NEWS RELEASE
FOR IMMEDIATE RELEASE Stock Symbol: PBCP
Thursday, October 23, 2003 Traded on NASDAQ National Market
CONTACT:
Paul A. Maisch, SVP & CFO
Roberta Lenett, VP & Manager of Shareholder Relations
(845) 369-8082
PROVIDENT BANCORP ANNOUNCES FISCAL 2003 EARNINGS OF
$11.3 MILLION, 18% HIGHER THAN PRIOR YEAR
FOURTH QUARTER EARNINGS UP 14.5%
MONTEBELLO, NY - October 24, 2003 -- Provident Bancorp, Inc. (Nasdaq-National
Market: PBCP), the parent company of Provident Bank, today announced that net
income for the fiscal year ended September 30, 2003 was $11.3 million, an
increase of 18.1% over prior-year earnings of $9.5 million. Basic and diluted
earnings per share increased to $1.46 and $1.44, respectively, for the 2003
fiscal year compared to $1.24 and $1.22, respectively, for fiscal 2002.
For the three months ended September 30, 2003 net income was $2.6 million, which
was an increase of 14.5% over net income of $2.3 million for the three months
ended September 30, 2002. Basic and diluted earnings per share for the most
recent quarter were $0.34 and $0.33, respectively, compared to $0.29 for both
basic and diluted earnings per share for the same period last year.
George Strayton, the Company's President and CEO, commented, "Fiscal 2003 was a
banner year for Provident Bank. Earnings improved significantly despite
declining interest rates. We were able to post $11.3 million in net income, or
$1.44 per diluted share, an increase of 18.0% from fiscal 2002 earnings per
diluted share of $1.22. Although asset yields declined steadily this year due to
falling market interest rates, we were diligent in turning market interest rate
declines to our advantage by lowering our overall cost of funds, realizing
appreciation in the investment portfolio, generating income from selling newly
originated long-term residential mortgages and collecting prepayment fees.
Growth in income was accompanied by growth in the balance sheet. We ended fiscal
2003 at nearly $1.2 billion in assets, up $146.6 million from a year ago, with
net loans increasing $42.4 million to $703.2 million and deposits up $69.9
million to $869.6 million. Our continuous investment in increasing our business
capacity enabled us to lay the foundation for the recently announced acquisition
of Ellenville National Bank and conversion to a fully public company. We filed
the proxy and prospectus with the regulatory agencies in mid-September and await
approval."
Commenting further, Mr. Strayton noted that "the marketplace has embraced the
pending transactions as our common stock price closed the year at $42.02
compared to the $33.10 closing price prior to the announcement (July 1, 2003)
and $28.45 at September 30, 2002."
Balance Sheet Data
- ------------------
Total assets as of September 30, 2003 were $1.2 billion, an increase of $146.6
- ------------
million, or 14.3%, over total assets of $1.0 billion at September 30, 2002.
Average total assets for the year ended September 30, 2003 were $1.1 billion, an
increase of $124.6 million, or 13.0%, over average total assets of $957.9
million in fiscal 2002.
Net loans as of September 30, 2003 were $703.2 million, an increase of $42.4
- ---------
million, or 6.4%, over net loan balances of $660.8 million at September 30,
2002. During fiscal 2003 the commercial loan portfolio, which consists of
commercial real estate, commercial business and construction loans experienced
growth of $31.2 million, or 14.1%. Residential mortgage loans grew during fiscal
2003 as well, posting an increase (net of significant refinancing activity) of
$14.7 million, or 4.0%, over balances at September 30, 2002. Consumer loans
declined to $80.6 million, down from $83.4 million at September 30, 2002, a
decrease of $2.8 million, or 3.4%, as many customers refinanced their home
equity loans with their first mortgages. Average total loans were $683.1 million
in fiscal 2003, an increase of $52.4 million, or 8.3%, over average total loans
of $630.7 million in fiscal 2002. At September 30, 2003, non-performing loans
totaled $4.7 million, or 0.66% of total loans, compared to 0.74% at September
30, 2002.
Deposits as of September 30, 2003 were $869.6 million, up $69.9 million, or
- --------
8.7%, from September 30, 2002. The Company's deposit mix has shifted along with
its deposit growth. Transaction accounts (demand and NOW deposits) represented
26% of deposits at September 30, 2003, compared to 24% at September 30, 2002.
Similarly, savings and money market account balances, which totaled $407.9
million at September 30, 2003, represented 47% of deposits at that date,
compared to 45% at the prior year-end. Certificates of deposit declined to 27%
of deposits at September 30, 2003 from 31% a year ago. This shift in mix to
lower cost transaction and savings accounts had a positive impact on earnings in
fiscal 2003.
Stockholders' equity increased by $7.0 million to $117.9 million at September
- ---------------------
30, 2003, compared to $110.9 million at September 30, 2002. In addition to net
income of $11.3 million for the current fiscal year, equity increased by $2.0
million due to the allocation of employee stock ownership plan shares and the
vesting of shares issued under our recognition and retention plan, and by $0.5
million related to transactions in our stock option plan. Partially offsetting
these increases were cash dividends, which reduced stockholders' equity by $2.4
million, $2.3 million in stock purchases, and a reduction of $2.1 million in the
after-tax net unrealized gains on securities available for sale.
During fiscal 2003, the Company repurchased 69,004 shares of its common stock,
of which 22,815 shares were repurchased under the Company's third repurchase
program, which was announced in March 2003 which authorized the repurchase of up
to 177,250 shares. The Company has repurchased a total of 376,740 shares under
its two previously announced and completed repurchase programs. Net of stock
option-related reissuances, a total of 333,479 treasury shares were held by the
Company at September 30, 2003.
Income Information - Full Fiscal Year
- -------------------------------------
Net interest income after provision for loan losses for the year ended September
- ---------------------------------------------------
30, 2003 increased to $44.8 million, compared to $41.9 million for the year
ended September 30, 2002, an increase of $2.9 million or 7.1%, which was largely
due to a $25.1 million increase in average net earning assets. The decrease in
interest income of $2.2 million, or 3.6%, reflects a decline in yield of 85
basis points to 5.75% on average earning assets, mostly offset by an increase in
average earning asset balances of $96.8 million, or 10.7%, to $1.0 billion as of
September 30, 2003. The cost of interest bearing liabilities declined by $5.1
million as the average rate paid on interest bearing liabilities decreased 82
basis points to 1.46%, offsetting an increase in average balances of $71.7
million to $827.9 million. Net interest margin decreased from 4.71% to 4.55% and
net interest spread decreased from 4.33% to 4.30%. The provision for loan losses
was $900,000 in fiscal 2003 and in fiscal 2002.
As noted in the above discussion, the increase in the Bank's net interest income
is due, in large part, to the relative changes in the yield and cost of the
Bank's assets and liabilities as a result of decreasing market interest rates
since 2001. This decrease in market interest rates has reduced the cost of
interest bearing liabilities faster and to a greater extent than the rates on
interest-earning assets such as loans and securities. However, if recently low
interest rate levels persist for an extended period of time, the prepayment of
assets could continue at a rate exceeding scheduled repayment. Such funds
received would most likely be reinvested at lower yields than those of
previously held assets. Also, as the reduction in liability costs have already
exceeded the pace at which assets repriced downward, net interest margin may be
further compressed.
Non-interest income for the fiscal year ended September 30, 2003 was $9.6
- --------------------
million compared to $5.4 million for the fiscal year ended September 30, 2002,
an increase of $4.2 million, or 76.9%. This increase was primarily attributable
to realized gains on securities available for sale and sales of loans of $2.0
million and $1.1 million, respectively, in the current fiscal year, a combined
increase of $2.5 million over the securities and loan sales gains of $607,000
for the prior fiscal year. Other factors include an increase of $786,000, or
18.7%, in banking fees and service charges, $483,000 in income from the new BOLI
program which began in December 2002, and an increase in prepayment fees of
$264,000.
Non-interest expense for the fiscal year ended September 30, 2003 were $36.8
- ---------------------
million, a $4.6 million, or 14.4%, increase over expenses of $32.2 million for
the fiscal year ended September 30, 2002. The increase was primarily
attributable to an increase in compensation and employee benefits of $3.5
million, or 20.0%, primarily related to annual merit raises, staff for new
branches, the payout of an employment agreement and the increased cost of
stock-based compensation plans due to the increase in the market price of the
Company's common stock.
Occupancy and office operations increased by $370,000, or 7.7%, due primarily to
the expenses associated with the branches acquired as part of the acquisition of
The National Bank of Florida (NBF), which branches were owned by the Company for
only five months in fiscal 2002. Advertising and promotion costs increased by
$187,000, or 12.7%, due to additional advertising related to new branches and
products. Increases in loan and deposit accounts generated a volume-related
increase of $472,000, or 19.3%, in data and check processing costs. A focus on
technological development and internal controls resulted in an increase in
professional fees over the same period in 2002 of $427,000, or 42.0%, to $1.4
million. Amortization of intangible assets increased by $152,000, or 53.1%, as
the NBF core deposit amortization was in place for the full year in fiscal 2003,
compared to five months in fiscal 2002. Other expenses increased by $91,000, or
2.1%, due primarily to an increase of $226,000, or 54.5%, in ATM charges related
to the increase in transaction accounts and greater debit card usage.
Income Information - Fourth Fiscal Quarter Ended September 30
- ---------------------------------------------------------------
Net interest income after provision for loan losses for the three months ended
- -----------------------------------------------------
September 30, 2003 was $11.2 million, compared to $11.3 million for the three
months ended September 30, 2002, a decrease of $95,000, or 0.8%. This slight
decrease in net interest income was largely due to lower average yields on loans
and securities, which offset an $82.8 million increase in average earning assets
to $1.045 billion during the quarter ended September 30, 2003, as compared to
$962.3 million for the same quarter in the prior year. Additionally, the Company
invested $12.0 million in BOLI, which decreased earning assets by the same
amount and reclassified earnings of $159,000 to non-interest income. The
increase in average earning assets was offset by a decline in average yield of
110 basis points from 6.44% to 5.34%. A decrease in the average cost of interest
bearing liabilities of 64 basis points led to a $1.3 million drop in interest
expense for the quarter compared to the same quarter in 2002, even as average
interest-bearing liabilities increased by $24.9 million. Net interest margin
declined by 49 basis points to 4.30%, while net interest spread declined by 45
basis points to 4.06%. The provision for loan losses decreased by $200,000 to
$100,000 for the period ended fiscal 2003 compared to $300,000 for the
comparable period in fiscal 2002.
Non-interest income for the three months ended September 30, 2003 was $2.4
- --------------------
million compared to $1.5 million for the three months ended September 30, 2002,
an increase of $818,000, or 52.8%. This increase was primarily attributable to
an increase of $319,000, or 25.1%, in banking fees and service charges. Also
contributing to this increase was the effect of net loan sales gains of $260,000
for the current three-month period, compared to $54,000 for the same period last
year. Other income increased from $53,000 for the three-month period ended
September 30, 2002 to $408,000 for the same period in fiscal 2003. The increase
was attributable to increases in loan fees of $124,000, income from BOLI of
$159,000 in fiscal 2003, and a net gain on the sale of real estate owned of
$109,000 in fiscal 2003.
Non-interest expense for the three months ended September 30, 2003 was $9.7
- ---------------------
million, a $395,000, or 4.3% increase over expense of $9.3 million for the three
months ended September 30, 2002. The increase was primarily attributable to
increases in compensation expenses and occupancy expenses of $575,000, or 11.5%,
and $54,000, or 4.1%, respectively, due to $382,000 related to stock based
compensation plans, annual salary and benefit increases, an increase of $88,000
in pension plan expense, a net increase of $76,000 in medical benefits (all of
which were partially offset by a $222,000 increase in deferred origination costs
related to the higher production of loans in the fourth quarter of 2002) and the
opening of a new branch in February 2003. Data and check processing expense also
increased by $43,000, or 6.0%, related to higher deposit and loan volumes.
Integration costs decreased by $173,000 as the costs incurred in the fourth
quarter of 2002 represent the final merger-related costs associated with the NBF
acquisition, while the current period costs are for the pending acquisition of
Ellenville National Bank. Amortization of branch purchase premiums declined by
$43,000 in accordance with the valuation schedule for the NBF deposits acquired.
Other non-interest expenses for the current three-month period increased by
$21,000, or 1.8%, over the comparable period last year, primarily due to an
increase of $50,000 in charitable contributions.
Other financial information is included in the tables that follow.
Note:
In addition to historical information, this earnings release contains
forward-looking statements. For this purpose, any statements contained herein
that are not statements of historical fact may be deemed to be forward-looking
statements. There are a number of important factors that could cause the
Company's actual results to differ materially from those contemplated by such
forward-looking statements. The Company undertakes no obligation to publicly
release the results of any revisions to those forward-looking statements which
may be made to reflect events or circumstances after the date of this release or
to reflect the occurrence of unanticipated events.
Provident Bancorp, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited)
(in thousands)
September 30, September 30,
2003 2002
---- ----
Assets:
Cash and due from banks $ 38,568 $ 35,093
Total securities 374,259 292,937
Loans held for sale 2,364 ---
Loans:
One-to four-family residential mortgage loans 380,776 366,111
Commercial real estate, commercial business
and construction loans 252,857 221,669
Consumer loans 80,620 83,419
-------------- --------------
Total loans 714,253 671,199
Allowance for loan losses (11,069) (10,383)
-------------- --------------
Total loans, net 703,184 660,816
-------------- --------------
Federal Home Loan Bank stock, at cost 8,220 5,348
Premises and equipment, net 11,647 11,071
Goodwill 13,540 13,540
Bank owned life insurance 12,483 ---
Other assets 10,040 8,896
-------------- --------------
Total assets $ 1,174,305 $ 1,027,701
============== ==============
Liabilities:
Deposits:
Transaction accounts $ 225,376 $ 193,114
Savings and money market deposits 407,939 362,983
Certificates of deposit 236,238 243,529
-------------- --------------
Total deposits 869,553 799,626
Borrowings 164,757 102,968
Mortgage escrow funds 3,949 3,747
Other 18,189 10,493
-------------- --------------
Total liabilities 1,056,448 916,834
Stockholders' equity 117,857 110,867
-------------- --------------
Total liabilities and stockholders' equity $ 1,174,305 $ 1,027,701
============== ==============
Common shares outstanding at period end 7,946,521 7,997,512
Book value per share $ 14.83 $ 13.86
Provident Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited)
(in thousands)
For the Three Months For the 12 Months
Ended September 30, Ended September 30,
2003 2002 2003 2002
----------- ---------- ---------- ----------
Interest and dividend income
Loans $ 10,616 $ 11,533 $ 43,815 44,967
Securities 3,362 3,950 13,586 14,496
Other earning assets 97 139 389 488
----------- ---------- ---------- ----------
Total interest and dividend income 14,075 15,622 57,790 59,951
----------- ---------- ---------- ----------
Interest expense:
Deposits 1,628 2,820 7,775 11,701
Borrowings 1,121 1,181 4,285 5,500
----------- ---------- ---------- ----------
Total interest expense 2,749 4,001 12,060 17,201
----------- ---------- ---------- ----------
Net interest income 11,326 11,621 45,730 42,750
Provision for loan losses 100 300 900 900
----------- ---------- ---------- ----------
Net interest income after provision for loan losses 11,226 11,321 44,830 41,850
----------- ---------- ---------- ----------
Non-interest income:
Banking fees and service changes 1,588 1,269 4,987 4,201
Gain on sales of securities available for sale 111 173 2,006 461
Gain on sales of loans 260 54 1,096 146
Other 408 53 1,466 593
----------- ---------- ---------- ----------
Total non-interest income 2,367 1,549 9,555 5,401
----------- ---------- ---------- ----------
Non-interest expense:
Compensation and employee benefits 5,594 5,019 20,703 17,246
Occupancy and office operations 1,367 1,313 5,178 4,808
Advertising and promotion 368 440 1,657 1,470
Professional fees 333 301 1,443 1,016
Data and check processing costs 762 719 2,923 2,451
Merger integration costs 4 177 4 531
Amortization of intangible assets 93 136 438 286
Other 1,133 1,154 4,444 4,353
----------- ---------- ---------- ----------
Total non-interest expense 9,654 9,259 36,790 32,161
----------- ---------- ---------- ----------
Income before income tax expense 3,939 3,611 17,595 15,090
Income tax expense 1,355 1,354 6,344 5,563
----------- ---------- ---------- ----------
Net income $ 2,584 $ 2,257 $ 11,251 $ 9,527
=========== ========== ========== ==========
Per common share:
Basic earnings $ 0.34 $ 0.29 $ 1.46 $ 1.24
Diluted earnings $ 0.33 $ 0.29 $ 1.44 $ 1.22
Dividends declared $ 0.15 $ 0.12 $ 0.57 $ 0.41
Weighted average common shares:
Basic 7,707,877 7,706,036 7,712,929 7,702,253
Diluted 7,836,144 7,833,597 7,823,276 7,820,055
Provident Bancorp, Inc.
SELECTED ADDITIONAL FINANCIAL DATA
(unaudited)
($ in thousands, except per share data)
September 30, September 30,
2003 2002
-------------- -------------
Asset Quality Data:
Non-performing loans (NPLs) $ 4,697 $ 4,954
Non-performing assets (NPAs) $ 4,697 $ 4,995
NPLs as % of total loans 0.66% 0.74%
NPAs as % of total assets 0.40% 0.49%
Allowance for loan losses as % of NPLs 235.66% 209.59%
Allowance for loan losses as % of total loans 1.55% 1.55%
Capital Ratios:
Equity to total assets (consolidated) 10.04% 10.79%
Tier 1 capital ratio (Bank only) 8.14% 8.45%
Three Months Ended Fiscal Year Ended
September 30, September 30,
2003 2002 2003 2002
---------- ----------- ----------- ---------
Performance Ratios (annualized):
Return on average assets 0.90% 0.87% 1.04% 0.99%
Return on average equity 8.91% 8.14% 9.92% 8.92%
Net interest rate spread 4.06% 4.51% 4.30% 4.33%
Net interest margin 4.30% 4.79% 4.55% 4.71%
Average Balance Data:
Average assets $1,133,447 $ 1,034,333 $ 1,082,562 $ 957,914
Average earnings assets 1,045,164 962,319 1,004,484 907,722
Average stockholders' equity 115,054 109,995 113,369 106,787