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Provident Bankshares Corp · 8-K · For 7/20/00 · EX-99.1

Filed On 7/24/00 5:14pm ET · SEC File 0-16421 · Accession Number 909654-0-456

  As Of               Filer                 Filing     As/For/On Docs:Pgs              Issuer               Agent

 7/24/00  Provident Bankshares Corp         8-K{5,7}    7/20/00    2:22                                     Muldoon Murphy..Faucette

Current Report · Form 8-K
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: 8-K         Current Report                                         4      5K 
 2: EX-99.1     Miscellaneous Exhibit                                 18     55K

EX-99.1 · Miscellaneous Exhibit

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PROVIDENT BANK SHARES, #745106
JULY 20, 2000, 10:30 A.M., EDT
 FINANCIAL RELATIONS BOARD
MODERATOR: JOHN MCNAMARA

Operator            Good   morning,  ladies  and  gentlemen,  and welcome to the
                    Provident  Bank Shares  quarterly  conference  call. At this
                    time all  participants  are in a listen only mode.  Later we
                    will conduct a question and answer session and  instructions
                    will  follow  at  that  time.  If  anyone   should   require
                    assistance  during the call,  please press the star followed
                    by the zero on your touchtone  phone. As a reminder,  ladies
         and gentlemen, this conference is being recorded.

                    I would now like to  introduce  Mr. John  McNamara  with the
        Financial Relations Board. Please go ahead, sir.

J. McNamara         Good  morning, everyone, and thank you all for participating
                    on Provident's  second quarter  conference  call. By now you
                    should  all have  received a copy of the press  release.  If
                    anyone   still   needs  one,   please   call  my  office  at
                    212/661-8030 and we'll fax you a copy immediately  following
the call.                               

                    With  us on  the  line  from  management  is  Peter  Martin,
                    Chairman  and  Chief  Executive  Officer.  Peter  will  also
                   introduce the other members of Provident's management team.

                    Before we begin, however, we would like to remind you all to
                    take  note  of the  cautionary  language  regarding  forward
                    looking statements contained in the press release. That same
                    language   applies  to  comments  made  on  this   morning's
conference call.                        
                    We'll begin the call with a brief  update on the quarter and
                    then we will open up the lines for  questions.  And now I'll
            turn the call over to Peter Martin. Go ahead, Peter.

P. Martin           Thanks,  John.  Welcome  all  of you. We're happy to discuss
                    our  quarterly  earnings with you. You all have the earnings
                    release which has earnings of $9,245,000 versus  $10,990,000
                    in 1999  and the big  story  of  course  is the $13  million
provision.                              

                    At our conference  call at the end of last quarter we talked
                    about our  healthcare,  two healthcare  credits and you were
                   correctly very curious about our progress on those credits.

                    We  determined  that we had to address  those credits in the
second quarter.                         

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                    Our first  effort in May was to sell a  Genesis  credit  for
                    64.5  cents  on  the  dollar.  Genesis  had  entered  into a
                    forbearance agreement and we could see a bankruptcy looming.
                    We had the  opportunity to reinvest the $9.5 million that we
                    got for that credit. We also took a substantial gain on some
                    swaps that we sold and we were able to  reinvest  that.  The
                    net result on the Genesis  transaction was that it will cost
                    us on earnings  per share a cent in 2000 and 2 cents for the
                    next three  years  because  the  reinvestment  of funds.  Of
                    course we reissued  debt at a higher  interest rate which is
             why we have the 2-cent difference on an annual basis.

                    That  left us with HIS.  There was a heavy  focus on IHS and
                    there's  potential for regulatory action on IHS, but we also
                    came to the conclusion  that we should deal with that in the
                    second  quarter.  So we took  $3  million  out of  potential
                    earnings and put that into loan loss reserve  which  grosses
                    up $5 million an additional  $5 million,  bringing us to the
                    $13 million.  And of course that was already a  non-accrual,
                  which cost us 4 to 5 cents per year on earnings per share.

                    There's still no bankruptcy  plan for IHS so we're still not
                    clear on exactly  what  results  are going to be, so we have
reserved heavily against that credit.   

                    At the  end of  the  second  quarter  you  folks  collective
                    lowered our consensus earnings by 5 cents in anticipation of
                    these credits, so we're pretty much in the same ballpark. We
                    have other  initiatives that we're involved in. We wanted to
                    remove the healthcare  cloud so that we could  emphasize the
                    good   things  that  are  going  on  at   Provident,   those
                    initiatives  make us  comfortable  with the present range of
annual estimates.                       

                    Dick  Oppitz  is  going  to  talk  to  you  about  the  loan
                    portfolios  and some  positive  personnel  additions  on the
                    commercial  side.  Dick is a  member  of the  Office  of the
              Chairman and heads up our commercial lending function.

                    Gary  Geisel is also in the Office of the  Chairman,  as you
                    may remember,  and heads up our branch system and operations
                    and human resources.  He's going to talk about divesting our
                    Fast and  Friendly  check  cashing  operation as well as our
                    branch  expansion  and fee income,  which is an  interesting
          story that we don't think we've emphasized enough.

                    Jack Novak,  who's also Office of the  Chairman and heads up
                    our mortgage and consumer lending,  will talk about mortgage
                    and our  progress in that  business to date.  Jack will also
                    discuss our decision to exit the indirect auto business.  We
   came  to  that  conclusion  in  our  second

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                    quarter as we reallocate our capital to assets  bringing the
better return.                          

                    Dennis Starliper, our CFO, will talk about stock buyback and
                    downsizing.  We also have Ellen  Grossman and Lillian Kilroy
                    with us today.  Ellen  manages our Investor  Relations,  and
                    Lillian  heads  up our  marketing  area.  We will be glad to
  answer your questions after these updates.

Dick.                                   

D. Oppitz           Good  morning.  This  is  Dick  Oppitz.  I  know that credit
                    quality has been a buzz word in all of the earnings releases
                    for the first two  quarters  of 2000.  I thought I'd spend a
little bit of time on that today.       

                    Much of the  focus in  discussions  of credit  quality  have
                    centered  around  healthcare and syndicated  loan portfolios
                    and I'll  give you a little  bit of a look at those  here at
Provident.                              

                    Those of you who  follow us are  aware  that  we've  closely
                    monitored  two major  relationships  within  the  healthcare
                    portfolio since mid-1999. Peter mentioned that we exited the
                    relationship with Genesis  healthcare by selling the credit,
                    incurring  a loss of $5.1  million,  and that we have set up
                    what we believe to be a  conservative  reserve  against  our
exposure to Integrated Health Services. 

                    At  6/30  of  this  year  our  total  healthcare  portfolio,
                    including the Integrated  Health  exposure,  stands at about
                    $75 million.  The balance of that  portfolio is  diversified
                    over other  healthcare  related  industries such as assisted
                    living,   continuous  care,   retirement  centers,   hospice
                    facilities,  doctors' groups,  healthcare staffing, so we've
                    got a pretty  good  diversification  in the balance of that.
                    All the remainder of that  portfolio is performing and as we
                    view the  portfolio  today we expect that to continue in the
future.                                 

                    Our  shared  national  credits  portfolio  totals  about $73
                    million,   and  also  has   diversification.   Some  of  the
                    industries   include  sports   facilities,   communications,
                    manufacturing,  and aerospace,  among others. That portfolio
                    also  is  performing.  There  are  no  delinquencies  in the
                    portfolio and more  importantly  that  portfolio is going to
                    contract  over the  balance  of the year.  Strategically  we
                    don't  see  the  yield  that  we  require  in   transactions
                    remaining in that portfolio. There is at least a transaction
                    or two we will  probably  sell  out of.  There  are also two
                    other  large  credits  in  that  portfolio  that  are in the
                    process of refinancing where the new debt will be at a lower
                    rate off our screen in terms of a desired yield,  so we will
                    not remain in these  credits.  That  portfolio will contract
     further as we go through the balance of 2000.

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                    In  regard   portfolio   quality  in  general,   we're  very
                    comfortable with the quality of our portfolio.  Our problems
                    have been  confined  to a couple of  specific  relationships
                    within  the  skilled  nursing  care side of  healthcare  and
that's really an industry issue.        

                    We're confident that we have the people, the systems and the
                    monitoring   processes   here  in  place  to  insure   early
                    identification and I think we've demonstrated our commitment
    to addressing credit problems as they arise.

                    I  talked  about  our  intent  to  de-emphasize   syndicated
                    lending.  We  made an  important  management  change  in the
                    second  quarter.   We  hired  Hugh  Newton,  an  experienced
                    commercial  banker, to lead our commercial  banking division
                    in the  Baltimore  marketplace.  Hugh  has  over 20 years of
                    experience  principally  with Bank of America and with Chevy
                    Chase in this  market.  I think  his  presence  will help us
                    refocus on doing business in our marketplace  with local and
                    regional companies, and as I said previously, we're going to
                    be moving away from the small  exposure we had in syndicated
national credits.                       

                    Our real estate group has been very strong this year.  We're
                    taking  advantage of strong markets,  both here in Baltimore
                    and in  suburban  Washington.  Look for the  growth  in real
                    estate  lending,  which  we've seen in the first half of the
          year, to continue through the balance of the year.

G. Geisel           Good  morning.   This  is  Gary  Geisel.   I'm  in charge of
                    community  banking  and Pete  asked me to talk  about  three
                    things very briefly - network  expansion,  Fast and Friendly
and key income.                         

                    Let me start with network expansion, maybe touch upon Harbor
                    Federal.  As many of you know, we should finalize the Harbor
                    Federal transaction in the third quarter and we would expect
                    to integrate Harbor into  Provident's  systems in the fourth
                    quarter.  That would also include branch  consolidations  in
                    the fourth quarter,  specifically nine locations that Harbor
                    currently  has. We will end up with five  locations  that we
             think strategically fit very nicely into our network.

                    In addition to Harbor, we opened five other locations during
                    the  quarter;  four  of  them  are  in-store,  one of them a
                    traditional  location.  That brings our total network to 91.
                    More  importantly  31 of  those  locations  now are  part of
                    suburban  Washington as you see us sort of brings a focus to
                    our  expansion  into suburban  Washington.  And 51 of the 91
                    locations  are  in-store  and  we've  talked  before  of the
 success  we've  had over the  years  with

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                    in-store and the  profitability  we've been able to reach in
18 months.                              

                    Our checking  volumes for the quarter  have been  excellent.
                    We've  grown  retail  checking  accounts  14% over the prior
                    quarter and 23% of this growth has come from  branches  that
                    are less than 12 months old. In the same timeframe, business
                    checking   is  up  23%   from   quarter-to-quarter   so  our
    origination of accounts has been very solid.

                    On the Fast and Friendly  front, as you may know, we entered
                    the check  cashing  business  in 1993.  We have eight  check
                    cashing locations in downtown Baltimore and we have made the
                    decision  to exit  that  business,  as we were  not  able to
                    obtain  adequate  return.  We have an  agreement  to sell in
                    place  right now with Dollar  Financial.  Dollar is actually
                    the second largest check cashing company in the world and we
                    would expect to close that transaction in the third quarter.

                    There's  no  cost of  exiting  the  business  and  from  the
                    standpoint of earnings,  there will be a modest  improvement
                    in 2000 and a similarly modest improvement  ongoing. The key
                    to our  decision  really  was to deploy our  resources  more
       efficiently and to improve our overall results.

                    The last subject I wanted to touch upon was fee income. As I
                    speak about fee income,  I'd like to do that  excluding  our
                    mortgage  banking  activity  as well as  excluding  security
                    gain.   If  you  look  at  fee  income   we've   grown  from
                    quarter-to-quarter  22%.  We're now at $15.6  million and of
                    that $15.6  million,  $10.5 of it is really  categorized  as
                    deposit  service  fees.  And when  you  look at that  number
                    you're talking about ATM,  you're talking about our checking
                    fees,  retail  and  commercial,  cash  management.  Our core
                    banking business, if you will is represented in this deposit
                    service   charge   and   that   grew   actually   26%   from
                    quarter-to-quarter.   Our  total  retail  accounts,   retail
                    checking  accounts stand at 244,000  accounts these days and
                    we were able to grow from  year-to-year,  quarter-to-quarter
                    core deposits 4.4%, so we're pleased with our fee income and
                    we're  especially  pleased  that it's  coming  from our core
banking business.                       

J. Novak            Good morning. This is Jack Novak. I run the consumer lending
                    operation  at the bank,  which also  includes  the  mortgage
                    corporation.  I'd  like  to talk  today  about  two  issues:
                    Progress we've made in the mortgage  banking  subsidiary and
            our decision to exit the indirect lending operation.

                    First let me talk about the mortgage operation. From June to
                    June we've probably experienced a 50% reduction in volume as
                    most  mortgage  lenders have during this period of time.  We
                    feel,  though,  that  during  that period of time we've also
          implemented  cost  reductions  that will bode well

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                    for us in the future and they have already.  We've  actually
                    reduced  expenses  during  that same  period of time by 45%.
                    This has brought us ... we've also, by the way,  changed the
                    mix of  business  that we are doing right now towards a much
                    more  profitable  retail  bank as opposed  to the  wholesale
                    operation.  We've  changed  that mix to the tune that we are
                    now doing  approximately  50% of our  business in the retail
                    line of business and 50% in the wholesale and that's quite a
swing during that year's period of time.

                    I'm also  happy to  report  with  the  changes  that we have
                    implemented,  the month of June saw us become profitable and
                    we think  that the  changes  that we have made will carry us
                    through  for the  rest of the year  also in that  particular
mode.                                   

                    Secondly, I will talk about our exiting the indirect lending
                    business.  We have analyzed this business for many years and
                    we have implemented changes that certainly have made us more
                    profitable.  In looking  at the  changes  and the  increased
                    profitability, we felt that as clean as the portfolio is and
                    as  inexpensively  as we operate it and as efficiently as we
                    operate  it,  the  industry  itself  does not  afford us the
                    opportunity  to make the returns that we want to make in our
                    core businesses.  We also looked at the cost of exiting this
                    business  and  there is very  little  cost of  exiting  this
                    business,  so we  implemented  changes in the second quarter
                    that will see us exit this  business  over a brief period of
                    time.  This will be very beneficial for the bank in the long
term.                                   

D. Starliper        Good  morning, everyone. This is Dennis Starliper. There are
                    a couple of things I wanted to talk to you  about.  First to
                    start  here with the share  repurchase  program.  During the
                    quarter the authorization level on our program was increased
                    by about 2.3  million  shares  and over the past  quarter we
                    have repurchased a little over 800,000 shares.  Total shares
            of the corporation are about 27 million outstanding.

                    We're out of the repurchase activity right now, the window's
                    closed  for  that  until we  settle  on the  Harbor  Federal
                    transaction  which  should  be the  end of  August.  We will
                    continue  to  repurchase  shares  after the window  opens in
                    connection  with the  integration of Harbor Federal and also
                    in connection  with the  downsizing of product lines that we
have made an election to exit.          

                    Secondly,  in the  second  quarter  we began  reviewing  the
                    result of  measuring  returns on  invested  capital  for our
                    various  product  lines.  This  process  has  assisted us in
      gaining insight into the strategic position of

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                    those  business  lines in terms of optimizing our returns on
                    invested  capital and more importantly  prioritizing  future
                    capital allocations. Doing this has confirmed that there are
                    certain  product  lines that we would be unable to reach our
                    desired returns and accordingly we discontinued two of them.
                    The  first  that  Gary  had  mentioned  earlier,   Fast  and
                    Friendly, this was eight check cashing locations.  There was
                    no gain or loss or  one-time  charges  associated  with that
                    exit.  The EPS  benefit  in 2000 is  negligible  and will be
about a penny in 2001.                  

                    The second was Provident Automotive.  This is a $230 million
                    portfolio  currently  on our books.  There  again will be no
                    gain or loss or long time charges to exit that  business and
                    the EPS benefit in 2000 is  negligible;  however,  we expect
four to five cents accretive in 2001.   

                    We're going to continue to develop the  measurement  process
                    on profitability for lines of business and we will use it to
                    assist us in setting strategic direction. But as most of you
                    know,  capital  allocation  methodologies  are  complex  and
                    require careful assessment of risks and allocation of risks,
                    but we do  believe  that in the long run  this  will  better
        align our performance with shareholder interest.

Pete, I'll turn it back to you.         

P. Martin           Alright, we're ready for questions.                         

Operator            Thank you. Ladies and gentlemen, at this time, if you have a
                    question,  you will need to press the one on your touch-tone
                    phone and you will hear a tone  acknowledging  your request.
                    Your  questions  will be taken in the  order  that  they are
                    received.  If your question has already been  answered,  you
                    may remove  yourself  from queue by pressing  the pound key.
                    Also,  if you  are on a  speakerphone,  please  pick up your
                    handset before  pressing the buttons.  One moment please for
the first question.                     

                    Holly Clark with Scott & Stringfellow,  please go ahead with
your question.                          

H. Clark            Yes, good morning. I had a question  first  with the Genesis
                    credit.  Can you  clarify  the  time,  some of the  timeline
                    related  to that  credit - when it became  past due and when
that credit was actually sold?          

D. Oppitz           Dick  Oppitz,  Holly.  Good morning.  We met with management
                    of  Genesis  the  last  week  of  the  first  quarter.  They
                    indicated  at that  point in time that they would be looking
                    to  restructure,  but the senior debt holders would come out
               at 100% and it was based on that that we left it on not

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                    performing  at the end of the  first  quarter.  Early in the
                    second quarter they came back with a different  story.  They
                    asked for  forbearance.  The banks went along with that.  It
                    became more  apparent  as the  quarter  went along that they
                    were  headed  down a road to  bankruptcy,  at  least  in our
                    opinion,  and that was borne out. We thought the best way to
                    maximize our position was to exit the credit via sale in the
                    secondary market. We affected that late in June. I think the
              transaction actually settled on the 30th of the month.

P. Martin           We executed the  transaction  May 19th. It settled  June 29.

H. Clark            Okay  and I had another question that related to Integrated.
                    What was the  specific  reasoning  with that  credit for the
writedown?                              

P. Martin           We have  not written it down. We have reserved, specifically
                    reserved quite heavily against the credit because it's still
                    an unknown  situation to us, so we have a very  conservative
reserve. We have not written it down.   

H. Clark            Okay and how much is the reserve?                           

D. Oppitz           Probably be in excess of 60%.                               

H. Clark            And where  was that ... how  does that compare to at the end
of the first quarter?                   

D. Oppitz           It  went  from  35%  reserve  to  60%,  so  as Pete said, we
increased it significantly.             

H. Clark            Okay  and then with the other piece that you have, I believe
                    it said $6 million,  have you done anything  different  with
that?                                   

D. Oppitz           Increased that reserve also.                                

H. Clark            And  by  how  much?                                         

D. Oppitz           That's up from about 25 to  probably  be in excess of 40%.  

P.  Martin          That is cash flowing still though, I might add.             

H. Clark            I'm sorry,  what was that?                                  

P. Martin           The last credit you  mentioned is still cash flowing.       

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H. Clark            Okay and  then  on  a separate subject, Dennis mentioned the
                    buyback  activity.  Can you  just  clarify  how  much of the
                    proceeds  from your  preferred  issue are of ... how much is
     still tagged for additional buyback activity?

D. Starliper        Of  the 30 million that we issued back in the first quarter,
Holly?                                  

H. Clark            Yes.  I  remember  at that time you all had designated about
                    half of that for buyback  activity  and I was  wondering  if
you've gone through all of that.        

D. Starliper        Yes, that's complete.                                       

H. Clark            Okay, thank you and then ...                                

D. Starliper        But the buyback is not complete.                            

P. Martin           No, we intend to do more.                                   

H. Clark            Okay, that  helps. Thank you and then one other question. Do
                    you  all  have  any  plans  to  reposition  your  securities
portfolio?                              

P. Martin           No, not at this time.                                       

H. Clark            And  my last question and then I'll get off for other people
                    to ask questions, and this is more of a housekeeping item. I
                    noticed  that on the  non-interest,  with  the  non-interest
                    income that other  income was up about  $600,000 on a linked
                    quarter basis. Was there anything specifically in there that
                    contributed to that gain? This is other non-interest income.
It went from about 3.1 to 3.7.          

P. Martin           We hear the question, Holly.                                

L. Kilroy           We're looking for the answer.                               

D. Starliper        There're  several loan fee categories in here. I'll call you
back with an analysis of it, Holly.     

H. Clark            Okay that's fine. Thank you.                                

Operator            Adam  Barkstrom  with  Legg Mason, please go ahead with your
question.                               

A. Barkstrom        Thank you. Good morning.                                    

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P. Martin           Hi, Adam.                                                   

A. Barkstrom        How're  you doing?  I hope I don't have as many questions as
                    Holly just did.  Just  kidding.  Let's see,  the  securities
                    gain,  can you give us a little more detail?  You  mentioned
                    the swaps were sold.  Specifically  I was  curious  what the
                    notional  amount  of the swaps  that were sold to  recognize
that gain?                              

D. Starliper        $270 million, Adam.                                         

A. Barkstrom        And  Peter  had  mentioned  or  at  least  I  think  he did,
                    potential.  What are the future  ramifications  of that swap
sale, the future EPS effect?            

P. Martin           The  sale  itself  cost  us 6 cents per share, however we're
                    looking  at it as an  entire  transaction  and  the  Genesis
                    reinvest   of   $9.5   million   which   would   have   been
                    non-performer, plus the gain brings back 4 cents a share, so
                    the net is 2 cents a share  for the next  three  years,  one
cent this year. Is that clear.          

A. Barkstrom        Yeah,  kind of ... yes. How is that going to affect your net
interest margin going forward?          

P. Martin           It's  just  a  trade  of line items, approximately two basis
points.                                 

A. Barkstrom        Okay,  second question - net interest margin. There was some
                    compression  during the  quarter.  Wonder if you could share
                    with us what the main drivers behind the net interest margin
compression were?                       

D. Starliper        Three  of  them  really, Adam, I think we were talking about
                    before -  reduced  yields  on our  loans  coming  from (1) a
                    reversal of accrued interest in the healthcare category, (2)
                    the  reduction  of income  in our  acquired  loan  portfolio
                    coming from the correction of the  amortization of discount,
                    rather  premium  in the  first  quarter  where  yields  were
                    unusually  high.  I was  explaining  in  the  first  quarter
                    teleconference how that was going to impact us going forward
          that the 3.23 was not sustainable for that reason.

                    Another   major   component  was  the  second  half  of  the
                    trust-preferred  issuance  we  leveraged  and that put about
                    $230  million  of assets on a spread  of  roughly  160 basis
                    points or so.  That had an impact as well on the  margins by
                    adding  about  a  million  dollar  favorable  impact  to net
      interest income. But it did impact the margin.

                    And  those  were  the  principal   reasons  why  the  margin
                    declined;  however,  going the other way, we had significant
margin   improvement  with  about       

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                    $81 million in average  deposits,  core  deposits put on our
                    books  improved  our  margin a bit.  So when you take  those
                    three things into consideration,  those are the three things
                that are responsible for about a 19 basis point decline.

A. Barkstrom        Gotcha.  The  leverage  that  was  implemented, how much was
that? You said $150 million?            

D.  Starliper       No, about $230 million.                                     

A. Barkstrom        And that was during the second quarter?                     

D. Starliper        That's  right  and that's into investments and into acquired
loans.                                  

A. Barkstrom        Right,  right.  Just briefly if you could, explain again the
                    middle,  the second  factor that you  mentioned the premiums
and amortization or changes.            

D. Starliper        The  amortization  of  the  premium  on  the  acquired  loan
                    portfolio  rises and falls with  interest  rates and the FAS
                    91, the  financial  accounting  standard that requires us to
                    maintain a level yield on that portfolio. If you recall back
                    at the end of '99 or rather the beginning of '99, our margin
                    was depressed by having to accelerate that premium given the
                    fall in  interest  rate.  Then  the  rise in  interest  rate
                    throughout  '99  extended  over the lives of that  portfolio
                    where we essentially  recovered in the fourth quarter of '99
                    and the first  quarter of 2000 that which we had  previously
                    written down a year earlier.  So it has the effect of moving
                    our margin out about 8 basis  points or so and that is not a
continuing benefit.                     

P. Martin           It's  basically  on prepayments on those loans, Adam, on the
                    acquired  portfolio  because we pay a premium for the loans.
                    But on the other side, we do have that hedged. If rates were
                    to go down  and  they  were to  accelerate  again,  it would
                    depress  the margin  but we'd have some gains on  securities
                    that we put on  specifically  to hedge that  portfolio  that
would offset that loss.                 

A. Barkstrom        Gotcha. How will the Harbor transaction affect margins going
          forward? What does their margin picture look like?

D. Starliper        Almost  on  top  of  ours, Adam. It is a purchase accounting
                    transaction,  so we will mark their  balances  to market and
                    therefore  the margins  will improve to market for the whole
                    balance sheet.  It's roughly $220 million worth of assets on
    top of $5.2 billion, it's not going to show.

A. Barkstrom        Not a meaningful effect?                                    

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D. Starliper        No.                                                         

A. Barkstrom        Well, I think that does it for me. Thank you.               

D. Oppitz           Thank you.                                                  

Operator            David  West with Davenport and Company, please go ahead with
your question.                          

D. West             Good morning.                                               

Management          Hi, David.                                                  

D. West             Wondering  if  you  could  talk  about  your activity in the
    broker deposit market in the second quarter.

D. Starliper        Activity  with  the  broker  deposit  market, David, follows
                    directly with activity in acquired loans. To the extent that
                    we put  acquired  loans on, we put broker  deposits  on. Now
                    what we have done recently though is we have found favorable
                    rates with the home loan, using home loan borrowings instead
                    of broker  deposits.  Adam,  back  last year we  securitized
                    about ...  oh, I'm sorry,  it's  David.  I'm so used to Adam
                    asking   questions,   everybody's   Adam  here.   David,  we
                    securitized  $370  million in  acquired  loans last year and
                    having that as new collateral available to the home loan for
                    secured  borrowings  made that  cheaper  than  doing  broker
                    deposits.  So in  the  last  quarter  or  so,  most  of  our
                    financing  for acquired loan  purchases  have gone that way.
                    Last  quarter we were  approximately  $1.5 billion in broker
             deposits; we're about $1.4 billion, $1.3 billion now.

D. West             Great.  Just  got  a  couple of unrelated questions here and
                    then,  Dennis,  while you've got the microphone,  you talked
                    about the  process  that  you're  going  through  looking at
                    various  product lines  developing  hurdle rates.  Could you
                    tell us a little bit more about that process?  Are you using
                    one hurdle rate for the  corporation  or are you  developing
                    separate hurdle rates for different  lines of business?  How
are you going about that?               

D. Starliper        David, it's somewhat rudimentary right now. We're just using
                    simplified allocation of capital now based upon our leverage
                    and risk based ratios.  And using that alone was  sufficient
                    for us to  determine  how we should rank the  priorities  of
allocating capital going forward.       

                    However,  in the longer term,  that is a much more  detailed
                    process that involves,  as you're  probably  aware,  complex
methods  of  measuring  risks           

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                    for each of those lines and therefore gaining determinations
 of how much capital to allocate to those.

                    That is a process that we are beginning  now. It's a process
                    where we have  proposals  for seeking  help,  not help,  but
                    advice and guidance  along the way.  It's  something  that's
                    going  to be a  strategic  effort  for  us.  I'm  unable  to
                    describe  exactly  how that will come out  except  that your
                    traditional  methods  of,  call it what you want,  you know,
                    shareholder  value added or whatever the current buzzword is
                    for that  technology,  we think it's a good one and we think
                    it better aligns measuring  performance of our units against
how shareholders want us to perform.    

                    If you take your  typical  look at those  kinds of  systems,
                    that's where we're  attempting to go, David.  And it will be
               something that will be a little ways down the road yet.

D. West             You  mentioned,  obviously  some  of the things you're doing
                    will result in some downsizing of the balance sheet, exiting
                    into  [inaudible]  for  example.  Can  you  give  us a rough
                    estimate  of what  level of assets you may  downside  to and
                    kind of what impact they'll have on your  projected  capital
ratios?                                 

D. Starliper        The  only  thing  now  that is available, David, is the $230
                    million  indirect auto  portfolio.  We don't plan on selling
                    it, it will just amortize and we will  repurchase  shares in
                    connection with that downsizing and other  initiatives  that
                    we are currently working on, we'll follow basically the same
pattern.                                

                    Now if returns on asset  alternatives are  satisfactory,  we
                    would not,  but to the  extent  that they  aren't,  we would
                    continue to repurchase  shares  associated with discontinued
operations.                             

D. West             Do  you  have  a  targeted leverage ratio that you're really
focusing on?                            

D. Starliper        Not other  than  where  we are now in the roughly 7 to 7.10,
tier II, 10-1/4.                        

P. Martin           As  Dennis  is indicating, David, this is a work in process,
                    but you also  have to tie it with  the  stock  buyback.  Our
                    leverage ratios will stay pretty much what they are, but our
                    capital  would  decline as we continue to buy back stock.  I
                    don't think you'd affect the ratios, you'd affect the shares
outstanding.                            

D. West             And then  my  last  question, kind of getting to the reserve
                    for loan loss and following on some earlier  questions about
                    Integrated   Health.   You've  talked  about  your  specific
reserves there.  Could you tell us what 

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                    additional  specific  reserves  you have against any of your
                    other healthcare credits and then kind of an adjunct to that
                    question,  what  kind of the level of your  unspecific  loan
                    loss reserve is right now, that you're allocated on, rather.

D. Oppitz           David,  it's  Dick  Oppitz.  There  are  no  other  specific
                    reserves against  healthcare  credits.  As a matter of fact,
                    there are none against any commercial real estate credits as
we sit here today.                      

D. West             And a rough idea what the unallocated portion of reserve is?

D.Oppitz            $15 million.                                                

D. West             Thank you very much.                                        

Management          Thank you.                                                  

Operator            Derek  Statkevicus  with  KBW,  please  go  ahead  with your
question.                               

D. Statkevicus      Close enough. Hi, guys.                                     

Management          Good morning.                                               

D. Statkevicus      One quick question here. How many new branches do you expect
                    to open  through  the  rest  of this  year  and  what's  the
                    breakout between supermarket and regular style branches? And
                    then as a follow up to that,  how will  those  additions  if
          any, affect the run rate on non-interest expenses?

G. Geisel           Derek,  it's  Gary  Geisel. We have about ten more locations
                    that  we  should  do  between  now  and   year-end  and  the
                    preponderance  of them would be  in-store.  A couple of them
                    ...  Excuse me, let's do it a different  way. We have 12 new
                    locations  specifically  between now and  year-end.  Five of
                    those would be Harbor Federal, that leaves us with seven and
                    out  of  the  seven  we  would  expect  two  of  them  to be
traditional and five of them in-store.  

Does that answer the expansion question?

D. Statkevicus      Yes, just one more quick question,  though, again especially
                    with salaries, occupancy, furniture, equipment, what type of
                    run rate should we be looking for given the additions of the
                    branches there?  Should we expect an increase X percent from
      the  second  quarter  to the end of the  year?

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What kind of target should we see?      

G. Geisel           That gets a little complicated.                             

D. Starliper        That gets very complicated.                                 

G. Geisel           Because  we've  got decreases in indirect auto and we've had
                    decreases  in mortgage,  but I think that's a good  question
but ....                                

D. Starliper        I'm  sorry.  I  was  just  going  to  say  the  reason  it's
                    complicated, Derek, if you'd remember we grew from 1998 year
                    end to 1999 year end 15  locations,  so in a lot of ways the
                    run  rate as you  describe  it and  the  expense  growth  is
                    already   built  into  what  you're   already   seeing  from
                    year-to-year and we're simply moving that forward and taking
                    other  actions  as we already  alluded to today to  decrease
some of our non-interest expense.       

P. Martin           I  think  we'd like to give you a more specific  answer than
                    we probably are prepared to give you right now, so we'll get
back to you on that, Derek.             

D. Statkevicus      Okay, that's fine. Thank you.                               

D. Starliper        I think you saw a sizeable jump from the first to the second
                    quarter.  I would not  anticipate  you're  going to see that
         kind of jump going forward in the quarters ahead.

D. Statkevicus      Okay, great. Okay thanks.                                   

Management          Thank you.                                                  

Operator            Collyn  Gilbert  with Ferris  Baker  Watts,  please go ahead
with your question.                     

C. Gilbert          Good morning, guys.                                         

Management          Hi, Collyn.                                                 

C.  Gilbert         I've got a couple  of  questions.  First,  surrounding  your
                    loan  portfolio,  if you could give me an indication or give
                    us an  indication  of the gross that you saw in the consumer
                    portfolio,  how  much  of  that  was  acquired  through  the
acquired loan portfolio?                

J. Novak            Well I would  suggest  that  for the ... are you talking ...
Collyn, this is Jack Novak.             

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C. Gilbert          Hey, Jack.                                                  

J. Novak            Are you talking quarter-over-quarter?                       

C. Gilbert          June 30 '99 to June 30, 2000.                               

J. Novak            Let  me  take  a  look  here.  It was,  for total  consumer,
                    including   the   acquired,   it  was  5.43%  and   acquired
                    represented  7.93 of that,  so we had some runoff in some of
                    the other  portfolios.  If you'd  like I'll go down and tell
    you what they were, including indirect auto.

C. Gilbert          Yeah,  I guess I actually would be most interested with what
the runoff was in the indirect auto.    

J. Novak            The  indirect  auto from quarter one to quarter two was $2.8
                    million.  So we actually had growth in all of the other,  as
 we linked them, the other two categories.

C. Gilbert          Okay,  so  essentially what you're saying is the increase in
                    acquired   loans  was  pretty  minimal  given  your  overall
increase in the consumer portfolio.     

J. Novak            Collyn,   it was really not minimal,  we had ... if you want
                    to get into  particulars  here,  we had roughly $118 million
                    increase in acquired  and we had total of $124  increase for
the whole portfolio.                    

C. Gilbert          Okay, with the 2.8 runoff there in the indirect?            

J. Novak            Exactly.                                                    

C.  Gilbert         Alright,  that's clear. Also another question on the lending
                    side and  without  you  having  to go into too much  detail,
                    curious about the decline and it could be  attributed,  some
                    of it to the  Genesis  credit  as well as the  IHS,  but why
                    commercial  loans dropped  roughly $62 million from June 30,
'99 to June 30, 2000?                   

D. Oppitz           Collyn,  it's  Dick Oppitz. Genesis was obviously a piece of
                    it. We've also ... I mentioned the de-emphasis in syndicated
                    lending. We've had three payoffs in this year and they would
                    have been credits, $10 million plus. That's been a strategic
focus on our part.                      

C. Gilbert          So most of that's coming from Genesis in this syndicated?   

D. Oppitz           Yes.                                                        

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C.  Gilbert         Okay and one last question  related to loans and then I have
                    just one more  question  about the  outlook  for  2001.  The
                    mortgage  business,  you  guys had  said  obviously  you saw
                    dramatic  reduction over what we were seeing last year. Kind
                    of  from  what I found  it  seems  as if some of your  peers
                    though are  starting  to see a pick up in that  business.  I
                    think whether it's lagged  because of  stabilization  in the
                    rates or just the strength of the D.C./Baltimore market, are
                    you guys looking more optimistic  about the rest of the year
                    in terms of your mortgage  business or are you thinking it's
going to continue to deteriorate?       

J.  Novak           Collyn,  it's  Jack  Novak  again.   We have been optimistic
                    about the mortgage business actually from a beginning of the
                    second quarter and forward and we too, like our peers,  have
                    seen an uptick  in  activity  and we do feel good  about the
rest of the year also.                  

C.  Gilbert         Okay  and  then  my  final  question  relates to what we can
                    expect  in 2001  and I  apologize.  I don't  know  what  the
                    consensus  estimate is out there.  Chances are I know I'm on
                    the high end,  but just from  what  you've  said in terms of
                    things - a couple cents here and there,  are you comfortable
                    with where the  consensus  estimate is or can you give us an
                  indication of what's going to be driving earnings in 2001?

P. Martin           We're comfortable with the consensus estimate for 2000, as a
                    matter of fact,  it's  built on that and talk  about some of
                    the  strategies  we've  discussed  this  morning  that we're
comfortable with that.                  

C. Gilbert          With 2000?                                                  

P. Martin           Yes, 2000 and therefore 2001, as a range of estimates.      

C. Gilbert          I  can  look  it up, but just curious, do you have the range
           there, what the 2001 or what consensus is for 2001?

D. Starliper        180's the mean. Probably a nickel either way.               

C.  Gilbert         So  this  couple  cents  here  and there that you're talking
                    about  really  is not going to ...  you're  not  causing  or
                    suggesting  that we raise or lower  our  estimates  then for
2001?                                   

P. Martin           No.                                                         

C. Gilbert          Okay, that's it. Thank you very much.                       

Management          Thanks, Collyn.                                             

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Operator            Ladies and gentleman, if there are any additional questions,
                    please press the one at this time.  Remember to pick up your
   handset before doing so. One moment please.

                    There are no further questions at this time. Please continue
with any closing comments.              

P.  Martin          We  appreciate  your  participating  in  our  teleconference
                    and we appreciate  the  questions  which were  excellent.  I
                    think we have  summarized that we're  optimistic  about 2000
                    and 2001 and having removed the cloud of healthcare,  we can
                    concentrate  on again the good  things  that are  happening.
                    We've  already  indicated  that we're  comfortable  with the
                    range of estimates  for the year 2000 and we're moving ahead
                    with the  integration  of  Harbor  Federal  and  we're  very
                    pleased with the trends in our  non-interest  income as well
                    as prospects for loan growth and continued  deposit  growth.
                    We look  forward to  talking to you all during the  quarter,
                    obviously  with any questions  that you have,  you're always
                    welcome to call any of us and we look forward to joining you
at the end of the third quarter.        

Operator            Ladies and gentlemen,  that does conclude our conference for
                    today.   You  may  all   disconnect   and   thank   you  for
participating.                          

E. Grossman         Thank you.                                                  

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Dates Referenced Herein and Documents Incorporated By Reference

		Referenced-On Page
This 8-K Filing	Date	First	Last	Other Filings

	6/30/00	16		10-Q
For The Period Ended	7/20/00	1
Filed On / Filed As Of	7/24/00

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Provident Bankshares Corp · 8-K · For 7/20/00 · EX-99.1

Filed On 7/24/00 5:14pm ET · SEC File 0-16421 · Accession Number 909654-0-456

Current Report · Form 8-KFiling Table of Contents

EX-99.1 · Miscellaneous Exhibit

Dates Referenced Herein and Documents Incorporated By Reference

Current Report · Form 8-K
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