Provident Bankshares (MM) (NASDAQ:PBKS)
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BALTIMORE, Jan. 27 /PRNewswire-FirstCall/ -- Provident Bankshares Corporation (NASDAQ:PBKS), the parent company of Provident Bank, today reported financial results for the fourth quarter of 2008.
The Company recorded a net loss of $26.7 million, or ($0.88) per diluted share, for the fourth quarter of 2008, compared with a net loss of $15.5 million, or ($0.49) per diluted share, for the same period of the prior year. The net loss recorded in the fourth quarter of 2008 was primarily due to a $32.7 million pre-tax non-cash accounting charge for other than temporary impairment ("OTTI") of certain investment securities and a $21.5 million provision for loan losses as a result of internal risk rating downgrades in the loan portfolio.
For the full year 2008, the Company recorded a net loss of $39.5 million, or ($1.38) per diluted share, compared to net income of $32.1 million, or $1.00 per diluted share, for 2007.
"As we anticipated, the deterioration in economic conditions during the fourth quarter had a significant impact on our investment and loan portfolios," said Gary N. Geisel, Chairman and CEO of Provident Bankshares. "However, the additional capital received through the TARP program and the continued stability of our deposit base helped us to maintain the financial strength of the Company despite the challenging environment. The TARP proceeds were valuable to continue funding attractive lending opportunities in our marketplace, which resulted in net loan growth of approximately $68 million since the receipt of TARP funds. In addition, we have recently closed the agreement to acquire the deposits of seven Chevy Chase Bank in-store branches in the Greater Baltimore area."
Acquisition by M&T Bank Corporation
As announced on December 19, 2008, Provident Bankshares and M&T Bank Corporation entered into a definitive agreement under which Provident will be acquired by M&T in a stock-for-stock transaction. The merger has been approved by the boards of directors of each company, is subject to certain customary conditions, including regulatory approval and approval by Provident's common shareholders, and is expected to close sometime in the second quarter of 2009.
"Although we could have chosen to continue operating as an independent bank, we made the strategic decision that a merger with a larger financial services company would produce the most value for our shareholders, as well as provide strong benefits for our customers and the community. After thoroughly examining all options available to Provident, we determined that it was in our best interests to combine with M&T Bank. We look forward to introducing our customers and communities to the expanded resources available from one of the nation's most successful banking franchises," said Mr. Geisel.
Income Statement
The Company's net interest income for the fourth quarter of 2008 was $39.6 million, compared with $45.9 million in the same period of the prior year. Despite an increase in average total earning assets from the prior year, net interest income declined due to a 47 basis point reduction in net interest margin.
On a sequential quarter basis, the net interest margin declined to 2.77% in the fourth quarter of 2008 from 3.09% in the third quarter of 2008. This decline was primarily attributable to a decline in the yield on earning assets that could not be fully offset by a reduction in interest rates paid on deposits and borrowings.
Non-interest income was negative $6.9 million in the fourth quarter of 2008, compared to negative $16.3 million in the same period of the prior year. The negative non-interest income in both periods was attributable to OTTI charges in the investment portfolio. Excluding OTTI charges, non-interest income was $25.9 million in the fourth quarter of 2008, compared to $31.2 million in the same period of the prior year. The decline in non-interest income was primarily attributable to lower service charges on deposit accounts.
Non-interest expense was $58.7 million in the fourth quarter of 2008, compared to $51.0 million in the same period of the prior year. Non-interest expense in the fourth quarter of 2008 included approximately $3.3 million in merger-related expenses.
Balance Sheet
Total average loans increased to $4.3 billion in the fourth quarter of 2008, compared with $4.2 billion in the third quarter of 2008. The increase was primarily due to growth in the home equity, commercial business and commercial mortgage loan portfolios. Subsequent to the receipt of a $151.5 million investment on November 14, 2008 from the U.S. Treasury as part of the federal government's TARP Capital Purchase Program, Provident originated $67.7 million in net loan growth during the remainder of the fourth quarter of 2008.
Total average deposits were $4.7 billion in the fourth quarter of 2008, an increase from $4.5 billion in the third quarter of 2008. During the fourth quarter, the Company experienced growth in savings accounts and customer certificates of deposits.
Investment Portfolio
During the fourth quarter of 2008, the Company recorded other-than-temporary-impairment of $32.7 million pre-tax, or $(0.60) per diluted share. This impairment occurred primarily as a result of weakness in the financial services industry and the resulting decline in expected future cash flows for the affected investments. The table below reflects the write-downs by the associated portfolio type.
(dollars in thousands) Fourth Quarter
2008
Portfolio Write-downs
--------- -----------
Pooled Trups - REITs $(2,072)
Non-agency mortgage backed securities (4,310)
Pooled Trups - Banks and Insurance (26,356)
-------
Totals $(32,738)
========
A detailed breakdown of the investment portfolio is included in the financial tables at the end of this press release.
Asset Quality and Capital Ratios
In the fourth quarter of 2008, the Company recorded a provision for loan losses of $21.5 million. The level of provision reflects an increase in net charge-offs and non-performing loans given the weakened economic conditions.
Total non-performing loans as a percentage of total loans was 1.94% at December 31, 2008, an increase from 0.95% at September 30, 2008. The increase is primarily due to deterioration in the residential real estate construction, commercial business, and commercial mortgage portfolios.
Loan delinquencies greater than 90 days as a percentage of total loans were 0.33% at December 31, 2008, compared to 0.27% at September 30, 2008. Net charge-offs as a percentage of average loans were 0.75% for the fourth quarter of 2008, an increase from 0.48% in the third quarter of 2008. The increase in net charge-offs was primarily attributable to higher net charge-offs in the commercial business, home equity and consumer portfolios.
Total allowance for loan losses to total loans was 1.68% at December 31, 2008, an increase from 1.40% at September 30, 2008. The allowance for loan losses to total loans at December 31, 2008 represents more than twice the level of annualized net charge-offs as a percentage of average loans during the fourth quarter of 2008. Total allowance for loan losses to non-performing loans was 87% at December 31, 2008, a decline from 148% at September 30, 2008.
Capital
On November 14, 2008, as part of the Troubled Asset Relief Program ("TARP") Capital Purchase Program, the Company entered into a Purchase Agreement with the United States Department of the Treasury, pursuant to which Provident sold 151,500 shares of Provident's Fixed Rate Cumulative Perpetual Preferred Stock, Series B and a warrant to purchase 2,374,608 shares of Provident's common stock, par value $1.00 per share for an aggregate purchase price of $151.5 million in cash. This capital addition is considered Tier 1 capital.
At December 31, 2008, all of the Company's regulatory capital ratios exceeded the guidelines required to be considered a "well capitalized institution" as established by the Company's primary banking regulators. These levels are considered to be at least 5.00% for the leverage ratio and 10.00% for the total capital ratio. At December 31, 2008, the Company's leverage ratio was 9.66% and the total capital ratio was 11.54%.
Dividend Declared
The Board of Directors of Provident Bankshares declared a quarterly cash dividend of $0.11 per share. The quarterly cash dividend will be paid on February 13, 2009, to common stockholders of record at the close of business on February 2, 2009.
The Board of Directors also declared a quarterly dividend of $25.00 per share on its convertible preferred stock. This dividend will be paid on February 2, 2009, to preferred stockholders of record as of that same date.
In addition, the Board of Directors declared a quarterly dividend of $12.6388888 per share on the fixed rate cumulative perpetual preferred stock, Series B shares sold to the U.S. Department of the Treasury as part of the TARP Capital Purchase Program. This dividend will be paid on February 17, 2009.
Supplemental financial tables not included with this release are available on the "Investor Relations" section of our website at http://www.provbank.com/. When in the Company's website, follow these links:
-- About Provident
-- Investor Relations
About Provident Bankshares Corporation
Provident Bankshares Corporation is the holding company for Provident Bank, the largest independent commercial bank headquartered in Maryland. With $6.6 billion in assets, Provident serves individuals and businesses in the key metropolitan areas of Baltimore, Washington and Richmond through a current branch network of 142 offices in Maryland, Virginia, and southern York County, Pennsylvania. Provident Bank also offers related financial services through wholly owned subsidiaries. Securities brokerage, investment management and related insurance services are available through Provident Investment Company and leases through Court Square Leasing. Visit Provident on the Web at http://www.provbank.com/.
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, 2007, 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 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
December 31,
----------------------------------
2008 2007 % Change
------- ------- --------
SUMMARY NON-GAAP INCOME STATEMENTS:
Net interest income $39,615 $45,912 (13.7)%
Provision for loan losses 21,527 10,027 114.7
Non-interest income (loss) (6,884) (16,338) (57.9)
Impairment on investment
securities (32,738) (47,488) (31.1)
Net gains (losses) (767) 405 -
Non-interest income, excluding
total gains (losses) 26,621 30,745 (13.4)
Total revenue, excluding total
gains (losses) 66,236 76,657 (13.6)
Non-interest expense 58,732 51,008 15.1
Merger expense & restructuring
activities 3,294 78 -
Non-interest exp., excluding
merger & restructuring 55,438 50,930 8.9
Income tax benefit (20,850) (15,987) 30.4
Net loss (26,678) (15,474) 72.4
Beneficial conversion feature -
preferred stock - - -
Dividends - preferred stock 2,514 - -
Net loss available to common
stockholders (29,192) (15,474) 88.7
SHARE DATA:
Basic loss per share $(0.88) $(0.49) 79.6%
Diluted loss per share (0.88) (0.49) 79.6
Cash dividends paid per common
share 0.11 0.32 (65.6)
Cash dividends paid per
preferred share 25.00 - -
Book value per common share 14.67 17.58 (16.6)
Weighted average shares - basic 32,993,033 31,635,109 4.3
Weighted average shares - diluted 32,993,033 31,773,779 3.8
Common shares outstanding 33,510,889 31,621,956 6.0
SELECTED RATIOS:
Return on average assets (1.65)% (0.96)%
Return on average equity (17.17) (10.16)
Return on average common equity (19.15) (9.49)
Net yield on average earning
assets (t/e basis) 2.77 3.24
Efficiency ratio * 82.72 65.68
Leverage ratio 9.66 7.89
Tier I risk-based capital ratio 9.57 9.59
Total risk-based capital ratio 11.54 10.85
Tangible common equity ratio 5.19 5.86
END OF PERIOD BALANCES:
Investment securities portfolio $1,374,342 $1,468,564 (6.4)%
Total loans 4,356,798 4,215,326 3.4
Assets 6,568,546 6,465,046 1.6
Deposits 4,752,704 4,179,520 13.7
Stockholders' equity 679,431 555,771 22.3
Common stockholders' equity 587,773 623,948 (5.8)
AVERAGE BALANCES:
Investment securities portfolio $1,512,139 $1,612,245 (6.2)%
Loans:
Originated and acquired
residential mortgage 253,434 297,801 (14.9)
Home equity 1,152,095 1,074,345 7.2
Other consumer 371,319 381,306 (2.6)
Commercial real estate 1,535,943 1,504,025 2.1
Commercial business 970,899 843,727 15.1
Total loans 4,283,690 4,101,204 4.4
Earning assets 5,801,588 5,725,165 1.3
Assets 6,549,847 6,405,737 2.2
Deposits 4,664,453 4,144,991 12.5
Stockholders' equity 618,134 604,364 2.3
Common stockholders' equity 606,561 646,935 (6.2)
Three Months Ended
September 30,
-----------------------
2008 % Change
------- --------
SUMMARY NON-GAAP INCOME STATEMENTS:
Net interest income $43,832 (9.6)%
Provision for loan losses 6,571 -
Non-interest income (loss) 4,553 -
Impairment on investment
securities (24,570) 33.2
Net gains (losses) 947 (181.0)
Non-interest income, excluding
total gains (losses) 28,176 (5.5)
Total revenue, excluding total
gains (losses) 72,008 (8.0)
Non-interest expense 53,193 10.4
Merger expense & restructuring
activities 5 -
Non-interest exp., excluding
merger & restructuring 53,188 4.2
Income tax benefit (5,987) -
Net loss (5,392) -
Beneficial conversion feature -
preferred stock - -
Dividends - preferred stock 1,523 65.1
Net loss available to common
stockholders (6,915) -
SHARE DATA:
Basic loss per share $(0.21) -%
Diluted loss per share (0.21) -
Cash dividends paid per common
share 0.11 -
Cash dividends paid per
preferred share 29.72 (15.9)
Book value per common share 14.73 (0.4)
Weighted average shares - basic 32,993,033 -
Weighted average shares - diluted 32,993,033 -
Common shares outstanding 33,338,972 0.5
SELECTED RATIOS:
Return on average assets (0.34)%
Return on average equity (3.78)
Return on average common equity (4.50)
Net yield on average earning
assets (t/e basis) 3.09
Efficiency ratio * 73.05
Leverage ratio 8.39
Tier I risk-based capital ratio 9.88
Total risk-based capital ratio 11.98
Tangible common equity ratio 5.65
END OF PERIOD BALANCES:
Investment securities portfolio $1,328,223 3.5%
Total loans 4,264,201 2.2
Assets 6,410,476 2.5
Deposits 4,595,393 3.4
Stockholders' equity 542,464 25.2
Common stockholders' equity 604,793 (2.8)
AVERAGE BALANCES:
Investment securities portfolio $1,511,735 -%
Loans:
Originated and acquired
residential mortgage 262,372 (3.4)
Home equity 1,117,718 3.1
Other consumer 382,691 (3.0)
Commercial real estate 1,510,880 1.7
Commercial business 946,563 2.6
Total loans 4,220,224 1.5
Earning assets 5,740,574 1.1
Assets 6,444,096 1.6
Deposits 4,475,136 4.2
Stockholders' equity 567,377 8.9
Common stockholders' equity 611,396 (0.8)
*Excludes merger expenses and restructuring activities
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES FINANCIAL SUMMARY
(dollars in thousands, except per share data)
Twelve Months Ended
December 31,
----------------------------------
2008 2007 % Change
-------- -------- --------
SUMMARY NON-GAAP INCOME STATEMENTS:
Net interest income $174,439 $191,232 (8.8)%
Provision for loan losses 37,612 23,365 61.0
Non-interest income (loss) (1,138) 79,919 (101.4)
Impairment on investment
securities (120,711) (47,488) 154.2
Net gains 8,140 6,930 17.5
Non-interest income,
excluding total gains 111,433 120,477 (7.5)
Total revenue, excluding
total gains 285,872 311,709 (8.3)
Non-interest expense 213,729 211,089 1.3
Merger expense &
restructuring activities 3,339 1,537 117.2
Non-interest exp., excluding
merger
& restructuring 210,390 209,552 0.4
Income tax expense (benefit) (38,572) 4,567 -
Net income (loss) (39,468) 32,130 -
Beneficial conversion feature -
preferred stock 1,463 - -
Dividends - preferred stock 4,037 - -
Net income (loss) available to
common stockholders (44,968) 32,130 -
SHARE DATA:
Basic earnings (loss) per share $(1.38) $1.00 -%
Diluted earnings (loss) per share (1.38) 1.00 -
Cash dividends paid per
common share 0.66 1.25 (47.6)
Cash dividends paid per
preferred share 54.72 - -
Book value per common share 14.67 17.58 (16.6)
Weighted average shares - basic 32,581,136 31,972,056 1.9
Weighted average shares - diluted 32,581,136 32,194,785 1.2
Common shares outstanding 33,510,889 31,621,956 6.0
SELECTED RATIOS:
Return on average assets (0.62)% 0.51%
Return on average equity (6.83) 5.17
Return on average common equity (7.35) 4.99
Net yield on average earning
assets (t/e basis) 3.08 3.47
Efficiency ratio * 72.74 66.58
Leverage ratio 9.66 7.89
Tier I risk-based capital ratio 9.57 9.59
Total risk-based capital ratio 11.54 10.85
Tangible common equity ratio 5.19 5.86
END OF PERIOD BALANCES:
Investment securities portfolio $1,374,342 $1,468,564 (6.4)%
Total loans 4,356,798 4,215,326 3.4
Assets 6,568,546 6,465,046 1.6
Deposits 4,752,704 4,179,520 13.7
Stockholders' equity 679,431 555,771 22.3
Common stockholders' equity 587,773 623,948 (5.8)
AVERAGE BALANCES:
Investment securities portfolio $1,534,581 $1,623,571 (5.5)%
Loans:
Originated and acquired
residential mortgage 269,997 307,977 (12.3)
Home equity 1,111,676 1,034,312 7.5
Other consumer 379,838 390,840 (2.8)
Commercial real estate 1,528,573 1,438,874 6.2
Commercial business 943,126 791,121 19.2
Total loans 4,233,210 3,963,124 6.8
Earning assets 5,777,738 5,600,478 3.2
Assets 6,485,399 6,284,152 3.2
Deposits 4,420,908 4,123,703 7.2
Stockholders' equity 578,177 621,600 (7.0)
Common stockholders' equity 612,057 643,998 (5.0)
*Excludes merger expenses and restructuring activities
Investment Securities Portfolio
-------------------------------
December 31, 2008 Unrealized
($ in thousands) Gains/
(Losses) Cumul-
Par Fair Amortized Recognized ative
Value Value Cost in OCI OTTI
----- ----- ---- ------ -----
Available For Sale
------------------
Treasuries $17,000 $16,992 $16,936 $56 $-
---------- ------- ------- ------- --- --
Sovereign 400 400 400 - -
--------- --- --- --- --- ---
FHLB Stock 37,919 37,919 37,919 - -
---------- ------ ------ ------ --- ---
Agency MBS/ARM 664,696 682,293 671,115 11,178 -
-------------- ------- ------- ------- ------ ---
Municipals
----------
AAA 18,565 18,952 18,604 348 -
AA 88,464 90,079 88,848 1,231 -
A 31,906 32,194 32,040 154 -
BBB 11,325 11,559 11,385 174 -
------- ------- ------- ----- ----
Total 150,260 152,784 150,877 1,907 -
------- ------- ------- ----- ----
Pooled Trups - Banks
& Insurance
--------------------
AAA 46,024 27,749 46,024 (18,275) -
AA 48,298 25,136 48,313 (23,177) -
A 30,512 15,247 30,520 (15,273) -
BB 5,000 2,294 5,000 (2,706) -
B 5,000 2,492 5,000 (2,508) -
------- ------ ------- ------- ----
Total 134,834 72,918 134,857 (61,939) -
------- ------ ------- ------- ----
Pooled Trups - REITs
--------------------
A 15,000 4,913 11,337 (6,424) (3,653)
BBB 11,000 3,159 3,361 (202) (7,642)
BB 44,667 3,273 2,567 706 (41,479)
B 26,280 783 770 13 (24,222)
CCC 10,167 2,155 2,560 (405) (7,440)
------- ------ ------ ------ -------
Total 107,114 14,283 20,595 (6,312) (84,436)
------- ------ ------ ------ -------
Non-Agency MBS
--------------
AAA 35,232 27,819 35,120 (7,301) -
AA 5,855 2,200 2,823 (623) (2,779)
A 28,132 9,873 12,859 (2,986) (15,359)
BBB 9,527 6,894 8,293 (1,399) (1,148)
BB 3,913 1,203 3,855 (2,652) -
B 6,354 3,130 3,695 (565) (2,555)
CCC 35,724 3,876 4,521 (645) (31,405)
------- ------ ------ ------- -------
Total 124,737 54,995 71,166 (16,171) (53,246)
------- ------ ------ ------- -------
Single Issuer Bank Trups
------------------------
AAA 5,375 5,539 5,375 164 -
A 18,750 12,032 17,468 (5,436) -
BBB 32,000 24,806 30,582 (5,776) -
BB 5,004 2,338 4,998 (2,660) -
------ ------ ------ ------- ----
Total 61,129 44,715 58,423 (13,708) -
------ ------ ------ ------- ----
Total Available
For Sale $1,298,089 $1,077,299 $1,162,288 $(84,989) $(137,682)
========== ========== ========== ========= ==========
Held-To-Maturity
----------------
Pooled Trups - Banks
& Insurance
--------------------
A 110,712 47,826 79,485 (19,512) (11,430)
BBB 105,610 42,320 73,097 (17,463) (14,893)
BB 34,591 15,354 24,789 (6,127) (3,676)
B 43,450 18,954 35,116 (7,817) (518)
CCC 51,529 20,653 39,550 (11,979) -
------- ------- ------- ------- -------
Total 345,892 145,107 252,037 (62,898) (30,517)
------- ------- ------- ------- -------
Single Issuer Bank
Trups
------------------
A 34,998 28,054 34,792 - -
BBB 1,600 1,652 1,541 - -
BB 5,500 4,280 5,515 19 -
NR (Not Rated) 3,200 3,359 3,158 - -
------ ------ ------ -- ---
Total 45,298 37,345 45,006 19 -
------ ------ ------ -- ---
Total Held-To-
Maturity $391,190 $182,452 $297,043 $(62,879) $(30,517)
======== ======== ======== ========= =========
Total Investment
Portfolio $1,689,279 $1,259,751 $1,459,331 $(147,868) $(168,199)
========== ========== ========== ========== ==========
DATASOURCE: Provident Bankshares Corporation
CONTACT: Media: Vicki Cox, +1-410-277-2063, or Investors: Dennis
Starliper, +1-410-277-2080, both of Provident Bankshares Corporation
Web Site: http://www.provbank.com/