Provident New York Bancorp Announces Quarterly Earnings of $5.6 Million, or $0.13 Per Diluted Share26 July 2006
Provident New York Bancorp (Nasdaq: PBNY), the parent company of Provident Bank, today announced that for the three months ended June 30, 2006, net income was $5.6 million, or $0.13 per diluted share, compared to net income of $5.7 million, or $0.13 per diluted share, for the three months ended June 30, 2005. For the nine months ended June 30, 2006, net income was $15.1 million, or $0.36 per diluted share, compared to net income of $15.9 million, or $0.36 per diluted share, for the nine months ended June 30, 2005.
"The current yield curve continues to put pressure on earnings in the short term, however, I believe we are well positioned for the long term and we continue to make strides in growing our non-interest income," said George Strayton, President and CEO. "Through the strength of our customer relationships, we have also successfully maintained our core deposits in historical ranges of 50% to 59% of deposits. While the rapid rise in CD and Money Market rates has outpaced the repricing of our investments and loans, I believe that as the rate of increase of deposit expense slows and rates begin to peak, the short duration of our loans and investments should begin to have a positive impact on margins."
"As this cycle completes, this quarter we grew fee income 7.4%, while lowering total non-interest expense through various initiatives," added Strayton. "When coupled with steady increases in loan volume, we expect to see improved earnings over the next six to nine months. Over the long term, our strong operational and credit risk positions should have a positive impact on earnings. In addition, our previously announced acquisition of Hudson Valley Investment Advisors, Inc. (HVIA), of Goshen, New York, with $200 million in assets under management should strengthen our non-interest income. I am pleased that Thomas Guarino, President of HVIA, entered into a long term contract to continue in his leadership of Hudson Valley Investment Advisors, Inc. In short, I am confident that we have the plans and people to meet the challenges of the marketplace and the regulatory environment."
Year-to-date balance sheet highlights:
* 8.2% year-to-date increase in earning assets, with an overall 7.0%
increase in total assets
* 7.6% year-to-date growth in commercial loans
* 12.5% year-to-date growth in consumer loans
Third quarter operating summary:
* 0.7% increase in net interest income
* 52 basis-point increase in yield on interest-earning assets
* 93 basis-point increase in average rate on interest-bearing liabilities
* Interest expense reduced by $1.0 million for recognition of accretion of
premiums on called borrowings
* 15.8% decrease in non-interest income as last year's quarter included
the following items:
- Bank Owned Life Insurance (BOLI) death claim proceeds of $372,000
- Previously unrecognized low income housing partnership investment
income of $681,000
* Stock-based compensation increased $473,000 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 $270,000 pre-tax expense for the quarter
- Employee Stock Ownership Plan (ESOP) expense increased $163,000 due to
the rise in the average stock price and due to additional shares,
expected to be released, compared to the same quarter last year
* 0.6% decrease in overall non-interest expense despite a 55% increase in
stock-based compensation expense
* Donation of property, acquired in the National Bank of Florida
acquisition, recording a $242,000 tax benefit
* Acquisition of substantially all of the assets of Hudson Valley
Investment Advisors.
Key Balance Sheet Changes at June 30, 2006 vs. September 30, 2005
* Total assets at June 30, 2006 increased to $2.8 billion, up $182.1
million, or 7.0%, from September 30, 2005.
* Gross loans grew $88.3 million to $1.5 billion, largely due to a $54.0
million, or 7.6%, increase in commercial loans.
* Securities increased $87.5 million to $981.4 million, with mortgage-
backed securities and municipal securities primarily contributing to the
increase.
* Non-transaction deposits grew $46.7 million to $1.2 billion, as
certificates of deposit increased by $83.8 million, offsetting a decline
in savings and money market accounts of $37.1 million. Non-interest
bearing deposits decreased $17.7 million to $367.4 million, reflecting
the seasonality of our transaction account deposit base and customers'
attraction to interest-bearing products at higher rates.
* Non-performing assets increased $3.0 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 decreased $3.7 million to $391.5 million as net
retentions of earnings were more than offset by the repurchase of
1,126,271 shares and an increase in other comprehensive loss on
available-for-sale securities (SFAS No.115) of $8.4 million to $16.6
million.
* In accordance with SFAS No.114, $1.0 million was reclassified from the
allowance for loan losses to other liabilities, reflecting reserves
required for contingent loan commitments (lines and letters of credit).
Similar amounts were reclassified for the prior periods.
Key Operating Results - Quarter
Net interest income increased $161,000, or 0.7%, to $21.7 million primarily as a result of recognizing $1.0 million of accretion of premiums on called Federal Home Loan Bank borrowings of $33.0 million, which were assumed in connection with the Warwick Community Bancorp acquisition. Tax equivalent net interest margin decreased from 3.98% to 3.69%. Interest-earning assets increased by $217.3 million, almost equally split between loans and securities. When coupled with the increase of 52 basis points in yield, the volume increase led to a $5.8 million increase in gross interest income to $34.9 million. Included in gross interest on loans and fees were prepayment fees and late charges of $243,000 for the current quarter and $255,000 previously classified as non-interest income for the prior year's quarter. The cost of interest-bearing liabilities increased by 93 basis points to 2.67%. Increases of $198.2 million in average borrowings and $25.4 million in interest-bearing deposits resulted in an increase in interest expense of $5.6 million, to $13.3 million (including the reduction in interest expense from premium accretion noted above). An increase of $119.2 million in the average balance of higher-cost certificates of deposit also contributed to the higher interest expense, more than offsetting a decline of $104.3 million in average savings account balances.
Non-interest income decreased $817,000, or 15.8%, due to the previously mentioned income items from the prior year's quarter, which totaled $1.1 million. Excluding those items, non-interest income increased by $236,000, or 5.7%, from last year. The increase is a reflection of the bank's efforts to improve non-interest income. Investment management fees (including $135,000 from HVIA) and title insurance fees increased by 80.5% and 10.5%, respectively.
Non-interest expense decreased $100,000, or 0.6%, to $18.0 million despite an increase of $473,000 in expense for stock-based compensation plans as previously described. Salaries and benefit costs declined $467,000, or 5.6%, to $7.8 million primarily due to reductions in employee benefits costs of $499,000. During the quarter the Company merged the separate pension plans of previously acquired entities into the Provident Defined Benefit Pension Plan. Pension and postretirement health insurance expense was $380,000 lower than the third quarter of 2005. 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 prior year's quarter included $249,000 in merger-integration costs.
The Company's effective tax rate for the quarter ended June 30, 2006 was 27.8%, compared to 32.1% for the quarter ended June 30, 2005. The lower rate reflects a land donation, which resulted in a tax benefit of $242,000, and higher utilization of tax-exempt securities.
Key Operating Results - Year to Date
Net interest income for the nine-month period ended June 30, 2006 decreased by $948,000, or 1.5%, compared to the same period last year. Taxable equivalent net interest margin declined 26 basis points from 4.01% to 3.75%. Interest income increased by $13.3 million, a reflection of higher average volume of interest-earning assets, mostly loans, and an increase of 48 basis points in the yield on interest-earning assets. Interest income included prepayment fees and late charges of $713,000 for the current nine-month period and $593,000 previously classified in non-interest income for the nine-month period ending June 30, 2005. Interest expense increased by $14.2 million as the average volume and cost of interest-bearing liabilities increased by $168.6 million and 86 basis points, respectively. This increase in interest expense was net of the recognition of accretion of $1.3 million in premiums on called Federal Home Loan Bank borrowings. An increase of $110.4 million in the average balances of higher cost certificates of deposit contributed to the higher interest expense and was partially offset by a decrease in average savings account balances of $97.1 million.
The provision for loan losses was $900,000 for the nine-month period this year compared to $525,000 for the nine-month period ended June 30, 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 decreased $310,000, or 2.4%. 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 would result in a favorable variance of $743,000, or 6.4%, with the prior year period and is a reflection of the Company's continued focus on improving non-interest income, which is less susceptible to interest rate fluctuations. Deposit fees and service charges, 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 $135,000 from HVIA) increased by 3.7%, 18.4%, 21.8% and 38.4%, respectively.
Non-interest expense for the current nine-month period increased by $684,000, or 1.3%, compared to the same period last year. Stock-based compensation increased by $2.4 million, or 110.5%, of which $868,000 was for stock option expenses under new accounting rules, $368,000 was for the acceleration of certain restricted stock awards and $427,000 was for an increase in ESOP expense, mostly during the second quarter, which reflected the release of the same number of shares for the 2005 ESOP plan year as in the past years. Stock-based compensation also reflects nine month's expense of $848,000 related to restricted stock awards that were granted in March 2005. These increases were partially offset by a decrease of $596,000 in pension and postretirement health insurance expense.
The transfer of our data processing operations in-house in November 2005 is primarily responsible for a $1.1 million 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 nine months ended June 30, 2006 was 31.0%, compared to 34.6% for the nine-month period ended June 30, 2005. A key factor in the lower rate is the shifting to tax-exempt securities, which represented 11.0% of the average securities portfolio for the current nine- month period, compared to 6.2% of the average securities portfolio for the prior nine-month period. The previously mentioned land donation, which resulted in a tax benefit of $242,000, also positively impacted the effective tax rate.
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)
June 30, September 30, June 30,
2006 2005 2005
Assets:
Cash and due from banks $55,758 $64,117 $51,578
Total securities 981,383 893,901 916,645
Loans held for sale 752 --- 3,684
Loans:
One- to four-family
residential mortgage
loans 467,064 456,794 439,097
Commercial real estate,
commercial business
and construction loans 767,514 713,471 698,918
Consumer loans 215,770 191,808 176,701
Total loans, gross 1,450,348 1,362,073 1,314,716
Allowance for loan losses (20,360) (21,047) (21,341)
Total loans, net 1,429,988 1,341,026 1,293,375
Federal Home Loan Bank stock,
at cost 30,021 21,333 18,076
Premises and equipment, net 31,943 32,101 29,810
Goodwill 159,093 157,656 157,993
Other amortizable intangibles 15,030 14,607 15,682
Bank owned life insurance 38,892 37,667 37,256
Other assets 37,559 35,915 36,190
Total assets $2,780,419 $2,598,323 $2,560,289
Liabilities:
Deposits:
Demand deposits $367,109 $407,662 $382,393
NOW deposits 161,614 143,363 138,574
Total transaction
accounts 528,723 551,025 520,967
Savings and money market
deposits 666,629 703,765 734,283
Certificates of deposit 555,428 471,611 493,020
Total deposits 1,750,780 1,726,401 1,748,270
Borrowings 605,523 442,203 377,626
Mortgage escrow funds and
other 32,624 34,562 34,699
Total liabilities 2,388,927 2,203,166 2,160,595
Stockholders' equity 391,492 395,157 399,694
Total liabilities and
stockholders' equity $ 2,780,419 $2,598,323 $2,560,289
Shares of common stock
outstanding at period end 42,623,299 43,505,659 43,848,778
Book value per share $9.18 $9.08 $9.11
Provident New York Bancorp and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME
(unaudited, in thousands, except share and per share data)
Three Months Ended Nine Months Ended
June 30, June 30,
2006 2005 2006 2005
Interest and dividend income:
Loans and loan fees $24,247 $20,557 69,842 $59,813
Securities 10,297 8,365 28,192 25,852
Other earning assets 402 244 1,058 136
Total interest and dividend
income 34,946 29,166 99,092 85,801
Interest expense:
Deposits 7,492 4,362 18,846 11,207
Borrowings 5,770 3,281 16,209 9,609
Total interest expense 13,262 7,643 35,055 20,816
Net interest income 21,684 21,523 64,037 64,985
Provision for loan losses 300 225 900 525
Net interest income after
provision for loan losses 21,384 21,298 63,137 64,460
Non-interest income:
Deposit fees and service
charges 2,699 2,673 7,898 7,613
Net gain on sales of
securities available
for sale --- 57 --- 369
Title insurance fees 399 361 1,206 1,019
Bank owned life insurance 418 768 1,225 1,378
Investment management fees 399 221 868 627
Previously unrecognized low
income housing partnership
investment --- 681 --- 681
Other 446 417 1,198 1,018
Total non-interest income 4,361 5,178 12,395 12,705
Non-interest expense:
Compensation and employee
benefits 7,810 8,277 24,001 24,063
Stock-based compensation
plans 1,327 854 4,509 2,142
Occupancy and office
operations 2,957 2,421 8,609 7,028
Advertising and promotion 905 808 1,899 2,620
Professional fees 877 523 2,526 1,801
Data and check processing 785 1,184 2,451 3,590
Merger integration costs --- 249 --- 965
Amortization of intangible
assets 808 929 2,456 3,046
ATM/debit card expense 460 322 1,142 948
Other 2,112 2,574 6,008 6,714
Total non-interest expense 18,041 18,141 53,601 52,917
Income before income tax
expense 7,704 8,335 21,931 24,248
Income tax expense 2,143 2,676 6,806 8,394
Net income $ 5,561 $5,659 $ 15,125 $15,854
Per common share:
Basic earnings $0.14 $0.13 $0.37 $0.36
Diluted earnings 0.13 0.13 $0.36 0.36
Dividends declared 0.05 0.045 $0.15 0.125
Weighted average common shares:
Basic 40,730,064 42,440,624 40,956,393 43,545,750
Diluted 41,276,806 43,073,358 41,514,055 44,292,686
Selected Financial Condition Data:
(in 000's except share and per share data)
Three Months Ended
06/30/06 03/31/06 12/31/05 09/30/05 6/30/05
(In thousands)
End of Period
Total assets $2,780,419 $2,745,628 $2,630,940 $2,598,323 $2,560,289
Loans, gross (1) 1,450,348 1,405,596 1,387,148 1,362,073 1,314,716
Securities
available for
sale 916,752 926,037 832,578 822,952 845,451
Securities held
to maturity 64,631 67,364 65,949 70,949 71,194
Bank owned life
insurance 38,892 38,475 38,080 37,667 37,256
Goodwill 159,093 157,526 157,656 157,656 157,993
Other amortizable
intangibles 15,030 12,983 13,742 14,607 15,682
Other non-earning
assets 69,502 74,910 67,381 68,016 66,000
Deposits 1,750,780 1,779,289 1,675,312 1,726,401 1,748,270
Borrowings 605,523 546,210 533,843 442,203 377,626
Equity 391,492 387,293 392,579 395,157 399,694
Average Balances
Total assets $2,756,664 $2,665,763 $2,604,713 $2,569,762 $2,524,925
Loans, gross:
Real estate-
residential
mortgage 465,703 457,030 453,018 439,242 433,938
Real estate-
commercial
mortgage 518,538 514,089 502,435 490,107 492,760
Real estate-
construction
& land
development 80,894 78,176 69,314 75,434 72,778
Commercial and
industrial 150,605 147,775 146,116 146,982 139,115
Consumer loans 209,970 199,014 192,819 183,750 169,801
Loans total 1,425,710 1,396,084 1,363,702 1,335,515 1,308,392
Securities
(taxable) 871,878 825,284 797,115 808,057 833,718
Securities
(non-taxable) 112,282 100,693 94,324 86,258 65,239
Total earning
assets 2,421,497 2,330,822 2,259,617 2,227,680 2,204,193
Non earning
assets 335,167 333,952 344,160 341,171 320,732
Non-interest
bearing checking 357,992 362,955 382,009 374,432 348,387
Interest bearing
NOW accounts 153,848 141,064 138,273 149,061 160,234
Total transaction
accounts 511,840 504,019 520,282 523,493 508,621
Savings and money
market accounts 676,682 670,253 692,932 742,938 764,071
Certificates of
deposit 577,219 521,399 488,517 472,081 458,023
Total deposits 1,765,741 1,695,671 1,701,731 1,738,512 1,730,715
Total interest
bearing
deposits 1,407,749 1,332,716 1,319,722 1,364,080 1,382,328
Borrowings 582,294 556,201 485,800 409,596 384,073
Equity 388,398 390,958 392,037 397,645 394,827
Other comprehensive
loss (SFAS 115),
reflected in
equity (14,280) (9,992) (10,269) (5,536) (5,993)
Selected Operating Data:
Condensed Tax Equivalent Income Statement
Interest and
dividend income $34,946 $32,744 $31,404 $30,369 $29,166
Tax equivalent
adjustment* 592 508 477 417 321
Interest expense 13,262 11,739 10,054 8,584 7,643
Net interest
income (tax
equivalent) 22,276 21,513 21,827 22,202 21,844
Provision for loan
losses 300 300 300 225 225
Net interest
income after
provision for
loan losses 21,976 21,213 21,527 21,977 21,619
Non-interest income 4,361 3,963 4,064 4,303 5,178
Non-interest
expense 18,041 18,145 17,409 17,665 18,141
Income before
income tax
expense 8,296 7,031 8,182 8,615 8,656
Income tax
expense (tax
equivalent) 2,735 2,626 3,022 3,227 2,997
Net income $5,561 $4,405 $5,160 $5,388 $5,659
(1) Does not reflect allowance for loan losses of $20,360, $20,093,
$20,714, $21,047 and $21,341.
* Tax exempt income assumed at a 35% federal rate.
Three Months Ended
06/30/06 03/31/06 12/31/05 09/30/05 6/30/05
Performance Ratios (annualized)
Return on Average
Assets 0.81% 0.67% 0.79% 0.83% 0.90%
Return on Average
Equity 5.72% 4.57% 5.22% 5.38% 5.75%
Non-Interest Income
to Average Assets 0.63% 0.60% 0.62% 0.66% 0.82%
Non-Interest Expense
to Average Assets 2.62% 2.76% 2.65% 2.73% 2.88%
Operating efficiency 69.3% 72.7% 68.5% 67.7% 67.9%
Analysis of Net Interest Income
Yield on:
Loans 6.92% 6.82% 6.65% 6.60% 6.41%
Investment
Securities- Tax
Equivalent 4.44% 4.28% 4.06% 3.85% 3.88%
Earning Assets-
Tax Equivalent 5.89% 5.79% 5.60% 5.48% 5.37%
Cost of:
Interest Bearing
Deposits 2.13% 1.86% 1.58% 1.40% 1.27%
Borrowings 3.97% 4.11% 3.92% 3.64% 3.43%
Interest Bearing
Liabilities 2.67% 2.52% 2.21% 1.92% 1.74%
Net Interest Tax
Equivalent:
Net Interest Rate
Spread- Tax
Equivalent Basis 3.21% 3.27% 3.39% 3.56% 3.63%
Net Interest Margin-
Tax Equivalent
Basis 3.69% 3.74% 3.83% 3.95% 3.98%
Capital Information Data
Tier 1 Leverage
Ratio- Bank Only 7.54% 7.43% 8.37% 8.20% 8.30%
Tier 1 Risk-Based
Capital- Bank
Only $196,957 $191,775 $206,062 $198,828 $198,535
Total Risk-Based
Capital- Bank
Only 217,317 211,868 227,713 220,122 219,271
Tangible Capital
Consolidated $218,255 $217,645 $221,990 $223,731 $226,814
Tangible Capital
as a % of
Tangible Assets 8.37% 8.45% 9.03% 9.22% 9.50%
Shares
Outstanding 42,623,299 42,424,255 43,044,299 43,505,659 43,848,778
Shares Repurchased
Per Stock Repurchase
Program 11,700 641,400 473,171 343,200 1,656,600
Basic weighted
common shares
outstanding 40,730,064 40,939,326 41,193,958 41,513,219 42,440,624
Diluted common
shares
outstanding 41,276,806 41,406,485 41,670,008 42,141,403 43,073,358
Per Common Share:
Basic Earnings $0.14 $0.11 $0.13 $0.13 $0.13
Diluted Earnings 0.13 0.11 0.12 0.13 0.13
Dividends Paid 0.05 0.05 0.05 0.045 0.045
Book Value 9.18 9.13 9.12 9.08 9.11
Tangible Book Value 5.12 5.13 5.16 5.14 5.17
Asset Quality Measurements
Non-performing
loans(NPLs) $4,674 $4,144 $5,054 $1,641 $3,249
Non-performing
assets (NPAs) 4,762 4,234 5,145 1,733 3,342
Net Charge-offs 192 992 489 469 222
Net Charge-offs as
% of average loans
(annualized) 0.05% 0.28% 0.14% 0.14% 0.07%
NPLs as % of total
loans 0.32% 0.29% 0.36% 0.12% 0.25%
NPAs as % of total
assets 0.17% 0.15% 0.20% 0.07% 0.13%
Allowance for loan
losses as % of
NPLs 436% 485% 410% 1283% 657%
Allowance for loan
losses as % of
total loans 1.43% 1.43% 1.49% 1.55% 1.62%
Source: prnewswire
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