SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K/A
Amendment No. 1
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the Fiscal Year Ended September 30, 2003
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: 0-25233
PROVIDENT BANCORP, INC.
------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 80-0091851
- ------------------------------ ----------------------
(State or Other Jurisdiction of (IRS Employer
Incorporation or Organization) Identification Number)
400 Rella Blvd., Montebello, New York 10901
- --------------------------------------- ----------
(Address of Principal Executive Office) (Zip Code)
(845) 369-8040
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(Registrant's Telephone Number including Area Code)
Securities Registered Pursuant to Section 12(b) of the Act: None
Securities Registered Pursuant to Section 12(g) of the Act:
Common stock, par value $0.01 per share
---------------------------------
(Title of Class)
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 check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendments to
this Form 10-K. YES NO X
----- -----
Indicate by check mark whether to Registrant is an accelerated filer (as
defined in Rule 12b-2 of the Securities Act of 1934). YES X NO
--- ---
As of December 15, 2003, there were issued and outstanding 7,947,321 shares
of the Registrant's common stock. The aggregate market value of the voting stock
held by non-affiliates of the Registrant, computed by reference to the closing
price of the common stock as of December 15, 2003, was $135,774,624.
DOCUMENTS INCORPORATED BY REFERENCE
None.
PROVIDENT BANCORP, INC.
FORM 10-K/A TABLE OF CONTENTS
September 30, 2003
PART III..........................................................................................................3
ITEM 10.Directors and Executive Officers of the Registrant..................................................3
ITEM 11.Executive Compensation..............................................................................4
ITEM 12.Security Ownership of Certain Beneficial Owners and Management & Related Stockholder Matters.......14
ITEM 13.Certain Relationships and Related Transactions.....................................................14
SIGNATURES.......................................................................................................15
Exhibit 31.1.....................................................................................................16
Exhibit 31.2.....................................................................................................17
PART III
ITEM 10. Directors and Executive Officers of the Registrant
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Directors and Executive Officers
As of January 15, 2004 the Board of Directors of Provident Bancorp, Inc.
("Provident Bancorp") is comprised of twelve members. Provident Bancorp's bylaws
provide that approximately one-third of the directors are to be elected
annually. Directors of Provident Bancorp are generally elected to serve for a
three-year period and until their respective successors shall have been elected
and shall qualify.
The table below sets forth certain information, as of January 15, 2004,
regarding current members of our Board of Directors and Executive Officers who
are not Directors, including the terms of office of board members. Share
information in this table reflects the 4.4323-for-one stock split resulting from
the mutual-to-stock conversion of Provident Bancorp, MHC, which was completed on
January 14, 2004.Share information presented elsewhere in this document reflects
information as of or prior to that date, and does not reflect the stock
split.
3
Position(s) Held With Shares
-------------------------- Director Current Beneficially Percent of
Name Provident Bancorp Age Since(1) Term Expires Owned Class
---- ----------------- --- -------- ------------ ----- -----
DIRECTORS
William F. Helmer Chairman of the Board 69 1974 2004 413,206(2) 1.0%
Dennis L. Coyle Vice Chairman 67 1984 2005 423,314(3) 1.1
George Strayton President, Chief 60 1991 2005 796,108(4) 2.0
Executive Officer and
Director
Judith Hershaft Director 62 2000 2006 132,273(5) *
Thomas F. Jauntig, Jr. Director 59 2000 2006 73,014(5) *
Victoria Kossover Director 48 2004 2005 2,607 *
Donald T. McNelis Director 70 1987 2006 200,328(6) *
Richard A. Nozell Director 69 1990 2006 134,345(7) *
Carl J. Rosenstock Director 50 2004 2006 71,413 *
William R. Sichol, Jr. Director 63 1990 2004 211,514(8) *
Burt Steinberg Director 58 2000 2005 184,400(5) *
F. Gary Zeh Director 65 1979 2004 292,506(3) *
EXECUTIVE OFFICERS WHO ARE NOT DIRECTORS
Daniel G. Rothstein Executive Vice President, 56 N/A N/A 321,891(9) *
Chief Risk Management
Officer, Regulatory
Counsel and Corporate
Secretary
Robert J. Sansky Executive Vice President 57 N/A N/A 197,255(10) *
and Chief Retail
Banking Officer
Paul A. Maisch Senior Vice President and 48 N/A N/A 33,000 *
Chief Financial Officer
Stephen G. Dormer Senior Vice President 52 N/A N/A 158,410(11) *
John F. Fitzpatrick Senior Vice President and 51 N/A N/A 173,044(12) *
Director of Support
Services
All Directors and 3,818,628(13) 9.4%
Executive Officers as ============ ===
a Group (17 persons)
- -------------------------------------------------------
* Less than 1%.
(1) Includes service with Provident Bank in mutual form.
(2) Includes 6,422 shares of common stock granted pursuant to Provident Bank's
2000 Recognition and Retention Plan (the "Recognition Plan") over which the
individual has voting power, and 44,947 shares that can be acquired
pursuant to stock options within 60 days of January 15, 2004.
(3) Includes 6,422 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 44,908 shares that can
be acquired pursuant to stock options within 60 days of January 15, 2004.
(4) Includes 42,816 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 353,954 shares that
can be acquired pursuant to stock options within 60 days of January 15,
2004.
(5) Includes 48,753 shares that can be acquired pursuant to stock options
within 60 days of January 15, 2004.
(6) Includes 6,422 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 36,987 shares that the
individual has the right to acquire pursuant to stock options within 60
days of January 15, 2004.
(7) Includes 6,422 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 48,755 shares that the
individual has the right to acquire pursuant to stock options within 60
days of January 15, 2004.
(8) Includes 6,422 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 48,755 shares that can
be acquired pursuant to stock options within 60 days of January 15, 2004.
(9) Includes 18,846 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 57,411 shares that can
be acquired pursuant to stock options within 60 days of January 15, 2004.
(10) Includes 15,530 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 65,088 shares that can
be acquired pursuant to stock options within 60 days of January 15, 2004.
(11) Includes 13,704 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 66,555 shares that can
be acquired pursuant to stock options within 60 days of January 15, 2004.
(12) Includes 13,704 shares of common stock granted pursuant to the Recognition
Plan over which the individual has voting power, and 66,511 shares that can
be acquired pursuant to stock options within 60 days of January 15, 2004.
(13) Includes 136,710 shares of common stock granted pursuant to the Recognition
Plan over which the individuals have voting power, and 882,624 shares that
can be acquired pursuant to stock options within 60 days of January 15,
2004.
4
The business experience for the past five years for each of our directors
and executive officers is as follows:
William F. Helmer has served as the Chairman of the board of directors of
Provident Bank since 1994 and Chairman of the board of directors of Provident
Bancorp since its formation in 1999. Mr. Helmer is the President of
Helmer-Cronin Construction, Inc., a construction company.
Dennis L. Coyle has served as Vice Chairman of the board of directors of
Provident Bank since 1994 and Vice Chairman of the board directors of Provident
Bancorp since its formation in 1999. Mr. Coyle is the owner and President of
Denlo Realty Corp., the owner of Dennis L. Coyle Rental Properties, and is
formerly the co-owner of the Coyle Insurance Agency, Inc.
George Strayton has been employed by Provident Bank since 1982, was named
President and Chief Executive Officer of Provident Bank in 1986, and has served
as President and Chief Executive Officer of Provident Bancorp since its
formation in 1999.
Judith Hershaft is the Chief Executive Officer of Innovative Plastics
Corp., a manufacturer of custom plastic products. She is also the Chairman of
Greenway Plastics and Innovative Plastics South Corp.
Thomas F. Jauntig, Jr. is a partner in Korn, Rosenbaum, Phillips & Jauntig
LLP, certified public accountants.
Victoria Kossover is a partner in Kossover Law Offices.
Dr. Donald T. McNelis served as President of St. Thomas Aquinas College in
Sparkill, New York from 1974 until his retirement in 1995.
Richard A. Nozell is the owner of Richard Nozell Building Construction and
serves as a general building contractor.
Carl J. Rosenstock is Secretary-Treasurer of General Sportswear Co., Inc.,
a manufacturer of children's apparel.
William R. Sichol, Jr. is a principal of Sichol & Hicks, P.C., a private
law firm.
Burt Steinberg is the Executive Director of The Dress Barn, Inc., a woman's
specialty store retailer.
F. Gary Zeh is the President of Haverstraw Transit Inc., a bus contracting
company, and President of Quality Bus Sales and Service, Inc.
Daniel G. Rothstein has been employed by Provident Bank since 1983, and was
named Executive Vice President in 1989. Mr. Rothstein served as Provident Bank's
Chief Credit Officer and Regulatory Counsel from 1996 until August 2003, when he
was appointed Chief Risk Management Officer. Mr. Rothstein was appointed
Corporate Secretary in December 2003.
Robert J. Sansky has been employed by Provident Bank since 1985, and was
named Executive Vice President in 1989. Mr. Sansky served as Provident Bank's
Director of Human Resources from 1996 until August 2003, when he was appointed
Chief Retail Banking Officer.
Paul A. Maisch has served as Senior Vice President and Chief Financial
Officer of Provident Bank and Provident Bancorp since March 2003. From 1998
through 2001, Mr. Maisch served as Executive Vice President and Chief Financial
Officer of Premier National Bancorp, Inc., and had been employed by Premier
National Bancorp, Inc. and its predecessors since 1984.
5
Stephen G. Dormer was named Senior Vice President of Provident Bank in 1994
and served as Provident Bank's Director of Business Development from 1996 until
August 2003, when he was appointed Assistant to the Office of the President,
Strategic Planning and Commercial Lending Officer.
John F. Fitzpatrick has been employed by Provident Bank since 1986, and was
named Senior Vice President and Director of Support Services in 1997.
Provident Bancorp has determined that Director Jauntig qualifies as an
"audit committee financial expert " and is serving as such for Provident
Bancorp's audit committee. Director Jauntig is "independent" of Provident
Bancorp, as that term is defined in Item 7(d)(3)(iv) of Schedule 14A under the
Securities and Exchange Act of 1934, as amended.
Section 16(a) Beneficial Ownership Reporting Compliance
Provident Bancorp's common stock is registered pursuant to Section 12(g) of
the Securities Exchange Act of 1934. The Executive Officers and Directors of
Provident Bancorp and beneficial owners of greater than 10% of the outstanding
shares of common stock ("10% beneficial owners") are required to file reports on
Forms 3, 4 and 5 with the Securities and Exchange Commission disclosing
beneficial ownership and changes in beneficial ownership of the common stock.
SEC rules require disclosure in the Proxy Statement and Annual Report on Form
10-K of the failure of an officer, director or 10% beneficial owner of the
common stock to file a Form 3, 4 or 5 as required. Based on Provident Bancorp's
review of ownership reports, no Executive Officer, Director or 10% beneficial
owner of Provident Bancorp's shares of common stock failed to file ownership
reports as required for the year ended September 30, 2003.
Code of Ethics
Provident Bancorp has adopted a Code of Ethics that is applicable to all of
its Directors, Officers and employees. The Code of Ethics has previously been
filed with the Securities and Exchange Commission as an exhibit to Provident
Bancorp's Annual Report on Form 10-K for the Year Ended September 30, 2003.
ITEM 11. Executive Compensation
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Compensation of Directors
Fees. Directors of Provident Bank receive an annual retainer fee of
$24,000. Chairman Helmer receives a retainer fee of $80,000. Directors also
receive a fee of $1,000 per Board meeting attended and $500 per committee
meeting attended. The chairman of each committee receives an additional $2,000
per year. Directors who are also employees of Provident Bank are not eligible to
receive any fees for their service as a director.
Deferred Compensation Agreements. Provident Bank has entered into
non-qualified deferred compensation agreements for the benefit of each of its
directors who elect to defer all or a portion of their board fees earned during
a calendar year. When a director reaches the mandatory retirement age, the
director's account is generally paid to him or her in quarterly installments
beginning on the first day of the first calendar quarter after the director
becomes entitled to such payments and continuing for five years. A director may
request to receive distributions from his or her account prior to the attainment
of mandatory retirement age, or that such distributions be paid over a longer
period of time of not more than ten years. In the event of the director's death,
the balance of the director's account will be paid to the director's designated
beneficiary in the same manner as it would otherwise have been paid to the
director, if living, and commencing in the first calendar quarter after death A
director may also request an early distribution from his or her account in the
event the director suffers a hardship. The granting of a hardship distribution
is within the sole direction of the board of directors and any hardship
distribution is limited to the amount reasonably necessary to meet the hardship.
6
All obligations arising under the deferred compensation agreements are payable
front Provident Bank's general assets; however, Provident Bank has established a
trust to help ensure that sufficient assets will be available to pay the
benefits under the deferred compensation agreements. The investments under the
deferred compensation agreements, as well as the distributions to the
participating directors, are handled by an independent trustee that holds and
accumulates the assets set aside to pay the benefits under the agreements.
Stock Benefit Plans. During the fiscal year ended September 30, 2000,
Provident Bank adopted, and Provident Bancorp's stockholders approved, the
Provident Bank 2000 Recognition and Retention Plan and the Provident Bank 2000
Stock Option Plan. Pursuant to the recognition and retention plan, 7,245 shares
of Provident Bancorp common stock were awarded to non-employee directors Coyle,
Helmer, McNelis, Nozell, Sichol, and Zeh. Pursuant to the stock option plan,
options to purchase 11,000 shares of common stock were granted to non-employee
Directors Coyle, Helmer, Hershaft, Jauntig, McNelis, Nozell, Sichol, Steinberg
and Zeh. During the fiscal year ended September 30, 2003, there were no grants
of shares of common stock or options to purchase shares of common stock to
directors of Provident Bancorp.
Summary Compensation Table
The following table sets forth for the three years ended September 30,
2003, certain information as to the total remuneration paid by Provident Bancorp
to its Chief Executive Officer, and Provident Bancorp's other four most highly
compensated Executive Officers at September 30, 2003 who received total annual
compensation in excess of $100,000 (together, "Named Executive Officers").
Long-Term Compensation
--------------------------------------------------------------
Annual Compensation Awards Payouts
-------------------------- ------------------------- -----------------------------------
Year Other Annual Restricted Options/
Name and Principal Ended Compensation Stock SARS LTIP All Other
Position (1) 9/30 Salary Bonus (2) Awards(3) (#) Payouts Compensation(4)
- ------------------------- ----- ------ ----- ------------ ----------- ------- -------- ---------------
George Strayton, 2003 $387,750 $ 235,200 $ -- -- 3,185(5) $ -- $ 95,265
President, Chief 2002 368,750 196,875 -- -- 7,746(5) -- 43,057
Executive Officer and 2001 344,000 183,750 -- -- 4,731(5) -- 32,982
Director
Daniel G. Rothstein, 2003 $200,750 $ 76,125 $ -- -- 1,590(5) $ -- $ 28,601
Executive Vice President, 2002 191,250 72,750 -- -- 11,785(5) -- 20,748
Chief Risk Management 2001 180,693 68,625 -- -- -- -- 16,011
Officer, Regulatory
Counsel and Corporate
Secretary
Robert J. Sansky, 2003 $179,400 $ 67,950 $ -- -- -- $ -- $ 25,270
Executive Vice President, 2002 167,625 65,250 -- -- 4,885(5) -- 19,937
and Chief Retail Banking 2001 163,469 62,063 -- -- -- -- 15,508
Officer
Stephen G. Dormer, Senior 2003 $161,600 $ 61,275 $ -- -- -- $ -- $ 14,019
Vice President, Assistant 2002 154,075 58,575 -- -- 1,994(5) -- 10,150
to the Office of the 2001 146,085 55,388 -- -- -- -- 7,646
President, Strategic
Planning and Commercial
Lending Officer
John F. Fitzpatrick, 2003 $144,800 $ 54,900 $ -- -- -- $ -- $ 11,032
Senior Vice President and 2002 144,231 52,500 -- -- 1,994(5) -- 6,511
Director of Support 2001 124,231 47,813 -- -- -- -- 5,407
Services
7
- ------------------------
(1) Information is not included for Senior Vice President and Chief Financial
Officer Paul Maisch, who commenced employment in March 2003.
(2) Provident Bank provides certain members of senior management with certain
other personal benefits, the aggregate value of which did not exceed the
lesser of $50,000 or 10% of the total annual salary and bonus reported for
each officer. The value of such personal benefits is not included in this
table.
(3) Represents the fair market value of shares granted pursuant to the
Provident Bank 2000 Recognition and Retention Plan. Dividends are paid on
the restricted stock and participants can vote the restricted stock to the
extent shares have vested or are available for issuance. At January 15,
2004 the following shares of unvested restricted stock awards were held by
the named executive officers: 19,320 shares for Mr. Strayton with a market
value of $811,826; 4,252 shares for Mr. Rothstein with a market value of
$178,669; 3,504 shares for Mr. Sansky with a market value of $147,238;
3,092 shares for Mr. Dormer with a market value of $129,926; and 3,092
shares for Mr. Fitzpatrick with a market value of $129,926.
(4) Includes employer contributions to a 401(k) plan, allocations under the
Supplemental Executive Retirement Plan as well as the payment of premiums
for life insurance policies.
(5) Represents reload options received upon the exercise of stock options when
previously owned shares of common stock were utilized to pay the option
exercise price.
Employment Agreements
In January 1996, Provident Bank entered into an employment agreement with
President and Chief Executive Officer George Strayton, which agreement was
amended in 1998. On each day during the term of the agreement, the term of the
agreement automatically renews so that the term of the agreement remains three
years unless notice of non-renewal is provided at least 60 days prior to the
anniversary date of the agreement. In the event that notice of non-renewal is
given, the agreement will expire at the end of its then three-year term. Under
the agreement, Mr. Strayton will be paid an annual rate of salary, which is
$392,000 for the year ended September 30, 2003. For each calendar year beginning
after a change in control (as defined in the agreement) of Provident Bank or
Provident Bancorp, Mr. Strayton's annual salary will be increased by a formula
set forth in the agreement. In addition to his annual salary, Mr. Strayton is
entitled to participate in all of Provident Bank's tax-qualified plans and other
incentive programs, and Provident Bank's group life, health, dental and
disability plans.
In the event Provident Bank terminates Mr. Strayton's employment for any
reason other than for cause (as defined in the agreement), in the event of his
voluntary resignation within one year following a demotion in title or duties or
a change in control of Provident Bank or Provident Bancorp, or in the event of
termination of his employment due to total and permanent disability, Mr.
Strayton will be entitled to certain benefits payable by Provident Bank. These
benefits include his earned but unpaid salary, continuation of his life, health
and disability insurance benefits for the remaining unexpired employment period
under the agreement, and continued health insurance for Mr. Strayton and his
spouse for their remaining lifetimes. Mr. Strayton also will be entitled to
certain lump sum payments, such as the present value of any salary and
director's fees that he would have earned for the remaining unexpired employment
period under the agreement, although Mr. Strayton does not currently receive
director's fees. Within 60 days of termination of his employment, Mr. Strayton
also will be entitled to payments relating to Provident Bank's defined benefit
pension plan, 401(k) Plan, employee stock ownership plan and Supplemental
Executive Retirement Plan. Mr. Strayton will also be entitled to immediate
vesting of any unearned options or shares of restricted stock awarded to him
under any stock benefit plan maintained by Provident Bancorp, and the payments
that would have been made to him under all incentive compensation plans and
programs adopted by Provident Bank, including the Management Incentive Program.
In the event that Provident Bank gives Mr. Strayton a notice of non-renewal, or
if Provident Bank does not extend the employment period at least 60 days prior
to any renewal date set forth under the agreement, Mr. Strayton may resign from
Provident Bank at any time and will receive a lump sum cash benefit within 30
days equal to the amounts set forth above. Also, in such event Provident Bank
will provide the life and health insurance benefits set forth above. In the
event that Mr. Strayton becomes subject to an excise tax on payments made under
the agreement in connection with a change in control, Mr. Strayton will be
reimbursed an amount determined pursuant to a formula set forth in the agreement
for payment of such excise taxes by Provident Bank, so long as during the
six-month period prior to such change in control Provident Bank was in
compliance with all applicable minimum regulatory capital requirements. For a
period of one year following the date of his termination for cause, the
agreement provides that Mr. Strayton shall not compete with Provident Bank.
Provident Bank has entered into employment agreements with Messrs.
Rothstein, Sansky, Dormer and Fitzpatrick. The employment agreements are for
terms of up to two years and renew on a daily basis so that the remaining term
under the agreements is for up to two years unless notice of non-renewal is
given. In the event of a change in control (as defined in the agreements), the
terms of the employment agreements extend to three years. Each executive officer
8
covered by an employment agreement receives an annual rate of salary, as
specified in the employment agreement, and will be entitled to participate in
all of Provident Bank's tax-qualified plans and other incentive programs, and
any group life, health, and disability plans maintained by Provident Bank from
time to time. The employment agreements for these officers are substantially
similar to the employment agreement with Mr. Strayton except that health
insurance for these officers does not continue for their lifetimes following
termination of the agreement.
Stock Option Plan
During the fiscal year ended September 30, 2000, Provident Bank adopted,
and Provident Bancorp's stockholders approved, the Provident Bank 2000 Stock
Option Plan. Set forth in the table that follows is information relating to
options granted under the stock option plan to the Named Executive Officers
during the fiscal year ended September 30, 2003.
OPTION GRANTS IN FISCAL YEAR 2003
- --------------------------------------------------------------------------------------------------------------------
Individual Grants
- --------------------------------------------------------------------------------------------------------------------
Percent of Total
Options Granted Exercise
Options to Employees in or Base Expiration Grant Date Present Value
Name Granted (1) Fiscal 2003 Price (2) Date (3)
- ------------------------- -------------- ----------------- ---------- ----------- -----------------------
George Strayton 3,185 30.0% $31.39 2/22/2010 $15,893
2/22/2010
Daniel G. Rothstein 1,590 15.0% $31.19 2/22/2010 $7,934
2/22/2010
Robert J. Sansky -- -- -- 2/22/2010 --
2/22/2010
Stephen G. Dormer -- -- -- 2/22/2010 --
John F. Fitzpatrick -- -- -- 2/22/2010 --
_____________________________
(1) Represents reload options received upon the exercise of stock options when
previously owned shares of common stock were utilized to pay the option
exercise price.
(2) The exercise price of the options is equal to the fair market value of the
underlying shares on the date of the award.
(3) Based on a grant date present value of $4.99 per share derived using the
Black-Scholes option pricing model with the following assumptions:
volatility of 14.67%; risk-free rate of return of 3.30%; dividend yield of
1.80%; and a 4.77-year option life.
9
Set forth below is certain information concerning options outstanding to
the Named Executive Officers at September 30, 2003, and the options exercised by
the Named Executive Officers during 2003.
AGGREGATE OPTION EXERCISES IN 2003 FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
- --------------------------------------------------------------------------------------------------------------------
Number of Unexercised Value of Unexercised
Options at In-The-Money Options at
Year-End Year-End (1)
-------------------------- --------------------------
Shares Acquired Value Exercisable/Unexercisable Exercisable/Unexercisable
Name Upon Exercise Realized (#) --------------------------
- ------------------------- --------------- ---------- --------------------------
George Strayton 6,451 $ 102,506 61,858/18,000 $ 1,483,328/$477,360
Daniel G. Rothstein 3,200 $ 50,208 7,323/ 5,630 $ 106,880/$124,361
Robert J. Sansky -- -- 11,045/ 3,640 $ 238,451/$ 96,533
Stephen G. Dormer -- -- 11,776/ 3,240 $ 293,955/$ 85,925
John F. Fitzpatrick -- -- 11,766/ 3,240 $ 293,530/$ 85,925
- ------------------------------------
(1) Equals the difference between the aggregate exercise price of such options
and the aggregate fair market value of the shares of common stock that
would be received upon exercise, assuming such exercise occurred on
September 30, 2003, at which date the last trade price of the common stock
as quoted on the Nasdaq National Market was $42.02.
Supplemental Executive Retirement Plan
Provident Bank maintains a non-qualified supplemental executive retirement
plan to compensate executives whose benefits under Provident Bank's
tax-qualified benefit plans are limited by the Internal Revenue Code of 1986, as
amended. The supplemental executive retirement plan provides executives with
retirement benefits generally equal to the difference between (i) the annual
benefit the executive would have received under Provident Bank's defined benefit
pension plan if such benefits were computed without giving effect to the
limitations on benefits imposed by the Internal Revenue Code, and (ii) the
amounts actually payable to the executive under the terms of the defined benefit
pension plan. In addition, the executive is entitled to a 401(k) benefit under
the supplemental executive retirement plan equal to the product of (i) Provident
Bank's contributions that could not be credited to his or her account in the
Provident Bank 401(k) Plan due to applicable limitations (including the
limitation on elective deferrals under Internal Revenue Code Section 402(g))
plus an earnings factor, and (ii) his or her vested percentage in the 401(k)
Plan. The supplemental executive retirement plan was amended in connection with
the adoption of the employee stock ownership plan so that an executive who does
not receive the maximum contribution under the employee stock ownership plan due
to an applicable limitation will be entitled to an employee stock ownership plan
benefit under the supplemental executive retirement plan, credited in units of
common stock, equal to the difference between the fair market value of the
number of shares of common stock that would have been allocated to the account
of the executive under the employee stock ownership plan had the limitations
under the Internal Revenue Code not been applicable, and the fair market value
of the number of shares of common stock actually allocated to the account of the
executive. The supplemental executive retirement plan is considered an unfunded
plan under the Internal Revenue Code and the Employee Retirement Income Security
Act of 1974, as amended ("ERISA") purposes. All obligations arising under the
supplemental executive retirement plan are payable from the general assets of
Provident Bank; however, Provident Bank has established a trust to ensure that
sufficient assets will be available to pay the benefits under the supplemental
executive retirement plan. The trust is entitled to purchase shares of common
stock to fund the employee stock ownership plan benefit under the supplemental
executive retirement plan.
As of December 31, 2003, Messrs. Strayton and Rothstein had accrued annual
benefits of $74,904 and $2,280, respectively, under the Retirement Plan portion
of the supplemental executive retirement plan, which would be payable upon their
reaching age 65. Contributions to the supplemental executive retirement plan
under the 401(k) and employee stock ownership plan portions of the supplemental
executive retirement plan are included in "--Summary Compensation Table" above.
10
Defined Benefit Pension Plan
Provident Bank maintains the Provident Bank Defined Benefit Pension Plan,
which is a qualified, tax-exempt defined benefit plan. Employees age 21 or older
who have worked at Provident Bank for a period of one year and have been
credited with 1,000 or more hours of service with Provident Bank during the year
are eligible to accrue benefits under this plan. Provident Bank contributes each
year, if necessary, an amount to the Retirement Plan at least equal to the
actuarially determined minimum funding requirements in accordance with ERISA.
For the plan year ended September 30, 2003 a contribution of $1.2 million was
made to the Retirement Plan. At September 30, 2003, the total market value of
the Defined Benefit Pension Plan trust fund assets was approximately $9.9
million.
In the event of retirement at normal retirement age (i.e., the later of age
65 or the 5th anniversary of participation in the Defined Benefit Pension Plan),
the plan provides a single life annuity. For a married participant, the normal
form of benefit is an actuarially reduced joint and survivor annuity where, upon
the participant's death, the participant's spouse is entitled to receive a
benefit equal to 50% of that paid during the participant's lifetime.
Alternatively, a participant may elect (with proper spousal consent, if
necessary) a joint and 100% survivor annuity, a joint and 75% survivor annuity,
a different form of annuity, or installments payable over a period of not more
than the life of the participant (and spouse, if applicable). Payment may be
made in a lump sum in cash, provided the participant has completed 20 years of
service with Provident Bank and attained age 55 or has attained normal
retirement age. All forms in which a participant's benefit may be paid will be
actuarially equivalent to the single life annuity. The monthly retirement
benefit provided is an amount equal to the greater of a participant's frozen
accrued benefit (as provided for in the Retirement Plan) or 1.6% of a
participant's average monthly compensation, multiplied by the participant's
years of service (up to a maximum of 35 years) plus 0.5% of the participant's
average monthly compensation in excess of one-twelfth of the participant's
Covered Compensation (as defined in the Defined Benefit Pension Plan) multiplied
by the participant's months of service (up to a maximum of 35 years), computed
to the nearest dollar. Retirement benefits are also payable upon retirement due
to early and late retirement or death and disability. A reduced benefit is
payable upon early retirement at or after age 55 and the completion of 10 years
of vested service with Provident Bank. No reduction in benefit will occur as a
result of special early retirement on or after age 62 and the completion of 20
years of vested service, if payment is made at the time of retirement. Upon
termination of employment other than as specified above, a participant who has
five years of vested service is eligible to receive his or her accrued benefit
commencing on such participant's retirement date, death or disability.
The following table indicates the annual retirement benefit that would be
payable under the Defined Benefit Pension Plan upon retirement at age 65 in
calendar year 2004, expressed in the form of a single life annuity for the
average monthly salary and benefit service classifications specified below.
Average Years of Service and Annual Benefit Payable at Retirement
Monthly ---------------------------------------------------------
Compensation 15 20 25 30 35
- ------------------------- -------- -------- --------- --------- -----------
$ 4,167 $ 12,284 $ 16,378 $ 20,473 $ 24,567 $ 28,662
6,250 20,157 26,876 33,596 40,315 47,034
8,333 28,031 37,375 46,718 56,062 65,406
10,417 35,909 47,878 59,848 71,817 83,787
14,167 50,084 66,778 83,473 100,167 116,862
16,667 and above(1) 59,500 79,400 99,200 119,100 138,900
____________________
(1) Reflects the maximum benefit payable under the Retirement Plan due to tax
law limitations.
As of September 30, 2003, Messrs. Strayton, Rothstein, Sansky, Dormer and
Fitzpatrick had 21, 21, 18, 9 and 17 years, respectively, of credited service
(i.e., benefit service) under the Retirement Plan.
11
Stock Performance Graph
Set forth below is a stock performance graph comparing the yearly total
return on Provident Bancorp's shares of common stock, commencing with the
closing price on January 8, 1999, the first day Provident Bancorp's shares of
common stock were publicly traded, with (a) the cumulative total return on
stocks included in the Nasdaq - Total US Index, and (b) the cumulative total
return on stocks included in the SNL Mid-Atlantic Thrift Index.
There can be no assurance that Provident Bancorp's stock performance will
continue in the future with the same or similar trend depicted in the graph.
Provident Bancorp will not make or endorse any predictions as to future stock
performance.
[OBJECT OMITTED PLOTTED POINTS BELOW]
1/8/99 9/30/99 9/30/00 9/30/01 9/30/02 9/30/03
- -------------------------------------------------------------------------------------
Provident Bancorp 100.00 107.87 132.18 184.91 247.42 371.92
Nasdaq - Total US Index* 100.00 117.43 157.32 64.41 50.57 77.46
SNL Mid-Atlantic Thrift Index 100.00 81.91 90.23 127.15 153.62 219.30
________________
* Source: CRSP, Center for Research in Security Prices, Graduate School of
Business, The University of Chicago 2003
12
Report of the Compensation Committee
Under rules established by the Securities and Exchange Commission,
Provident Bancorp is required to provide certain data and information in regard
to the compensation and benefits provided to Provident Bancorp's Chief Executive
Officer and other executive officers of Provident Bancorp. The disclosure
requirements for the Chief Executive Officer and other executive officers
include the use of tables and a report explaining the rationale and
considerations that led to fundamental executive compensation decisions
affecting those individuals. In fulfillment of this requirement, the Executive
Compensation Committee of Provident Bank, at the direction of the Board of
Directors, has prepared the following report for inclusion in this proxy
statement.
The executive compensation program of Provident Bank is designed to attract
and retain experienced, motivated and productive officers who will help
Provident Bank reach its strategic and financial objectives. The compensation
program is made up of base salary, short- and long-term incentive compensation,
and benefits. The following is a discussion of each component of the
compensation program:
o Base Salary. Salaries paid to executives are designed to be competitive
with other financial institutions of similar size and locations. Salaries
are paid for performance and the successful completion of job description
responsibilities and accompanying standards.
o Incentive Compensation. Provident Bank provides short-term cash incentive
opportunities (the "Management Incentive Program") based upon Provident
Bank's profitability. Provident Bank also offers long-term incentives in
the form of stock options awarded under the Provident Bank 2000 Stock
Option Plan and restricted stock awarded under the Provident Bank 2000
Recognition and Retention Plan.
o Benefits. Provident Bank sponsors a variety of benefit plans, including the
Provident Bank Employee Stock Ownership Plan, a 401(k) plan, the Provident
Bank Defined Benefit Pension Plan, and for certain senior executives, a
supplemental executive retirement plan. Both the ESOP and the 401(k) plan
promote equity ownership in Provident Bancorp and Provident Bank by
affording investment in shares of common stock.
The Executive Compensation Committee of the Board of Directors is
responsible for the performance review of the Chief Executive Officer, who in
turn reviews each member of senior management and makes recommendations
regarding compensation levels. Compensation strategy is tied to performance,
productivity, operating results and market competitiveness. Incentive
compensation for executive officers is based upon Bank profitability. The
Executive Compensation Committee reviews executive officer salaries and other
aspects of executive compensation annually. The committee periodically reviews
compensation levels for competitiveness and reasonableness as compared to
industry peers and competitors from information gathered by external
consultants.
Compensation for the Chief Executive Officer is comprised of base salary,
incentives and benefits. The Chief Executive Officer's base salary is determined
by individual performance, competitive salaries, successful accomplishment of
strategic goals and Provident Bank's profitability. As of January 1, 2003, the
Chief Executive Officer's base salary was increased to $392,000. Provident
Bank's short-term incentive plan provides goals for targeted returns of
Provident Bank's profitability. Based on the Bank's overall earnings, the Chief
Executive Officer's short-term incentive compensation for 2003 was equal to
approximately 60% of his then-existing base salary. Long-term incentives
previously have been provided in the form of awards of stock options and
restricted stock.
This report has been provided by the Executive Compensation Committee:
Dennis L. Coyle William R. Sichol, Jr.
William F. Helmer F. Gary Zeh
Donald T. McNelis
13
ITEM 12. Security Ownership of Certain Beneficial Owners and Management &
- --------------------------------------------------------------------------------
Related Stockholder Matters
---------------------------
Provident Bancorp does not have any equity compensation programs that were
not approved by stockholders, other than its employee stock ownership plan.
Set forth below is certain information as of September 30, 2003, regarding
equity compensation plans that have been approved by stockholders.
================================== ========================= ================== ==========================
Equity compensation plans Number of securities to Number of securities
approved by be Weighted average remaining available for
stockholders Issued upon exercise of exercise price issuance
outstanding options and under plan
rights
---------------------------------- ------------------------- ------------------ --------------------------
Stock Option Plan 233,268 $17.40 40,360
---------------------------------- ------------------------- ------------------ --------------------------
Recognition and Retention Plan 35,550 Not Applicable 6,185
(1)
---------------------------------- ------------------------- ------------------ --------------------------
Total (2) 268,818 $17.40 40,360
================================== ========================= ================== ==========================
(1) Represents shares that have been granted but have not yet vested.
(2) Weighted average exercise price represents exercise price of stock options
only, since restricted shares have no exercise price.
ITEM 13. Certain Relationships and Related Transactions
- -------------------------------------------------------
No Directors, Executive Officers or immediate family members of such
individuals were engaged in transactions with Provident Bancorp or any
subsidiary involving more than $60,000 (other than through a loan) during the
fiscal year ended September 30, 2003. In addition, during the fiscal year ended
September 30, 2003, no Directors, Executive Officers or immediate family members
of such individuals were involved in loans from Provident Bancorp or Provident
Bank involving more than $60,000 which had not been made in the ordinary course
of business and on substantially the same terms and conditions, including
interest rate and collateral, as those of comparable transactions prevailing at
the time with other persons, and do not include more than the normal risk of
collectibility or present other unfavorable features.
14
SIGNATURES
Pursuant to the requirements of Section 13 of the Securities Exchange Act
of 1934, Provident Bancorp has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
Provident Bancorp, Inc.
Date: January 22, 2004 By: \s\ George Strayton
-------------------
George Strayton
President,
Chief Executive Officer
and Director
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
By: \s\ George Strayton By: \s\ Paul A. Maisch
------------------- ------------------
George Strayton Paul A. Maisch
President, Chief Executive Officer Senior Vice President and
and Director Chief Financial Officer
Date: January 22, 2004 Date: January 22, 2004
By: \s\ William F. Helmer By: \s\ Dennis L. Coyle
-------------------- --------------------
William F. Helmer Dennis L. Coyle
Chairman of the Board Vice Chairman
Date: January 22, 2004 Date: January 22, 2004
By: \s\ Judith Hershaft By: \s\ Thomas F. Jauntig, Jr.
------------------- --------------------------
Judith Hershaft Thomas F. Jauntig, Jr.
Director Director
Date: January 22, 2004 Date: January 22, 2004
By: \s\ Victoria Kossover By: \s\ Donald T. McNelis
--------------------- ---------------------
Victoria Kossover Donald T. McNelis
Director Director
Date: January 22, 2004 Date: January 22, 2004
By: \s\ Richard A. Nozell By: \s\ Carl J. Rosenstock
------------------- ----------------------
Richard A. Nozell Carl J. Rosenstock
Director Director
Date: January 22, 2004 Date: January 22, 2004
By: \s\ William R. Sichol, Jr. By: \s\ Burt Steinberg
------------------------- ------------------
William R. Sichol, Jr. Burt Steinberg
Director Director
Date: January 22, 2004 Date: January 22, 2004
By: \s\ F. Gary Zeh
-------------------
F. Gary Zeh
Director
Date: January 22, 2004
15