NEWS RELEASE
FOR IMMEDIATE RELEASE Stock Symbol: PBCP
Thursday, July 22, 2004 Traded on Nasdaq National Market
CONTACT:
Paul A. Maisch, SVP & Chief Financial Officer
Roberta Lenett, VP & Manager of Shareholder Relations
(845) 369-8082
PROVIDENT BANCORP ANNOUNCES
QUARTERLY EARNINGS OF
$3.7 MILLION, OR $0.10 PER DILUTED SHARE
MONTEBELLO, NY - July 22, 2004 -- Provident Bancorp, Inc. (Nasdaq-National
Market: PBCP), the parent company of Provident Bank, today announced that for
the three months ended June 30, 2004, net income was $3.7 million, or $0.10 per
diluted share compared to net income of $3.1 million, or $0.09 per diluted share
for the three months ended June 30, 2003, an increase of $548,000, or 17.6%.
Included in the earnings for the current three-month period are after-tax
charges for merger integration costs ($34,000) and amortization of core deposit
intangibles ($409,000). Net income for the nine months ended June 30, 2004 was
$6.8 million, including after-tax charges of: (i) $3.0 million due to the
establishment of the charitable foundation in connection with the second-step
conversion in January 2004, (ii) $464,000 in merger integration costs and (iii)
$881,000 in amortization of core deposit intangibles. This compares to $8.7
million for the nine-months ended June 30, 2003, which included only $207,000 in
after-tax cost of amortization of core deposit intangibles. Diluted earnings per
share was $0.18 for the nine months ended June 30, 2004 compared to $0.25 for
the same period last year. Earnings per share results for the prior periods have
been restated to reflect the 4.4323-to-one conversion ratio as a result of the
Company's second-step conversion.
George Strayton, the Company's President and CEO, commented: "I am pleased with
the continued growth of our commercial loan portfolio and transaction accounts,
which are up during the most recent quarter by $26 million and $24 million,
respectively. Growth of products and services are key objectives of our business
strategy and contributed to the increase in income in the third quarter.
In addition to continuing to grow our core business and integrating Ellenville
National Bank ("ENB"), we have now turned our attention to the merger and
integration of Warwick Community Bancorp, Inc. ("Warwick"). We anticipate the
merger to be consummated early in October 2004 and a systems conversion shortly
thereafter. Once completed, we will have added a branch network of 18 branches,
over $1 billion in assets, and approximately 42,000 customers to Provident in a
span of approximately nine months."
Total assets as of June 30, 2004 were $1.8 billion, an increase of $608.4
million, or 51.8%, over assets of $1.2 billion at September 30, 2003, and an
increase of $668.0 million, or 59.9%, over assets of $1.1 billion at June 30,
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2003. The increase over both periods is due primarily to (i) the January
acquisition of ENB, whose assets totaled $349.7 million on the merger date (ii)
proceeds from the offering in the second-step conversion of $192.2 million, net
of related costs and (iii) internal growth of the company.
Net Loans as of June 30, 2004 were $970.6 million, an increase of $267.4
million, or 38.0%, over net loan balances of $703.2 million at September 30,
2003, and an increase of $288.0 million, or 42.2%, over balances at June 30,
2003. Loans acquired from ENB totaled $219.2 million, while allowances for loan
losses acquired in connection with ENB were $5.7 million, or 2.6% of ENB's
outstanding loan balances. Inclusive of ENB loans acquired, commercial loans
increased by $226.8 million, or 89.7%, over balances at September 30, 2003.
Consumer loans increased by $44.6 million, or 55.3%, during the nine-month
period, while residential loans increased by $2.2 million, or 0.6%. Asset
quality continues to be strong. At $5.5 million, or 0.31% of total assets,
non-performing assets are up slightly from $4.7 million at September 30, 2003
and $5.4 million at June 30, 2003.
Securities increased by $267.7 million, or 71.5%, to $642.0 million at June 30,
2004 from $374.3 million at September 30, 2003 as the Company invested the
majority of the stock subscription funds received in securities. Investments
were made primarily in mortgage-backed securities, which increased by $179.1
million, or 84.5%, and in U.S. Government and Federal Agency Securities, which
increased by $67.5 million, or 50.6%.
Deposits as of June 30, 2004 were $1.2 billion, up $371.3 million, or 42.7%,
from September 30, 2003, and $383.3 million, or 44.7%, from June 30, 2003.
Deposits acquired from ENB totaled $326.8 million. As of June 30, 2004 retail
and commercial transaction accounts were 29.4% of deposits compared to 25.9% at
September 30, 2003 and 25.5% at June 30, 2003.
Stockholders' equity increased by $224.7 million to $342.6 million at June 30,
2004 compared to $117.9 million at September 30, 2003. The Company completed its
second-step stock conversion in January, 2004, raising $192.2 million in new
capital, net of related costs. In addition, $39.7 million and $4.0 million,
respectively, in new stock were issued for the purchase of ENB and for the
formation of the charitable foundation. Net income of $6.8 million for the
nine-month period also increased capital. Partially offsetting the increases
were the payments of cash dividends totaling $3.4 million, the purchase of
additional ESOP shares totaling $10.0 million and net declines in accumulated
comprehensive income of $7.2 million.
Income Information - Quarter
Net interest income after provision for loan losses for the three months ended
June 30, 2004 was $16.3 million, compared to $11.1 million for the three months
ended June 30, 2003, an increase of $5.2 million or 46.9%. The increase in net
interest income was largely due to a $540.5 million increase in average earning
assets to $1.6 billion during the quarter ended June 30, 2004, as compared to
$1.0 billion for the same quarter in the prior year, due primarily to the
Ellenville National Bank acquisition, net proceeds from the second-step offering
and continued internal growth. The increase in average earning assets was
partially offset by a decline in average yield of 46 basis points from 5.62% to
5.16%. A decrease in the average cost of interest bearing liabilities of 22
basis points still resulted in a $512,000 increase in interest expense for the
quarter compared to the same quarter in 2003, as average interest-bearing
liabilities increased by $336.5 million. On a fully taxable equivalent basis,
net interest margin declined by 17 basis points to 4.31%, while net interest
spread declined by 22 basis points to 4.02%.
Non-interest income was $2.9 million for both the three months ended June 30,
2004 and June 30, 2003. Gains on the sale of securities were $446,000 for the
current three-month period, compared to $811,000 for the same period last year.
During the three-month period ended June 30, 2004, the Company also recorded
gains on sales of loans totaling $61,000, compared to $394,000 for the same
period last year. Excluding the effects of gains on sales of securities and
loans, the increase in non-interest income was $685,000, or 40.7%. Banking fees
and service charges increased by $714,000, or 59.7%, of which $449,000 was
generated from the acquired Ellenville branches. The remaining increase of
$265,000 was due primarily to volume-driven increases in overdraft,
non-sufficient funds, and ATM and debit card fees. Other non-interest income
decreased by $29,000, or 6.0%, due primarily to lower earnings on the Company's
bank owned life insurance ("BOLI") investments.
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Non-interest expenses for the three months ended June 30, 2004 increased by $4.3
million, or 46.7%, to $13.5 million, compared to $9.2 million for the three
months ended June 30, 2003. The acquisition of ENB in January, 2004 played a
major role in the increases in most categories. Compensation and employee
benefits increased by $1.6 million, or 36.4%, to $6.1 million for the period
ended June 30, 2004. Of that amount, $700,000 was attributable to the ENB
acquisition and the remainder was due to staff additions for future growth and
expansion as well as normal merit increase. An increase in stock-based
compensation plans of $147,000, or 35.8%, occurred during the current
three-month period primarily due to vesting and allocations of benefit plans at
an average common stock value of $10.91 per share for the three months ended
June 30, 2004 compared to $7.30 per share for the three months ended June 30,
2003. Occupancy and office operations increased by $523,000, or 39.6%, for the
three months ended June 30, 2004, almost all of which was attributable to the
acquired Ellenville properties. Professional fees increased by $230,000, or
54.0%, due primarily to fees associated with the Company's compliance with the
provisions of Sarbanes-Oxley Section 404, and fees paid to contracted
consultants engaged to run day-to-day operations, as the Company's permanent
employees focus on the integrations of Ellenville National Bank and Warwick.
Amortization of core deposit intangible increased by $578,000 as a result of the
ENB deposits acquired. Stationery and office supplies increased by $197,000, or
132.2%, as the new Ellenville branches were stocked. Other expenses increased by
$528,000, or 44.7%, due primarily to increases of $136,000, $56,000, $42,000 and
$68,000 in SEC and shareholder-related expenses, courier expenses, correspondent
bank expense and postage, respectively. Further, merger integration expenses
were $56,000.
Income Information - Nine-months
Net interest income after provision for loan losses increased by $9.8 million,
or 29.2%, to $43.4 million for the nine-months ended June 30, 2004 from $33.6
million for the same period in 2003. The increase in interest income reflects an
increase in average earning assets of $402.3 million to $1.4 billion, offset by
a decline in yield of 78 basis points to 5.12%. The cost of interest bearing
liabilities increased by $90,000 as the average balances increased by $212.2
million to $1.0 billion, even though the average rate paid on average interest
bearing funds decreased 30 basis points to 1.22%. On a fully taxable equivalent
basis, net interest margin decreased from 4.68% to 4.27% and net interest spread
declined from 4.42% to 3.95%.
Non-interest income for the nine-month period ended June 30, 2004 increased to
$8.5 million, an increase of $1.2 million, or 16.4%, compared to $7.3 million
for the same nine-month period last year. Gains on sales of securities and loans
were $1.9 million and $231,000, respectively, for the current period, generating
a combined decrease of $606,000 from the securities and loan sales gains of $1.9
million and $836,000, respectively, for the same period last year. Banking fees
and service charges increased to $5.1 million for the current nine-month period,
an increase of $1.7 million, or 49.5%, over the same period last year. The
increase is primarily attributable to increases in service fees of $867,000
resulting from the acquired branches, coupled with volume-related increases in
service fees on new and existing accounts at the original Provident branches.
Other income increased by $127,000, or 11.3%, to $1.3 million for the nine-month
period ended June 30, 2004, from $1.1 million for the same period last year. The
increase is primarily due to $422,000 in income from the BOLI for the current
nine-month period compared to $324,000 for the same period last year, as the
BOLI program was only established for six months of fiscal 2003.
Non-interest expenses, excluding the Charitable Foundation contribution of $5.0
million, increased to $36.7 million for the nine-month period ended June 30,
2004, an increase of $9.5 million, or 35.1%, compared to $27.1 million for the
same nine-month period last year. Increases in compensation and benefits
directly attributable to the acquisition of ENB were $1.2 million and in
occupancy and office operations were $564,000. Compensation and benefits
increased by an additional $2.3 million, due to annual salary increases and
staff additions. Stock-based compensation expense increased by $664,000, or
46.8%, as the company's per share value increased from an average of $7.01 per
share for the nine months ended June 30, 2003 to an average of $10.87 per share
for the nine months ended June 30, 2004. Also, the Company allocated additional
shares related to the $10.0 million ESOP plan purchase. Professional fees
increased to $1.7 million for the nine-month period ended June 30, 2004, an
increase of $446,000, or 36.7%, over the comparable period in the prior year.
The increase is primarily due to the additional fees associated with
Sarbanes-Oxley Section 404 compliance, and the fees for contracted consultants
engaged during the integration periods of Ellenville National Bank and Warwick.
Additional increases in non-interest expense categories for the current
year-to-date period are advertising costs of $255,000, or 19.8%, and a
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volume-related increase of $424,000, or 19.6%, in data and check processing
costs. Amortization of intangible assets increased by $1.1 million due to the
addition of the ENB core deposit intangible. Other non-interest expense
increased by $871,000, or 24.2%, primarily due to increases in SEC and
shareholder relations expenses ($160,000), regulatory assessments ($84,000),
postage ($150,000) and correspondent bank expense ($123,000).
Provident Bancorp, Inc. has filed a registration statement and other relevant
documents concerning the proposed acquisition of Warwick Community Bancorp, Inc.
with the Securities and Exchange Commission (the "SEC"). Stockholders are urged
to read the registration statement and the proxy statement/prospectus when it
becomes available and any other relevant documents filed with the SEC, as well
as any amendments or supplements to those documents, because they will contain
important information. You will be able to obtain a free copy of the joint proxy
statement/prospectus, as well as other filings containing information about
Provident Bancorp and Warwick, at the SEC's Internet site (http://www.sec.gov).
Copies of the proxy statement/prospectus to be filed by Provident Bancorp, Inc.
also can be obtained, when available and without charge, by directing a request
to Provident Bancorp, Inc., Investor Relations, attn. Roberta Lenett, 400 Rella
Boulevard, Montebello, New York 10901, (845) 369-8082 or to Warwick Community
Bancorp, Inc., attn. Barbara A. Rudy - Moore, Senior Vice President, 18 Oakland
Avenue, P.O. Box 591, Warwick, New York 10990-0591, 845-986-2206 ext. 2238, or
by sending a request to wsbbar@warwick.net.
Warwick Community Bancorp, Inc., and its directors and executive officers may be
deemed to be participants in the solicitation of proxies from the stockholders
of Warwick in connection with the acquisition. Information about the directors
and executive officers of Warwick and their ownership of Warwick common stock is
set forth in Warwick's most recent proxy statement as filed with the SEC, which
is available at the SEC's Internet site (http://www.sec.gov) and at Warwick's
address in the preceding paragraph. Additional information regarding the
interests of these participants may be obtained by reading the joint proxy
statement/prospectus regarding the proposed transaction when it becomes
available.
Note:
In addition to historical information, this earnings release may contain
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 which have been outlined in
previously filed documents with the Securities and Exchange Commission, and
other factors that could cause the Company's actual results to differ materially
from those contemplated by such forward-looking statements. The Company
undertakes no obligation to publicly release the results of any revisions to
those forward-looking statements which may be made to reflect events or
circumstances after the date of this release or to reflect the occurrence of
unanticipated events.
Provident Bancorp, Inc.
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share data)
June 30, 2004 September 30, 2003 June 30, 2003
------------- ------------------ -------------
Assets:
Cash and due from banks $33,686 $ 33,500 $ 32,473
Federal Funds Sold --- --- 11,000
Total securities 642,028 374,259 334,700
Loans held for sale 1,385 2,364 2,554
Loans:
One-to four-family residential mortgage loans 383,012 380,776 379,794
Commercial real estate, commercial business
and construction loans 479,689 252,857 232,563
Consumer loans 125,180 80,620 81,253
------- -------- --------
Gross loans 987,881 714,253 693,610
Allowance for loan losses (17,331) (11,069) (11,055)
------- -------- --------
Total loans, net 970,550 703,184 682,555
------- -------- --------
Federal Home Loan Bank stock, at cost 9,755 8,220 5,819
Premises and equipment, net 16,259 11,647 11,616
Goodwill 65,823 13,540 13,540
Core Deposit Intangible 6,219 1,063 1,156
Bank owned life insurance 13,116 12,483 12,324
Other assets 23,849 14,045 6,961
------- -------- --------
Total assets $1,782,670 $1,174,305 $1,114,698
========== ========== ==========
Liabilities:
Deposits:
Transaction accounts $364,715 $ 225,376 $ 218,636
Savings and money market deposits 530,283 407,939 406,576
Certificates of deposit 345,829 236,238 232,322
------- -------- --------
Total deposits 1,240,827 869,553 857,534
------- -------- --------
Borrowings 169,552 164,757 116,732
Mortgage escrow funds and other 29,647 22,138 24,695
------- -------- --------
Total liabilities 1,440,026 1,056,448 998,961
Stockholders' equity 342,644 117,857 115,737
------- -------- --------
Total liabilities and stockholders' equity $1,782,670 $1,174,305 $1,114,698
========= ========== ==========
Common shares outstanding at period end (1) 39,638,415 35,221,365 35,250,414
Book value per share $ 8.64 $ 3.35 $ 3.28
(1) Prior period share information has been adjusted to reflect the
4.4323-to-one conversion ratio in connection with the Company's second
step common stock offering in January 2004.
Provident Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share data)
Three Months Ended Nine-months Ended
June 30, June 30,
2004 2003 2004 2003
---- ---- ---- ----
Interest and dividend income:
Loans $14,300 $ 10,712 $38,651 $ 33,187
Securities 5,646 3,425 14,633 10,236
Other earning assets 38 115 103 292
-------- -------- ------ --------
Total interest and dividend income 19,984 14,252 53,387 43,715
-------- -------- ------ --------
Interest expense:
Deposits 2,137 1,831 5,682 6,127
Borrowings 1,350 1,144 3,719 3,184
-------- -------- ------ --------
Total interest expense 3,487 2,975 9,401 9,311
-------- -------- ------ ---------
Net interest income 16,497 11,277 43,986 34,404
Provision for loan losses 225 200 575 800
-------- -------- ------ --------
Net interest income after provision for loan losses 16,272 11,077 43,411 33,604
-------- -------- ------ --------
Non-interest income:
Banking fees and service charges 1,910 1,196 5,082 3,399
Gains on sales of securities available for sale 446 811 1,894 1,895
Gains on sales of loans 61 394 231 836
Other 458 487 1,255 1,128
-------- -------- ------ --------
Total non-interest income 2,875 2,888 8,462 7,258
-------- -------- ------ --------
Non-interest expense:
Compensation and employee benefits 6,070 4,424 16,523 12,976
Stock-based compensation plans 558 411 2,083 1,419
Occupancy and office operations 1,844 1,321 4,834 3,811
Advertising and promotion 509 378 1,544 1,289
Professional fees 656 426 1,660 1,214
Data and check processing 1,076 783 2,585 2,161
Stationery and office supplies 346 149 785 392
Merger integration costs 56 --- 773 ---
Amortization of intangible assets 681 103 1,468 345
Establishment of charitable foundation --- --- 5,000 ---
Other 1,709 1,181 4,470 3,599
-------- -------- ------ --------
Total non-interest expense 13,505 9,176 41,725 27,206
-------- -------- ------ --------
Income before income tax expense 5,642 4,789 10,148 13,656
Income tax expense 1,988 1,683 3,377 4,989
-------- -------- ------ --------
Net income $ 3,654 $ 3,106 $6,771 $ 8,667
======== ======== ====== ========
Per common share:
Basic earnings $0.10 $0.09 $0.19 $0.25
Diluted earnings 0.10 0.09 0.18 0.25
Dividends declared 0.04 0.04 0.11 0.09
Weighted average common shares (1):
Basic 37,806,911 34,149,200 36,450,748 34,193,558
Diluted 38,426,183 34,680,987 37,068,663 34,699,674
(1) Prior period information has been adjusted to reflect the 4.4323-to-one
conversion ratio in connection with the Company's second-step stock offering.
Provident Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share data)
June 30, September 30, June 30,
2004 2003 2003
------------------- ------------------- --------------------
Asset Quality Data:
Non-performing loans (NPLs) $5,477 $4,697 $5,370
Non-performing assets (NPAs) 5,477 4,697 5,370
NPLs as % of total loans 0.55% 0.66% 0.77%
NPAs as % of total assets 0.31% 0.40% 0.48%
Allowance for loan losses as % of NPLs 316% 236% 206%
Allowance for loan losses as % of total loans 1.75% 1.55% 1.59%
Capital Ratios:
Equity to total assets (consolidated) 19.22% 10.04% 10.38%
Tier 1 capital ratio (Bank only) 11.86% 8.14% 8.34%
Tier 1 capital consolidated 16.04% 8.70% 8.90%
Three Months Ended Nine-months Ended
June 30, June 30,
2004 2003 2004 2003
--------------- ---------------- -------------- ---------------
Performance Ratios (annualized):
Return on:
Average assets 0.82% 1.13% 0.59% 1.09%
Average common equity 4.24% 10.89% 3.51% 10.27%
Net interest rate spread (tax-equivalent basis) 4.02% 4.24% 3.95% 4.42%
Net interest margin (tax-equivalent basis) 4.31% 4.48% 4.27% 4.68%
Average Balance Data:
Average assets $1,794,947 $1,100,851 $1,540,303 $1,065,414
Average earning assets 1,558,537 1,017,993 1,393,056 990,775
Average stockholders' equity 346,763 114,425 257,904 112,801