Provident Bankshares Corporation Anticipates Additional Write-Downs In Investment Portfolio

Company to host conference call on February 27, 2008 at 9:00 A.M.

BALTIMORE, Feb. 26 /PRNewswire-FirstCall/ -- Provident Bankshares Corporation (NASDAQ:PBKS), the parent company of Provident Bank, announced today that it anticipates additional write downs on its REIT trust preferred securities portfolio. As previously reported, the Corporation recorded a $47.5 million pre-tax write down relating to the REIT portfolio as a result of declines in dealer price quotes and a downgrade in the securities by the rating agencies.

Based upon newly available information, continued deterioration in market prices subsequent to year-end and its continuing analysis of the REIT portfolio, the Company may realize additional impairment charges on some or all of the remaining $32.8 million of the REIT portfolio at the end of the first quarter. These anticipated write downs result from the Company's analysis of the individual securities' credit risk surrounding the residential mortgage and homebuilding industries and the risk with respect to collection of future interest or principal payments on the securities.

In addition, based upon the ongoing credit analysis of the Company's non- agency mortgage backed securities portfolio, the Company may realize additional impairment charges on some or all of $14.9 million of that portfolio at the end of the first quarter due to increased delinquency levels in the loans underlying these securities.

At this time, there have been no other securities in the investment portfolio identified as other than temporarily impaired. The determination of actual impairment charges will be made at the end of the first quarter based upon information available to management at that time.

"We felt it important to get this updated information regarding our investment portfolio out as soon as it came to our attention and to be as transparent as possible," said Gary N. Geisel, Chairman and Chief Executive Officer. "While the news is disappointing, these developments result in no direct customer impact. The Bank's core businesses remain profitable and the Bank remains well-capitalized for regulatory purposes."

The following seven tables reflect the Company's current analysis of the investment portfolio. Table one presents the composition of the entire portfolio. Tables two, three and four present information on the trust preferred portfolio. Tables five, six and seven present information on the non-agency mortgage backed securities portfolio.

The Company will conduct a conference call for analysts at 9 A.M. Eastern Time on February 27, 2008 to discuss this information. The conference call will be simultaneously webcast at www.provbank.com and archived through March 5, 2008. To listen to the conference call, please go to the Company's website to register, download and install any necessary software. When in the Company's website, follow these links:

-- About Provident
-- Investor Relations
-- Upcoming Events
-- Provident Bankshares Corporation Conference Call

An audio replay of the teleconference will be available through March 5, 2008 by dialing 1-888-286-8010, passcode 15679173; the international dial-in number is 617-801-6888.

Forward-looking Statements

This press release, as well as other written communications made from time to time by Provident Bankshares Corporation and its subsidiaries (the "Company") and oral communications made from time to time by authorized officers of the Company, may contain statements relating to the future results of the Company (including certain projections and business trends) that are considered "forward-looking statements" as defined in the Private Securities Litigation Reform Act of 1995 (the "PSLRA"). Such forward-looking statements may be identified by the use of such words as "believe," "expect," "anticipate," "should," "planned," "estimated," "intend" and "potential." Examples of forward-looking statements include, but are not limited to, possible or assumed estimates with respect to the financial condition, expected or anticipated revenue, and results of operations and business of the Company, including earnings growth, revenue growth in retail banking, lending and other areas; origination volume in the Company's consumer, commercial and other lending businesses; asset quality and levels of non-performing assets; current and future capital management programs; non-interest income levels, including fees from services and product sales; tangible capital generation; market share; expense levels; and other business operations and strategies. For these statements, the Company claims the protection of the safe harbor for forward-looking statements contained in the PSLRA. No forward-looking statement can be guaranteed, and actual results may differ from those projected. The Company undertakes no obligation to publicly update any forward-looking statement, whether as a result of new information, future events or otherwise. Forward-looking statements in this release should be evaluated together with the uncertainties that affect the Company's business, particularly those mentioned under the headings "Forward -Looking Statements" and "Item 1A. Risk Factors" in the Company's Form 10-K for the year ended December 31, 2006, and its reports on Forms 10-Q and 8-K, which the Company incorporates by reference.

Table 1
Investment Portfolio Composition
January 31, 2008 Book Values
($000)
Description % Amount

U.S. Treasury &
Agency MBS 39% $622,707
Pooled Trust
Preferred Stock 34% $547,393
G.O. Municipals 10% $152,858
Non Agency 8% $131,331
Corporate Bonds 9% $142,845
Total 100% $1,597,134

Table 2
Pooled Trust Preferred Portfolio
Description % Amount

Banks 75% $410,430
REITs 11% $57,551
Insurance 15% $79,412
Total 100% $547,393

Table 3
REIT Trust Preferred
Description % Amount

Senior Securities
(AAA S&P / A+ to BBB + Fitch) 43% $24,747
Mezzanine Securities
(A to BBB- S&P / BBB to B Fitch) 57% $32,804
Remaining REIT Trust Preferred Portfolio 100% $57,551

Table 4
REIT Credit Composition
($000)

Mezzanine Senior
Securities Securities
Securities "Other than temporarily impaired"
on Dec 31 $18,698

Mezzanine Securities (A- AA S&P, BBB Fitch) 14,106
At-Risk Securities $32,804

Senior Securities (AAA S&P, BBB+ to A+ Fitch) $24,747

Credit Quality: Defaults and Credit Support

Current Default Level 11.7% 10.9%

Average Credit Support Level*
For Interest Payments 25% 40%
For Principal Payments 35% 56%

* Credit Support Level represents the % of issues in default required
before the security suffers permanent loss of interest or principal
payments.

Table 5
Non-Agency MBS Portfolio

AAA 51 % $66,979
AA 49 % 64,352
$131,331

Table 6
AAA Averages AA Averages

# of Issues 13 # of Issues 16
FICO 733 FICO 731
LTV 64% LTV 70%
Avg. Loan Size $514,000 Avg. Loan Size $371,000
Delinquency + 60 Delinquency + 60
Day 1.84% Day 3.79%

Table 7
Non-Agency MBS
Credit Composition

60+ Days Potential
Book Delin- Losses Current Potential
Value quency (35% Sev- Credit Remaining AVG AVG
erity) Support Support FICO LTV
Non-Agency MBS
at Risk
AA-rated
Mezzanine
securities $14,932 9.18% 3.21% 4.11% 0.90% 707 74%

Remaining
AA-rated Mezzanine
Non-Agency MBS

1st Quartile 12,578 4.63% 1.62% 3.53% 1.91% 714 71%
2nd Quartile 9,591 2.69% 0.94% 3.08% 2.14% 720 69%
3rd Quartile 12,455 1.21% 0.42% 2.24% 1.82% 742 70%
4th Quartile 14,795 0.55% 0.19% 1.92% 1.73% 745 71%
$49,420

AAA-rated
Non-Agency MBS
AAA-rated Senior
securities - 2 positions 8,946 10.26% 3.59% 6.30% 2.71% 707 72%
Remaining
AAA-rated
Senior
Securities 58,034 0.54% 0.19% 4.28% 4.09% 737 63%
$66,979

Total Non-Agency
MBS $131,331

First Call Analyst:
FCMN Contact:

Source: Provident Bankshares Corporation

CONTACT: Media, Vicki Cox, +1-410-277-2063, or Investors, Cheryl B.
Ursida, +1-410-277-2080, both of Provident Bankshares Corporation

Web site: http://www.provbank.com/

Company News On-Call: http://www.prnewswire.com/comp/721938.html

2008-02-26 20:10:11 0298979 PRNEWSWIRE