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FOR IMMEDIATE RELEASE Stock Symbol: PBNY
October 25, 2005 Traded on NASDAQ National Market
PROVIDENT BANK CONTACT:
Paul A. Maisch, SVP & Chief Financial Officer
Christina L. Maier, VP & Controller
845. 369.8040
PROVIDENT NEW YORK BANCORP ANNOUNCES
QUARTERLY EARNINGS OF $5.4 MILLION, OR $0.13 PER DILUTED SHARE
ANNUAL EARNINGS OF $21.2 MILLION, OR $0.49 PER DILUTED SHARE
MONTEBELLO, NY - October 25, 2005 - Provident New York Bancorp (Nasdaq-National
Market: PBNY), the parent company of Provident Bank, today announced that for
the three months ended September 30, 2005, net income was $5.4 million, or $0.13
per diluted share compared to net income of $4.2 million or $0.11 per diluted
share for the three months ended September 30, 2004. This represents an increase
of $1,142,000 or 26.9%.
Net income for the fiscal year ended September 30, 2005 was $21.2 million,
compared to net income of $11.0 million for the fiscal year ended September 30,
2004, an increase of $10.2 million. Diluted earnings per share were $0.49 and
$0.29 for the years ended September 30, 2005 and September 30, 2004,
respectively. The increase in earnings in 2005 reflects twelve months of
operations of Warwick Community Bancorp, Inc. ("Warwick" or "WSB") following the
acquisition of WSB in October 2004. Earnings for fiscal 2004 reflect
approximately three quarters of operations of ENB Holding Company, Inc., and
Ellenville National Bank ("ENB") following the acquisition of ENB in January
2004. Earnings for 2004 also reflect after-tax charges of $3.0 million relating
to the establishment of the Charitable Foundation in connection with the
second-step conversion, which decreased earnings per share by $0.08 for the
year.
George Strayton, President and CEO, commented: "We kicked off the year in
October of 2004 with the acquisition of Warwick Savings Bank and completed that
computer system integration in November of 2004, which was nine months after the
same process with Ellenville National Bank. Both computer conversions went well.
For the most part, both of these institutions concentrated their branch networks
in the Orange County, New York region. This past summer, we completed the
process of installing Provident's trade mark seven-day banking strategy into
this new branch network and began the process of condensing the business
products of the three banks. As the result of a significant training effort and
products that were relatively new to the two banks, such as credit-scored small
business loans, mortgage loans and equity lines of credit, new business
development has been on the rise. Legacy Provident branches out performed newer
branches, however, we believe the newer branch locations will at least perform
to the level of legacy branches in a short time.
Core deposit retention and growth were a challenge in fiscal 2005 and will
continue to be a challenge in 2006, given the significant rise in short-term
rates. Provident's core deposit anchor, business and retail transaction
accounts, grew at a rate of 47.8% for the fiscal year. We experienced movement
from our legacy savings passbook and statement savings products and money market
products into higher yielding certificates of deposit. Despite this change
Provident's cost of deposits continues to be at a very low level, supporting our
strong net interest margin.
<Page>
Provident New York Bancorp Press Release cont.
Looking forward to 2006, in addition to the revenue opportunities we should see
from the acquired branches, we have undertaken a process improvement initiative
and efforts to condense the numerous duplicative benefit plans we now have as a
result of the recent acquisitions.
Having completed the integration of the Warwick and Ellenville banks, I am
pleased to report that net income, excluding the effects of the Charitable
Foundation of $3.0 million after tax, or $0.08 per share, increased from $14.0
million in 2004 to $21.2 million in 2005, or 52%, and diluted earnings per share
increased from $0.37 to $0.49 in 2005, an increase of $0.12 or 32%."
Total assets as of September 30, 2005 were $2.6 billion, an increase of $771.2
million, or 42.2%, over assets of $1.8 billion at September 30, 2004. The
increase from September 30, 2004 was due to the October 2004 acquisition of
Warwick, whose assets totaled $703.7 million on the merger date, and the
purchase of an HSBC Bank USA, National Association ("HSBC") branch office in
South Fallsburg, New York, which added $23.3 million of assets in the third
quarter of 2005, as well as internal growth of the Company. Goodwill increased
by $92.4 million from September 30, 2004 as a result of the completion of the
Warwick acquisition, and core deposit intangibles increased by $8.1 million, net
of $3.9 million in amortization, from September 30, 2004 as a result of the
Warwick and the South Fallsburg HSBC branch acquisitions.
Net loans as of September 30, 2005 were $1.3 billion, an increase of $359.8
million, or 36.7%, over net loan balances of $980.3 million at September 30,
2004. Loans acquired from WSB totaled $288.2 million, while allowances for loan
losses acquired in connection with WSB were $4.9 million, or 1.7% of WSB's
outstanding loan balances. Inclusive of Warwick loans acquired, commercial loans
increased by $226.6 million, or 46.5%, over balances at September 30, 2004.
Consumer loans increased by $61.8 million, or 47.6%, during the year ended
September 30, 2005, while residential loans increased by $76.0 million, or
20.0%. Total loan originations, excluding those added from acquisitions, have
increased from $342.5 million for the year ended September 30, 2004 to $515.4
million for the year ended September 30, 2005. However, repayments and sales of
loans have also increased from $294.2 million from 2004 to $442.1 million for
the year ended September 30, 2005. Loan quality continues to be strong. At $1.6
million, non-performing loans as a percentage of total loans is 0.12%, as
opposed to 0.27% at September 30, 2004.
Securities increased by $290.5 million, or 48.2%, to $893.9 million at September
30, 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 $182.3 million, or 50.7%, and in
U.S. Government and federal agency securities, which increased by $108.2
million, or 44.3%.
Deposits as of September 30, 2005 were $1.7 billion, up $486.9 million, or
39.3%, from the balance of September 30, 2004. Deposits acquired from Warwick
and HSBC totaled $475.1 million and $23.3 million, respectively. As of September
30, 2005, retail and commercial transaction accounts were 31.9% of deposits
compared to 30.0% at September 30, 2004.
Borrowings increased by $227.3 million from $214.9 million at September 30, 2004
to $442.2 million at September 30, 2005. $160 million of the increase is related
to the borrowings assumed from Warwick.
Stockholders' equity increased by $45.6 million to $395.2 million at September
30, 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 $21.2 million and ESOP allocations of $809,000 for the fiscal year
also increased equity. Partially offsetting the increases were the payments of
cash dividends totaling $7.5 million and a decrease of $8.0 million in other
comprehensive income due to unrealized losses on available for sale securities.
Since September 30, 2004, we have purchased a total of 3.2 million treasury
shares, which further decreased stockholders' equity by $38.0 million.
During the fourth quarter the Company repurchased 343,200 shares for a total
purchase price of $4.1 million. As of September 30, 2005, 1,307,400 shares
remain under its previously announced repurchase authorization. Also during
2005, 762,400 shares of restricted stock were granted from treasury shares. Tier
I capital to assets stands at 9.6% at September 30, 2005.
Provident New York Bancorp Press Release cont.
Income Information - Quarter
Net interest income after provision for loan losses for the three months ended
September 30, 2005 increased by $3.9 million, or 22.7%, to $21.3 million for the
quarter ended September 30, 2005, compared to $17.3 million for the quarter
ended September 30, 2004. Gross interest income increased by $8.9 million, or
42.3%, to $30.1 million for the quarter ended September 30, 2005, compared to
$21.1 million for the same three months in 2004. The increase in interest income
was largely due to a $618.4 million increase in average earning assets to $2.2
billion during the quarter ended September 30, 2005, as compared to $1.6 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 enhanced by an increase in average yield of 15 basis points
from 5.28% to 5.43%, on a fully taxable equivalent basis. The average yields on
the loan and investment portfolios increased 23 basis points and nine basis
points, respectively. Interest expense increased by $5.0 million for the quarter
compared to the same quarter in 2004, as average interest-bearing liabilities
increased by $615.6 million and the average cost of interest-bearing liabilities
increased by 69 basis points. The tax equivalent net interest margin declined by
49 basis points to 3.90%, while net interest spread declined by 54 basis points
to 3.51%. This was primarily the result of assets acquired from Warwick being
recorded at then-current market interest rates, coupled with the impact of the
increase in the cost of interest-bearing liabilities resulting from the 275
basis point increase in the target federal funds rate since May of 2004.
Non-interest income was $4.6 million for the three months ended September 30,
2005, compared to $3.1 million for the three months ended September 30, 2004, an
increase of $1.5 million or 48.2%. Deposit fees and service charges increased by
$929,000 or 51.4%, of which $490,000 was generated from the acquired Warwick
branches, while $439,000 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
$282,000 or 216.8% due to additional BOLI investments of $24.4 million ($13.3
million of which were added from the Warwick acquisition). Title insurance fee
income derived from the Company's new wholly-owned title subsidiary, Hardenburgh
Abstract Company, Inc. (acquired as part of the Warwick acquisition), was
$541,000 for the quarter. There were no gains on the sale of securities during
the current three-month period, compared to $561,000 for the same period last
year. During the three-month period ended September 30, 2005, the Company also
recorded gains on sales of loans totaling $21,000 compared to $89,000 for the
same period last year.
Non-interest expense for the three months ended September 30, 2005 increased by
$3.2 million, or 22.5%, due largely due to the increase in branch locations and
office facilities, as well as staff acquired in the Warwick acquisition.
Compensation and employee benefits increased by $1.0 million, or 15.9%, to $7.5
million for the three months ended September 30, 2005. In addition, there was an
increase in the cost of stock-based compensation benefits of $111,000. Occupancy
and office operations increased by $652,000, or 34.2%, for the three months
ended September 30, 2005, of which $428,000 was attributable to the acquired
Warwick properties. Advertising and promotion decreased $24,000 or 4.7%,
primarily as a result of the completion of the Company's new brand identity
project, which commenced in late fiscal 2004. Professional fees increased by
$112,000, or 11.2% to $1.1 million, due largely to consulting and auditing fees
incurred on behalf of our Sarbanes-Oxley Section 404 compliance initiative. This
was offset somewhat by a decline in consulting fees related to the Warwick
acquisition. Merger and integration costs were $159,000 for the 2005 quarter,
primarily due to the acquisition of the HSBC South Fallsburg branch. There were
no merger and integration costs during the 2004 quarter. Other non-interest
expense increased $491,000, or 29.0%, due to increased overhead relating to the
increase in branch locations and administration costs associated with being a
larger bank.
The efficiency ratio, which excludes securities gains, merger costs,
amortization of intangible assets, and the $5.0 million charitable contribution,
and includes the tax equivalent adjustment for interest income, has improved to
62.7% for the current quarter from 68.0% for the quarter ending September 30,
2004, reflecting the strides we have made in combining Warwick and Ellenville
into Provident and the operating leverage derived from those efforts [See
attached table for a calculation of the efficiency ratio].
The Company's effective tax rate was 34.3% for the three months ended September
30, 2005 vs. 29.3% for the tree months ended September 30, 2004, substantially
as a result of a $300 thousand release of tax reserves in 2004.
Provident New York Bancorp Press Release cont.
Income Information -Fiscal Year
Net interest income after provision for loan losses for the fiscal year ended
September 30, 2005 was $85.1 million, compared to $60.7 million for the year
ended September 30, 2004, an increase of $24.4 million or 40.2%. Interest income
increased $40.8 million to $115.3 million for the fiscal year ending September
30, 2005, compared to $74.5 million for the prior year. The increase in interest
income was largely due to a $767.6 million increase in average earning assets to
$2.2 billion during the year ended September 30, 2005, as compared to $1.4
billion for the prior fiscal year. The increase is primarily due to the Warwick
acquisition and continued internal growth. An increase in average yield on
earning assets of six basis points, from 5.20% to 5.26%, on a fully taxable
equivalent basis, also contributed to the increase in net interest income.
Average yields increased in both the loan and securities portfolios, of 17 basis
points and four basis points, respectively, with the overall yield on total
interest-earning assets increasing in every category. Interest expense increased
by $16.4 million for the fiscal year ended September 30, 2005 from $13.0 million
for the year ended September 30, 2004, to $29.4 million, as average
interest-bearing liabilities increased by $686.8 million and the average cost of
interest-bearing liabilities increased 46 basis points. The net interest margin
declined by 37 basis points to 3.94%, while the net interest spread declined by
40 basis points to 3.59%, due to the assets acquired in the Warwick acquisition
being recorded at then-current market interest rates and the increase in
short-term interest rates. This change in short-term rates, which affected
funding costs to a larger degree than existing earning assets (which are
primarily fixed-rate until maturity) was disproportionately large as compared to
the change in longer term market interest rates, and thus has decreased net
interest margin. The Federal Reserve has increased short term rates eleven times
since May 2004, increasing the target federal funds rate from 1% to 3.75%.
Conversely, the 10-year treasury rate has decreased from an average of 4.29% for
the fiscal year ended September 30, 2004 to 4.20% for the year ended September
30, 2005. The bank's average cost of interest-bearing liabilities has increased
and, although the average asset yields increased during this period, they did so
at a slower pace due to continued market pressure. This has been offset somewhat
by a greater increase of interest earning assets compared to interest bearing
liabilities 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 generated from an increasing volume of assets.
Non-interest income was $17.9 million for the fiscal year ended September 30,
2005 compared to $11.6 million for the prior fiscal year. Deposit fees and
service charges increased by $3.8 million, or 57.5% to $10.4 million, of which
$1.8 million was generated from the acquired Warwick branches, while $2.0
million was primarily due to volume-driven increases in overdraft,
non-sufficient funds, and ATM and debit card fees. Loan fees and late charges
increased by $679,000 or 81.6% to $1.5 million largely due to pre-payment
penalties. Income derived from the Company's BOLI investments increased by $1.2
million, or 224.3%, due to the additional BOLI investment previously discussed,
and the receipt of death benefit proceeds. Title insurance fee income derived
from the new Hardenburgh Abstract Company, Inc. was $1.6 million. Gains on the
sale of securities were $369,000 for the 2005 fiscal year compared to $2.5
million for the prior fiscal year. During the year ended September 30, 2005, the
Company also recorded gains on sales of loans totaling $206,000 compared to
$320,000 for the prior year. For the year ending September 30, 2005, there was
of $681,000 in income pertaining to our investment as a limited partner in a
low-income housing partnership. The investment had been amortized quarterly
since 1996 in excess of our interest in the partnership. There was no material
impact on any quarter in the affected periods.
Non-interest expense for the fiscal year ended September 30, 2005 increased by
$14.4 million, or 25.7%. Excluding the 2004 charge of $5.0 million, pre-tax, for
the Charitable Foundation, non-interest expenses for the year ended September
30, 2005 increased by $19.4 million, or 38.0%, to $70.6 million, compared to
$51.1 million for the same period in 2004. The acquisitions 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 $8.6 million, or
37.3%, to $31.6 million for the year ended September 30, 2005. The increase was
primarily attributable to the acquisitions. Occupancy and office operations
increased by $2.8 million, or 42.2%, for the year ended September 30, 2005,
almost all of which was attributable to the acquisitions. Advertising and
promotion increased $1.1 million or 51.3%, primarily as a result of the
Company's new brand identity and the additional promotions in the Orange County
market. Amortization of core deposit intangible increased by $1.9 million as a
result of acquired deposits. Data and check processing expense increased $1.1
million, or 31.2%, primarily due to the higher level of services related to the
accounts acquired in the mergers and in the acquisition of the new HSBC South
Fallsburg branch. Other expenses increased by $2.5 million, or 44.4%, primarily
due to increases in correspondent bank expense, postage, telephone expense, loan
servicing and credit report expenses, and insurance premium expense, all of
which directly related to the increased size of Provident Bank following the
mergers. ATM and debit card expense increased $550,000, or 68.2%, primarily as a
result of the increase in the number of accounts.
<Page>
Provident New York Bancorp Press Release cont.
The Company's effective tax rate for the year ended September 30, 2005 was 34.5%
compared to 31.8% for the year ended September 30, 2004.
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 New York Bancorp and Subsidiaries CONSOLIDATED CONDENSED STATEMENTS OF
FINANCIAL CONDITION (unaudited, in thousands, except share and per share data)
September 30, September 30,
------------- ------------
2005 2004
---- ----
Assets:
Cash and due from banks $ 64,117 $ 107,571
Total securities 893,901 603,375
Loans held for sale --- 855
Loans:
One- to four-family residential mortgage loans 456,794 380,749
Commercial real estate, commercial business
and construction 713,471 486,904
loans
Consumer loans 191,808 129,981
---------- ---------
Gross loans 1,362,073 997,634
Allowance for loan losses (22,008) (17,353)
---------- ---------
Total loans, net 1,340,065 980,281
---------- ---------
Federal Home Loan Bank stock, at cost 21,333 10,247
Premises and equipment, net 32,101 16,846
Goodwill 157,656 65,260
Core deposit intangible 13,770 5,624
Bank owned life insurance 37,667 13,245
Other assets 36,762 22,847
---------- --------
Total assets $2,597,372 $1,826,151
========== =========
Liabilities:
Deposits:
Demand deposits $ 407,662 $ 289,360
NOW deposits 143,363 83,439
---------- ----------
Total transaction accounts 551,025 372,799
---------- ----------
Savings and money market deposits 703,765 533,410
Certificates of deposit 471,611 333,323
---------- ----------
Total deposits 1,726,401 1,239,532
---------- ----------
Borrowings 442,203 214,909
Mortgage escrow funds and other 33,611 22,198
---------- ----------
Total liabilities 2,202,215 1,476,639
Stockholders' equity 395,157 349,512
---------- ----------
Total liabilities and stockholders' equity $2,597,372 $1,826,151
========== ==========
Common shares outstanding at year end 43,505,659 39,618,373
Book value per share $ 9.08 $ 8.82
Provident New York Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share and per share data)
Three Months Ended Year Ended
September 30, September 30,
2005 2004 2005 2004
---- ---- ---- ----
Interest and dividend income:
Loans $21,553 $15,442 $80,773 $54,093
Securities 8,501 5,598 34,353 20,231
Other earning assets 8 81 144 184
--------- --------- --------- ---------
Total interest and dividend income 30,062 21,121 115,270 74,508
--------- --------- --------- ---------
Interest expense:
Deposits 4,829 2,219 16,036 7,901
Borrowings 3,755 1,362 13,364 5,081
--------- --------- --------- ---------
Total interest expense 8,584 3,581 29,400 12,982
--------- --------- --------- ---------
21,478 17,540 85,870 61,526
Provision for loan losses 225 225 750 800
--------- --------- --------- ---------
Net interest income after provision for loan losses 21,253 17,315 85,120 60,726
--------- --------- --------- ---------
Non-interest income:
Deposit fees and service charges 2,738 1,809 10,351 6,570
Loan fees and late charges 500 241 1,511 832
Gains on sales of securities available for sale --- 561 369 2,455
Gains on sales of loans 21 89 206 320
Title insurance fees 541 --- 1,560 ---
Bank owned life insurance 412 130 1,790 552
Previously unrecognized low income housing
partnership investment --- --- 681 ---
Other 398 281 1,440 844
--------- --------- --------- ---------
Total non-interest income 4,610 3,111 17,908 11,573
--------- --------- --------- ---------
Non-interest expense:
Compensation and employee benefits 7,510 6,478 31,573 23,001
Stock-based compensation plans 818 707 2,960 2,790
Occupancy and office operations 2,559 1,907 9,587 6,741
Advertising and promotion 482 506 3,102 2,050
Professional fees 1,107 995 2,908 2,655
Data and check processing 1,177 1,049 4,767 3,634
Stationery and office supplies 369 251 1,184 1,036
Merger integration costs 159 --- 1,124 773
Amortization of intangible assets 893 595 3,939 2,063
ATM/debit card expense 409 242 1,357 807
Other 2,182 1,691 8,081 5,596
--------- --------- --------- ---------
Sub-total 17,665 14,421 70,582 51,146
Establishment of Charitable Foundation --- --- --- 5,000
--------- --------- --------- ---------
Total non-interest expense 17,665 14,421 70,582 56,146
--------- --------- --------- ---------
Income before income tax expense 8,198 6,005 32,446 16,153
Income tax expense 2,810 1,759 11,204 5,136
--------- --------- --------- ---------
Net income $ 5,388 4,246 $ 21,242 $ 11,017
========= ========= ========= =========
Per common share:
Basic earnings $ 0.13 $ 0.11 $ 0.49 $ 0.30
Diluted earnings 0.13 0.11 0.49 0.29
Dividends declared 0.045 0.04 0.17 0.15
Weighted average common shares:
Basic 41,513,219 37,877,763 43,033,441 36,809,451
Diluted 42,141,403 38,499,635 43,702,640 37,444,381
<Page>
Provident New York Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands)
September 30, September 30,
2005 2004
---------------------- ---------------------
Asset Quality Data:
Non-performing loans (NPLs) $1,641 $2,737
Non-performing assets (NPAs) $1,733 $2,737
NPLs as % of total loans 0.12% 0.27%
NPAs as % of total assets 0.07% 0.15%
Allowance for loan losses as % of NPLs 1,341% 634%
Allowance for loan losses as % of total loans 1.62% 1.74%
Capital Ratios:
Equity to total assets (consolidated) 15.21% 19.15%
Tier 1 capital consolidated 9.56% 15.91%
Three Months Ended Twelve Months Ended
September 30, September 30,
2005 2004 2005 2004
--------------------------------------------------------
Performance Ratios (annualized):
Return on:
Average assets 0.83% 0.93% 0.84% 0.69%
Average equity 5.38% 4.89% 5.16% 3.94%
Net interest rate spread (tax-equivalent basis) 3.51% 4.05% 3.59% 3.99%
Net interest margin (tax-equivalent basis) 3.90% 4.39% 3.94% 4.31%
Average Balance Data:
Average assets $2,568,852 $1,808,002 $2,531,547 $1,607,594
Average earning assets $2,227,680 $1,609,285 $2,213,601 $1,446,003
Average stockholders' equity $397,645 $345,360 $411,647 $279,888
Efficiency Ratio
Non-interest expense $ 17,665 $ 14,421 $ 70,582 $ 56,146
---------------------------------------------------------
Interest & Non-interest income $ 26,088 $ 20,651 $ 103,778 $ 73,099
GAAP efficiency ratio 67.7% 69.8% 68.0% 76.8%
Non-interest expense $ 17,665 $ 14,421 $ 70,582 $ 56,146
less:
merger integration costs (159) - (1,124) (773)
amortization of intangible assets (893) (595) (3,939) (2,063)
charitable foundation - - - (5,000)
---------------------------------------------------------
Adjusted non-interest expense $ 16,613 $ 13,826 $ 65,519 $ 48,310
Interest & Non-interest income $ 26,088 $ 20,651 $103,778 $ 73,099
add: tax equivalent adjustment 417 229 1,241 736
less:
gains on sales of securities - (561) (369) (2,455)
gain on low income housing LLP - - (681) -
----------------------------------------------------------
Adjusted income $ 26,505 $ 20,319 $ 103,969 $ 71,380
Adjusted (Non-GAAP) efficiency ratio 62.7% 68.0% 63.0% 67.7%