726,420
============ ============ ============ ============ ============
-8-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CREDIT LOSS EXPERIENCE
(UNAUDITED)
2004 2003
--------- --------------------------------------------------------------------
First Fourth Third Second First Full
Quarter Quarter Quarter Quarter Quarter Year
--------- --------- --------- --------- --------- ---------
Reserve for Loan and Lease Losses
At Beginning of Period $ 160,000 $ 184,160 $ 185,019 $ 201,020 $ 201,051 $ 201,051
Provision Charged to Expense 9,962 35,070 11,919 52,469 16,521 115,979
Net Charge-Offs:
Corporate Lending:
Commercial 6,295 24,166 7,726 11,147 8,093 51,132
Mortgage 1 1,062 -- 54 46 1,162
Construction (52) 52 (56) (241) 65 (180)
Lease Financing 1,595 32,094 3,946 1,714 3,294 41,048
--------- --------- --------- --------- --------- ---------
Net Corporate Lending 7,839 57,374 11,616 12,674 11,498 93,162
Consumer Lending:
Installment 1,061 2,003 1,118 1,467 576 5,164
Residential 1,011 (166) 2 54,320 4,478 58,634
Lease Financing 51 19 42 9 -- 70
--------- --------- --------- --------- --------- ---------
Net Consumer Lending 2,123 1,856 1,162 55,796 5,054 63,868
--------- --------- --------- --------- --------- ---------
Net Charge-Offs 9,962 59,230 12,778 68,470 16,552 157,030
--------- --------- --------- --------- --------- ---------
Reserve for Loan and Lease Losses
At End of Period $ 160,000 $ 160,000 $ 184,160 $ 185,019 $ 201,020 $ 160,000
========= ========= ========= ========= ========= =========
Net Charge-Offs to Average Total Loans and
Leases: (Annualized)
Corporate Lending:
Commercial 0.64% 2.34% 0.69% 0.99% 0.73% 1.17%
Mortgage --% 0.44% --% 0.02% 0.02% 0.12%
Construction (0.05%) 0.04% (0.04%) (0.18%) 0.05% (0.03%)
Lease Financing 0.51% 9.89% 1.27% 0.56% 1.06% 3.27%
--------- --------- --------- --------- --------- ---------
Total Corporate Lending 0.48% 3.33% 0.65% 0.70% 0.64% 1.31%
Consumer Lending:
Installment 0.25% 0.48% 0.29% 0.42% 0.17% 0.35%
Residential 10.16% (2.49%) 0.07% 44.70% 3.25% 22.04%
Lease Financing 0.04% 0.02% 0.07% 0.04% --% 0.04%
--------- --------- --------- --------- --------- ---------
Total Consumer Lending 0.38% 0.35% 0.26% 11.21% 1.04% 3.28%
--------- --------- --------- --------- --------- ---------
Total Loans and Leases 0.45% 2.64% 0.57% 2.98% 0.73% 1.73%
========= ========= ========= ========= ========= =========
-9-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED NONPERFORMING ASSETS
(UNAUDITED)
2004 2003
-------- -----------------------------------------------
First Fourth Third Second First
Quarter Quarter Quarter Quarter Quarter
-------- -------- -------- -------- --------
Nonaccrual Loans:
Corporate Lending:
Commercial $ 61,656 $ 62,288 $109,022 $116,926 $123,912
Mortgage 8,638 8,146 5,330 6,307 7,298
Construction 2,333 2,469 3,617 3,792 1,321
Lease Financing 103 514 2,271 2,267 2,792
-------- -------- -------- -------- --------
Total Corporate Lending 72,730 73,417 120,240 129,292 135,323
Consumer Lending:
Installment -- -- -- -- --
Residential 4,025 6,442 3,468 4,011 45,927
Lease Financing -- -- -- -- --
-------- -------- -------- -------- --------
Total Consumer Lending 4,025 6,442 3,468 4,011 45,927
-------- -------- -------- -------- --------
Total Nonaccrual Loans 76,755 79,859 123,708 133,303 181,250
Other Nonperforming Assets 3,232 4,299 8,251 13,858 22,172
-------- -------- -------- -------- --------
Total Nonperforming Assets $ 79,987 $ 84,158 $131,959 $147,161 $203,422
======== ======== ======== ======== ========
Loans 90 Days Past Due Still Accruing $ 6,768 $ 12,702 $ 10,211 $ 5,971 $ 36,038
Reserve for Loan and Lease Losses as a Percent of:
Nonaccrual Loans 208.46% 200.35% 148.87% 138.80% 110.91%
Nonperforming Assets 200.03% 190.12% 139.56% 125.73% 98.82%
Total Loans and Leases 1.80% 1.80% 2.04% 2.09% 2.20%
Nonaccrual Loans as a % of Total Loans and Leases .86% .90% 1.37% 1.50% 1.98%
Nonperforming Assets as a Percent of:
Total Loans, Leases and Other Nonperforming Assets .90% .95% 1.46% 1.66% 2.22%
Total Assets .48% .49% .75% .83% 1.15%
-10-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED AVERAGE BALANCES AND RATES
ON A FULLY TAXABLE EQUIVALENT BASIS
(UNAUDITED)
2004 2003
--------------------- ------------------------------------------------
First Quarter Fourth Quarter Third Quarter
--------------------- --------------------- ---------------------
Average Average Average Average Average Average
(Dollars In Millions) Balance Rate Balance Rate Balance Rate
- ------------------------------------------------------------------ --------------------- ---------------------
ASSETS:
Loans and Leases:
Corporate Lending:
Commercial $ 3,928 5.58% $ 4,130 5.40% $ 4,461 5.71%
Mortgage 950 4.96 971 5.19 980 5.32
Construction 436 3.79 488 3.79 512 4.45
Lease Financing 1,257 7.99 1,299 7.72 1,247 8.14
------- ------- ------- ------- ------- -------
Total Corporate Lending 6,571 5.83 6,888 5.69 7,200 5.99
Consumer Lending:
Installment 1,697 4.03 1,666 4.08 1,519 4.36
Residential 40 15.44 27 14.21 12 13.46
Lease Financing 518 5.11 401 5.63 234 7.02
------- ------- ------- ------- ------- -------
Total Consumer Lending 2,255 4.48 2,094 4.51 1,765 4.77
------- ------- ------- ------- ------- -------
Total Loans and Leases 8,826 5.49 8,982 5.42 8,965 5.75
Investment Securities 4,502 3.87 4,583 3.76 4,702 3.63
Federal Funds Sold and Reverse
Repurchase Agreements 297 1.72 377 1.56 446 1.55
Other Short-Term Investments 453 4.67 613 4.66 549 5.85
------- ------- ------- ------- ------- -------
Total Earning Assets 14,078 4.86 14,555 4.76 14,662 4.95
Cash and Due From Banks 242 276 306
Leased Equipment 1,551 1,737 1,918
Other Assets 742 827 791
------- ------- -------
Total Assets $16,613 $17,395 $17,677
======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Deposits:
Demand Deposits $ 872 0.77 $ 1,119 1.22 $ 1,266 1.33
Savings Deposits 1,614 1.61 1,633 1.66 1,553 1.71
Time Deposits 6,218 2.31 6,384 2.28 6,700 2.56
------- ------- ------- ------- ------- -------
Total Deposits 8,704 2.02 9,136 2.04 9,519 2.26
Short-Term Debt:
Federal Funds Purchased and
Repurchase Agreements 1,060 2.59 1,046 2.55 1,168 2.32
Commercial Paper 260 1.09 244 1.01 250 1.14
------- ------- ------- ------- ------- -------
Total Short-Term Debt 1,320 2.30 1,290 2.26 1,418 2.11
Long-Term Debt 3,143 4.92 3,459 4.80 3,573 4.72
Junior Subordinated Debentures 466 3.83 452 3.92 451 3.95
------- ------- ------- ------- ------- -------
Total Interest Bearing Liabilities 13,633 2.78 14,337 2.78 14,961 2.88
Noninterest Bearing Deposits 1,487 1,515 1,388
Minority Interest 161 161 161
Other Liabilities 405 488 316
Shareholders' Equity 927 894 851
------- ------- -------
Total Liabilities and
Shareholders' Equity $16,613 $17,395 $17,677
======= ======= =======
Net Interest Spread 2.08% 1.98% 2.07%
======= ======= =======
Net Interest Margin 2.17% 2.02% 2.01%
======= ======= =======
2003
---------------------------------------------------------------------------
Second Quarter First Quarter Full Year
--------------------- --------------------- ---------------------
Average Average Average Average Average Average
(Dollars In Millions) Balance Rate Balance Rate Balance Rate
- ------------------------------------------------------------------ --------------------- ---------------------
ASSETS:
Loans and Leases:
Corporate Lending:
Commercial $ 4,518 5.73% $ 4,446 5.66% $ 4,388 5.63%
Mortgage 909 5.59 934 5.83 949 5.48
Construction 539 4.34 522 4.19 515 4.20
Lease Financing 1,227 8.72 1,246 8.85 1,254 8.35
------- ------- ------- ------- ------- -------
Total Corporate Lending 7,193 6.12 7,148 6.13 7,106 5.98
Consumer Lending:
Installment 1,407 4.78 1,352 5.12 1,487 4.55
Residential 486 10.17 552 11.68 266 11.12
Lease Financing 97 8.91 33 7.92 192 6.56
------- ------- ------- ------- ------- -------
Total Consumer Lending 1,990 6.29 1,937 7.04 1,945 5.65
------- ------- ------- ------- ------- -------
Total Loans and Leases 9,183 6.16 9,085 6.32 9,051 5.91
Investment Securities 4,471 4.32 4,292 4.90 4,514 4.13
Federal Funds Sold and Reverse
Repurchase Agreements 441 1.90 313 2.13 395 1.76
Other Short-Term Investments 498 5.70 504 5.35 542 5.35
------- ------- ------- ------- ------- -------
Total Earning Assets 14,593 5.45 14,194 5.76 14,502 5.22
Cash and Due From Banks 310 311 301
Leased Equipment 2,101 2,242 1,999
Other Assets 868 787 817
------- ------- -------
Total Assets $17,872 $17,534 $17,619
======= ======= =======
LIABILITIES AND
SHAREHOLDERS' EQUITY:
Deposits:
Demand Deposits $ 1,204 1.51 $ 1,053 1.43 $ 1,161 1.37
Savings Deposits 1,460 1.80 1,419 1.76 1,517 1.73
Time Deposits 6,990 2.68 6,498 2.94 6,643 2.61
------- ------- ------- ------- ------- -------
Total Deposits 9,654 2.40 8,970 2.57 9,321 2.31
Short-Term Debt:
Federal Funds Purchased and
Repurchase Agreements 1,129 2.37 1,488 2.11 1,206 2.32
Commercial Paper 265 1.24 300 1.47 265 1.23
------- ------- ------- ------- ------- -------
Total Short-Term Debt 1,394 2.16 1,788 2.00 1,471 2.12
Long-Term Debt 3,638 4.85 3,769 5.20 3,609 4.89
Junior Subordinated Debentures 451 4.09 451 4.22 451 4.04
------- ------- ------- ------- ------- -------
Total Interest Bearing Liabilities 15,137 3.01 14,978 3.22 14,852 2.97
Noninterest Bearing Deposits 1,264 1,137 1,327
Minority Interest 162 161 161
Other Liabilities 406 380 397
Shareholders' Equity 903 878 882
------- ------- -------
Total Liabilities and
Shareholders' Equity $17,872 $17,534 $17,619
======= ======= =======
Net Interest Spread 2.44% 2.54% 2.25%
======= ======= =======
Net Interest Margin 2.32% 2.37% 2.18%
======= ======= =======
-11-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
CONSOLIDATED CAPITAL DATA
(UNAUDITED)
2004 2003
---------- ------------------------------------------------------------------
First Fourth Third Second First Full
Quarter Quarter Quarter Quarter Quarter Year
- -------------------------------------------------------- ---------- ---------- ---------- ---------- ----------
PER COMMON SHARE:
Shares Outstanding (In Thousands):
Average - Basic 49,189 48,943 48,830 48,770 48,776 48,830
Average - Diluted 53,206 51,478 50,885 50,668 50,766 50,950
Period-End 49,401 49,040 48,885 48,783 48,759
Book Value $ 18.70 $ 18.19 $ 18.11 $ 18.11 $ 17.88
Price:
High $ 41.40 $ 32.68 $ 28.78 $ 26.45 $ 28.91 $ 32.68
Low 32.05 28.00 25.67 21.01 21.23 21.01
Period-End 40.18 31.95 27.97 25.75 21.23
CAPITAL RATIOS (DOLLARS IN MILLIONS):
Risk-Based Capital (Current Qtr Estimated):
Risk-Adjusted Assets $ 13,096 $ 13,334 $ 13,836 $ 13,807 $ 13,886
Tier 1 Capital $ 1,444 $ 1,412 $ 1,382 $ 1,358 $ 1,359
Percentage of Risk Adjusted Assets 11.03% 10.59% 9.99% 9.84% 9.78%
Total Capital $ 1,680 $ 1,658 $ 1,643 $ 1,625 $ 1,617
Percentage of Risk Adjusted Assets 12.83% 12.44% 11.87% 11.77% 11.65%
Tier 1 Leverage Ratio 8.73% 8.13% 7.82% 7.62% 7.76%
Period End Shareholders' Equity
to Total Period-End Assets 5.56% 5.28% 5.07% 5.01% 4.96%
Period-End Tangible Shareholders' Equity
to Total Period-End Tangible Assets 5.05% 4.79% 4.56% 4.49% 4.45%
Average Shareholders' Equity
to Total Average Assets 5.58% 5.14% 4.81% 5.05% 5.01% 5.00%
Average Tangible Shareholders' Equity
to Total Average Tangible Assets 5.07% 4.64% 4.30% 4.54% 4.48% 4.49%
-12-
PROVIDENT FINANCIAL GROUP, INC. AND SUBSIDIARIES
SUPPLEMENTARY DATA
(UNAUDITED)
In conjunction with the reclassification of the company's auto leases from the
loan category to leased equipment, which is not included in loans or earning
assets, the company believes this presentation aids in illustrating the impact
the reclassification has on certain performance measures as illustrated below.
This is not intended to imply that, if this reclassification were not made,
these measures would be precisely equal to the adjusted measures listed below.
Instead, we are providing this data to demonstrate in a general sense how these
measures would look if the leased equipment were treated as an earning asset and
operating lease income and depreciation expense were included in revenues.
Three Months Ended
----------------------------------
(In Thousands) March 31, 2004 March 31, 2003
- ---------------------------------------------------------------------- --------------
NET INTEREST INCOME $ 76,011 $ 82,959
Add: Operating Lease Income 104,089 137,974
Less: Depreciation on Operating Leases (77,383) (99,653)
------------ ------------
NET FINANCING INCOME $ 102,717 $ 121,280
NONINTEREST INCOME $ 168,132 $ 193,287
Less: Operating Lease Income (104,089) (137,974)
------------ ------------
NONINTEREST INCOME EXCLUDING OPERATING LEASE INCOME $ 64,043 $ 55,313
TOTAL FINANCING REVENUES $ 166,760 $ 176,593
NONINTEREST EXPENSES $ 194,107 $ 221,196
Less: Depreciation on Operating Leases (77,383) (99,653)
------------ ------------
NONINTEREST EXPENSES EXCLUDING
DEPRECIATION ON OPERATING LEASES $ 116,724 $ 121,543
AVERAGE EARNING ASSETS $ 14,078,000 $ 14,194,000
Add: Average Leased Equipment 1,551,000 2,242,000
------------ ------------
AVERAGE EARNING ASSETS INCLUDING LEASED EQUIPMENT $ 15,629,000 $ 16,436,000
NET INTEREST MARGIN RATIO - GAAP BASIS 2.17% 2.37%
NET FINANCING INCOME RATIO 2.64% 2.99%
NONINTEREST EXPENSES AS A PERCENT OF
TOTAL REVENUES - GAAP BASIS 80% 80%
NONINTEREST EXPENSES EXCLUDING DEPRECIATION ON
OPERATING LEASES AS A PERCENT OF TOTAL REVENUES
WHICH INCLUDES DEPRECIATION ON OPERATING LEASES 70% 69%
The company has average leased equipment which as a percentage of total average
assets were 9.3% and 12.8% for the three month periods presented. Because of the
significance of the leased equipment, which generates significant revenues but
are not included in earning assets in the financial statements, the company
believes that in order to compare some of the company's key metrics to other
banks, the impact these financing assets have on the company's net interest
margin and its noninterest expenses as a percentage of total revenues should be
illustrated. Additionally, from an internal management perspective, the leased
equipment is included in the company's overall interest sensitivity analysis and
these assets are typically priced based on the company's cost of funds. In the
financial statements, the financing cost directly related to these assets is
included in net interest income and the related operating lease revenue and
depreciation is reported separately in noninterest income and noninterest
expense. The revenue and expense amounts listed above are derived from the
company's income statements and statements of cash flows. The balance sheet data
is derived from the company's average balance sheets.
-13-
Stockholders are urged to read the joint proxy statement/prospectus regarding
the proposed transaction when it becomes available, because it will contain
important information. Stockholders will be able to obtain a free copy of the
joint proxy statement/prospectus, as well as other filings containing
information about National City Corporation and Provident Financial Group, Inc.,
without charge, at the SEC's Internet site (http://www.sec.gov). Copies of the
joint proxy statement/prospectus and the filings with the SEC that will be
incorporated by reference in the joint proxy statement/prospectus can also be
obtained, without charge, by directing a request to National City Corporation,
National City Center, 1900 East Ninth Street, Cleveland, Ohio 44114-3484
Attention: Office of the Secretary (216-222-2000), or to Provident Financial
Group, Inc., One East Fourth Street, Cincinnati, Ohio 45202 Attention: Secretary
(513-579-2861). The respective directors and executive officers of National City
and Provident and other persons may be deemed to be participants in the
solicitation of proxies in respect of the proposed merger. Information regarding
National City's directors and executive officers is available in its proxy
statement filed with the SEC by National City on March 11, 2004, and information
regarding Provident's directors and executive officers is available in its
Form 10-K filed with the SEC by Provident on March 15, 2004. Other information
regarding the participants in the proxy solicitation and a description of their
direct and indirect interests, by security holdings or otherwise, are contained
in the joint proxy statement/prospectus.