Common Stock Offering and
Second-Step Conversion
December 2003
Provident Bancorp Executives
George Strayton - President and Chief Executive Officer
Stephen G. Dormer - Senior Vice President
Paul A. Maisch - Senior Vice President and Chief Financial Officer
This presentation is for informational purposes only and
does not constitute an offer to sell shares of common stock
of Provident Bancorp, Inc.
Please refer to the Prospectus dated November 14, 2003.
Forward-looking Statements
This presentation contains forward-looking
statements which involve risks and
uncertainties. The Company's actual results may differ
significantly from the results
discussed in the forward-looking statements.
Factors that might cause such a difference
include, but are not limited to, those
discussed in the "Risk Factors" section of
the Prospectus.
Tonight's Agenda
o An overview of Provident Bancorp, Inc.
o Financial Highlights
o Offering Overview
o E.N.B. Holding Company, Inc. Acquisition
--------------------------
| Provident Bancorp, Inc. |
--------------------------
Provident Bancorp, Inc.-Snapshot
o Established in 1888
o Federal Savings and Loan Association charter
o Reorganized into an MHC in January 1999 and conducted an IPO that
raised $38.6 million
o $1.2 Billion in Assets
o 18 branch offices and 25 ATMs -Rockland and Orange Counties, New York
o In April 2002, Provident Municipal Bank was created as a wholly-owned
subsidiary
o Provident's trust department is the only trust operation headquartered
in Rockland County
o History of acquisitions: Nassau Fed S&L branch
First Federal of Suffern
First Nationwide branch
National Bank of Florida
Business Strategy
Access - Convenience - Service
o Vision Statement-"Make customers our advocates"
o Full-service, community bank
o Service to consumers
o Service to businesses
o All branches open six full days per week
o Full service at 8 of 18 branches seven days per week
o Voice response
o Internet banking
o Consumers
o Business
o Debit cards
Branch Locations
[Map Omitted]
Robust Market Place
o Rockland and Orange Counties provide an excellent economy to operate
within. Both counties experienced meaningful growth in population within
the last census period. Orange - 11% & Rockland - 8%
o Unemployment rate well below the national level. Orange - 3.8% & Rockland -
3.6%
Orange County, New York Rockland County, New York
--------------------------------------------- ------------------------------------------
Current % Change Estiated % Change Current % Change Estimated % Change
2003 2000-2003 2008 2003-2008 2003 2000-2003 2008 2003-2008
--------------------------------------------- ------------------------------------------
Total Population: 355,189 4.05 376,500 6.00 292,049 1.85 300,807 3.00
Land Mass (in sq. mi.) 816 --- --- --- 174 --- --- ---
Pop. Density 435 4.02 461 6.00 1,678 1.95 1,729 3.00
Unemployment 7,600 NM NA NA 5,800 NM NA NA
Total # of Businesses * 8,458 4.73 NA NA 8,844 2.93 NA NA
Housing Costs 243,000 51.97 NA NA 371,750 40.28 NA NA
Total Households: 120,085 4.61 128,395 6.92 94,618 2.10 97,890 3.46
$0-24K (%): 20 -4.23 18 -4.10 15 -4.94 14 -5.15
$25-50K (%): 24 -3.50 27 22.76 18 -5.64 23 34.38
$50K+ (%): 57 12.16 61 15.25 67 6.09 70 8.15
Median HH Income: 57,778 8.90 63,980 10.73 74,426 7.47 82,211 10.46
Per Capita Income: 23,950 10.90 27,147 13.35 30,944 10.19 34,571 11.72
* Current number of businesses is as of 2001.
Critical Mass in Each Market
Rockland County, NY Deposit Market Share Analysis
At June 30, 2003
---------------------------------------------
Deposits Market % of Parent
in Market Share Deposits
# of ---------------------------------
Rank Institution Branches ($000) (%) (%) ($000)
1 U.S.B. Holding Co. (NY) 14 1,046,659 17.39 61.00
2 Bank of New York Co. (NY) 23 960,147 15.95 2.573
3 Provident Bancorp Inc. 15 785,129 13.04 65.98
4 HSBC Holdings plc 11 735,442 12.22 1.78
5 J.P. Morgan Chase & Co. (NY) 6 555,720 9.23 0.28
6 M&T Bank Corp. (NY) 7 455,113 7.56 1.46
7 Citigroup Inc. (NY) 2 366,227 6.08 0.20
8 Washington Mutual Inc. (WA) 4 349,038 5.80 0.26
9 Charter One Financial (OH) 2 219,755 3.65 0.77
10 KeyCorp (OH) 1 181,430 3.01 0.38
11 Wachovia Corp. (NC) 4 145,895 2.42 0.07
12 North Fork Bancorp. (NY) 3 105,027 1.74 0.73
13 Hudson United Bancorp (NJ) 3 32,589 0.54 0.52
14 Trust Co. of New Jersey (NJ) 3 29,465 0.49 0.86
15 Sound Federal Bancorp Inc. (NY) 1 27,303 0.45 4.09
Totals 101 6,020,340 100%
Rockland County, NY Deposit Market Share Analysis
At June 30, 2003
---------------------------------------------
Deposits Market % of Parent
in Market Share Deposits
# of ---------------------------------
Rank Institution Branches ($000) (%) (%) ($000)
1 Bank of America Corp. (NC) 12 670,157 14.22 0.13
2 Bank of New York Co. (NY) 16 563,502 11.95 1.51
3 Hudson United Bancorp (NJ) 15 483,437 10.26 7.75
4 Warwick Community Bancorp (NY) 7 427,134 9.06 81.56
5 Charter One Financial (OH) 7 424,092 9.00 1.50
6 KeyCorp (OH) 9 385,563 8.18 0.81
7 M&T Bank Corp. (NY) 10 308,995 6.56 0.99
8 Provident Bancorp Inc. 10 251,115 5.33 21.10
9 Orange County Trust Co. (NY) 5 228,461 4.85 100.00
10 HSBC Holdings plc 5 204,863 4.35 0.49
11 Berkshire Bancorp Inc. (NY) 3 189,359 4.02 33.49
12 Walden Savings Bank (NY) 7 173,988 3.69 93.90
13 First Federal Svgs Middletown (NY) 2 129,471 2.75 100.00
14 Walden Federal Savings & Loan (NY) 3 74,327 1.58 100.00
15 U.S.B. Holding Co. (NY) 1 48,598 1.03 2.83
Totals 123 4,713,618 100%
Competitive Advantage in
Rockland & Orange Counties
o Competition in Rockland: Money Center/Regional Banks and one local
competitor
o Competition in Orange: Money Center/Regional Banks, one bank our size,
several smaller banks
o Provident Advantages:
- Local decision making
- Local lending presence
- Local product support
- Local branch distribution/extended service hours
- Local community involvement
Full Service Community Bank
o We offer a full array of products for consumers, including:
o Internet banking - Penetration Rate of 27%
o Internet bill payment
o We offer a full array of products for businesses, including:
o C&I (commercial and industrial loans)
o Commercial real estate loans
o Credit scoring for small business loans
o Internet cash management and sweep - Currently over 1,200
customers
o We offer Wealth Management
o Asset Management capacity
o Trust services
o Mutual Funds and Annuities
What is Provident's Unique Selling Proposition?
o We have 8 of our 18 branches open seven days per week.
Since 1995 ------------------------
o All our branches are open a full day on Saturday.
--- ---------------------------
Since 1987
o Our Loan Officers have money center bank experience.
o Our size provides us with distinct marketing advantages.
o We are large enough that 98% of requests for credit fall within
our lending authority.
o We are small enough that one lender will oversee a number of
different loan activities.
Why Service?
o Low cost funds - Higher profitability
Lower interest rate risk
o Transaction accounts
- First chance for new business
- Fee income opportunities
o Low cost savings products
o Competitive advantage
o Harder for large banks to compete on service
o Quality loan portfolio
----------------------
| Financial Highlights |
----------------------
Financial Snapshot
(as of September 30, 2003)
Assets $1.2 billion
Loans $706 million
Deposits $870 million
Shareholders' Equity $118 million
Equity to Assets 10.04%
Return on Average Assets 1.04%
Return on Average Equity 9.92%
Asset Growth
At September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars $844.3 $881.3 $1,027.7 $1,174.3
in Millions
CAGR 11.62%
Loan Portfolio Composition
As of September 30, 2003
Loan Type Percent of Total
----------- ------------------
Commercial Real Estate 26%
Commercial Business Loans 8%
One to Four Family 53%
Construction and Land 2%
Consumer Loans 11%
Lending Growth
At September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars $589.8 $606.1 $660.8 $705.5
in Millions
CAGR 6.15%
Asset Quality
(as of September 30, 2003)
$500 million - $1.5 billion
in Assets
Provident ----------------------------
Bancorp, Inc. Banks Thrifts
------------- --------- ----------
Nonperforming assets 0.40% 0.64% 0.47%
to total assets
Net charge-offs to 0.05% 0.30% 0.16%
average loans
Nonperforming loans to 0.66% 0.76% 0.59%
total loans
Reserve Coverage Ratio 1.55% 1.42% 1.04%
Deposit Growth
At September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars in Millions
Core (Non-Time) Deposits 359.588 407.773 556.097 633.315
Non Core (Time) Deposits 249.388 245.327 243.529 236.238
Total $609 $653 $800 $870
CAGR 12.61%
Growth in Transaction Accounts
At September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars in Millions
Retail Demand 38.145 41.28 54.399 90.471
Commercial Demand 28.324 33.081 55.732 72.538
NOW 54.8 63.509 82.983 62.367
Savings 161.987 160.777 247.918 279.717
Money Market 76.332 109.126 115.065 128.222
CAGR 20.76%
Net Interest Income Growth
For the Year Ended September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars in Millions
Net Interest Income 32.865 34.734 42.75 45.73
Net Interest Margin 4.12% 4.20% 4.71% 4.55%
Revenue Diversification
For the Year Ended September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars in Millions
Net Interest Income 32.865 34.734 42.75 45.73
Non-Interest Income 3.193 4.175 4.94 7.549
CAGR 13.87%
Strong Earnings Growth
For the Year Ended September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars $5.9 $7.5 $9.5 $11.3
in Millions
CAGR 24.20%
Strong EPS Growth
For the Year Ended September 30,
2000 2001 2002 2003
------ ------ ------ ------
Dollars $0.76 $0.97 $1.22 $1.44
in Millions
CAGR 23.74%
A Record of Creating Shareholder Value
Since our 1999 IPO and the formation of the MHC:
o Price of PBCP common stock is nearly 5 times its IPO price
o Quarterly dividend has increased 400%
o Five year average annual return to shareholders of approximately 63%
Experienced Management Team
Years at Banking
Provident Experience
--------- ----------
George Strayton 22 39
President and Chief Executive Officer
Daniel G. Rothstein 21 29
Executive Vice President
Chief Risk Management Officer
Robert J. Sansky 19 31
Executive Vice President
Chief Retail Banking Officer
Paul A. Maisch 1 26
Senior Vice President
Chief Financial Officer
Stephen G. Dormer 10 31
Senior Vice President
Assistant to the Office of the President,
Strategic Planning and Commercial Lending Officer
John J. Fitzpatrick 18 30
Senior Vice President
Director of Support Services
Strategic Overview
o Provident's ability to execute both the second-step conversion and the
acquisition of ENB provides a unique strategic opportunity.
o The acquisition will enhance Provident's commercial business
focus
o Enhances Orange County franchise
o Leveraging a portion of the new equity raised in the second-step
offering with higher yielding loans will enhance Provident's
performance
--------------------------
| Common Stock Offering and |
| Second-Step Conversion |
--------------------------
Overview of the Offering
Adjusted
Midpoint Maximum Super-Max
------------------ --------------- ---------------
Number of shares sold in the offering 14,800,000 17,020,000 19,573,000
Exchange shares 11,854,327 13,632,477 15,677,348
Total shares outstanding - pro forma 26,654,327 30,652,477 35,250,348
Gross proceeds ($ 000s) $148,000 $170,200 $195,730
Estimated net proceeds ($ 000s) $131,033 $151,024 $174,014
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Exchange Ratio 3.3514x 3.8542x 4.4323x
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Pro forma net income - 6/03 $10,218 $10,211 $10,203
Pro forma earnings per share $0.35 $0.31 $0.27
- -----------------------------------------------------------------------------------------------------
Pro Forma Price to Earnings 21.43x 24.19x 27.78x
- -----------------------------------------------------------------------------------------------------
Pro forma stockholders' equity $285,543 $305,534 $331,550
Pro forma stockholders' equity per share $9.28 $8.80 $8.38
- -----------------------------------------------------------------------------------------------------
Pro Forma Price to Book Value 107.76% 113.64% 119.33%
- -----------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------
Pro Forma Price to Tang. Book Value 140.14% 145.14% 151.06%
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Pro Forma Valuation
Provident Thrift Bank
(Maximum) Peer Group * Peer Group **
-------------- ---------------- -----------------
Price / Book 113.64% 198.80% 208.82%
Price / Tangible Book 145.14% 216.83% 227.06%
Price / EPS 24.19x 30.76x 17.53x
* Includes thrifts in the New England and Mid-Atlantic regions, with assets
between $500M and $1.5B.
* * Includes commercial banks in the New England and Mid-Atlantic regions,
with assets between $500M and $1.5B.
- - Pricing as of 11/28/03
Use of Proceeds
We intend to use the proceeds from the offering to enhance profitability
and further strengthen our position as an independent community bank in
Southeastern New York. We seek to accomplish that goal by:
o Growing and diversifying our loan portfolio
o Enhancing existing products and services and supporting new products and
services
o Expanding our retail banking franchise through acquisitions and de novo
branching
o Enhancing customer service
o Continued commitment to our community
-------------------
| E.N.B. Acquisiton |
-------------------
E.N.B. Acquisition - Bank Profile
Headquartered Ellenville, NY
Branch Offices 9
Branches by County Orange - 5 branches
Sullivan - 2 branches
Ulster - 2 branches
(At June 30, 2003)
Assets $341.7 million
Loans $202.3 million
Deposits $307.7 million
Shareholders' Equity $29.9 million
Post-Acquisition Pro Forma
At or For the Nine Months Ended June 30, 2003 (1)
Based Upon the Sale at $10.00 Per Share of 17,020,000 Shares
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E.N.B. Holding Combined
Provident Bancorp Company, Inc. Pro Forma
($ in thousands) Historical Historical at Maximum
------------------ ------------------- ----------------
Total Assets $1,114,698 $341,676 $1,616,542
Loans $685,109 $199,758 $888,567
Deposits $857,534 $307,698 $1,166,178
Stockholders' Equity $115,737 $29,900 $305,534
Net Interest Income $34,404 $11,659 $45,010
Noninterest Income $7,188 $1,898 $9,086
Noninterest Expense $27,136 $8,902 $36,899
Net Income $8,667 $2,774 $10,211
Earnings Per Share $1.11 $0.31
(1) Assumes that the acquisition of E.N.B. Holding Company, Inc. was completed
at June 30, 2003.
Pro Forma Loan and Deposit Composition
As of September 30, 2003
Loan Type Percent of Total
----------- ------------------
Commercial Real Estate 31%
Commercial Business Loans 10%
One to Four Family 45%
Construction and Land 3%
Consumer Loans 11%
Deposit Type Percent of Total
------------ ------------------
Demand 21%
NOW 8%
Savings 30%
MMDA 12%
Time Deposits < $100K 21%
Time Deposits > $100K 8%
E.N.B. Acquisition - Strategic Rationale
o Low risk transaction
o Enhances commercial business lines
o Consolidates and enhances Orange County presence
o Provides an immediate presence in two adjacent counties in which
Provident does not currently operate: Sullivan and Ulster
Investment Attributes
o Profitable, Strategically Positioned Institution
o Strong Management
o Exceptional Asset Quality
o Well Capitalized
o Directors and Officers anticipate owning more than 2.5 million shares
of common stock, or 8.5% of the total outstanding shares at the
midpoint of the offering range
o Anticipated Annual Dividend of $0.16 per share at maximum offering
range
Offering Schedule
November 25: Stock Information Center Opens
December 18: Subscription and community offerings
end at 10:00 AM New York time
January 2004: Anticipated completion of conversion,
stock offering and E.N.B. acquisition
Questions?