Provident New York Bancorp Announces Fourth Quarter 2012 Earnings of $0.17 per Diluted Share Excluding Merger Related Charges(1), or $0.06 per Diluted Share in GAAP Earnings(2)

October 29, 2012

MONTEBELLO, NY--(Marketwire - Oct 29, 2012) - Provident New York Bancorp ( NYSE : PBNY ), the parent company of Provident Bank, today announced fiscal fourth quarter results for the period ending September 30, 2012, as well as for the fiscal year ending September 30, 2012. Net income for the quarter was $6.9 million, or $0.17 per diluted share excluding merger related charges related to the acquisition of Gotham Bank of New York ("Gotham"), compared to a net loss of $493,000, or $(0.01) per diluted share for same quarter last year; and $6.2 million, or $0.17 per diluted share for the linked quarter ended June 30, 2012. For the fiscal year ending September 30, 2012, net income for the year was $24.4 million, or $0.64 per diluted share excluding merger related charges, as compared to net income of $11.7 million or $0.31(3) per diluted share for the year ending September 30, 2011.

President's Comments
Jack Kopnisky, President and CEO, commented: "The fiscal fourth quarter of 2012 continued to produce strong earnings for our Bank, yielding $0.17 per diluted share, excluding merger related charges for Gotham. This is a continuation of the solid earnings that we put forth for the third fiscal quarter ending June 30, 2012.

"We had earnings of $0.64 (excluding merger related charges) per diluted share for the fiscal year 2012 as compared to $0.31 per diluted share in the fiscal year 2011. This represents a 106 percent increase in earnings per share year over year. We have been able to grow earnings for our Bank based on strong commercial loan and deposit growth, expense controls, and improvement in credit quality. We implemented a team based approach in commercial banking that facilitated the significant growth in loans and deposits for the year. We reduced approximately $10 million in noninterest core expenses by reducing back office and retail costs and redeployed approximately $5 million to customer facing opportunities. The completion of the Gotham acquisition accelerated our entry into the New York City market, which is strategically beneficial for our Bank. We also raised $46.0 million in capital, which resulted in a Tier 1 Leverage Ratio of 8.9(4) percent based on average assets for the fourth quarter. We were able to significantly reduce our non-performing loans during the fourth quarter to $39.8 million, representing a 10 percent decrease in non-performing loans quarter over quarter. Net charge offs as a percentage of average loans stood at 57 basis points compared to 55 basis points last quarter, and 241 basis points for the fourth quarter last year.

"In terms of the balance sheet, we saw net loan growth of $415.3 million for 2012, a 24.8 percent increase over last year. We funded this loan growth with deposit base expansion, excluding more volatile municipal deposits of $527.5 million, or a 31.4 percent increase year over year."

Key items for the quarter

  • Total loan originations were $205.7 million compared to $206.2 million in the linked quarter, and $180.6 million for the fourth fiscal quarter of 2011.
  • Non-performing loans were reduced from $44.5 million at June 30, 2012, to $39.8 million at September 30, 2012.
  • Our allowance for loan losses increased $695,000 significantly improving the ratio to non-performing loans increased to approximately 71 percent from 62 percent. Provision for loan losses increased by $1.2 million during the fourth quarter. For the fourth quarter of fiscal 2011, provision for loan losses was $8.8 million.
  • Securities gains were $3.0 million after tax based on the period's effective tax rate, for the fourth quarter.

Gotham Bank Acquisition
On August 10, 2012 the Company accelerated its growth into the New York City market area with the completion of the Gotham Bank acquisition with $434.0 million of assets, $209.4 million of loans, and $368.5 million in deposits. Intangible assets increased $9.8 million due to good will and core deposit intangibles associated with the transaction. The fair value analysis of the assets resulted in a discount of 1.9 percent to the loan portfolio and a core deposit premium of 2.8 percent. Merger related costs related to this acquisition were $5.9 million or $4.5 million net of taxes.

Net Interest Income and Margin
Fourth quarter fiscal 2012 compared with fourth quarter fiscal 2011
Net interest income was $25.2 million for the fourth quarter of fiscal 2012, up $2.4 million for the same quarter of fiscal 2011. Reflecting the current interest rate environment, the tax-equivalent yield on investments decreased 37 basis points and loan yields were down 25 basis points compared to the fourth quarter fiscal 2011. As a result, the yield on interest-earning assets declined 32 basis points. The cost of deposits increased 1basis point to 27 basis points, and the cost of borrowings decreased by 4 basis points to 3.65 percent.The resulting net interest margin on a tax-equivalent basis was 3.38 percent for the fourth quarter of fiscal 2012, compared to 3.58 percent for the same period a year ago. 

Fourth quarter fiscal 2012 compared with linked quarter ended June 30, 2012
Net interest income for the quarter ending September 30, 2012 increased $1.2 million to $25.2 million, compared to $24.1 million at the linked quarter ending June 30, 2012. The tax-equivalent net interest margin decreased to 3.38 percent from 3.59 percent in the linked quarter. Loan yields were 4.97 percent. Deposit costs increased by 5basis points mainly due to the inflow of Gotham deposits, while the cost of borrowings decreased 12 basis points.

Noninterest Income
Fourth quarter fiscal 2012 compared with fourth quarter fiscal 2011
Noninterest income remained stable for the fourth quarter fiscal 2012 compared with fourth quarter fiscal 2011. Increases in deposit fees, service charges and gain on sale of loans partly offset the decrease in the net gain on sale of securities.

Fourth quarter fiscal 2012 compared with linked quarter ended June 30, 2012
Noninterest income increased $1.0 million to $9.0 million for the fourth fiscal quarter of 2012 compared to the linked quarter ended June 30, 2012, primarily due to security gains.

Noninterest Expense
Fourth quarter fiscal 2012 compared with fourth quarter fiscal 2011
Noninterest expense increased $4.4 million, when compared to the fourth quarter fiscal 2011, mostly due to merger related charges of $4.5 million net of tax incurred during the fourth quarter of fiscal 2012. The fourth quarter of fiscal 2011 includes $3.2 million of restructuring charges.

Fourth quarter fiscal 2012 compared with the linked quarter ended June 30, 2012
Noninterest expense increased $7.6 million, or 36.0 percent over the linked quarter. Increases of $4.5 million were seen in merger related costs related to the Gotham acquisition, totaling approximately $4.9 million. Compensation and benefits increased $2.0 million in part due to the Gotham acquisition, and incentive bonus accruals.

Income Taxes
The Company recorded income tax expense for the year 2012 at an effective tax rate of 23.6 percent compared to 19.3 percent for the same period in fiscal 2011. The difference is primarily due to an increased write-off of credits in 2011, as well as larger tax-exempt municipal security interest relative to pre-tax income for fiscal 2011.

Credit Quality
Nonperforming loans decreased to $39.8 million at September 30, 2012 compared to $44.5 million at June 30, 2012. We disposed of one ADC ("Acquisition, Development and Construction") loan of approximately $3.0 million and completed foreclosure on $1.5 million from the ADC portfolio. During the quarter, we also disposed of $2.0 million in foreclosed properties, reducing that balance from $7.3 million at June 30, 2012 to $6.4 million at September 30, 2012. Net charge-offs for the quarter were $2.8 million compared to $3.5 million in provision. For the year, net charge-offs were $10.2 million and the provision was $10.6 million. The allowance for loan losses at September 30, 2012 was $28.3 million, 71 percent of nonperforming loans and 1.47 percent of the Provident loan portfolio, excluding loans acquired from Gotham which are carried at fair value and are not assigned any reserves.

Key Balance Sheet Changes

  • Assets increased $872.7 million or 27.7 percent compared to June 30, 2012 as a result of increases in investment securities of $267.8 million, net loans of $267.8 million, and cash balances of $326.5 million.
  • Deposits increased $779.1 million compared to June 30, 2012, with growth experienced in all deposit categories. Municipal deposits increased $422.0 million compared to June 30, 2012, as a result of seasonal tax deposits.
  • Securities increased $267.8 million over June 30, 2012 levels, primarily due to purchases of $462.8 million in securities during the fourth fiscal quarter partially offset by sales of $100.0million, with associated gains of $3.2 million, and $95.0 million in calls, maturities and principal pay downs.
  • Foreclosed properties decreased by 12.2 percent from June 30, 2012 to $6.4 million at September 30, 2012, as we continue to actively manage our portfolios and the market moves towards a greater stability.

Capital and Liquidity
Provident Bank remained well capitalized at September 30, 2012 with a Tier 1 Leverage ratio of approximately 8.9 percent based on average assets. Tier 1 Leverage ratio based on period end assets was approximately 7.6 percent, which is still considered well capitalized. Tangible book value per share decreased to $7.30 at September 30, 2012 from $7.35 at June 30, 2012, due to the acquisition of Gotham. Total capital increased $49.0 million from June 30, 2012, to $492.2 million at September 30, 2012, due primarily to the capital raise announced previously.

Subsequent Events
During October the Company agreed to sell Hudson Valley Investment Advisors, LLC ("HVIA"), an investment advisory firm. The assets related to HVIA are shown on the balance sheet as assets held for sale at a fair value of $4.6 million which reflects deductions in goodwill of $3.3 million.

About Provident New York Bancorp
Headquartered in Montebello, N.Y., Provident Bank, with $4.0 billion in assets, specializes in the delivery of service and solutions to business owners, their families, and consumers in communities within the greater New York City marketplace through teams of dedicated and experienced relationship managers. Our franchise includes 35 Financial Centers. Provident Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Provident Bank web site at www.providentbanking.com.

(1) Earnings excluding merger charges are calculated using the effective tax rate. See table on pages 10 and 11 for reconciliation of GAAP earnings to earnings excluding merger related charges.

(2) GAAP earnings include merger related charges for Gotham, and include securities' gains.

(3) Includes $5 million pre-tax related to restructuring charges and defined benefit settlement charges.

(4) Tier 1 leverage based on period end assets equated to 7.6%, still well capitalized.

FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK FACTORS
In addition to historical information, this earnings release may contain forward-looking statements for purposes of applicable securities laws. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties. There are a number of important factors described in documents previously filed by the Company with the Securities and Exchange Commission, and other factors that could cause the Company's actual results to differ materially from those contemplated by such forward-looking statements. The Company undertakes no obligation to publicly release the results of any revisions to those forward-looking statements, which may be made to reflect events or circumstances after the date of this release or to reflect the occurrence of unanticipated events.

Financial information contained in this release should be considered to be an estimate pending completion of the annual audit of the Company's financial statements and the filing of its fiscal 2012 Annual Report on Form 10-K with the Securities and Exchange Commission. While the Company is not aware of any need to revise the results disclosed in this release, the Company's auditors currently are reviewing the Company's testing of the carrying amount of goodwill on its financial statements in view of the relationship between the Company's book value per share and the market price of its common stock at the end of the fiscal year. Moreover, accounting literature may require adverse information received by management between the date of this release and the filing of the 10-K to be reflected in the results of fiscal 2012, even though the new information was received by management in fiscal 2013 subsequent to the date of this release.

                   
Provident New York Bancorp and Subsidiaries  
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION  
(unaudited, in thousands, except share and per share data)  
               
    September 30,     September 30,     June 30,  
    2012     2011     2012  
Assets:                        
Cash and due from banks   $ 437,982     $ 281,512     $ 111,400  
Total securities     1,153,248       849,884       885,433  
Loans held for sale     7,505       4,176       5,369  
HVIA assets held for sale     4,550       --       --  
Loans:                        
  One- to four-family residential mortgage loans     350,022       389,765       357,943  
  Commercial real estate, commercial business     1,415,811       913,279       1,114,764  
  Acquisition, development and construction loans     144,061       175,931       165,125  
  Consumer loans     209,578       224,824       213,195  
      Total loans, gross     2,119,472       1,703,799       1,851,027  
  Allowance for loan losses     (28,282 )     (27,917 )     (27,587 )
      Total loans, net     2,091,190       1,675,882       1,823,440  
Federal Home Loan Bank stock, at cost     19,249       17,584       18,207  
Premises and equipment, net     38,483       40,886       38,877  
Goodwill     162,631       160,861       160,861  
Other amortizable intangibles     7,164       4,629       3,718  
Bank owned life insurance     59,017       56,967       58,506  
Foreclosed properties     6,403       5,391       7,292  
Other assets     35,359       39,630       36,937  
      Total assets   $ 4,022,781     $ 3,137,402     $ 3,150,040  
Liabilities:                        
  Deposits                        
    Retail   $ 167,050     $ 194,299     $ 167,527  
    Commercial     412,630       296,505       320,849  
    Municipal     367,624       160,422       15,936  
    Personal NOW deposits     213,755       164,637       203,290  
    Business NOW deposits     38,486       37,092       39,170  
    Municipal NOW deposits     195,882       200,773       180,433  
      Total transaction accounts     1,395,427       1,053,728       927,205  
    Savings     506,538       429,825       476,349  
    Money market deposits     821,704       509,483       673,498  
    Certificates of deposit     387,482       303,659       255,039  
      Total deposits     3,111,151       2,296,695       2,332,091  
  Borrowings     345,176       323,522       314,154  
  Borrowings Senior Note     -       51,499       -  
  Mortgage escrow funds and other liabilities     74,286       34,552       60,667  
      Total liabilities     3,530,613       2,706,268       2,706,912  
Stockholders' equity     492,168       431,134       443,128  
      Total liabilities and stockholders' equity   $ 4,022,781     $ 3,137,402     $ 3,150,040  
                         
Shares of common stock outstanding at period end     44,173,470       37,864,008       37,899,007  
Book value per share   $ 11.14     $ 11.39     $ 11.69  
Tangible book value per share   $ 7.30     $ 7.02     $ 7.35  
                         
                         
Provident New York Bancorp and Subsidiaries  
CONSOLIDATED CONDENSED STATEMENTS OF INCOME  
(unaudited, in thousands, except share and per share data)  
                     
          Three          
    Quarter Ended     Months Ended   Twelve Months Ended  
    September 30,     June 30,   September 30,  
    2012   2011     2012   2012   2011  
Interest and dividend income:                                  
  Loans and loan fees   $ 24,396   $ 21,995     $ 22,312   $ 91,010   $ 89,500  
  Securities taxable     3,909     3,825       4,224     16,538     14,493  
  Securities non-taxable     1,543     1,786       1,581     6,497     7,441  
  Other earning assets     265     211       228     992     1,180  
Total interest income     30,113     27,817       28,345     115,037     112,614  
Interest expense:                                  
  Deposits     1,789     1,384       1,262     5,581     6,104  
  Borrowings     3,085     3,642       3,001     12,992     15,220  
Total interest expense     4,874     5,026       4,263     18,573     21,324  
Net interest income     25,239     22,791       24,082     96,464     91,290  
Provision for loan losses     3,500     8,784       2,312     10,612     16,584  
Net interest income after provision for loan losses     21,739     14,007       21,770     85,852     74,706  
Non-interest income:                                  
  Deposit fees and service charges   $ 3,065   $ 2,727     $ 2,816   $ 11,377   $ 10,811  
  Net gain on sales of securities     3,152     4,519       2,412     10,452     10,011  
  Other than temporary loss on securities     (3 )   (251 )     (6 )   (47 )   (278 )
  Title insurance fees     332     275       249     1,106     1,224  
  Bank owned life insurance     512     514       518     2,050     2,049  
  Gain on sale of loans     429     166       578     1,897     1,027  
  Gain on sale of premises and equipment     70     -       -     75     -  
  Loss on sale of HVIA     (135 )   -       -     (135 )   -  
  Investment management fees     776     733       802     3,143     3,080  
  Fair value loss on interest rate caps     (6 )   (170 )     (14 )   (63 )   (197 )
  Other     834     543       624     2,297     2,224  
Total non-interest income     9,026     9,056       7,979     32,152     29,951  
Non-interest expense:                                  
  Compensation and benefits     12,873     10,129       10,845     46,038     43,662  
  Stock-based compensation plans     302     303       326     1,187     1,162  
  Merger related expenses     4,928     -       451     5,925     255  
  Defined benefit settlement charge/CEO transition     -     -       -     -     1,772  
  Restructuring charge(severance/branch relocation)     -     3,201       -     -     3,201  
  Occupancy and office operations     3,959     3,693       3,388     14,457     14,508  
  Advertising and promotion     369     677       440     1,849     3,328  
  Professional fees     1,136     1,147       1,128     4,247     4,389  
  Data and check processing     715     718       705     2,802     2,763  
  Amortization of intangible assets     334     338       283     1,245     1,426  
  FDIC insurance and regulatory assessments     843     636       782     3,096     2,910  
  ATM/debit card expense     438     425       437     1,711     1,584  
  Foreclosed property expense     573     677       428     1,618     1,171  
  Other     2,314     2,438       1,949     7,782     7,980  
Total non-interest expense     28,784     24,382       21,162     91,957     90,111  
Income before income tax expense     1,981     (1,319 )     8,587     26,047     14,546  
Income tax expense (benefit)     (280 )   (826 )     2,378     6,159     2,807  
Net income (loss)   $ 2,261   $ (493 )   $ 6,209   $ 19,888   $ 11,739  
  Basic earnings (loss) per common share   $ 0.06   $ (0.01 )   $ 0.17   $ 0.52   $ 0.31  
  Diluted earnings (loss) per common share     0.06     (0.01 )     0.17     0.52     0.31  
  Dividends declared     0.06     0.06       0.06     0.24     0.24  
Weighted average common shares:                                  
  Basic     41,054,458     37,332,121       37,302,693     38,227,653     37,452,596  
  Diluted     41,099,237     37,332,245       37,330,467     38,248,046     37,453,542  
           
           
Selected Financial Condition Data:   Three Months Ended  
(in thousands except share and per share data)   09/30/12   06/30/12   03/31/12   12/31/11   09/30/11  
End of Period                                
Total assets   $ 4,022,781   $ 3,150,040   $ 3,210,871   $ 3,084,166   $ 3,137,402  
Loans, gross (1)     2,119,472     1,851,027     1,799,112     1,775,893     1,703,799  
Securities available for sale     1,010,872     714,200     852,717     785,462     739,844  
Securities held to maturity     142,376     171,233     174,824     182,076     110,040  
Bank owned life insurance     59,017     58,506     57,987     57,485     56,967  
Goodwill     162,631     160,861     160,861     160,861     160,861  
Other amortizable intangibles     7,164     3,718     4,001     4,306     4,629  
Other non-earning assets     80,245     83,106     80,020     78,710     85,907  
Deposits     3,111,151     2,332,091     2,368,988     2,135,555     2,296,695  
Borrowings     345,176     314,154     313,849     468,543     375,021  
Equity     492,168     443,128     439,699     437,682     431,134  
Other comprehensive income related to investment securities reflected in stockholders' equity     15,066     14,141     13,780     15,823     13,604  
Average Balances                                
Total assets   $ 3,451,055   $ 3,133,958   $ 3,131,854   $ 3,062,520   $ 2,978,273  
Loans, gross:                                
  Real estate- residential mortgage     352,724     360,487     374,498     385,269     398,420  
  Real estate- commercial mortgage     989,349     868,963     838,935     752,325     681,165  
  Real estate- Acquisition, Development & Construction     156,726     165,442     163,116     172,155     186,398  
  Commercial and industrial     263,922     205,051     197,507     203,929     208,181  
  Consumer loans     210,650     215,555     220,537     224,422     226,687  
Loans total (1)     1,973,371     1,815,498     1,794,593     1,738,100     1,700,851  
Securities (taxable)     841,373     778,782     799,753     696,293     717,893  
Securities (non-taxable)     181,540     182,003     185,062     205,366     208,692  
Total earning assets     3,070,315     2,797,093     2,792,042     2,715,027     2,634,941  
Non earning assets     380,740     336,865     339,812     347,493     343,332  
Non-interest bearing checking     592,962     483,589     503,539     500,621     486,504  
Interest bearing NOW accounts     398,493     412,072     389,846     398,885     309,729  
Total transaction accounts     991,455     895,661     893,385     899,506     796,233  
Savings (including mortgage escrow funds)     539,904     493,234     463,971     445,236     461,566  
Money market deposits     756,655     697,342     654,013     577,387     504,476  
Certificates of deposit     303,788     265,375     284,737     302,713     371,907  
Total deposits and mortgage escrow     2,591,802     2,351,612     2,296,106     2,224,842     2,134,182  
Total interest bearing deposits (including escrow)     1,998,840     1,868,023     1,792,567     1,724,221     1,647,678  
Borrowings     336,217     320,237     375,766     392,785     391,391  
Equity     475,652     441,956     439,384     431,129     433,841  
Selected Operating Data:                                
Condensed Tax Equivalent Income (Loss) Statement                                
Interest and dividend income   $ 30,113   $ 28,345   $ 28,411   $ 28,168   $ 27,817  
Tax equivalent adjustment*     830     852     861     955     962  
Interest expense     4,874     4,263     4,506     4,930     5,026  
    Net interest income (tax equivalent)     26,069     24,934     24,766     24,193     23,753  
Provision for loan losses     3,500     2,312     2,850     1,950     8,784  
    Net interest income after provision for loan losses     22,569     22,622     21,916     22,243     14,969  
Non-interest income     9,026     7,979     7,971     7,176     9,056  
Non-interest expense     28,784     21,162     21,290     20,721     24,382  
Income (loss) before income tax expense     2,811     9,439     8,597     8,698     (357 )
Income tax expense (tax equivalent)*     550     3,230     2,896     2,981     136  
    Net income (loss)   $ 2,261   $ 6,209   $ 5,701   $ 5,717   $ (493 )
                                 
(1) Does not reflect allowance for loan losses of $28,282, $27,587, $27,787, $28,245, and $27,917.      ...