PROVIDENT NEW YORK BANCORP (Form: 10-Q, Received: 08/09/2011 06:17:59)

Large Accelerated Filer

Accelerated Filer

Non-Accelerated Filer

Smaller Reporting Company

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x	QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2011

¨	TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 0-25233

PROVIDENT NEW YORK BANCORP

(Exact Name of Registrant as Specified in its Charter)

Delaware

80-0091851

(State or Other Jurisdiction of

Incorporation or Organization)

(IRS Employer ID No.)


400 Rella Boulevard, Montebello, New York		10901
(Address of Principal Executive Office)		(Zip Code)

(845) 369-8040

(Registrant’s Telephone Number including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding twelve months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes x No ¨

Indicate by checkmark whether the registrant has submitted electronically and posted on its corporate website, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files). Yes x No ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ¨ No x

Indicate the number of shares outstanding of each of the issuer’s classes of common stock, as of the latest practicable date.


Classes of Common Stock		Shares Outstanding as of August 1, 2011

$0.01 per share		38,047,236

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

QUARTERLY PERIOD ENDED JUNE 30, 2011


PART I. FINANCIAL INFORMATION

Item 1.	Financial Statements

	Consolidated Statements of Financial Condition (unaudited) at June 30, 2011 and September 30, 2010	3
	Consolidated Statements of Income (unaudited) for the Three and Nine Months ending June 30, 2011 and 2010	4
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Nine Months Ended June 30, 2011	5
	Consolidated Statements of Cash Flows (unaudited) for the Nine Months Ended June 30, 2011 and 2010	6
	Consolidated Statements of Comprehensive Income (unaudited) for the Three and Nine Months Ended June 30, 2011 and 2010	8
	Notes to Consolidated Financial Statements (unaudited)	9

Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	32

Item 3.	Quantitative and Qualitative Disclosures about Market Risk	43

Item 4.	Controls and Procedures	45

PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	45
Item 1.A.	Risk Factors	45

Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	45

Item 3.	Defaults Upon Senior Securities	45

Item 4.	(Removed and reserved).	45

Item 5.	Other Information	45

Item 6.	Exhibits	46
	Signatures	47

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

(In thousands, except share data)


	June 30, 2011			September 30, 2010
ASSETS
Cash and due from banks	$	45,530		$	90,872
Securities (note 6) (including $556,994 and $719,172 pledged as collateral for borrowings and deposits at June 30, 2011 and September 30, 2010 respectively)
Available for Sale		919,805			901,012
Held to maturity, at amortized cost (fair value of $26,685 and $35,062 at June 30, 2011 and September 30, 2010, respectively)		25,425			33,848

Total securities		945,230			934,860

Loans held for sale		—			5,890
Loans (notes 3 and 4):
Gross loans		1,685,272			1,701,541
Allowance for loan losses		(29,385	)		(30,843	)

Total loans, net		1,655,887			1,670,698
Federal Home Loan Bank (“FHLB”) stock, at cost		18,807			19,572
Accrued interest receivable		10,212			11,069
Premises and equipment, net		42,249			43,598
Goodwill		160,861			160,861
Core deposit and other intangible assets		4,967			3,640
Bank owned life insurance		56,454			50,938
Other assets		35,860			29,027

Total assets	$	2,976,057		$	3,021,025

LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits (note 7)	$	2,098,073		$	2,142,702
FHLB borrowings (including repurchase agreements of $211,427 and $222,500 at June 30, 2011 and September 30, 2010, respectively) (note 8)		350,333			363,751
Borrowings senior unsecured note (FDIC insured) (note 8)		51,498			51,496
Mortgage escrow funds		26,310			8,198
Other liabilities		20,806			23,923

Total liabilities		2,547,020			2,590,070

Commitments and contingent liabilities (note 13)		—			—

STOCKHOLDERS’ EQUITY :
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; none issued or outstanding)		—			—
Common stock (par value $0.01 per share; 75,000,000 shares authorized; 45,929,552 issued; 38,005,866 and 38,262,288 shares outstanding at June 30, 2011 and September 30, 2010, respectively)		459			459
Additional paid-in capital		357,232			356,912
Unallocated common stock held by employee stock ownership plan (“ESOP”)		(6,262	)		(6,637	)
Treasury stock, at cost (7,923,686 and 7,667,264 shares at June 30, 2011 and September 30, 2010, respectively)		(89,715	)		(87,336	)
Retained earnings		168,097			162,433
Accumulated other comprehensive income (loss), net of taxes		(774	)		5,124

Total stockholders’ equity		429,037			430,955

Total liabilities and stockholders’ equity	$	2,976,057		$	3,021,025

See accompanying notes to unaudited consolidated financial statements

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except share data)


	For the Three Months Ended June 30,						For the Nine Months Ended June 30,
	2011			2010			2011			2010
Interest and dividend income:
Loans	$	22,261		$	23,393		$	67,505		$	69,448
Taxable securities		3,607			4,716			10,668			14,192
Non-taxable securities		1,829			2,037			5,655			5,833
Other earning assets		237			262			968			980

Total interest and dividend income		27,934			30,408			84,796			90,453
Interest expense:
Deposits		1,493			1,849			4,720			6,840
Borrowings		3,637			4,361			11,578			13,595

Total interest expense		5,130			6,210			16,298			20,435

Net interest income		22,804			24,198			68,498			70,018
Provision for loan losses ( note 4)		3,600			2,750			7,800			7,750

Net interest income after provision for loan losses		19,204			21,448			60,698			62,268
Non-interest income:
Deposit fees and service charges		2,674			2,796			8,085			8,533
Net gain on sale of securities		542			945			5,492			5,217
Other than temporary impairment (credit loss)		(27	)		—			(27	)		—
Title insurance fees		312			336			949			884
Bank owned life insurance		488			503			1,535			1,553
Net gain on sale of loans		9			45			861			445
Investment management fees		815			756			2,347			2,311
Fair value loss on interest rate cap		(259	)		(595	)		(27	)		(831	)
Other		663			495			1,681			1,375

Total non-interest income		5,217			5,281			20,896			19,487
Non-interest expense:
Compensation and employee benefits (note 12)		11,122			11,061			33,533			32,149
CEO retirement expenses		1,494			—			1,772			—
Stock-based compensation plans		284			172			859			1,205
Occupancy and office operations		3,423			3,168			10,815			10,031
Advertising and promotion		855			1,041			2,651			2,577
Professional fees		1,137			1,063			3,242			2,811
Data and check processing		712			571			2,045			1,698
Amortization of intangible assets		305			452			1,088			1,417
FDIC insurance and regulatory assessments		587			927			2,274			2,642
ATM/debit card expense		400			164			1,159			1,254
Foreclosed property expense		461			69			494			116
Other		1,889			2,053			5,797			5,908

Total non-interest expense		22,669			20,741			65,729			61,808

Income before income tax expense		1,752			5,988			15,865			19,947
Income tax expense		(187	)		1,232			3,633			4,858

Net Income	$	1,939		$	4,756		$	12,232		$	15,089

Weighted average common shares:
Basic		37,368,391			38,086,535			37,472,548			38,284,965
Diluted		37,370,213			38,086,579			37,473,167			38,317,220
Earnings per common share (note 10)
Basic	$	0.05		$	0.12		$	0.33		$	0.39
Diluted	$	0.05		$	0.12		$	0.33		$	0.39

See accompanying notes to unaudited consolidated financial statements

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

(In thousands, except share data)


	Number of Shares			Common Stock		Additional Paid-In Capital			Unallocated ESOP Shares			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (loss)			Total Stockholders’ Equity
Balance at September 30, 2010		38,262,288		$	459	$	356,912		$	(6,637	)	$	(87,336	)	$	162,433		$	5,124		$	430,955
Net income		—			—		—			—			—			12,232			—			12,232
Other comprehensive loss		—			—		—			—			—			—			(5,898	)		(5,898	)

Total comprehensive loss																						6,334
Deferred compensation transactions		—			—		19			—			—			—			—			19
Stock option transactions, net		—			—		409			—			—			—			—			409
ESOP shares allocated or committed to be released for allocation (37,449 shares)		—			—		(22	)		375			—			—			—			353
RRP Awards		19,000			—		(187	)		—			187			—			—
Vesting of RRP Awards		(968	)		—		101			—			—			—			—			101
Purchase of treasury shares		(274,454	)		—		—			—			(2,566	)		—			—			(2,566	)
Cash dividends paid ($0.18 per common share)		—			—		—			—			—			(6,690	)		—			(6,690	)
Other		—			—		—			—			—			122			—			122

Balance at June 30, 2011		38,005,866		$	459	$	357,232		$	(6,262	)	$	(89,715	)	$	168,097		$	(774	)	$	429,037

See accompanying notes to unaudited consolidated financial statements

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In thousands, except share data)


	For the Nine Months Ended June 30,
	2011			2010
Cash flows from operating activities:
Net income	$	12,232		$	15,089
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		7,800			7,750
Write down of other real estate owned		429			44
Depreciation and amortization of premises and equipment		3,971			3,666
Amortization of intangibles		1,088			1,417
Net gain on sales of loans held for sale		(861	)		(445	)
Net realized gain on sale of securities available for sale		(5,492	)		(5,217	)
Other than temporary impairment (credit Loss)		27			—
Fair value (income) loss on interest rate cap		27			831
Loss on sales of fixed assets		—			54
Net amortization of premium on securities		2,318			6,574
Amortization of premiums on borrowings		(31	)		(211	)
Amortization of prepaid penalties on restructured borrowings		686			—
ESOP and RRP expense		453			1,162
ESOP forfeitures		(3	)		(2	)
Stock option compensation expense		409			45
Originations of loans held for sale		(37,819	)		(27,198	)
Proceeds from sales of loans held for sale		44,570			26,722
Increase in cash surrender value of bank owned life insurance		(1,536	)		(1,586	)
Deferred income tax expense		(4,109	)		(5,900	)
Net changes in accrued interest receivable and payable		747			(738	)
Other adjustments (principally net changes in other assets and other liabilities)		(1,842	)		(319	)

Net cash provided by operating activities		23,064			21,738

Cash flows from investing activities
Purchases of available for sale securities		(505,846	)		(555,031	)
Purchases of held to maturity securities		(6,675	)		(18,314	)
Proceeds from maturities, calls and other principal payments on securities:
Available for sale		185,343			232,625
Held to maturity		15,088			22,469
Proceeds from sales of securities available for sale		293,328			276,021
Loan originations		(409,980	)		(351,860	)
Loan principal payments		415,994			342,601
Purchase of interest rate derivative		—			(1,368	)
Redemption (Purchase) of FHLB stock		765			(1,419	)
Purchase of BOLI		(3,980	)
Purchases of premises and equipment		(2,622	)		(6,059	)
Proceeds from the sale of premises		—			48

Net cash used in investing activities		(18,585	)		(60,287	)

Continued

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In thousands, except share data)


	For the Nine Months Ended June 30,
	2011			2010
Cash flows from financing activities:
Net decrease in transaction, savings and money market deposits	$	(55,752	)	$	(54,044	)
Net increase (decrease) in time deposits		11,123			(67,233	)
Net increase in short-term borrowings		27,100			100,600
Gross repayments of long-term borrowings		(36,020	)		(55,599	)
Payments of pre-paid penalties on FHLBNY advances		(5,151	)		—
Net increase in mortgage escrow funds		18,112			12,086
Death benefit received from BOLI		—			750
Treasury shares purchased		(2,566	)		(9,783	)
Stock option transactions		4			857
Other stock-based compensation transactions		19			64
Cash dividends paid		(6,690	)		(6,897	)

Net cash used in financing activities		(49,821	)		(79,199	)

Net decrease in cash and cash equivalents		(45,342	)		(117,748	)
Cash and cash equivalents at beginning of period		90,872			160,408

Cash and cash equivalents at end of period	$	45,530		$	42,660


Supplemental information:
Interest payments	$	16,408		$	20,968
Income tax payments		7,034			4,882
Net change in net unrealized losses recorded on securities available for sale		(11,540	)		752
Change in deferred taxes on net unrealized losses on securities available for sale		4,686			(308	)
Real estate acquired in settlement of loans		985			1,628

See accompanying notes to unaudited consolidated financial statements

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (unaudited)

(In thousands, except share data)


	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
	2011		2010		2011			2010
Net Income:	$	1,939	$	4,756	$	12,232		$	15,089
Other Comprehensive income (loss) :
Net unrealized holding gains (losses) on securities available for sale net of related tax expense (benefit) of $6,316, $4,474, $(2,456) and $2,424		9,236		6,543		(3,592	)		3,545

Less:
Reclassification adjustment for net unrealized gains included in net income, net of related income tax expense of $220, $383, $2,230 and $2,116		322		562		3,262			3,101

		8,914		5,981		(6,854	)		444

Change in funded status of defined benefit plans, net of related income tax expense of $272, $152, $652 and $453		400		226		956			680

		9,314		6,207		(5,898	)		1,124


Total Comprehensive income	$	11,253	$	10,963	$	6,334		$	16,213

See accompanying notes to unaudited consolidated financial statements.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

1.	Basis of Presentation

The consolidated financial statements include the accounts of Provident New York Bancorp (“Provident Bancorp” or “the Company”), Hardenburgh Abstract Title Company, Inc., which provides title searches and insurance for residential and commercial real estate, Hudson Valley Investment Advisors, LLC (“HVIA”), a registered investment advisor, Provident Risk Management, (a captive insurance company), Provident Bank (“the Bank”), and the Bank’s wholly owned subsidiaries. These subsidiaries are (i) Provident Municipal Bank (“PMB”) which is a limited-purpose, New York State-chartered commercial bank formed to accept deposits from municipalities in the Company’s market area, (ii) Provident REIT, Inc. and WSB Funding, Inc. which are real estate investment trusts that hold a portion of the Company’s real estate loans, (iii) Provest Services Corp. I, which has invested in a low-income housing partnership, (iv) Provest Services Corp. II, which has engaged a third-party provider to sell mutual funds and annuities to the Bank’s customers, and (v) companies which hold foreclosed properties acquired by the Bank. Intercompany transactions and balances are eliminated in consolidation.

The Company’s off-balance sheet activities are limited to loan origination commitments, loan commitments pending sale, lines of credit extended to customers and letters of credit on behalf of customers, which all are in the ordinary course of its lending activities. In addition, the Company purchased interest rate caps with a notional value of $50.0 million during the first quarter of fiscal 2010. The Company does not engage in off-balance sheet financing transactions or other activities involving the use of special-purpose or variable interest entities.

The consolidated financial statements have been prepared by management without audit, but, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s financial position and results of operations as of the dates and for the periods presented. Although certain information and footnote disclosures have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the Company believes that the disclosures are adequate to make the information presented clear. The results of operations for the nine months ended June 30, 2011 are not necessarily indicative of results to be expected for other interim periods or the entire fiscal year ending September 30, 2011. The unaudited consolidated financial statements presented herein should be read in conjunction with the annual audited financial statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2010.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense. Actual results could differ significantly from these estimates. A material estimate that is particularly susceptible to near-term change is the allowance for loan loss (see note 4), which reflects the application of a critical accounting policy.

Certain loans amounts from prior periods have been reclassified to conform to the current fiscal year presentation.

2.	Recent Accounting Standards, Not Yet Adopted

Accounting Standards Update (ASU) 2011-02, Receivables (Topic 310)- A Creditor’s Determination of Whether a Restructuring is a Troubled Debt Restructuring has been issued. The ASU clarifies which loan modifications constitute troubled debt restructurings and assists creditors in determining whether a modification of the terms of a receivable meets the criteria to be considered a troubled debt restructuring, both for purposes of recording an impairment loss and for disclosure of troubled debt restructurings. This standard is effective for the Company July 1, 2011 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2011-03, Transfers and Servicing (Topic 860)- Reconsideration of Effective Control for Repurchase Agreements has been issued, which is to improve the accounting for repurchase agreements and other agreements that both entitle and obligate a transferor to repurchase or redeem financial assets before their maturity. This standard is effective for the Company January 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2011-04, Fair Value Measurement (Topic 820)- Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRS has been issued, which will conform the meaning and disclosure requirements of fair value measurement between U.S. GAAP and in IFRS. This standard is effective for the Company January 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2011-05- Presentation of Comprehensive Income (Topic 220) has been issued. This standard was issued to conform U.S. GAAP and IFRS as well as to increase the prominence of items reported in other comprehensive income. This standard is effective for the Company January 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Loans

Major classifications of loans, excluding loans held for sale, are summarized below:


	June 30, 2011		September 30, 2010
Real estate - residential mortgage	$	402,072	$	434,900
Real estate - commercial mortgage		661,758		579,232
Acquisition, development & construction loans		193,312		231,258
Commercial business loans		201,612		217,927
Consumer loans, including home equity loans		226,518		238,224

Total	$	1,685,272	$	1,701,541

4.	Allowance for Loan Losses and Non-Performing Assets

The allowance for loan losses is established through provisions for losses charged to earnings. Loan losses are charged against the allowance when management believes that the collection of principal is unlikely. Recoveries of loans previously charged-off are credited to the allowance when realized. The allowance for loan losses is the amount that management has determined to be necessary to absorb probable incurred loan losses inherent in the existing portfolio. Management’s evaluations, which are subject to periodic review by the Company’s regulators, are made using a consistently applied methodology that takes into consideration such factors as the Company’s past loan loss experience, changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and collateral values, and current economic conditions. Modifications to the methodology used in the allowance for loan losses evaluation may be necessary in the future based on economic and real estate market conditions, new information obtained regarding known problem loans, regulatory guidelines and examinations, the identification of additional problem loans, and other factors. Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for the periods indicated are summarized below:


	Three Months Ended June 30, 2011
	Beginning Allowance for loan losses		Charge-offs			Recoveries		Net Charge-offs			Provision for losses			Ending Allowance for Loan Losses
Loans by class:
Real estate - residential mortgage	$	3,539	$	(438	)	$	13	$	(425	)	$	162		$	3,276
Real estate - commercial mortgage		5,213		(114	)		1		(113	)		439			5,539
Real estate - commercial mortgage (CBL) ¹		1,062		(279	)		—		(279	)		293			1,076
Commercial business loans		2,692		(185	)		2		(183	)		2			2,511
Commercial business loans (CBL) ¹		5,447		(599	)		103		(496	)		(200	)		4,751
Acquisition Development & Construction		8,728		(2,095	)		3		(2,092	)		2,316			8,952
Consumer, including home equity		3,449		(788	)		31		(757	)		588			3,280

Total Loans	$	30,130	$	(4,498	)	$	153	$	(4,345	)	$	3,600		$	29,385


Net charge-offs to average loans outstanding (annualized)															1.03	%

¹	Community Business Loans

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)


	Nine Months Ended June 30, 2011
	Beginning Allowance for loan losses		Charge-offs			Recoveries		Net Charge-offs			Provision for losses			Ending Allowance for Loan Losses
Loans by class:
Real estate - residential mortgage	$	2,587	$	(878	)	$	14	$	(864	)	$	1,553		$	3,276
Real estate - commercial mortgage		5,068		(547	)		1		(546	)		1,017			5,539
Real estate - commercial mortgage (CBL)		845		(722	)		—		(722	)		953			1,076
Commercial business loans		3,172		(367	)		179		(188	)		(473	)		2,511
Commercial business loans (CBL)		5,505		(3,697	)		315		(3,382	)		2,628			4,751
Acquisition Development & Construction		10,231		(2,220	)		10		(2,210	)		931			8,952
Consumer, including home equity		3,435		(1,453	)		107		(1,346	)		1,191			3,280

Total Loans	$	30,843	$	(9,884	)	$	626	$	(9,258	)	$	7,800		$	29,385


Net charge-offs to average loans outstanding (annualized)															0.73	%


	June 30, 2011
	Individually evaluated for impairment		Collectively evaluated for impairment		Total ending loans balance
Loans by class:
Real estate - residential mortgage	$	10,535	$	391,537	$	402,072
Real estate - commercial mortgage		8,770		557,626		566,396
Real estate - commercial mortgage (CBL)		4,768		90,594		95,362
Commercial business loans		520		123,824		124,344
Commercial business loans (CBL)		297		76,971		77,268
Acquisition Development & Construction		27,736		165,576		193,312
Consumer, including home equity		2,483		224,035		226,518

Total Loans	$	55,109	$	1,630,163	$	1,685,272


	June 30, 2011
	Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance balance
Ending allowance by class:
Real estate - residential mortgage	$	1,045	$	2,231	$	3,276
Real estate - commercial mortgage		541		4,998		5,539
Real estate - commercial mortgage (CBL)		352		724		1,076
Commercial business loans		90		2,421		2,511
Commercial business loans (CBL)		164		4,587		4,751
Acquisition Development & Construction		1,066		7,886		8,952
Consumer, including home equity		450		2,830		3,280

Total Loans	$	3,708	$	25,677	$	29,385

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)


	Three months ended June 30, 2010			Nine months ended June 30, 2010
Allowance for loan losses:
Beginning Balance	$	30,444		$	30,050
Charge-offs		(2,427	)		(7,651	)
Recoveries		254			872

Net Charge-offs		(2,173	)		(6,779	)
Provision for loan losses		2,750			7,750

Ending Balance	$	31,021		$	31,021

Net charge-offs to average loans outstanding (annualized)		0.52	%		0.54	%


Loans as of June 30, 2010:
Individually evaluated for impairment	$	22,071
Collectively evaluated for impairment		1,683,666

Total ending loans balance	$	1,705,737

A loan is impaired when it is probable that a creditor will be unable to collect all amounts due according to the contractual terms of the loan agreement. Impaired loans substantially consist of nonperforming loans and accruing and performing troubled debt restructured loans. The recorded investment of an impaired loan includes the unpaid principal balance, negative escrow and any tax in arrears.

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2011:


	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated		YTD Average Impaired Loans		Interest Income Recognized		Cash-basis Interest Income Recognized
With no related allowance recorded:
Real estate - residential mortgage	$	4,699	$	4,921	$	—	$	4,904	$	149	$	48
Real estate - commercial mortgage		5,931		5,938		—		5,811		73		68
Real estate - commercial mortgage (CBL)		3,006		3,114		—		3,294		167		24
Acquisition, development and construction		20,496		20,893		—		22,426		788		766
Commercial business loans		383		383		—		589		—		33
Commercial business loans (CBL)		—		—		—		—		—		—
Consumer loans, including home equity		1,322		1,322		—		1,389		43		2

Subtotal		35,837		36,571		—		38,413		1,220		941

With an allowance recorded:
Real estate - residential mortgage		5,560		5,614		1,045		5,877		25		48
Real estate - commercial mortgage		2,755		2,832		541		2,811		102		35
Real estate - commercial mortgage (CBL)		1,578		1,654		352		1,766		—		—
Acquisition, development and construction		6,830		6,843		1,066		6,710		24		34
Commercial business loans		137		137		90		333		—		—
Commercial business loans (CBL)		297		297		164		305		—		—
Consumer loans, including home equity		1,161		1,161		450		1,201		14		10

Subtotal		18,318		18,538		3,708		19,003		165		127

Total	$	54,155	$	55,109	$	3,708	$	57,416	$	1,385	$	1,068

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table presents loans individually evaluated for impairment by segment of loans as of September 30, 2010:


	Unpaid Principal Balance		Recorded Investment		Allowance for Loan Losses Allocated
With no related allowance recorded:
Real estate - residential mortgage	$	2,896	$	2,930	$	—
Real estate - commercial mortgage		1,658		1,793		—
Acquisition, development and construction		4,732		4,760		—
Commercial business loans		458		458		—
Consumer loans, including home equity		378		378		—

Subtotal		10,122		10,319		—

With an allowance recorded:
Real estate - residential mortgage		5,682		5,879		800
Real estate - commercial mortgage		6,974		7,203		399
Acquisition, development and construction		15,613		15,652		766
Commercial business loans		1,365		1,365		511
Consumer loans, including home equity		1,663		1,664		570

Subtotal		31,297		31,763		3,046

Total	$	41,419	$	42,082	$	3,046

Average impaired loans for the nine months ending June 30, 2011 were $67,371. Listed below are the interest income recognized during impairment and cash received for interest during impairment for the nine months ending June 30, 2011 and June 30, 2010, respectively.


	June 30, 2011		June 30, 2010

Interest income recognized during impairment	$	1,385	$	1,481
Cash-basis interest income recognized		1,068		868

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following tables set forth the amounts and categories of the Company’s non-performing assets and troubled debt restructurings at June 30, 2011 and September 30, 2010.


	June 30, 2011
	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual			Total Loans
Non-performing loans:
Real estate - residential mortgage	$	390,143	$	1,301	$	370	$	2,064	$	8,194		$	402,072
Real estate - commerical mortgage		555,736		2,442		—		1,194		7,024			566,396
Real estate - commerical mortgage (CBL)		90,862		—		—		1,455		3,045			95,362
Commercial business loans		124,157		17		31		—		139			124,344
Commercial business loans (CBL)		76,972		—		—		—		296			77,268
Acquisition, development and construction loans		166,214		4,086		224		445		22,343			193,312
Consumer, including home equity loans		223,993		573		88		679		1,185			226,518

Total non-performing loans	$	1,628,077	$	8,419	$	713	$	5,837	$	42,226		$	1,685,272

Loans 90+ and still accruing										5,837

Real estate owned:
Land										2,505
Commercial real estate										2,325
One- to four-family										353

Total real estate owned										5,183

Total non-performing assets									$	53,246


Troubled Debt Restructurings still accruing and not included above									$	7,447

Ratios:
Non-performing loans to total loans										2.85	%
Non-performing assets to total assets										1.79	%
Allowance for loan losses to total non-performing loans										61	%
Allowance for loan losses to average loans										1.74	%

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)


	September 30, 2010
	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual			Total Loans
Non-performing loans:
Real estate - residential mortgage	$	426,754	$	113	$	—	$	1,953	$	6,080		$	434,900
Real estate - commerical mortgage		475,532		616		853		1,866		5,061			483,928
Real estate - commerical mortgage (CBL)		92,374		—		—		1,105		1,825			95,304
Commercial business loans		121,301		3,403		—		—		1,061			125,765
Commercial business loans (CBL)		91,847		—		—		—		315			92,162
Acquisition, development and construction loans		218,847		3,982		2,699		—		5,730			231,258
Consumer, including home equity loans		235,700		375		305		503		1,341			238,224

Total non-performing loans	$	1,662,355	$	8,489	$	3,857	$	5,427	$	21,413		$	1,701,541

Loans 90+ and still accruing										5,427

Real estate owned:
Land										2,029
Commercial real estate										1,507
One- to four-family										355

Total real estate owned										3,891

Total non-performing assets									$	30,731


Troubled Debt Restructurings still accruing and not included above									$	16,047

Ratios:
Non-performing loans to total loans										1.58	%
Non-performing assets to total assets										1.02	%
Allowance for loan losses to total non-performing loans										115	%
Allowance for loan losses to average loans										1.82	%

Troubled Debt Restructurings :

Troubled debt restructurings are renegotiated loans for which concessions have been granted to the borrower that the Company would not have otherwise granted and the borrower is experiencing financial difficulty. Restructured loans are recorded in accrual status when the loans have demonstrated performance, generally evidenced by six months of payment performance in accordance with the restructured terms, or by the presence of other significant items. Total troubled debt restructurings were $20,864 and $21,504 at June 30, 2011 and September 30, 2010, respectively. There were $13,417 and $5,457 in troubled debt restructurings included in non- performing loans at June 30, 2011 and September 30, 2010, respectively. Troubled debt restructurings still accruing and considered to be performing were $7,447 and $16,047 at June 30, 2011 and September 30, 2010, respectively. The Company has allocated $331 and $673 of specific reserves to customers whose loan terms have been modified in troubled debt restructurings as of June 30, 2011 and September 30, 2010 respectively.

The Company has committed to lend additional amounts totaling up to $4,063 and $3,957 as of June 30, 2011 and September 30, 2010 to customers with outstanding loans that are classified as troubled debt restructurings. The commitments to lend on the restructured debt is contingent on clear title and a third party inspection to verify completion of work and is associated with loans that are considered to be performing.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Credit Quality Indicators:

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes loans individually by classifying the loans as to credit risk. This analysis includes all loans. This analysis is performed on a monthly basis on all criticized classified loans. The Company uses the following definitions of risk ratings:

Special Mention . Loans classified as special mention have a potential weakness that deserves management’s close attention. If left uncorrected these potential weaknesses may result in the deterioration of the repayment prospects for the loan or the institution’s credit position at some current future date.

Substandard . Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful . Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Based on the most recent analysis performed as of June 30, 2011, the risk category of loans by class of gross loans is as follows:


	Special Mention		Substandard		Doubtful
Real estate - residential mortgage	$	3,396	$	10,108	$	—
Real estate - commercial mortgage		11,807		26,645
Real estate - commercial mortgage (CBL)		1,172		4,768		—
Acquisition, development and construction		5,072		54,399		—
Commercial business loans		1,540		4,717
Commercial business loans (CBL)		610		768		68
Consumer loans, including home equity loans		502		2,352		—

Total	$	24,099	$	103,757	$	68

5.	Fair value measurements

Fair value is the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. There are three levels of inputs that may be used to measure fair values.

LEVEL 1 – Valuation is based on quoted prices in active markets for identical assets and liabilities.

LEVEL 2 – Valuation is determined from quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar instruments in markets that are not active or by model-based techniques in which all significant inputs are observable in the market.

LEVEL 3 – Valuation is derived from model-based techniques in which at least one significant input is unobservable and based on the Company’s own estimates about the assumptions that the market participants would use to value the asset or liability.

When available, the Company attempts to use quoted market prices in active markets to determine fair value and classifies such items as Level 1 or Level 2. If quoted market prices in active markets are not available, fair value is often determined using model-based techniques incorporating various assumptions including interest rates, prepayment speeds and credit losses. Assets and liabilities valued using model-based techniques are classified as either Level 2 or Level 3, depending on the lowest level classification of an input that is considered significant to the overall valuation.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following is a description of the valuation methodologies used for the Company’s assets and liabilities that are measured on a recurring basis at estimated fair value.

Investment securities available for sale

The majority of the Company’s available for sale investment securities have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable and, therefore, such valuations have been classified as Level 2. Certain investments are actively traded and therefore have been classified as Level 1 valuations (U.S. Treasuries and certain government sponsored agencies).

The Company utilizes an outside vendor to obtain valuations for its traded securities as well as information received from a third party investment advisor. The majority of the Company’s available for sale investment securities (mortgage backed securities issued by US government corporations and government sponsored entities) have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable (Level 2). The Company utilizes prices from a leading provider of market data information and compares them to dealer indicative bids from the Company’s external investment advisor. For securities where there is limited trading activity (private label CMO’s) and less observable valuation inputs, the Company has classified such valuations as Level 3.

The Company reviewed the volume and level of activity for its available for sale securities to identify transactions which may not be orderly or reflective of significant activity and volume. Although estimated prices were generally obtained for such securities, there has been a decline in the volume and level of activity in the market for its private label mortgage backed securities. The market assumptions regarding credit adjusted cash flows and liquidity influences on discount rates were difficult to observe at the individual bond level. Because of the inactivity in the markets and the lack of observable valuation inputs the Company has classified the valuation of privately issued residential mortgage backed securities as Level 3 as of April 1, 2009 with a fair value of $9,534. As of June 30, 2011, these securities have an amortized cost of $5,602 and a fair value of $5,314. In determining the fair value of these securities the Company utilized unobservable inputs which reflect assumptions regarding the inputs that market participants would use in pricing these securities in an orderly market. Present value estimated cash flow models were used discounted at a rate that was reflective of similarly structured securities in an orderly market. The resultant prices were averaged with prices obtained from two independent third parties to arrive at the fair value as of June 30, 2011. These securities have a weighted average coupon rate of 2.96 percent, a weighted average life of 4.69 years, a weighted average 1 month prepayment history of 9.87 years and a weighted average twelve month default rate of 4.17 CDR. It was determined that one of these securities with a carrying amount of $1,878 and an amortized cost of $2,071 had an other than temporary loss which resulted in a $27 temporary impairment charge.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The investment grades of these securities are as follows:


	Amortized Cost		Fair Value
Investment Grade:
Aa1	$	356	$	357
Ba1		163		154
B		5,083		4,803

Total private label CMOs	$	5,602	$	5,314

Derivatives

The fair values of derivatives are based on valuation models using current market terms (including interest rates and fees), the remaining terms of the agreements and the credit worthiness of the counter party as of the measurement date (Level 2). The Company’s derivatives consist of two interest rate caps and three interest rate swaps (see footnote 9).

Commitments to sell real estate loans

The Company enters into various commitments to sell real estate loans into the secondary market. Such commitments are considered to be derivative financial instruments and, therefore are carried at estimated fair value on the consolidated balance sheets. The estimated fair values of these commitments were generally calculated by reference to quoted prices in secondary markets for commitments to sell to certain government sponsored agencies. The fair values of these commitments generally result in a Level 2 classification. The fair values of these commitments are not considered material.

A summary of assets and liabilities at June 30, 2011 measured at estimated fair value on a recurring basis were as follows:


	Fair Value Measurements at June 30, 2011		Level 1		Level 2		Level 3

Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	121,433	$	—	$	121,433	$	—
Freddie Mac		70,903		—		70,903		—
Ginnie Mae		5,130		—		5,130		—
CMO/Other MBS		85,918		—		85,918		—
Privately issued collateralized mortgage obligations		5,314		—		—		5,314

		288,698		—		283,384		5,314

Investment securities
U.S. Government securities		56,182		56,182		—		—
Federal agencies		368,452		—		368,452		—
Corporate debt securities		17,086		—		17,086		—
Obligations of states and political subdivisions		188,217		—		188,217		—
Equities		1,170		—		1,170		—

Total investment securities available for sale		631,107		56,182		574,925		—


Total available for sale securities		919,805		56,182		858,309		5,314


Interest rate caps and swaps		375		—		375		—


Total assets	$	920,180	$	56,182	$	858,684	$	5,314


Swaps	$	139	$	—	$	139	$	—


Total Liabilities	$	139	$	—	$	139	$	—

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

A summary of assets and liabilities at September 30, 2010 measured at estimated fair value on a recurring basis were as follows:


	Fair Value Measurements at September 30, 2010		Level 1		Level 2		Level 3
Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	153,188	$	—	$	153,188	$	—
Freddie Mac		58,452		—		58,452		—
Ginnie Mae		9,315		—		9,315		—
CMO/Other MBS		32,663		—		32,663		—
Privately issued collateralized mortgage obligation		5,996		—		—		5,996

		259,614		—		253,618		5,996
Investment securities
U.S. Government securities		72,293		72,293		—		—
Federal agencies		346,019		346,019		—		—
Corporate debt securities		30,540		—		30,540		—
Obligations of states and political subdivisions		191,657		—		191,657		—
Equities		889		—		889		—

Total investment securities available for sale		641,398		418,312		223,086		—


Total available for sale securities		901,012		418,312		476,704		5,996


Interest rate caps and swaps		435		—		435		—


Total assets	$	901,447	$	418,312	$	477,139	$	5,996


Swaps	$	173	$	—	$	173	$	—


Total Liabilities	$	173	$	—	$	173	$	—

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows for the period ending June 30, 2011:


	Privately issued CMOS
Balance at September 30, 2009	$	10,411
Pay downs		(1,528	)
(Amortization) and accretion, net		3
Change in fair value		124

Balance at June 30, 2010	$	9,010


Balance at September 30, 2010	$	5,996
Pay downs		(725	)
(Amortization) and accretion, net		(1	)
Credit loss write down (OTTI)		(27	)
Change in fair value		71

Balance at June 30, 2011	$	5,314

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following categories of financial assets are not measured at fair value on a recurring basis, but are subject to fair value adjustments in certain circumstances:

Loans Held for Sale and Loans

Loans held for sale are recorded at the lower of cost or fair value in accordance with GAAP.

The Company may record nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of these loans. Nonrecurring adjustments also include certain impairment amounts for collateral dependant loans calculated in accordance with FASB ASC Topic 310 – Receivables , when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is valued using independent appraisals or other indications of value based upon recent comparable sales of similar properties or assumptions generally observable by market participants. Any fair value adjustments for loans categorized here are classified as Level 3. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the market place and therefore such valuations have been classified as Level 3. Loans subject to nonrecurring fair value measurements were $51,401 and $28,717 which equals the carrying value less the allowance for loan losses allocated to these loans at June 30, 2011 and September 30, 2010, respectively. Loans subject to nonrecurring fair value measurements have been transferred from Level 2 to Level 3 as of September 30, 2010. Changes in fair value recognized on provisions on loans held by the Company were $662 and $1,913 nine months ended June 30, 2011 and 2010, respectively.

Mortgage servicing rights

The Company utilizes the amortization method to subsequently measure the carrying value of its servicing asset. In accordance with FASB ASC Topic 860- Transfers and Servicing, the Company must record impairment charges on a nonrecurring basis, when the carrying value exceeds the estimated fair value. To estimate the fair value of servicing rights the Company utilizes a third party vendor, which considers the market prices for similar assets and the present value of expected future cash flows associated with the servicing rights. Assumptions utilized include estimates of the cost of servicing, loan default rates, an appropriate discount rate and prepayment speeds. The determination of fair value of servicing rights is considered a Level 3 valuation. Changes in fair value of mortgage servicing rights recognized for the nine months ended June 30, 2011 was $399. There was no valuation allowance recorded at June 30, 2011. A valuation allowance of $54 was recorded at September 30, 2010, reflecting fair market value.

Assets taken in foreclosure of defaulted loans

Assets taken in foreclosure of defaulted loans are primarily comprised of commercial and residential real property and upon initial recognition, were re-measured and reported at fair value through a charge-off to the allowance for loan losses based upon the fair value of the foreclosed asset. The fair value is generally determined using appraisals or other indications of value based on recent comparable sales of similar properties or assumptions generally observable in the market place, and the related nonrecurring fair value measurements adjustments have generally been classified as Level 2. Assets taken in foreclosure of defaulted loans subject to nonrecurring fair value measurement were $5,184 and $3,891 at June 30, 2011 and September 30, 2010, respectively. There were $329 and $44 changes in fair value recognized through income for those foreclosed assets held by the Company during the nine months ending June 30, 2011 and 2010, respectively.

A summary of assets and liabilities at June 30, 2011 measured at estimated fair value on a nonrecurring basis were as follows:


	Fair Value Measurements at June 30, 2011		Level 1		Level 2		Level 3

Real estate - residential mortgage	$	4,569	$	—	$	—	$	4,569
Real estate - commercial mortgage		3,593		—		—		3,593
Acquisition, development and construction		5,777		—		—		5,777
Commercial business loans		180		—		—		180
Consumer loans		711		—		—		711

Total impaired loans with specific allowance allocations	$	14,830	$	—	$	—	$	14,830

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Fair values of financial instruments

FASB Codification Topic 825: Financial Instruments, requires disclosure of fair value information for those financial instruments for which it is practicable to estimate fair value, whether or not such financial instruments are recognized in the consolidated statements of financial condition for interim and annual periods. Fair value is the amount at which a financial instrument could be exchanged in a current transaction between willing parties, other than in a forced sale or liquidation.

Quoted market prices are used to estimate fair values when those prices are available, although active markets do not exist for many types of financial instruments. Fair values for these instruments must be estimated by management using techniques such as discounted cash flow analysis and comparison to similar instruments. These estimates are highly subjective and require judgments regarding significant matters, such as the amount and timing of future cash flows and the selection of discount rates that appropriately reflect market and credit risks. Changes in these judgments often have a material effect on the fair value estimates. Since these estimates are made as of a specific point in time, they are susceptible to material near-term changes. Fair values disclosed in accordance with FASB Topic 825 do not reflect any premium or discount that could result from the sale of a large volume of a particular financial instrument, nor do they reflect possible tax ramifications or estimated transaction costs.

The following is a summary of the carrying amounts and estimated fair values of financial assets and liabilities (none of which were held for trading purposes):


	June 30, 2011						September 30, 2010
	Carrying amount			Estimated fair value			Carrying amount			Estimated fair value
Financial assets:
Cash and due from banks	$	45,530		$	45,530		$	90,872		$	90,872
Securities available for sale		919,805			919,805			901,012			901,012
Securities held to maturity		25,425			26,685			33,848			35,062
Loans		1,655,887			1,701,770			1,670,698			1,680,939
Loans held for sale		—			—			5,890			5,934
Accrued interest receivable		10,212			10,212			11,069			11,069
FHLB of New York stock		18,807			18,807			19,572			19,572
Financial liabilities:
Non-maturity deposits		(1,709,377	)		(1,709,377	)		(1,765,129	)		(1,765,129	)
Certificates of Deposit		(388,696	)		(380,898	)		(377,573	)		(380,744	)
FHLB and other borrowings		(401,831	)		(457,865	)		(415,247	)		(473,785	)
Mortgage escrow funds		(26,310	)		(26,306	)		(8,198	)		(8,198	)
Accrued interest payable		(2,197	)		(2,197	)		(2,307	)		(2,307	)

The following paragraphs summarize the principal methods and assumptions used by management to estimate the fair value of the Company’s financial instruments.

(a) Cash and due from banks

The carrying value of cash and due from banks approximates their fair value

(b) Securities

The fair value measurements consider observable data that may include dealer quotes, market spreads, cash flows, live trading levels, market consensus prepayment speeds, credit information and the bond’s terms and conditions among other items. For certain securities, for which the inputs used by independent pricing services were derived from unobservable market information, the Company evaluated the appropriateness of each price. In accordance with adoption of FASB Codification Topic 820, the Company reviewed the volume and level of activity for its different classes of securities to determine whether transactions were not considered orderly. For these securities, the quoted prices received from independent pricing services may be adjusted, as necessary, to estimate fair value in accordance with FASB Codification Topic 820. If applicable, adjustments to fair value were based on averaging present value cash flow model projections with prices obtained from independent pricing services.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

(c) Loans held for sale

Loans held for sale are recorded at the lower of cost or fair value in accordance with GAAP.

(d) Loans

Fair values were estimated for portfolios of loans with similar financial characteristics. For valuation purposes, the total loan portfolio was segregated into adjustable-rate and fixed-rate categories. Fixed-rate loans were further segmented by type, such as residential mortgage, commercial mortgage, commercial business and consumer loans. Loans were also segmented by maturity dates. Fair values were estimated by discounting scheduled future cash flows through estimated maturity using a discount rate equivalent to the current market rate on loans that are similar with regard to collateral, maturity and the type of borrower. The discounted value of the cash flows was reduced by a credit risk adjustment based on loan categories. Based on the current composition of the Company’s loan portfolio, as well as past experience and current economic conditions and trends, the future cash flows were adjusted by prepayment assumptions that shortened the estimated remaining time to maturity and therefore affected the fair value estimates.

(e) FHLB of New York Stock

The redeemable carrying amount of these securities with limited marketability approximates their fair value.

(f) Deposits and Mortgage Escrow Funds

In accordance with FASB Codification Topic 825, deposits with no stated maturity (such as savings, demand and money market deposits) were assigned fair values equal to the carrying amounts payable on demand. Certificates of deposit and mortgage escrow funds were segregated by account type and original term, and fair values were estimated by discounting the contractual cash flows. The discount rate for each account grouping was equivalent to the current market rates for deposits of similar type and maturity.

These fair values do not include the value of core deposit relationships that comprise a significant portion of the Company’s deposit base. Management believes that the Company’s core deposit relationships provide a relatively stable, low-cost funding source that has a substantial value separate from the deposit balances.

(g) Borrowings

Fair values of FHLB and other borrowings were estimated by discounting the contractual cash flows. A discount rate was utilized for each outstanding borrowing equivalent to the then-current rate offered on borrowings of similar type and maturity.

(h) Other Financial Instruments

The other financial assets and liabilities listed in the preceding table have estimated fair values that approximate the respective carrying amounts because the instruments are payable on demand or have short-term maturities and present relatively low credit risk and interest rate risk.

The fair values of the Company’s off-balance sheet financial instruments were estimated based on current market terms (including interest rates and fees), considering the remaining terms of the agreements and the credit worthiness of the counterparties. At June 30, 2011 and September 30, 2010, the estimated fair values of these instruments approximated the related carrying amounts, which were insignificant.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

6.	Securities

The following is a summary of securities available for sale:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2011
*Mortgage-backed securities-residential*
Fannie Mae	$	120,501		1,446		(514	)		121,433
Freddie Mac		70,138		1,069		(304	)		70,903
Ginnie Mae		5,066		64		—			5,130
CMO/Other MBS		91,632		605		(1,005	)		91,232

		287,337		3,184		(1,823	)		288,698

*Investment securities*
U.S. Government securities		55,802		380		—			56,182
Federal agencies		367,444		2,040		(1,032	)		368,452
Corporate bonds		16,918		178		(10	)		17,086
State and municipal securities		181,193		7,227		(203	)		188,217
Equities		1,396		—		(226	)		1,170

		622,753		9,825		(1,471	)		631,107


Total available for sale	$	910,090	$	13,009	$	(3,294	)	$	919,805


September 30, 2010
*Mortgage-backed securities-residential*
Fannie Mae	$	149,084	$	4,105	$	(1	)	$	153,188
Freddie Mac		56,632		1,820		—			58,452
Ginnie Mae		9,047		268		—			9,315
CMO/Other MBS		38,338		680		(359	)		38,659

		253,101		6,873		(360	)		259,614

*Investment securities*
U.S. Government securities		71,071		1,222		—			72,293
Federal agencies		344,154		1,919		(54	)		346,019
Corporate bonds		29,406		1,134		—			30,540
State and municipal securities		180,879		10,798		(20	)		191,657
Equities		1,146		—		(257	)		889

		626,656		15,073		(331	)		641,398


Total available for sale	$	879,757	$	21,946	$	(691	)	$	901,012

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following is a summary of the amortized cost and fair value of investment securities available for sale (other than equity securities), by remaining period to contractual maturity. Actual maturities may differ because certain issuers have the right to call or prepay their obligations.


	June 30, 2011
	Amortized Cost		Fair Value
Remaining period to contractual maturity
Less than one year	$	4,576		4,627
One to five years		405,912		408,366
Five to ten years		160,373		164,754
Greater than ten years		50,496		52,190

Total	$	621,357	$	629,937

Proceeds from sales of securities available for sale totaled $293,328 and $276,021 during the nine months ending June 30, 2011 and 2010, respectively. These sales resulted in gross realized gains of $5,492 and $5,391 for the nine months ending June 30, 2011 and 2010 respectively, and gross realized losses of $0 and $174 for the nine months ending June 30, 2011 and 2010 respectively.

Proceeds from sales of securities available for sale totaled $22,977 and $45,003 during the three months ending June 30, 2011 and 2010, respectively. These sales resulted in gross realized gains of $542 and $983 for the three months ending June 30, 2011 and 2010 respectively, and gross realized losses of $0 and $38 for the three months ending June 30, 2011 and 2010 respectively.

Securities, including some held to maturity securities, with carrying amounts of $219,764 and $228,442 were pledged as collateral for borrowings at June 30, 2011 and September 30, 2010, respectively. Securities with carrying amounts of $337,230 and $490,730 were pledged as collateral for municipal deposits and other purposes at June 30, 2011 and September 30, 2010, respectively.

Securities Available for Sale with Unrealized Losses. The following table summarizes those securities available for sale with unrealized losses, segregated by the length of time in a continuous unrealized loss position:


	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer					Total
As of June 30, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

Fannie Mae mortgage	$	35,459	$	(513	)	$	95	$	(1	)	$	35,554	$	(514	)
Freddie Mac		26,987		(304	)		—		—			26,987		(304	)
CMO / Other MBS		52,481		(819	)		2,032		(186	)		54,513		(1,005	)

Total Mortgage-backed securities-residential		114,927		(1,636	)		2,127		(187	)		117,054		(1,823	)
U.S. Government and agency securities		129,980		(1,032	)		—		—			129,980		(1,032	)
Corporate bonds		2,081		(10	)		—		—			2,081		(10	)
State and municipal securities		9,275		(203	)		—		—			9,275		(203	)
Equity securities		103		(2	)		816		(224	)		919		(226	)

Total	$	256,366	$	(2,883	)	$	2,943	$	(411	)	$	259,309	$	(3,294	)

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)


	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer					Total
As of September 30, 2010	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

Fannie Mae	$	124	$	(1	)	$	—	$	—		$	124	$	(1	)
CMO’s		486		(7	)		5,511		(352	)		5,997		(359	)

Total Mortgage-backed securities-residential		610		(8	)		5,511		(352	)		6,121		(360	)
U.S. Government and agency securities		40,638		(54	)		—		—			40,638		(54	)
Corporate bonds		—		—			—		—			—		—
State and municipal securities		1,541		(20	)		—		—			1,541		(20	)
Equity securities		99		(6	)		790		(251	)		889		(257	)

Total	$	42,888	$	(88	)	$	6,301	$	(603	)	$	49,189	$	(691	)

The Company, as of June 30, 2009 adopted the provisions under FASB ASC Topic 320 – Investments- Debt and Equity Securities which requires a forecast of recovery of cost basis through cash flow collection on all debt securities with a fair value less than its amortized cost less any current period credit loss with an assertion on the lack of intent to sell (or requirement to sell prior to recovery of cost basis). Based on a review of each of the securities in the investment portfolio in accordance with FASB ASC 320 at June 30, 2011, the Company concluded that it expects to recover the amortized cost basis of its investments on all but one private label CMO security and therefore there was an impairment charge of $27. As of June 30, 2011 the Company does not intend to sell nor is it more than likely than not that it would be required to sell any of its securities with unrealized losses prior to recovery of its amortized cost basis less any current-period credit loss.

Substantially all of the unrealized losses at June 30, 2011 relate to investment grade securities and are attributable to changes in market interest rates subsequent to purchase. There were no securities with unrealized losses that were individually significant dollar amounts at June 30, 2011. A total of 56 available for sale securities were in a continuous unrealized loss position for less than 12 months and 11 securities for 12 months or longer. For securities with fixed maturities, there are no securities past due or securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the investment.

Within the collateralized mortgage-backed securities (CMO’s) category of the available for sale portfolio there are four individual private label CMO’s that have an amortized cost of $5,602 and a fair value (carrying value) of $5,314 as of June 30, 2011. One of the four securities is considered to be impaired as noted above and is below investment grade. The impaired private label CMO has an amortized cost of $2,055 and a fair value of $1,878 at June 30, 2011. The remaining three securities are rated at or above B. The remaining three securities in this category are performing as of June 30, 2011 and are expected to perform based on current information.

In determining whether there existed other than temporary impairment on these securities the Company evaluated the present value of cash flows expected to be collected based on collateral specific assumptions, including credit risk and liquidity risk, and determined that no losses are expected. The Company will continue to evaluate its portfolio in this manner on a quarterly basis.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Securities Held to Maturity

The following is a summary of securities held to maturity:


	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
June 30, 2011
*Mortgage-backed securities-residential*
Fannie Mae	$	1,550	$	86	$	—		$	1,636
Freddie Mac		2,031		109		—			2,140
Ginnie Mae		3		—		—			3
CMO/Other MBS		644		9		—			653

		4,228		204		—			4,432

*Investment securities*
State and municipal securities		19,697		1,030		(14	)		20,713
Other		1,500		40		—			1,540

		21,197		1,070		(14	)		22,253


Total held to maturity	$	25,425	$	1,274	$	(14	)	$	26,685


September 30, 2010
*Mortgage-backed securities-residential*
Fannie Mae	$	1,835	$	96	$	—		$	1,931
Freddie Mac		2,389		124		—			2,513
Ginnie Mae		16		1		—			17
CMO/Other MBS		729		19		—			748

		4,969		240		—			5,209

*Investment securities*
State and municipal securities		27,879		980		(44	)		28,815
Other		1,000		38		—			1,038

		28,879		1,018		(44	)		29,853


Total held to maturity	$	33,848	$	1,258	$	(44	)	$	35,062

The following is a summary of the amortized cost and fair value of investment securities held to maturity, by remaining period to contractual maturity. Actual maturities may differ because certain issuers have the right to call or repay their obligations.


	June 30, 2011
	Amortized Cost		Fair Value
Remaining period to contractual maturity
Less than one year	$	6,314	$	6,350
One to five years		8,124		8,496
Five to ten years		3,109		3,456
Greater than ten years		3,650		3,951

Total	$	21,197	$	22,253

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table summarizes those securities held to maturity with unrealized losses, segregated by the length of time in a continuous unrealized loss position:


	Continuous Unrealized Loss Position
	Less Than 12 Months				12 Months or Longer					Total
As of June 30, 2011	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

State and municipal securities	$	—	$	—	$	666	$	(14	)	$	666	$	(14	)

Total	$	—	$	—	$	666	$	(14	)	$	666	$	(14	)


	Continuous Unrealized Loss Position
	Less Than 12 Months				12 Months or Longer					Total
As of September 30, 2010	Fair Value		Unrealized Losses		Fair Value		Unrealized Losses			Fair Value		Unrealized Losses

State and municipal securities	$	—	$	—	$	676	$	(44	)	$	676	$	(44	)

Total	$	—	$	—	$	676	$	(44	)	$	676	$	(44	)

All of the unrealized losses on held to maturity securities at June 30, 2011 relate to local municipal general obligation bonds and are attributable to changes in market interest rates and credit risk spreads subsequent to purchase. There were no securities with unrealized losses that individually had significant dollar amounts at June 30, 2011. There was one held-to-maturity securities in a continuous unrealized loss position for more than 12 months, and no securities for less than 12 months. For securities with fixed maturities, there were no securities past due nor securities for which the Company currently believes it is not probable that it will collect all amounts due according to the contractual terms of the investment. Because the Company has the ability and intent to hold securities with unrealized losses until maturity, the Company did not consider these investments to be other-than-temporarily impaired at June 30, 2011.

7.	Deposits

Major classifications of deposits are summarized below:


	June 30, 2011		September 30, 2010
Demand Deposits
Retail	$	174,652	$	174,731
Business		279,659		277,217
Municipal		15,559		77,909
NOW Deposits
Retail		155,141		139,517
Business		29,892		34,105
Municipal		113,876		241,995

Total transaction accounts		768,779		945,474
Savings		428,120		392,321
Money market		512,478		427,334
Certificates of deposit		388,696		377,573

Total deposits	$	2,098,073	$	2,142,702

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Municipal deposits of $367,941 and $513,760 were included in total deposits at June 30, 2011 and September 30, 2010, respectively. Deposits received for tax receipts were approximately $219,000 at September 30, 2010. Listed below are the Company’s brokered deposits:


	June 30, 2011		September 30, 2010

Money market	$	26,363	$	—
Reciprocal CDAR’s ¹		7,997		7,889
CDAR’s one way		67,004		10,665

Total brokered deposits	$	101,364	$	18,554

¹	Certificate of deposit account registry service

8.	Borrowings

The Company’s FHLB and other borrowings and weighted average interest rates are summarized as follows:


	June 30, 2011					September 30, 2010
	Amount		Rate			Amount		Rate

By type of borrowing:
FHLB advances	$	138,906		3.09	%	$	141,251		4.16	%
FHLB Repurchase agreements		211,427		3.52	%		222,500		3.98	%
Senior Debt (FDIC insured)		51,498		2.74	%		51,496		2.75	%

Total borrowings	$	401,831		3.27	%	$	415,247		3.88	%

By remaining period to maturity:
Less than one year	$	88,598		2.15	%	$	44,873		3.82	%
One to two years		5,000		4.04	%		73,996		3.14	%
Two to three years		35,767		2.08	%		27,708		4.00	%
Three to four years		49,068		1.93	%		25,125		4.14	%
Four to five years		—		0.00	%		20,000		2.96	%
Greater than five years		223,398		4.19	%		223,545		4.19	%

Total borrowings	$	401,831		3.27	%	$	415,247		3.88	%

As a member of the FHLB of New York, the Bank may borrow in the form of term and overnight borrowings up to the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. As of June 30, 2011 and September 30, 2010, the Bank had pledged mortgages totaling $355,966 and $313,587 respectively. The Bank had also pledged securities with carrying amounts of $219,764 and $228,442 as of June 30, 2011 and September 30, 2010, respectively, to secure borrowings. As of June 30, 2011, the Bank may increase its borrowing capacity by pledging securities and mortgages not required to be pledged for other purposes with a market value of $367,513. FHLB advances are subject to prepayment penalties, if repaid prior to maturity.

FHLB borrowings (includes advance and repurchase agreements) of $200,000 and $227,500 at June 30, 2011 and September 30, 2010, respectively are putable quarterly, at the discretion of the FHLB. These borrowings have a weighted average remaining term to the contractual maturity dates of approximately 5.81 years and 6.16 years and weighted average interest rates of 4.23 percent and 4.24 percent at June 30, 2011 and September 30, 2010, respectively. An additional $20,000 is putable on a one time basis after an initial lockout period beginning in February 2013 with an interest rate of 3.57 percent.

The Company had restructured $89,135 of its FHLBNY advances which had a weighted average rate of 3.69 percent and a duration of 2.2 years, into new borrowings with a weighted average rate of 2.63 percent, duration of 1.43 years and an annualized interest expense savings of approximately $945. Prepayment penalties of $5,151 associated with the modifications are being amortized over the new duration of 1.43 years on a level yield basis.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

9.	Derivatives

The Company purchased two interest rate caps in the first quarter of fiscal 2010 to assist in offsetting a portion of interest rate exposure should short term rate increases lead to rapid increases in general levels of market interest rates on deposits. These caps are linked to LIBOR and have strike prices of 3.50 percent and 4.0 percent. These caps are stand alone derivatives and therefore changes in fair value are reported in current period earnings, the amount for the nine months ended June 30, 2011 and June 30, 2010 was a fair value loss of $27 and $831, respectively. The fair value of the interest rate caps at June 30, 2011, is reflected in other assets with a corresponding credit (charge) to income recorded as a gain (loss) to non-interest income.

The Company acts as an interest rate swap counterparty with certain commercial customers and manages this risk by entering into corresponding and offsetting interest rate risk agreements with third parties. The swaps are considered a derivative instrument and must be carried at fair value. As the swaps are not a designated qualifying hedge, the change in fair value is recognized in current earnings, with no offset from any other instrument. There was no net gain or loss recorded in earnings during the first nine months of 2011 and 2010. Interest rate swaps are recorded on our consolidated statements of financial condition as an other asset or other liability at estimated fair value.

At June 30, 2011, summary information regarding these derivatives is presented below:


	Notional Amount			Average Maturity		Weighted Average Rate		Weighted Average Variable Rate	Fair Value

Interest Rate Caps	$	50,000			3.43		3.75	NA	$	235
3rd party interest rate swaps		1,158			8.62		6.25	1 m Libor + 2.25%		139
Customer interest rate swaps		(1,158	)		8.62		6.25	1 m Libor + 2.25%		(139	)

At September 30, 2010, summary information regarding these derivatives is presented below:


	Notional Amount			Average Maturity		Weighted Average Rate		Weighted Average Variable Rate	Fair Value

Interest Rate Caps	$	50,000			4.18		3.75	NA	$	262
3rd party interest rate swaps		1,182			9.37		6.25	1 m Libor + 2.25%		173
Customer interest rate swaps		(1,182	)		9.37		6.25	1 m Libor + 2.25%		(173	)

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

10.

Earnings Per Common Share

The number of shares used in the computation of basic earnings per share excludes unallocated ESOP shares, shares held to fund deferred compensation plans, and unvested shares of restricted stock that have not been released to participants.

Common stock equivalent shares are incremental shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive stock options and unvested RRP shares were exercised or became vested during the periods.

Basic earnings per common share are computed as follows:


	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
	2011		2010		2011		2010
Weighted average common shares outstanding (basic), in ’000s		37,368		38,087		37,473		38,285
Net Income	$	1,939	$	4,756	$	12,232	$	15,089
Basic earnings per common share	$	0.05	$	0.12	$	0.33	$	0.39

Diluted earnings per common share are computed as follows:


	For the Three Months Ended June 30,				For the Nine Months Ended June 30,
	2011		2010		2011		2010
Weighted average common shares outstanding (basic), in ’000s		37,368		38,087		37,473		38,285
Effect of common stock equivalents		2		—		—		32

		37,370		38,087		37,473		38,317
Net Income	$	1,939	$	4,756	$	12,232	$	15,089
Diluted earnings per common share	$	0.05	$	0.12	$	0.33	$	0.39

As of June 30, 2011, 1,862,328 and 1,890,218 weighted average shares were anti-dilutive for the three month period and nine month period, respectively. As of June 30, 2010, 1,690,346 and 1,816,426 weighted average shares were anti-dilutive for the three month period and nine month period, respectively. Anti-dilutive shares are not included in the determination of diluted earnings per share.

11.

Guarantor’s Obligations Under Guarantees

Most letters of credit issued by, or on behalf of the Company are standby letters of credit. Standby letters of credit are commitments issued by the Company on behalf of its customer/obligor in favor of a beneficiary that specify an amount the Company can be called upon to pay upon the beneficiary’s compliance with the terms of the letter of credit. These commitments are primarily issued in favor of local municipalities to support the obligor’s completion of real estate development projects. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers.

As of June 30, 2011, the Company had $20,010 in outstanding letters of credit, of which $5,361 are cash secured and $3,602 were secured by collateral. The carrying values of these obligations are considered immaterial.

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

12.

Pension and Other Post Retirement Plans

Net post-retirement cost, which is recorded within salaries and employee benefits expense in the consolidated statements of income, is comprised of the following:


	Pension Plan						Other Post Retirement Plans
	Three months Ended June 30,						Three months Ended June 30,
	2011			2010			2011			2010
Service Cost	$	—		$	—		$	7		$	8
Interest Cost		375			389			27			27
Expected return on plan assets		(570	)		(487	)		—			—
Amortization of net transition obligation		—			—			6			6
Amortization of prior service cost		—			—			12			12
Amortization of (gain) or loss		447			377			(24	)		(23	)
Settlement Charge		490						—			—

	$	742		$	279		$	28		$	30


	Pension Plan						Other Post Retirement Plans
	Nine months Ended June 30,						Nine months Ended June 30,
	2011			2010			2011			2010
Service Cost	$	—		$	—		$	21		$	24
Interest Cost		1,123			1,166			81			81
Expected return on plan assets		(1,711	)		(1,432	)		—			—
Amortization of net transition obligation		—			—			18			18
Amortization of prior service cost		—			—			36			36
Amortization of (gain) or loss		1,342			1,132			(71	)		(69	)
Settlement Charge		490			—			—			—

	$	1,244		$	866		$	85		$	90

As of June 30, 2011, contributions totaling $4,400 have been deposited into the pension plan. The Company has determined no additional contributions will be made during the fiscal year 2011. During the third quarter of fiscal year 2011 the Company made a distribution under its qualified benefit pension plan of $490.

The Company has also established a non-qualified Supplemental Executive Retirement Plan (“SERP”) to provide certain executives with supplemental retirement benefits in addition to the benefits provided by the pension plan due to amounts limited by the Internal Revenue Code of 1986, as amended (“IRS Code”). The periodic pension expense for the supplemental plan amounted to $317 for the nine months ended June 30, 2011 (including a settlement charge of $278) and $66 for the nine months ended June 30, 2010. As of June 30, 2011 there were $1,109 in contributions to fund benefit payments on an in service withdrawal of $1,083 related to the SERP.

13.

Contingencies

Certain premises and equipment are leased under operating leases with terms expiring through 2033. The Company has the option to renew certain of these leases for additional terms.

The Company is a defendant in certain claims and legal actions arising in the ordinary course of business. Management, after consultation with legal counsel, does not anticipate losses on any of these claims or actions that would have a material adverse effect on the consolidated financial statements.

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

Forward-Looking Statements

We make statements in this Report, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses, cost savings, taxes, management’s plans, strategies and objectives for future operations, dividends, share repurchases and/or other matters regarding or affecting Provident New York Bancorp that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions or future or conditional verbs such as “will,” “should,” “would” and “could.” These statements are not historical facts, but instead represent our current expectations, plans or forecasts and are based on the beliefs and assumptions of the management and the information available to management at the time that these disclosures were prepared.

Forward-looking statements are subject to numerous assumptions, risks and uncertainties, which change over time. Forward-looking statements speak only as of the date they are made. We do not assume any duty and do not undertake to update our forward-looking statements. Because forward-looking statements are subject to assumptions and uncertainties, 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.

The following factors, among others, could cause our future results to differ materially from the plans, objectives, goals, expectations, anticipations, estimates and intentions expressed in the forward-looking statements:

•

Legislative and regulatory changes such as the Dodd-Frank Act and its pending and future implementing regulations that adversely affect our business including changes in regulators and regulatory policies and principles or the interpretation of regulatory capital or other rules;

•

A deterioration in general economic conditions, either nationally or in our market areas, including extended declines in the real estate market and constrained financial markets;

•

Our ability to make accurate assumptions and judgments about an appropriate level of allowance for loan losses and the collectability of our loan portfolio, including changes in the level and trend of loan delinquencies and write-offs that may lead to increased losses and non-performing assets in our loan portfolio, result in our allowance for loan losses not being adequate to cover actual losses, and require us to materially increase our reserves;

•

Our use of estimates in determining fair value of certain of our assets, which estimates may prove to be incorrect and result in significant declines in valuation;

•

Changes in the levels of general interest rates, and the relative differences between short and long term interest rates, deposit interest rates, our net interest margin and funding sources;

•

Our success in implementing strategic, financial and operational initiatives;

•

Computer systems on which we depend could fail or experience a security breach, implementation of new technologies may not be successful; and our ability to anticipate and respond to technological changes can affect our ability to meet customer needs; and

•

Our business and operating results can be affected by widespread national disasters, terrorist activities or international hostilities, either as a result of the impact on the economy, and financial and capital markets generally, or on us, our customers, suppliers or counterparties.

Additional factors that may affect our results are discussed in our annual report on Form 10-K under “Item 1A, Risk Factors” and elsewhere in this Report or in other filings with the SEC. These risks and uncertainties should be considered in evaluating forward-looking statements and undue reliance should not be placed on such statements.

Overview and Management Strategy

We operate as an independent community bank that offers a broad range of customer-focused financial services as an alternative to large regional, multi-state and international banks in our market area, which is principally New York and New Jersey. Additionally, the Company offers investment management services through its subsidiary, HVIA. The financial condition and results of operations of Provident New York Bancorp are discussed herein on a consolidated basis with the Bank. Reference to Provident New York Bancorp or the Company may signify the Bank, depending on the context.

On July 6, 2011, Jack L. Kopnisky officially assumed the position of President and Chief Executive Officer succeeding George Strayton who retired after 25 years of service. The Company’s press release relating to the management transition is available in the Company’s investor relations section of its website www.providentbanking.com , as well as the Company’s Current Report on Form 8-K filed with the Commission on June 21, 2011.

Management has invested in the infrastructure and staffing to support our strategy of serving the financial needs of businesses, individuals and municipalities in our market area. We focus our efforts on core deposit generation, especially transaction accounts and quality loan growth with emphasis on growing commercial loan balances. We seek to maintain a disciplined pricing strategy on deposit generation that will allow us to compete for high quality loans while maintaining an appropriate spread over funding costs. Going forward imperatives for the Company will be to grow revenue and earnings by expanding client acquisitions, continuing to improve credit metrics and to significantly improve efficiency levels. To achieve these goals we will focus on high value client segments, expand delivery channels and distribution to increase client acquisitions, execute effectively by creating a highly productive performance culture, reduce operating costs, and to proactively manage enterprise risk.

There are key factors that have affected our results during the last three months and fiscal 2011. The underlying national economic conditions continue, with issues regarding unemployment continuing to be a factor. While the economy in our footprint has not been affected to the extent that other areas in the country have, we still have seen the effects on our consumer, small business and commercial customers. As a result there has been limited opportunity to make loans that meet our credit standards and pricing.

The slow economic recovery has continued to result in some borrowers experiencing higher levels of stress, which has resulted in increased levels of charge-offs during this fiscal year and past quarter. However for the first nine months of the current fiscal year we are seeing some of our credit quality indicators reflect a positive trend. Total criticized and classified loans have decreased by $42.0 million over September 30, 2010 levels. Nonperforming loans increased $21.2 million from September 30, 2010 levels due mostly to the deterioration of one ADC relationship which had been classified as a substandard performing TDR (classified as non performing as of June 30, 2011) and net charge offs increased 36.6 percent compared to the nine months ended June 30, 2010. Management of the loan portfolio and improvement of credit metrics continues to be a top priority and we remain cautious in our credit outlook as fluctuations of charge offs and problem assets are still occurring.

We continue to experience pressure on net interest income as low rates continue to have the effect of causing many assets to prepay or to be called. As of June 30, 2011, equilibrium was reached in our investment portfolio as we were able to purchase investment securities at rates approximately equal to the overall investment portfolio yield. Many of our liabilities are at rates that are either fixed or already very low, so maintaining net interest margin is a function of loan growth, growth in non-interest bearing deposits and certain core deposits, and continuation of our deposit pricing discipline. Current market interest rates have declined, and may have an affect on our reinvestment opportunities. The low interest rate environment has also caused management to sell fixed rate conforming residential mortgages into the secondary market in order to reduce interest rate risk. This past quarter saw a slight uptick in the long term interest rates, which in turn were relayed to the residential mortgage market. A result was that management made a decision to retain a portion of 1-4 family originations this past quarter to improve margin as opposed to prior strategy of selling substantially all fixed rate conforming originations.

Comparison of Financial Condition at June 30, 2011 and September 30, 2010

Total assets as of June 30, 2011 remained relatively unchanged decreasing $45.0 million or 1.5 percent from September 30, 2010. The gross loan portfolio accounts for $16.3 million of this decrease, as residential mortgages decreased $32.8 million and acquisition, development and construction loans decreased $37.9 million due to strong repayments of $25.3 million and were only partially offset by commercial real estate loan increases of $82.5 million. Cash and due from banks decreased by $45.3 million as the fiscal year end historically has a large cash position.

Net loans as of June 30, 2011 were $1.7 billion, essentially unchanged from September 30, 2010. The composition of the portfolio changed as a result of our emphasis on commercial lending and sales of substantially all new residential mortgage production. Commercial real estate loans increased $82.5 million, and Acquisition, Development and Construction loans (ADC) decreased $37.9 million to $193.3 million compared to $231.3 million as of September, 2010, primarily due to the repayments. Consumer loans decreased by $11.7 million, and residential loans decreased by $32.8 million during the nine months ended June 30, 2011. Total loan originations, including loans originated for sale were $447.8 million for the nine months ending June 30, 2011, while repayments were $416.0 million and sales of residential mortgages were $44.6 million. There were decreases in the loan loss reserves of $1.4 million in commercial business loans and $1.3 million of ADC, with increases of $702,000 in commercial real estate and $689,000 in residential mortgages. The variances were driven by modifications in reserve factors as well as changes in loan balances.

Total securities increased by $10.4 million, to $945.2 million at June 30, 2011 from $934.9 million at September 30, 2010. Securities purchases were $512.5 million, sales of securities were $293.3 million, and maturities, calls, and repayments were $200.4 million. Carrying values of securities were reduced by $11.5 million due to unrealized losses.

Core deposit and other intangible assets increased $1.3 million due to Provident Bank entering into a naming rights contract for Provident Bank Ball Park, net of amortization of $1.1 million.

Deposits as of June 30, 2011 were $2.1 billion, a decrease of $44.6 million, or 2.1 percent, from September 30, 2010. As of June 30, 2011 transaction accounts were 36.6 percent of deposits, or $768.8 million compared to $945.5 million or 44.1 percent of deposits at September 30, 2010. Deposits received from municipalities for tax payments were approximately $219 million at September 30, 2010. As of June 30, 2011 savings deposits were $428.1 million, an increase of $35.8 million or 9.1 percent. Money market accounts increased $85.1 million or 19.9 percent to $512.5 million at June 30, 2011. Certificate of deposit accounts increased by $11.1 million or 2.9 percent. As of June 30, 2011 the Company had $101.3 million in wholesale deposits with a weighted average rate of 0.29 percent included in total deposits.

Borrowings decreased by $13.4 million, or 3.2 percent, from September 2010, to $401.8 million. Borrowings decreased as $35 million in advances matured and seasonal municipal tax deposits were retained. The Company completed restructuring $89.1 million of FHLBNY advances during the second quarter of fiscal 2011 which had a weighted average rate of 3.69 percent and a duration of 2.2 years, into new borrowings with a weighted average rate of 2.63 percent, duration of 1.43 years and an annualized interest expense savings of approximately $945,000, assuming no increase in interest rates. Prepayment penalties of $5.2 million associated with the modifications are being amortized into interest expense over the modification period on a level yield basis.

Stockholders’ equity decreased $1.9 million from September 30, 2010 to $429.0 million at June 30, 2011. The decrease was due to a $2.6 million increase in treasury stock, and a $5.9 million decrease in accumulated other comprehensive income, after realizing year to date securities gains of $5.5 million. These items were offset in part by a $5.7 million increase in the Company’s retained earnings and an increase of $882,000 due to stock based compensation items. For the 2011 fiscal year to date, the Company repurchased 274,454 shares of its common stock in the open market at a cost of $2.6 million under the treasury repurchase program. Future share repurchases will depend on, among other factors, market conditions, earnings levels and alternative uses of capital.

As of June 30, 2011 the Company had authorization to purchase up to additional 959,713 shares of common stock. Bank Tier I capital to assets was 8.77 percent at June 30, 2011. Tangible capital as a percentage of tangible assets at the consolidated company level was 9.37 percent.

Credit Quality (Also see Note 4 to the consolidated financial statements)

The third quarter of fiscal 2011’s credit metrics were negatively impacted by the movement to non-performing loans of a $14 million ADC relationship previously classified (as of March 31, 2011) as a substandard performing TDR. This downgrade was due to a significant decline in sales activity in the project during the third quarter. This subsequently resulted in a charge-off of $2.0 million and an increase in loan loss provision of $1.5 million.

Net charge-offs for the nine months ended June 30, 2011 were $9.3 million (0.73 percent of average loans, on an annualized basis) compared to $6.8 million (0.54 percent of average loans, on an annualized basis) for the same period in the prior year.

Our year-to-date provision of $7.8 million resulted in a net decrease in the allowance for loan losses of $1.5 million, from $30.8 million at September 30, 2010 to $29.4 million at June 30, 2011.

Substandard loans at June 30, 2011 were $103.8 million compared to $132.1 million at September 30, 2010, while special mention loans went from $37.9 million at September 30, 2010 to $24.1 million at June 30, 2011. Net declines in ADC and commercial business loan portfolios were offset in part by net increases in commercial mortgages and residential loans.

Nonperforming loans at June 30, 2011 were $48.1 million compared to $26.8 million at September 30, 2010. The increase in non-performing loans was caused by $20.5 million in additions to non-performing ADC loans, net of a $2.0 million charge-off related to one borrower. Of loans classified as non-performing at September 30, 2010 we favorably resolved $8.2 million through upgrades or paydowns. Charge-offs were $2.8 million of those non-performing loans and $3.1 million was transferred to REO. In addition, a commercial construction loan of $6.7 million was classified as non-performing at December 31, 2010 and was subsequently refinanced, resulting in a $4.7 million performing loan and a $2.0 million loan paying as agreed but currently in non-performing status. At June 30, 2011, the allowance for loan losses was 61.1 percent of nonperforming loans and 1.7 percent of the average loan portfolio. At September 30, 2010, the allowance for loan losses was 115 percent of nonperforming loans and 1.81 percent of the average loan portfolio. The current weighted average loan to value of mortgage secured non performing loans before and after specific reserves was 80 percent and 77 percent, respectively.

Comparison of Operating Results for the Three Months Ended June 30, 2011 and June 30, 2010

Net income for the three months ended June 30, 2011 was $1.9 million or $0.05 per diluted share, a decrease of $2.8 million compared to $4.8 million or $0.12 per diluted share, for the same period in fiscal 2010. Excluding the after tax effect of net securities gains, the fair value adjustment of interest rate caps , and a defined benefit settlement and change in CEO charge net income was $0.07 per diluted share for the three month period ending June 30, 2011 and compared to $0.12 per diluted share for the three month period ending June 30, 2010. The provision for loan losses for the three months ended June 30, 2011 was $3.6 million, an increase of $850,000, compared to $2.8 million for the same period in the prior year. Net interest margin on a tax equivalent basis for the three months ended June 30, 2011, decreased 21 basis points compared to the same period last year from 3.91 percent to 3.70 percent. Non-interest income for the three months ended June 30, 2011, remained relatively unchanged at $5.2 million. Non-interest expense increased $1.9 million, or 9.3 percent, to $22.7 million for the three months ended June 30, 2011, compared to $20.7 million for the same period in the prior year primarily due to the retirement benefit settlement charge and costs associated with the change in the Company’s CEO of $1.5 million.

Earnings excluding securities gains, retirement benefit settlement charge and the fair value adjustment of interest rate caps are presented below. The Company presents earnings excluding these factors so that investors can better understand the results of the Company’s core banking operations and to better align with the views of the investment community.

Non-GAAP disclosures

(In thousands, except share data)


	Three months ended June 30,
	2011			2010
Net Income
Net Income	$	1,939		$	4,756
Securities gains and credit losses ¹		(306	)		(561	)
Retirement benefit settlement charge/change in CEO ¹		887			—
Fair value loss on interest rate caps ¹		154			353

Net adjusted income	$	2,674		$	4,548


Earnings per common share
Diluted Earnings per common share	$	0.05		$	0.12
Securities gains and credit losses ¹		(0.01	)		(0.01	)
Retirement benefit settlement charge/change in CEO ¹		0.02			—
Fair value loss on interest rate caps ¹		—			0.01

Diluted adjusted earnings per common share	$	0.07	*	$	0.12


Non-interest income
Total non-interest income	$	5,217		$	5,281
Securities gains and credit losses		(515	)		(945	)
Fair value loss on interest rate caps		259			595

Adjusted non interest-income	$	4,961		$	4,931


Non-interest expense
Total non-interest expense	$	22,669		$	20,741
Retirement benefit settlement charge/change in CEO		(1,494	)		—

Adjusted non interest-expense	$	21,175		$	20,741

¹	After marginal tax effect 40.61%

Rounding

Relevant operating results performance measures follow:


	Three Months Ended June 30,
	2011			2010
Per common share:
Basic earnings	$	.05		$	0.12
Diluted earnings		.05			0.12
Dividends declared		.06			0.06
Return on average (annualized):
Assets		0.27	%		0.65	%
Equity		1.83	%		4.50	%

The following table sets forth the consolidated average balance sheets for the Company for the periods indicated. Also set forth is information regarding weighted average yields on interest-earning assets and weighted average rates paid on interest-bearing liabilities (dollars in thousands).


	Three Months Ended June 30,
	2011									2010
	Average Outstanding Balance			Interest			Average Yield Rate			Average Outstanding Balance			Interest			Average Yield Rate
Interest earning assets:
Commercial and commercial mortgage loans	$	1,038,674		$	14,429			5.57	%	$	983,264		$	14,572			5.94	%
Consumer loans		231,018			2,585			4.49			244,341			2,736			4.49
Residential mortgage loans		382,060			5,247			5.51			425,419			6,085			5.74

Total loans ¹		1,651,752			22,261			5.41			1,653,024			23,393			5.68

Securities-taxable		688,445			3,607			2.10			693,554			4,716			2.73
Securities-tax exempt ²		208,643			2,814			5.41			219,121			3,135			5.74
Federal Reserve excess reserves		11,957			11			0.37			4,029			3			0.30
Other earning assets		19,632			226			4.62			24,536			259			4.23

Total securities and other earning assets		928,677			6,658			2.88			941,240			8,113			3.46

Total interest-earning assets		2,580,429			28,919			4.50			2,594,264			31,506			4.87

Non-interest-earning assets		335,559									334,362

Total assets	$	2,915,988								$	2,928,626

Interest bearing liabilities:
NOW Checking	$	296,677			132			0.18	%	$	263,709			123			0.19	%
Savings, clubs and escrow		444,913			122			0.11			413,315			105			0.10
Money market accounts		529,286			445			0.34			428,612			345			0.32
Certificate accounts		346,903			794			0.92			467,360			1,276			1.10

Total interest-bearing deposits		1,617,779			1,493			0.37			1,572,996			1,849			0.47
Borrowings		397,531			3,637			3.67			481,460			4,361			3.63

Total interest-bearing liabilities		2,015,310			5,130			1.02			2,054,456			6,210			1.21

Non- interest bearing deposits		464,197									430,387
Other non-interest-bearing liabilities		11,519									19,562

Total liabilities		2,491,026									2,504,405
Stockholders’ equity		424,961									424,221

Total liabilities and equity	$	2,915,987								$	2,928,626

Net interest rate spread								3.48	%								3.66	%

Net earning assets	$	565,119								$	539,808

Net interest margin					23,789			3.70	%					25,296			3.91	%

Less tax equivalent adjustment ²					(985	)								(1,098	)

Net interest income				$	22,804								$	24,198

Ratio of average interest-earning assets to average interest bearing liabilities		128.04	%								126.27	%

¹	Includes non-accrual loans

²	Reflects tax equivalent adjustment for tax exempt income based on a 35% federal rate

The table below details the changes in interest income and interest expense for the periods indicated due to both changes in average outstanding balances and changes in average interest rates (dollars in thousands):


	Three Months Ended June 30,
	2011 vs. 2010
	Increase / (Decrease) Due to
	Volume ¹			Rate ¹			Total
Interest earning assets
Commercial and commercial mortgage loans	$	796		$	(939	)	$	(143	)
Consumer loans		(151	)		—			(151	)
Residential mortgage loans		(601	)		(237	)		(838	)
Securities-taxable		(34	)		(1,075	)		(1,109	)
Securities-tax exempt ²		(145	)		(176	)		(321	)
Federal Reserve excess reserves		7			1			8
Other earning assets		(49	)		16			(33	)

Total interest income		(177	)		(2,410	)		(2,587	)

Interest-bearing liabilities
NOW checking		16			(7	)		9
Savings		8			9			17
Money market		79			21			100
Certificates of deposit		(295	)		(187	)		(482	)
Borrowings		(756	)		32			(724	)

Total interest expense		(948	)		(132	)		(1,080	)

Net interest margin		771			(2,278	)		(1,507	)

Less tax equivalent adjustment ²		50			63			113

Net interest income	$	821		$	(2,215	)	$	(1,394	)

¹	Changes due to increases in both rate and volume have been allocated proportionately to rate and volume.

²	Reflects tax equivalent adjustment for tax-exempt income based on a 35% federal rate.

Net interest income for the three months ended June 30, 2011 decreased by $1.4 million, to $22.8 million, compared to $24.2 million for the quarter ended June 30, 2010. Gross interest income on a tax-equivalent basis decreased by $2.6 million, or 8.2 percent, to $28.9 million for the quarter ended June 30, 2011, compared to $31.5 million for the same three months in 2010 . General market interest rates have declined from the prior period. As a result the general levels of yields in the asset and liability structure of the Company’s balance sheet have declined. Further, as the Company restructured a large portion of its investment portfolio, the reinvestment of proceeds from sales into generally lower yielding securities resulted in additional declines in investment income. Interest expense decreased by $1.1 million with the primary decrease in certificates of deposit of $482,000 and borrowings of $724,000. The average costs of borrowings increased as a result in the change in the mix of shorter and long term advances.

Provision for Loan Losses . The Company records provisions for loan losses, which are charged to earnings, in order to maintain the allowance for loan losses at a level necessary to absorb probable incurred loan losses inherent in the existing portfolio. The Company recorded $3.6 million in loan loss provisions for the quarter ended June 30, 2011. Refer to the credit quality section for a discussion on net charge-offs and nonperforming loans. Net charge-offs for the quarter ended June 30, 2011 were $4.3 million, which included $1.0 million of specific reserves recorded in prior periods.

Non-interest income for the three months ended June 30, 2011 decreased by $64,000 to $5.2 million. The decrease was due mainly to net gains on sales of securities of $542,000 in third quarter fiscal 2011 compared to $945,000 in third quarter fiscal 2010. This decrease was offset in part by a lower fair value loss on interest rate caps and higher other income, as other categories of noninterest income were relatively stable.

Non-interest expense for the three months ended June 30, 2011 increased by 9.3 percent, to $22.7 million, primarily due to charges associated with the change in CEO and the related defined benefit settlement charges of $1.5 million, REO expenses and occupancy expense offset in part by lower advertising and promotion, regulatory fees from FDIC insurance and intangible amortization. In addition, the third quarter of 2010 benefited from a recovery of $300,000 related to servicing costs of our ATM and debit card programs.

Income Tax The Company recorded an income tax credit for the third quarter of $187,000 compared to an effective tax rate of 20.6 percent for the same period in the prior year. The decline is due to tax exempt municipal securities and BOLI income being a larger portion of overall pretax income in the current period.

Comparison of Operating Results for the Nine Months Ended June 30, 2011 and June 30, 2010

Net income for the nine months ended June 30, 2011 was $12.2 million or $0.33 per diluted share, a decrease of $2.9 million, compared to $15.1 million or $0.39 per diluted share for the same period in fiscal 2010. Excluding the after tax effect of net securities gains, the fair value adjustment of interest rate caps , and a defined benefit settlement charge and change in CEO, net income was $0.27 per diluted share and $0.33 per diluted share for the nine months ending June 30, 2011 and 2010, respectively. Net interest income before provision for loan losses for the nine months ended June 30, 2011, decreased by $1.5 million to $68.5 million, compared to $70.0 million for the same period in the prior year. The provision for loan losses was $7.8 million in both periods. Net interest margin on a tax equivalent basis for the nine months ended June 30, 2011, decreased 11 basis points compared to the same period last year from 3.79 percent to 3.68 percent. Non-interest income for the nine months ended June 30, 2011, was $20.9 million, an increase of $1.4 million, compared to $19.5 million for the same period last year. The increase was due to higher gains on sale of securities and loans, and a lower fair value loss on interest rate caps, offset in part by lower deposit fees and service charges. Non-interest expense increased $3.9 million or 6.3 percent, to $65.7 million for the nine months ended June 30, 2011, compared to $61.8 million for the same period in the prior year. The increase is primarily due to charges associated with the change in CEO and defined benefit settlement charge of $1.8 million, and staffing and occupancy expenses for new offices in Westchester and Nyack, and professional fees.

Earnings excluding securities gains, retirement benefit settlement and change in CEO charge, and the fair value adjustment of interest rate caps are presented below. The Company presents earnings excluding these factors so that investors can better understand the results of the Company’s core banking operations and to better align with the views of the investment community.

Non-GAAP disclosures

(In thousands, except share data)


	Nine months ended June 30,
	2011			2010
Net Income
Net Income	$	12,232		$	15,089
Securities gains and credit losses ¹		(3,246	)		(3,098	)
Retirement benefit settlement charge/change in CEO ¹		1,052			—
Fair value loss on interest rate caps ¹		16			494

Net adjusted income	$	10,054		$	12,485

Earnings per common share
Diluted Earnings per common share	$	0.33		$	0.39
Securities gains and credit losses ¹		(0.09	)		(0.08	)
Retirement benefit settlement charge/change in CEO ¹		0.03			—
Fair value loss on interest rate caps ¹		—			0.01

Diluted adjusted earnings per common share	$	0.27	*	$	0.33	*

Non-interest income
Total non-interest income	$	20,896		$	19,487
Securities gains and credit losses		(5,465	)		(5,217	)
Fair value loss on interest rate caps		27			831

Adjusted non interest-income	$	15,458		$	15,101

Non-interest expense
Total non-interest expense	$	65,729		$	61,808
Retirement benefit settlement charge/change in CEO		(1,772	)		—

Adjusted non interest-expense	$	63,957		$	61,808

¹	After marginal tax effect 40.61%

Rounding

Relevant operating results performance measures follow:


	Nine Months Ended June 30,
	2011			2010
Per common share:
Basic earnings	$	0.33		$	0.39
Diluted earnings		0.33			0.39
Dividends declared		0.18			0.18
Return on average (annualized):
Assets		0.56	%		0.69	%
Equity		3.85	%		4.76	%


	Nine Months Ended June 30,
	2011									2010
	Average Outstanding Balance			Interest			Average Yield Rate			Average Outstanding Balance			Interest			Average Yield Rate
Interest earning assets:
Commercial and commercial mortgage loans	$	1,038,093		$	43,372			5.59	%	$	965,237		$	42,087			5.83	%
Consumer loans		234,569			7,828			4.46			248,504			8,409			4.52
Residential mortgage loans		390,353			16,305			5.58			437,175			18,952			5.80

Total net loans ¹		1,663,015			67,505			5.43			1,650,916			69,448			5.62

Securities-taxable		688,570			10,668			2.07			671,451			14,192			2.83
Securities-tax exempt ²		215,052			8,700			5.41			207,988			8,973			5.77
Federal Reserve excess reserves		12,977			28			0.29			25,299			48			0.25
Other earning assets		21,637			940			5.81			25,091			932			4.97

Total securities and other earning assets		938,236			20,336			2.90			929,829			24,145			3.47

Total interest-earning assets		2,601,251			87,841			4.51			2,580,745			93,593			4.85

Non-interest-earning assets		337,078									330,623

Total assets	$	2,938,329								$	2,911,368

Interest bearing liabilities:
NOW Checking	$	317,610			476			0.20	%	$	284,804			458			0.22	%
Savings, clubs and escrow		422,247			344			0.11			388,914			295			0.10
Money market accounts		484,249			1,196			0.33			418,196			1,126			0.36
Certificate accounts		373,558			2,704			0.97			463,793			4,961			1.43

Total interest-bearing deposits		1,597,664			4,720			0.39			1,555,707			6,840			0.59
Borrowings		433,406			11,578			3.57			489,095			13,595			3.72

Total interest-bearing liabilities		2,031,070			16,298			1.07			2,044,802			20,435			1.34

Non- interest bearing deposits		467,711									422,911
Other non-interest-bearing liabilities		15,156									20,085

Total liabilities		2,513,937									2,487,798
Stockholders’ equity		424,392									423,570

Total liabilities and equity	$	2,938,329								$	2,911,368

Net interest rate spread								3.44	%								3.51	%

Net earning assets	$	570,181								$	535,943

Net interest margin					71,543			3.68	%					73,158			3.79	%

Less tax equivalent adjustment ²					(3,045	)								(3,140	)

Net interest income				$	68,498								$	70,018

Ratio of average interest-earning assets to average interest bearing liabilities		128.07	%								126.21	%

¹	Includes non-accrual loans

²	Reflects tax equivalent adjustment for tax exempt income based on a 35% federal rate


	Nine Months Ended June 30,
	2011 vs. 2010
	Increase / (Decrease) Due to
	Volume ¹			Rate ¹			Total
Interest earning assets
Commercial and commercial mortgage loans	$	3,080		$	(1,795	)	$	1,285
Consumer loans		(470	)		(111	)		(581	)
Residential mortgage loans		(1,955	)		(692	)		(2,647	)
Securities-taxable		358			(3,882	)		(3,524	)
Securities-tax exempt ²		300			(573	)		(273	)
Federal Reserve excess reserves		(27	)		7			(20	)
Other earning assets		(128	)		136			8

Total interest income		1,158			(6,910	)		(5,752	)

Interest-bearing liabilities
NOW checking		58			(40	)		18
Savings		23			26			49
Money market		169			(99	)		70
Certificates of deposit		(851	)		(1,406	)		(2,257	)
Borrowings		(1,475	)		(542	)		(2,017	)

Total interest expense		(2,076	)		(2,061	)		(4,137	)

Net interest margin		3,234			(4,849	)		(1,615	)

Less tax equivalent adjustment ²		(107	)		202			95

Net interest income	$	3,127		$	(4,647	)	$	(1,520	)

¹	Changes due to increases in both rate and volume have been allocated proportionately to rate and volume.

³	Reflects tax equivalent adjustment for tax-exempt income based on a 35 percent federal rate.

Net interest income for the nine months ended June 30, 2011 decreased by $1.5 million to $68.5 million, compared to $70.0 million for the nine months ended June 30, 2010. Net interest income on a tax-equivalent basis decreased by $1.6 million to $71.5 million for the nine months ended June 30, 2011, compared to $73.2 million for the nine months ended June 30, 2010. As a result the general levels of yields in the asset and liability structure of the Company’s balance sheet have declined. Further, as the Company restructured a large portion of its investment portfolio, the reinvestment of proceeds from sales into generally lower yielding securities resulted in additional declines in investment income. Interest expense decreased by $4.1 million with the primary decrease in certificates of deposit of $2.3 million and borrowings of $2.0 million.

Provision for Loan Losses . The Company records provisions for loan losses, which are charged to earnings, in order to maintain the allowance for loan losses at a level necessary to absorb probable incurred loan losses inherent in the existing portfolio. We recorded $7.8 million in loan loss provisions for nine months June 30, 2011, or $1.5 million less than net charge-offs. This compares to $7.8 million for the nine month period ended June 30, 2010 with net charge-offs for the period of $6.8 million. Refer to the credit quality section for a discussion on net charge-offs and nonperforming loans.

Non-interest income for the nine months ended June 30, 2011 increased $1.4 million to $20.9 million due to higher gains on sales of securities and loans, and a lower fair value loss on interest rate caps. Partially offsetting these increases in non interest income were lower deposit fees and service charges. The decline in fees is primarily related to changes in customer behavior regarding overdrafts.

Non-interest expense for the nine months ended June 30, 2011 increased $3.9 million to $65.7 million primarily due to increased retirement plan expense due to the retirement of the CEO, employee medical insurance, staffing for new offices in Westchester and Nyack, professional fees and occupancy costs for new locations. Offset in part by declines in stock based compensation expense and ATM service charge expense.

Income Tax The effective tax rate was 22.9 percent and 24.4 percent, for year to date fiscal 2011 and 2010 respectively. The decrease is mainly due to the elimination of the New York State Thrift bad debt deduction, but was offset by tax benefits generated by our captive insurance company as well as a larger proportion of tax exempt income related to pretax income.

Liquidity and Capital Resources

The overall objective of our liquidity management is to ensure the availability of sufficient cash funds to meet all financial commitments and to take advantage of investment opportunities. We manage liquidity in order to meet deposit withdrawals on demand or at contractual maturity, to repay borrowings as they mature, and to fund new loans and investments as opportunities arise.

Our primary sources of funds are deposits, principal and interest payments on loans and securities, wholesale borrowings, the proceeds from maturing securities and short-term investments, and the proceeds from the sales of loans and securities. The scheduled amortizations of loans and securities, as well as proceeds from borrowings, are predictable sources of funds. Other funding sources, however, such as deposit inflows, mortgage prepayments and mortgage loan sales are greatly influenced by market interest rates, economic conditions and competition.

Our cash flows are derived from operating activities, investing activities and financing activities as reported in the Consolidated Statements of Cash Flows in our consolidated financial statements. Our primary investing activities are the origination of commercial real estate and residential one- to four-family loans, and the purchase of investment securities and mortgage-backed securities. During the nine months ended June 30, 2011 and 2010, our loan originations totaled $447.8 million and $379.1 million, respectively. Purchases of securities available for sale totaled $505.8 million and $555.0 million for the nine months ended June 30, 2011 and 2010, respectively. Purchases of securities held to maturity totaled $6.7 million and $18.3 million for the nine months ended June 30, 2011 and 2010, respectively. These activities were funded primarily by sales of securities, by borrowings and by principal repayments on loans and securities. Loan origination commitments totaled $62.4 million at June 30, 2011, and consisted of $54.5 million at adjustable or variable rates and $7.9 million at fixed rates. Unused lines of credit granted to customers were $321.5 million at June 30, 2011. We anticipate that we will have sufficient funds available to meet current loan commitments and lines of credit.

The Company’s investments in BOLI are considered illiquid and are therefore classified as other assets. Earnings from BOLI are derived from the net increase in cash surrender value of the BOLI contracts and the proceeds from the payment on the insurance policies, if any. The recorded value of BOLI contracts totaled $56.5 million and $50.9 million at June 30, 2011 and September 30, 2010, respectively.

Deposit flows are generally affected by the level of market interest rates, the interest rates and other conditions on deposit products offered by our banking competitors, and other factors. The net decrease in total deposits was $44.6 million and $121.3 million for the nine months ended June 30, 2011 and 2010, respectively. Based upon prior experience and our current pricing strategy, management believes that a significant portion of deposits will remain with us, although we may be required to compete for many of the maturing certificates in a highly competitive environment.

Credit markets continue to improve during fiscal 2011 when compared to fiscal 2010. Credit spreads narrowed steadily during the past year and many are very near historically low levels. Nevertheless, loan demand remains muted causing liquidity to remain high. Furthermore, the extremely low interest rate environment caused our deposits to remain at elevated levels which has also strengthened our liquidity position. Many banks are experiencing a situation similar to ours resulting in the industry liquidity to be at significantly elevated levels. However, much of this liquidity is held in the form of very short-term securities. The preference of depositors to stay short could portend potential liquidity reductions in the future and possibly put pressure on us to raise rates in the future to retain these funds.

We generally remain fully invested and utilize additional sources of funds through Federal Home Loan Bank of New York (“FHLB”) advances and other sources of which $401.8 million was outstanding at June 30, 2011. At June 30, 2011, we had the ability to borrow an additional $172.9 million under our credit facilities with the Federal Home Loan Bank. The Bank may borrow up to an additional $367.5 million by pledging securities not required to be pledged for other purposes as of June 30, 2011. Further, at June 30, 2011 we had $101.4 million in Brokered Deposits (including certificates of deposit accounts registry service (CDAR’s) reciprocal CD’s of $8.0 million) and have relationships with several brokers to utilize these low cost sources of funding should conditions warrant further sources of funds.

The Bank provides supplemental reporting of Non-GAAP tangible equity ratios as management believes this information is useful to investors. As of June 30, 2011, the Company’s tangible capital as a percent of tangible assets increased to 9.37 percent, and its tangible book value decreased to $6.93 per share, compared to September 30, 2010. The following table shows the reconciliation of tangible equity and the tangible equity ratio:


	June 30,			September 30,
	2011			2010
Total assets	$	2,976,057		$	3,021,025
Goodwill and other amortizable intangibles		(165,828	)		(164,501	)

Tangible assets	$	2,810,229		$	2,856,524


Stockholders’ equity	$	429,037		$	430,955
Goodwill and other amortizable intangibles		(165,828	)		(164,501	)

Tangible stockholders’ equity	$	263,209		$	266,454


Outstanding Shares		38,005,866			38,262,288
Tangible capital as a % of tangible assets (consolidated)		9.37	%		9.33	%
Tangible book value per share	$	6.93		$	6.96

The Company declared a dividend of $0.06 per share payable on August 18, 2011 to stockholders of record on August 8, 2011.

The following table sets forth the Bank’s regulatory capital position at June 30, 2011 and September 30, 2010, compared to OTS requirements:


						OTS requirements
	Bank actual					Minimum capital adequacy					Classification as well capitalized
	Amount		Ratio			Amount		Ratio			Amount		Ratio
June 30, 2011:
Tangible capital	$	246,291		8.8	%	$	42,128		1.5	%	$	—		—
Tier 1 (core) capital		246,291		8.8			112,342		4.0			140,427		5.0	%
Risk-based capital:
Tier 1		246,291		12.2			—		—			120,894		6.0
Total		271,483		13.5			161,192		8.0	%		201,489		10.0

September 30, 2010:
Tangible capital	$	240,230		8.4	%	$	42,734		1.5	%	$	—		—
Tier 1 (core) capital		240,230		8.4			113,958		4.0			142,447		5.0	%
Risk-based capital:
Tier 1		240,230		12.1			—		—			119,251		6.0
Total		265,148		13.3			159,002		8.0	%		198,752		10.0

The levels are well above current regulatory capital requirements to be considered well capitalized. Management is currently studying the impact on capital resulting from the Basel III accords.

Item 3.

Quantitative and Qualitative Disclosures about Market Risk

Management believes that our most significant form of market risk is interest rate risk. The general objective of our interest rate risk management is to determine the appropriate level of risk given our business strategy, and then manage that risk in a manner that is consistent with our policy to limit the exposure of our net interest income to changes in market interest rates. Provident Bank’s Asset/Liability Management Committee (“ALCO”), which consists of certain members of senior management, evaluates the interest rate risk inherent in certain assets and liabilities, our operating environment, and capital and liquidity requirements, and modifies our lending, investing and deposit gathering strategies accordingly. A committee of the Board of Directors reviews the ALCO’s activities and strategies, the effect of those strategies on our net interest margin, and the effect that changes in market interest rates would have on the economic value of our loan and securities portfolios as well as the intrinsic value of our deposits and borrowings.

We actively evaluate interest rate risk in connection with our lending, investing, and deposit activities. We emphasize the origination of commercial mortgage loans, commercial business loans, ADC loans, and residential fixed-rate mortgage loans that are repaid monthly and bi-weekly, fixed-rate commercial mortgage loans, adjustable-rate residential and consumer loans. Depending on market interest rates and our capital and liquidity position, we may retain all of the fixed-rate, fixed-term residential mortgage loans that we originate or we may sell or securitize all, or a portion of such longer-term loans, generally on a servicing-retained basis. We also invest in shorter-term securities, which generally have lower yields compared to longer-term investments. Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities may help us to better match the maturities and interest rates of our assets and liabilities, thereby reducing the exposure of our net interest income to changes in market interest rates. These strategies may adversely affect net interest income due to lower initial yields on these investments in comparison to longer-term, fixed-rate loans and investments.

Management monitors interest rate sensitivity primarily through the use of a model that simulates net interest income (“NII”) under varying interest rate assumptions. Management also evaluates this sensitivity using a model that estimates the change in the Company and the Bank’s net portfolio value (“NPV”) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. The model assumes estimated loan prepayment rates, reinvestment rates and deposit decay rates that seem reasonable, based on historical experience during prior interest rate changes.

Estimated Changes in NPV and NII. The table below sets forth, as of June 30, 2011, the estimated changes in our (1) NPV that would result from the designated instantaneous changes in the forward rate curves, and (2) NII that would result from the designated instantaneous changes in the U.S. Treasury yield curve. Computations of prospective effects of hypothetical interest rate changes are based on numerous assumptions including relative levels of market interest rates, loan prepayments and deposit decay, and should not be relied upon as indicative of actual results.


Change in				Estimated Increase (Decrease)								Increase (Decrease) in
Interest Rates		Estimated		in NPV						Estimated		Estimated NII
(basis points)		NPV		Amount			Percent			NII		Amount			Percent
(Dollars in thousands)
	+300	$	301,808	$	(37,466	)		-11.0	%	$	91,661	$	4,689			5.4	%
	+200		314,069		(25,205	)		-7.4	%		90,583		3,611			4.2	%
	+100		327,155		(12,119	)		-3.6	%		89,034		2,062			2.4	%
	0		339,274		0			0.0	%		86,972		0			0.0	%
	-100		344,381		5,107			1.5	%		80,839		(6,133	)		-7.1	%

The table set forth above indicates that at June 30, 2011, in the event of an immediate 200 basis point increase in interest rates, we would be expected to experience a 7.4 percent decrease in NPV and a 4.2 percent increase in NII. Due to the current level of interest rates, management is unable to reasonably model the impact of decreases in interest rates on NPV and NII beyond -100 basis points.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV and NII requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The NPV and NII table presented above assumes that the composition of our interest-rate sensitive assets and liabilities existing at the beginning of a period remains constant over the period being measured and, accordingly, the data does not reflect any actions management may undertake in response to changes in interest rates. The table also assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration to maturity or the re-pricing characteristics of specific assets and liabilities. Accordingly, although the NPV and NII table provides an indication of our sensitivity to interest rate changes at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on our net interest income and will differ from actual results.

During the third quarter of fiscal year 2011, the federal funds target rate remained in a range of 0.00 – 0.25 percent as the Federal Open Market Committee (“FOMC”) did not change the target overnight lending rate. U.S. Treasury yields in the two year maturities increased by 3 basis points from 0.42 percent to 0.45 percent during the first three quarters of fiscal year 2011 while the yield on U.S. Treasury 10 year notes increased 65 basis points from 2.53 percent to 3.18 percent over the same time period. The disproportionately greater rate of increase on longer term maturities has resulted in the 2-10 year treasury yield curve being steeper at the end of the third quarter of fiscal 2011 than it was when the year began. To fight the economic downturn the FOMC declared a willingness to keep the federal funds target low for an “extended period”. Should economic conditions improve, the FOMC could reverse direction and increase the federal funds target rate. This could cause the shorter end of the yield curve to rise disproportionably more than the longer end thereby resulting in margin compression. We hold $50 million in notional principal of interest rate caps to help mitigate this risk. Should rates not increase sufficiently to collect on such derivatives; the fair value of this derivative would decline and eventually mature. The net value at risk is $235.

Item 4.

Controls and Procedures

The Company’s management, including the Principal Executive Officer and Principal Financial Officer, evaluated the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended the “Exchange Act”) as of the end of the period covered by this report. Based upon that evaluation, the Company’s management, including the Principal Executive Officer and Principal Financial Officer, concluded that, as of the end of the period covered by this report, the Company’s disclosure controls and procedures were effective to ensure that information required to be disclosed in the reports that the Company files or submits under the Exchange Act is properly recorded, processed, summarized and reported within the time frames specified in the SEC’s rules and forms.

There were no changes in the Company’s internal control over financial reporting during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

PART II

OTHER INFORMATION

Item 1.

Legal Proceedings

The Company is not involved in any pending legal proceedings which, in the aggregate, management believes to be material to the consolidated financial condition and operations of the Company.

Item 1A.

Risk Factors

For information regarding factors that could affect the Company’s results of operations, financial condition and liquidity, see the risk factors discussed under Part I, Item 1A of the Company’s most recent annual report on Form 10-K. See also Part I, Item 2 (Forward-Looking Statements) of this quarterly report on Form 10-Q. There have been no material changes from the risk factors previously disclosed in the Company’s most recent annual report on Form 10-K.

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

(a)	Not applicable.

(b)	Not applicable

(c)	Issuer Purchases of Equity Securities


	Total Number of shares (or Units) Purchased		Average Price Paid per Share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs		Maximum Number (or Approximated Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs
April 1 - April 30		37,908	$	9.35		37,908		987,913
May 1 - May 31		28,200		9.32		28,200		959,713
June 1 - June 30		968		8.36		—		959,713

Total		67,076	$	9.32		66,108

Item 3.

Defaults Upon Senior Securities

None

Item 4.

(Removed and reserved).

Item 5.

Other Information

None

Item 6.

Exhibits


Exhibit Number		Description

10.1		Employment Agreement among Provident New York bancorp, Provident Bank and Jack L. Kopnisky (incorporated herein by reference to Exhibit 10.1 to the Registrant’s Current Report on Form 8-K filed with the Commission on June 21, 2011).

10.2		Letter agreement between Provident New York Bancorp and George L. Strayton (incorporated herein by reference to Exhibit 10.2 to the Registrant’s Current Report on From 8-K filed with the Commission on June 21, 2011).

10.3		Form of Stock Option Agreement between Provident New York Bancorp and Jack L. Kopnisky (grant date July 6,2011) ⁺

10.4		Form of Restricted Stock Award Notice between Provident New York Bancorp and Jack L. Kopnisky (grant date July 6,2011) ⁺

10.5		Form of Performance-based Restricted Stock Award Notice between Provident New York Bancorp and Jack L. Kopnisky (grant date July 6,2011) ⁺

31.1		Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

31.2		Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

32.1		Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

⁺	Management compensatory plan or agreement

SIGNATURES

Pursuant to the requirements of Section 13 of the Securities Exchange Act of 1934, Provident New York Bancorp has duly caused this report to be signed on its behalf by the undersigned, there unto duly authorized.

Provident New York Bancorp


Date:	August 9, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

Date:	August 9, 2011	By:	/s/ Paul A. Maisch
			Paul A. Maisch
			Executive Vice President
			Chief Financial Officer
			Principal Accounting Officer
			(Principal Financial Officer)

Exhibit 10.3

F ORM OF

P ROVIDENT N EW Y ORK B ANCORP 2011 E MPLOYMENT INDUCEMENT STOCK PROGRAM

JACK L . KOPNISKY

S TOCK O PTION A GREEMENT


Jack L Kopnisky
Name of Recipient		Social Security Number


Street Address


City	State	ZIP Code

This Stock Option Agreement is intended to set forth the terms and conditions on which a Stock Option has been granted under the Provident New York Bancorp 2011 Employment Inducement Stock Incentive Program. Set forth below are the specific terms and conditions applicable to this Stock Option. Attached as Exhibit A are its general terms and conditions.

OPTION GRANT

GRANT
SUMMARY**

OPTION DETAIL BY VESTING DATE

Grant Date:

07/06/2011

07/06/2012

07/06/2013

07/06/2014

07/06/2015

Class of Optioned Shares *

Common Shares

No. of Optioned Shares*

107,526

26,881

26,883

Option Type (ISO or NQSO)

NQSO

Exercise Price Per Share *

$8.46

Vesting Percent *

25%

50%

75%

100%

No. of Shares Released from Grant on Each Indicated Vesting Date *

26,881

26,883

Cumulative No. of Shares Exercisable on Each Indicated Vesting Date *

less any
previously
exercised Shares
from this Grant

less any
previously
exercised
Shares from
this Grant

Option Expiration Date *

07/06/2021

*	Subject to adjustment as provided in the Plan and the General Terms and Conditions.

**	This column reflects a summary of the option grant detailed in the remaining columns of this table. It does not constitute a separate, additional option grant.

By signing where indicated below, Provident New York Bancorp (the “Company”) grants this Stock Option upon the specified terms and conditions, and the Recipient acknowledges receipt of this Stock Option Agreement, including Exhibit A, and agrees to observe and be bound by the terms and conditions set forth herein.

EXHIBIT A

P ROVIDENT N EW Y ORK B ANCORP 2011 E MPLOYMENT INDUCMENT S TOCK PROGRAM

S TOCK O PTION A GREEMENT

General Terms and Conditions

Section 1. Incentive Stock Option . If the Option has been granted to a recipient who is a non-employee director, it is a Non-Qualified Stock Option (NQSO). If the Option has been granted to an individual who is an employee and is designated as an ISO, the Company intends the Option evidenced hereby to be an “incentive stock option” within the meaning of section 422 of the Internal Revenue Code of 1986 (“Code”). If the Option or any part of the Option does not qualify as an “incentive stock option” under the Plan or the Code, the Option, or the part not qualifying, shall be treated as a Non-Qualified Stock Option under the Code.

Incentive Stock options granted under the Employment Inducement Program are subject to all the terms and conditions of this Stock Option Agreement and the Provident Bancorp Inc, 2004 Stock Incentive Plan as if this Option were granted under that Plan.

Section 2. Option Period . (a) Subject to section 2(b), the Recipient shall have the right to purchase all or any portion of the optioned Shares at any time during the period (“Option Period”) commencing on the Earliest Vesting Date and ending on the earliest to occur of the following dates:

(i) the close of business on the date of the Recipient’s termination of service due to resignation or immediately upon Termination for Cause;

(ii) last day of the 3-month period commencing on the date of the termination of all service with the Company and Provident Bank due to a discharge that is not a Termination for Cause;

(iii) the last day of the 1-year period commencing on the date of termination of all service with the Company and Provident Bank due to death, Disability or Retirement, and

(iv) the last day of the ten-year period following the date on which the Option was granted.

(b) If the Option is designated as an ISO, the favorable tax treatment applicable to incentive stock options may not apply if it is exercisable more than three months after termination of employment for reasons other than death or total and permanent disability (within this meaning of section 22(e)(3) of the Code) or more than one year after termination of employment due to death or total and permanent disability.

(c) If the Option has an Earliest Exercise Date that is before its Vesting Date, the Option may be exercised before it is vested. In this case, the Shares issued will bear a restrictive legend and will be nontransferable and subject to forfeiture until their Vesting Date.

(d) To become vested in an Option, the Recipient must be in continuous service with the Company during the period beginning on the Grant Date and ending on the Vesting Date. In addition, the disinterested members of the “Committee” (as defined in the 2004 Stock Incentive Plan) must determine in its discretion that the Recipient’s performance as an officer or employee has been satisfactory. In general, performance is considered satisfactory if the recipient has been the subject of a formal written performance appraisal within the most recent 12 months and received a salary increase or one-time payment in lieu of a salary increase and no material negative change in the performance level has occurred. If performance is not determined to have been satisfactory, or, if the Recipient terminated service with the

Company prior to a Vesting Date, any Options granted hereunder that are scheduled to vest on that Vesting Date, and any Shares issued upon exercise of such an Option, are deemed forfeited for that recipient. In the event of the Recipient’s termination of service with the Company due to death, Disability or Retirement, unvested Options with a Vesting Date that occurs during the calendar year of termination or the following calendar year, and any Shares issued upon exercise of such Options, will be deemed vested as of the termination date. Options that are forfeited will be canceled and will cease to be exercisable. Any Shares that are forfeited must be returned to the Company in exchange for a payment equal to Exercise Price paid for the Shares or their Fair Market Value on the date forfeited, whichever is less. In the event of a Change in Control, all Options evidenced by this Agreement that were not previously forfeited will be 100% vested.

(e) To qualify for Retirement, the Recipient must, as of the termination date, have attained age 65, or attained age 55 and have at least 10 consecutive years of service, and, in either case, must enter into a retirement agreement with the Company in a form approved by the Committee, within the Committee’s discretion, and under which the Recipient agrees, for a period of 2 years, to provide consulting services to the Company and Provident Bank (as specified in Section 2.35 of the Plan) and to refrain from competing with or soliciting employees and customers of the Company and Provident Bank.

Section 3. Exercise Price . During the Option Period, and after the applicable Earliest Exercise Date, the Recipient shall have the right to purchase all or any portion of the optioned Shares at the Exercise Price per Share.

Section 4. Method of Exercise . The Recipient may, at any time during the Option Period provided by section 2, exercise his right to purchase all or any part of the optioned Shares then available for purchase; provided, however , that the minimum number of shares of optioned Shares which may be purchased shall be one hundred (100) or, if less, the total number of shares of optioned Shares then available for purchase. The Recipient shall exercise such right by:

(a) giving written notice to the Committee, in the form attached hereto as Appendix A; and

(b) delivering to the Committee full payment of the Exercise Price for the optioned Common Stock to be purchased.

The date of exercise shall be the earliest date practicable following the date the requirements of this section 4 have been satisfied. Payment shall be made (i) in United States dollars by certified check, money order, official bank check or personal check made payable to the order of Provident New York Bancorp, (ii) with the Committee’s approval, in Shares duly endorsed for transfer and with all necessary stock transfer tax stamps attached (or using a “constructive delivery” method approved by the Committee), already owned by the Recipient for more than 6 months and having a fair market value equal to the Exercise Price, such fair market value to be determined in such manner as may be provided by the Committee or as may be required in order to comply with or conform to the requirements of any applicable laws or regulations, or (iii) in a combination of (i) and (ii). If this Option is designated as an ISO or is exercised before its Vesting Date, the Recipient shall not, without the prior written approval of the Committee, dispose of Shares acquired pursuant to the exercise.

Section 5. Delivery and Registration of Optioned Shares . As soon as is practicable following the date on which the Recipient has satisfied the requirements of section 4, the Committee shall take such action as is necessary to cause the Company to issue a stock certificate evidencing the Recipient’s ownership of the optioned Shares that have been purchased. The Recipient shall have no right to vote or to receive dividends, nor have any other rights with respect to optioned Shares, prior to the date as of which such optioned Shares are transferred to the Recipient on the stock transfer records of the Company, and no adjustments shall be made for any dividends or other rights for which the record date is prior to the date as of which such transfer is effected. The obligation of the Company to deliver Shares under this Agreement shall, if the Committee so requests, be conditioned upon the receipt of a representation as to the investment intention of the person to whom such Shares are to be delivered, in such form as the Committee shall determine to be necessary or advisable to comply with the provisions of applicable federal, state or local law. The Committee

may provide that any such representation shall become inoperative upon registration of the Shares or upon the occurrence of any other event eliminating the necessity of such representation. The Company shall not be required to deliver any Shares under this Agreement prior to (a) the admission of such Common Stock to listing on any stock exchange on which Shares may then be listed, or (b) the completion of such registration or other qualification under any state or federal law, rule or regulations as the Committee shall determine to be necessary or advisable.

Section 6. Adjustments in the Event of Reorganization . In the event of any merger, consolidation, or other business reorganization in which the Company is the surviving entity, and in the event of any stock split, stock dividend or other event which the Committee believes warrants an adjustment to avoid the enlargement or dilution of rights, the number of Shares subject to the Option granted hereunder and the Exercise Price per share of such Option shall be adjusted in accordance with the Plan to account for such event. In the event of any merger, consolidation, or other business reorganization in which the Company is not the surviving entity, any exercisable option granted hereunder shall be cancelled or adjusted in accordance with the Plan.

Section 7. No Right to Continued Service . Nothing in this Agreement nor any action of the Board or Committee with respect to this Agreement shall be held or construed to confer upon the Recipient any right to a continuation of service by the Company or Provident Bank. The Recipient may be dismissed or otherwise dealt with as though this Agreement had not been entered into.

Section 8. Taxes . Where any person is entitled to receive Shares pursuant to the exercise of the Option granted hereunder, the Company shall have the right to require such person to pay to the Company the amount of any tax which the Company is required to withhold with respect to such Shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of Shares to cover the amount required to be withheld.

Section 9. Notices . Any communication required or permitted to be given under the Plan, including any notice, direction, designation, comment, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally or five (5) days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below, or at such other address as one such party may by written notice specify to the other party:

(a)

If to the Committee:

Provident New York Bancorp

c/o Provident Bank

400 Rella Boulevard

Montebello, New York

Attention: Corporate Secretary

(b)

If to the Recipient, to the Recipient’s address as shown in the Company’s records.

Section 10. Restrictions on Transfer . The Option granted hereunder shall not be subject in any manner to anticipation, alienation or assignment, nor shall such option be liable for or subject to debts, contracts, liabilities, engagements or torts, nor shall it be transferable by the Recipient other than by will or by the laws of descent and distribution or as otherwise permitted by the Plan. To name a Beneficiary who may exercise your Options following your death, complete the attached Appendix B and file it with the Corporate Secretary of Provident New York Bancorp The Recipient may, with the approval of the Committee, transfer unexercised NQSOs to certain Family Members after those Options have vested. Options transferred to Family Members continue to be subject to the same terms and conditions (including post-termination expiration provisions) that would apply if they had not been transferred.

Section 11. Successors and Assigns . This Agreement shall inure to the benefit of and shall be binding upon the Company and the Recipient and their respective heirs, successors and assigns.

Section 12. Construction of Language . Whenever appropriate in the Agreement, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may be read as referring equally to the feminine or the neuter. Any reference to a section shall be a reference to a section of this Agreement, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings assigned to them under the Plan.

Section 13. Governing Law . This Agreement shall be construed, administered and enforced according to the laws of the State of New York without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by the federal law. The federal and state courts having jurisdiction in Rockland County, New York shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any Option granted under this Agreement, the Recipient, and any other person claiming any rights under the Agreement, agrees to submit himself, and any such legal action as he shall bring under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.

Section 14. Amendment . This Agreement may be amended, in whole or in part and in any manner not inconsistent with the provisions of the Plan, at any time and from time to time, by written agreement between the Company and the Recipient. This Agreement amends and supersedes any Stock Option Agreement bearing the same grant date.

Section 15. Plan Provisions Control . This Agreement and the rights and obligations created hereunder shall be subject to all of the terms and conditions of the Plan that would apply if this Option were being granted under the Plan. In the event of any conflict between the provisions of the Plan and the provisions of this Agreement, the terms of the Plan, which are incorporated herein by reference, shall control. By signing this Agreement, the Recipient acknowledges receipt of a copy of the Plan. The Recipient acknowledges that he or she may not and will not rely on any statement of account or other communication or document issued in connection with the Plan other than the Plan, this Agreement, and any document signed by an authorized representative of the Company that is designated as an amendment of the Plan or this Agreement.

A PPENDIX A TO S TOCK O PTION A GREEMENT

Beneficiary Designation Form – Stock Options

GENERAL

INFORMATION

Use this form to designate the Beneficiary(ies) who may exercise Options outstanding to you at the time of your death.

Name of Person

Social Security Number

Making Designation

— —

BENEFICIARY

DESIGNATION

Complete sections A and B. If no percentage shares are specified, each Beneficiary in the same class (primary or contingent) shall have an equal share. If any designated Beneficiary predeceases you, the shares of each remaining Beneficiary in the same class (primary or contingent) shall be increased proportionately.

A PRIMARY BENEFICIARY(IES). I hereby designate the following person as my primary Beneficiary under the Plan, reserving the right to change or revoke this designation at any time prior to my death:

Name

Address

Relationship

Birthdate

Share

Total = 100%

B CONTINGENT BENEFICIARY(IES). I hereby designate the following person(s) as my contingent Beneficiary(ies) under the Plan to receive benefits only if all of my primary Beneficiaries should predecease me, reserving the right to change or revoke this designation at any time prior to my death as to all outstanding Options:

Name

Address

Relationship

Birthdate

Share

Total = 100%

LOGO

I understand that this Beneficiary Designation shall be effective only if properly completed and received by the Corporate Secretary of Provident New York Bancorp prior to my death, and that it is subject to all of the terms and conditions of the Plan. I also understand that an effective Beneficiary designation revokes my prior designation(s) with respect to all outstanding Options.

Your Signature

Date

-------------------------------------------------------------- Internal Use Only ---------------------------------------------------------------


This Beneficiary Designation was received by the Corporate Secretary of Provident New York Bancorp on the date indicated.			Comments
By
	Authorized Signature	Date

E XHIBIT 10.4

F ORM OF

P ROVIDENT N EW Y ORK B ANCORP

2011 E MPLOYMENT I NDUCEMENT S TOCK P ROGRAM

J ACK L . KOPNISKY

R ESTRICTED S TOCK A WARD N OTICE


Jack L Kopnisky				- -
Name of Award Recipient				Social Security Number


Street Address

This Restricted Stock Award Notice is intended to set forth the terms and conditions on which a Restricted Stock Award has been granted under the Provident New York Bancorp 2011 Employment Inducement Stock Program. Set forth below are the specific terms and conditions applicable to this Restricted Stock Award. Attached as Exhibit A are its general terms and conditions.

Restricted Stock Award

(A)

(B)

(C)

(D)

(E)

(F)

Effective Date

07/06/2011

Class of Shares*

Common

No. of Awarded Shares*

7,387

7,389

[ ]

Type of Award (Escrow or Legended Certificate)

Escrow

Vesting Date*

07/06/2012

07/06/2013

07/06/2014

07/06/2015

n/a

*	Subject to adjustment as provided in the Plan and the General Terms and Conditions.

By signing where indicated below, Provident New York Bancorp (the “Company”) grants this Restricted Stock Award upon the specified terms and conditions, and the Restricted Stock Award Recipient acknowledges receipt of this Restricted Stock Award Notice, including Exhibit A, and agrees to observe and be bound by the terms and conditions set forth herein


P ROVIDENT N EW Y ORK B ANCORP			A WARD R ECIPIENT

By	/s/ Dan Rothstein		Jack L Kopnisky
	Name:	Dan Rothstein
			Print Name
	Title:	Executive Vice President, Regulatory Counsel & Chief Risk Officer	/s/ Jack L Kopnisky
			Recipient’s Signature

Instructions : This page should be completed by or on behalf of the Executive Compensation Committee. Any blank space intentionally left blank should be crossed out. A Restricted Stock Award consists of shares granted with uniform terms and conditions. Where shares granted under a Restricted Stock Award are awarded on the same date with varying terms and conditions (for example, varying vesting dates), the awards should be recorded as a series of grants each with its own uniform terms and conditions.

EXHIBIT A

P ROVIDENT N EW Y ORK B ANCORP

2011 E MPLOYMENT I NDUCEMENT S TOCK P ROGRAM S TOCK I NCENTIVE P LAN

R ESTRICTED S TOCK A WARD N OTICE FOR J ACK L . KOPNISKY

General Terms and Conditions

Section 1. Size and Type of Award . The shares of Common Stock of Provident New York Bancorp (“Shares”) covered by this Award (“Awarded Shares”) are listed on the Restricted Stock Award Notice. The Restricted Stock Award Notice designates the Awarded Shares as Escrow. Awarded Shares are subject to all of the terms and conditions of this Award Notice and the Provident Bancorp, Inc. 2004 Stock incentive Plan (“Plan”)

Your Awarded Shares will be held in the name of the Plan Trustee on a pooled basis with other Awarded Shares. If permitted by the administrative committee, you may elect to be taxed on shares that are transferred to you in certificated form immediately upon their transfer to you instead of later when they vest. If you make this election, you will be required to include in ordinary income, for the taxable year in which the transfer of certificates occurs, an amount equal to the fair market value of the shares on the transfer date. Provident New York Bancorp may be allowed to claim a tax deduction, for compensation expense, in a like amount. You make this election by filing a statement of election containing specified items of information with the Internal Revenue Service within thirty days after the date of transfer of the shares to you. You must give a copy of the statement you file to Provident New York Bancorp and Provident Bank.

If you make this election, the vesting of your awards will not subject you to further income tax.

Section 2. Vesting .

(a) Vesting Dates . The Vesting Dates for your Awarded Shares are specified on the Award Notice. On each Vesting Date, you will obtain unrestricted ownership of the Awarded Shares that vest on that Vesting Date. A stock certificate evidencing unrestricted ownership will be transferred to you.

( b ) Vesting Conditions . There are conditions you must satisfy before your Restricted Stock Award will vest:

Employees . If you receive your Restricted Stock Award for services as an officer or employee, you must remain in continuous service from the Effective Date shown on the Restricted Stock Award Notice through the relevant Vesting Date

(c) Forfeitures . If you terminate service with the Company prior to a Vesting Date, you will forfeit any Awarded Shares that are scheduled to vest on that date. When you forfeit Awarded Shares, all of your interest in the Awarded Shares will be canceled and any stock certificate or other evidence of ownership must be returned to the Plan Trustee to be used for future awards to others. You agree to take any action and execute and deliver any document that the Company requests to effect the return of your unvested Awarded Shares. In the event you do not cooperate with the Company in this regard, you hereby appoint and designate the Company as your attorney-in-fact for the purpose of taking any action and signing any document, in your name, which the Company determines is necessary to enforce the forfeiture.

(d) Accelerated Vesting . All of your Awarded Shares that have not previously vested will become fully vested immediately, and without any further action on your part, in the event of your death or Disability (as defined in the Plan) before your termination of service with the Company. In addition, if your service terminates due to Retirement (as defined in the Plan) or in the event a Change of Control (as defined in the Plan) occurs before you terminate service with the Company, then any Awarded Shares not theretofore forfeited shall become immediately vested on the date of your Retirement or Change of Control. You may designate a Beneficiary to receive any Awarded Shares that vest upon your death using the Beneficiary Designation attached as Appendix A. To qualify for Retirement, you must, as of the termination date, have attained age 65, or attained age 55 and have at least 10 consecutive years of service, and must enter into a retirement agreement with the Company in a form approved by the Committee under which you agree, for a period of 2 years, to provide consulting services to the Company and Provident Bank and to refrain from competing with or soliciting employees and customers of the Company and Provident Bank.

(e) Definition of Service . For purposes of determining the vesting of your Awarded Shares, you will be deemed to be in the service of the Company for so long as you serve in any capacity as an employee, officer, non-employee director or consultant of the Company or Provident Bank.

Section 3. Dividends . Your Awarded Shares are designated as Escrow: you will receive the dividends on an unrestricted basis, but they will be paid to you by, and will be taxable in the same manner as other compensation paid to you by, the Company; by signing this Award Notice and accepting its terms, you direct the Plan Trustee to remit to the Company for payment to you any dividends that may be received as the record holder of your unvested Awarded Shares.

Page 1 of 3

Section 4. Voting Rights . You shall have the right to control all voting rights relating to all unvested Awarded Shares. If your Awarded Shares are Legended Certificates, you will receive proxy materials for voting in the same manner as other shareholders with Shares in brokerage accounts. If your unvested Awarded Shares are held by the Plan Trustee, the Plan Trustee will ask you for voting directions and will follow your directions in voting your unvested Awarded Shares.

Section 5. Taxes . Where any person is entitled to receive Shares pursuant to the Restricted Stock Award granted hereunder, the Company shall have the right to require such person to pay to the Company the amount of any tax which the Company is required to withhold with respect to such Shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of Shares to cover the amount required to be withheld.

Section 6. Notices . Any communication required or permitted to be given under the Plan, including any notice, direction, designation, comment, instruction, objection or waiver, shall be in writing and shall be deemed to have been given at such time as it is delivered personally or five (5) days after mailing if mailed, postage prepaid, by registered or certified mail, return receipt requested, addressed to such party at the address listed below, or at such other address as one such party may by written notice specify to the other party:

If to the Recipient, to the Recipient’s address as shown in the Company’s records.

Section 7. Restrictions on Transfer . The Restricted Stock Award granted hereunder shall not be subject in any manner to anticipation, alienation or assignment, nor shall such award be liable for or subject to debts, contracts, liabilities, engagements or torts, nor shall it be transferable by the Recipient other than by will or by the laws of descent and distribution or as otherwise permitted by the Plan. To name a Beneficiary, complete the attached Appendix A and file it with the Corporate Secretary of Provident New York Bancorp

Section 8. Successors and Assigns . This Agreement shall inure to the benefit of and shall be binding upon the Company and the Recipient and their respective heirs, successors and assigns.

Section 9. Construction of Language . Whenever appropriate in the Agreement, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may be read as referring equally to the feminine or the neuter. Any reference to a section shall be a reference to a section of this Agreement, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings assigned to them under the Plan.

Section 10. Governing Law . This Agreement shall be construed, administered and enforced according to the laws of the State of New York without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by the federal law. The federal and state courts having jurisdiction in Rockland County, New York shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any Award granted under this Agreement, the Recipient, and any other person claiming any rights under the Agreement, agrees to submit himself, and any such legal action as he shall bring under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.

Section 11. Amendment . This Agreement may be amended, in whole or in part and in any manner not inconsistent with the provisions of the Plan, at any time and from time to time, by written agreement between the Company and the Recipient. This Agreement amends and supersedes any Restricted Stock Award Notice having the same effective date.

Section 12. Plan Provisions Control . This Agreement and the rights and obligations created hereunder shall be subject to all of the terms and conditions of the Plan that would apply if this award were being made under the Plan In the event of any conflict between the provisions of the Plan and the provisions of this Agreement, the terms of the Plan, which are incorporated herein by reference, shall control. By signing this Agreement, the Recipient acknowledges receipt of a copy of the Plan. The Recipient acknowledges that he or she may not and will not rely on any statement of account or other communication or document issued in connection with the Plan other than the Plan, this Agreement, and any document signed by an authorized representative of the Company that is designated as an amendment of the Plan or this Agreement.

Page 2 of 3

A PPENDIX A TO RESTRICTED S TOCK A WARD N OTICE

Beneficiary Designation Form - Restricted Stock

GENERAL

INFORMATION

Use this form to designate the Beneficiary(ies) who may receive Restricted Stock Awards that become vested at your death.

Name of Person

Social Security Number

Making Designation

— —

BENEFICIARY

DESIGNATION

Name

Address

Relationship

Birthdate

Share

Total = 100%

Name

Address

Relationship

Birthdate

Share

Total = 100%

LOGO

Your Signature

Date

-------------------------------------------------------------- Internal Use Only ---------------------------------------------------------------


This Beneficiary Designation was received by the Corporate Secretary of Provident New York Bancorp on the date indicated.			Comments

By
	Authorized Signature	Date

Exhibit 10.5

P ROVIDENT N EW Y ORK B ANCORP

2011 E MPLOYMENT I NDUCEMENT S TOCK P ROGRAM

J ACK L. K OPNISKY

P ERFORMANCE -B ASED R ESTRICTED S TOCK A WARD N OTICE


Jack L. Kopnisky		- -
Name of Award Recipient		Social Security Number

Street Address

This Performance-Based Restricted Stock Award Notice is intended to set forth the terms and conditions on which a Performance-Based Restricted Stock Award has been granted under the Provident New York Bancorp 2011 Employment Inducement Stock Program. Set forth below are the specific terms and conditions applicable to this Restricted Stock Award. Attached as Exhibit A are its general terms and conditions.


Restricted Stock Award	(A)	(B)	(C)
Effective Date	07/06/2011	07/06/2011	07/06/2011
Class of Shares*	Common	Common	Common
No. of Awarded Shares*	3,940	3,940	3,940
Type of Award (Escrow or Legended Certificate)	Escrow	Escrow	Escrow
Vesting Date*	December 31, 2014	December 31, 2014	December 31, 2014
Performance Conditions*	See Appendix B to exhibit A	See Appendix B to Exhibit A	See Appendix B to Exhibit A

*	Subject to adjustment as provided in the Plan and the General Terms and Conditions.

By signing where indicated below, Provident New York Bancorp (the “Company”) grants this Performance-Based Restricted Stock Award upon the specified terms and conditions, and the Performance-Based Restricted Stock Award Recipient acknowledges receipt of this Performance-Based Restricted Stock Award Notice, including Exhibit A and Appendices A and B, and agrees to observe and be bound by the terms and conditions set forth herein


P ROVIDENT N EW Y ORK B ANCORP			A WARD R ECIPIENT

By	/s/ Daniel Rothstein		/s/ Jack L. Kopinsky
	Name:	Daniel Rothstein	Jack L. Kopinsky
	Title:	Executive Vice President
		Regulatory Counsel & Chief Risk Officer

Instructions : This page should be completed by or on behalf of the Compensation administrative committee. Any blank space intentionally left blank should be crossed out. A Performance-Based Restricted Stock Award consists of shares granted with uniform terms and conditions. Where shares granted under a Performance-Based Restricted Stock Award are awarded on the same date with varying terms and conditions (for example, varying vesting dates), the awards should be recorded as a series of grants each with its own uniform terms and conditions.

EXHIBIT A

P ROVIDENT N EW Y ORK B ANCORP , I NC

2011 E MPLOYMENT I NDUCEMENT S TOCK P ROGRAM S TOCK I NCENTIVE P LAN

P ERFORMANCE -B ASED R ESTRICTED S TOCK A WARD N OTICE FOR J ACK L . K OPNISKY

General Terms and Conditions

Section 1. Size and Type of Award . The shares of Common Stock of Provident New York Bancorp (“Shares”) covered by this Award (“Awarded Shares”) are listed on the Performance-Based Restricted Stock Award Notice. The Performance-Based Restricted Stock Award Notice is subject to all of the terms and conditions of this Award Notice and the Provident Bancorp Inc. 2004 Stock incentive Plan (“Plan”) as if this Award were made under that Plan.

Unless otherwise permitted by the administrative committee, your Awarded Shares will be designated “Escrow” and held in the name of the administrative committee or of a trustee or custodian named by the administrative committee on a pooled basis with other Awarded Shares. If permitted by the administrative committee, you may elect to be taxed on shares that are transferred to you in certificated form immediately upon their transfer to you instead of later when they vest. If you make this election, you will be required to include in ordinary income, for the taxable year in which the transfer of certificates occurs, an amount equal to the fair market value of the shares on the transfer date. Provident New York Bancorp may be allowed to claim a tax deduction, for compensation expense, in a like amount. You make this election by filing a statement of election containing specified items of information with the Internal Revenue Service within thirty days after the date of transfer of the shares to you. You must give a copy of the statement you file to Provident New York Bancorp and Provident Bank If you make this election, your Awarded Shares will be designated “Legended Certificate.” A certificate evidencing the Awarded Shares will be issued to you and will include a restrictive legend incorporating the terms and conditions of this Award Notice. If you make this election, the vesting of your awards will not subject you to further income tax.

Your acceptance of employment with Provident New York Bancorp and Provident Bank, and your commencement of such employment, constitute adequate consideration for the issuance of the Awarded Shares to you having a value at least equal to the par value of the Awarded Shares, but the vesting conditions described below will nevertheless determine your right to acquire unrestricted ownership of the Awarded Shares.

Section 2. Vesting.

( b ) Vesting Conditions . There are conditions you must satisfy before your Performance-Based Restricted Stock Award will vest:

(i) You must remain in the continuous service of the Provident New York Bancorp and/or Provident Bank through the Vesting Date shown in this Performance-Based Restricted Stock Award Notice (“Service Conditions”).

(ii) Any Performance Condition(s) specified in this Performance-Based Restricted Stock Award Notice must be met as of the end of their respective Performance Measurement Period(s) as determined by the administrative committee on the basis of such evidence as it deems appropriate (“Performance Conditions”).

As a general rule, if you have satisfied BOTH the Service Conditions and the Performance Conditions, your right to the Awarded Shares will be nonforfeitable.

(c) Forfeitures . If you terminate service with the Company prior to a Vesting Date, you will forfeit any Awarded Shares that are scheduled to vest on that date. If you remain in continuous service with Provident New York Bancorp and/or Provident Bank through the applicable Vesting Date but one or more of the applicable Performance Conditions are not satisfied, you will forfeit any Awarded Shares the vesting of which depended on satisfaction of the unsatisfied Performance Condition(s). When you forfeit Awarded Shares, all of your interest in the Awarded Shares will be canceled and any stock certificate or other evidence of ownership must be returned to the administrative committee or to the Company. You agree to take any action and execute and deliver any document that the Company requests to effect the return of your unvested Awarded Shares. In the event you do not cooperate with the Company in this regard, you hereby appoint and designate the Company as your attorney-in-fact for the purpose of taking any action and signing any document, in your name, which the Company determines is necessary to enforce the forfeiture.

(d) Accelerated Vesting .

(i) In the event of your service terminates due to death or Disability (as defined in the Plan) or Retirement (as defined in the Plan), then:

(A) any Performance Condition for which the Performance Measurement Period has not ended will be deemed satisfied (or will be deemed achieved at target if more than one level of performance is provided for), and

Page 1 of 3

(B) a pro-rated portion of the Awarded Shares for which the Performance Conditions have or are deemed to have been satisfied, determined based on the ratio (not to exceed 1.00) of the number of days during the period beginning on Effective Date and ending on the date of termination to the number of days during the period beginning on Effective Date and ending on the Vesting Date will vest on an accelerated basis as of the date of termination.

To qualify for Retirement, you must, as of the termination date, have attained age 65, or attained age 55 and have at least 10 consecutive years of service, and, in either case, must enter into a retirement agreement with the Company in a form approved by the administrative committee, within the administrative committee’s discretion, and under which the you agree, for a period of 2 years, to provide consulting services to the Company and Provident Bank (as specified in Section 2.35 of the Plan) and to refrain from competing with or soliciting employees and customers of the Company and Provident Bank.

(ii) In the event of your service terminates due to discharge without “Cause” or voluntary resignation with “Good Reason” (in each case as defined in the Employment Agreement among you, the Company and Provident Bank as in effect on the Effective Date) within 18 months following a Change of Control (as defined in the Plan) then:

(B) a pro-rated portion of the Awarded Shares for which the Performance Conditions have or are deemed to have been satisfied, determined based on the ratio (not to exceed 1.00) of the number of days during the period beginning on Effective Date and ending on the date of termination to the number of days during the period beginning on Effective Date and ending on the Vesting Date, will vest on an accelerated basis sixty (600 days after termination or resignation, as applicable, if and to the extent all conditions of such accelerated vesting imposed under such Employment Agreement are satisfied .

(f) Application of Clawback Policy . Notwithstanding anything in the Restricted Stock Award Notice to the contrary, the Awarded Shares and any related dividends shall be subject to adjustment and/or recovery, in whole or in part, following the date on which they become vested and payable if and to the extent (i) required by any applicable law, rule or regulation or (ii) provided under the terms of any clawback policy or other policy of similar import adopted by the Company and in effect on the date the Awarded Shares or dividends, as applicable, become vested and payable.

Section 3. Dividends . Dividends or distributions paid on Awarded Shares, whether or not in cash, will not be paid to you currently. Instead, they will be vested, accumulated and paid to you if, as and when the related Awarded Shares become vested and will be subject to the same Service Conditions and Performance Conditions as the Awarded Shares.

Section 4. Voting and Tender Rights . You will not have the right to vote, or direct the voting of, Awarded Shares, or the right to respond, or direct the response with respect to Awarded Shares to any tender offer, exchange offer or other offer made to the holder of Shares, unless and until the applicable Service Conditions and Performance Conditions have been satisfied and ownership of record of the Awarded Shares has been conveyed to you.

Section 5. Taxes . Where any person is en t itled to receive Shares pursuant to the Restricted Stock Award granted hereunder, the Company shall have the right to require such person to pay to the Company the amount of any tax which the Company is required to withhold with respect to such Shares, or, in lieu thereof, to retain, or to sell without notice, a sufficient number of Shares to cover the amount required to be withheld.

If to the Recipient, to the Recipient’s address as shown in the Company’s records.

If to the administrative committee:

Provident New York Bancorp

c/o Provident Bank

400 Rella Blvd.

Montebello, New York

Attention: Corporate Secretary

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Section 8. Successors and Assigns . This Agreement shall inure to the benefit of and shall be binding upon the Company and the Recipient and their respective heirs, successors and assigns.

Section 9. Construction of Language . Whenever appropriate in the Agreement, words used in the singular may be read in the plural, words used in the plural may be read in the singular, and words importing the masculine gender may be read as referring equally to the feminine or the neuter. Any reference to a section shall be a reference to a section of this Notice, unless the context clearly indicates otherwise. Capitalized terms not specifically defined herein shall have the meanings assigned to them under the Plan.

Section 10. Governing Law . This Notice shall be construed, administered and enforced according to the laws of the State of New York without giving effect to the conflict of laws principles thereof, except to the extent that such laws are preempted by the federal law. The federal and state courts having jurisdiction in Rockland County, New York shall have exclusive jurisdiction over any claim, action, complaint or lawsuit brought under the terms of the Plan. By accepting any Award granted under this Notice, the Recipient, and any other person claiming any rights under the Notice, agrees to submit himself, and any such legal action as he shall bring under the Plan, to the sole jurisdiction of such courts for the adjudication and resolution of any such disputes.

Section 11. Amendment . This Award may be amended, in whole or in part and in any manner not inconsistent with the provisions of the Plan, at any time and from time to time, by written agreement between the Company and the Recipient. This Award amends and supersedes any Performance-Based Restricted Stock Award Notice bearing the same effective date.

Section 12. Plan Provisions Control . This Award and the rights and obligations created hereunder shall be subject to all of the terms and conditions of the Plan that would apply if this Award were being made under the Plan In the event of any conflict between the provisions of the Plan and the provisions of this Notice, the terms of the Plan, which are incorporated herein by reference, shall control. By signing this Agreement, the Recipient acknowledges receipt of a copy of the Plan. The Recipient acknowledges that he or she may not and will not rely on any statement of account or other communication or document issued in connection with the Award other than the Plan, this Notice, or any document signed by an authorized representative of the Company that is designated as an amendment of the Plan or this Notice.

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A PPENDIX A TO P ERFORMANCE -B ASED R ESTRICTED S TOCK A WARD N OTICE

Beneficiary Designation Form - Performance-Based Restricted Stock

GENERAL

INFORMATION

Use this form to designate the Beneficiary(ies) who may receive Performance-Based Restricted Stock Awards that become vested at your death.

Name of Person

Making Designation

Social Security Number – –

BENEFICIARY

DESIGNATION

Name

Address

Relationship

Birthdate

Share

Total = 100%

Name

Address

Relationship

Birthdate

Share

Total = 100%

Your Signature

Date

------------------------------------------------------------------ Internal Use Only -----------------------------------------------------------


This Beneficiary Designation was received by the Corporate Secretary of Provident New York Bancorp on the date indicated.			Comments

By
	Authorized Signature	Date

A PPENDIX B TO P ERFORMANCE -B ASED R ESTRICTED S TOCK A WARD N OTICE

Performance Vesting Conditions

[To be supplied]

Exhibit 31.1

Certification of Principal Executive Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Jack Kopnisky, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Provident New York Bancorp;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	August 9, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

Exhibit 31.2

Certification of Principal Financial Officer

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Paul A. Maisch, certify that:

1.	I have reviewed this Quarterly Report on Form 10-Q of Provident New York Bancorp;

2.	Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3.	Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

5.	The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


Date:	August 9, 2011	By:	/s/ Paul A. Maisch
			Paul A. Maisch
			Executive Vice President
			Chief Financial Officer
			Principal Accounting Officer
			(Principal Financial Officer)

Exhibit 32.1

Certification of Principal Executive Officer and Principal Financial Officer

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Jack Kopnisky, Chief Executive Officer and Paul A. Maisch, Chief Financial Officer of Provident New York Bancorp (the “Company”) each certify in his capacity as an officer of the Company that he has reviewed the quarterly report on Form 10-Q for the quarter ended June 30, 2011 and that to the best of his knowledge:

(1)

the report fully complies with the requirements of Sections 13(a) or 15(d) of the Securities Exchange Act of 1934; and

(2)

the information contained in the report fairly presents, in all material respects, the financial condition and results of operations of the Company.


Date:	August 9, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

Date:	August 9, 2011	By:	/s/ Paul A. Maisch
			Paul A. Maisch
			Executive Vice President
			Chief Financial Officer
			Principal Accounting Officer
			(Principal Financial Officer)

A signed original of this written statement required by Section 906 has been provided to Provident New York Bancorp and will be retained by Provident New York Bancorp and furnished to the Securities and Exchange Commission or its staff upon request.