BALTIMORE, Jan. 16 /PRNewswire-FirstCall/ -- Provident Bankshares Corporation , 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 http://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 http://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:
-- About Provident -- Investor Relations -- Upcoming Events -- 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.
TABLES FOLLOW PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES FINANCIAL SUMMARY (dollars in thousands, except per share data) Three Months Ended December 31, 2007 2006 % Change SUMMARY INCOME STATEMENTS: Net interest income $45,912 $49,376 (7.0)% Provision for loan losses 10,027 1,877 - Non-interest income (loss) (16,338) 22,318 (173.2) Impairment on investment securities (47,488) - - Net gains (losses) 405 (7,542) (105.4) Net derivative activities 240 170 41.2 Non-interest income, excluding total gains (losses) 30,505 29,690 2.7 Total revenue, excluding total gains (losses) 76,417 79,066 (3.4) Non-interest expense 51,008 55,379 (7.9) Restructuring activities 78 - - Non-interest expense, excluding restructuring 50,930 55,379 (8.0) Income tax expense (benefit) (15,987) 3,155 - Net income (loss) (15,474) 11,283 (237.1) SHARE DATA: Basic earnings per share $(0.49) $0.35 (240.0)% Diluted earnings per share (0.49) 0.34 (244.1) Cash dividends paid per share 0.320 0.300 6.7 Book value per share 17.56 19.54 (10.1) Weighted average shares - basic 31,635,109 32,573,415 (2.9) Weighted average shares - diluted 31,773,779 32,887,017 (3.4) Common shares outstanding 31,621,956 32,433,387 (2.5) SELECTED RATIOS: Return on average assets (0.95)% 0.70 % Return on average equity (10.16) 6.89 Return on average common equity (9.49) 6.78 Net yield on average earning assets (t/e basis) 3.24 3.50 Efficiency ratio (excludes restructuring activities) 65.88 69.49 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 $1,612,245 $1,833,442 (12.1)% Loans: Originated and acquired residential mortgage 297,801 344,201 (13.5) Home equity 1,074,345 993,942 8.1 Other consumer 381,306 409,401 (6.9) Commercial real estate 1,504,025 1,348,307 11.5 Commercial business 843,727 714,037 18.2 Total loans 4,101,204 3,809,888 7.6 Earning assets 5,725,165 5,663,261 1.1 Assets 6,405,735 6,372,157 0.5 Deposits: Noninterest-bearing 660,576 742,494 (11.0) Interest-bearing 3,484,415 3,337,785 4.4 Total deposits 4,144,991 4,080,279 1.6 Stockholders' equity 604,360 649,865 (7.0) Common stockholders' equity 646,931 660,350 (2.0) PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES FINANCIAL SUMMARY (dollars in thousands, except per share data) Three Months Ended September 30, 2007 % Change SUMMARY INCOME STATEMENTS: Net interest income $47,837 (4.0)% Provision for loan losses 7,494 33.8 Non-interest income (loss) 35,303 (146.3) Impairment on investment securities - - Net gains (losses) 4,902 (91.7) Net derivative activities 397 (39.5) Non-interest income, excluding total gains (losses) 30,004 1.7 Total revenue, excluding total gains (losses) 77,841 (1.8) Non-interest expense 52,685 (3.2) Restructuring activities 111 (29.7) Non-interest expense, excluding restructuring 52,574 (3.1) Income tax expense (benefit) 6,993 - Net income (loss) 15,968 (196.9) SHARE DATA: Basic earnings per share $0.50 (198.0)% Diluted earnings per share 0.50 (198.0) Cash dividends paid per share 0.315 1.6 Book value per share 19.10 (8.1) Weighted average shares - basic 31,931,837 (0.9) Weighted average shares - diluted 32,091,566 (1.0) Common shares outstanding 31,974,520 (1.1) SELECTED RATIOS: Return on average assets 1.00 % Return on average equity 10.27 Return on average common equity 9.82 Net yield on average earning assets (t/e basis) 3.45 Efficiency ratio (excludes restructuring activities) 66.84 Leverage ratio 8.74 Tier I risk-based capital ratio 10.76 Total risk-based capital ratio 11.82 Tangible common equity ratio 6.50 END OF PERIOD BALANCES: Investment securities portfolio $1,559,599 (5.8)% Total loans 4,047,715 4.1 Assets 6,364,010 1.6 Deposits 4,206,741 (0.6) Stockholders' equity 610,721 (9.1) Common stockholders' equity 657,286 (5.1) AVERAGE BALANCES: Investment securities portfolio $1,609,766 0.2 % Loans: Originated and acquired residential mortgage 298,019 (0.1) Home equity 1,050,442 2.3 Other consumer 386,750 (1.4) Commercial real estate 1,434,997 4.8 Commercial business 803,537 5.0 Total loans 3,973,745 3.2 Earning assets 5,596,734 2.3 Assets 6,279,353 2.0 Deposits: Noninterest-bearing 709,492 (6.9) Interest-bearing 3,375,739 3.2 Total deposits 4,085,231 1.5 Stockholders' equity 617,043 (2.1) Common stockholders' equity 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)
