Sterling Bancorp (STL) 10-Q 2012 Q1 Quarterly report

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended December 31, 2011

OR

¨ TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from            to            

Commission File Number: 001-35385

PROVIDENT NEW YORK BANCORP

(Exact Name of Registrant as Specified in its Charter)

Delaware	80-0091851
(State or Other Jurisdiction of	(IRS Employer ID No.)
Incorporation or Organization)
400 Rella Boulevard, Montebello, New York	10901
(Address of Principal Executive Office)	(Zip Code)

(845) 369-8040

(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 twelve 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 by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Large Accelerated Filer	¨	Accelerated Filer	x
Non-Accelerated Filer	¨	Smaller Reporting Company	¨

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

Yes  ¨    No  x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.

Classes of Common Stock	Shares Outstanding as of February 1, 2012
$0.01 per share	37,890,008

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

QUARTERLY PERIOD ENDED DECEMBER 31, 2011

	PART I. FINANCIAL INFORMATION
Item1.	Financial Statements
	Consolidated Statements of Financial Condition (unaudited) at December 31, 2011 and September 30, 2011	3
	Consolidated Statements of Income (unaudited) for the Three Months Ended December 31, 2011 and 2010	4
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three Months Ended December 31, 2011	5
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended December 31, 2011 and 2010	6
	Consolidated Statements of Comprehensive Income (unaudited) for the Three Months Ended December 31, 2011 and 2010	8
	Notes to Consolidated Financial Statements (unaudited)	9
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	49
Item 4.	Controls and Procedures	50
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	50
Item 1A.	Risk Factors	50
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	50
Item 3.	Defaults Upon Senior Securities	50
Item 4.	(Removed and reserved).	50
Item 5.	Other Information	50
Item 6.	Exhibits	51
	Signatures	52

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

(In thousands, except share data)

	December 31, 2011			September 30, 2011
ASSETS
Cash and due from banks	$	43,687		$	281,512
Securities (including $634,856 and $644,910 pledged as collateral for borrowings and deposits at December 31, 2011 and September 30, 2011 respectively)
Available for Sale		785,462			739,844
Held to maturity, at amortized cost (fair value of $184,119 and $111,272 at December 31, 2011 and September 30, 2011, respectively)		182,076			110,040
Total securities		967,538			849,884
Loans held for sale		2,142			4,176
Gross loans:		1,775,893			1,703,799
Allowance for loan losses		(28,245	)		(27,917	)
Total loans, net		1,747,648			1,675,882
Federal Home Loan Bank (“FHLB”) stock, at cost		21,789			17,584
Accrued interest receivable		9,430			9,904
Premises and equipment, net		39,860			40,886
Goodwill		160,861			160,861
Core deposit and other intangible assets		4,306			4,629
Bank owned life insurance		57,485			56,967
Forclosed properties		5,625			5,391
Other assets		23,795			29,726
Total assets	$	3,084,166		$	3,137,402
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits	$	2,135,555		$	2,296,695
FHLB borrowings (including repurchase agreements of $206,696 and $211,694 at December 31, 2011 and September 30, 2011, respectively)		417,043			323,522
Borrowings senior unsecured note (FDIC insured)		51,500			51,499
Mortgage escrow funds		18,597			9,701
Other liabilities		23,789			24,851
Total liabilities		2,646,484			2,706,268
Commitments and contingent liabilities		—			—
STOCKHOLDERS’ EQUITY :
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; none issued or outstanding)		—			—
Common stock (par value $0.01 per share; 75,000,000 shares authorized; 45,929,552 issued; 37,883,008 and 37,864,008 shares outstanding at December 31, 2011 and September 30, 2011, respectively)		459			459
Additional paid-in capital		357,359			357,063
Unallocated common stock held by employee stock ownership plan (“ESOP”)		(6,013	)		(6,138	)
Treasury stock, at cost (8,046,544 and 8,065,544 shares at December 31, 2011 and September 30, 2011, respectively)		(90,452	)		(90,585	)
Retained earnings		168,637			165,199
Accumulated other comprehensive income, net of taxes		7,692			5,136
Total stockholders’ equity		437,682			431,134
Total liabilities and stockholders’ equity	$	3,084,166		$	3,137,402

See accompanying notes to unaudited consolidated financial statements

3

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except share data)

	For the Three Months Ended December 31,
	2011			2010
Interest and dividend income:
Loans	$	22,149		$	23,205
Taxable securities		3,990			3,530
Non-taxable securities		1,774			1,925
Other earning assets		255			400
Total interest and dividend income		28,168			29,060
Interest expense:
Deposits		1,313			1,642
Borrowings		3,617			4,234
Total interest expense		4,930			5,876
Net interest income		23,238			23,184
Provision for loan losses		1,950			2,100
Net interest income after provision for loan losses		21,288			21,084
Non-interest income:
Deposit fees and service charges		2,790			2,767
Net gain on sale of securities		1,989			4,202
Other than temporary impairment on securities		(38	)		—
Title insurance fees		260			363
Bank owned life insurance		518			494
Gain on sale of loans		440			542
Investment management fees		765			743
Fair value gain (loss) on interest rate cap		(3	)		234
Other		455			538
Total non-interest income		7,176			9,883
Non-interest expense:
Compensation and employee benefits		10,925			11,228
Stock-based compensation plans		275			279
Merger related expense		247			—
Occupancy and office operations		3,701			3,635
Advertising and promotion		613			953
Professional fees		927			1,062
Data and check processing		672			642
Amortization of intangible assets		323			412
Forclosed property expense		205			(84	)
FDIC insurance and regulatory assessments		728			768
ATM/debit card expense		411			393
Other		1,694			1,981
Total non-interest expense		20,721			21,269
Income before income tax expense		7,743			9,698
Income tax expense		2,026			2,978
Net Income	$	5,717		$	6,720
Weighted average common shares:
Basic		37,252,464			37,552,245
Diluted		37,252,464			37,552,245
Per common share
Basic	$	0.15		$	0.18
Diluted	$	0.15		$	0.18

See accompanying notes to unaudited consolidated financial statements

4

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

(In thousands, except share data)

	Number of Shares		Common Stock		Additional Paid-In Capital			Unallocated ESOP Shares			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income		Total Stockholders’ Equity
Balance at October 1, 2011		37,864,008	$	459	$	357,063		$	(6,138	)	$	(90,585	)	$	165,199		$	5,136	$	431,134
Net income		—		—		—			—			—			5,717			—		5,717
Other comprehensive income		—		—		—			—			—			—			2,556		2,556
Total comprehensive income																				8,273
Deferred compensation transactions		—		—		125			—			—			—			—		125
Stock option transactions, net		—		—		133			—			—			—			—		133
ESOP shares allocated or committed to be released for allocation (12,483 shares)		—		—		111			125			—			—			—		236
RRP Awards		19,000		—		(132	)		—			133			—			—		1
Vesting of RRP Awards		—		—		59			—			—			—			—		59
Purchase of treasury shares		—		—		—			—			—			—			—		—
Cash dividends paid ($0.06 per common share)		—		—		—			—			—			(2,279	)		—		(2,279	)
Balance at December 31, 2011		37,883,008	$	459	$	357,359		$	(6,013	)	$	(90,452	)	$	168,637		$	7,692	$	437,682

See accompanying notes to unaudited consolidated financial statements

5

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In thousands, except share data)

	For the Three Months Ended December 31,
	2011			2010
Cash flows from operating activities:
Net income	$	5,717		$	6,720
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		1,950			2,100
Loss on real estate owned		56			—
Depreciation of premises and equipment		1,255			1,413
Amortization of intangibles		323			412
Net gains on loans held for sale		(440	)		(542	)
Other than temporary impairment loss (credit loss)		38			—
Net gains on sale of securities		(1,989	)		(4,202	)
Fair value (gain) loss on interest rate cap		3			(234	)
Net amortization of premium on securities		677			4,024
Accretion (amortization) of premiums on borrowings		1			(11	)
Amortization of prepaid penalties on borrowings		360			1
ESOP and RRP expense		143			144
ESOP forfeitures		(1	)		(3	)
Stock option compensation expense		133			138
Originations of loans held for sale		(15,204	)		(30,028	)
Proceeds from sales of loans held for sale		17,678			33,409
Increase in cash surrender value of bank owned life insurance		(518	)		(495	)
Deferred income tax benefit		(6,824	)		(6,069	)
Net changes in accrued interest receivable and payable		786			247
Other adjustments (principally net changes in other assets and other liabilities)		10,202			9,689
Net cash provided by operating activities		14,346			16,713
Cash flows from investing activities
Purchases of available for sale securities		(151,185	)		(301,065	)
Purchases of held to maturity securities		(76,832	)		(3,986	)
Proceeds from maturities, calls and other principal payments on securities:
Available for sale		27,083			81,275
Held to maturity		4,710			7,407
Proceeds from sales of securities available for sale and held to maturity		83,579			224,797
Loan originations		(216,422	)		(151,989	)
Loan principal payments		141,718			151,895
Proceeds from sales of other real estate owned		695			—
Purchase of FHLB stock, net		(4,205	)		(3,703	)
Purchases of premises and equipment		(229	)		(1,310	)
Net cash (used in) provided by investing activities		(191,088	)		3,321

(Continued)

6

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In thousands, except share data)

	For the Three Months Ended December 31,
	2011			2010
Cash flows from financing activities
Net decrease in transaction, savings and money market deposits		(168,515	)		(192,620	)
Net increase in time deposits		7,375			29,986
Net increase in short-term borrowings		93,499			85,360
Gross repayments of long-term borrowings		(60	)		(3,063	)
Payment of penalties on restrucrured borrowings		(278	)		(1,751	)
Net increase in mortgage escrow funds		8,896			8,892
Treasury shares purchased		—			(757	)
Stock option transactions		154			3
Other stock-based compensation transactions		125			22
Cash dividends paid		(2,279	)		(2,134	)
Net cash used in financing activities		(61,083	)		(76,062	)
Net decrease in cash and cash equivalents		(237,825	)		(56,028	)
Cash and cash equivalents at beginning of period		281,512			90,872
Cash and cash equivalents at end of period	$	43,687		$	34,844
Supplemental information:
Interest payments	$	4,618		$	5,861
Income tax payments		36			36
Net change in net unrealized gains recorded on securities available for sale		3,735			(26,189	)
Change in deferred taxes on net unrealized gains on securities available for sale		(1,517	)		10,636
Real estate acquired in settlement of loans		988			226

See accompanying notes to unaudited consolidated financial statements

7

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(In thousands, except share data)

	For the Three Months Ended December 31,
	2011			2010
Net Income:	$	5,717		$	6,720
Other comprehensive income (loss) :
Net unrealized holding gains ( losses) on securities available for sale net of related tax expense (benefit) of $2,310 and ($8,930)		3,376			(13,057	)
Less:
Reclassification adjustment for net unrealized gains included in net income, net of related income tax expense of $808 and $1,706		1,181			2,496
Reclassification adjustment for other than temporary impaired losses included in net income, net of related income tax expense of $15		(23	)		—
		2,218			(15,553	)
Change in funded status of defined benefit plans, net of related income tax expense of $229 and $74		338			107
		2,556			(15,446	)
Total comprehensive income (loss)	$	8,273		$	(8,726	)

See accompanying notes to unaudited consolidated financial statements.

8

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

1.Basis of Presentation

The consolidated financial statements include the accounts of Provident New York Bancorp (“Provident Bancorp” or “the Company”), Hardenburgh Abstract Title Company, Inc., which provides title searches and insurance for residential and commercial real estate, Hudson Valley Investment Advisors, LLC (“HVIA”), a registered investment advisor, Provident Risk Management, (a captive insurance company), Provident Bank (“the Bank”), and the Bank’s wholly owned subsidiaries. These subsidiaries are (i) Provident Municipal Bank (“PMB”) which is a limited-purpose, New York State-chartered commercial bank formed to accept deposits from municipalities in the Company’s market area, (ii) Provident REIT, Inc. and WSB Funding, Inc. which are real estate investment trusts that hold a portion of the Company’s real estate loans, (iii) Provest Services Corp. I, which has invested in a low-income housing partnership, (iv) Provest Services Corp. II, which has engaged a third-party provider to sell mutual funds and annuities to the Bank’s customers, and (v) companies which hold foreclosed properties acquired by the Bank. Intercompany transactions and balances are eliminated in consolidation.

The Company’s off-balance sheet activities are limited to loan origination commitments, loan commitments pending sale, lines of credit extended to customers and letters of credit on behalf of customers, which all occur in the ordinary course of its lending activities. In addition, the Company purchased interest rate caps with a notional value of $50,000 during the first quarter of fiscal 2010. The Company does not engage in off-balance sheet financing transactions or other activities involving the use of special-purpose or variable interest entities.

The consolidated financial statements have been prepared by management without audit, but, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s financial position and results of operations as of the dates and for the periods presented. Although certain information and footnote disclosures have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the Company believes that the disclosures are adequate to make the information presented clear. The results of operations for the three months ended December 31, 2011 are not necessarily indicative of results to be expected for other interim periods or the entire fiscal year ending September 30, 2012. The unaudited consolidated financial statements presented herein should be read in conjunction with the annual audited financial statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2011.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense. Actual results could differ significantly from these estimates. A material estimate that is particularly susceptible to near-term change is the allowance for loan loss (see note 4), which reflects the application of a critical accounting policy.

Certain loan amounts from prior periods have been reclassified to conform to the current fiscal year presentation.

2.Stock-Based Compensation

The Company has two share based compensation plans as described below. Total compensation cost that has been charged against income for those plans was $192, and $39, for the three months ending December 31, 2011 and 2010. There was no income tax benefit for the three months ending December 31, 2011 and 2010.

Stock Option Plan

The Company’s 2004 Employee Share Option Plan (stock option plan), which is shareholder-approved, permits the grant of share options to its employees for up to 159,107 shares of common stock as of December 31, 2011. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods ranging from 2 to 5 years and have 10 year contractual terms. The Company has a policy of using shares held as treasury stock to satisfy share option exercises. Currently, the Company has a sufficient number of treasury shares to satisfy expected share option exercises.

The fair value of each option award is estimated on the date of grant using a closed form option valuation (Black-Scholes) model that uses the assumptions noted in the table below. Expected volatilities are based on historical volatilities of the Company’s common stock. The expected term of options granted is based on historical data and represents the period of time that options granted are expected to be outstanding, which takes into account that the options are not transferable. The risk-free interest rate for the expected term of the option is based on the U.S. Treasury yield curve in effect at the time of the grant.

9

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The fair value of options granted was determined using the following weighted-average assumptions as of grant date:

	Three months ended December 31,
	2011			2010
Risk-free interest rate(1)		1.7	%		—
Expected stock price volatility		39.1	%		—
Dividend yield(2)		3.2	%		—
Expected term in years		5.9			—

The following table summarizes the Company's stock option activity for the three months ended December 31, 2011:

	Number of Shares			Weighted Average Exercise Price
Outstanding at October 1, 2011		1,906,020		$	12.20
Granted		150,000			7.28
Exercised		—			—
Forfeited		(101,500	)		12.47
Outstanding at December 31, 2011		1,954,520		$	11.81
Exercisable at December 31, 2011		1,516,844		$	12.61
Weighted average estimated fair value of options granted during the period				$	2.09

Information related to the stock option plan during the period:

		0000000		0000000
	Three months ended December 31,
	2011		2010
Intrinsic value of options exercised	$	—	$	—
Cash received from option exercises		—		—
Tax benefit realized from option exercises		—		—
Weighted average fair value of options granted		2.09		—

As of December 31, 2011, there was $665 of total unrecognized compensation cost related to non-vested stock options granted under the Plan. The cost is expected to be recognized over a weighted-average period of 1.5 years.

There were no modifications for the three months ending December 31, 2011 and 2010.

10

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Share Award Plan

A Recognition and Retention Plan (“RRP”) provides for the issuance of shares to directors and officers. Compensation expense is recognized on a straight line basis over the vesting period of the awards based on the fair value of the stock at issue date. RRP shares vest annually on the anniversary of the grant date over the vesting period.Total shares issuable under the plan are 8,120 shares of authorized but un-issued shares remain available for future grant at December 31, 2011. Inducement shares of 41,370 were issued in July of 2011.

A summary of restricted stock award activity under the plan for the three months ended December 31, 2011, is presented below:

	Number of Shares		Weighted Average Grant-Date Fair Value
Nonvested shares at September 30, 2011		57,520	$	8.77
Granted		19,000		6.96
Vested		—		—
Forfeited		—		—
Nonvested shares at December 31, 2011		76,520	$	8.77

As of December 31, 2011, there was $551 of total unrecognized compensation cost related to non-vested shares granted under the Plan. The cost is expected to be recognized over a weighted-average period of 2.81 years.

3. Recent Accounting Standards, Not Yet Adopted

Accounting Standards Update (ASU) 2011-03,Transfers and Servicing (Topic 860)—Reconsideration of Effective Control for Repurchase Agreementshas been issued, which is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This standard is effective for the Company on January 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2011-04,Fair Value Measurement (Topic 820)-Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRShas been issued, which will conform the meaning and disclosure requirements of fair value measurement between U.S. GAAP and IFRS. This standard is effective for the Company on January 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2011-05-Presentation of Comprehensive Income (Topic 220) has been issued. This standard was issued to conform U.S. GAAP and IFRS as well as to increase the prominence of items reported in other comprehensive income. This standard is effective for the Company on January 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting standards update (ASU) 2011-11,Balance Sheet(Topic 210)—Disclosures about offsetting Assets and Liabilitieshas been issued to enhance disclosures required by U.S. GAAP by requiring improved information about financial instruments that are either (1) offset or (2) subject to an enforceable master netting arrangement. This information will enable users of an entity's financial statements to evaluate the effect or potential effect of netting arrangements on an entity's financial position. This standard is effective for the Company on January 1, 2013 and is not expected to have a material effect on the Company's consolidated financial statements.

11

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

4.Loans

The components of the loan portfolio, excluding loans held for sale, were as follows:

	December 31, 2011			September 30, 2011
One- to four-family residential mortgage loans	$	385,552		$	389,765
Commercial real estate loans		809,078			703,356
Commercial business loans		199,362			209,923
Acquisition, development & construction loans		161,990			175,931
Total Commercial loans		1,170,430			1,089,210
Consumer loans:
Home equity lines of credit		172,235			174,521
Homeowner loans		38,667			40,969
Other consumer loans, including overdrafts		9,009			9,334
		219,911			224,824
Total loans		1,775,893			1,703,799
Allowance for loan losses		(28,245	)		(27,917	)
Total loans, net	$	1,747,648		$	1,675,882

Total loans include net deferred loan origination costs of $0 and $308 at December 31, 2011 and September 30, 2011, respectively.

Loans where management has the intent and ability to hold for the foreseeable future or until maturity or payoff (other than loans held for sale) are reported at amortized cost less the allowance for loan losses. Interest income on loans is accrued on the level yield method.

A loan is placed on non-accrual status when management has determined that the borrower may likely be unable to meet contractual principal or interest obligations, or when payments are 90 days or more past due, unless well secured and in the process of collection. Accrual of interest ceases and, in general, uncollected past due interest is reversed and charged against current interest income, while interest recorded in the prior year is charged to the allowance for loan losses. Interest payments received on non-accrual loans, including impaired loans, are not recognized as income unless warranted based on the borrower’s financial condition and payment record.

The Company defers nonrefundable loan origination and commitment fees, and certain direct loan origination costs, and amortizes the net amount as an adjustment of the yield over the estimated life of the loan. If a loan is prepaid or sold, the net deferred amount is recognized in the statement of income at that time. Interest and fees on loans include prepayment fees and late charges collected.

The allowance for loan losses is established through provisions for losses charged to earnings. Losses on loans (including impaired loans) are charged to the allowance for loan losses when management believes that the collection of principal is unlikely. Recoveries of loans previously charged-off are credited to the allowance when realized.

A substantial portion of the Company’s loan portfolio is secured by residential and commercial real estate located in Rockland and Orange Counties of New York and contiguous areas such as Ulster, Sullivan, Putnam and Westchester Counties of New York and Bergen County, New Jersey. The ability of the Company’s borrowers to make principal and interest payments is dependent upon, among other things, the level of overall economic activity and the real estate market conditions prevailing within the Company’s concentrated lending area. Commercial real estate and acquisition, development and construction loans are considered by management to be of somewhat greater credit risk than loans to fund the purchase of a primary residence due to the generally larger loan amounts and dependency on income production or sale of the real estate. Substantially all of these loans are collateralized by real estate located in the Company’s primary market area.

12

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The allowance for loan losses is established through provisions for losses charged to earnings. Losses on loans (including impaired loans) are charged to the allowance for loan losses when management believes that the collection of principal is unlikely. Recoveries of loans previously charged-off are credited to the allowance when realized.

The allowance for loan losses is an amount that management believes is necessary to absorb probable incurred losses on existing loans that may become uncollectible. Management’s evaluations, which are subject to periodic review by the Company’s primary regulator, take into consideration factors such as the Company’s past loan loss experience, changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and collateral values, and current economic conditions that may affect the borrowers’ ability to pay. Future adjustments to the allowance for loan losses may be necessary, based on changes in economic and real estate market conditions, further information obtained regarding known problem loans, results of regulatory examinations, the identification of additional problem loans, and other factors. The process of assessing the adequacy of the allowance for loan loss is subjective, particularly in times of economic downturns. It is reasonably possible that future credit losses may exceed historical loss levels and may also exceed management’s current estimates. As such there can be no assurance that future charge-offs will not exceed management’s current estimate of what constitutes a reasonable allowance for loan losses.

The Company considers a loan to be impaired when, based on current information and events, it is probable that the borrower will be unable to comply with contractual principal and interest payments due. Certain loans are individually evaluated for collectability in accordance with the Company’s ongoing loan review procedures (principally commercial real estate, commercial business and construction loans). Smaller-balance homogeneous loans are collectively evaluated for impairment, such as residential mortgage loans and consumer loans. Impaired loans are based on one of three measures — the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the measure of an impaired loan is less than its recorded investment, a portion of the allowance for loan losses is allocated so that the loan is reported, net, at its measured value.

Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for December 31, 2011 are summarized below:

	For the three months ended December 31, 2011
	Beginning Allowance for loan losses		Charge-offs			Recoveries		Net Charge-offs			Provision for losses			Ending Allowance for Loan Losses
Loans by segment:
Real estate—residential mortgage	$	3,498	$	(789	)	$	119	$	(670	)	$	1,339		$	4,167
Real estate—commercial mortgage		4,533		(472	)		—		(472	)		711			4,772
Real estate—commercial mortgage (CBL)		1,035		(474	)		350		(124	)		(161	)		750
Commercial business loans		1,331		—			53		53			(175	)		1,209
Commercial business loans (CBL)		4,614		(208	)		493		285			(487	)		4,412
Acquisition Development & Construction		9,895		(275	)		—		(275	)		(217	)		9,403
Consumer, including home equity		3,011		(462	)		43		(419	)		940			3,532
Total Loans	$	27,917	$	(2,680	)	$	1,058	$	(1,622	)	$	1,950		$	28,245
Net charge-offs to average gross loans annualized															0.37	%

13

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table sets forth the loans evaluated for impairment by segment at December 31, 2011:

	December 31, 2011
	Individually evaluated for impairment		Collectively evaluated for impairment		Total ending loans balance
Loans by segment:
Real estate—residential mortgage	$	9,363	$	376,189	$	385,552
Real estate—commercial mortgage		10,912		705,235		716,147
Real estate—commercial mortgage (CBL)		3,953		88,978		92,931
Commercial business loans		597		125,758		126,355
Commercial business loans (CBL)		129		72,878		73,007
Acquisition Development & Construction		28,792		133,198		161,990
Consumer, including home equity		2,590		217,321		219,911
Total Loans	$	56,336	$	1,719,557	$	1,775,893

The following table sets forth the allowance evaluated for impairment by segment at December 31, 2011:

	December 31, 2011
	Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance balance
Ending allowance by segment:
Real estate—residential mortgage	$	922	$	3,245	$	4,167
Real estate—commercial mortgage		378		4,394		4,772
Real estate—commercial mortgage (CBL)		236		514		750
Commercial business loans		67		1,142		1,209
Commercial business loans (CBL)		51		4,361		4,412
Acquisition Development & Construction		1,864		7,539		9,403
Consumer, including home equity		394		3,138		3,532
Total allowance	$	3,912	$	24,333	$	28,245

Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for December 31, 2010 are summarized below:

	For the three months ended December 31, 2010
	Beginning Allowance for loan losses		Charge-offs			Recoveries		Net Charge-offs			Provision for losses			Ending Allowance for Loan Losses
Loans by segment:
Real estate—residential mortgage	$	2,641	$	(153	)	$	1	$	(152	)	$	325		$	2,814
Real estate—commercial mortgage		5,915		(217	)				(217	)		586			6,284
Commercial business loans		8,970		(1,359	)		290		(1,069	)		1,315			9,216
Acquisition Development & Construction		9,752		—			8		8			(779	)		8,981
Consumer, including home equity		3,565		(507	)		30		(477	)		653			3,741
Total Loans	$	30,843	$	(2,236	)	$	329	$	(1,907	)	$	2,100		$	31,036
Net charge-offs to average gross loans outstanding annualized															0.45	%

14

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table sets forth the loans evaluated for impairment by segment at September 30, 2011:

	September 30, 2011
	Individually evaluated for impairment		Collectively evaluated for impairment		Total ending loans balance
Loans by segment:
Real estate—residential mortgage	$	8,573	$	381,192	$	389,765
Real estate—commercial mortgage		10,653		599,726		610,379
Real estate—commercial mortgage (CBL)		4,477		88,500		92,977
Commercial business loans		531		133,868		134,399
Commercial business loans (CBL)		—		75,524		75,524
Acquisition Development & Construction		28,223		147,708		175,931
Consumer, including home equity		2,504		222,320		224,824
Total Loans	$	54,961	$	1,648,838	$	1,703,799

The following table sets forth the allowance evaluated for impairment by segment at September 30,, 2011:

	September 30, 2011
	Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance balance
Ending allowance by segment:
Real estate—residential mortgage	$	1,069	$	2,429	$	3,498
Real estate—commercial mortgage		474		4,059		4,533
Real estate—commercial mortgage (CBL)		594		441		1,035
Commercial business loans		—		1,331		1,331
Commercial business loans (CBL)		—		4,614		4,614
Acquisition Development & Construction		1,409		8,486		9,895
Consumer, including home equity		260		2,751		3,011
Total allowance	$	3,806	$	24,111	$	27,917

A loan is impaired when it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans substantially consist of non-performing loans and accruing and performing troubled debt restructured loans. The recorded investment of an impaired loan includes the unpaid principal balance, negative escrow and any tax in arrears.

15

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table presents loans individually evaluated for impairment by segment of loans as of December 31, 2011:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		YTD Average Impaired Loans		Interest Income Recognized		Cash-basis Interest Income Recognized
With no related allowance recorded:
Real estate—residential mortgage	$	3,184	$	3,394	$	—	$	2,729	$	30	$	12
Real estate—commercial mortgage		7,185		7,322		—		6,956		84		56
Real estate—commercial mortgage (CBL)		2,328		2,400		—		2,288		23		13
Acquisition, development and construction		19,794		19,888		—		22,660		201		108
Commercial business loans		503		503		—		615		4		4
Commercial business loans (CBL)		58		58		—		58		1		—
Consumer loans, including home equity		1,696		1,710		—		1,697		15		4
Subtotal		34,748		35,275		—		37,003		358		197
With an allowance recorded:
Real estate—residential mortgage		5,852		5,969		922		5,595		32		31
Real estate—commercial mortgage		3,551		3,590		378		3,621		19		10
Real estate—commercial mortgage (CBL)		1,430		1,553		236		1,430		—		—
Acquisition, development and construction		8,567		8,904		1,864		11,750		85		81
Commercial business loans		95		94		67		47		2		2
Commercial business loans (CBL)		71		71		51		71		1		—
Consumer loans, including home equity		872		880		394		842		9		6
Subtotal		20,438		21,061		3,912		23,356		148		130
Total	$	55,186	$	56,336	$	3,912	$	60,359	$	506	$	327

16

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table presents loans individually evaluated for impairment by segment of loans as of September 30, 2011:

	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		YTD Average Impaired Loans		Interest Income Recognized		Cash-basis Interest Income Recognized
With no related allowance recorded:
Real estate—residential mortgage	$	2,437	$	2,577	$	—	$	2,702	$	92	$	51
Real estate—commercial mortgage		6,753		6,823		—		6,769		332		146
Real estate—commercial mortgage (CBL)		2,012		2,050		—		2,148		165		102
Acquisition, development and construction		20,914		21,316		—		26,111		1,892		1,454
Commercial business loans		531		531		—		862		42		42
Commercial business loans (CBL)		—		—		—		—		—		—
Consumer loans, including home equity		1,879		1,885		—		1,860		61		13
Subtotal		34,526		35,182		—		40,452		2,584		1,808
With an allowance recorded:
Real estate—residential mortgage		5,836		5,996		1,069		6,319		159		159
Real estate—commercial mortgage		3,741		3,830		474		3,843		108		108
Real estate—commercial mortgage (CBL)		2,283		2,427		594		2,662		91		36
Acquisition, development and construction		6,900		6,907		1,409		6,963		114		96
Commercial business loans		—		—		—		—		—		—
Commercial business loans (CBL)		—		—		—		—		—		—
Consumer loans, including home equity		619		619		260		642		33		22
Subtotal		19,379		19,779		3,806		20,429		505		421
Total	$	53,905	$	54,961	$	3,806	$	60,881	$	3,089	$	2,229

Listed below is the interest income recognized during impairment and cash received for interest during impairment for the three months ended December 31, 2011 and December 31, 2010, respectively.

	December 31, 2011		December 31, 2010
Interest income recognized during impairment	$	506	$	407
Cash-basis interest income recognized		327		235

17

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following tables set forth the amounts and status of the Company's loans, troubled debt restructurings and other real estate owned at December 31, 2011 and September 30, 2011.

	December 31, 2011
	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual			Total Loans
Non-performing loans:
Real estate—residential mortgage	$	375,502	$	1,794	$	94	$	1,619	$	6,543		$	385,552
Real estate—commercial mortgage		705,078		584		—		1,683		8,802			716,147
Real estate—commercial mortgage (CBL)		89,544		—		—		312		3,075			92,931
Commercial business loans		126,094		—		—		—		261			126,355
Commercial business loans (CBL)		72,936		—		—		71		—			73,007
Acquisition, development and construction loans		132,835		2,946		4,889		446		20,874			161,990
Consumer, including home equity loans		216,687		500		497		1,005		1,222			219,911
Total	$	1,718,676	$	5,824	$	5,480	$	5,136	$	40,777		$	1,775,893
Total troubled debt restructurings included above	$	7,049	$	—	$	1,494	$	446	$	8,868		$	17,857
Non Performing Assets:
Loans 90+ and still accruing									$	5,136
Nonaccrual loans										40,777
Total non performing loans										45,913
Other real estate owned:
Land										2,419
Commercial real estate										2,051
Acquisition, development & construction loans										222
One- to four-family										933
Total other real estate owned										5,625
Total non-performing assets									$	51,538
Ratios:
Non-performing loans to total loans										2.59	%
Non-performing assets to total assets										1.67	%
Allowance for loan losses to total non-performing loans										62	%
Allowance for loan losses to average loans										1.63	%

18

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

	September 30, 2011
	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual			Total Loans
Non-performing loans:
Real estate—residential mortgage	$	380,577	$	868	$	344	$	491	$	7,485		$	389,765
Real estate—commercial mortgage		599,619		768		337		1,639		8,016			610,379
Real estate—commercial mortgage (CBL)		89,418		—		—		350		3,209			92,977
Commercial business loans		133,741		490		—		—		168			134,399
Commercial business loans (CBL)		75,449		—		—		—		75			75,524
Acquisition, development and construction loans		154,682		3,859		406		446		16,538			175,931
Consumer, including home equity loans		221,880		494		300		1,164		986			224,824
Total	$	1,655,366	$	6,479	$	1,387	$	4,090	$	36,477		$	1,703,799
Total troubled debt restructurings included above	$	9,060	$	266	$	—	$	446	$	7,792		$	17,564
Non Performing Assets:
Loans 90+ and still accruing									$	4,090
Nonaccrual loans										36,477
Total non performing loans										40,567
Other real estate owned:
Land										1,926
Commercial real estate										2,163
Acquisition, development & construction loans										745
One- to four-family										557
Total other real estate owned										5,391
Total non-performing assets									$	45,958
Ratios:
Non-performing loans to total loans										2.38	%
Non-performing assets to total assets										1.46	%
Allowance for loan losses to total non-performing loans										69	%
Allowance for loan losses to average loans										1.68	%

Troubled Debt Restructurings:

Troubled debt restructurings are renegotiated loans for which concessions have been granted to the borrower that the Company would not have otherwise granted and the borrower is experiencing financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed under the company’s internal underwriting policy. The modification of the terms of such loans include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. Modifications involving a reduction of the stated interest rate of the loan were for period ranging from 3 months to 30 years. Modifications involving an extension of the maturity date were for periods ranging from 3 months to 30 years. Restructured loans are recorded in accrual status when the loans have demonstrated performance, generally evidenced by six months of payment performance in accordance with the restructured terms, or by the presence of other significant items. Troubled debt restructurings resulted in $101 in charge offs for the three months ending December 31, 2011.

19

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Troubled debt restructurings at December 31, 2011 were as follows:

	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual		Total TDR’s
Real estate—residential mortgage	$	1,058	$	—	$	—	$	—	$	857	$	1,915
Real estate—commercial mortgage		587		—		—		—		1,009		1,596
Acquisition, development and construction		5,245		—		1,494		446		7,002		14,187
Consumer loans, including home equity		159		—		—						159
Total	$	7,049	$	—	$	1,494	$	446	$	8,868	$	17,857
Allowance	$	249	$	—	$	—	$	—	$	690	$	939

Troubled debt restructurings at September 30, 2011 were as follows:

	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual		Total TDR’s
Real estate—residential mortgage	$	485	$	—	$	—	$	—	$	1,226	$	1,711
Real estate—commercial mortgage		1,439		—		—		—		—		1,439
Acquisition, development and construction		6,975		266		—		446		6,566		14,253
Consumer loans, including home equity		161		—		—				—		161
Total	$	9,060	$	266	$	—	$	446	$	7,792	$	17,564
Allowance	$	7	$	56	$	—	$	—	$	346	$	409

The Company has committed to lend additional amounts totaling up to $4,081, and $4,225 as of December 31, 2011, and September 30, 2011, respectively to customers with outstanding loans that are classified as troubled debt restructurings. The commitments to lend on the restructured debt is contingent on clear title and a third party inspection to verify completion of work and is associated with loans that are considered to be performing.

The following table presents by class loans modified as troubled debt restructurings that occurred during the three months ending December 31, 2011:

			Recorded Investment
	Number		Pre- Modification		Post- Modification
Restructured Loans:
Real estate—residential mortgage		2	$	328	$	314
Real estate—commercial mortgage		1		159		159
Total restructured loans		3	$	487	$	473

The troubled debt restructurings described above increased the allowance for loan losses by $134. There were $11 in charge offs as a result of the above troubled debt restructurings.

20

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

A loan is considered to be in default once it is 90 days contractually past due under the modified terms. The following table presents by class loans that were modified as troubled debt restructurings during the last twelve months that have subsequently defaulted during the current quarter ended December 31, 2011:

	Number of Loans		Recorded Investment
Real estate—commercial mortgage		1	$	850

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all loans. This analysis is performed on a monthly basis on all criticized/classified loans. The Company uses the following definitions of risk ratings:

Special Mention. Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected these potential weaknesses may result in the deterioration of the repayment prospects for the loan or the institution’s credit position at some future date.

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed as of December 31, 2011 and September 30, 2011, the risk category of loans by segment of gross loans is as follows:

	December 31, 2011
	Special Mention		Substandard		Doubtful
Real estate—residential mortgage	$	2,410	$	9,436	$	—
Real estate—commercial mortgage		7,457		28,908		—
Real estate—commercial mortgage (CBL)		1,104		3,953		—
Acquisition, development and construction		4,531		50,445		—
Commercial business loans		1,571		3,832		—
Commercial business loans (CBL)		853		137		71
Consumer loans, including home equity loans		498		2,601		—
Total	$	18,424	$	99,312	$	71

21

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

	September 30, 2011
	Special Mention		Substandard		Doubtful
Real estate—residential mortgage	$	3,701	$	8,525	$	—
Real estate—commercial mortgage		10,175		25,952		—
Real estate—commercial mortgage (CBL)		897		4,044		—
Acquisition, development and construction		5,170		49,294		—
Commercial business loans		1,915		3,501		—
Commercial business loans (CBL)		557		150		—
Consumer loans, including home equity loans		611		2,523		—
Total	$	23,026	$	93,989	$	—

5.Fair value measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values.

Level 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities.

Level 2 – Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

Level 3 – Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the Company’s own estimates about the assumptions that the market participants would use to value the asset or liability.

When available, the Company attempts to use quoted market prices in active markets to determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not available, fair value is often determined using model-based techniques incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation.

The following is a description of the valuation methodologies used for the Company’s assets and liabilities that are measured on a recurring basis at estimated fair value.

Investment securities available for sale

The majority of the Company’s available for sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. U.S. Treasuries are actively traded and therefore have been classified as Level 1 valuations. As of October 1, 2010 the company determined that government sponsored agencies totaling $346,019 previously reported as Level 1 securities were not classified based on the lowest level within the fair value hierarchy and deemed it appropriate to transfer the securities to Level 2.

The Company utilizes an outside vendor to obtain valuations for its traded securities as well as information received from a third party investment advisor. The majority of the Company’s available for sale investment securities (mortgage backed securities issued by US government corporations and government sponsored entities) have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable (Level 2). The Company utilizes prices from a leading provider of financial market data and compares them to dealer indicative bids from the Company’s external investment advisor. The Company does not make adjustments to these prices unless it is determined there is limited trading activity. For securities where there is limited trading activity (private label CMO’s) and less observable valuation inputs, the Company has classified such valuations as Level 3.

22

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The Company reviewed the volume and level of activity for its available for sale securities to identify transactions which may not be orderly or reflective of significant activity and volume. Although estimated prices were generally obtained for such securities, there has been a decline in the volume and level of activity in the market for its private label mortgage backed securities. The market assumptions regarding credit adjusted cash flows and liquidity influences on discount rates were difficult to observe at the individual bond level. Because of the inactivity in the markets and the lack of observable valuation inputs the Company has classified the valuation of privately issued residential mortgage backed securities as Level 3. As of December 31, 2011, these securities have an amortized cost of $5,189 and a fair value of $4,675. In determining the fair value of these securities the Company utilized unobservable inputs which reflect assumptions regarding the inputs that market participants would use in pricing these securities in an orderly market. Present value estimated cash flow models were used discounted at a rate that was reflective of similarly structured securities in an orderly market. The resultant prices were averaged with prices obtained from two independent third parties to arrive at the fair value as of December 31, 2011. These securities have a weighted average coupon rate of 2.86%, a weighted average life of 5.11 years, a weighted average one month prepayment history of 7.75 years and a weighted average twelve month default rate of 4.29 CDR. It was determined that two of these securities with a carrying amount of $4,228 and an amortized cost of $4,726 had other than temporary losses which resulted in a $38 other than temporary impairment charge for the three months ending December 31, 2011. These two securities have a total of $113 in other than temporary charges.

The investment grades of these securities are as follows:

	Amortized Cost		Fair Value
Investment Rating:
Aa1	$	326	$	320
Ba1		137		127
B1		2,882		2,631
B3		1,844		1,597
Total private label CMOs	$	5,189	$	4,675

Derivatives

The fair values of derivatives are based on valuation models using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2). The Company’s derivatives consist of two interest rate caps and three interest rate swaps (see note 9).

Commitments to sell real estate loans

The Company enters into various commitments to sell real estate loans into the secondary market. Such commitments are considered to be derivative financial instruments and therefore are carried at estimated fair value on the consolidated statements of financial condition. The estimated fair values of these commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell to certain government sponsored agencies. The fair values of these commitments generally result in a Level 2 classification. The fair values of these commitments are not considered material.

23

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

A summary of assets and liabilities at December 31, 2011 measured at estimated fair value on a recurring basis were as follows:

	Fair Value Measurements at December 31, 2011		Level 1		Level 2		Level 3
Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	197,609	$	—	$	197,609	$	—
Freddie Mac		112,379		—		112,379		—
Ginnie Mae		5,134		—		5,134		—
CMO/Other MBS		114,815		—		114,815		—
Privately issued collateralized mortgage obligations		4,675		—		—		4,675
		434,612		—		429,937		4,675
Investment securities
Federal agencies		152,847		—		152,847		—
Corporate debt securities		17,162		—		17,162		—
Obligations of states and political subdivisions		179,705		—		179,705		—
Equities		1,136		—		1,136		—
Total investment securities available for sale		350,850		—		350,850		—
Total available for sale securities		785,462		—		780,787		4,675
Interest rate caps and swaps		1,180		—		1,180		—
Total assets	$	786,642	$	—	$	781,967	$	4,675
Swaps	$	1,114	$	—	$	1,114	$	—
Total Liabilities	$	1,114	$	—	$	1,114	$	—

24

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

A summary of assets and liabilities at September 30, 2011 measured at estimated fair value on a recurring basis were as follows:

	Fair Value Measurements at September 30, 2011		Level 1		Level 2		Level 3
Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	139,991	$	—	$	139,991	$	—
Freddie Mac		100,675		—		100,675		—
Ginnie Mae		5,180		—		5,180		—
CMO/Other MBS		77,561		—		77,561		—
Privately issued collateralized mortgage obligations		4,851		—		—		4,851
		328,258		—		323,407		4,851
Investment securities
Federal agencies		204,648		—		204,648		—
Corporate debt securities		17,062		—		17,062		—
Obligations of states and political subdivisions		188,684		—		188,684		—
Equities		1,192		—		1,192		—
Total investment securities available for sale		411,586		—		411,586		—
Total available for sale securities		739,844		—		734,993		4,851
Interest rate caps and swaps		1,474		—		1,474		—
Total assets	$	741,318	$	—	$	736,467	$	4,851
Swaps	$	1,411	$	—	$	1,411	$	—
Total Liabilities	$	1,411	$	—	$	1,411	$	—

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows for the period ending December 31, 2011:

	Fair Value Measurement three months ended December 31, 2010 Using Significant Unobservable Inputs Level 3			Fair Value Measurement three months ended December 31, 2011 Using Significant Unobservable Inputs Level 3
Private label CMOs available for sale
Beginning Balance September 30	$	5,996		$	4,851
Pay downs		(216	)		(148	)
(Amortization) and accretion, net		—			3
Credit loss write down (OTTI)		—			(38	)
Change in fair value		156			7
Ending Balance December 31	$	5,936		$	4,675

25

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following categories of financial assets are not measured at fair value on a recurring basis, but are subject to fair value adjustments in certain circumstances:

Loans Held for Sale and Impaired Loans

Loans held for sale are recorded at the lower of cost or fair value.

The Company may record nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of these loans. Nonrecurring adjustments also include certain impairment amounts for collateral dependant loans calculated in accordance with FASB ASC Topic 310 –Receivables, when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is valued using independent appraisals or other indications of value based upon recent comparable sales of similar properties or assumptions generally observable by market participants. Any fair value adjustments for loans categorized here are classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the market place and therefore such valuations have been classified as Level 3. Loans subject to nonrecurring fair value measurements were $52,424 and $51,155 which equals the carrying value less the allowance for loan losses allocated to these loans at December 31, 2011 and September 30, 2011, respectively. Changes in fair value recognized on provisions on loans held by the Company were $1,648 and $864 for the three months ended December 31, 2011 and 2010, respectively.

A summary of impaired loans at December 31, 2011 measured at estimated fair value on a nonrecurring basis were as follows:

	Fair Value Measurements at December 31, 2011		Level 1		Level 2		Level 3
Real estate—residential mortgage	$	6,440	$	—	$	—	$	6,440
Real estate—commercial mortgage		3,614		—		—		3,614
Real estate—commercial mortgage (CBL)		2,220		—		—		2,220
Commercial business loans		28		—		—		28
Commercial business loans (CBL)		20		—		—		20
Acquisition, development and construction		11,038		—		—		11,038
Consumer loans		810		—		—		810
Total impaired loans with specific allowance allocations	$	24,170	$	—	$	—	$	24,170

A summary of impaired loans at September 30, 2011 measured at estimated fair value on a nonrecurring basis were as follows:

	Fair Value Measurements at September 30, 2011		Level 1		Level 2		Level 3
Real estate—residential mortgage	$	6,469	$	—	$	—	$	6,469
Real estate—commercial mortgage		3,741		—		—		3,741
Commercial business loans (CBL)		2,119		—		—		2,119
Acquisition, development and construction		2,126		—		—		2,126
Consumer loans		569		—		—		569
Total impaired loans with specific allowance allocations	$	15,024	$	—	$	—	$	15,024

26

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Mortgage servicing rights

The Company utilizes the amortization method to subsequently measure the carrying value of its servicing asset. In accordance with FASB ASC Topic 860-Transfers and Servicing, the Company must record impairment charges on a nonrecurring basis, when the carrying value exceeds the estimated fair value. To estimate the fair value of servicing rights the Company utilizes a third party vendor, which considers the market prices for similar assets and the present value of expected future cash flows associated with the servicing rights. Assumptions utilized include estimates of the cost of servicing, loan default rates, an appropriate discount rate and prepayment speeds. The determination of fair value of servicing rights is considered a Level 3 valuation. Changes in fair value of mortgage servicing rights recognized for the three months ended December 31, 2011 and 2010 was $(29) and $305, respectively. A valuation allowance of $10 was recorded at December 31, 2011, reflecting fair market value. There was no valuation allowance recorded at September 30, 2011.

Assets taken in foreclosure of defaulted loans

Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and upon initial recognition, were re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the foreclosed asset. The fair value is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the market place, and the related nonrecurring fair value measurements adjustments have generally been classified as Level 2. Assets taken in foreclosure of defaulted loans subject to nonrecurring fair value measurement were $5,625 and $5,391 at December 31, 2011 and September 30, 2011, respectively. There were $68 and $0 changes in fair value recognized through income for those foreclosed assets held by the Company during the three months ending December 31, 2011 and 2010, respectively.

27

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Fair values of financial instruments

FASB Codification Topic 825:Financial Instruments,requires disclosure of fair value information for those financial instruments for which it is practicable to estimate fair value, whether or not such financial instruments are recognized in the consolidated statements of financial condition for interim and annual periods. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.

Quoted market prices are used to estimate fair values when those prices are available, although active markets do not exist for many types of financial instruments. Fair values for these instruments must be estimated by management using techniques such as discounted cash flow analysis and comparison to similar instruments. These estimates are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments often have a material effect on the fair value estimates. Since these estimates are made as of a specific point in time, they are susceptible to material near-term changes. Fair values disclosed in accordance with FASB Topic 825 do not reflect any premium or discount that could result from the sale of a large volume of a particular financial instrument, nor do they reflect possible tax ramifications or estimated transaction costs.

The following is a summary of the carrying amounts and estimated fair values of financial assets and liabilities (none of which were held for trading purposes):

	December 31, 2011						September 30, 2011
	Carrying amount			Estimated fair value			Carrying amount			Estimated fair value
Financial assets:
Cash and due from banks	$	43,687		$	43,687		$	281,512		$	281,512
Securities available for sale		785,462			785,462			739,844			739,844
Securities held to maturity		182,076			184,119			110,040			111,272
Loans		1,747,648			1,791,629			1,675,882			1,718,372
Loans held for sale		2,142			2,142			4,176			4,176
Accrued interest receivable		9,430			9,430			9,904			9,904
FHLB of New York stock		21,789			21,789			17,584			17,584
Financial liabilities:
Non-maturity deposits		(1,824,521	)		(1,824,521	)		(1,993,036	)		(1,993,036	)
Certificates of Deposit		(311,034	)		(313,071	)		(303,659	)		(305,940	)
FHLB and other borrowings		(468,543	)		(510,950	)		(375,021	)		(417,879	)
Mortgage escrow funds		(18,597	)		(18,597	)		(9,701	)		(9,701	)
Accrued interest payable		(2,128	)		(2,128	)		(1,816	)		(1,816	)

The following paragraphs summarize the principal methods and assumptions used by management to estimate the fair value of the Company’s financial instruments.

(a) Cash and due from banks

The carrying value of cash and due from banks approximates their fair value.

(b) Securities

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, live trading levels, market consensus prepayment speeds, credit information and the bond’s terms and conditions among other items. For certain securities, for which the inputs used by independent pricing services were derived from unobservable market information, the Company evaluated the appropriateness of each price. In accordance with adoption of FASB ASC Topic 820, the Company reviewed the volume and level of activity for its different classes of securities to determine whether transactions were not considered orderly. For these securities, the quoted prices received from independent pricing services may be adjusted, as necessary, to estimate fair value in accordance with FASB Codification Topic 820. If applicable, adjustments to fair value were based on averaging present value cash flow model projections with prices obtained from independent pricing services.

28

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

(c) Loans held for sale

Loans held for sale are recorded at the lower of cost or fair value in accordance with GAAP.

(d) Loans

Fair values were estimated for portfolios of loans with similar financial characteristics. For valuation purposes, the total loan portfolio was segregated into adjustable-rate and fixed-rate categories. Fixed-rate loans were further segmented by type, such as residential mortgage, commercial mortgage, commercial business and consumer loans. Loans were also segmented by maturity dates. Fair values were estimated by discounting scheduled future cash flows through estimated maturity using a discount rate equivalent to the current market rate on loans that are similar with regard to collateral, maturity and the type of borrower. The discounted value of the cash flows was reduced by a credit risk adjustment based on loan categories. Based on the current composition of the Company’s loan portfolio, as well as past experience and current economic conditions and trends, the future cash flows were adjusted by prepayment assumptions that shortened the estimated remaining time to maturity and therefore affected the fair value estimates.

(e) FHLB of New York Stock

The redeemable carrying amount of these securities with limited marketability approximates their fair value.

(f) Deposits and Mortgage Escrow Funds

In accordance with FASB Codification Topic 825, deposits with no stated maturity (such as savings, demand and money market deposits) were assigned fair values equal to the carrying amounts payable on demand. Certificates of deposit and mortgage escrow funds were segregated by account type and original term, and fair values were estimated by discounting the contractual cash flows. The discount rate for each account grouping was equivalent to the current market rates for deposits of similar type and maturity.

These fair values do not include the value of core deposit relationships that comprise a significant portion of the Company’s deposit base. Management believes that the Company’s core deposit relationships provide a relatively stable, low-cost funding source that has a substantial value separate from the deposit balances.

(g) Borrowings

Fair values of FHLB and other borrowings were estimated by discounting the contractual cash flows. A discount rate was utilized for each outstanding borrowing equivalent to the then-current rate offered on borrowings of similar type and maturity.

(h) Other Financial Instruments

The other financial assets and liabilities listed in the preceding table have estimated fair values that approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

The fair values of the Company’s off-balance sheet financial instruments were estimated based on current market terms (including interest rates and fees), considering the remaining terms of the agreements and the credit worthiness of the counterparties. At December 31, 2011 and September 30, 2011, the estimated fair values of these instruments approximated the related carrying amounts, which were insignificant.

29

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

6.Securities

The following is a summary of securities available for sale:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
December 31, 2011
Mortgage-backed securities-residential
Fannie Mae	$	193,557	$	4,052	$	—		$	197,609
Freddie Mac		110,049		2,333		(3	)		112,379
Ginnie Mae		4,934		200		—			5,134
CMO/Other MBS		118,420		1,709		(639	)		119,490
		426,960		8,294		(642	)		434,612
Investment securities
Federal agencies		148,870		3,977		—			152,847
Corporate bonds		16,922		401		(161	)		17,162
State and municipal securities		164,875		14,830		—			179,705
Equities		1,192		—		(56	)		1,136
		331,859		19,208		(217	)		350,850
Total available for sale	$	758,819	$	27,502	$	(859	)	$	785,462
September 30, 2011
Mortgage-backed securities-residential
Fannie Mae	$	136,699	$	3,292	$	—		$	139,991
Freddie Mac		98,511		2,205		(41	)		100,675
Ginnie Mae		4,973		207		—			5,180
CMO/Other MBS		81,170		1,764		(522	)		82,412
		321,353		7,468		(563	)		328,258
Investment securities
Federal agencies		199,741		4,986		(79	)		204,648
Corporate bonds		16,984		257		(179	)		17,062
State and municipal securities		177,666		11,018		—			188,684
Equities		1,192		—		—			1,192
		395,583		16,261		(258	)		411,586
Total available for sale	$	716,936	$	23,729	$	(821	)	$	739,844

30

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following is a summary of the amortized cost and fair value of investment securities available for sale (other than equity securities), by remaining period to contractual maturity. Actual maturities may differ because certain issuers have the right to call or prepay their obligations.

	December 31, 2011
	Amortized Cost		Fair Value
Remaining period to contractual maturity
Less than one year	$	3,025	$	3,052
One to five years		131,660		136,440
Five to ten years		152,622		162,946
Greater than ten years		43,360		47,276
Total investment securities		330,667		349,714
Mortgage backed securities-residential		426,960		434,612
Equity securities		1,192		1,136
Total available for sale securities	$	758,819	$	785,462

Proceeds from sales of securities available for sale totaled $83,579 and $224,797 during the three months ending December 31, 2011 and 2010, respectively. These sales resulted in gross realized gains of $1,989 and $4,202 for the three months ending December 31, 2011 and 2010, respectively. There were no gross realized losses for the three months ending December 31, 2011 and 2010.

Securities, including some held to maturity securities, with carrying amounts of $262,370 and $206,829 were pledged as collateral for borrowings at December 31, 2011 and September 30, 2011, respectively. Securities with carrying amounts of $372,486 and $438,081 were pledged as collateral for municipal deposits and other purposes at December 31, 2011 and September 30, 2011, respectively.

Securities Available for Sale with Unrealized Losses. The following table summarizes those securities available for sale with unrealized losses, segregated by the length of time in a continuous unrealized loss position:

	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer					Total
As of December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Freddie Mac	$	5,130	$	(3	)	$	—	$	—		$	5,130	$	(3	)
CMO/Other MBS		12,726		(382	)		1,724		(257	)		14,450		(639	)
Total mortgage backed securities - residential		17,856		(385	)		1,724		(257	)		19,580		(642	)
Corporate bonds		2,029		(161	)		—		—			2,029		(161	)
Equity		886		(56	)		—		—			886		(56	)
Total	$	20,771	$	(602	)	$	1,724	$	(257	)	$	22,495	$	(859	)

	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer					Total
As of September 30, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Freddie Mac	$	10,262	$	(41	)	$	—	$	—		$	10,262	$	(41	)
CMO/Other MBS		3,037		(257	)		1,813		(265	)		4,850		(522	)
Total mortgage backed securities—residential		13,299		(298	)		1,813		(265	)		15,112		(563	)
U.S. Government and agency securities		9,914		(79	)		—		—			9,914		(79	)
Corporate bonds		1,886		(179	)		—		—			1,886		(179	)
Total	$	25,099	$	(556	)	$	1,813	$	(265	)	$	26,912	$	(821	)

31

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The Company, as of June 30, 2009 adopted the provisions under FASB ASC Topic 320 –Investments- Debt and Equity Securities which requires a forecast of recovery of cost basis through cash flow collection on all debt securities with a fair value less than its amortized cost less any current period credit loss with an assertion on the lack of intent to sell (or requirement to sell prior to recovery of cost basis). Based on a review of each of the securities in the investment portfolio in accordance with FASB ASC 320 at December 31, 2011, the Company concluded that it expects to recover the amortized cost basis of its investments on all but two private label collateralized mortgage-backed securities (“CMO’s”) which incurred impairment charges of $38 for the three months ended December 31, 2011. Total cumulative impairment charges on the two private label CMO’s total $113. As of December 31, 2011, the Company does not intend to sell nor is it more than likely than not that it would be required to sell any of its securities with unrealized losses prior to recovery of its amortized cost basis less any current-period applicable credit losses.

The losses related to privately issued residential CMO’s were recognized in light of deterioration of housing values in the residential real estate market and a rise in delinquencies and charge-offs of underlying mortgage loans collateralizing those securities. The Company uses a discounted cash flow (“DCF”) analysis to provide an estimate of an OTTI loss. Inputs to the discount model included known defaults and interest deferrals, projected additional default rates, projected additional deferrals of interest, over collateralization tests, interest coverage tests and other factors. Expected default and deferral rates were weighted toward the near future to reflect the current adverse economic environment affecting the banking industry. The discount rate was based upon the yield expected from the related securities.

Substantially all of the unrealized losses at September 30, 2011 relate to investment grade securities and are attributable to changes in market interest rates subsequent to purchase. A total of 18 available for sale securities were in a continuous unrealized loss position for less than 12 months and 4 securities for 12 months or longer. For securities with fixed maturities, there are no securities past due or securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the investment.

Within the CMO category of the available for sale portfolio there are four individual private label CMO’s that have an amortized cost of $5,189 and a fair value (carrying value) of $4,675 as of December 31, 2011. Two of the four securities are considered to be other than temporarily impaired as noted above and are below investment grade. The impaired private label CMO’s have an amortized cost of $4,726 and a fair value of $4,228 at December 31, 2011. The remaining two securities are rated at or above Ba1 and are performing as of December 31, 2011 and are expected to perform based on current information.

In determining whether there existed other than temporary impairment on these securities the Company evaluated the present value of cash flows expected to be collected based on collateral specific assumptions, including credit risk and liquidity risk, and determined that no losses are expected. The Company will continue to evaluate its portfolio in this manner on a quarterly basis.

32

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Securities Held to Maturity

The following is a summary of securities held to maturity:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Decemer 31, 2011
Mortgage-backed securities-residential
Fannie Mae	$	32,051	$	242	$	—		$	32,293
Freddie Mac		57,501		323		(10	)		57,814
CMO/Other MBS		30,333		260		(20	)		30,573
		119,885		825		(30	)		120,680
Investment securities
Federal agencies		40,739		87		(42	)		40,784
State and municipal securities		19,952		1,168		—			21,120
Other		1,500		35		—			1,535
		62,191		1,290		(42	)		63,439
Total held to maturity	$	182,076	$	2,115	$	(72	)	$	184,119
September 30, 2011
Mortgage-backed securities-residential
Fannie Mae	$	1,298	$	63	$	—		$	1,361
Freddie Mac		32,858		103		(120	)		32,841
CMO/Other MBS		25,828		155		—			25,983
		59,984		321		(120	)		60,185
Investment securities
Federal agencies		29,973		25		(141	)		29,857
State and municipal securities		18,583		1,108		—			19,691
Other		1,500		39		—			1,539
		50,056		1,172		(141	)		51,087
Total held to maturity	$	110,040	$	1,493	$	(261	)	$	111,272

The following is a summary of the amortized cost and fair value of investment securities held to maturity, by remaining period to contractual maturity. Actual maturities may differ because certain issuers have the right to call or repay their obligations.

	December 31, 2011
	Amortized Cost		Fair Value
Remaining period to contractual maturity
Less than one year	$	10,327	$	10,424
One to five years		4,291		4,519
Five to ten years		44,086		44,590
Greater than ten years		3,487		3,906
Total investment securities		62,191		63,439
Mortgage backed securities-residential		119,885		120,680
Total held to maturity securities	$	182,076	$	184,119

33

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table summarizes those securities held to maturity with unrealized losses, segregated by the length of time in a continuous unrealized loss position:

	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer				Total
As of December 31, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Freddie Mac MBS-residential	$	15,123	$	(10	)	$	—	$	—	$	15,123	$	(10	)
CMO other MBS		4,992		(20	)						4,992		(20	)
Total mortgage back securities		20,115		(30	)						20,115		(30	)
US Gov’t Agencies		14,958		(42	)						14,958		(42	)
Total	$	35,073	$	(72	)	$	—	$	—	$	35,073	$	(72	)

	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer				Total
As of September 30, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Freddie Mac MBS-residential	$	25,770	$	(120	)	$	—	$	—	$	25,770	$	(120	)
Federal Agencies		24,831		(141	)		—		—		24,831		(141	)
Total	$	50,601	$	(261	)	$	—	$	—	$	50,601	$	(261	)

All of the unrealized losses on held to maturity securities at December 31, 2011 are attributable to changes in market interest rates and credit risk spreads subsequent to purchase. There were no securities with unrealized losses that individually had significant dollar amounts at December 31, 2011. There were no held-to-maturity securities in a continuous unrealized loss position for more than 12 months and 6 securities in a continuous unrealized loss for less than 12 months. For securities with fixed maturities, the Company currently believes it is probable that it will collect all amounts due according to the contractual terms of the investment. As of December 31, 2011, the Company does not intend to sell nor is it more than likely than not that it would be required to sell any of its securities with unrealized losses prior to recovery of its amortized cost basis less any current-period applicable credit losses.

34

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

7. Deposits

Major classifications of deposits are summarized below:

	December 31, 2011		September 30, 2011
Demand Deposits
Retail	$	166,972	$	194,299
Business		307,004		296,505
Municipal		14,870		160,422
NOW Deposits
Retail		178,226		164,637
Business		33,844		37,092
Municipal		98,847		200,773
Total transaction accounts		799,763		1,053,728
Savings		444,803		429,825
Money market		579,955		509,483
Certificates of deposit		311,034		303,659
Total deposits	$	2,135,555	$	2,296,695

Municipal deposits of $401,517 and $614,834 were included in total deposits at December 31, 2011 and September 30, 2011, respectively. Deposits received for tax receipts were approximately $284,000 at September 30, 2011. Listed below are the Company’s brokered deposits included in the table above:

	December 31, 2011		September 30, 2011
Money market	$	31,431	$	5,725
Reciprocal CDAR’s1		1,349		2,746
CDAR’s one way		22,157		3,366
Total brokered deposits	$	54,937	$	11,837

¹  Certificate of deposit account registry service

35

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

8.Borrowings

The Company’s FHLB and other borrowings and weighted average interest rates are summarized as follows:

	December 31, 2011					September 30, 2011
	Amount		Rate			Amount		Rate
By type of borrowing:
FHLB advances	$	210,347		2.13	%	$	111,828		3.83	%
FHLB Repurchase agreements		206,696		3.66			211,694		3.61
Senior Debt (FDIC insured)		51,500		2.75			51,499		2.75
Total borrowings	$	468,543		2.87	%	$	375,021		3.56	%
By remaining period to maturity:
Less than one year	$	155,000		1.12	%	$	61,500		2.96	%
One to two years		35,955		2.65			5,066		4.04
Two to three years		9,486		3.01			35,795		2.37
Three to four years		42,439		2.63			49,312		2.28
Four to five years		2,574		1.38			211		5.32
Greater than five years		223,089		4.18			223,137		4.18
Total borrowings	$	468,543		2.87	%	$	375,021		3.56	%

As a member of the FHLB of New York, the Bank may borrow in the form of term and overnight borrowings up to the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. As of December 31, 2011 and September 30, 2011, the Bank had pledged mortgages totaling $527,936 and $464,900 respectively. The Bank had also pledged securities with carrying amounts of $262,370 and $206,829 as of December 31, 2011 and September 30, 2011, respectively, to secure borrowings. As of December 31, 2011, the Bank may increase its borrowing capacity by pledging securities and mortgages not required to be pledged for other purposes with a market value of $373,263. FHLB advances are subject to prepayment penalties, if repaid prior to maturity.

FHLB borrowings (includes advance and repurchase agreements) of $200,000 at June 30, 2011 and December 31, 2011, respectively are putable quarterly, at the discretion of the FHLB. These borrowings have a weighted average remaining term to the contractual maturity dates of approximately 5.31 years and 5.56 years and weighted average interest rates of 4.23 percent and 4.23 percent at December 31, 2011 and September 30, 2011, respectively. An additional $20,000 is putable on a one time basis after an initial lockout period beginning in February 2013 with an interest rate of 3.57 percent.

During the three months ending December 31, 2011, the Company restructured $5,000 of its FHLBNY advances which had a weighted average rate of 4.04 percent and a duration of 1.5 years, into new borrowings with a weighted average rate of 2.37 percent net of prepayment penalties , duration of 1.6 years. Prepayment penalties of $278 associated with the modifications are being amortized to maturity on a level yield basis.

36

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

9.Derivatives

The Company purchased two interest rate caps in the first quarter of fiscal 2010 to assist in offsetting a portion of interest rate exposure should short term rate increases lead to rapid increases in general levels of market interest rates on deposits. These caps are linked to LIBOR and have strike prices of 3.5 percent and 4.0 percent. These caps are stand alone derivatives and therefore changes in fair value are reported in current period earnings; the amount for December 31, 2011 and 2010 is a fair value loss of $3 and a fair value gain of $234, respectively. The fair value of the interest rate caps at December 31, 2011 is reflected in other assets with a corresponding credit (charge) to income recorded as a gain (loss) to non-interest income.

The Company acts as an interest rate swap counterparty with certain commercial customers and manages this risk by entering into corresponding and offsetting interest rate risk agreements with third parties. The swaps are considered a derivative instrument and must be carried at fair value. As the swaps are not a designated qualifying hedge, the change in fair value is recognized in current earnings, with no offset from any other instrument. There was no net gain or loss recorded in earnings during the three months ended December 31, 2011 and 2010. Interest rate swaps are recorded on our consolidated statements of financial condition as an other asset or other liability at estimated fair value.

At December 31, 2011 summary information regarding these derivatives is presented below:

	December 31, 2011
	Notional Amount			Average Maturity		Weighted Average Rate Fixed			Weighted Average Variable Rate			Fair Value
Interest Rate Caps	$	50,000			2.93		3.75	%		NA	%	$	62
3rd party interest rate swap		23,920			7.44		4.63			1 m Libor + 2.32	%		1,411
Customer interest rate swap		(23,920	)		7.44		4.63			1 m Libor + 2.32	%		(1,411	)

At September 30, 2011, summary information regarding these derivatives is presented below:

	September 30, 2011
	Notional Amount			Average Maturity		Weighted Average Rate Fixed			Weighted Average Variable Rate			Fair Value
Interest Rate Caps	$	50,000			3.18		3.75	%		NA	%	$	65
3rd party interest rate swap		12,009			10.23		5.28			1 m Libor + 2.15	%		1,114
Customer interest rate swap		(12,009	)		10.23		5.28			1 m Libor + 2.15	%		(1,114	)

The Company enters into various commitments to sell real estate loans into the secondary market. Such commitments are considered to be derivative financial instruments and, therefore are carried at estimated fair value on the consolidated balance sheets. The fair values of these commitments are not considered material.

37

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

10.Earnings Per Common Share

The number of shares used in the computation of basic earnings per share excludes unallocated ESOP shares, shares held to fund deferred compensation plans, and unvested shares of restricted stock that have not been released to participants.

Common stock equivalent shares are incremental shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive stock options and unvested RRP shares were exercised or became vested during the periods.

Basic earnings per common share are computed as follows:

	For the Three Months Ended December 31,
	2011		2010
Weighted average common shares outstanding (basic), in ‘000s		37,252		37,552
Net Income	$	5,717	$	6,720
Basic earnings per common share	$	0.15	$	0.18

Diluted earnings per common share are computed as follows:

	For the Three Months Ended December 31,
	2011		2010
Weighted average common shares outstanding (basic), in ‘000s		37,252		37,552
Effect of common stock equivalents		—		—
		37,252		37,552
Net Income	$	5,717	$	6,720
Diluted earnings per common share	$	0.15	$	0.18

Anti-dilutive shares excluded in the determination of earnings per share were 1,935,830 and 1,916,707 at December 31, 2011 and 2010, respectively. Anti-dilutive shares are not included in the determination of diluted earnings per share.

11.Guarantor’s Obligations Under Guarantees

Most letters of credit issued by, or on behalf of the Company are standby letters of credit. Standby letters of credit are commitments issued by the Company on behalf of its customer/obligor in favor of a beneficiary that specify an amount the Company can be called upon to pay upon the beneficiary’s compliance with the terms of the letter of credit. These commitments are primarily issued in favor of local municipalities to support the obligor’s completion of real estate development projects. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

As of December 31, 2011, the Company had $17,725 in outstanding letters of credit, of which $171 are cash secured and $7,027 were secured by collateral. The carrying values of these obligations are considered immaterial.

38

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

12.Pension and Other Post Retirement Plans

Net post-retirement cost, which is recorded within salaries and employee benefits expense in the consolidated statements of income, is comprised of the following:

	Pension Plan						Other Post Retirement Plans
	Three months Ended December 31,						Three months Ended December 31,
	2011			2010			2011			2010
Service Cost	$	—		$	—		$	9		$	7
Interest Cost		375			378			27			27
Expected return on plan assets		(531	)		(498	)		—			—
Amortization of net transition obligation		—			—			6			6
Amortization of prior service cost		—			—			12			12
Amortization of (gain) or loss		579			509			(15	)		(24	)
	$	423		$	389		$	39		$	28

As of December 31, 2011, no contributions were deposited into the pension plan. The Company has not yet determined if additional contributions will be made during the fiscal year 2012.

The Company has also established a non-qualified Supplemental Executive Retirement Plan (“SERP”) to provide certain executives with supplemental retirement benefits in addition to the benefits provided by the pension plan due to amounts limited by the Internal Revenue Code of 1986, as amended (“IRS Code”). The periodic pension expense for the supplemental plan amounted to $13 for the three months ended December 31, 2011 and $22 for the three months ended December 31, 2010. As of December 31, 2011 there were $9 in contributions to fund benefit payments related to the SERP.

13.Contingencies

Certain premises and equipment are leased under operating leases with terms expiring through 2033. The Company has the option to renew certain of these leases for additional terms.

The Company is a defendant in certain claims and legal actions arising in the ordinary course of business. Management, after consultation with legal counsel, does not anticipate losses on any of these claims or actions that would have a material adverse effect on the consolidated financial statements.

14.Subsequent Events

The Company announced January 18, 2012 that Provident Bank its subsidiary has entered into a definitive agreement to acquire Gotham Bank of New York in a cash transaction valued at approximately $40.5 million. The closing considerations will be 125% of adjusted tangible net worth as calculated under the merger agreement, resulting in an estimated 3.3% core deposit premium. Completion of the transaction is subject to regulatory and Gotham Bank shareholder approvals as well as other customary closing conditions.

39

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

We make statements in this Report, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other financial, business or strategic matters regarding or affecting Provident Bancorp that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions or future or conditional verbs such as “will,” “should,” “would” and “could.” These statements are not historical facts, but instead represent our current expectations, plans or forecasts and are based on the beliefs and assumptions of the management and the information available to management at the time that these disclosures were prepared.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements and future results could differ materially from our historical performance.

The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

• legislative and regulatory changes such as the Dodd-Frank Act and its implementing regulations that adversely affect our business including changes in regulatory policies and principles or the interpretation of regulatory capital or other rules;

• a further deterioration in general economic conditions, either nationally, internationally, or in our market areas, including extended declines in the real estate market and constrained financial markets;

• the effects of and changes in monetary and fiscal policies of the Board of Governors of the Federal Reserve System and the U.S. Government;

• our ability to make accurate assumptions and judgments about an appropriate level of allowance for loan losses and the collectability of our loan portfolio, including changes in the level and trend of loan delinquencies and write-offs that may lead to increased losses and non-performing assets in our loan portfolio, result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves;

• our use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;

• changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;

• computer systems on which we depend could fail or experience a security breach, implementation of new technologies may not be successful; and our ability to anticipate and respond to technological changes can affect our ability to meet customer needs;

• changes in other economic, competitive, governmental, regulatory, and technological factors affecting our markets, operations, pricing, products, services and fees;

• our Company’s ability to successfully implement growth, expense reduction and other strategic initiatives and to complete merger and acquisition activities and realize expected strategic and operating efficiencies associated with such matters;

• our success at managing the risks involved in the foregoing and managing our business; and

• the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond our control.

Additional factors that may affect our results are discussed in our annual report on Form 10-K under “Item 1A, Risk Factors” and elsewhere in this Report or in other filings with the SEC. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

40

Overview and Management Strategy

We operate as an independent community bank that offers a broad range of customer-focused financial services as an alternative to large regional, multi-state and international banks in our market area, which is the greater New York City market place. Additionally, the Company offers investment management services through its subsidiary, HVIA. The financial condition and results of operations of Provident New York Bancorp are discussed herein on a consolidated basis with the Bank. Reference to Provident New York Bancorp or the Company may signify the Bank, depending on the context.

We specialize in the delivery of service solutions to business owners, their families and consumers within our marketplace through a team based approach. We focus our efforts on core deposit generation, especially transaction accounts and quality loan growth with emphasis on growing commercial loan balances. We seek to maintain a disciplined pricing strategy on deposit generation that will allow us to compete for high quality loans while maintaining an appropriate spread over funding costs. Going forward imperatives for the Company will be to grow revenue and earnings by expanding client acquisitions, continuing to improve credit metrics and to significantly improve efficiency levels. To achieve these goals we will focus on high value client segments, expand delivery channels and distribution to increase client acquisitions, execute effectively by creating a highly productive performance culture, reduce operating costs, and proactively manage enterprise risk.

The Company’s results for the first quarter of fiscal 2012 reflected the effects of the implementation of our strategies. During the first quarter we restructured the organization around markets and have hired high performing leadership to assume the roles of Market Presidents and Chief Operating Officer. We also announced during the quarter our expansion into New York City which follows through on our strategic objective of expanding our reach into the greater New York City marketplace. In line with our strategies during the month of January we hired a new Chief Financial Officer and entered into a definitive agreement to acquire Gotham Bank of New York. Gotham Bank is a great strategic fit for the Company and provides an attractive platform in the New York City marketplace to grow our franchise. In addition we have hired four seasoned commercial banking teams for the New York City marketplace, all with proven track records of delivering superior service to their clients.

We continue to experience pressure on net interest income as low rates continue to have the effect of causing many assets to prepay or to be called. Many of our liabilities are at rates that are either fixed or already very low, so maintaining net interest margin is a function of loan growth, growth in non-interest bearing deposits and certain core deposits, and continuation of our deposit pricing discipline. Current market interest rates have declined, and may have an affect on our reinvestment opportunities. The low interest rate environment has also caused management to sell fixed rate conforming residential mortgages into the secondary market in order to reduce interest rate risk.

We continue to make progress in credit quality as we work through the criticized and classified portfolio seeking positive resolution on existing problem credits. The loan portfolio demonstrates an improving credit risk profile as nearly all originations are at the desirable internal risk rating which is five or better. Our average portfolio risk rating improved to 5.46 at December 31, 2011 from 5.71 at December 31, 2010. The ADC portfolio continues to decline in size as we have deemphasized this business and repayments continue. Non performing loans increased primarily in the ADC and residential portfolios. The increase in nonperforming ADC loans from September 30, 2011 is related mostly to one large relationship and plans to resolve this credit is in progress. Residential loans have an extended three to four year foreclosure process and therefore are difficult to resolve in a timely manner potentially resulting in increased charge offs and non performing loans in this category. See credit quality section for further discussion.

41

Comparison of Financial Condition at December 31, 2011 and September 30, 2011

Total assets as of December 31, 2011 decreased $53.2 million or 1.7 percent from September 30, 2011 due primarily to a decrease in cash and due from banks. September 30, 2011 balances historically reflect deposits of municipal tax collections that are drawn down over time to fund government expenditures. Other cash balances were redeployed into higher yielding loans and securities.

Net loans as of December 31, 2011 increased $71.8 million or 4.3 percent to $1.7 billion from September 30, 2011. Commercial real estate loans were the sole contributor with an increase of $105.7 million. Acquisition, Development and Construction loans (ADC) declined $13.9 million to $162.0 million compared to $175.9 million at September 30, 2011, a reflection of the Company’s de-emphasis on the originations of this type of loan. Consumer loans decreased by $4.9 million, and residential loans decreased by $4.2 million as of December 31, 2011. Total loan originations, including loans originated for sale were $231.6 million for the three months ending December 31, 2011, while repayments were $141.7 million. Loan loss reserves increased $328,000 during the three months ended December 31, 2011 to $28.2 million compared to the three months ended September 30, 2011.

Total securities increased by $117.7 million, to $967.5 million at December 31, 2011 from $849.9 million at September 30, 2011. Securities purchases were $228.0 million, sales of securities were $83.6 million, and maturities, calls, and repayments were $31.8 million. Carrying values of securities increased by $3.7 million mainly due to unrealized gains. Security gains and other than temporarily impaired losses were $2.0 million and net amortization of securities were $677,000 for the three months ended December 31, 2011.

Deposits as of December 31, 2011 were $2.1 billion, a decrease of $161.1 million, or 7.0 percent, from September 30, 2011. As of December 31, 2011 transaction accounts were 37.5 percent of deposits, or $799.8 million compared to $1.1 billion or 45.9 percent of deposits at September 30, 2011. Deposits received from municipalities for tax payments were approximately $284.0 million at September 30, 2011. As of December 31, 2011 savings deposits were $444.8 million, an increase of $15.0 million or 3.5 percent. Money market accounts increased $70.5 million or 13.8 percent to $580.0 million at December 31, 2011. Certificate of deposit accounts increased by $7.4 million or 2.4 percent. As of December 31, 2011, the Company had $54.9 million in wholesale deposits.

Borrowings increased by $93.5 million, or 24.9 percent, from September 30, 2011, to $468.5 million primarily due to the slower exit of municipal tax deposits received at September 30, 2011. The Company completed restructuring of $5.0 million of FHLBNY advances during the first quarter of fiscal 2012 which had a weighted average rate of 4.04 percent and a duration of 1.5 years, into new borrowings with a weighted average rate of 2.37 percent, and a duration of 1.6 years. Prepayment penalties of $278,500 associated with the modifications are being amortized into interest expense over the modification period on a level yield basis.

Stockholders’ equity increased $6.5 million from September 30, 2011 to $437.7 million at December 31, 2011. The increase was due to an increase in retained earnings of $3.4 million and a $2.6 million increase in accumulated other comprehensive income, after realizing securities gains of $2.0 million for the quarter ended, December 31, 2011.

As of December 31, 2011 the Company had authorization to purchase up to additional 776,713 shares of common stock. Bank Tier I capital to assets was 8.51 percent at December 31, 2011. Tangible capital as a percentage of tangible assets at the consolidated company level was 9.34 percent.

Credit Quality (Also see Note 4 to the consolidated financial statements)

Our non-performing loans (“NPLs”) increased $5.3 million from $40.6 million at September 30 2011, to $45.9 million at December 31, 2011, driven primarily by one relationship in the ADC portfolio of $3.6 million, which had been previously classified as substandard. This increase in NPLs caused our coverage ratio of reserves to NPLs to drop from 69% to 62% quarter-over-quarter. The coverage compared to total loans was 1.59% at December 31, 2011 compared to 1.64% at September 30, 2011. Our provision for the quarter of $2.0 million exceeded net charge-offs of $1.6 million, increasing the Allowance for Loan Losses by $328,000 from September 30, 2011 to $28.2 million at December 31, 2011.

NPLs are concentrated in the ADC portfolio, which contains $21.3 million of NPLs compared to total NPLs of $45.9 million. There are 2 larger relationships in the NPL ADC portfolio. The first was added to nonperforming at June 30, 2011. It is in litigation and has been written down to $8.5 million, supported by current appraisals. There is a related performing group of loans, which partially guarantees the nonperforming debt, it is secured by a condominium project now selling in Phase 3 of its 5 phases. We are working toward a consensual arrangement to liquidate that guaranty. The other nonperforming loan relates to 3 projects that are still in development. We also are working toward a consensual arrangement to bring this relationship back to performing status. We have recourse to a substantial guarantor should that prove necessary.

Also contributing disproportionately to NPLs is the residential mortgage portfolio, with $8.2 million in that status at December 31, 2011. The time to foreclose on these loans has risen dramatically, limiting our capacity to timely resolve defaulted loans.

42

Net charge-offs for the quarter were $1.6 million, or 0.37% of the average loan portfolio. This compares to $10.3 million (2.41% of average loans) in the prior quarter and $1.9 million (0.45% of average loans) in the same quarter last year. Net charge-offs benefited from recoveries of $1.1 million, mostly from recoveries on commercial business loans. Charge-offs for the quarter were concentrated in write-downs of mortgage-secured nonperforming loans based on declining appraisal values.

Comparison of Operating Results for the Three Months Ended December 31, 2011 and December 31, 2010

Net income for the three months ended December 31, 2011 was $5.7 million or $0.15 per diluted share, a decrease of $1.0 million compared to $6.7 million or $0.18 per diluted share, for the same period in fiscal 2011. Excluding the after tax effect of securities gains and other than temporary impairment credit losses, the fair value adjustment of interest rate caps, severances, and merger related expenses associated with the pending acquisition of Gotham Bank, net income was $ 0.13 per diluted share for the three month period ending December 31, 2011 compared to $0.11 per diluted share for the three month period ending December 31, 2010. The provision for loan losses for the three months ended December 31, 2011 was $2.0 million, $150,000 lower, compared to $2.1 million for the same period in the prior year. Net interest margin on a tax equivalent basis for the three months ended December 31, 2011, decreased by 12 basis points compared to the same period last year from 3.66 percent to 3.54 percent. Non-interest income totaled $7.2 million for the three months ended December 31, 2011 a decrease of $2.7 million compared to December 31, 2010. The decrease was mainly attributable to fact that there were lower gains on sales of securities of $2.0 million, a decline of $2.2 million compared to $4.2 million and a fair value gain on interest rate caps in the first fiscal quarter of 2011. Additionally, declines in other- loan fees, gains on sale of loans and lower title insurance fees also contributed to the decrease. Non-interest expense decreased $548,000, or 2.6 percent, to $20.7 million for the three months ended December 31, 2011, compared to $21.3 million for the same period in the prior year primarily due to lower employee benefits of $319,000 which were offset by severance costs of $375,000 and new hires in executive management. Marketing and consulting costs declined by $340,000 and $306,000, respectively. These expense reductions were offset in part by merger-related costs of $247,000 and an increase in real estate owned expense of $289,000.

43

Earnings excluding securities gains, retirement benefit settlement charge and the fair value adjustment of interest rate caps are presented below. The Company presents earnings excluding these factors so that investors can better understand the results of the Company’s core banking operations and to better align with the views of the investment community.

	Three months ended December 31,
	2011			2010
Net Income
Net Income	$	5,717		$	6,720
Securities net gains and credit losses(1)		(1,159	)		(2,496	)
Fair value (gain) loss on interest rate caps(1)		2			(139	)
Severance (1)		223			—
Merger related expenses(1)		147			—
Net adjusted income	$	4,930		$	4,085
Earnings per common share
Diluted Earnings per common share	$	0.15		$	0.18
Securities net gains and credit losses(1)		(0.03	)		(0.07	)
Fair value (gain) loss on interest rate caps(1)		—			—
Severance (1)		0.01			—
Merger related expenses(1)		—			—
Diluted adjusted earnings per common share	$	0.13		$	0.11
Non-interest income
Total non-interest income	$	7,176		$	9,883
Securities net gains and credit losses		(1,951	)		(4,202	)
Fair value (gain) loss on interest rate caps		3			(234	)
Adjusted non interest-income	$	5,228		$	5,447
Non-interest expense
Total non-interest expense	$	20,721		$	21,269
Severance		(376	)		—
Merger related expenses		(247	)		—
Adjusted non interest-expense	$	20,098		$	21,269

⁽¹⁾ After marginal tax effect 40.61%

^*  Rounding

Relevant operating results performance measures follow:

	Three Months Ended December 31,
	2011			2010
Per common share:
Basic earnings	$	0.15		$	0.18
Diluted earnings		0.15			0.18
Dividends declared		0.06			0.06
Return on average (annualized):
Assets		0.74	%		0.90	%
Equity		5.26	%		6.22	%

44

The following table sets forth the consolidated average balance sheets for the Company for the periods indicated. Also set forth is information regarding weighted average yields on interest-earning assets and weighted average rates paid on interest-bearing liabilities (dollars in thousands).

	Three Months Ended December 31,
	2011									2010
	Average Outstanding Balance			Interest			Average Yield Rate			Average Outstanding Balance			Interest			Average Yield Rate
Interest earning assets:
Commercial and commercial mortgage loans	$	1,097,476		$	14,245			5.15	%	$	1,040,065		$	14,864			5.67	%
Consumer loans		227,274			2,635			4.60			238,319			2,673			4.45
Residential mortgage loans		387,446			5,269			5.40			403,567			5,668			5.57
Total net loans1		1,712,196			22,149			5.13			1,681,951			23,205			5.47
Securities-taxable		696,293			3,990			2.27			692,346			3,530			2.02
Securities-tax exempt2		205,366			2,729			5.27			221,802			2,961			5.30
Federal Reserve balances		82,437			63			0.30			8,459			20			0.94
Other earning assets		18,735			192			4.07			24,257			380			6.22
Total securities and other earning assets		1,002,831			6,974			2.76			946,864			6,891			2.89
Total interest-earning assets		2,715,027			29,123			4.26			2,628,815			30,096			4.54
Non-interest-earning assets		347,493									332,643
Total assets	$	3,062,520								$	2,961,458
Interest bearing liabilities:
NOW Checking	$	398,885			164			0.16	%	$	317,876			173			0.22	%
Savings, clubs and escrow		445,236			81			0.07			405,177			109			0.11
Money market accounts		577,387			397			0.27			433,865			339			0.31
Certificate accounts		302,713			671			0.88			406,241			1,021			1.00
Total interest-bearing deposits		1,724,221			1,313			0.30			1,563,159			1,642			0.42
Borrowings		392,785			3,617			3.65			481,939			4,234			3.49
Total interest-bearing liabilities		2,117,006			4,930			0.92			2,045,098			5,876			1.14
Non- interest bearing deposits		500,621									470,873
Other non-interest-bearing liabilities		13,764									16,587
Total liabilities		2,631,391									2,532,558
Stockholders’ equity		431,129									428,900
Total liabilities and equity	$	3,062,520								$	2,961,458
Net interest rate spread								3.34	%								3.40	%
Net earning assets	$	598,021								$	583,717
Net interest margin					24,193			3.54	%					24,220			3.66	%
Less tax equivalent adjustment2					(955	)								(1,036	)
Net interest income				$	23,238								$	23,184
Ratio of average interest-earning assets to average interest bearing liabilities		128.25	%								128.54	%

¹  Includes non-accrual loans

²  Reflects tax equivalent adjustment for tax exempt income based on a 35% federal rate

45

The table below details the changes in interest income and interest expense for the periods indicated due to both changes in average outstanding balances and changes in average interest rates (dollars in thousands):

	Three Months Ended December 31, 2011 vs. 2010 Increase / (Decrease) Due to
	Volume1			Rate1			Total
Interest earning assets
Commercial and commercial mortgage loans	$	784		$	(1,403	)	$	(619	)
Consumer loans		(125	)		87			(38	)
Residential mortgage loans		(226	)		(173	)		(399	)
Securities-taxable		20			440			460
Securities-tax exempt2		(215	)		(17	)		(232	)
Federal Reserve excess reserves		66			(23	)		43
Other earning assets		(69	)		(119	)		(188	)
Total interest income		235			(1,208	)		(973	)
Interest-bearing liabilities
NOW checking		42			(51	)		(9	)
Savings		11			(39	)		(28	)
Money market		104			(46	)		58
Certificates of deposit		(238	)		(112	)		(350	)
Borrowings		(802	)		185			(617	)
Total interest expense		(883	)		(63	)		(946	)
Net interest margin		1,118			(1,145	)		(27	)
Less tax equivalent adjustment2		75			6			81
Net interest income	$	1,193		$	(1,139	)	$	54

¹ Changes due to increases in both rate and volume have been allocated proportionately to rate and volume.

²  Reflects tax equivalent adjustment for tax-exempt income based on a 35% federal rate.

Net interest income for the three months ended December 31, 2011 of $23.2 million remained flat, compared to the same quarter December 31, 2010. Gross interest income on a tax-equivalent basis of $29.1 million remained relatively unchanged for the quarter ended December 31, 2011 compared to the same period in fiscal 2011. The current quarter was negatively impacted by non-accrual interest on non-performing loans net of prepayment fees, which reduced interest income on loans by $384,000 in the first quarter of 2012 and $83,000 in the first quarter of 2011. Interest expense declined by $946,000 with the decrease mainly in certificates of deposit of $350,000 and borrowings of $617,000. The average costs of borrowings increased as result of a change in mix between short-term and long-term funding.

Provision for Loan Losses. The Company records provisions for loan losses, which are charged to earnings, in order to maintain the allowance for loan losses at a level necessary to absorb probable incurred loan losses inherent in the existing portfolio. The Company recorded $2.0 million in loan loss provisions for the quarter ended December 31, 2011. Refer to the credit quality section for a discussion on net charge-offs and nonperforming loans. Net charge-offs for the quarter ended December 31, 2011 were $1.6 million, which included $1.3 million of specific reserves recorded in prior periods.

Non-interest income for the three months ended December 31, 2011 decreased by $2.7 million to $7.2 million. The primary driver of the decrease were lower gains on sales of securities of $2.0 million, a decrease of $2.2 million compared to $4.2 million and a fair value gain on interest rate caps in the first fiscal quarter of 2011. Declines in other loan fees, gains on sales of loans in fiscal 2011 and lower title insurance fees also contributed to the decrease.

Non-interest expensefor the three months ended December 31, 2011 decreased by 2.6 percent, to $20.7 million, due to lower employee benefits of $319,000 which were primarily offset by severance costs of $375,000 and new hires in executive management. Marketing and consulting costs declined by $340,000 and $306,000, respectively. These expense reductions were offset in part by merger-related costs of $247,000 and an increase in real estate owned expense of $289,000.

Income Taxdecreased $1 million to $2.0 million for the three months ended December 31, 2011, compared to $3.0 million for the period ended December 31, 2010. The effective tax rate was 26.2 percent and 30.7 percent for the periods ended December 31, 2011 and 2010, respectively. The decline is due to municipal income and BOLI income making up a larger percentage of overall pretax income in the current period.

46

Liquidity and Capital Resources

The overall objective of our liquidity management is to ensure the availability of sufficient cash funds to meet all financial commitments and to take advantage of investment opportunities. We manage liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, wholesale borrowings, the proceeds from maturing securities and short-term investments, and the proceeds from the sales of loans and securities. The scheduled amortizations of loans and securities, as well as proceeds from borrowings, are predictable sources of funds. Other funding sources, however, such as deposit inflows, mortgage prepayments and mortgage loan sales are greatly influenced by market interest rates, economic conditions and competition.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in the Consolidated Statements of Cash Flows in our consolidated financial statements. Our primary investing activities are the origination of commercial real estate and residential one- to four-family loans, and the purchase of investment securities and mortgage-backed securities. During the three months ended December 31, 2011 and 2010, our loan originations totaled $231.6 million and $182.0 million, respectively. Purchases of securities available for sale totaled $151.2 million and $301.1 million for the three months ended December 31, 2011 and 2010, respectively. Purchases of securities held to maturity totaled $76.8 million and $4.0 million for the three months ended December 31, 2011 and 2010, respectively. These activities were funded primarily by sales of securities, by borrowings and by principal repayments on loans and securities. Loan origination commitments totaled $63.8 million at December 31, 2011, and consisted of $54.0 million at adjustable or variable rates and $9.8 million at fixed rates. Unused lines of credit granted to customers were $288.6 million at December 31, 2011. We anticipate that we will have sufficient funds available to meet current loan commitments and lines of credit.

The Company’s investments in BOLI are considered illiquid and are therefore classified as other assets. Earnings from BOLI are derived from the net increase in cash surrender value of the BOLI contracts and the proceeds from the payment on the insurance policies, if any. The recorded value of BOLI contracts totaled $57.5 million and $57.0 million at December 31, 2011 and September 30, 2011, respectively.

Deposit flows are generally affected by the level of market interest rates, the interest rates and other conditions on deposit products offered by our banking competitors, and other factors. The net decrease in total deposits was $161.1 million and $162.6 million for the three months ended December 31, 2011 and 2010, respectively. Based upon prior experience and our current pricing strategy, management believes that a significant portion of deposits will remain with us, although we may be required to compete for many of the maturing certificates in a highly competitive environment.

Credit markets continue to improve during fiscal 2012 from the extreme conditions that existed in 2009. Credit spreads narrowed steadily during the past year and many are very near historically low levels. Nevertheless, loan demand remains muted causing liquidity to remain high. Furthermore, the extremely low interest rate environment caused our deposits to remain at elevated levels which have also strengthened our liquidity position. Many banks are experiencing a situation similar to ours resulting in the industry liquidity to be at significantly elevated levels. However, much of this liquidity is held in the form of very short-term securities. The preference of depositors to stay short could portend potential liquidity reductions in the future and possibly put pressure on us to raise rates in the future to retain these funds.

We generally remain fully invested and utilize additional sources of funds through Federal Home Loan Bank of New York (“FHLB”) advances and other sources of which $468.5 million was outstanding at December 31, 2011. At December 31, 2011, we had the ability to borrow an additional $373.3 million under our credit facilities with the Federal Home Loan Bank. The Bank may borrow up to an additional $313.4 million by pledging securities not required to be pledged for other purposes as of December 31, 2011. Further, at December 31, 2011 we had $54.9 million in Brokered Deposits (including certificates of deposit accounts registry service (CDAR’s) reciprocal CD’s of $1.3 million) and have relationships with several brokers to utilize these low cost sources of funding should conditions warrant further sources of funds.

47

The Bank provides supplemental reporting of Non-GAAP tangible equity ratios as management believes this information is useful to investors. As of December 31, 2011, the Company’s tangible capital as a percent of tangible assets increased 40 basis points to 9.34 percent, and its tangible book value increased $0.17 to $7.19 per share, compared to September 30, 2011. The following table shows the reconciliation of tangible equity and the tangible equity ratio:

	December 31, 2011			September 30, 2011
Total assets	$	3,084,166		$	3,137,402
Goodwill and other amortizable intangibles		(165,167	)		(165,490	)
Tangible assets	$	2,918,999		$	2,971,912
Stockholders’ equity	$	437,682		$	431,134
Goodwill and other amortizable intangibles		(165,167	)		(165,490	)
Tangible stockholders’ equity	$	272,515		$	265,644
Outstanding Shares		37,883,008			37,864,008
Tangible capital as a % of tangible assets (consolidated)		9.34	%		8.94	%
Tangible book value per share	$	7.19		$	7.02

The Company declared a dividend of $0.06 per share payable on February 16, 2012 to stockholders of record on February 6, 2012.

The following table sets forth the Bank’s regulatory capital position at December 31, 2011 and September 30, 2011, compared to OCC requirements:

						OCC requirements
	Bank actual					Minimum capital adequacy					Classification as well capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
December 31, 2011:
Tangible capital	$	247,433		8.5	%	$	43,632		1.5	%	$	—		—
Tier 1 (core) capital		247,433		8.5			116,353		4.0			145,441		5.0	%
Risk-based capital:
Tier 1		247,433		11.7			—		—			126,681		6.0
Total		273,847		13.0			168,908		8.0	%		211,134		10.0
September 30, 2011:
Tangible capital	$	241,196		8.1	%	$	44,460		1.5	%	$	—		—
Tier 1 (core) capital		241,196		8.1			118,559		4.0			148,199		5.0	%
Risk-based capital:
Tier 1		241,196		11.8			—		—			122,126		6.0
Total		265,307		13.0			162,835		8.0	%		203,544		10.0

The levels are well above current regulatory capital requirements to be considered well capitalized. Management is currently studying the impact on capital requirements resulting from the Basel III accords.

48

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Management believes that our most significant form of market risk is interest rate risk. The general objective of our interest rate risk management is to determine the appropriate level of risk given our business strategy, and then manage that risk in a manner that is consistent with our policy to limit the exposure of our net interest income to changes in market interest rates. Provident Bank’s Asset/Liability Management Committee (“ALCO”), which consists of certain members of senior management, evaluates the interest rate risk inherent in certain assets and liabilities, our operating environment, and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. A committee of the Board of Directors reviews the ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios as well as the intrinsic value of our deposits and borrowings.

We actively evaluate interest rate risk in connection with our lending, investing, and deposit activities. We emphasize the origination of commercial mortgage loans, commercial business loans, and residential fixed-rate mortgage loans that are repaid monthly and bi-weekly, fixed-rate commercial mortgage loans, adjustable-rate residential and consumer loans. Depending on market interest rates and our capital and liquidity position, we may retain all of the fixed-rate, fixed-term residential mortgage loans that we originate or we may sell or securitize all, or a portion of such longer-term loans, generally on a servicing-retained basis. We also invest in shorter-term securities, which generally have lower yields compared to longer-term investments. Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities may help us to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. These strategies may adversely affect net interest income due to lower initial yields on these investments in comparison to longer-term, fixed-rate loans and investments.

Management monitors interest rate sensitivity primarily through the use of a model that simulates net interest income (“NII”) under varying interest rate assumptions. Management also evaluates this sensitivity using a model that estimates the change in the Company and the Bank’s net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The model assumes estimated loan prepayment rates, reinvestment rates and deposit decay rates that seem reasonable, based on historical experience during prior interest rate changes.

Estimated Changes in NPV and NII.The table below sets forth, as of December 31, 2011, the estimated changes in our (1) NPV that would result from the designated instantaneous changes in the forward rate curves, and (2) NII that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.

Interest Rates		Estimated		in NPV						Estimated		Estimated NII
(basis points)		NPV		Amount			Percent			NII		Amount			Percent
		(Dollars in thousands)
	+300	$	282,585	$	(60,355	)		-17.6	%	$	98,195	$	5,999			6.5	%
	+200		309,224		(33,716	)		-9.8	%		97,442		5,246			5.7	%
	+100		331,450		(11,490	)		-3.4	%		95,299		3,103			3.4	%
	0		342,940		0			0.0	%		92,196		0			0.0	%
	-100		338,124		(4,816	)		-1.4	%		84,835		(7,361	)		-8.0	%

The table set forth above indicates that at December 31, 2011, in the event of an immediate 200 basis point increase in interest rates, we would be expected to experience an 9.8 percent decrease in NPV and a 5.7 percent increase in NII. Due to the current level of interest rates, management is unable to reasonably model the impact of decreases in interest rates on NPV and NII beyond -100 basis points.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV and NII requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The NPV and NII table presented above assumes that the composition of our interest-rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions management may undertake in response to changes in interest rates. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the re-pricing characteristics of specific assets and liabilities. Accordingly, although the NPV and NII table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

49

During the first quarter of fiscal year 2012, the federal funds target rate remained in a range of 0.00 – 0.25 percent as the Federal Open Market Committee (“FOMC”) did not change the target overnight lending rate. U.S. Treasury yields in the two year maturities remained unchanged at 0.25 percent at the end of the first quarter of fiscal year 2012 while the yield on U.S. Treasury 10 year notes decreased 3 basis points from 1.92 percent to 1.89 percent over the same three month period. The slight decrease in yield on longer term maturities while the yield on shorter term maturities remained unchanged resulted in the 2-10 year treasury yield curve being only slightly flatter at the end of the first quarter of fiscal 2012 than it was when the year began. To fight the economic downturn the FOMC declared a willingness to keep the federal funds target low for an “extended period”. Furthermore, during the fourth quarter of the current fiscal year the FOMC stated that it anticipates that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013. However, should economic conditions improve, the FOMC could reverse direction and increase the federal funds target rate. This could cause the shorter end of the yield curve to rise disproportionably more than the longer end thereby resulting in margin compression.

Item 4. Controls and Procedures

The Company’s management, including the Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended the “Exchange Act”) as of the end of the period covered by this report. Based upon that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is properly recorded, processed, summarized and reported within the time frames specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1. Legal Proceedings

The Company is not involved in any pending legal proceedings which, in the aggregate, management believes to be material to the consolidated financial condition and operations of the Company.

Item 1A. Risk Factors

For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussed under Part I, Item 1A of the Company’s most recent annual report on Form 10-K. See also Part I, Item 2 (Forward-Looking Statements) of this quarterly report on Form 10-Q. There have been no material changes from the risk factors previously disclosed in the Company’s most recent annual report on Form 10-K.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

(a) Not applicable.

(b) Not applicable

(c) Issuer Purchases of Equity Securities—NONE

Item 3. Defaults Upon Senior Securities

    None

Item 4. (Removed and reserved).

Item 5. Other Information

    None

50

Item 6. Exhibits

Exhibit Number	Description
2.1	Agreement and Plan of Merger, dated as of January 17, 2012, by and between Provident Bank and Gotham Bank of New York (listed exhibits and schedules have been omitted pursuant to Regulation S-K Item 601(b)(2). The Registrant agrees to furnish a supplemental copy of such exhibits and schedules upon the request of the Securities and Exchange Commission).
10.1	Employment Agreement by and among Provident New York Bancorp, Provident Bank and Steven V. Masterson (incorporated herein by reference to Exhibit 10.1 to the Registrant's Current Report on Form 8-K filed with the Commission on January 10, 2012).+
10.2	Separation agreement between Provident New York Bancorp and Paul A. Maisch (incorporated herein by reference to Exhibit 10.2 to the Registrant's Current Report on Form 8-K filed with the Commission on January 10, 2012).+
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes- Oxley Act of 2002
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS	XBRL Instance Document1(filed herewith)
101.SCH	XBRL Taxonomy Extension Schema Document1(filed herewith)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document1(filed herewith)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document1(filed herewith)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document1(filed herewith)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document1(filed herewith)

⁺  Management compensatory plan or agreement

¹  In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed “not filed” for purposes of section 18 of the exchange act, and otherwise are not subject to liability under that section.

51

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Provident New York Bancorp has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Provident New York Bancorp

Date:    February 8, 2012	By:	/s/    Jack Kopnisky
		Jack Kopnisky
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

Date:    February 8, 2012	By:	/s/    Stephen V. Masterson
		Stephen V. Masterson
		Executive Vice President
		Chief Financial Officer
		Principal Accounting Officer
		(Principal Financial Officer)

52