<PAGE> 1
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE TRANSITION PERIOD
COMMISSION FILE NUMBER 0-16421
PROVIDENT BANKSHARES CORPORATION
--------------------------------
(Exact Name of Registrant as Specified in its Charter)
MARYLAND 52-1518642
- --------------------------------- ----------
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
114 EAST LEXINGTON STREET, BALTIMORE, MARYLAND 21202
-----------------------------------------------------------
(Address of Principal Executive Offices)
Not Applicable
----------------------------------------------------
(Former Name, Former Address and Former Fiscal Year
if Changed Since Last Report)
(410) 277-7000
-------------------------------------------------------
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
----- -----
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date:
Common Stock, par value $1.00 per share, 25,119,279 shares outstanding at May 1,
2000.
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PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
TABLE OF CONTENTS
Page
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Consolidated Statement of Condition
March 31, 2000 and 1999 and December 31, 1999 3
Consolidated Statement of Income - Unaudited
Three months Ended March 31, 2000 and 1999 4
Consolidated Statement of Cash Flows - Unaudited
Three months Ended March 31, 2000 and 1999 5
Notes to Consolidated Financial Statements - Unaudited 6
Item 2. Management's Discussion and Analysis
of Results of Operations and Financial Condition 9
Item 3. Quantitative and Qualitative Disclosures
About Market Risk 11
PART II - OTHER INFORMATION 12
Item 1. Legal Proceedings 12
Item 2. Changes in Securities and Use of Proceeds 12
Item 3. Defaults upon Senior Securities 12
Item 4. Submission of Matters to a Vote of Security Holders 12
Item 5. Other Information 12
Item 6. Exhibits and Reports on Form 8-K 12
SIGNATURES 13
EXHIBIT INDEX 14
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Statements contained in this Form 10-Q which are not historical facts are
forward-looking statements, as that term is defined in the Private Securities
Litigation Reform Act of 1995. Such forward-looking statements are subject to
risk and uncertainties which could cause actual results to differ materially
from those projected. Such risk and uncertainties include potential changes in
interest rates, competitive factors in the financial services industry, general
economic conditions, the effect of new legislation and other risks detailed in
documents filed by the Company with the SEC from time to time.
- --------------------------------------------------------------------------------
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<TABLE>
<CAPTION>
PART I - FINANCIAL INFORMATION
CONSOLIDATED STATEMENT OF CONDITION
Provident Bankshares Corporation and Subsidiaries
MARCH 31, December 31, March 31,
(DOLLARS IN THOUSANDS) 2000 1999 1999
===================================================================================================================
<S> <C> <C> <C>
ASSETS
Cash and Due From Banks $ 84,237 $ 90,840 $ 67,220
Short-Term Investments 1,732 1,759 40,092
Mortgage Loans Held for Sale 13,731 30,535 187,168
Securities Available for Sale 1,686,192 1,671,507 1,347,176
Loans:
Consumer 2,313,211 2,204,943 2,269,909
Commercial Business 361,810 363,059 383,012
Real Estate -- Construction 191,225 151,875 136,329
Real Estate -- Mortgage 482,001 464,242 339,498
- --------------------------------------------------------------------------------------------------------------------
TOTAL LOANS 3,348,247 3,184,119 3,128,748
Less: Allowance for Loan Losses 41,051 39,780 37,897
- --------------------------------------------------------------------------------------------------------------------
NET LOANS 3,307,196 3,144,339 3,090,851
- --------------------------------------------------------------------------------------------------------------------
Premises and Equipment, Net 43,876 44,277 40,361
Accrued Interest Receivable 47,530 46,507 42,536
Other Assets 63,013 64,713 52,197
- --------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $5,247,507 $ 5,094,477 $ 4,867,601
====================================================================================================================
LIABILITIES
Deposits:
Noninterest-Bearing $ 311,893 $ 264,252 $ 264,615
Interest-Bearing 3,470,419 3,544,276 3,164,898
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TOTAL DEPOSITS 3,782,312 3,808,528 3,429,513
- --------------------------------------------------------------------------------------------------------------------
Short-Term Borrowings 540,486 301,323 280,110
Long-Term Debt 543,403 627,118 743,151
Other Liabilities 38,833 43,747 80,925
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TOTAL LIABILITIES 4,905,034 4,780,716 4,533,699
- --------------------------------------------------------------------------------------------------------------------
Corporation-Obligated Mandatorily Redeemable Capital Securities 68,068 39,162 39,244
- --------------------------------------------------------------------------------------------------------------------
STOCKHOLDERS' EQUITY
Preferred Stock (Par Value $.01) Authorized 1,000 Shares, Issued 899 Shares
at March 31, 2000 -- -- --
Common Stock (Par Value $1.00) Authorized 100,000,000 Shares,
Issued 26,251,384, 26,225,752 and 24,838,760 Shares; at March 31,
2000, December 31, 1999 and March 31, 1999, respectively 26,251 26,226 24,839
Capital Surplus 203,755 203,364 172,614
Retained Earnings 110,010 102,587 110,299
Net Accumulated Other Comprehensive Income (44,684) (44,323) (3,317)
Treasury Stock at Cost - 1,177,432 Shares at March 31, 2000
693,866 at December 31, 1999 and 525,766 at March 31, 1999 (20,927) (13,255) (9,777)
- --------------------------------------------------------------------------------------------------------------------
TOTAL STOCKHOLDERS' EQUITY 274,405 274,599 294,658
- --------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY $5,247,507 $ 5,094,477 $ 4,867,601
====================================================================================================================
These financial statements should be read in conjunction with the accompanying notes.
</TABLE>
3
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF INCOME - UNAUDITED
Provident Bankshares Corporation and Subsidiaries
Three Months Ended
March 31,
- -----------------------------------------------------------------------------------------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999
=======================================================================================================================
<S> <C> <C>
INTEREST INCOME
Interest and Fees on Loans $ 67,821 $ 60,653
Interest on Securities 29,633 20,091
Tax-Advantaged Interest 514 589
Interest on Short-Term Investments 46 39
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TOTAL INTEREST INCOME 98,014 81,372
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INTEREST EXPENSE
Interest on Deposits 42,695 34,401
Interest on Short-Term Borrowings 5,963 3,026
Interest on Long-Term Debt 8,937 10,204
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TOTAL INTEREST EXPENSE 57,595 47,631
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NET INTEREST INCOME 40,419 33,741
Less: Provision for Loan Losses 4,300 1,961
- -----------------------------------------------------------------------------------------------------------------------
NET INTEREST INCOME AFTER PROVISION FOR LOAN LOSSES 36,119 31,780
- -----------------------------------------------------------------------------------------------------------------------
NON-INTEREST INCOME
Service Charges on Deposit Accounts 8,775 7,538
Mortgage Banking Activities 811 4,004
Commissions and Fees 1,388 1,476
Net Securities Gains (Losses) 79 (63)
Other Non-Interest Income 3,163 2,520
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TOTAL NON-INTEREST INCOME 14,216 15,475
- -----------------------------------------------------------------------------------------------------------------------
NON-INTEREST EXPENSE
Salaries and Employee Benefits 17,031 16,230
Occupancy Expense, Net 3,190 2,852
Furniture and Equipment Expense 2,451 2,157
External Processing Fees 3,789 3,701
Capital Securities Expense 984 836
Other Non-Interest Expense 7,431 6,404
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TOTAL NON-INTEREST EXPENSE 34,876 32,180
- -----------------------------------------------------------------------------------------------------------------------
INCOME BEFORE INCOME TAXES 15,459 15,075
Income Tax Expense 4,594 4,750
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INCOME BEFORE EXTRAORDINARY ITEM 10,865 10,325
Extraordinary Item -- Gain on Debt Extinguishment, Net 770 --
- -----------------------------------------------------------------------------------------------------------------------
NET INCOME $ 11,635 $ 10,325
- -----------------------------------------------------------------------------------------------------------------------
BASIC EARNINGS PER SHARE
Income Before Extraordinary Item $ 0.43 $ 0.40
Net Income 0.46 0.40
- -----------------------------------------------------------------------------------------------------------------------
DILUTED EARNINGS PER SHARE
Income Before Extraordinary Item 0.42 0.39
Net Income 0.45 0.39
- -----------------------------------------------------------------------------------------------------------------------
These financial statements should be read in conjunction with the accompanying notes.
</TABLE>
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<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS - UNAUDITED
Provident Bankshares Corporation and Subsidiaries
(in thousands)
Three Months Ended March 31, 2000 1999
=====================================================================================================================
<S> <C> <C>
OPERATING ACTIVITIES
Net Income $ 11,635 $ 10,325
Adjustments to Reconcile Net Income to
Net Cash Provided (Used) by Operating Activities:
Depreciation and Amortization 4,373 9,685
Provision for Loan Losses 4,300 1,961
Provision for Deferred Income Tax 4,848 2,466
Realized Net Securities (Gains) Losses (79) 63
Loans Originated or Acquired and Held for Sale (47,782) (243,020)
Proceeds from Sales of Loans 64,804 283,119
Gain on Sales of Loans (218) (2,560)
Other Operating Activities (8,877) (11,800)
- ---------------------------------------------------------------------------------------------------------------------
TOTAL ADJUSTMENTS 21,369 39,914
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NET CASH PROVIDED BY OPERATING ACTIVITIES 33,004 50,239
- ---------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Principal Collections and Maturities of Securities Available for Sale 39,365 58,565
Proceeds on Sales of Securities Available for Sale 18,602 4,272
Purchases of Securities Available for Sale (74,099) (184,473)
Loan Originations and Purchases Less Principal Collections (169,472) (43,577)
Purchases of Premises and Equipment (1,794) (1,773)
- ---------------------------------------------------------------------------------------------------------------------
NET CASH USED BY INVESTING ACTIVITIES (187,398) (166,986)
- ---------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Net Increase (Decrease) in Deposits (26,216) 9,956
Net Increase in Short-Term Borrowings 239,163 134,747
Proceeds from Long-Term Debt 50,000 10,000
Payments and Maturities of Long-Term Debt (133,715) (2,088)
Proceeds from Capital Securities 30,000 --
Issuance of Stock 416 403
Purchase of Treasury Stock (7,672) --
Cash Dividends on Common Stock (4,212) (3,522)
- ---------------------------------------------------------------------------------------------------------------------
NET CASH PROVIDED BY FINANCING ACTIVITIES 147,764 149,496
- ---------------------------------------------------------------------------------------------------------------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (6,630) 32,749
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR 92,599 74,563
- ---------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 85,969 $ 107,312
=====================================================================================================================
SUPPLEMENTAL DISCLOSURES
- ---------------------------------------------------------------------------------------------------------------------
Interest Paid, Net of Amount Capitalized $ 45,674 $ 32,729
Income Taxes Paid 121 665
These financial statements should be read in conjunction with the accompanying notes.
</TABLE>
5
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - UNAUDITED
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
MARCH 31, 2000
NOTE A - BASIS OF PRESENTATION
The accompanying unaudited consolidated financial statements have been
prepared in accordance with generally accepted accounting principles for interim
financial information and Rule 10-01 of Regulation S-X. Accordingly, they do not
include all of the information and notes required by generally accepted
accounting principles for complete financial statements. In the opinion of
management, all adjustments (consisting of only normal recurring accruals)
considered necessary for a fair presentation have been included. Operating
results for the three month period ended March 31, 2000 are not necessarily
indicative of the results that may be expected for the year ending December 31,
2000. For further information, refer to the consolidated financial statements
and notes thereto included in the Provident Bankshares Corporation's ("the
Corporation") Annual Report on Form 10-K for the year ended December 31, 1999 as
filed with the Securities and Exchange Commission on February 17, 2000.
NOTE B - EXTRAORDINARY ITEM
During the first quarter, the Corporation liquidated $78 million of
Federal Home Loan Bank Advances due in 2001 through 2003. Accordingly, a net
gain of $770 thousand, or $.03 per share, after taxes of $415 thousand was
recognized.
NOTE C - PER SHARE INFORMATION
The following table presents a summary of per share data and amounts for
the periods indicated:
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- ---------------------------------------------------------------------------------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE DATA) 2000 1999
- ---------------------------------------------------------------------------------------
<S> <C> <C>
Net Income Before Extraordinary Item $ 10,865 $ 10,325
Extraordinary Item--Gain on Debt Extinguishment, Net 770 --
- ---------------------------------------------------------------------------------------
Net Income $ 11,635 $ 10,325
=======================================================================================
BASIC
Basic EPS Shares 25,364 25,511
Net Income Before Extraordinary Item $ 0.43 $ 0.40
Extraordinary Item--Gain on Debt Extinguishment, Net 0.03 --
- ---------------------------------------------------------------------------------------
Net Income Per Share $ 0.46 $ 0.40
=======================================================================================
DILUTED
Dilutive Shares (principally stock options) 522 896
Diluted EPS Shares 25,886 26,407
Net Income Before Extraordinary Item $ 0.42 $ 0.39
Extraordinary Item--Gain on Debt Extinguishment, Net 0.03 --
- ---------------------------------------------------------------------------------------
Net Income Per Share $ 0.45 $ 0.39
=======================================================================================
</TABLE>
6
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NOTE D - INVESTMENT SECURITIES
The aggregate amortized cost and market values of the investment
securities portfolio at March 31, were as follows:
<TABLE>
<CAPTION>
GROSS GROSS
AMORTIZED UNREALIZED UNREALIZED MARKET
(IN THOUSANDS) COST GAINS LOSSES VALUE
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
MARCH 31, 2000
SECURITIES AVAILABLE FOR SALE
U.S. Treasury and Government
Agencies and Corporations $ 81,014 $ 119 $ 151 $ 80,982
Mortgage-Backed Securities 1,510,939 3,229 55,476 1,458,692
Municipal Securities 26,621 138 428 26,331
Other Debt Securities 136,363 -- 16,176 120,187
- ------------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale $ 1,754,937 $ 3,486 $ 72,231 $ 1,686,192
- ------------------------------------------------------------------------------------------------------------------------
MARCH 31, 1999
SECURITIES AVAILABLE FOR SALE
U.S. Treasury and Government
Agencies and Corporations $ 42,766 $ 5 $ -- $ 42,771
Mortgage-Backed Securities 1,145,073 4,499 6,412 1,143,160
Municipal Securities 26,784 762 -- 27,546
Other Debt Securities 138,040 238 4,579 133,699
- ------------------------------------------------------------------------------------------------------------------------
Total Securities Available for Sale $ 1,352,663 $ 5,504 $ 10,991 $ 1,347,176
- ------------------------------------------------------------------------------------------------------------------------
</TABLE>
At March 31, 2000 a net unrealized loss of $44.7 million was reflected as Net
Accumulated Other Comprehensive Income which is reflected separately as a
component of Stockholders' Equity in the Consolidated Statement of Condition and
therefore has no effect on the financial results of the Corporation's
operations. This compares to a net unrealized loss of $3.3 million at March 31,
1999. For details regarding investment securities at December 31, 1999, refer to
Notes 1 and 3 of the Consolidated Financial Statements incorporated in the
Corporation's 10-K filed February 17, 2000.
7
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NOTE E - COMPREHENSIVE INCOME
Comprehensive income is defined as net income plus transactions and other
occurrences which are the result of nonowner changes in equity. For financial
statements presented for the Corporation, the only nonowner equity change is
comprised of unrealized gains or losses on available for sale debt securities
that will be accumulated with net income from operations. This change does not
have an impact on the Corporation's results of operations.
Presented below is a reconcilement of net income to comprehensive income
indicating the components of other comprehensive income.
<TABLE>
<CAPTION>
Three Months Ended
March 31,
- --------------------------------------------------------------------------------------------
(IN THOUSANDS) 2000 1999
- --------------------------------------------------------------------------------------------
<S> <C> <C>
Net Income $ 11,635 $ 10,325
Other Comprehensive Income:
Unrealized Holding Gain (Loss) on Debt Securities (478) (14,331)
Less: Reclassification Adjustment for Gains (Loss) Included
in Net Income 79 (63)
- --------------------------------------------------------------------------------------------
Other Comprehensive Income, Before Tax (577) (14,268)
Income Tax (Benefit) Related to Items of Other Comprehensive Income (196) (5,643)
- --------------------------------------------------------------------------------------------
Other Comprehensive Income, After Tax (361) (8,625)
- --------------------------------------------------------------------------------------------
Comprehensive Income $ 11,274 $ 1,700
- --------------------------------------------------------------------------------------------
</TABLE>
NOTE F - FUTURE ACCOUNTING DISCLOSURE REQUIREMENTS
In June 1998, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities" ("SFAS No. 133"). As amended, the statement
becomes effective for fiscal years beginning after June 15, 2000 and will not be
applied retroactively. The statement establishes accounting and reporting
standards for derivative instruments and hedging activity. Under the standard,
all derivatives must be measured at fair value and recognized as either assets
or liabilities in the financial statements.
The accounting for changes in fair value (gains and losses) of a
derivative is dependent on the intended use of the derivative and its
designation. Derivatives may be used to: 1) hedge exposure to changes in the
fair value of a recognized asset or liability or a firm commitment, referred to
as a fair value hedge, 2) hedge exposure to variable cash flow of forecasted
transactions, referred to as a cash flow hedge, or 3) hedge foreign currency
exposure.
The Corporation only engages in fair value and cash flow hedges. In both
types of hedges, the effective portions of the hedges, if included in earnings,
would not affect corporate net income. Ineffective portions of hedges are
reported in and affect net earnings immediately. Derivatives not designed as a
hedging instrument have the changes in their fair value recognized in earnings
in the period of change. Management is currently assessing the potential impact
of SFAS No. 133 on future corporate operations.
NOTE G - PENDING ACQUISITION
On May 4, 2000, the Corporation and Harbor Federal Bancorp, a $244 million
savings bank holding company, entered into a definitive agreement whereby the
Corporation will exchange 1.256 shares of its common stock for each share of
Harbor Federal Bancorp's common stock outstanding. The acquisition will be
accounted for as a purchase and is expected to be completed in the third
quarter of 2000.
8
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ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
PROVIDENT BANKSHARES CORPORATION AND SUBSIDIARIES
FINANCIAL REVIEW
EARNINGS SUMMARY
Provident Bankshares Corporation recorded net income for the quarter ended
March 31, 2000 of $11.6 million or $.46 per share basic and $.45 diluted. Net
income for the quarter ended March 31, 1999 was $10.3 million or $.40 per share
basic and $.39 diluted. The higher earnings in 2000 were mainly due to the
increase in average interest earning assets of $449 million and a 24 basis point
increase in margin. Non-interest income, net of securities gains and losses,
decreased $1.4 million for the quarter driven mainly by lower mortgage banking
income. Net of mortgage banking income, non-interest income increased $1.9
million. Operating expenses net of capital securities expenses increased 8.1
percent from the first quarter of 1999. This increase is associated with
continued network expansion, as 16 new branches have been opened since the end
of the first quarter of 1999. There was a $4.3 million provision for loan losses
during the quarter with net charge-offs of $3.0 million. The Corporation also
recognized an extraordinary gain from debt extinguishment of $770 thousand, net
of taxes.
NET INTEREST INCOME
Growth in average earning assets and a higher net interest margin raised
tax-equivalent net interest income to $40.7 million for the first quarter of
2000, a $6.6 million increase over the prior year. The net interest margin for
the quarter increased 24 basis points from the same quarter last year. The
primary factors included a higher rate environment, which lowered prepayments on
first and second mortgages raising the yield on this class of assets. The rate
paid on interest-bearing liabilities was also up but 19 basis points less than
the increase in the yield on interest earning assets.
Provident's tax equivalent interest income rose $16.6 million from the
first quarter of 1999, the result of a $449 million expansion in average earning
assets and a 63 basis point increase in yield. Growth in total average earning
assets was provided by increases of $94 million in consumer loans and $475
million in investments. Commercial construction and commercial mortgage loan
increased $43 million and $18 million, respectively. Mortgage loans held for
sale declined $154 million and commercial business loans declined $13 million.
Residential mortgage loans also declined $11 million due to a $119 million loan
sale during the first quarter of 1999. The yield on earning assets was 7.81%
compared to 7.18% for the first quarter of 1999.
Total interest expense for the first quarter of 2000 was $10.0 million
above a year ago, the combined result of an increase of $405 million in the
average outstanding balance of interest-bearing liabilities and a 44 basis point
increase in rate paid. Included in this increase were $315 million in matched
maturity brokered deposits, $46 million in interest bearing demand/money market
deposits and $23 million in certificates of deposits. Savings deposits and IRA
deposits decreased $16 million and $17 million, respectively. Short term
borrowed money increased $184 million while long term borrowings declined $133
million.
Management monitors the level of earnings at risk due to interest rate
volatility through the simulation of multiple interest rate scenarios. Interest
rate risk products such as interest rate swaps, caps and floors are acquired as
effective protection against the negative effects should certain scenarios that
create earnings volatility occur. These risk avoidance costs decreased interest
income by $27 thousand and increased interest expense by $946 thousand for a
total decrease of $973 thousand in net interest income for the quarter ending
March 31, 2000. Included in this net interest income decrease was the
amortization of closed positions, which decreased interest expense by $184
thousand for the current quarter. Without the amortization of closed positions,
off-balance sheet positions reduced net interest income by $1.2 million.
Management does not speculate on future interest rate movements. At March
31, 2000, the forward markets indicated that short-term interest rates will
increase 100 basis points and long-term rates will remain unchanged over the
next twelve months. The Corporation's analysis indicates that if management does
not adjust its March 31, 2000 off-balance sheet positions and the forward yield
curve assumptions occur, off-balance sheet positions, including
9
<PAGE> 10
amortization of closed positions, would decrease net interest income by $1.3
million over the next twelve months. This compares to a decrease of $4.0 million
should interest rates remain unchanged. However, yields on associated on-balance
sheet hedged assets would improve by a corresponding amount. Amortization of
closed positions will increase net interest income by $615 thousand over the
next twelve months. Thus, without amortization of closed positions, net interest
income would decrease $1.9 million over the next twelve months if the forward
yield curve assumptions occur and $4.6 million if rates remain unchanged.
PROVISION FOR LOAN LOSSES
The Corporation recorded a $4.3 million provision for loan losses, with
net charge-offs of $3.0 million for the first quarter of 2000, compared to a
provision of $2.0 million and net charge-offs of $6.8 million for the same
period of 1999. The increase in the provision for loan losses is for losses that
are expected to grow due to the growth in the portfolio and is comparable to the
$3.6 million recorded in fourth quarter of 1999. The decrease in charge- offs
was the result of the payment of a judgment entered in April of 1998 stemming
from a lawsuit alleging that Provident Bank of Maryland had failed to fully
honor a letter of credit which was issued in 1989. The amount of the judgement
was $5.2 million, exclusive of post-judgment interest. The amount of this
payment was fully reserved for at December 31, 1998 and payment made during the
first quarter of 1999. The Corporation continues to emphasize loan quality and
closely monitors potential problem credits. Senior managers meet at least
monthly to review the credit quality of the loan portfolios and at least
quarterly with executive management to review the adequacy of the allowance for
loan losses. Provident has been closely monitoring its health care industry
credits where the operators have had to adjust to changes in Medicare
reimbursement policies. Non-performing loans from this group are expected to
increase during the year and charge-offs may be incurred in future quarters as a
result of continuing challenges in the health care sector. The entire health
care portfolio represents less than 2.8% of Provident's total loans. The
allowance for loan losses at March 31, 2000 was $41.1 million, compared to $37.9
million a year ago. At March 31, 2000, the allowance represented 1.23% of total
loans and 158% of non-performing loans. Total non-performing loans were $26
million at March 31, 2000, up from $10.1 million as of March 31, 1999.
Non-performing loans as a percent of loans outstanding as of March 31, 2000
were .78%.
NON-INTEREST INCOME
Non-interest income, exclusive of securities gains, totaled $14.1 million
in the first quarter of 2000 compared to $15.5 million for the first quarter
of 1999. This decrease was driven by lower mortgage banking income and lower
commissions and fees attributable to lower investment product sales. Service
charges on deposit accounts increased $1.2 million and other income was up $643
thousand, mainly attributable to increased use of bank card products. The
increase in deposit service fees was driven by higher account volume. Mortgage
banking originations totaled $78 million during the first quarter of 2000
compared to $281 million during the same quarter of 1999. Sales of mortgage
loans resulted in $222 thousand in gains for the first quarter of 2000 as
compared to $2.6 million for the same period in 1999.
Sale of securities resulted in a $79 thousand gain for the quarter
compared to $63 thousand loss for the same quarter in 1999.
NON-INTEREST EXPENSE
First quarter non-interest expense was $34.9 million, compared to $32.2
million for the same period last year. Salaries and benefits increased $801
thousand, mainly related to merit increases and the expansion of the bank's
branch network. The branch network expansion also contributed to increased
occupancy costs of $338 thousand, furniture and equipment expense of $294
thousand and $88 thousand in external processing fees related to increased
account volume. During the first quarter of 2000, $30 million of trust preferred
capital securities were issued resulting in the increase in capital securities
expense. All other expenses increased a total of $1.0 million mainly associated
with increases in marketing expenses, communication expenses and net losses
associated with deposit accounts. These increases are also associated with
branch network expansion.
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INCOME TAXES
Provident recorded income tax expense of $4.6 million on income before
taxes of $15.5 million, an effective tax rate of 29.7%. During the first quarter
of 1999, Provident's tax expense was $4.8 million on pre-tax income of $15.1
million, an effective tax rate of 31.5%. The change in effective tax rate is the
result of the elimination of federal and state tax issues for which a liability
had previously been provided.
YEAR 2000 ISSUES
- ----------------
The Corporation continued to monitor Y2K issues and no material items occurred
that required changes to the Corporation's computer systems.
FINANCIAL CONDITION
Total assets of the Corporation increased $153 million from December 31,
1999 to March 31, 2000 as loan balances increased $164 million. Consumer loans
were up $108 million, real estate construction loans up $39 million and real
estate mortgage loans were up $18 million. Commercial business loans were down
slightly ending the quarter at $362 million. Total deposits ended the quarter at
$3.78 billion, a decrease of $26 million over the December 31, 1999 level. Core
deposits increased $131 million during the quarter as non-interest bearing
demand increased $48 million and interest bearing demand/money market increased
$43 million. Direct certificates of deposits and savings deposits also increased
$25 million and $21 million, respectively. Borrowings increased $155 million
from December 31, 1999 ending the quarter at $1.08 billion. In February 2000,
the Corporation issued $30 million of trust preferred capital securities, which
were outstanding as of March 31, 2000. A subsidiary trust of the Corporation
issued these capital securities and the Corporation received the proceeds by
issuing junior subordinated debentures to the trust. These capital securities
are considered tier 1 capital for regulatory purposes. Total trust preferred
capital securities, as of March 31, 2000 was $70 million.
The primary sources of liquidity at March 31, 2000 were loans held for
sale and investments available for sale, which totaled $1.7 billion. This
represents 35% of total liabilities compared to 36% at December 31, 1999.
At March 31, 2000, total stockholders' equity was $274.4 million, a $200
thousand decrease over December 31, 1999. In addition to the ordinary
adjustments to stockholders' equity of net income and dividends paid, additional
capital of $184 thousand was raised through the dividend reinvestment plan,
$132 thousand from the exercise of stock options, while capital decreased by
$361 thousand during the first quarter of 2000 as a result of Statement of
Financial Accounting Standards No. 115. During the first quarter of 2000, the
Corporation also repurchased shares totaling $7.7 million. At quarter-end, the
leverage ratio was 7.44% and total stockholders' equity represented 10.71% of
risk adjusted assets. These ratios exceed the minimum requirements of the
current leverage capital and risk-based capital standards established by
regulatory agencies.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information regarding market risk at December 31, 1999, see "Interest
Sensitivity Management" and Note 11 to the Consolidated Financial Statements in
the Corporation's Form 10-K filed with the Commission on February 17, 2000. The
market risk of the Corporation has not experienced any material changes as of
March 31, 2000 from December 31, 1999. Additionally, refer to "Net Interest
Income" in Item 2 - Management's Discussion and Analysis of Results of
Operations and Financial Condition for additional quantitative and qualitative
discussions about market risk at March 31, 2000.
11
<PAGE> 12
PART II - OTHER INFORMATION
Item 1. Legal Proceedings - None
Item 2. Changes in Securities and Use of Proceeds - None
Item 3. Defaults Upon Senior Securities - None
Item 4. Submission of Matters to a Vote of Security Holders - None
Item 5. Other Information - None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits filed as part of this report are listed below:
(3.1) Articles of Incorporation of Provident Bankshares
Corporation (1)
(3.2) Fourth Amended and Restated Bylaws of Provident Bankshares
Corporation (3)
(4.1) Stockholder Protection Rights Plan, as amended (2)
(27) Financial Data Schedule
(b) Reports on Form 8-K
No reports on Form 8-K were filed by the Corporation during the
quarter ended March 31, 2000.
(1) Incorporated by reference from Provident's Registration Statement on Form
S-3 (File No. 33-73162) filed with the Commission on August 18, 1994.
(2) Incorporated by reference from Provident's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1998, filed with the Commission on August 14,
1998.
(3) Filed herein.
12
<PAGE> 13
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
PROVIDENT BANKSHARES CORPORATION
--------------------------------
Registrant
May 10, 2000 /s/ Peter M. Martin
-------------------
Peter M. Martin
President, Chairman and Chief
Executive Officer
May 10, 2000 /s/ R. Wayne Hall
-----------------
R. Wayne Hall
Treasurer
13
<PAGE> 14
EXHIBIT INDEX
Exhibit Description Sequentially Numbered Page
- ------- ----------- --------------------------
(3.2) Fourth Amended and Restated Bylaws of
Provident Bankshares Corporation
(27) Financial Data Schedule
14
<PAGE> 1
PROVIDENT BANKSHARES CORPORATION
FOURTH AMENDED AND RESTATED BYLAWS
----------------------------------
ARTICLE I - OFFICES
-------------------
The principal office of the Corporation in Maryland shall be located at
114 East Lexington Street, Baltimore, Maryland 21202. The Corporation may have
such other offices, either within or without the State of Maryland as the Board
of Directors may designate or as the business of the Corporation may from time
to time require.
ARTICLE II - STOCKHOLDERS
-------------------------
Section 1 - ANNUAL MEETING
--------------
The annual meeting of the stockholders of the Corporation shall be held at
such time during April of each year as the Board of Directors shall, in their
discretion, fix. The business to be transacted at the annual meting shall
include the election of directors, consideration of the report of the President,
and any other business properly brought before the meeting in accordance with
Section 7(b).
Section 2 - SPECIAL MEETINGS
----------------
A special meeting of the stockholders may be called at any time for any
purpose or purposes by the Chairman of the Board, the President, or by a
majority of the Board of Directors and a special meeting of stockholders shall
be called by the Secretary of the Corporation upon the request in writing of the
holders of a majority of all shares outstanding and entitled to vote on the
business to be transacted at such meeting. Notwithstanding the first sentence of
this Section 2, the Secretary of the Corporation shall not be obligated to call
a special meeting of the stockholders requested by stockholders for the purpose
of taking any action that is non-binding or advisory in nature.
Section 3 - PLACE OF MEETING
----------------
The Board of Directors may designate any place, either within or without
the State of Maryland as the place of meeting for any annual or special meeting
of stockholders. If no designation is made, or if a special meeting be otherwise
called, the place of the meeting shall be the principal office of the
Corporation in Maryland.
Section 4 - NOTICE OF MEETING; WAIVER OF NOTICE
-----------------------------------
Not less than ten (10) days or more than ninety (90) days before the date
of every stockholders meeting, the Secretary shall give to each stockholder
entitled to vote at such meeting, written or printed notice stating the place,
date and hour of the meeting and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, either by mail or by presenting it
<PAGE> 2
to him personally or by leaving it at his residence or usual place of business.
Notwithstanding the foregoing provisions, a written waiver of notice, signed by
the person entitled to notice, whether before or after the time stated therein,
shall be equivalent to notice. Attendance of a person entitled to notice at a
meeting, in person or by proxy, shall constitute a waiver of notice of such
meeting, except when such person attends the meeting for the express purpose of
objecting, at the beginning of the meeting, to the transaction of any business
because the meeting is not lawfully called or convened.
Section 5 - QUORUM
------
At any meeting of stockholders, a majority of the shares entitled to vote
a the meeting, present in person or by proxy, shall constitute a quorum. The
affirmative vote of a majority of the shares present at a meeting of
stockholders, duly called and at which a quorum is present, shall be sufficient
to take or to authorize action upon any matter which may properly come before
the meeting unless more than a majority of votes is required by statute or by
the Certificate of Incorporation of the Corporation.
In the absence of a quorum a majority of the shares represented in person
or by proxy may adjourn the meeting from time to time not exceeding a total of
thirty (30) days without further notice other than that by announcement at such
meeting. At such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the meeting
originally called. The stockholders present at a duly organized meeting may
continue to transact business until adjournment, notwithstanding the withdrawal
of enough stockholders to leave less than a quorum.
Section 6 - ORGANIZATION
------------
The Chairman of the Board of the Corporation or, in his absence, the
President of the Corporation, or in his absence such person as the Board of
Directors may have designated or, in the absence of such a person, such person
as may be chosen by the holders of a majority of the shares entitled to vote who
are present, in person or by proxy, shall call to order any meeting of the
stockholders and act as chairman of the meeting. In the absence of the Secretary
of the Corporation, the secretary of the meeting shall be such person as the
chairman appoints.
Section 7 - CONDUCT OF BUSINESS
-------------------
(a) The chairman of any meeting of stockholders shall determine the order
of business and the procedures at the meeting, including such regulation of the
manner of voting and the conduct of discussion as seem to him or her in order.
The date and time of the opening and closing of the polls for each matter upon
which the stockholders will vote at the meeting shall be announced at the
meeting.
(b) At any annual meeting of the stockholders, only such business shall be
conducted as shall have been brought before the meeting (i) by or at the
direction of the Board of Directors or (ii)
2
<PAGE> 3
by any stockholder of the Corporation who is entitled to vote with respect
thereto and who complies with the notice procedures set forth in this Section
7(b). For business to be properly brought before an annual meeting by a
stockholder, the business must relate to a proper subject matter for stockholder
action and the stockholder must have given timely notice thereof in writing to
the Secretary of the Corporation. To be timely, a stockholder's notice must be
delivered or mailed to and received at the principal executive office of the
Corporation not less than ninety (90) days prior to the date of the annual
meeting; provided, however, that in the event that less than one hundred (100)
days' notice or prior public disclosure of the date of the meeting is given or
made to stockholders, notice by the stockholder to be timely must be received
not later than the close of business on the 10th day following the day on which
such notice of the date of the annual meeting was mailed or such public
disclosure was made. A stockholder's notice to the Secretary shall set forth as
to each matter such stockholder proposes to bring before the annual meeting (i)
a brief description of the business desired to be brought before the annual
meeting and the reasons for conducting such business at the annual meeting, (ii)
the name and address, as they appear on the Corporation's books, of the
stockholder proposing such business, (iii) the class and number of shares of the
Corporation's capital stock that are beneficially owned by such stockholder,
(iv) a statement disclosing (I) whether such stockholder is acting with or on
behalf of any other person and (II) if applicable, the identity of such person,
and (v) any material interest of such stockholder in such business.
Notwithstanding anything in these Bylaws to the contrary, no business shall be
brought before or conducted at an annual meeting except in accordance with the
provisions of this Section 7(b). The Chairman of the Board or other person
presiding over the annual meeting shall, if the facts so warrant, determine and
declare to the meeting that business was not properly brought before the meeting
in accordance with the provisions of this Section 7(b) and, if he should so
determine, he shall so declare to the meeting and any such business so
determined to be not properly brought before the meeting shall not be
transacted.
(c) Only persons who are nominated in accordance with the procedures set
forth in these Bylaws shall be eligible for election as Directors. Nominations
of persons for election to the Board of Directors of the Corporation may be made
at a meeting of stockholders at which directors are to be elected only (i) by or
at the direction of the Board of Directors or (ii) by any stockholder of the
Corporation entitled to vote for the election of Directors at the meeting who
complies with the notice procedures set forth in this Section 7(c). Such
nominations, other than those made by or at the direction of the Board of
Directors, shall be made by timely notice in writing to the Secretary of the
Corporation. To be timely, a stockholder's notice shall be delivered or mailed
to and received at the principal executive office of the Corporation not less
than ninety (90) days prior to the date of the meeting; provided, however, that
in the event that less than one hundred (100) days' notice or prior disclosure
of the date of the meeting is given or made to stockholders, notice by the
stockholder to be timely must be so received not later than the close of
business on the 10th day following the day on which such notice of the date of
the meeting was mailed or such public disclosure was made. Such stockholder's
notice shall set forth (i) as to each person whom such stockholder proposes to
nominate for election or re-elections as a Director, all information relating to
such person that is required to be disclosed in solicitations of proxies for
election of Directors, or is otherwise required, in each case pursuant to
Regulation 14A under the Securities Exchange Act of 1934, as amended (including
such person's written consent to being named in the proxy statement as a nominee
and
3
<PAGE> 4
to serving as a Director if elected); and (ii) as to the stockholder giving the
notice (x) the name and address, as they appear on the Corporation's books, of
such stockholder, (y) the class and number of shares of the Corporation's
Capital Stock that are beneficially owned by such stockholder, and (z) a
statement disclosing (I) whether such stockholder or any nominee thereof is
acting with or on behalf of any other person and (II) if applicable, the
identity of such person.
Section 8 - VOTING
------
Unless the Certificate of Incorporation provides for a greater or lesser
number of votes per share or limits or denies voting rights, each outstanding
share of stock, regardless of class, is entitled to one (1) vote on each matter
submitted to a vote at a meeting of stockholders.
Section 9 - PROXIES
-------
At all meetings of stockholders, a stockholder may vote the shares owned
of record by him either in person or by proxy executed in writing by the
stockholder or by his duly authorized attorney-in-fact. Such proxy shall be
filed with the Secretary of the Corporation before or a the time of the meeting.
No proxy shall be valid after eleven (11) months from the date of its execution,
unless otherwise provided in the proxy.
Section 10 - RESERVED
--------
Section 11 - CONDUCT OF VOTING
-----------------
At all meetings of stockholders, unless the voting is conducted by
inspectors, the proxies and ballots shall be received, and all questions
touching the qualification of voters and the validity of proxies and the
acceptance or rejection of votes shall be decided by the chairman of the
meeting. If demanded by stockholders, present in person or by proxy, entitled to
cast ten percent (10%) in number of votes entitled to be cast, or if ordered by
the chairman, the voting shall be conducted by two inspectors, in which event
the proxies and ballots shall be received, and all questions touching the
qualification of voters and the validity of proxies and the acceptance or
rejection of votes, shall be decided by such inspectors. Unless so demanded or
ordered, voting need not be conducted by inspectors. The stockholders at any
meeting may choose an inspector or inspectors to act at such meeting, and in
default or such election the chairman of the meeting may appoint an inspector or
inspectors. No candidate for election as a director at a meeting shall serve as
an inspector thereat.
ARTICLE III - DIRECTORS
-----------------------
Section 1 - GENERAL POWERS
--------------
The business and affairs of the Corporation shall be managed by its Board
of Directors. The Board of Directors may exercise all the powers of the
Corporation, except those conferred on or reserved to the stockholders by
statute or by the Certificate of Incorporation or the Bylaws. The Board may
adopt such rules and regulations for the conduct of their meetings and the
management
4
<PAGE> 5
of the Corporation as they may deem proper, and which are not inconsistent with
these Bylaws and with the Maryland General Corporation Law.
Section 2 - NUMBER
------
The number of directors of the Corporation shall be at least three (3);
provided, however, that a majority of the entire Board of Directors may be
- -------- -------
resolution set the number of directors at such number as it may determine, but
such action shall not affect the tenure of office of any director. Each director
shall hold office until his successor is elected and qualified or until his
earlier resignation or removal.
Section 3 - ELECTION AND TENURE
-------------------
(a) The directors shall be divided into three (3) classes, as nearly equal
in number as possible, with the term of office of the first class to expire at
the 1991 annual meeting of stockholders, the term of office of the second class
to expire at the 1992 annual meeting of stockholders, and the term of office of
the third class to expire at the 1993 annual meeting of stockholders. At each
annual meeting of stockholders beginning in 1991, successors to the class of
directors whose term expires at that annual meeting shall be elected for a term
of three (3) years.
(b) Notwithstanding the provisions of Article III, Section 3(a) above, the
term of office of a director of the Corporation shall expire upon the date of
the annual meeting of stockholders immediately following the date on which the
director reaches seventy (70) years of age, and upon the date of such annual
meeting of stockholders such individual shall cease to be a director of the
Corporation unless the Board of Directors shall determine otherwise. The vacancy
created by such expiration shall be filled in accordance with Article III,
Section 4.
Section 4 - VACANCIES
---------
Subject to the rights of the holders of any class or series of preferred
stock then outstanding, any vacancy in the Board of Directors, including one
occurring because of an increase in the authorized number of directors, shall be
filled by a majority vote of the remaining directors at any regular or special
meeting of the Board of Directors, but if a vacancy exists at the time of any
annual meeting of stockholders, such vacancy shall be filled by majority vote of
the shares entitled to vote at such meeting. An individual chosen to fill a
vacancy created by the death, removal, resignation or expiration of the term of
a director shall hold office for the remainder of the departed director's term
and until his successor is elected and qualified, or until his earlier
resignation or removal. An individual chosen to fill a vacancy created by an
increase in the authorized number of directors of the Corporation shall hold
office for such term as the Board of Directors shall specify in accordance with
Article III, Section 3(a), and in any event until his successor is elected and
qualified or until his earlier resignation or removal.
5
<PAGE> 6
Section 5 - REGULAR MEETINGS
----------------
The Board of Directors shall meet for the purposes of organization, the
election of officers and the transaction of other business after the close of
each meeting of stockholders at which a Board of Directors shall have been
elected. Other regular meetings of the Board of Directors shall be held at such
times and such places, either within or without the State of Maryland, as may be
designated from time to time by the Chief Executive Officer or by the Board of
Directors.
Section 6 - SPECIAL MEETINGS
----------------
Special meetings of the Board of Directors may be called by the Chairman
of the Board or by the Chief Executive Officer, or by a majority of the Board of
Directors in writing. The person or persons authorized to call special meetings
of the Board of Directors may fix any place, either within or without the State
of Maryland, as the place for holding the special meeting of the Board of
Directors called by them.
Section 7 - NOTICE
------
The Secretary shall give notice to each director of the time and place of
every regular or special meeting of the Board of Directors. Notice is given to a
director when it is delivered personally to him, left at his residence or usual
place of business, or sent by telephone or telegraph, at least 24 hours before
the time of the meeting, or in the alternative, when it is mailed to his address
as it appears on the records of the Corporation, at least 72 hours before the
time of the meeting. Any director may waive notice of any meeting either before
or after the holding thereof by written waiver filed with the records of the
meeting. The attendance of a director at a meeting shall constitute a waiver of
notice of such meeting, except where a director attends a meeting for the
express purpose of objecting, at the beginning of the meeting, to the
transaction of any business because the meeting is not lawfully called or
convened. Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of the Board of Directors need by specified in the
notice or waiver of notice of such meeting.
Section 8 - TELEPHONIC MEETINGS
-------------------
Members of the Board of Directors, or of any committee thereof, may
participate in a meeting of such Board or committee by means of a conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section 8 shall constitute presence in person at such meeting.
Section 9 - QUORUM
------
A majority of the total number of directors shall constitute a quorum for
the transaction of business, but if less than such quorum is present at a
meeting, a majority of the directors present may adjourn the meeting without
further notice from time to time until a quorum shall attend. At any
6
<PAGE> 7
such adjourned meeting at which a quorum shall be present, any business may be
transacted which might have been transacted at the meeting as originally
notified.
Section 10 - MANNER OF ACTING
----------------
The vote of the majority of the directors present at a meeting at which a
quorum is present shall be the action of the Board of Directors unless the
concurrence of a greater proportion is required for such action by the
Certificate of Incorporation.
Section 11 - INFORMAL ACTION
---------------
Any action required or permitted to be taken at any meeting of the Board
of Directors or of any committee thereof may be taken without a meeting, if a
written consent to such action is signed by all members of the Board of
Directors or the committee, as the case may be, and such written consent if
filed with the minutes of the proceedings of the Board of Directors.
Section 12 - REMOVAL OF DIRECTORS
--------------------
Any or all of the directors may be removed, at any time, but then only for
cause and then only by the affirmative vote of the holders of at least 80% of
the shares then entitled to vote at any election of directors.
Section 13 - RESIGNATION
-----------
A director may resign at any time by giving written notice to the Board,
the President or the Secretary of the Corporation. Unless otherwise specified in
the notice, the resignation shall take effect upon receipt thereof by the Board
or such officer, and the acceptance of the resignation shall not be necessary to
make it effective.
Section 14 - COMPENSATION
------------
By resolution of the Board of Directors, a fixed sum and expenses, if any,
for attendance at each regular or special meeting of the Board of Directors or
of committees thereof, and other compensation for their services as such or on
such committees, may be paid to directors, as may compensation for such other
services as a director may render to the Corporation.
Section 15 - COMMITTEES
----------
The Board of Directors may, by resolution passed by a majority of the
entire Board, designate an executive committee, a nominating committee, an audit
committee, a compensation and human resources committee or other committees,
each committee to consist of two or more directors of the Corporation. The Board
may designate one or more directors as alternate members of any meeting
7
<PAGE> 8
of any committee, who may replace any absent or disqualified member at any
meeting of any committee. A majority of the total number of committee members
shall constitute a quorum for the conduct of a committee's business and affairs,
and the vote of a majority of the members constituting said quorum shall be the
act of that committee. In the absence or disqualification of a member of a
committee, the member or members remaining and not disqualified from voting,
whether or not such member or members constitute a quorum, may unanimously
appoint another member of the Board of Directors to act as a member at the
committee meeting in place of the absent or disqualified committee member.
Any such committee, to the extent provided in the resolution of the Board
of Directors, shall have and may exercise all the powers and authority of the
Board of Directors in the management of the business and affairs of the
Corporation, and may authorize the seal of the Corporation to be affixed to all
papers which may require it; provided, however, that any such committee shall
have no power or authority with reference to (i) amending the Certificate of
Incorporation, (ii) adopting an agreement of merger or consolidation under Title
3 of the Maryland General Corporation Law, (iii) recommending to the
stockholders the sale, lease or exchange of all or substantially all of the
Corporation's property and assets, (iv) recommending to the stockholders a
dissolution of the Corporation or a revocation of a dissolution, (v) declaring
dividends or distributions on stock, (vi) issuing stock other than as provided
by the Maryland General Corporation Law, or (vii) amending the Bylaws of the
Corporation.
ARTICLE IV - OFFICERS
---------------------
Section 1 - EXECUTIVE AND OTHER OFFICERS
----------------------------
The Corporation shall have a President, who shall be a director of the
Corporation, a Secretary and a Treasurer. It may also have a Chairman of the
Board, who shall be a director of the Corporation and shall be an executive
officer if he is designated as the chief executive officer of the Corporation.
The Board of Directors may designate who shall serve as chief executive officer,
having general supervision of the business and affairs of the Corporation, and
as chief operating officer, having supervision of the operations of the
Corporation; in the absence of a designation the President shall serve as chief
executive officer and chief operating officer. The Corporation may have one or
more Executive Vice-Presidents, one or more Assistant Vice-Presidents, one or
more Assistant Secretaries and one or more Assistant Treasurers. A person may
hold more than one office in the Corporation but may not serve concurrently as
Post President and Vice-President of the Corporation.
Section 2 - CHAIRMAN OF THE BOARD
---------------------
The Chairman of the Board, of one be elected, shall preside at all
meetings of the Board of Directors and of the stockholders at which he shall be
present. He shall have and may exercise such duties and powers as are from time
to time assigned to him by the Board of Directors.
8
<PAGE> 9
Section 3 - PRESIDENT
---------
In the absence of the Chairman of the Board, the President shall preside
at all meetings of the stockholders and of the Board of Directors at which he
shall be present; he may sign and execute, in the name of the Corporation, all
authorized deeds, mortgages, bonds, contracts or other instruments, except in
cases in which the signing and execution thereof shall have been expressly
delegated to some other office or agent of the Corporation; and, in general, he
shall perform all duties usually performed by a president of a corporation and
such other duties as may from time to time be assigned to him by the Board of
Directors or by the chief executive officer of the Corporation.
Section 4 - EXECUTIVE VICE-PRESIDENTS
-------------------------
The Executive Vice-President or Executive Vice-Presidents, at the request
of the chief executive officer or the President or in the President's absence or
during his inability to act, shall perform the duties and exercise the functions
of the President, and when so acting shall have the powers of the President. If
there be more than one Executive Vice-President, the Board of Directors may
determine which one or more of the Executive Vice-Presidents shall perform any
of such duties or exercise any of such functions, or if such determination is
not made by the Board of Directors, the chief executive officer may make such
determination; otherwise any of the Executive Vice-Presidents may perform any
of such duties or exercise any of such functions. The Executive Vice-President
or Executive Vice-Presidents shall have such other powers and perform such other
duties, and have such additional descriptive designations in their titles (if
any), as may be assigned by the Board of Directors or the Chief Executive
Officer.
Section 5 - VICE-PRESIDENTS
---------------
In the absence of the Chairman of the Board, the chief executive officer
and the chief operating officer (if designated), all Executive Vice-Presidents,
and all Senior Vice-Presidents (if such office then exists), such Vice President
as may be designated from time to time by the Board of Directors shall be vested
with the powers of the President and shall perform his duties. In addition
thereto, all Vice Presidents shall perform such duties as may be assigned to
them by the Board of Directors, the Chairman of the Board, the chief executive
officer or the President.
Section 6 - SECRETARY
---------
The Secretary shall keep the minutes of the meetings of the stockholders,
of the Board of Directors and of any committees, in books provided for the
purpose; he shall see that all notices are duly given in accordance with the
provisions of the Bylaws or as required by law; he shall be custodian of the
records of the Corporation; he shall witness all documents on behalf of the
Corporation, the execution of which is duly authorized, see that the corporate
seal is affixed where such document is required to be under its seal, and, when
so affixed, may attest the same; and, in
9
<PAGE> 10
general, he shall perform all duties incident to the office of a secretary of a
corporation, and such other duties as may from time to time be assigned to him
by the Board of Directors or the President.
Section 7 - TREASURER
---------
The Treasurer shall have charge of and be responsible for all funds,
securities, receipts and disbursements of the Corporation, and shall deposit, or
cause to be deposited, in the name of the Corporation, all monies or other
valuable effects in such banks, trust companies or other depositories as shall,
from time to time, be selected by the Board of Directors. In general, he shall
perform all the duties incident to the office of a treasurer of a corporation,
and such other duties as may from time to time be assigned to him by the Board
of Directors, the chief executive officer or the President.
Section 8 - ASSISTANT OFFICERS
------------------
The Assistant Vice-Presidents shall have such duties as may from time to
time be assigned to them by the Board of Directors or the President. The
Assistant Secretaries shall have such duties as may from time to time be
assigned to them by the Board of Directors or the Secretary. The Assistant
Treasurers shall have such duties as may from time to time be assigned to them
by the Board of Directors or the Treasurer.
Section 9 - SUBORDINATE OFFICERS
--------------------
The Corporation may have such subordinate officers as the Board of
Directors may from time to time deem desirable. Each such officer shall hold
office for such period and perform such duties as the Board of Directors, the
President or the committee or officer designated pursuant to Article IV, Section
11 may prescribe.
Section 10 - COMPENSATION
------------
The Board of Directors shall have power to fix the salaries and other
compensation and remuneration, of whatever kind, of all officers of the
Corporation. It may authorize any committee or officer, upon whom the power of
appointing subordinate officers may have been conferred, to fix the salaries,
compensation and remuneration of such subordinate officers.
Section 11 - ELECTION, TENURE AND REMOVAL OF OFFICERS
----------------------------------------
The Board of Directors shall elect the officers. The Board of Directors
may from time to time authorize any committee or officer to appoint subordinate
officers. An officer serves for one year and until his successor is elected and
qualified. If the Board of Directors in its judgment finds that the best
interests of the Corporation will be served, it may remove any officer or agent
of the Corporation. The removal of an officer or agent does not prejudice any of
his contract rights. The Board of Directors (or any committee or officer
authorized by the Board of Directors) may fill a vacancy which occurs in any
office for the unexpired portion of the term of that office.
10
<PAGE> 11
ARTICLE V - STOCK
-----------------
Section 1 - CERTIFICATES FOR STOCK
----------------------
Each stockholder shall be entitled to certificates which represent and
certify the shares of stock he holds in the Corporation. Each stock certificate
shall include on its face the name of the Corporation, the name of the
stockholder and the class of stock and number of shares represented by the
certificate and be in such form, not inconsistent with law or with the
Certificate of Incorporation, as shall be approved by the Board of Directors or
any officer or officers designated for such purpose by resolution of the Board
of Directors. Each stock certificate shall be signed by the President, an
Executive Vice-President or the Chairman of the Board, and countersigned by the
Secretary, an Assistant Secretary, the Treasurer, or an Assistant Treasurer.
Each certificate shall be sealed with the actual corporate seal or a facsimile
of it or in any other form and the signatures on each certificate may be either
manual or facsimile signatures. A certificate is valid and may be issued whether
or not an officer who signed it is still an officer of the Corporation when it
is issued.
Section 2 - TRANSFERS
---------
The Board of Directors shall have power and authority to make such rules
and regulations as it may deem expedient concerning the issue, transfer and
registration of certificates of stock, and may appoint transfer agents and
registrars thereof. The duties of transfer agent and registrar may be combined.
Section 3 - RECORD DATE AND CLOSING OF TRANSFER BOOKS
-----------------------------------------
In order that the Corporation may determine the stockholders entitled to
notice of or to vote at any meeting of stockholders or any adjournment thereof,
or entitled to receive payment of any dividend or other distribution or
allotment of any rights, or entitled to exercise any rights in respect of any
change, conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which shall
not be more than sixty (60) nor less than ten (10) days before the date of such
meeting, nor more than sixty (60) days prior to any other action.
Section 4 - STOCK LEDGER
------------
The Corporation shall maintain a stock ledger which contains the name and
address of each stockholder and the number of shares of stock of each class
registered in the name of each stockholder. The stock ledger may be in written
form or in any other form which can be converted within a reasonable time into
written form for visual inspection. The original or a duplicate of the stock
ledger shall be kept at the offices of a transfer agent for the particular class
of stock, within or without the State of Maryland, or, if none, at the principal
office or the principal executive offices of the Corporation in the State of
Maryland.
11
<PAGE> 12
Section 5 - CERTIFICATION OF BENEFICIAL OWNERS
----------------------------------
The Board of Directors may adopt by resolution a procedure by which a
stockholder of the Corporation may certify in writing to the Corporation that
any shares of stock registered in the name of the stockholder are held for the
account of a specified person other than the stockholder. The resolution shall
set forth the class of stockholders who may certify; the purpose for which the
certification may be made, the form of certification and the information to be
contained in it; if the certification is with respect to a record date or
closing of the stock transfer books, the time after the record date or closing
of the stock transfer books within which the certification must be received by
the Corporation; and any other provisions with respect to the procedure which
the Board considers necessary or desirable. On receipt of a certification which
complies with the procedure adopted by the Board in accordance with this
Section, the person specified in the certification is, for the purpose set forth
in the certification, the holder of record of the specified stock in place of
the stockholder who makes the certification.
Section 6 - LOST, STOLEN OR DESTROYED STOCK CERTIFICATES
--------------------------------------------
The Board of Directors of the Corporation may determine the conditions for
issuing a new stock certificate in place of one which is purportedly alleged to
have been lost, stolen or destroyed, or the Board of Directors may delegate such
power to any officer or officers of the Corporation. In its discretion, the
Board of Directors or such officer or officers may refuse to issue such new
certificate except upon the order of a court having jurisdiction in the
premises.
ARTICLE VI - FINANCE
--------------------
Section 1 - CHECKS, DRAFTS, ETC.
--------------------
All checks, drafts and orders for the payment of money, notes and other
evidences of indebtedness, issued in the name of the Corporation, shall, unless
otherwise provided by resolution of the Board of Directors, be signed by the
President, an Executive Vice-President or a Vice-President and countersigned by
the Treasurer, an Assistant Treasurer, the Secretary or an Assistant Secretary.
Section 2 - ANNUAL STATEMENT OF AFFAIRS
---------------------------
There shall be prepared annually a full and correct statement of the
affairs of the Corporation, to include a balance sheet and a financial statement
of operations for the preceding fiscal year. The statement of affairs shall be
submitted at the annual meeting of the stockholders and, within twenty (20) days
after the meeting, placed on file at the Corporation's principal office. Such
statement shall be prepared or caused to be prepared by such executive officer
of the Corporation as may be designated in an additional or supplementary bylaw
adopted by the Board of Directors. If no other executive officer is so
designated, it shall be the duty of the President to prepare or cause to be
prepared such statement.
12
<PAGE> 13
Section 3 - FISCAL YEAR
-----------
The fiscal year of the Corporation shall commence on the first day of
January and end on the last day of December in each year.
ARTICLE VII - SUNDRY PROVISIONS
-------------------------------
Section 1 - BOOKS AND RECORDS
-----------------
The Corporation shall keep correct and complete books and records of its
accounts and transactions and minutes of the proceedings of its stockholders and
Board of Directors and of any executive or other committee when exercising any
of the powers of the Board of Directors. The books and records of the
Corporation may be in written form or in any other form which can be converted
within a reasonable time into written form for visual inspection. Minutes shall
be recorded in written form but may be maintained in the form of a reproduction.
Section 2 - CORPORATE SEAL
--------------
The Board of Directors shall provide a suitable seal, bearing the name of
the Corporation, which shall be in the charge of the Secretary. The Board of
Directors may authorize one or more duplicate seals and provide for the custody
thereof.
Section 3 - BONDS
-----
The Board of Directors may require any officer, agent or employee of the
Corporation to give a bond to the Corporation, conditioned upon the faithful
discharge of his duties, with one or more sureties and in such amount as may be
satisfactory to the Board of Directors.
Section 4 - VOTING UPON SHARES IN OTHER CORPORATIONS
----------------------------------------
Stock of other corporations or associations, registered in the name of the
Corporation, may be voted by the Chief Executive Officer, the President, an
Executive Vice-President or a proxy appointed by any of them. The Board of
Directors, however, may by resolution appoint some other person to vote such
shares, in which case such person shall be entitled to vote such shares upon the
production of a certified copy of such resolution.
Section 5 - MAIL
----
Any notice or other document which is required by these Bylaws to be
mailed shall be deposited in the United States mails, postage prepaid.
13
<PAGE> 14
Section 6 - EXECUTION OF DOCUMENTS
----------------------
A person who holds more than one office in the Corporation may not act in
more than one capacity to execute, acknowledge, or verify an instrument required
by law to be executed, acknowledged or verified by more than one officer.
Section 7 - AMENDMENT OF BYLAWS
-------------------
The Board of Directors shall have the power and authority to amend, alter
or repeal these Bylaws or any provision thereof, and may from time to time make
additional Bylaws.
ARTICLE VIII - INDEMNIFICATION
------------------------------
Section 1 - RIGHT TO INDEMNIFICATION
------------------------
Each person who was or is a party or is threatened to be made a party to
any threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (a "proceeding"), by reason of the
fact that he, or a person of whom he is the legal representative, is or was a
director, officer, employee or agent of the Corporation or is or was serving at
the request of the Corporation as a director, officer, employee or agent of
another corporation or of a partnership, joint venture, trust or other
enterprise (including service with respect to employee benefit plans), whether
the basis of such proceeding is alleged action in an official capacity as a
director, officer, employee or agent or in any other capacity while serving as a
director, officer, employee or agent, shall be indemnified and held harmless by
the Corporation to the fullest extent authorized by the Maryland General
Corporation Law, as the same exists or may hereafter be amended (but, in the
case of any such amendment, only to the extent that such amendment, only to the
extent that such amendment permits the Corporation to provide broader
indemnification rights than said Law permitted the Corporation to provide prior
to such amendment) against all expenses, liability and loss (including
attorney's fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) reasonably incurred or suffered by such person
in connection therewith; provided, however, that the Corporation shall indemnify
any such person seeking indemnity in connection with a proceeding (or part
thereof) initiated by such person only if such proceeding (or part thereof) was
authorized by the Board of Directors of the Corporation. Such right to
indemnification under this Section shall be a contract right and shall include
the right of an officer or director to be paid by the Corporation expenses
incurred in defending any civil or criminal action, suit or proceeding in
advance of the final disposition of any such action, suit or proceeding, upon
the receipt by the Corporation of an undertaking, by or on behalf of such
director or officer, to repay all amounts so advanced if it shall ultimately be
determined that such director or officer is not entitled to be indemnified under
this Section or otherwise.
Section 2 - RIGHT OF CLAIMANT TO BRING SUIT
-------------------------------
If a claim for indemnification or advancement of expenses under Section 1
is not paid in full by the Corporation within ninety (90) days after a written
claim for such has been received by the
14
<PAGE> 15
Corporation, the claimant may at any time thereafter bring suit against the
Corporation to recover the unpaid amount of the claim and, if successful in
whole or in part, the claimant shall be entitled to be paid also the expense of
prosecuting such claim. It shall be a defense to any such action (other than an
action brought to enforce a claim for expenses incurred in defending any
proceeding in advance of its final disposition where the required undertaking
has been tendered to the Corporation) that the claimant has not met the
standards of conduct which make it permissible under the Maryland General
Corporation Law for the Corporation to indemnify the claimant for the amount
claimed, but the burden of proving such defense shall be on the Corporation.
Neither the failure of the Corporation (including its Board of Directors,
independent legal counsel, or its stockholders) to make a determination prior to
the commencement of such action that indemnification of the claimant is proper
in the circumstances because he meets the applicable standard of conduct set
forth in the Maryland General Corporation Law, nor an actual determination by
the Corporation (including its Board of Directors, independent legal counsel, or
its stockholders) that the claimant did not meet such applicable standard of
conduct, shall be a defense to the action or cerate a presumption that claimant
has not met the applicable standard of conduct.
Section 3 - NON-EXCLUSIVITY OF RIGHTS
-------------------------
The rights conferred on any person by Sections 1 and 2 of this Article
VIII shall not be exclusive of any other right which such person may have or
hereafter acquire under any statute, provision of the Certificate of
Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors
or otherwise.
Section 4 - INSURANCE
---------
The Corporation may maintain insurance, at its expense, to protect itself
and any such director, officer, employee or agent of the Corporation or another
corporation, partnership, joint venture, trust or other enterprise against any
such expense, liability or loss, whether or not the Corporation would have the
power to indemnify such person against such expense, liability or loss under the
Maryland General Corporation Law.
IN WITNESS WHEREOF, these Bylaws are hereby certified as the duly adopted
Bylaws of the Corporation on February 16, 2000.
/s/ Robert L. Davis
---------------------
Corporate Secretary
15
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary information extracted from the Form 10-Q and
is qualified in its entirety by reference to such financial statements.
</LEGEND>
<CIK> 0000818969
<NAME> Provident Bankshares Corporation
<MULTIPLIER> 1,000
<CURRENCY> U.S. Dollars
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
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<INT-BEARING-DEPOSITS> 0
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<LOANS> 3,348,247
<ALLOWANCE> 41,051
<TOTAL-ASSETS> 5,247,507
<DEPOSITS> 3,782,312
<SHORT-TERM> 540,486
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<LONG-TERM> 543,403
68,068
0
<COMMON> 26,251
<OTHER-SE> 248,154
<TOTAL-LIABILITIES-AND-EQUITY> 5,247,507
<INTEREST-LOAN> 67,821
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<INTEREST-DEPOSIT> 42,695
<INTEREST-EXPENSE> 57,595
<INTEREST-INCOME-NET> 40,419
<LOAN-LOSSES> 4,300
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<EXPENSE-OTHER> 20,739
<INCOME-PRETAX> 15,459
<INCOME-PRE-EXTRAORDINARY> 15,459
<EXTRAORDINARY> 770
<CHANGES> 0
<NET-INCOME> 11,635
<EPS-BASIC> 0.46
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<YIELD-ACTUAL> 3.23
<LOANS-NON> 26,000
<LOANS-PAST> 28,512
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