MONTEBELLO, N.Y., April 25 /PRNewswire-FirstCall/ -- Provident New York Bancorp , the parent company of Provident Bank, today announced that for three months ended March 31, 2007, net income was $4.4 million, or $0.11 per diluted share, the same as the three months ended March 31, 2006. For the six months ended March 31, 2007, net income was $9.0 million, or $0.22 per diluted share, compared to net income of $9.6 million, or $0.23 per diluted share, for the six months ended March 31, 2006.
George Strayton, President and CEO commented: "With the stabilizing rate environment and the strength of our loyal customer base, we have been able to significantly reduce deposit migration as we had anticipated. We are pleased that our interest income growth is now outpacing interest expense growth. Our net interest margin of 3.50% for the second quarter of 2007 has shown growth over both the previous quarter (3.28%) and the fourth quarter of 2006 (3.46%). This improvement was fueled by our continued strong commercial loan growth, up by $63 million, or 16% on an annualized basis over year end 2006.
Our ability to control interest expense was aided by our ongoing disciplined deposit pricing applied across our customer base. The net income results were achieved despite marketing-related costs required to implement our strategy for long-term growth. As we seek to enhance revenues, we have strengthened our opportunities through new revenue streams including our recently acquired investment management firm, Hudson Valley Investment Advisors LLC, and through new products launched during the quarter such as Remote Deposit capabilities to broaden our customer base. In addition, we expect to see results from our Service Excellence Program, enabling us to serve our customers more effectively and efficiently - just a few of the programs and products that I believe position us well for continued growth."
Second quarter operating summary:
* Net interest margin increased 22 basis points compared to the linked
quarter ended December 31, 2006. This was mainly the result of increases
in yields on loans and investment securities outpacing the costs of
deposits and borrowings.
* Net interest income declined by $537,000, or 2.6% from the previous
year's quarter, and tax equivalent net interest margin declined by 24
basis points.
* Non-interest income increased $942,000, or 23.8%, compared to the
quarter ended March 31, 2006, as a result of investment management fee
growth, increases in deposit services fees and gains associated with the
Company's student loan portfolio.
* Non-interest expense increased $426,000, or 2.4%, compared to the
previous year's quarter, mainly due to increased expenses associated
with marketing the Company's loan and deposit products and professional
fees related to our investment management subsidiary, Hudson Valley
Investment Advisors ("HVIA").
Key Balance Sheet Changes at March 31, 2007 vs. September 30, 2006
* Total assets at March 31, 2007 decreased slightly to $2.8 billion, down
$40.0 million, or 1.4%, from September 30, 2006.
* Gross loans, excluding loans held for sale, grew $86.8 million to $1.6
billion, largely due to a $63.0 million, or 8.0%, increase in commercial
loans.
* Securities decreased $116.4 million to $896.4 million, as the Company
paid down high-cost borrowings with maturing securities.
* Money market accounts and certificates of deposit increased by $25.4
million and $13.1 million, respectively, offsetting a decline in savings
accounts of $13.5 million. Transaction deposits decreased $14.4 million
to $506.2 million.
* The Company currently does not hold any subprime loans. Non-performing
assets increased $3.3 million from September 30, 2006 as payment on
certain previously criticized loans ceased or slowed further, resulting
in their categorization as nonperforming. No significant increase in
loan loss reserves was required by this classification.
* Stockholders' equity increased $7.4 million to $412.6 million primarily
due to net retentions of earnings of $5.2 million, $3.4 million in
stock-based compensation and a decrease in other comprehensive loss on
available-for-sale securities (SFAS No.115) of $3.5 million to $4.1
million. Offsetting these increases were repurchases of 354,000 shares
of stock at a cost of $4.8 million under the Company's stock repurchase
program, all of which occurred during the quarter ended March 31, 2007.
Key Operating Results -- Quarter Ended March 31, 2007 vs. March 31, 2006
Net interest income decreased $537,000, or 2.6%, to $20.5 million primarily as a result of an increase in interest expense of $2.7 million for deposits and $2.3 million for borrowings. This was offset in part by an increase in interest income of $4.5 million over last year's quarter. Tax equivalent net interest margin decreased from 3.74% for the three months ended March 31, 2006 to 3.50% for the same period in 2007. In the quarter ended March 31, 2006 interest expense was reduced by $225,000 due to accretion recorded on a called borrowing.
Average interest-earning assets increased by $130.5 million compared to the prior year's quarter, including an increase of $145.2 million in loans, partially offset by a decrease of $19.7 million in securities. The overall tax equivalent yield on earning assets increased 47 basis points to 6.26%. These factors led an increase of $4.5 million in gross interest income. The cost of interest-bearing liabilities increased by 87 basis points to 3.39%. Increases of $81.3 million in average borrowings and $39.9 million in average interest- bearing deposits resulted in increased interest expense of $5.1 million, to $16.8 million. The difference in the mix of deposits also contributed to higher interest expense. Higher cost certificates of deposit grew, on average, by $79.6 million, while the average balance of lower cost savings accounts declined by $79.9 million.
Non-interest income increased by $942,000, or 23.8% for the three months ended March 31, 2007 compared to the same period the prior year. Investment management fees increased by $514,000 primarily due to fees earned by our investment management subsidiary, HVIA acquired in June of 2006. An increase in deposit services charges and fees of $253,000, or 10.0%, offset a decline in title insurance fees of $109,000 due to a slowdown in the real estate markets. Other non-interest income increased $271,000 due to gains associated with the Company's student loan portfolio. The Company expects to cease student loan originations by the end of 2007.
Total non-interest expense increased by $426,000, or 2.4%, to $18.6 million primarily due to increased marketing expenses of $472,000 and professional fees of $284,000 (HVIA management fees). Compensation and benefits expense declined $209,000 for the quarter due to savings from retirement plan changes implemented in the prior year. Stock-based compensation declined by $193,000 mainly due to an ESOP expenses adjustment in the prior year resulting from changes in vesting assumptions. ATM/debit card expense increased $113,000 due to volume increases, which was more than offset by lower data and check processing expenses of $150,000 (in telecommunication costs) and proof of delivery costs. Other expenses increased by $150,000 primarily due to business development and training expense increases.
The Company's effective tax rate for the quarter ended March 31, 2007 was 30.8%, compared to 32.5% for the quarter ended March 31, 2006. The lower rate reflects the higher utilization of tax-exempt securities.
Key Operating Results -- Six Months Ended March 31, 2007 vs. March 31, 2006
Net interest income decreased $2.2 million or 5.2%, to $40.2 million primarily as a result of an increase in interest expense of $6.6 million for deposits and $6.0 million for borrowings. This was offset in part by an increase in interest income of $10.5 million over last year's period. Tax equivalent net interest margin decreased from 3.79% for the six months ended March 31, 2006 to 3.39% for the same period in 2007.
Average interest-earning assets increased by $170.7 million compared to the prior year, including an increase of $137.2 million in loans and $33.5 million in securities and other earning assets. This resulted in an increase in yield on earning assets of 49 basis points to 6.18%. The cost of interest- bearing liabilities increased by 104 basis points to 3.41%. Short-term borrowing rates increased 108 basis points, compounded by the increase of $108.7 million in the average balance of higher-cost certificates of deposit, offsetting a decline of $91.4 million in average savings account balances from the previous year. When combined with increases of $126.9 million in average borrowings and $54.5 million in average interest-bearing deposits, the result was increased interest expense of $12.6 million, to $34.4 million. The difference in the mix of deposits also contributed to higher interest expense.
Non-interest income increased by $1.9 million, or 23.7% for the six months ended March 31, 2007 compared to the same period the prior year. Investment management fees increased by $879,000 primarily due to fees earned by our investment management subsidiary, HVIA. Increases in deposit services fees of $431,000 offset a decline in title insurance fees of $260,000 due to a slowdown in the real estate markets. Income from Bank-owned Life Insurance increased by $374,000 due to death benefit proceeds received in the first fiscal quarter of 2007. Other non-interest income increased $482,000 due to gains on the disposition of real estate of $212,000 in the first quarter of 2007 and gains associated with the Company's student loan portfolio of $326,000.
Total non-interest expense increased by $933,000, or 2.6%, to $36.5 million primarily due to increased marketing expenses of $763,000 and professional fees of $419,000 (HVIA management fees). Compensation and benefits expense declined $240,000 from the prior year due to savings from retirement plan changes implemented in the prior year. Stock-based compensation declined by $329,000 due to lower acceleration of vesting of restricted stock awards and prior year ESOP adjustments. The ATM/debit card expense increase of $211,000 was offset by lower data and check processing expenses of $375,000 as we took our data processing operations in-house in November of 2005. Other non-interest expenses increased by $363,000 mainly due to increases in business development and training expenses, courier and correspondent expenses, and regulatory assessments.
The Company's effective tax rate for the six months ended March 31, 2007 was 29.4%, compared to 32.8% for the six months ended March 31, 2006. The lower rate reflects the higher utilization of tax-exempt securities and receipt of the non-taxable BOLI death benefit proceeds.
Additional information
At March 31, 2007, the Company had $237.4 million in investment securities that will mature or reprice within the next 12 months. The average tax equivalent yield of these investments is 3.96%. Depending on the market conditions at the point of reinvestment, proceeds from the maturities will be either reinvested at the current market rates or borrowings will be reduced.
The Company maintains two ESOP loans, which release a total of 188,000 shares per year. The Company's first ESOP loan will be paid off as of December 31, 2007. As a result, after December 31, 2007, expense will be recorded on the annual release of only 50,000 shares.
On March 30, 2007, the Company received notice of the disallowance of certain expenses related to Warwick Community Bancorp, Inc.'s disposition of assets prior to its acquisition by the Company. This disallowance of $2.3 million in federal income taxes, if realized, would result in a reduction of a refund receivable. The Company intends to vigorously contest the disallowance. After further research, since filing Form 8-K (April 5, 2007) on this matter, the Company believes that any disallowance realized would adjust goodwill recorded in connection with the acquisition.
Consistent with its long-standing credit policies, Provident Bank does not originate or hold any subprime mortgage loans, which we consider to be loans to borrowers with subprime credit scores combined with either high loan-to- value or high debt-to-income ratios. We also hold no subprime loans in our investment portfolio.
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)
March 31, Sept. 30 March 31,
2007 2006 2006
Assets:
Cash and due from banks $48,397 $57,293 $55,110
Total securities 896,351 1,012,716 993,401
Loans held for sale 689 7,473 460
Loans:
One- to four-family
residential mortgage loans 479,022 462,996 463,003
Commercial real estate,
commercial business
and construction loans 850,039 787,086 738,276
Consumer loans 231,332 223,476 204,317
Total loans, gross 1,560,393 1,473,558 1,405,596
Allowance for loan losses (20,435) (20,373) (20,093)
Total loans, net 1,539,958 1,453,185 1,385,503
Federal Home Loan Bank stock, at
cost 30,660 33,518 27,260
Premises and equipment, net 29,718 31,739 32,461
Goodwill 159,813 159,817 157,526
Other amortizable intangibles 12,556 14,189 12,122
Bank owned life insurance 39,954 39,308 38,475
Other assets 43,269 32,099 43,310
Total assets $2,801,365 $2,841,337 $2,745,628
Liabilities:
Deposits:
Demand deposits $349,352 $366,847 378,182
NOW deposits 156,875 153,732 143,381
Total transaction
accounts 506,227 520,579 521,563
Savings 364,808 378,337 433,306
Money market deposits 264,417 238,977 235,652
Certificates of deposit 604,853 591,766 588,768
Total deposits 1,740,305 1,729,659 1,779,289
Borrowings 618,643 682,739 546,210
Mortgage escrow funds and other 29,779 23,653 32,836
Total liabilities 2,388,727 2,436,051 2,358,335
Stockholders' equity 412,638 405,286 387,293
Total liabilities and
stockholders' equity $2,801,365 $2,841,337 $2,745,628
Shares of common stock
outstanding at period end 42,376,905 42,699,046 42,424,255
Book value per share $9.74 $9.49 $9.13
Provident New York Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share and per share data)
Three Months Ended Six Months Ended
March 31, March 31,
2007 2006 2007 2006
Interest and dividend income:
Loans and loan fees $26,663 $23,119 $52,951 45,596
Securities 9,974 9,267 20,474 17,896
Other earning assets 628 358 1,179 656
Total interest and dividend
income 37,265 32,744 74,604 64,148
Interest expense:
Deposits 8,829 6,096 17,963 11,354
Borrowings 7,968 5,643 16,478 10,439
Total interest expense 16,797 11,739 34,441 21,793
Net interest income 20,468 21,005 40,163 42,355
Provision for loan losses 400 300 800 600
Net interest income after
provision for loan losses 20,068 20,705 39,363 41,755
Non-interest income:
Deposit fees and service
charges 2,784 2,531 5,630 5,199
Title insurance fees 281 390 547 807
Bank owned life insurance 407 394 1,181 807
Investment management fees 726 212 1,348 469
Other 707 436 1,234 752
Total non-interest income 4,905 3,963 9,940 8,034
Non-interest expense:
Compensation and employee
benefits 8,142 8,351 15,951 16,191
Stock-based compensation
plans 1,477 1,670 2,853 3,182
Occupancy and office
operations 3,011 3,015 5,844 5,652
Advertising and promotion 874 402 1,757 994
Professional fees 1,079 795 2,068 1,649
Data and check processing 639 789 1,291 1,666
Amortization of intangible
assets 774 811 1,577 1,648
ATM/debit card expense 451 338 894 683
Other 2,124 1,974 4,260 3,897
Total non-interest expense 18,571 18,145 36,495 35,562
Income before income tax
expense 6,402 6,523 12,808 14,227
Income tax expense 1,970 2,118 3,765 4,663
Net income $4,432 $4,405 $9,043 $9,564
Per common share:
Basic earnings $0.11 $0.11 $0.22 $0.23
Diluted earnings 0.11 0.11 0.22 0.23
Dividends declared 0.05 0.05 0.10 0.10
Weighted average common shares:
Basic 41,144,852 40,939,326 41,156,998 41,069,557
Diluted 41,672,245 41,406,485 41,717,290 41,541,154
Selected Financial Condition Data: Three Months Ended
(in thousands except share and per
share data) 03/31/07 12/31/06 09/30/06
End of Period
Total assets $2,801,365 $2,796,454 $2,841,337
Loans, gross (1) 1,560,393 1,506,380 1,473,558
Securities available for sale 844,271 881,106 951,729
Securities held to maturity 52,080 56,740 60,987
Bank owned life insurance 39,954 39,548 39,308
Goodwill 159,813 159,828 159,817
Other amortizable intangibles 12,556 13,358 14,189
Deposits 1,740,305 1,726,186 1,729,659
Borrowings 618,643 623,250 682,739
Equity 412,638 411,280 405,286
Average Balances
Total assets $2,786,727 $2,813,257 $2,795,917
Loans, gross:
Real estate- residential mortgage 470,741 463,285 465,231
Real estate- commercial mortgage 535,178 529,781 528,225
Real estate- construction & land
development 111,671 101,769 91,280
Commercial and industrial 181,204 165,120 156,737
Consumer loans 242,464 233,155 221,880
Loans total 1,541,258 1,493,110 1,463,353
Securities (taxable) 765,255 824,657 850,929
Securities (non-taxable) 140,987 139,876 128,257
Total earning assets 2,461,371 2,472,425 2,456,228
Non earning assets 325,356 340,832 339,689
Non-interest bearing checking 341,016 341,259 356,651
Interest bearing NOW accounts 153,105 149,311 153,653
Total transaction accounts 494,121 490,570 510,304
Savings (including mortgage escrow
funds) 368,171 375,325 418,942
Money market deposits 250,347 238,079 246,471
Certificates of deposit 600,956 625,781 565,111
Total deposits 1,713,595 1,729,755 1,740,828
Total interest bearing deposits 1,372,579 1,388,496 1,384,177
Borrowings 637,472 657,269 631,760
Equity 411,611 406,927 396,263
Other comprehensive loss (SFAS 115),
reflected in equity (5,583) (6,013) (13,203)
Selected Operating Data:
Condensed Tax Equivalent Income
Statement
Interest and dividend income $37,265 $37,340 $36,524
Tax equivalent adjustment* 756 720 677
Interest expense 16,797 17,644 15,804
Net interest income (tax
equivalent) 21,224 20,416 21,397
Provision for loan losses 400 400 300
Net interest income after provision
for loan
losses 20,824 20,016 21,097
Non-interest income 4,905 5,034 4,756
Non-interest expense 18,571 17,924 17,654
Income before income tax expense 7,158 7,126 8,199
Income tax expense (tax equivalent) 2,726 2,515 3,129
Net income $4,432 $4,611 $5,070
Selected Financial Condition Data:
(in thousands except share and per Three Months Ended
share data) 06/30/06 03/31/06
End of Period
Total assets $2,780,419 $2,745,628
Loans, gross (1) 1,450,348 1,405,596
Securities available for sale 916,752 926,037
Securities held to maturity 64,631 67,364
Bank owned life insurance 38,892 38,475
Goodwill 159,093 157,526
Other amortizable intangibles 15,030 12,983
Deposits 1,750,780 1,779,289
Borrowings 605,523 546,210
Equity 391,492 387,293
Average Balances
Total assets $2,756,664 $2,664,774
Loans, gross:
Real estate- residential mortgage 465,703 457,030
Real estate- commercial mortgage 518,538 514,089
Real estate- construction & land
development 80,894 78,176
Commercial and industrial 150,605 147,775
Consumer loans 209,970 199,014
Loans total 1,425,710 1,396,084
Securities (taxable) 871,878 825,284
Securities (non-taxable) 112,282 100,693
Total earning assets 2,421,497 2,330,822
Non earning assets 335,167 333,952
Non-interest bearing checking 357,992 362,955
Interest bearing NOW accounts 153,848 141,064
Total transaction accounts 511,840 504,019
Savings (including mortgage escrow
funds) 436,611 448,084
Money market deposits 240,071 222,169
Certificates of deposit 577,219 521,399
Total deposits 1,765,741 1,695,671
Total interest bearing deposits 1,407,749 1,332,716
Borrowings 582,294 556,201
Equity 388,398 390,958
Other comprehensive loss (SFAS 115),
reflected in equity (14,280) (9,992)
Selected Operating Data:
Condensed Tax Equivalent Income
Statement
Interest and dividend income $34,946 $32,744
Tax equivalent adjustment* 592 509
Interest expense 13,262 11,739
Net interest income (tax
equivalent) 22,276 21,514
Provision for loan losses 300 300
Net interest income after
provision for loan
losses 21,976 21,214
Non-interest income 4,361 3,963
Non-interest expense 18,041 18,145
Income before income tax expense 8,296 7,031
Income tax expense (tax equivalent) 2,735 2,627
Net income $5,561 $4,405
(1) Does not reflect allowance for loan losses of $20,435, $20,436,
$20,373, $20,360 and $20,093
* Tax Exempt income assumed at a 35% federal rate
Three Months Ended
03/31/07 12/31/06 09/30/06
Performance Ratios (annualized)
Return on Average Assets 0.64% 0.65% 0.72%
Return on Average Equity 4.37% 4.50% 5.08%
Non-Interest Income to Average
Assets 0.71% 0.71% 0.67%
Non-Interest Expense to Average
Assets 2.70% 2.53% 2.51%
Operating efficiency 73.2% 72.5% 69.3%
Analysis of Net Interest Income
Yield on:
Loans 7.11% 7.08% 7.06%
Investment Securities- Tax
Equivalent 4.80% 4.62% 4.48%
Earning Assets- Tax Equivalent 6.26% 6.11% 6.01%
Cost of:
Interest Bearing Deposits 2.61% 2.61% 2.28%
Borrowings 5.07% 5.14% 4.93%
Interest Bearing Liabilities 3.39% 3.42% 3.11%
Net Interest Tax Equivalent:
Net Interest Rate Spread- Tax
Equivalent Basis 2.88% 2.69% 2.90%
Net Interest Margin- tax Equivalent
Basis 3.50% 3.28% 3.46%
Capital Information Data
Tier 1 Leverage Ratio- Bank Only 8.55% 8.27% 7.82%
Tier 1 Risk-Based Capital- Bank Only $224,694 216,820 208,820
Total Risk-Based Capital- Bank Only 245,129 237,256 229,193
Tangible Capital Consolidated $240,269 238,943 233,121
Tangible Capital as a % of Tangible
Assets Consolidated 9.14% 9.11% 8.74%
Shares Outstanding 42,376,905 42,716,253 42,699,046
Shares Repurchased Per Stock
Repurchase Program 354,400 - 35,623
Basic weighted common shares
outstanding 41,144,852 41,168,880 40,945,185
Diluted common shares outstanding 41,672,245 41,861,358 41,407,390
Per Common Share:
Basic Earnings $0.11 0.11 0.12
Diluted Earnings 0.11 0.11 0.12
Dividends Paid 0.05 0.05 0.05
Book Value 9.74 9.63 9.49
Tangible Book Value 5.67 5.59 5.46
Asset Quality Measurements
Non-performing loans (NPLs): non-
accrual $4,840 4,278 3,442
Non-performing loans (NPLs): still
accruing 3,484 2,171 1,582
Non-performing assets (NPAs) 8,411 6,536 5,111
Net Charge-offs (recoveries) 401 337 (35)
Net Charge-offs (recoveries) as %
of average loans (annualized) 0.10% 0.09% (0.01%)
NPLs as % of total loans 0.53% 0.43% 0.34%
NPAs as % of total assets 0.30% 0.23% 0.18%
Allowance for loan losses as % of
NPLs 245% 317% 406%
Allowance for loan losses as % of
total loans 1.33% 1.38% 1.40%
Three Months Ended
06/30/06 03/31/06
Performance Ratios (annualized)
Return on Average Assets 0.81% 0.67%
Return on Average Equity 5.72% 4.57%
Non-Interest Income to Average
Assets 0.63% 0.60%
Non-Interest Expense to Average
Assets 2.62% 2.76%
Operating efficiency 69.3% 72.7%
Analysis of Net Interest Income
Yield on:
Loans 6.92% 6.82%
Investment Securities- Tax
Equivalent 4.44% 4.28%
Earning Assets- Tax Equivalent 5.89% 5.79%
Cost of:
Interest Bearing Deposits 2.13% 1.86%
Borrowings 3.97% 4.11%
Interest Bearing Liabilities 2.67% 2.52%
Net Interest Tax Equivalent:
Net Interest Rate Spread- Tax
Equivalent Basis 3.21% 3.27%
Net Interest Margin- tax Equivalent
Basis 3.69% 3.74%
Capital Information Data
Tier 1 Leverage Ratio- Bank Only 7.54% 7.43%
Tier 1 Risk-Based Capital- Bank Only 196,957 191,775
Total Risk-Based Capital- Bank Only 217,317 211,868
Tangible Capital Consolidated 218,255 217,645
Tangible Capital as a % of Tangible
Assets Consolidated 8.37% 8.45%
Shares Outstanding 42,623,299 42,424,255
Shares Repurchased Per Stock
Repurchase Program 11,700 641,400
Basic weighted common shares
outstanding 40,730,064 40,939,326
Diluted common shares outstanding 41,276,806 41,406,485
Per Common Share:
Basic Earnings 0.14 0.11
Diluted Earnings 0.13 0.11
Dividends Paid 0.05 0.05
Book Value 9.18 9.13
Tangible Book Value 5.12 5.13
Asset Quality Measurements
Non-performing loans (NPLs): non-
accrual 1,887 1,746
Non-performing loans (NPLs): still
accruing 2,787 2,398
Non-performing assets (NPAs) 4,762 4,234
Net Charge-offs (recoveries) 33 992
Net Charge-offs (recoveries) as %
of average loans (annualized) 0.05% 0.28%
NPLs as % of total loans 0.32% 0.29%
NPAs as % of total assets 0.17% 0.15%
Allowance for loan losses as % of
NPLs 436% 485%
Allowance for loan losses as % of
total loans 1.43% 1.43%
