MONTEBELLO, N.Y., Oct. 30 /PRNewswire-FirstCall/ -- Provident New York Bancorp , the parent company of Provident Bank, today announced that for the three months ended September 30, 2006, net income was $5.1 million, or $0.12 per diluted share, compared to net income of $5.4 million, or $0.13 per diluted share, for the three months ended September 30, 2005. For the year ended September 30, 2006, net income was $20.2 million, or $0.49 per diluted share, compared to net income of $21.2 million, or $0.49 per diluted share, for the year ended September 30, 2005.
"I am pleased to report that despite the head winds of the flat yield curve, Provident has maintained its earnings per share at the same level as last year," said George Strayton President and CEO. "Our growth in commercial loan, commercial checking deposits and fee income made up most of the revenue lost as low cost deposits migrated to higher paying deposit products. Our franchise value remains strong as Provident has the largest deposit share in Orange County, holds the number two position in Rockland and is the overall Rockland/Orange deposit leader based on FDIC branch deposit reports as of June 2006."
Fourth quarter operating summary:
* 53 basis-point increase in yield on interest-earning assets
* 119 basis-point increase in average rate on interest-bearing liabilities
* Interest expense increased by $7.2 million due to both increased rates
and increased volumes paid on certificates of deposit and borrowings as
compared to the fourth quarter of last year
* 4.9% decrease in net interest income
* 10.5% increase in non-interest income compared to last year's quarter
was mainly due to fees collected on the Company's investment advisory
subsidiary.
* Overall non-interest expense remained essentially the same despite a
61.0% increase in stock-based compensation expense
* Stock-based compensation increased $499,000 primarily due to:
* The effect of implementing Statement of Financial Accounting Standards
(SFAS) No. 123R, which requires the expensing of stock option grants,
resulting in a $261,000 pre-tax expense for the quarter
* Employee Stock Ownership Plan (ESOP) expense increased $176,000 due to
the rise in the average stock price and due to additional shares,
released in the current year, compared to the same quarter last year
* Data and check processing costs decreased by $541,000 or 46.0%, (through
consolidation of telecommunication services and bringing data processing
in-house).
* The Company's Pension Plan accruals were frozen as of September 30,
2006. There will be no additional accruals for years of service or
salary increases related to defined pension benefits, and the Company
amended its 401K Plan to create a profit sharing component expected to
be 3% of eligible salary. The Company expects that benefit-related
expenses will decrease by $800,000, based on its existing salary base.
Key Balance Sheet Changes at September 30, 2006 vs. September 30, 2005
* Total assets at September 30, 2006 increased to $2.8 billion, up $242
million, or 9.3%, from September 30, 2005.
* Gross loans grew $111 million to $1.5 billion, largely due to a $73.6
million, or 10.3%, increase in commercial loans.
* Loans held for sale of $7.5 million represent student loans, which will
be purchased by a third party 60 days after annual advances have
occurred.
* Securities increased $118.8 million to $1.0 billion, with mortgage-
backed securities and municipal securities primarily contributing to the
increase.
* Non-transaction deposits grew $33.7 million to $1.2 billion, as
certificates of deposit increased by $120.2 million, offsetting a
decline in savings and money market accounts of $86.5 million.
Transaction deposits decreased $30.4 million to $520.6 million,
reflecting retail customers' migration to interest-bearing products at
higher rates.
* Non-performing assets increased $3.4 million from September 30, 2005,
primarily due to two commercial loan relationships from the acquired
Ellenville National Bank portfolio. We charged off $770,000 of one of
these relationships in the second fiscal quarter.
* Stockholders' equity increased $10.1 million to $405.3 million as net
retentions of earnings, $5.9 million is stock-based compensation capital
credits and a decrease in other comprehensive loss on available-for-sale
securities (SFAS No.115) of $700,000 to $7.6 million more than offset
the repurchase of 1.2 million shares.
* In accordance with SFAS No.114, $1.0 million was reclassified from the
allowance for loan losses to other liabilities as of September 30, 2005,
reflecting reserves required for contingent loan commitments (lines and
letters of credit). As of September 30, 2006 the reserve for contingent
loan commitments was $1.4 million.
* At September 30, 2006 the Company had $272 million in investment
securities that will mature or reprice within the next 12 months. The
average tax equivalent yield of these investments is 3.56%. Depending
on the market conditions at the point of reinvestment, such funds will
be either reinvested at current market rates or borrowings will be
reduced.
Key Operating Results -- Quarter
Net interest income decreased $1.1 million or 4.9%, to $20.7 million primarily as a result of unfavorable interest expense variances of $2.7 million for certificates of deposit and $4.1 million for borrowings expense. This was offset in part by an increase in interest income of $6.2 million over last year's quarter. Tax equivalent net interest margin decreased from 3.95% to 3.46%. Interest-earning assets, on average, increased by $228.5 million, including $129.6 million in loans and $98.9 million in securities. When coupled with the increase of 53 basis points in yield, the volume increase led to a $6.2 million (or $6.4 million tax equivalent) increase in gross interest income to $37.2 million. Included in gross interest on loans and fees were prepayment fees and late charges of $246,000 for the current quarter and $307,000 previously classified as non-interest income for the prior year's quarter. The cost of interest-bearing liabilities increased by 119 basis points to 3.11%. Increases of $242.3 million in average borrowings and $20.1 million in interest-bearing deposits resulted in an increase in interest expense of $7.2 million, to $15.8 million. An increase of $93.0 million in the average balance of higher-cost certificates of deposit also contributed to the higher interest expense, more than offsetting reduced interest expense due to a decline of $99.6 million in average savings account balances.
Non-interest income increased $453,000, or 10.5%. The increase is a reflection of the bank's efforts to improve non-interest income. Investment management fees included $450,000 from our new investment management subsidiary, Hudson Valley Investment Advisors, LLC, "HVIA," acquired April 1, 2006.
Non-interest expense remained essentially the same despite an increase of $499,000 in expense for stock-based compensation plans as previously described. Salaries and benefit costs increased $671,000, or 8.9%, to $8.2 million primarily due to increases in salaries due to an increase in head count which was only partially offset by declines in benefit costs. As a result of bringing our data processing operations in-house, certain costs have been redistributed to salaries and benefits as well as occupancy and equipment.
The Company's effective tax rate for the quarter ended September 30, 2006 was 32.6%, compared to 34.3% for the quarter ended September 30, 2005. The lower rate reflects the higher utilization of tax-exempt securities.
Key Operating Results -- Fiscal Year
Net interest income for the year ended September 30, 2006 decreased by $2.0 million or 2.3% compared to the same period last year. Interest income increased by $19.4 million, a reflection of higher average volume of interest- earning assets, mostly loans, and an increase of 52 basis points in the yield on interest-earning assets. Interest income included prepayment fees and late charges of $959 thousand for the year ended September 30, 2006 and $900 thousand previously classified in non-interest income for the year ended September 30, 2005. Interest expense increased by $21.5 million as the average volume and cost of interest-bearing liabilities increased by $177.3 million and 96 basis points, respectively. This increase in interest expense was net of the recognition of accretion of $1.5 million in premiums on called Federal Home Loan Bank borrowings. An increase of $103.4 million in the average balances of higher cost certificates of deposit contributed to the higher interest expense and was only partially offset by a decrease in interest expense related to decreased average savings account balances of $100.4 million. The migration of account balances from non-interest bearing accounts and low yielding deposit accounts to certificates of deposit and market rate money market accounts is expected to continue, if short term rates remain at the current levels.
The provision for loan losses was $1.2 million for the year ended September 30, 2006 compared to $750,000 for fiscal 2005. The increase in the provision was made in order to maintain the allowance for loan losses at a level to absorb probable loan losses inherent in the existing portfolio.
Non-interest income increased $145,000 or 0.9%. The prior year's income includes the previously mentioned BOLI death claim proceeds of $372,000 and the one-time income item of $681,000 for low income housing partnership investment income. Excluding these two items, non-interest income increased $1.2 million from the prior year's income. This increase is a reflection of the Company's continued focus on improving non-interest income, which is less susceptible to interest rate fluctuations. Fee income from our title insurance subsidiary, income from our BOLI investments (excluding the prior year's death claim proceeds of $372,000) and investment management fees (including $585,000 from HVIA) increased by 9.0%, 15.7% and 80%, respectively.
Non-interest expense for the year ended September 30, 2006 increased by $674,000, or 1.0% compared to the same period last year. Stock-based compensation increased by $2.9 million, or 96.8%, of which $1,129,000 was for stock option expenses under new accounting rules, $368,000 was for the acceleration of certain restricted stock awards and $604,000 was for an increase in ESOP expense, which reflected the release of the same number of shares for the 2005 ESOP plan year as in past years. Stock-based compensation also reflects a full year's expense of $2.2 million related to restricted stock awards that were granted in March 2005, compared to $1.0 million for the prior year. These increases were partially offset by a decrease of $748 thousand in pension and post-retirement health insurance expense.
The transfer of our data processing operations in-house in November 2005 is primarily responsible for a $1,679,000 decrease in data and check processing costs, which is offset by related increases in compensation and occupancy costs.
The Company's effective tax rate for the full year 2006 was 31.4%, compared to 34.5% for 2005. A key factor in the lower rate is the shifting to tax-exempt securities, which represented 11.5% of the average securities portfolio for 2006, compared to 7.1% of the average securities portfolio for 2005. The effective tax rate was also positively impacted by a land donation during the third quarter, which resulted in a tax benefit of $242,000.
Additional information
The Company maintains two ESOP loans, which release 187,000 shares per year. The Company's loan payments on its first ESOP loan result in the release of 137,000 shares per year. For the year ended September 30, 2006 the Company recorded $1.7 million in expense related to the release of these shares. This loan will be paid off as of December 31, 2007. As a result of the payoff, no further ESOP expense will be recorded on the release of these shares and the expense related to this share release will be eliminated after that time.
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 that 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 New York Bancorp and Subsidiaries
CONSOLIDATED CONDENSED STATEMENTS OF FINANCIAL CONDITION
(unaudited, in thousands, except share and per share data)
September 30, September 30,
2006 2005
Assets:
Cash and due from banks $57,293 $64,117
Total securities 1,012,716 893,901
Loans held for sale 7,473 ---
Loans:
One- to four-family residential
mortgage loans 462,996 456,794
Commercial real estate, commercial
business and construction loans 787,086 713,471
Consumer loans 223,476 191,808
Total loans, gross 1,473,558 1,362,073
Allowance for loan losses (20,373) (21,047)
Total loans, net 1,453,185 1,341,026
Federal Home Loan Bank stock, at cost 33,518 21,333
Premises and equipment, net 31,739 32,101
Goodwill 158,853 157,656
Other amortizable intangibles 14,189 14,607
Bank owned life insurance 39,308 37,667
Other assets 32,099 35,915
Total assets $2,840,373 $2,598,323
Liabilities:
Deposits:
Demand deposits $366,847 $407,662
NOW deposits 153,732 143,363
Total transaction
accounts 520,579 551,025
Savings and money market deposits 617,314 703,765
Certificates of deposit 591,766 471,611
Total deposits 1,729,659 1,726,401
Borrowings 682,739 442,203
Mortgage escrow funds and other 22,689 34,562
Total liabilities 2,435,087 2,203,166
Stockholders' equity 405,286 395,157
Total liabilities and
stockholders' equity $2,840,373 $2,598,323
Shares of common stock outstanding at
period end 42,699,046 43,505,659
Book value per share $9.49 $9.08
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,
2006 2005 2006 2005
Interest and dividend income:
Loans and loan fees $25,690 $21,860 $95,531 $81,674
Securities 10,373 8,501 38,565 33,665
Other earning assets 461 8 1,520 832
Total interest and dividend
income 36,524 30,369 135,616 116,171
Interest expense:
Deposits 7,956 4,829 26,802 16,076
Borrowings 7,848 3,755 24,057 13,324
Total interest expense 15,804 8,584 50,859 29,400
Net interest income 20,720 21,785 84,757 86,771
Provision for loan losses 300 225 1,200 750
Net interest income after
provision for loan losses 20,420 21,560 83,557 86,021
Non-interest income:
Deposit fees and service
charges 2,791 2,738 10,689 10,351
Net gain on sales of
securities available for
sale --- --- --- 369
Title insurance fees 493 541 1,700 1,560
Bank owned life insurance 416 412 1,641 1,790
Investment management fees 622 201 1,490 828
Previously unrecognized low
income housing partnership
investment --- --- --- 681
Other 434 411 1,632 1,428
Total non-interest income 4,756 4,303 17,152 17,007
Non-interest expense:
Compensation and employee
benefits 8,181 7,510 32,182 31,573
Stock-based compensation
plans 1,317 818 5,826 2,960
Occupancy and office
operations 2,826 2,559 11,435 9,587
Advertising and promotion 547 482 2,445 3,102
Professional fees 924 1,107 3,450 2,908
Data and check processing 636 1,177 3,088 4,767
Merger integration costs --- 159 --- 1,124
Amortization of intangible
assets 832 893 3,288 3,939
ATM/debit card expense 423 409 1,565 1,357
Other 1,968 2,551 7,977 9,265
Total non-interest expense 17,654 17,665 71,256 70,582
Income before income tax
expense 7,522 8,198 29,453 32,446
Income tax expense 2,452 2,810 9,258 11,204
Net income $5,070 $5,388 $20,195 $21,242
Per common share:
Basic earnings $0.12 $0.13 $0.49 $0.49
Diluted earnings 0.12 0.13 0.49 0.49
Dividends declared 0.05 0.045 0.20 0.17
Weighted average common
shares:
Basic 40,945,185 41,513,219 40,953,010 43,033,441
Diluted 41,407,390 42,141,403 41,441,859 44,702,640
Selected Financial Condition Data: Three Months Ended
(in thousands except share and
per share data)
09/30/06 06/30/06 03/31/06 12/31/05 09/30/05
(In thousands)
End of
Period
Total
assets $2,840,373 $2,780,419 $2,745,628 $2,630,940 $2,598,323
Loans,
gross(1) 1,473,558 1,450,348 1,405,596 1,387,148 1,362,073
Securities
available
for sale 951,729 916,752 926,037 832,578 822,952
Securities
held to
maturity 60,987 64,631 67,364 65,949 70,949
Bank owned
life
insurance 39,308 38,892 38,475 38,080 37,667
Goodwill 158,853 159,093 157,526 157,656 157,656
Other
amortizable
intangibles 14,189 15,030 12,983 13,742 14,607
Deposits 1,729,659 1,750,780 1,779,289 1,675,312 1,726,401
Borrowings 682,739 605,523 546,210 533,843 442,203
Equity 405,286 391,492 387,293 392,579 395,157
Average
Balances
Total
assets $2,795,917 $2,756,664 $2,665,763 $2,604,713 $2,569,762
Loans,
gross:
Real
estate -
residential
mortgage 465,231 465,703 457,030 453,018 439,242
Real estate -
commercial
mortgage 528,225 518,538 514,089 502,435 490,107
Real estate -
construction
& land
development 91,280 80,894 78,176 69,314 75,434
Commercial
and
industrial 156,737 150,605 147,775 146,116 146,982
Consumer
loans 221,880 209,970 199,014 192,819 183,750
Loans total 1,463,353 1,425,710 1,396,084 1,363,702 1,335,515
Securities
(taxable) 850,929 871,878 825,284 797,115 808,057
Securities
(non-
taxable) 128,257 112,282 100,693 94,324 86,258
Total
earning
assets 2,456,228 2,421,497 2,330,822 2,259,617 2,227,680
Non earning
assets 339,689 335,167 333,952 344,160 341,171
Non-interest
bearing
checking 356,651 357,992 362,955 382,009 374,432
Interest
bearing
NOW
accounts 153,653 153,848 141,064 138,273 149,061
Total
transaction
accounts 500,520 511,840 504,019 520,282 523,493
Savings and
money market
accounts 665,413 676,682 670,253 692,932 742,938
Certificates
of deposit 565,111 577,219 521,399 488,517 472,081
Total
deposits 1,731,044 1,765,741 1,695,671 1,701,731 1,738,512
Total
interest
bearing
deposits 1,384,177 1,407,749 1,332,716 1,319,722 1,364,080
Borrowings 631,760 582,294 556,201 485,800 409,596
Equity 396,263 388,398 390,958 392,037 397,645
Other
comprehensive
loss
(SFAS 115),
reflected in
equity (13,203) (14,280) (9,992) (10,269) (5,536)
Selected
Operating
Data:
Condensed
Tax
Equivalent
Income
Statement
Interest and
dividend
income $36,524 $34,946 $32,742 $31,404 $30,369
Tax
equivalent
adjustment* 677 592 508 477 417
Interest
expense 15,804 13,262 11,739 10,054 8,584
Net interest
income (tax
equivalent) 21,397 22,276 21,511 21,827 22,202
Provision for
loan losses 300 300 300 300 225
Net interest
income after
provision
for loan
losses 21,097 21,976 21,211 21,527 21,977
Non-interest
income 4,756 4,361 3,964 4,071 4,303
Non-interest
expense 17,654 18,041 18,144 17,417 17,665
Income before
income tax
expense 8,199 8,296 7,031 8,181 8,615
Income tax
expense
(tax
equivalent) 3,129 2,735 2,626 3,022 3,227
Net income $5,070 $5,561 $4,405 $5,159 $5,388
(1) Does not reflect allowance for loan losses of $20,373, $20,360,
$20,093, $20,714 and $21,047.
* Tax exempt income assumed at a 35% federal rate.
Three Months Ended
09/30/06 06/30/06 03/31/06
Performance Ratios (annualized)
Return on Average Assets 0.72% 0.81% 0.67%
Return on Average Equity 5.08% 5.72% 4.57%
Non-Interest Income to Average Assets 0.67% 0.63% 0.60%
Non-Interest Expense to Average Assets 2.51% 2.62% 2.76%
Operating efficiency 69.3% 69.3% 72.7%
Analysis of Net Interest Income
Yield on:
Loans 7.06% 6.92% 6.82%
Investment Securities - Tax Equivalent 4.48% 4.44% 4.28%
Earning Assets - Tax Equivalent 6.01% 5.89% 5.79%
Cost of:
Interest Bearing Deposits 2.28% 2.13% 1.86%
Borrowings 4.93% 3.97% 4.11%
Interest Bearing Liabilities 3.11% 2.67% 2.52%
Net Interest Tax Equivalent:
Net Interest Rate Spread - Tax
Equivalent Basis 2.90% 3.21% 3.27%
Net Interest Margin - tax Equivalent
Basis 3.46% 3.69% 3.74%
Capital Information Data
Tier 1 Leverage Ratio - Bank Only 7.82% 7.54% 7.43%
Tier 1 Risk-Based Capital - Bank Only $208,820 $196,957 $191,775
Total Risk-Based Capital - Bank Only 229,193 217,317 211,868
Tangible Capital Consolidated $233,121 $218,255 $217,645
Tangible Capital as a % of Tangible
Assets 8.74% 8.37% 8.45%
Shares Outstanding 42,699,046 42,623,299 42,424,255
Shares Repurchased Per Stock
Repurchase Program 35,623 11,700 641,400
Basic weighted common shares
outstanding 40,945,185 40,730,064 40,939,326
Diluted common shares outstanding 41,407,390 41,276,806 41,406,485
Per Common Share:
Basic Earnings $0.12 $0.14 $0.11
Diluted Earnings 0.12 0.13 0.11
Dividends Paid 0.05 0.05 0.05
Book Value 9.49 9.18 9.13
Tangible Book Value 5.46 5.12 5.13
Asset Quality Measurements
Non-performing loans (NPLs) $5,024 $4,674 $4,144
Non-performing assets (NPAs) 5,111 4,762 4,234
Net Charge-offs (recoveries) (35) 33 992
Net Charge-offs (recoveries) as %
of average loans (annualized) (0.01%) 0.05% 0.28%
NPLs as % of total loans 0.34% 0.32% 0.29%
NPAs as % of total assets 0.18% 0.17% 0.15%
Allowance for loan losses as % of NPLs 406% 436% 485%
Allowance for loan losses as % of
total loans 1.40% 1.43% 1.43%
Three Months Ended
12/31/05 09/30/05
Performance Ratios (annualized)
Return on Average Assets 0.79% 0.83%
Return on Average Equity 5.22% 5.38%
Non-Interest Income to Average Assets 0.62% 0.66%
Non-Interest Expense to Average Assets 2.65% 2.73%
Operating efficiency 68.5% 67.7%
Analysis of Net Interest Income
Yield on:
Loans 6.65% 6.60%
Investment Securities - Tax Equivalent 4.06% 3.85%
Earning Assets - Tax Equivalent 5.60% 5.48%
Cost of:
Interest Bearing Deposits 1.58% 1.40%
Borrowings 3.92% 3.64%
Interest Bearing Liabilities 2.21% 1.92%
Net Interest Tax Equivalent:
Net Interest Rate Spread - Tax Equivalent Basis 3.39% 3.56%
Net Interest Margin - tax Equivalent Basis 3.83% 3.95%
Capital Information Data
Tier 1 Leverage Ratio - Bank Only 8.37% 8.20%
Tier 1 Risk-Based Capital - Bank Only $206,062 $198,828
Total Risk-Based Capital - Bank Only 227,713 220,122
Tangible Capital Consolidated $221,990 $223,731
Tangible Capital as a % of Tangible Assets 9.03% 9.22%
Shares Outstanding 43,044,299 43,505,659
Shares Repurchased Per Stock Repurchase
Program 473,171 343,200
Basic weighted common shares outstanding 41,193,958 41,513,219
Diluted common shares outstanding 41,670,008 42,141,403
Per Common Share:
Basic Earnings $0.13 $0.13
Diluted Earnings 0.12 0.13
Dividends Paid 0.05 0.045
Book Value 9.12 9.08
Tangible Book Value 5.16 5.14
Asset Quality Measurements
Non-performing loans (NPLs) $5,054 $1,641
Non-performing assets (NPAs) 5,145 1,733
Net Charge-offs (recoveries) 489 469
Net Charge-offs (recoveries) as % of
average loans (annualized) 0.14% 0.14%
NPLs as % of total loans 0.36% 0.12%
NPAs as % of total assets 0.20% 0.07%
Allowance for loan losses as % of NPLs 410% 1283%
Allowance for loan losses as % of total loans 1.49% 1.55%
