Provident --------------------------------------------------
Bancorp, Inc. 400 RELLA BLVD*MONTEBELLO, NY 10901*(845) 369-8040
NEWS RELEASE
FOR IMMEDIATE RELEASE Stock Symbol: PBCP
April 25, 2005 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 $5.2 MILLION, OR $0.12 PER DILUTED SHARE
MONTEBELLO, NY - April 25, 2005 -- Provident Bancorp, Inc. (Nasdaq-National
Market: PBCP), the parent company of Provident Bank, today announced that for
the three months ended March 31, 2005, net income was $5.2 million, or $0.12 per
diluted share compared to net income of $72,000 or less than $0.01 per diluted
share for the three months ended March 31, 2004. This represents an increase of
$5.1 million. Earnings for the current three-month period reflect after-tax
charges for merger integration costs ($205,000, or $.005 per share). Excluding
merger integration costs, net income would have been $5.4 million, or $0.12 per
diluted share for the three months ended March 31, 2005. Net income for the
three-month period ended March 31, 2004 before the after-tax charges for the
establishment of the Provident Bank Charitable Foundation ($3.0 million, or
$0.08 per share) and merger integration costs ($430,000, or $0.01 per share) was
$3.5 million, or $0.09 per diluted share.
Net income for the six months ended March 31, 2005 was $10.2 million, compared
to net income of $3.1 million for the six months ended March 31, 2004, an
increase of $7.1 million. Diluted earning per share were $0.23 and $0.09
respectively, for the six months ended March 31, 2005 and March 31, 2004. The
increase in earnings in 2005 reflects six months of operations related to the
acquisition of Warwick Community Bancorp, Inc. ("Warwick" or "WSB"). Earnings in
the same period of fiscal 2004 reflect one quarter of operations related to
Ellenville National Bank ("ENB"). Earnings for the current six-month period
reflect after-tax charges for merger integration costs ($433,000, or $0.01 per
share). Excluding merger integration costs, net income would have been $10.6
million, or $0.24 per diluted share. Earnings for the 2004 period reflect
after-tax charges relating to the establishment of the Charitable Foundation in
connection with the second-step conversion ($3.0 million, or $0.08 per share)
and merger integration costs ($430,000, or $0.01 per share). Excluding these
charges, net income would have been $6.5 million, or $0.18 per diluted share.
George Strayton, President and CEO commented: "Balance sheet strength and
efficiency ratio improvement were evident as net interest income for the current
quarter is virtually unchanged from that reported for fiscal 2005 first quarter
despite margin compression. As of January 1, 2005 the branches acquired from
Warwick are able to originate residential mortgages. Complete integration of our
past acquisitions is coming to fruition as we launched our new brand identity
program and sales training program. This comes at a time when all the acquired
branches are operating on the same sales and service platform. We are excited
about our new fresh look and an all-hands sales effort to optimize financial
results from our larger branch system."
Total assets as of March 31, 2005 were $2.5 billion, an increase of $692.0
million, or 37.9%, over assets of $1.8 billion at September 30, 2004, and an
increase of $804.2 million, or 46.9%, over assets of $1.7 billion at March 31,
2004. The increase from September 30, 2004 was primarily due to the October 2004
acquisition of Warwick, whose assets totaled $703.7 million on the merger date.
The increase over March 31, 2004, was due to (i) the October 2004 acquisition of
Warwick, and (ii) internal growth of the Company, which was partially offset by
a $57.5 million decrease in cash and due from banks as the balance in these
accounts at September 30, 2004 reflected the cash portion of the Warwick
acquisition. Goodwill and intangibles increased by $101.2 million from September
30, 2004 as a result of the completion of the Warwick acquisition.
Net loans as of March 31, 2005 were $1.3 billion, an increase of $299.7 million,
or 30.6%, over net loan balances of $980.3 million at September 30, 2004, and an
increase of $335.3 million, or 35.5%, over balances at March 31, 2004. Loans
acquired from WSB totaled $288.2 million, while allowances for loan losses
acquired in connection with WSB were $4.9 million, or 1.70% of WSB's outstanding
loan balances. Inclusive of Warwick loans acquired, commercial loans increased
by $210.2 million, or 43.2%, over balances at September 30, 2004. Consumer loans
increased by $37.7 million, or 29.0%, during the six-month period ended March
31, 2005, while residential loans increased by $56.6 million, or 14.9%. Total
loan originations have increased from $83.1 million for the quarter ended March
31, 2004 to $112.4 million for the 2005 quarter. 8 However, repayments and sales
of loans have also increased from $60.2 million in the quarter ended March 31,
2004 to $98.9 million in the 2005 quarter. Asset quality continues to be strong.
At $2.9 million, non-performing assets as a percentage of total assets is 0.11%,
down from 0.15% at September 30, 2004 and 0.25% at March 31, 2004.
Securities increased by $295.2 million, or 48.9%, to $898.6 million at March 31,
2005 from $603.4 million at September 30, 2004. Securities acquired from Warwick
totaled $298.2 million. Investments were made primarily in mortgage-backed
securities, which increased by $222.0 million, or 61.8%, and in U.S. Government
and Federal Agency Securities, which increased by $72.2 million, or 37.5%.
Deposits as of March 31, 2005 were $1.7 billion, up $444.7 million, or 35.9%,
from September 30, 2004, and $475.9 million, or 39.4%, from March 31, 2004.
Deposits acquired from Warwick totaled $475.1 million. As of March 31, 2005
retail and commercial transaction accounts were 29.6% of deposits compared to
30.1% at September 30, 2004 and 28.2% at March 31, 2004.
Stockholders' equity increased by $59.3 million to $408.8 million at March 31,
2005 compared to $349.5 million at September 30, 2004. Shares of common stock
with a value of $74.6 million were issued for the purchase of Warwick. Net
income of $10.2 million and ESOP allocations of $1.4 million for the six-month
period also increased equity. Partially offsetting the increases were the
payments of cash dividends totaling $3.5 million and net declines in accumulated
comprehensive income of $8.4 million. During the quarter the Company announced a
stock repurchase plan of up to 2,295,000 shares. Under this plan repurchases
during the quarter of 1,187,800 shares totaled $15.3 million. Also during the
quarter restricted stock awards of 762,400 shares were granted from the
repurchased treasury shares. Stock options on 1,718,300 shares were also
granted, with no effect on capital. Tier I regulatory capital to assets stands
at 10.42% at March 31, 2005.
Income Information - Quarter
Net interest income after provision for loan losses for the three months ended
March 31, 2005 was $21.3 million, compared to $15.7 million for the three months
ended March 31, 2004, an increase of $5.6 million or 35.2%. The increase in
interest income was largely due to a $737.4 million increase in average earning
assets to $2.2 billion during the quarter ended March 31, 2005, as compared to
$1.5 billion for the same quarter in the prior year. The increase is primarily
due to the Warwick acquisition and continued internal growth. The increase in
average earning assets was partially offset by a decline in average yield of two
basis points from 5.24% to 5.22%, on a fully taxable equivalent basis. Despite
yield increases in the loan and securities portfolios of 5 basis points and 8
basis points, respectively, the overall yield on total interest-earning assets
declined because the lower yielding securities portfolio grew more rapidly than
the loan portfolio on a relative basis. Interest expense increased by $3.7
million for the quarter compared to the same quarter in 2004, as average
interest-bearing liabilities increased by $657.3 million and the average cost of
interest-bearing liabilities increased 43 basis points. Net interest margin
declined by 42 basis points to 3.96%, while net interest spread declined by 45
basis points to 3.64%. This was primarily the result of assets acquired in the
Warwick acquisition recorded at current market interest rates coupled with the
impact of the increase in the cost of interest-bearing liabilities resulting
from the 175 basis point increase in the target federal funds rate since May of
2004.
Non-interest income was $3.8 million for the three months ended March 31, 2005
compared to $2.8 million for the three months ended March 31, 2004. Deposit fees
and service charges increased by $726,000, or 43.2%, of which $419,000 was
generated from the acquired Warwick branches, while $307,000 was primarily due
to volume-driven increases in overdraft, non-sufficient funds, and ATM and debit
card fees. Income derived from the Company's bank owned life insurance ("BOLI")
investments increased by $160,000, or 118.5% due to additional BOLI investments
of $13.3 million from the Warwick acquisition. Income derived from the Company's
new wholly-owned title subsidiary, Hardenburgh Abstract Company, Inc., was
$300,000. Gains on the sale of securities were $263,000 for the current
three-month period, compared to $518,000 for the same period last year. During
the three-month period ended March 31, 2005, the Company also recorded gains on
sales of loans totaling $21,000, compared to $84,000 for the same period last
year.
Non-interest expenses for the three months ended March 31, 2005 decreased by
$1.6 million, or 8.5%, due to the $5.0 million charge in 2004 for the
establishment of the Charitable Foundation. Excluding the 2004 charge of $5.0
million, pre-tax, non-interest expenses for the three months ended March 31,
2005 increased by $3.4 million, or 25.0%, to $17.1 million. The acquisition of
Warwick in October, 2004 played a major role in the increases in most
categories. Compensation and employee benefits increased by $1.9 million, or
32.2%, to $8.0 million for the three months ended March 31, 2005. The increase
was primarily attributable to the Warwick acquisition. A decrease in the cost of
stock-based compensation benefits of $406,000, or 47.7%, occurred during the
current three-month period primarily due to stock-based deferred compensation
programs directly tied to the Company's stock price, which was lower in the
current period. Occupancy and office operations increased by $796,000, or 47.9%,
for the three months ended March 31, 2005, of which $472,000 was attributable to
the acquired Warwick properties. The remaining increase is also attributable to
the harsh winter in 2005 and increases in real estate taxes. Advertising and
promotion increased $83,000, or 14.6%, primarily as a result of the Company's
new brand identity. Professional fees increased by $89,000, or 17.1%, primarily
due to fees associated with the Company's regulatory filings. Amortization of
core deposit intangible increased by $287,000 as a result of the Warwick
deposits acquired. Data and check processing increased $393,000, or 51.4%,
primarily due to the higher volume of services related to the accounts acquired
in the Warwick merger, and only half of the 2004 quarter included accounts
acquired in the ENB acquisition. Other expenses increased by $556,000, or 41.4%,
primarily due to increases in correspondent bank expense, postage, telephone
expense and insurance premium expense, all directly related to the increased
size of Provident Bank following the mergers. Further, merger integration
expenses decreased $376,000, pretax, or 52.4%.
The efficiency ratio (which excludes securities gains, merger costs,
amortization of intangible assets and the $5.0 million charitable contribution)
has improved to 62.3% for the current quarter from 66.5% for the quarter ending
March 31, 2004, reflecting the strides we have made in combining the Warwick and
Ellenville Banks into Provident and the operating leverage derived from those
efforts.
Income Information - Six Months
Net interest income after provision for loan losses for the six months ended
March 31, 2005 was $42.8 million, compared to $27.1 million for the six months
ended March 31, 2004, an increase of $15.7 million or 57.8%. The increase in
interest income was largely due to a $902.7 million increase in average earning
assets to $2.2 billion during the period ended March 31, 2005, as compared to
$1.3 billion for the same period in the prior fiscal year. The increase is
primarily due to the Warwick acquisition and continued internal growth. The
increase in average earning assets was partially offset by a decline in average
yield of two basis points from 5.21% to 5.19%, on a fully taxable equivalent
basis. Despite yield increases in the loan and securities portfolios of 13 basis
points and 1 basis point, respectively, the overall yield on total
interest-earning assets declined because the lower yielding securities portfolio
grew more rapidly than the loan portfolio on a relative basis. Interest expense
increased by $7.3 million for the six months ended March 31, 2005 from $5.9
million for the same period in fiscal 2004 to $13.2 million, as average
interest-bearing liabilities increased by $786.1 million and the average cost of
interest-bearing liabilities increased 28 basis points. The net interest margin
declined by 31 basis points to 3.99%, while the net interest spread declined by
30 basis points to 3.68%, due to the assets acquired in the Warwick acquisition
being recorded at current market interest rates and the increase in short-term
interest rates. The Federal Reserve has increased short term rates seven times
since May 2004, increasing the target federal funds rate from 1% to 2.75%.
However, longer term interest rates (10-year treasury) have only increased from
an average of 4.13% for the six months ended March 31, 2004 to 4.23% for the six
months ended March 31, 2005. As the yield has increased on short-term rates
faster than longer term rates, the bank's average cost of interest-bearing
liabilities has increased faster than the average increase in asset yields.
Should the yield curve continue to "flatten," a continued decline in net
interest margin may occur, offsetting a portion of gains in net interest income
arising from increasing volume of assets generated.
Non-interest income was $7.9 million for the six months ended March 31, 2005
compared to $5.6 million for the six months ended March 31, 2004. Deposit fees
and service charges increased by $2.0 million, or 66.7%, of which $1.8 million
was generated from the acquired Warwick and ENB branches, while $200,000 was
primarily due to volume-driven increases in overdraft, non-sufficient funds, and
ATM and debit card fees. Income derived from the Company's BOLI investments
increased by $319,000, or 109.2% due to the additional BOLI investment
previously discussed. Income derived from the new Hardenburgh Abstract Company,
Inc. was $658,000. Gains on the sale of securities were $317,000 for the current
six-month period, compared to $1.4 million for the same period in the prior
fiscal year. During the six-month period ended March 31, 2005, the Company also
recorded gains on sales of loans totaling $80,000, compared to $170,000 for the
same period last year.
Non-interest expenses for the six months ended March 31, 2005 increased by $6.6
million, or 23.2%,. Excluding the 2004 charge of $5.0 million, pre-tax, for the
Charitable Foundation, non-interest expenses for the six months ended March 31,
2005 increased by $11.6 million, or 49.8%, to $34.8 million, compared to $23.2
million for the six months ended March 31, 2004. The acquisition of ENB in
January 2004 and Warwick in October 2004 played a major role in the increases in
most categories. Compensation and employee benefits increased by $5.3 million,
or 51.0%, to $15.8 million for the six-month period ended March 31, 2005. The
increase was primarily attributable to the Warwick and ENB acquisitions. A
decrease in the cost of stock-based compensation benefits of $238,000, or 15.6%,
occurred during the current six-month period primarily due to stock-based
deferred compensation programs directly tied to the Company's stock price.
Occupancy and office operations increased by $1.6 million, or 54.1%, for the six
months ended March 31, 2005, almost all of which was attributable to the
acquired ENB and Warwick properties. Advertising and promotion increased
$777,000, or 75.1%, primarily as a result of the new brand identity the Company
has unveiled and the additional promotions in the Orange County market due to
the acquisitions of Warwick and ENB. Professional fees increased by $275,000, or
27.4%, primarily due to fees associated with the Company's compliance with the
provisions of Sarbanes-Oxley Section 404 and fees previously noted. Amortization
of core deposit intangible increased by $1.3 million as a result of the Warwick
and ENB deposits acquired. Stationery and office supplies increased by $71,000,
or 16.2%, due to the doubling of our branches compared to the prior year. Data
and check processing increased $897,000, or 59.4%, primarily due to the higher
level of services related to the accounts acquired in the mergers. Other
expenses increased by $1.2 million, or 51.0%, primarily due to increases in
correspondent bank expense, postage, telephone expense and insurance premium
expense, all directly related to the increased size of Provident Bank following
the mergers. ATM and debit card expense increased $266,000, or 73.1%, primarily
as a result of the accounts acquired in the mergers.
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, including, but not
limited to increases in anticipated merger integration expenses. 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 and per share data)
March 31, 2005 September 30, 2004 March 31, 2004
-------------- ------------------ --------------
Assets:
Cash and due from banks $ 50,039 $ 107,571 $ 50,523
Total securities 898,610 603,375 593,908
Loans held for sale 653 855 946
Loans:
One-to four-family residential mortgage loans 437,386 380,749 389,154
Commercial real estate, commercial business
and construction 697,110 486,904 453,984
loans
Consumer loans 167,721 129,981 118,579
------------ ------------ ------------
Gross loans 1,302,217 997,634 961,717
Allowance for loan losses (22,249) (17,353) (17,093)
------------ ------------ ------------
Total loans, net 1,279,968 980,281 944,624
------------ ------------ ------------
Federal Home Loan Bank stock, at cost 20,569 10,247 6,724
Premises and equipment, net 29,081 16,846 16,365
Goodwill 158,132 65,260 65,670
Core Deposit Intangible 13,902 5,624 6,900
Bank owned life insurance 27,176 13,245 12,985
Other assets 39,983 22,847 15,295
------------ ------------ ------------
Total assets $ 2,518,113 $ 1,826,151 $ 1,713,940
============ ============ ============
Liabilities:
Deposits:
Demand deposits $ 362,098 $ 289,360 $ 259,595
NOW deposits 135,780 83,439 80,710
------------ ------------ ------------
Total transaction accounts 497,878 372,799 340,305
Savings and money market deposits 771,458 533,410 513,511
Certificates of deposit 414,943 333,323 354,558
------------ ------------ ------------
Total deposits 1,684,279 1,239,532 1,208,374
------------ ------------ ------------
Borrowings 395,452 214,909 134,726
Mortgage escrow funds and other 29,612 22,198 22,754
------------ ------------ ------------
Total liabilities 2,109,343 1,476,639 1,365,854
Stockholders' equity 408,770 349,512 348,086
------------ ------------ ------------
Total liabilities and stockholders' equity $ 2,518,113 $ 1,826,151 $ 1,713,940
============ ============ ============
Common shares outstanding at period end 45,505,378 39,618,373 39,619,261
Book value per share $ 8.98 $ 8.82 $ 8.79
Provident Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share and per share data)
Three Months Ended Six Months Ended
March 31, March 31,
2005 2004 2005 2004
------------ ------------ ------------ ------------
Interest and dividend income:
Loans $ 19,506 $ 13,821 $ 38,919 $ 24,351
Securities 8,641 5,222 17,027 8,987
Other earning assets 137 42 350 65
------------ ------------ ------------ ------------
Total interest and dividend income 28,284 19,085 56,296 33,403
------------ ------------ ------------ ------------
Interest expense:
Deposits 3,494 1,996 6,913 3,553
Borrowings 3,369 1,151 6,261 2,361
------------ ------------ ------------ ------------
Total interest expense 6,863 3,147 13,174 5,914
------------ ------------ ------------ ------------
Net interest income 21,421 15,938 43,122 27,489
Provision for loan losses 150 200 300 350
------------ ------------ ------------ ------------
Net interest income after provision for loan losses 21,271 15,738 42,822 27,139
------------ ------------ ------------ ------------
Non-interest income:
Deposit fees and service charges 2,405 1,679 4,940 2,964
Loan fees and late charges 248 227 631 404
Gains on sales of securities available for sale 263 518 317 1,448
Gains on sales of loans 21 84 80 170
Title insurance fees 300 -- 658 --
Bank Owned Life Insurance 295 135 611 292
Other 309 141 629 309
------------ ------------ ------------ ------------
Total non-interest income 3,841 2,784 7,866 5,587
------------ ------------ ------------ ------------
Non-interest expense:
Compensation and employee benefits 7,955 6,017 15,787 10,453
Stock-based compensation plans 446 852 1,286 1,524
Occupancy and office operations 2,459 1,663 4,607 2,990
Advertising and promotion 650 567 1,812 1,035
Professional fees 610 521 1,279 1,004
Data and check processing 1,158 765 2,406 1,509
Stationery and office supplies 255 290 510 439
Merger integration costs 341 717 721 717
Amortization of intangible assets 990 703 2,117 787
ATM/debit card expense 304 211 630 364
Other 1,900 1,344 3,620 2,398
------------ ------------ ------------ ------------
Sub-total 17,068 13,650 34,775 23,220
Establishment of Charitable Foundation -- 5,000 -- 5,000
------------ ------------ ------------ ------------
Total non-interest expense 17,068 18,650 34,775 28,220
------------ ------------ ------------ ------------
Income (loss) before income tax expense 8,044 (128) 15,913 4,506
Income tax (benefit) expense 2,864 (200) 5,718 1,389
------------ ------------ ------------ ------------
Net income $ 5,180 $ 72 $ 10,195 $ 3,117
============ ============ ============ ============
Per common share:
Basic earnings $ 0.12 $ 0.00 $ 0.23 $ 0.09
Diluted earnings 0.12 0.00 0.23 0.09
Dividends declared 0.04 0.035 0.08 0.07
Weighted average common shares:
Basic 43,871,714 37,269,062 44,099,771 35,777,054
Diluted 44,442,178 37,912,560 44,688,487 36,391,057
Provident Bancorp, Inc.
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands)
March 31, September 30, March 31,
2005 2004 2004
--------- --------- ---------
Asset Quality Data:
Non-performing loans (NPLs) $ 2,767 $ 2,737 $ 4,138
Non-performing assets (NPAs) 2,860 2,737 4,250
NPLs as % of total loans 0.21% 0.27% 0.43%
NPAs as % of total assets 0.11% 0.15% 0.25%
Allowance for loan losses as % of NPLs 804% 634% 413%
Allowance for loan losses as % of total loans 1.71% 1.74% 1.78%
Capital Ratios:
Equity to total assets (consolidated) 16.23% 19.15% 20.31%
Tier 1 capital consolidated 10.42% 15.91% 15.96%
Three Months Ended Six Months Ended
March 31, March 31,
2005 2004 2005 2004
---------- --------- --------- ----------
Performance Ratios (annualized):
Return on:
Average assets 0.83% 0.02% 0.81% 0.44%
Average common equity 5.00% 0.09% 4.84% 2.92%
Net interest rate spread (tax-equivalent basis) 3.64% 4.09% 3.68% 3.98%
Net interest margin (tax-equivalent basis) 3.96% 4.38% 3.99% 4.30%
Average Balance Data:
Average assets $2,532,840 1,670,002 2,521,644 $1,424,599
Average earning assets 2,217,679 1,480,254 2,195,264 1,292,517
Average stockholders' equity 420,419 310,858 422,212 213,717