MONTEBELLO, NY — (Marketwired) — 07/23/13 — (NYSE: PBNY) Net income for the quarter was $6.4 million, or $0.15 per diluted share, compared to net income of $6.2 million, or $0.17 per diluted share for the same quarter last year; and $6.5 million, or $0.15 per diluted share for the linked quarter ended March 31, 2013. Excluding merger-related expenses, net income for the quarter was $7.4 million or $0.17 per diluted share, compared to net income of $6.5 million, or $0.18 per diluted share for the same quarter last year; and $6.9 million, or $0.16 per diluted share for the linked quarter ended March 31, 2013. See the reconciliation of this non-GAAP financial measure.
Jack Kopnisky, President and CEO, commented: “We continued to successfully execute our strategy. In the third quarter we earned $6.4 million, a $167 thousand increase compared to the third quarter of 2012. Earnings declined $153 thousand compared to the linked quarter, which was mainly the result of an increase in merger-related expenses to $1.5 million compared to $542 thousand in the quarter ended March 31, 2013. Absent merger-related expenses, net income for the third fiscal quarter of 2013 increased $891 thousand, or 13.6% year-over-year and grew $492 thousand, or 7.1% on a linked quarter basis.
Our commercial banking teams are delivering results as demonstrated by our strong quarter with nearly $350 million in loan originations, which represents a 69% increase over loan originations in the fiscal third quarter of 2012 and an increase of 38% over the linked quarter. We increased our outstanding loan balances by $486 million, reaching $2.34 billion at June 30, 2013, which represents 26.2% growth over outstanding loans at June 30, 2012.
We improved operating efficiency during the quarter and have continued to focus on managing expenses. For the quarter ended June 30, 2013, our core efficiency ratio was below 60%. Our year-over-year growth in core total revenues was 10.6% while we held core operating expenses at the same levels as a year ago. Our method of calculating the core efficiency ratio is illustrated.
Our credit quality continues to improve. Although our non-performing loans of $31.5 million at June 30, 2013 increased $184 thousand compared to the linked quarter, our ratio of non-performing loans to total loans declined by seven basis points to 1.35% at June 30, 2013. Our allowance for loan losses to non-performing loans increased to 90.2% at June 30, 2013, and the positive trend in the risk ratings of our commercial loan portfolio continued as well.
Our capital and liquidity position remain strong. Our Tier 1 leverage ratio was approximately 8.49% at Provident Bank and our consolidated tangible equity to tangible assets ratio was 8.50%.
On July 2, 2013 we completed the capital raise we announced in connection with our pending merger with Sterling Bancorp (NYSE: STL). We raised $100 million through an offering of Senior Notes due 2018 at an interest rate of 5.50%. We will use most of the net proceeds to fund a capital contribution to Provident Bank, which will allow us to further accelerate our growth and execute our strategy.
We continue to focus primarily on serving small-to-middle market clients through a differentiated, team-based distribution strategy. We are working closely with Sterling Bancorp and continue to see tremendous opportunities in combining the two institutions. We are diligently planning all aspects of the integration through cross-functional teams from both organizations. We anticipate the merger will close during the fourth calendar quarter of 2013 and look forward to building a high performing combined institution.”
Total loan originations were $347.7 million compared to $253.2 million in the linked quarter, and $206.2 million for the third fiscal quarter of 2012.
Total loans reached $2.34 billion at June 30, 2013, a $132 million increase compared to March 31, 2013, and a $486 million year-over-year increase.
Tax equivalent net interest margin was 3.46% for the third quarter of fiscal 2013 compared to 3.41% in the linked quarter and 3.59% in the third quarter of fiscal 2012.
The allowance for loan losses increased to $28.4 million at June 30, 2013 and the allowance as a percentage of non-performing loans increased to 90.2% from 88.1% at March 31, 2013. The allowance for loan losses as a percentage of total loans was 1.21% at June 30, 2013, compared to 1.25% in the linked quarter. The allowance ratios are inclusive of acquired Gotham loans that were recorded at fair value at acquisition date for which there is no additional allowance for loan losses at either June 30, 2013 or March 31, 2013.
Non-performing loans decreased from $39.8 million at September 30, 2012, to $31.5 million at June 30, 2013.
Provision for loan losses was $3.9 million and increased by $1.3 million compared to the linked quarter. For the third quarter of fiscal 2012, the provision for loan losses was $2.3 million.
The core efficiency ratio was 59.1% compared to 64.6% in the linked quarter and 65.5% for the third fiscal quarter of 2012. The improvement in the core efficiency ratio in the third fiscal quarter of 2013 as compared to the other periods was due to improvements in our net interest income and expense reductions in professional fees and compensation and benefits, which are discussed further below. Year-over-year core total revenues have grown 10.6%, while core non-interest expense was unchanged. See the reconciliation of this non-GAAP financial measure.
Third quarter fiscal 2013 compared with third quarter fiscal 2012
Net interest income was $28.3 million for the third quarter of fiscal 2013, up $4.2 million compared to the third quarter of fiscal 2012 due mainly to higher average loan volumes. Reflecting the current interest rate environment, the tax-equivalent yield on investments decreased 41 basis points and yield on loans declined 21 basis points compared to the third quarter of fiscal 2012. As a result, the yield on interest-earning assets declined 23 basis points to 3.97% on a tax equivalent basis for the third quarter of fiscal 2013. The cost of total deposits decreased five basis points to 17 basis points from the year ago quarter, mainly due to the maturity of higher priced certificates of deposit which were re-priced to current market interest rates. The cost of borrowings decreased 93 basis points to 2.84%, as a higher portion of borrowings were overnight borrowings in the third quarter of 2013. The net interest margin on a tax-equivalent basis was 3.46% for the third quarter of fiscal 2013 compared to 3.59% for the same period a year ago.
Third quarter fiscal 2013 compared with linked quarter ended March 31, 2013
Net interest income for the quarter ended June 30, 2013 increased $498 thousand to $28.3 million, compared to $27.8 million for the linked quarter ended March 31, 2013. Interest income on loans increased $260 thousand as a result of strong loan growth during the quarter. In addition, interest expense on deposits continued to decline. Inclusive of non-interest bearing deposits, interest expense on total deposits was 17 basis points for the third fiscal quarter compared to 22 basis points for the second fiscal quarter of 2013. Yield on loans decreased 13 basis points and was 4.80%. The yield on interest earning assets increased one basis point to 3.97% from 3.96% in the linked quarter. As a result of the above mentioned factors the tax-equivalent net interest margin increased to 3.46% from 3.41% in the linked quarter.
Third quarter fiscal 2013 compared with third quarter fiscal 2012
Non-interest income declined $1.4 million to $6.6 million for the third quarter of fiscal 2013 compared with the third quarter of fiscal 2012. The decrease was mainly due to a decrease in net gain on sales of securities of $467 thousand and an aggregate decrease in investment management fees and title insurance fees of $373 thousand. In fiscal 2012 we sold the assets of our former subsidiaries that were active in title insurance and investment management businesses.
Third quarter fiscal 2013 compared with linked quarter ended March 31, 2013
Non-interest income decreased $271 thousand to $6.6 million for the third fiscal quarter of 2013 compared to the linked quarter ended March 31, 2013. The decline was principally due to lower net gain on sales of securities, which declined $284 thousand. Also contributing to the decline in non-interest income were lower deposit fees and service charges of $121 thousand and a decline in gain on sale of loans of $78 thousand. Our new title insurance and investment management initiatives are gaining momentum and are beginning to contribute to our non-interest income. Aggregate title insurance and investment management fees increased $256 thousand compared to the linked quarter.
Third quarter fiscal 2013 compared with third quarter fiscal 2012
Non-interest expense increased $627 thousand to $21.8 million relative to the third quarter of fiscal 2012 principally the result of an increase of $1.1 million in merger-related expenses. Other factors that contributed to the increase were additional personnel expense associated with the continued growth in the number of our commercial banking teams and related occupancy expense. These increases were partially offset by a reduction in professional fees and foreclosed property expenses, which declined by $602 thousand and $456 thousand, respectively, as compared to the same period a year ago.
Third quarter fiscal 2013 compared with the linked quarter ended March 31, 2013
Non-interest expense declined $1.6 million compared to the linked quarter notwithstanding a $974 thousand increase in merger-related expenses associated with our pending merger with Sterling Bancorp. The decrease in non-interest expense was a result of lower professional fees of $386 thousand, lower foreclosed property expense of $943 thousand and a reduction in compensation and benefits of $485 thousand. The decrease in compensation and benefits was mainly driven by staff turnover, lower payroll taxes and an increase in deferred compensation due to higher volumes of loan originations in the quarter.
In the third quarter of fiscal 2013, the Company recorded income tax expense at 30.8% compared to an estimated effective tax rate of 25.2% in the linked quarter and 27.7% for the same period in fiscal 2012. The increase in the estimated effective tax rate in the third quarter of fiscal 2013 was due to our expectation that a portion of current and anticipated merger-related expenses will not be tax deductible.
Non-performing loans decreased to $31.5 million at June 30, 2013 compared to $39.8 million at September 30, 2012. During the first nine months of the fiscal year we exited several large credit relationships, which contributed to the decline. Net charge-offs for the third quarter were $3.1 million compared to $3.2 million in the linked quarter. Non-performing loans at June 30, 2013 were $184 thousand higher compared to the prior quarter end. The allowance for loan losses at June 30, 2013 was $28.4 million, which represented 90.2% of non-performing loans and 1.21% of our total loan portfolio. This compares to the linked quarter, in which the allowance for loan losses was $27.5 million, which represented 88.1% of non-performing loans and 1.25% of our total loan portfolio. A significant portion of the increase in the allowance for loan losses was related to the higher balance of loans outstanding at June 30, 2013. The allowance for loan losses to total loans, excluding loans acquired in the Gotham transaction that were recorded at fair value at the acquisition date and continue to carry no allowance was 1.30% and 1.36%, at June 30, 2013 and March 31, 2013, respectively. Please refer to the Company-s reconciliation of this non-GAAP measure.
During the quarter, the balance of foreclosed properties declined $1.1 million to $4.4 million. Several properties were sold during the quarter, which reduced the balance by $1.3 million. We incurred $284 thousand of write-downs on properties to reflect current appraisal values. Partially offsetting these declines were additions to OREO which totaled $504 thousand.
Total assets at June 30, 2013 decreased $198.6 million or 4.94% compared to September 30, 2012, mainly related to a decrease in our cash balance of $328.8 million. Our cash balance at September 30, 2012 was elevated given a seasonal increase in municipal deposits due to municipal tax collections that were subsequently drawn down.
Loans at June 30, 2013 increased $217.1 million or 13.7% on an annual basis compared to September 30, 2012.
Commercial real estate and commercial and industrial loans increased $247.6 million or 23.3% on an annual basis compared to September 30, 2012.
Acquisition development and construction loans declined to $106.2 million at June 30, 2013 from $144.1 million at September 30, 2012.
Securities at June 30, 2013 decreased $87.5 million as compared to September 30, 2012. As of June 30, 2013, securities represented 27.9% of total assets compared to 28.7% at September 30, 2012.
Deposits decreased $371.9 million between September 30, 2012 and June 30, 2013. Municipal deposits decreased $436.2 million compared to September 30, 2012, as a result of seasonal tax deposits; this was partially offset by increases in other deposits of $64.2 million.
Provident Bank remained well capitalized at June 30, 2013 with a Tier 1 leverage ratio of 8.49% based on period end assets. The Company-s stockholders- equity decreased $11.0 million from September 30, 2012, to $480.2 million at June 30, 2013. Tangible book value per share decreased by $0.25 to $7.01 at June 30, 2013 from $7.26 at September 30, 2012. These declines were mainly the result of changes in interest rates which caused a decline in the accumulated other comprehensive income component of stockholders- equity during the period of $24.6 million. For the quarter ended June 30, 2013, the basic and diluted weighted average common shares outstanding increased to 43.8 million and 43.9 million, respectively, compared to 41.1 million, basic and diluted shares, for the quarter ended September 30, 2012 as a result of our equity capital raise in August 2012.
Headquartered in Montebello, N.Y. Provident New York Bancorp is the holding company for Provident Bank, a growing financial services firm with $3.8 billion in assets that specializes in the delivery of service and solutions to business owners, their families, and consumers in communities within the greater New York City area through teams of dedicated and experienced relationship managers. Provident Bank offers a complete line of commercial, business, and consumer banking products and services. For more information, visit the Provident Bank web site at .
FORWARD-LOOKING STATEMENTS AND ASSOCIATED RISK FACTORS
In addition to historical information, this earnings release may contain forward-looking statements for purposes of applicable securities laws. Any statements contained herein that are not statements of historical fact may be deemed to be forward-looking statements. Forward-looking statements are subject to numerous assumptions, risks and uncertainties. There are a number of important factors described in documents previously filed by the Company 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.
These forward-looking statements are subject to numerous assumptions, risks and uncertainties which change over time. In addition to factors previously disclosed in reports filed with the Securities and Exchange Commission, the following factors, among others, could cause actual results to differ materially from forward-looking statements: ability to obtain regulatory approvals and meet other closing conditions to the merger (the “Merger”) between Provident New York Bancorp (“Provident”) and Sterling Bancorp (“Sterling”), including approval by Provident and Sterling shareholders, on the expected terms and schedule; delay in closing the Merger; difficulties and delays in integrating the Provident and Sterling businesses or fully realizing cost savings and other benefits; changes in asset quality and credit risk; the inability to sustain revenue and earnings growth; changes in interest rates and capital markets; inflation; customer borrowing, repayment, investment and deposit practices; customer disintermediation; the introduction, withdrawal, success and timing of business initiatives; competitive conditions; the inability to realize cost savings or revenues or to implement integration plans and other consequences associated with mergers, acquisitions and divestitures; economic conditions; changes in Provident-s stock price before the completion of the Merger, including as a result of the financial performance of Sterling prior to closing; the reaction to the Merger of the companies- customers, employees and counterparties; and the impact, extent and timing of technological changes, capital management activities, and other actions of the Federal Reserve Board and legislative and regulatory actions and reforms. These factors should be considered in evaluating the forward-looking statements and undue reliance should not be placed on such statements. Actual results or future events could differ, possibly materially, from those that we anticipated in our forward-looking statements, and future results could differ materially from our historical performance. Forward-looking statements speak only as of the date they are made and we undertake no obligation to update these forward-looking statements to reflect events or circumstances that occur after the date on which such statements were made.
Financial information contained in this release should be considered to be an estimate pending the filing with the Securities and Exchange Commission of the Company-s Quarterly Report on Form 10-Q for the quarter ended June 30, 2013. While the Company is not aware of any need to revise the results disclosed in this release, accounting literature may require information received by management between the date of this release and the filing of the 10-Q to be reflected in the results of the fiscal period, even though the new information was received by management subsequent to the date of this release.
In connection with the proposed merger, Provident has filed with the Securities and Exchange Commission (“SEC”) a Registration Statement on Form S-4/A that includes a joint proxy statement of Provident and Sterling and a prospectus of Provident, as well as other relevant documents concerning the proposed transaction. Provident and Sterling will mail the joint proxy statement/prospectus to their stockholders. Investors and security holders may obtain a free copy of the preliminary proxy statement/prospectus and other filings containing information about Provident and Sterling at the SEC-s website at . The joint preliminary proxy statement/prospectus and the other filings may also be obtained free of charge at Provident-s website at under the tab “Investor Relations,” and then under the heading “SEC Filings” or at Sterling-s website at under the tab “Investor Relations,” and then under the heading “SEC Filings.”
Provident, Sterling and certain of their respective directors and executive officers, under the SEC-s rules, may be deemed to be participants in the solicitation of proxies of Provident-s and Sterling-s shareholders in connection with the proposed merger. Information about the directors and executive officers of Provident and their ownership of Provident common stock is set forth in the proxy statement for Provident-s 2013 annual meeting of shareholders, as filed with the SEC on Schedule 14A on January 10, 2013 and the preliminary proxy statement/prospectus related to the proposed merger, which is included in the registration statement on Form S-4/A that was filed with the SEC on July 17, 2013. Information about the directors and executive officers of Sterling and their ownership of Sterling common stock is set forth in the proxy statement for Sterling-s 2012 annual meeting of shareholders, as filed with the SEC on a Schedule 14A on April 3, 2012 and the preliminary proxy statement/prospectus included in the Form S-4/A. Free copies of these documents may be obtained as described in the preceding paragraph. Additional information regarding the interests of those participants and other persons who may be deemed participants in the transaction may be obtained by reading the definitive proxy statement/prospectus regarding the proposed merger when it becomes available.
Provident New York Bancorp
400 Rella Boulevard
Montebello, NY 10901-4243
T 845.369.8040
F 845.369.8255