10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

______________________

FORM 10-K

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

For the Fiscal Year Ended September 30, 2012

OR

¨ 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 Identification Number)
400 Rella Blvd., Montebello, New York	10901
(Address of Principal Executive Office)	(Zip Code)

(845) 369-8040

(Registrant’s Telephone Number including Area Code)

Securities Registered Pursuant to Section 12(b) of the Act:

Title of Class	Name of Each Exchange On Which Registered
Common Stock, par value $0.01 per share	New York Stock Exchange

Securities Registered Pursuant to Section 12(g) of the Act:

None

____________________________

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act    YES  ¨    NO  ý

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    YES  ¨     NO  ý

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  ý    NO  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for shorter period that the registrant was required to submit and post such files)   YES  ý     NO  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendments to this Form 10-K.    ¨

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

Large Accelerated Filer	o	Accelerated Filer	x
Non-Accelerated Filer	o	Smaller Reporting Company	o

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).   YES  ¨     NO  ý

The aggregate market value of the voting stock held by non-affiliates of the Registrant, computed by reference to the closing price of the common stock as of March 31, 2012 was $283,477,866

As of December 5, 2012 there were outstanding 44,346,087 shares of the Registrant’s common stock.

___________________________________

DOCUMENT INCORPORATED BY REFERENCE

Proxy Statement for the Annual Meeting of Stockholders (Part III) to be filed within 120 days after the end of the Registrant’s fiscal year ended September 30, 2012.

PROVIDENT NEW YORK BANCORP

FORM 10-K TABLE OF CONTENTS

September 30, 2012

PART I
ITEM 1.	Business	1
ITEM 1A.	Risk Factors	28
ITEM 1B.	Unresolved Staff Comments	33
ITEM 2.	Properties	33
ITEM 3.	Legal Proceedings	33
ITEM 4.	Mine Safety Disclosures	33
PART II
ITEM 5.	Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities	34
ITEM 6.	Selected Financial Data	36
ITEM 7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	40
ITEM 7A.	Quantitative and Qualitative Disclosures about Market Risk	54
ITEM 8.	Financial Statements and Supplementary Data	55
ITEM 9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	120
ITEM 9A.	Controls and Procedures	120
ITEM 9B.	Other Information	120
PART III
ITEM 10.	Directors, Executive Officers, and Corporate Governance	121
ITEM 11.	Executive Compensation	121
ITEM 12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	121
ITEM 13.	Certain Relationships and Related Transactions, and Director Independence	121
ITEM 14.	Principal Accountant Fees and Services	121
PART IV
ITEM 15.	Exhibits and Financial Statement Schedules	122
SIGNATURES		125

PART I

ITEM 1. Business

Provident New York Bancorp

Provident New York Bancorp (“Provident Bancorp” or the “Company”) is a Delaware corporation that owns all of the outstanding shares of common stock of Provident Bank (the “Bank”). At September 30, 2012, Provident Bancorp had, on a consolidated basis, assets of $4.0 billion, deposits of $3.1 billion and stockholders’ equity of $491.1 million. As of September 30, 2012, Provident Bancorp had 44,173,470 shares of common stock outstanding.

Provident Bank

Provident Bank, an independent, full-service bank founded in 1888, is headquartered in Montebello, New York and is the principal bank subsidiary of Provident Bancorp. With $4.0 billion in assets and 493 full-time equivalent employees, Provident Bank accounts for substantially all of Provident Bancorp’s consolidated assets and net income. We operate 35 financial centers which serve the greater New York metropolitan area . There are 13 offices located in Rockland County, New York, 12 offices in Orange County, New York, 8 offices in contiguous Sullivan, Ulster, Westchester and Putnam Counties in New York, 1 office in New York City, and 1 office in Bergen County, New Jersey which operate under the name PBNY Bank, a division of Provident Bank, New York. Provident Bank offers a complete line of commercial, business banking (small business), wealth management, and consumer banking products and services.

We also offer deposit services to municipalities located in the State of New York through Provident Bank’s wholly-owned subsidiary, Provident Municipal Bank.

Provest Services Corporation I is a wholly-owned subsidiary of Provident Bank, holding an investment in a limited partnership that operates an assisted-living facility. A percentage of the units in the facility are for low-income individuals. Provest Services Corp. II is a wholly-owned subsidiary of Provident Bank that has engaged a third-party provider to sell annuities, life and health insurance products to Provident Bank’s customers. The activities of these subsidiaries have had an insignificant effect on our consolidated financial condition and results of operations to date. Provident REIT, Inc. and WSB Funding are subsidiaries in the form of real estate investment trusts and hold commercial real estate loans. Also, the Bank maintains several corporations which hold foreclosed properties acquired by Provident Bank.

Provident Bank’s website (www.providentbanking.com) contains a direct link to the Company’s filings with the Securities and Exchange Commission ("SEC"), including copies of annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and amendments to these filings, as well as ownership reports on Forms 3, 4 and 5 filed by the Company’s directors and executive officers. Copies may also be obtained, without charge, by written request to Provident New York Bancorp Investor Relations, 400 Rella Boulevard, Montebello, New York 10901, Attention: Donna Peterson, Provident Bank’s website is not part of this Annual Report on Form 10-K.

Non-Bank Subsidiaries

In addition to Provident Bank, the Company owns Hardenburgh Abstract Company, Inc. (“Hardenburgh”) that was acquired in connection with the acquisition of Warwick Community Bancorp (“WSB”) and Hudson Valley Investment Advisors, LLC ("HVIA"), an investment advisory firm that generates investment management fees. Hardenburgh had gross revenue from title insurance policies and abstracts of $1.1 million and net income of $202,000 for the fiscal year ending September 30, 2012. Hardenburgh and Madison Title Holding, LLC entered into a joint venture under Provident Bank, creating PB Madison Title Agency, LP, a title insurance agency that will significantly increase our capacity and market coverage.

On November 16, 2012, the Company sold Hudson Valley Investment Advisors, LLC ("HVIA"), an investment advisory firm that generated $2.4 million in fee income and net income of $372,000 in 2012. The Company has launched an enhanced program to deliver a wide range of superior wealth management products that were previously offered by HVIA.

Provident Risk Management, Inc., a captive insurance company, generated $1.2 million in intercompany revenues and $1.0 million in net income for the fiscal year ending September 30, 2012.

Provident Municipal Bank

Provident Municipal Bank, a wholly-owned subsidiary of Provident Bank, is a New York State-chartered commercial bank which is engaged in the business of accepting deposits from municipalities in our market area. New York State law requires municipalities located in the State of New York to deposit funds with commercial banks, effectively forbidding these municipalities from depositing funds with savings banks, including federally chartered savings associations, such as Provident Bank.

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Acquisition of Gotham Bank of New York

On August 10, 2012, the Company acquired Gotham Bank of New York (“Gotham”), a New York state-chartered banking corporation with approximately $431.4 million in assets, $205.5 million in loans, and $368.9 million in deposits and one branch location in midtown Manhattan as of the acquisition date. At the closing, Gotham was merged with and into Provident Bank, with Provident Bank as the surviving entity. The shareholders of Gotham received cash equal to 125% of adjusted tangible net worth, subject to fair value adjustments. The aggregate cash consideration to Gotham shareholders and option holders was approximately $41 million. We believe that Gotham provides us with an established platform in New York City which is additive to our growth strategy and will support the expansion of our franchise in this attractive market.

Common Equity Capital Raise

On August 7, 2012, the Company sold directly to several institutional investors (the “Investors”) an aggregate of 6,258,504 shares of its common stock at a price of $7.35 per share. The Company received net proceeds of approximately $46 million, which were used to fund the acquisition of Gotham and for general corporate purposes

Forward-Looking Statements

From time to time the Company has made and may continue to make written or oral forward-looking statements regarding our outlook or expectations for earnings, revenues, expenses, capital levels, asset quality or other future financial or business performance, strategies or expectations, or the impact of legal, regulatory or supervisory matters on our business operations or performance. This Annual Report on Form 10-K also includes forward-looking statements. With respect to all such forward-looking statements, you should review our Risk Factors discussion in Item 1A. and our Cautionary Statement Regarding Forward-Looking Information included in Item 7.

Market Area

Provident Bank specializes in the delivery of service and solutions to business owners, their families, and the consumers in communities within the greater New York City marketplace through teams of dedicated and experienced relationship managers and offers a complete line of commercial, business, and consumer banking products and services. Collectively, we now operate 35 full service financial centers which serve the greater New York metropolitan area. There are 13 offices located in Rockland County, New York, 12 offices in Orange County, New York, 8 offices in contiguous Sullivan, Ulster, Westchester and Putnam Counties in New York, 1 office in New York City, and 1 office in Bergen County, New Jersey which operates under the name PBNY Bank, a division of Provident Bank, New York. Provident Bank offers a complete line of commercial, business banking (small business) and consumer banking products and services.

Management Strategy

We operate as an regional 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. 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 focusing on core deposit generation, and quality loan growth with emphasis on growing commercial loan balances. We believe this provides a favorable platform for long-term sustainable growth. 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. Imperatives for the Company will be to grow revenue and earnings by expanding client acquisitions, continuing to improve credit metrics and significantly improving operating efficiency levels. To achieve these goals we will focus on high value client segments, the expansion of delivery channels and distribution to increase client acquisitions, execute effectively by creating a highly productive performance culture, reduce operating costs, and to proactivly manage enterprise risk. Highlights of management’s business strategy are as follows:

Operating within a defined market. As an regional bank, we emphasize the centralized nature of our decision-making to respond more effectively to the needs of our customers while providing a full range of financial services to the businesses, individuals, and municipalities in our market area. We offer a broad range of financial products to meet the changing needs of the marketplace, including Internet banking, cash management services and, on a selective basis, sweep accounts. In addition, we offer wealth management services to meet the investing needs of individuals, corporations and not-for-profit entities. As a result, we are able to provide, at the local level, the financial services required to meet the needs of the majority of existing and potential customers in our market.

Enhancing Customer Service. We are committed to providing superior customer service as a way to differentiate us from our competition. Our team based approach provides a level of distinctive service across our franchise. Clients are served by a focused group of professionals that provide commercial and consumer solutions to their clients. Additionally as part of our commitment to service, we have been engaged in Sunday banking since 1995. In addition, we offer multiple access channels to our customers, including our branch and ATM network, Internet banking, our Customer Care Telephone Center and our Automated Voice Response

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system. We reinforce in our employees a commitment to customer service through extensive training, recognition programs and measurement of service standards.

Growing and maintaining a Diversified Loan Portfolio. We offer a broad range of loan products to commercial businesses, real estate owners, developers and individuals. To support this activity, we maintain commercial, consumer and residential loan departments staffed with experienced professionals to promote the continued growth and prudent management of loan assets. We have experienced consistent and significant growth in our commercial loan portfolio while continuing to provide our residential mortgage and consumer lending services. As a result, we believe that we have developed a high quality diversified loan portfolio with a favorable mix of loan types, maturities and yields. We have currently deemphasized acquisition and development lending for residential housing development of single family homes, as this area has been the most affected by the economy of the region.

Expanding our Banking Franchise. Management intends to continue the expansion of the banking franchise and to increase the number of customers served and products used by businesses and consumers in our market area. Our strategy is to deliver exceptional customer service, which depends on up-to-date technology and multiple access channels, as well as courteous personal contact from a trained and motivated workforce. This approach has resulted in a relatively high level of core deposits, which drives a lower overall cost of funds. Management intends to maintain this strategy, which will require ongoing investment in banking locations and technology to support exceptional service levels for Provident Bank’s customers. Recent expansion efforts have been focused on the greater NYC metro area through the addition of commercial teams. We intend to concentrate on certain segments of the market, in particular focusing on business with revenues up to $100 million, small business with revenues of up to $5 million and financially secure families.

Lending Activities

General. We primarily originate commercial real estate loans, multifamily real estate and commercial business loans. We are de-emphasizing acquisition, development and construction loans. We also originate residential mortgage loans in our market area on a fixed-rate and adjustable-rate (“ARM”) basis collateralized by residential real estate, and consumer loans such as home equity lines of credit, homeowner loans and personal loans. We may sell longer-term one- to four-family residential loans and participations in some commercial loans for portfolio management purposes.

Commercial Real Estate Lending. We originate real estate loans secured predominantly by first liens on commercial real estate. The commercial properties are predominantly non-residential properties such as office buildings, shopping centers, retail strip centers, industrial and warehouse properties and, to a lesser extent, more specialized properties such as assisted living and nursing homes, churches, mobile home parks, restaurants and motel/hotels. We may, from time to time, purchase commercial real estate loan participations. We also originate multifamily properties to diversify the portfolio. We target commercial real estate loans with initial principal balances between $1.0 million and $15.0 million. At September 30, 2012, loans secured by commercial real estate totaled $1.1 billion, or 50.6% of our total loan portfolio and consisted of 1,124 loans outstanding. Substantially all of our commercial real estate loans are secured by properties located in our primary market area.

The majority of our commercial real estate loans are written as five-year adjustable-rate or ten-year fixed-rate mortgages and typically have ten year balloon maturities up to ten years. Amortization on these loans is typically based on 25-year payout schedules. Margins generally range from 200 basis points to 300 basis points above a reference index.

In the underwriting of commercial real estate loans, we generally lend up to 75% of the property’s appraised value. Decisions to lend are based on the economic viability of the property and the creditworthiness of the borrower. In evaluating a proposed commercial real estate loan, we primarily emphasize the ratio of the property’s projected net cash flow to the loan’s debt service requirement (generally targeting a minimum ratio of 120%), computed after deduction for a vacancy factor and property expenses we deem appropriate. In addition, a personal guarantee of the loan or a portion thereof is generally required from the principal(s) of the borrower, except for loans secured by multi-family properties. We require title insurance insuring the priority of our lien, fire and extended coverage casualty insurance, and flood insurance, if appropriate, in order to protect our security interest in the underlying property.

Commercial real estate loans typically involve significant loan balances concentrated with single borrowers or groups of related borrowers. In addition, the payment experience on loans secured by income-producing properties typically depends on the successful operation of the related real estate project and thus may be subject to adverse conditions in the real estate market and in the general economy. For commercial real estate loans in which the borrower is a significant tenant, repayment experience also depends on the successful operation of the borrower’s underlying business.

Commercial Business Loans. We make various types of secured and unsecured commercial loans to customers in our market area for the purpose of financing equipment acquisition, expansion, working capital and other general business purposes. The terms of

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these loans generally range from less than one year to seven years. The loans are either negotiated on a fixed-rate basis or carry adjustable interest rates indexed to a lending rate that is determined internally, or a short-term market rate index. At September 30, 2012, we had 1,994 commercial business loans outstanding with an aggregate balance of $343.3 million, or 16.2% of our total loan portfolio. As of September 30, 2012, the average commercial business loan balance was approximately $172,000. A determination is made as to the applicant’s ability to repay in accordance with the proposed terms as well as an overall assessment of the risks involved. An evaluation is made of the applicant to determine character and capacity to manage. Personal guarantees of the principals are generally required, except in the case of not-for-profit corporations. In addition to an evaluation of the loan applicant’s financial statements, a determination is made of the probable adequacy of the primary and secondary sources of repayment to be relied upon in the transaction. Credit agency reports of the applicant’s credit history supplement the analysis of the applicant’s creditworthiness. Checking with other banks and trade investigations may also be conducted. Collateral supporting a secured transaction also is analyzed to determine its marketability. For small business loans and lines of credit, generally those not exceeding $250,000, we use a modified credit scoring system that enables us to process the loan requests more quickly and efficiently.

Residential Mortgage Lending. We offer conforming and non-conforming, fixed-rate and adjustable-rate residential mortgage loans with maturities of up to 30 years and maximum loan amounts generally up to $4.0 million that are fully amortizing with monthly or bi-weekly loan payments. This portfolio totaled $350.0 million, or 16.5% of our total loan portfolio at September 30, 2012.

Residential mortgage loans are generally underwritten according to Fannie Mae and Freddie Mac guidelines for loans they designate as acceptable for purchase. Loans that conform to such guidelines are referred to as “conforming loans.” We generally originate fixed-rate loans in amounts up to the maximum conforming loan limits as established by Fannie Mae and Freddie Mac, which are currently $417,000 for single-family homes or higher in certain areas as determined by the Federal Housing Finance Agency. Private mortgage insurance is generally required for loans with loan-to-value ratios in excess of 80%. In order to reduce exposure to rising interest rates, we sold or securitized a portion of our conforming fixed rate real estate- residential loans originated, totaling $79.1 million and $52.5 million in proceeds for the fiscal years ending September 30, 2012 and 2011, respectively.

We also originate loans above conforming limits, referred to as “jumbo loans,” which have been underwritten to substantially the same credit standards as conforming loans. These loans are generally intended to be held in our loan portfolio. Depending on market interest rates and our capital and liquidity position, we may retain all of our newly originated longer term fixed-rate residential mortgage loans, or from time to time we may decide to sell all or a portion of such loans in the secondary mortgage market to government sponsored entities such as Fannie Mae and Freddie Mac or other purchasers. Our bi-weekly residential mortgage loans that are retained in our portfolio result in shorter repayment schedules than conventional monthly mortgage loans, and are repaid through an automatic deduction from the borrower’s savings or checking account. We retain the servicing rights on a large majority of loans sold to generate fee income and reinforce our commitment to customer service, although we may also sell non-conforming loans to mortgage banking companies, generally on a servicing-released basis. As of September 30, 2012, loans serviced for others, excluding loan participations, totaled $207.4 million.

We currently offer several ARM loan products secured by residential properties with rates that are fixed for a period ranging from six months to ten years. After the initial term, if the loan is not already refinanced, the interest rate on these loans generally resets every year based upon a contractual spread or margin above the average yield on U.S. Treasury securities, adjusted to a constant maturity of one year, as published weekly by the Federal Reserve Board and subject to certain periodic and lifetime limitations on interest rate changes. Many of the borrowers who select these loans have shorter-term credit needs than those who select long-term, fixed-rate loans. ARM loans generally pose different credit risks than fixed-rate loans primarily because the underlying debt service payments of the borrowers rise as interest rates rise, thereby increasing the potential for default.

We require title insurance on all of our residential mortgage loans, and we also require that borrowers maintain fire and extended coverage or all risk casualty insurance (and, if appropriate, flood insurance) in an amount at least equal to the lesser of the loan balance or the replacement cost of the improvements, but in any event in an amount calculated to avoid the effect of any coinsurance clause. Residential first mortgage loans generally are required to have a mortgage escrow account from which disbursements are made for real estate taxes and for hazard and flood insurance.

Acquisition, Development and Construction Loans. Historically, we originated acquisition, development and construction (“ADC”) loans to builders in our market area. The Company has deemphasized this lending due to the economic slow down and declines in the real estate market. Effective August 2011, our policy is to consider ADC loans only on an exception basis. ADC loans totaled $144.1 million, or 6.8% of our total loan portfolio at September 30, 2012, a decline of $31.9 million, compared to September 30, 2011. ADC loans help finance the purchase of land intended for further development, including single-family houses, multi-family housing, and commercial income properties. In some cases, we may make an acquisition loan before the

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borrower has received approval to develop the land as planned. In general, the maximum loan-to-value ratio for a land acquisition loan is 50% of the appraised value of the property, although higher loan-to-value ratios may be allowed for certain borrowers we deem to be lower risk. We also make development loans to builders in our market area to finance improvements to real estate, consisting mainly of single-family subdivisions, typically to finance the cost of utilities, roads, sewers and other development costs. Builders generally rely on the sale of single-family homes to repay development loans, although in some cases the improved building lots may be sold to another builder. The maximum loan amount is generally limited to the cost of the improvements plus limited approval of soft costs. In general, we do not originate loans with interest reserves. A portion of our ADC loans acquired through the purchase of participations do carry interest reserves. The total of these ADC participation loans with interest reserves at September 30, 2012 were $7.6 million. Advances are made in accordance with a schedule reflecting the cost of the improvements.

We also make construction loans to area builders which are not affected by our new policy. In the case of residential subdivisions, these loans finance the cost of completing homes on the improved property. Advances on construction loans are made in accordance with a schedule reflecting the cost of construction. Repayment of construction loans on residential subdivisions is normally expected from the sale of units to individual purchasers except in cases of owner occupied construction loans. Owner occupied commercial construction loans totaled $10.1 million at September 30, 2012. In the case of income-producing property, repayment is usually expected from permanent financing upon completion of construction. We commit to provide the permanent mortgage financing on most of our construction loans on income-producing property. Collateral coverage and risk profile is maintained by restricting the number of model or speculative units in each project.

ADC lending exposes us to greater credit risk than permanent mortgage financing. The repayment of ADC loans depends upon the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. In the event we make an acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. These events may adversely affect the borrower and the collateral value of the property. Development and construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. In recent years as a result of the economic downturn, most projects have performed behind schedule, requiring the borrowers to carry these projects for a longer period than was originally contemplated when we approved the credit facilities. As a result many of the borrowers have been utilizing other sources to maintain debt service or have been unable to maintain debt service requirements. As of September 30, 2012 $22.6 million of acquisition and development loans are being amortized from outside sources of cash flow.

Consumer Loans. We originate a variety of consumer and other loans, including homeowner loans, home equity lines of credit, new and used automobile loans, and personal unsecured loans, including fixed-rate installment loans and variable lines of credit. As of September 30, 2012, consumer loans totaled $209.6 million, or 9.9% of the total loan portfolio. We offer fixed-rate, fixed-term second mortgage loans, referred to as homeowner loans, and we also offer adjustable-rate home equity lines of credit secured by junior liens on residential properties. As of September 30, 2012, homeowner loans totaled $35.0 million or 1.7% of our total loan portfolio. The disbursed portion of home equity lines of credit totaled $165.2 million, or 7.8% of our total loan portfolio at September 30, 2012, with $110.4 million remaining undisbursed.

Other consumer loans include personal loans including overdraft lines of credit and loans secured by new or used automobiles.

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Loan Portfolio Composition. The following table sets forth the composition of our loan portfolio, excluding loans held for sale, by type of loan at the dates indicated.

	September 30,
	2012					2011					2010					2009					2008
	Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent		Amount			Percent
	(Dollars in thousands)
Real-estate residential mortgage loans	$	350,022		16.5	%	$	389,765		22.9	%	$	434,900		25.5	%	$	460,728		27.0	%	$	513,381		29.6	%
Commercial real estate loans	1,072,504			50.6		703,356			41.4		579,232			34.0		546,767			32.1		554,811			32.0
Commercial business loans	343,307			16.2		209,923			12.3		217,927			12.8		242,629			14.2		243,642			14.1
Acquisition, development & construction	144,061			6.8		175,931			10.3		231,258			13.6		201,611			11.9		170,979			9.9
Total commercial loans	1,559,872			73.6		1,089,210			64.0		1,028,417			60.4		991,007			58.2		969,432			56.0
Home equity lines of credit	165,200			7.8		174,521			10.2		176,134			10.4		180,205			10.6		166,491			9.6
Homeowner loans	34,999			1.7		40,969			2.4		48,941			2.9		54,941			3.2		58,569			3.4
Other consumer loans	9,379			0.4		9,334			0.5		13,149			0.8		16,376			1.0		23,680			1.4
Total consumer loans	209,578			9.9		224,824			13.1		238,224			14.1		251,522			14.8		248,740			14.4
Total loans	2,119,472			100.0	%	1,703,799			100.0	%	1,701,541			100.0	%	1,703,257			100.0	%	1,731,553			100.0	%
Allowance for loan losses	(28,282		)			(27,917		)			(30,843		)			(30,050		)			(23,101		)
Total loans, net	$	2,091,190				$	1,675,882				$	1,670,698				$	1,673,207				$	1,708,452

Loan Portfolio Maturities and Yields. The following table summarizes the scheduled repayments of our loan portfolio at September 30, 2012. Demand loans, loans having no stated repayment schedule or maturity, and overdraft loans are reported as being due in one year or less. Weighted average rates are computed based on the rate of the loan at September 30, 2012.

	Residential Mortgage				Commercial Real Estate				Commercial Business				ADC				Consumer				Total
	Amount		Weighted Average Rate		Amount		Weighted Average Rate		Amount		Weighted Average Rate		Amount		Weighted Average Rate		Amount		Weighted Average Rate		Amount		Weighted Average Rate
	(Dollars in thousands)
Due During the Years Ending September 30,
2013	$	6,362	5.17	%	$	64,491	5.38	%	$	93,987	4.14	%	$	89,831	4.50	%	$	4,817	13.67	%	$	259,488	4.77	%
2014 to 2017	26,142		4.78		439,009		4.93		116,924		4.41		44,961		5.05		11,557		7.28		638,593		4.88
2017 and beyond	317,518		5.26		569,004		5.01		132,396		4.27		9,269		3.34		193,204		4.29		1,221,391		4.87
Total	$	350,022	5.22	%	$	1,072,504	5.00	%	$	343,307	4.29	%	$	144,061	4.60	%	$	209,578	4.67	%	$	2,119,472	4.86	%

The following table sets forth the scheduled repayments of fixed- and adjustable-rate loans at September 30, 2012 that are contractually due after September 30, 2013.

	Fixed		Adjustable		Total
	(Dollars in thousands)
Residential mortgage loans	$	271,716	$	71,944	$	343,660
Commercial real estate loans	482,201		525,812		1,008,013
Commercial business loans	110,891		138,429		249,320
Acquisition, development & construction	13,309		40,921		54,230
Total commercial loans	606,401		705,162		1,311,563
Consumer loans	41,765		162,996		204,761
Total loans	$	919,882	$	940,102	$	1,859,984

Loan Originations, Purchases, Sales and Servicing. While we originate both fixed-rate and adjustable-rate loans, our ability to generate each type of loan depends upon borrower demand, market interest rates, borrower preference for fixed versus adjustable-rate loans, and the interest rates offered on each type of loan by other lenders in our market area. These include competing banks,

6

savings banks, credit unions, mortgage banking companies, life insurance companies and similar financial services firms. Loan originations are derived from a number of sources, including branch office personnel, commercial banking officers, existing customers, borrowers, builders, attorneys, real estate broker referrals and walk-in customers.

Our loan origination and sales activity may be adversely affected by a rising interest rate environment or period of falling house prices, which typically result in decreased loan demand, while declining interest rates may stimulate increased loan demand. Accordingly, the volume of loan origination, the mix of fixed and adjustable-rate loans, and the profitability of this activity can vary from period to period.

During fiscal year 2012, we did not sell any loans through securitzations. However, we sold $79.1 million as whole loans to Freddie Mac. We are a qualified loan servicer for both Fannie Mae and Freddie Mac. Our policy generally has been to retain the servicing rights for all conforming loans sold. We therefore continue to collect payments on the loans, maintain tax escrows and applicable fire and flood insurance coverage, and supervise foreclosure proceedings, if necessary. We retain a portion of the interest paid by the borrower on the loans as consideration for our servicing activities.

Loan Approval/Authority and Underwriting. The Board of Directors has established the Credit Risk Committee (the “CRC”) to oversee the lending functions of the Bank. The CRC reviews loans approved by the Bank’s Management Credit Committee, oversees the performance of the Bank’s loan portfolio and its various components, assists in the development of strategic initiatives to enhance portfolio performance, and considers matters for approval and recommendation to the Board of Directors.

The Management Credit Committee (the “MCC”) consists of the President and Chief Executive Officer, Chief Risk Officer, Chief Credit Officer, and other senior lending personnel. The MCC is authorized to approve loans within the existing policy limits established by the Board. For loans that are not within policy guidelines but are nonetheless deemed desirable, the MCC may recommend approval to the CRC, which in turn may recommend approval to the Board.

The MCC may also authorize lending authority to individual Bank officers for both single and dual initial approval authority. Other than overdrafts, the only single initial lending authorities are for credit secured small business loans up to $250,000. and up to $500,000 if secured by residential property. Two loan officers with sufficient authority acting together may approve loans up to $2 million.

We have established a risk rating system for our commercial business loans, commercial and multi-family real estate loans, and ADC loans to builders. The risk rating system assesses a variety of factors to rank the risk of default and risk of loss associated with the loan. These ratings are performed by commercial credit personnel who do not have responsibility for loan originations. We determine our maximum loan-to-one-borrower limits based upon the rating of the loan. The large majority of loans fall into four categories. The maximum for the best-rated borrowers is $20 million, $15 million for the next group of borrowers, $12 million for the third group and $6 million for the last group. Sub-limits apply based on reliance on any single property, and for commercial business loans. On occasion, the Board of Directors may approve higher exposure limits for loans to one borrower in an amount not to exceed the legal lending limit of the Bank. The Board may also authorize the Chief Risk Officer, or Management Credit Committee to approve loans for specific borrowers up to a designated Board approved limit in excess of the policy limit, for that borrower.

In connection with our residential and commercial real estate loans, we generally require property appraisals to be performed by independent appraisers who are approved by the Board. Appraisals are then reviewed by the appropriate loan underwriting areas. Under certain conditions, appraisals may not be required for loans under $250,000 or in other limited circumstances. We also require title insurance, hazard insurance and, if indicated, flood insurance on property securing mortgage loans. Title insurance is not required for consumer loans under $100,000, such as home equity lines of credit and homeowner loans and in connection with certain residential mortgage refinances.

Loan Origination Fees and Costs. In addition to interest earned on loans, we receive loan origination fees. Such fees vary with the volume and type of loans and commitments made, and competitive conditions in the mortgage markets, which in turn respond to the demand and availability of money. We defer loan origination fees and costs, and amortize such amounts as an adjustment to yield over the term of the loan by use of the level yield method. Deferred loan origination fees (net of deferred costs) were $310,000 at September 30, 2012.

To the extent that originated loans are sold with servicing retained, we capitalize a mortgage servicing asset at the time of the sale. The capitalized amount is amortized thereafter (over the period of estimated net servicing income) as a reduction of servicing fee income. The unamortized amount is fully charged to income when loans are prepaid. Originated mortgage servicing rights with an amortized cost of $1.6 million are included in other assets at September 30, 2012.

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Loans to One Borrower. At September 30, 2012, our five largest aggregate amounts loaned to any one borrower and certain related interests (including any unused lines of credit) consisted of secured and unsecured financing of $24.4 million, $22.1 million, $19.9 million, $18.9 million and $18.8 million. In addition, we have 35 relationships with an amount loaned of $10 million or more, with an aggregate exposure of $503.1 million. See “Regulation — Regulation of Provident Bank — Loans to One Borrower” for a discussion of applicable regulatory limitations.

Delinquent Loans, Troubled Debt Restructure, Impaired Loans, Other Real Estate Owned and Classified Assets

Collection Procedures for Residential and Commercial Mortgage Loans and Consumer Loans. A late notice is automatically generated after the 16th day of loan payment due date requesting the payment due plus any late charge that was assessed. Legal action, notwithstanding ongoing collection efforts are put in place after 90 days of the original due date for failure to make payment. Unsecured consumer loans are generally charged-off after 120 days. For commercial loans, procedures vary depending upon individual circumstances.

Loans Past Due and Non-Performing Assets. Loans are reviewed on a regular basis, and are placed on non-accrual status when either principal or interest is 90 days or more past due, unless well secured and in the process of collection. In addition, loans are placed on non-accrual status when, in the opinion of management, there is sufficient reason to question the borrower’s ability to continue to meet principal or interest payment obligations. Interest accrued and unpaid at the time a loan is placed on non-accrual status is reversed from interest income related to current year income and charged to the allowance for loan losses with respect to income that was recorded in the prior fiscal year. Interest payments received on non-accrual loans are not recognized as income unless warranted based on the borrower’s financial condition and payment record. Appraisals are performed at least annually on criticized/classifieds loans. At September 30, 2012, we had non-accrual loans of $35.4 million and $4.4 million of loans 90 days past due and still accruing interest, which were well secured and in the process of collection. At September 30, 2011, we had non-accrual loans of $36.5 million and $4.1 million of loans 90 days past due and still accruing interest.

Impaired Loans. 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 are based on one of three measures — the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s observable market price, or the fair value of the collateral if the loan is collateral dependent. If the measure of an impaired loan is less than its recorded investment, a portion of the allowance for loan losses is allocated so that the loan is reported, net, at its measured value. Impaired loans substantially consist of non-performing loans and accruing and performing troubled debt restructured loans. At September 30, 2012, we had $53.3 million in impaired loans with $3.2 million in specific allowances.

Other Real Estate Owned. Real estate acquired as a result of foreclosure or by deed in lieu of foreclosure is classified as real estate owned (“REO”) until such time as it is sold. When real estate is acquired through foreclosure or by deed in lieu of foreclosure, it is recorded at the lower of book value or fair value less cost to sell. If the fair value of the property is less than the loan balance, the difference is charged against the allowance for loan losses. At September 30, 2012, we had 24 foreclosed properties with a recorded balance of $6.4 million.

Troubled Debt Restructure. The Company may modify loans to certain borrowers who are experiencing financial difficulty. If the terms of the modification include a concession, as defined by US GAAP guidance, the loan as modified is considered a trouble debt restructure (“TDR”). Nearly all of these loans are secured by real estate. Total TDRs were $24.9 million at September 30, 2012, of which $10.9 million were classified as nonaccrual and $14.1 million were performing according to terms and still accruing interest income. TDRs still accruing interest income were modified for a troubled borrower, who was still performing in accordance with the terms of their loan. The majority of TDRs consisted of four relationships totaling $8.7 million, $4.8 million, $3.5 million and $812,000 respectively. Included in the total of $17.8 million of these four relationships are $8.7 million of non performing loans. The loan modifications included actions such as extension of maturity date or the lowering of interest rates and monthly payments. The amount of commitments to lend borrowers with loans that have been modified is $4.2 million at September 30, 2012. 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.

Classification of Assets. Our policies, consistent with regulatory guidelines, provide for the classification of loans and other assets that are considered to be of lesser quality as substandard, doubtful, or loss assets. An asset is considered substandard if it is inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Substandard assets include those characterized by the distinct possibility that the bank will sustain some loss if the deficiencies are not corrected. Assets classified as “doubtful” have all of the weaknesses inherent in those classified as “substandard” with the added characteristic that the weaknesses present make collection or liquidation in full, on the basis of currently existing facts, conditions, and values,

8

highly questionable and improbable. Assets classified as “loss” are those considered uncollectible and of such little value that their continuance as assets is not warranted and are charged off. Assets that do not expose us to risk sufficient to warrant classification in one of the aforementioned categories, but which possess potential weaknesses that deserve our close attention, designated as “special mention”. As of September 30, 2012, we had $42.4 million of assets designated as “special mention”.

Our determination as to the classification of our assets and the amount of our loss allowances are subject to review by our regulatory agencies, which can order the establishment of additional loss allowances. Management regularly reviews our asset portfolio to determine whether any assets require classification in accordance with applicable regulations. On the basis of management’s review of our assets at September 30, 2012, classified assets consisted of substandard and doubtful loans of $88.7 million.

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Loan Portfolio Delinquencies. The following table sets forth certain information with respect to our loan portfolio delinquencies at the dates indicated.

	Loans Delinquent For
	30-89 Days			90 Days & over still accruing & non- accrual			Total
	Number	Amount		Number	Amount		Number	Amount
	(Dollars in thousands)
At September 30, 2012
Real estate — residential mortgage	10	$	1,352	56	$	11,314	66	$	12,666
Real estate — commercial mortgage	7	1,875		30	10,453		37	12,328
Commercial business loans	7	237		2	344		9	581
Acquisition, development & construction	9	7,067		29	15,404		38	22,471
Consumer, including home equity loans	22	1,816		21	2,299		43	4,115
Total	55	$	12,347	138	$	39,814	193	$	52,161
At September 30, 2011
Real estate — residential mortgage	8	$	1,212	40	$	7,976	48	$	9,188
Real estate — commercial mortgage	4	1,105		34	13,214		38	14,319
Commercial business loans	2	490		3	243		5	733
Acquisition, development & construction	4	4,265		24	16,984		28	21,249
Consumer, including home equity loans	20	794		26	2,150		46	2,944
Total	38	$	7,866	127	$	40,567	165	$	48,433
At September 30, 2010
Real estate — residential mortgage	1	$	113	36	$	8,033	37	$	8,146
Real estate — commercial mortgage	4	1,469		26	9,857		30	11,326
Commercial business loans	2	3,403		6	1,376		8	4,779
Acquisition, development & construction	2	6,681		11	5,730		13	12,411
Consumer, including home equity loans	27	681		22	1,844		49	2,525
Total	36	$	12,347	101	$	26,840	137	$	39,187
At September 30, 2009
Real estate — residential mortgage	2	$	390	32	$	7,357	34	$	7,747
Real estate — commercial mortgage	2	398		24	6,803		26	7,201
Commercial business loans	18	999		8	457		26	1,456
Acquisition, development & construction	1	366		20	11,270		21	11,636
Consumer, including home equity loans	22	494		13	582		35	1,076
Total	45	$	2,647	97	$	26,469	142	$	29,116
At September 30, 2008
Real estate — residential mortgage	19	$	4,106	19	$	4,218	38	$	8,324
Real estate — commercial mortgage	8	1,666		12	3,832		20	5,498
Commercial business loans	29	1,318		35	2,811		64	4,129
Acquisition, development & construction loans	—	—		9	5,596		9	5,596
Consumer, including home equity	43	435		41	421		84	856
Total	99	$	7,525	116	$	16,878	215	$	24,403

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Risk elements. The table below sets forth the amounts and categories of our non-performing assets at the dates indicated.

	September 30,
	2012			2011			2010			2009			2008
	(Dollars in thousands)
Non-performing loans:
Real estate — residential mortgage	$	9,051		$	7,485		$	6,080		$	4,425		$	1,731
Real estate — commercial mortgage	8,815			11,225			6,886			5,826			3,100
Commercial business loans	344			243			1,376			457			2,811
Acquisition, development & construction	15,404			16,538			5,730			10,830			5,596
Consumer, including home equity loans	1,830			986			1,341			371			351
Accruing loans past due 90 days or more	4,370			4,090			5,427			4,560			3,289
Total non-performing loans	$	39,814		$	40,567		$	26,840		$	26,469		$	16,878
Foreclosed properties	6,403			5,391			3,891			1,712			84
Total non-performing assets	$	46,217		$	45,958		$	30,731		$	28,181		$	16,962
Troubled Debt Restructures still accruing and not included above	$	14,077		$	8,470		$	16,047		$	674		$	—
Ratios:
Non-performing loans to total loans	1.87		%	2.38		%	1.58		%	1.55		%	0.97		%
Non-performing assets to total assets	1.15		%	1.46		%	1.02		%	0.93		%	0.57		%

For the year ended September 30, 2012, gross interest income that would have been recorded had the non-accrual loans at the end of the year remained on accrual status throughout the year amounted to $1.7 million. Interest income actually recognized on such loans totaled $470,000.

Allowance for Loan Losses. We provide for loan losses based on the allowance method. Accordingly, all loan losses are charged to the related allowance and all recoveries are credited to it. Additions to the allowance for loan losses are provided by charges to income based on various factors which, in management’s judgment, deserve current recognition in estimating probable incurred losses. Management regularly reviews the loan portfolio and makes provisions for loan losses in order to maintain the allowance for loan losses in accordance with accounting principles generally accepted in the United States of America. The allowance for loan losses consists of amounts specifically allocated to non-performing loans and other criticized or classified loans (if any), as well as allowances determined for each major loan category. After we establish a provision for loans that are known to be non-performing, criticized or classified, we calculate a percentage to apply to the remaining loan portfolio to estimate the probable incurred losses inherent in that portion of the portfolio. These percentages are determined by management, based on historical loss experience for the applicable loan category, and are adjusted to reflect our evaluation of:

• levels of, and trends in, delinquencies and non-accruals;

• trends in volume and terms of loans;

• effects of any changes in lending policies and procedures;

• experience, ability, and depth of lending management and staff;

• national and local economic trends and conditions;

• concentrations of credit by such factors as location, industry, inter-relationships, and borrower; and

• for commercial loans, trends in risk ratings.

The Company analyzes loans by two broad segments or classes: real estate secured loans and loans that are either unsecured or secured by other collateral. The segments or classes considered real estate secured are: residential mortgage loans; commercial mortgage loans; commercial mortgage community business loans; ADC loans; homeowner loans, and equity lines of credit. The segments or classes considered unsecured or secured by other than real estate collateral are: commercial business loans, commercial community business loans, and consumer loans. In all segments or classes, loans are reviewed for impairment once they are past due 90 days or more past due, or are classified substandard or doubtful. If a loan is deemed to be impaired in one of the real estate secured segments, it is generally considered collateral dependent. If the value of the collateral securing a collateral dependent impaired loan is less than the loan's carrying value, a charge-off is recognized equal to the difference between the appraised value and the book value of the loan. Additionally impairment reserves are recognized for estimated costs to hold and to liquidate and a 10% discount of the appraisal value. The ranges for the costs to hold and liquidate are 12-22% for the following segments: commercial mortgage loans, commercial mortgage community business mortgage loans and ADC loans and 7-13 % for homeowner loans, equity lines of credit, and residential mortgage loans. Impaired loans in the real estate secured segments are re-appraised using a summary or drive-by appraisal report every six to nine months.

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For loans in the commercial community business loans segmentwe charge off the full amount of the loan when it becomes 90 days or more past due, or earlier in the case of bankruptcy, after giving effect to any cash or marketable securities pledged as collateral for the loan.  For loans in the commercial business loan segment, we conduct a cash flow projection, and charge off the difference between the net present value of the cash flows discounted at the effective note rate and the carrying value of the loan, and generally recognize a 10% impairment reserve to account for the imprecision of our estimates.  However, most of these cases receipt of future cash flows is too unreliable to be considered probable, resulting in the charge off of the entire balance of the loan.  For unsecured consumer loans, charge offs are recognized once the loan is 90 days or more past due or the borrower files for bankruptcy protection.

ADC lending is considered higher risk and exposes us to greater credit risk than permanent mortgage financing. The repayment of land acquisition, development and construction loans depends upon the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. In the event we make an acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. These events may adversely affect the borrower and the collateral value of the property. ADC loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. All of these factors are considered as part of the underwriting, structuring and pricing of the loan. We have deemphasized this type of loan.

Commercial real estate loans subject us to the risks that the property securing the loan may not generate sufficient cash flow to service the debt or the borrower may use the cash flow for other purposes. In addition, the foreclosure process, if necessary may be slow and properties may deteriorate in the process. The market values are also subject to a wide variety of factors, including general economic conditions, industry specific factors, environmental factors, interest rates and the availability and terms of credit.

Commercial business lending is also higher risk because repayment depends on the successful operation of the business which is subject to a wide range of risks and uncertainties. In addition, the ability to successfully liquidate collateral, if any, is subject to a variety of risks because we must gain control of assets used in the borrower’s business before foreclosing which we cannot be assured of doing, and the value in a foreclosure sale or other means of liquidation is subject to downward pressure.

When we evaluate residential mortgage loans and equity loans we weigh both the credit capacity of the borrower and the collateral value of the home. As unemployment and underemployment increases, and liquidity reserves if any, diminish, the credit capacity of the borrower decreases, which increases our risk. Also, after a period of years of stable or increasing home values in our market, home prices have declined from a high in 2005 and 2006. We are exposed to risk in both our first mortgage and equity lending programs due to declines in values in recent years. We are also exposed to risk because the time to foreclose is significant and has become longer under current conditions.

The carrying value of loans is periodically evaluated and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of their examination process, our regulatory agencies periodically review the allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

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Allowance for Loan Losses by Year. The following table sets forth activity in our allowance for loan losses for the years indicated.

	September 30,
	2012			2011			2010			2009			2008
	(Dollars in thousands)
Balance at beginning of period	$	27,917		$	30,843		$	30,050		$	23,101		$	20,389
Charge-offs:
Real estate — residential mortgage	(2,551		)	(2,140		)	(749		)	(461		)	(97		)
Real estate — commercial mortgage	(2,707		)	(1,802		)	(987		)	(902		)	(627		)
Commercial business loans	(1,526		)	(5,400		)	(6,578		)	(7,271		)	(3,596		)
Acquisition, development & construction	(4,124		)	(8,939		)	(848		)	(1,515		)	—
Consumer, including home equity loans	(1,901		)	(1,989		)	(1,168		)	(1,140		)	(609		)
	(12,809		)	(20,270		)	(10,330		)	(11,289		)	(4,929		)
Recoveries:
Real estate — residential mortgage	356			15			3			2			—
Real estate — commercial mortgage	528			2			23			—			—
Commercial business loans	1,116			605			670			249			291
Acquisition, development & construction	299			10			261			200			—
Consumer, including home equity loans	263			128			166			187			150
	2,562			760			1,123			638			441
Net charge-offs	(10,247		)	(19,510		)	(9,207		)	(10,651		)	(4,488		)
Provision for loan losses	10,612			16,584			10,000			17,600			7,200
Balance at end of period	$	28,282		$	27,917		$	30,843		$	30,050		$	23,101
Ratios:
Net charge-offs to average loans outstanding	0.56		%	1.17		%	0.56		%	0.62		%	0.28		%
Allowance for loan losses to non-performing loans	71		%	69		%	115		%	114		%	137		%
Allowance for loan losses to total loans	1.48		%	1.64		%	1.81		%	1.76		%	1.33		%

Allocation of Allowance for Loan Losses. The following tables set forth the allowance for loan losses allocated by loan category, the total loan balances by category (excluding loans held for sale), and the percent of loans in each category to total loans at the dates indicated. The allowance for loan losses allocated to each category is not necessarily indicative of future losses in any particular category and does not restrict the use of the allowance to absorb losses in other categories.

	September 30,
	2012						2011						2010
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real estate — residential mortgage	$	4,359	$	349,382	16.48	%	$	3,498	$	389,765	22.88	%	$	2,641	$	434,900	25.56	%
Real estate — commercial mortgage	7,230		968,703		45.70	%	5,568		703,356		41.28	%	5,915		579,231		34.04	%
Commercial business loans	4,603		242,242		11.43	%	5,945		209,923		12.31	%	8,970		217,928		12.81	%
Acquisition, development & construction	8,526		144,061		6.80	%	9,895		175,931		10.33	%	9,752		231,258		13.59	%
Consumer, including home equity loans	3,564		209,320		9.88	%	3,011		224,824		13.20	%	3,565		238,224		14.00	%
Loans acquired in Gotham acquisition	—		205,764		9.71	%	—		—		—	%	—		—		—	%
Total	$	28,282	$	2,119,472	100.00	%	$	27,917	$	1,703,799	100.00	%	$	30,843	$	1,701,541	100.00	%

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	September 30,
	2009						2008
	Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans		Allowance for Loan Losses		Loan Balances by Category		Percent of Loans in Each Category to Total Loans
	(Dollars in thousands)
Real estate — residential mortgage	$	3,106	$	460,728	27.04	%	$	1,494	$	513,381	29.60	%
Real estate — commercial mortgage	4,824		460,649		27.05	%	5,793		554,811		32.00	%
Real estate — commercial mortgage (CBL)	2,871		86,118		5.06	%
Commercial business loans	3,917		142,908		8.39	%	7,051		243,642		14.10	%
Commercial business loans (CBL)	5,011		99,721		5.85	%
Acquisition, development & construction	7,680		201,611		11.84	%	6,841		170,979		9.90	%
Consumer, including home equity loans	2,641		251,522		14.77	%	1,922		248,740		14.40	%
Total	$	30,050	$	1,703,257	100.00	%	$	23,101	$	1,731,553	100.00	%

Investment Securities

Our investment securities policy is established by our Board of Directors. This policy dictates that investment decisions be made based on the safety of the investment, liquidity requirements, potential returns, cash flow targets, and consistency with our interest rate risk management strategy. The Board’s Enterprise Risk Committee oversees our investment program and evaluates on an ongoing basis our investment policy and objectives. Our chief financial officer, chief executive officer, treasurer and certain other senior officers have the authority to purchase and sell securities within specific guidelines established by the investment policy. In addition, a summary of all transactions are reviewed by the Enterprise Risk Committee at least quarterly.

Our current investment policy generally permits securities investments in debt securities issued by the U.S. government and U.S. agencies, municipal bonds and notes, and corporate debt obligations, as well as investments in preferred and common stock of government agencies and government sponsored enterprises such as Fannie Mae, Freddie Mac and the Federal Home Loan Bank of New York (federal agency securities) and, to a lesser extent, other equity securities. Securities in these categories are classified as “investment securities” for financial reporting purposes. The policy also permits investments in mortgage-backed securities, including pass-through securities issued and guaranteed by Fannie Mae, Freddie Mac and Ginnie Mae as well as collateralized mortgage obligations (“CMOs”) issued or backed by securities issued by these government agencies. Also permitted are investments in securities issued or backed by the Small Business Administration, privately issued mortgage-backed securities and CMOs, and asset-backed securities collateralized by auto loans, credit card receivables, and home equity and home improvement loans. Our current investment strategy uses a risk management approach of diversified investing in fixed-rate securities with short- to intermediate-term maturities, as well as adjustable-rate securities, which may have a longer term to maturity. The emphasis of this approach is to increase overall securities investment yields while managing interest rate and credit risk.

FASB ASC Topic 320, Investments - Debt and Equity Securities, requires that, at the time of purchase, we designate a security as held to maturity, available for sale, or trading, depending on our ability to hold the security and our intent. Securities available for sale are reported at fair value, while securities held to maturity are reported at amortized cost. We do not have a trading portfolio. Excluding mortgage-backed securities and CMO’s, management sold $253.3 million in investment securities at amortized cost and realized net gains of $8.4 million for the fiscal year ended September 30, 2012

Government and Agency Securities. At September 30, 2012, we held government and agency securities as available for sale with a fair value of $408.8 million, consisting primarily of agency obligations with maturities of more than one year through ten years. In addition, we held $22.2 million in government and agency securities as held to maturity at amortized cost. While these securities generally provide lower yields than other investments such as mortgage-backed securities, our current investment strategy is to maintain investments in such instruments to the extent appropriate for liquidity purposes and as collateral for borrowings and municipal deposits.

Corporate Notes. At September 30, 2012, we did not have any corporate debt securities. Corporate bonds have a higher risk of default due to adverse changes in the creditworthiness of the issuer. In recognition of this risk, our policy limits investments in corporate bonds to securities with maturities of ten years or less and rated “A” or better by at least one nationally recognized rating agency at time of purchase, and to a total investment of no more than $2.0 million per issuer and a total corporate bond portfolio limit of 5% of assets.

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Municipal Bonds. At September 30, 2012, we held $175.9 million at carrying value in bonds issued by states and political subdivisions, $19.4 million of which were classified as held to maturity at amortized cost and are mainly unrated and $156.5 million of which were classified as available for sale at fair value. The policy limits investments in municipal bonds to securities with maturities of 20 years or less and rated as investment grade by at least one nationally recognized rating agency at the time of purchase, and favors issues that are insured, however we also purchase securities that are issued by local government entities within our service area. Such local entity obligations generally are not rated, and are subject to internal credit reviews. In addition, the policy generally imposes an investment limitation of $5.0 million per municipal issuer and a total municipal bond portfolio limit of 10% of assets. At September 30, 2012, we did not hold any obligations that were rated less than “A-” as available for sale.

Equity Securities. At September 30, 2012, we held equity securities as available for sale had a fair value of $1.1 million. We also held $19.2 million (at cost) of Federal Home Loan Bank of New York (“FHLBNY”) common stock, a portion of which must be held as a condition of membership in the Federal Home Loan Bank System, with the remainder held as a condition to our borrowing under the Federal Home Loan Bank advance program. Dividends on FHLBNY stock recorded during the year ended September 30, 2012 amounted to $849,000. We did not hold preferred shares of Freddie Mac or Fannie Mae, auction rate securities, or pooled trust securities, for the year ended September 30, 2012. We held approximately $809,000 in fair value of equity securities in a local bank.

Mortgage-Backed Securities. We purchase mortgage-backed securities in order to: (i) generate positive interest rate spreads with minimal administrative expense; (ii) lower credit risk as a result of the guarantees provided by Freddie Mac and Fannie Mae; a (iii) increase liquidity, and (iv) maintain our status as a thrift for charter and income tax purposes. We invest primarily in mortgage-backed securities issued or sponsored by Freddie Mac, and Fannie Mae or private issuers for CMOs. To a lesser extent, we also invest in securities backed by agencies of the U.S. Government, such as Ginnie Mae. At September 30, 2012, our mortgage-backed securities portfolio totaled $543.8 million, consisting of $444.5 million available for sale securities at fair value and $99.3 million held to maturity securities at amortized cost. The total mortgage-backed securities portfolio includes CMOs of $221.0 million, consisting of $193.1 million available for sale securities at fair value and $27.9 million held to maturity at amortized cost. The CMO portfolio contains securities issued by private issuers totaling $4.7 million at amortized cost and $4.6 million fair value, of which $4.4 million at amortized cost are below investment grade, to which we have recorded $47,000 in other than temporary impairment as of September 30, 2012.

Mortgage-backed securities are created by pooling mortgages and issuing a security collateralized by the pool of mortgages with an interest rate that is less than the interest rate on the underlying mortgages. Mortgage-backed securities typically represent a participation interest in a pool of single-family or multi-family mortgages, although most of our mortgage-backed securities are collateralized by single-family mortgages. The issuers of such securities (generally U.S. Government agencies and government sponsored enterprises, including Fannie Mae, Freddie Mac and Ginnie Mae) pool and resell the participation interests in the form of securities to investors, such as us, and guarantee the payment of principal and interest to these investors. Investments in mortgage-backed securities involve a risk in addition to the guarantee of repayment of principal outstanding that actual prepayments will be greater or less than the prepayment rate estimated at the time of purchase, which may require adjustments to the amortization of any premium or accretion of any discount relating to such instruments, thereby affecting the net yield and duration of such securities. We review prepayment estimates for our mortgage-backed securities at purchase to ensure that prepayment assumptions are reasonable considering the underlying collateral for the securities at issue and current interest rates, and to determine the yield and estimated maturity of the mortgage-backed securities portfolio. Periodic reviews of current prepayment speeds are performed in order to ascertain whether prepayment estimates require modification that would cause amortization or accretion adjustments. As a result of our reviews, we anticipated an acceleration of prepayments. Management sold $89.1 million in mortgage-backed securities at amortized cost, including CMO’s, at amortized cost and realized $2.1 million in net gains on the sales. These proceeds were reinvested in securities with yields which were lower than the recorded yields of the securities sold and which had a more diversified risk profile.

A portion of our mortgage-backed securities portfolio is invested in CMOs, including Real Estate Mortgage Investment Conduits (“REMICs”), backed by Fannie Mae and Freddie Mac and certain private issuers. CMOs and REMICs are types of debt securities issued by special-purpose entities that aggregate pools of mortgages and mortgage-backed securities and create different classes of securities with varying maturities and amortization schedules, as well as a residual interest, with each class possessing different risk characteristics. The cash flows from the underlying collateral are generally divided into “tranches” or classes that have descending priorities with respect to the distribution of principal and interest cash flows, while cash flows on pass-through mortgage-backed securities are distributed pro rata to all security holders. Our practice is to limit fixed-rate CMO investments primarily to the early-to-intermediate tranches, which have the greatest cash flow stability. Floating rate CMOs are purchased with emphasis on the relative trade-offs between lifetime rate caps, prepayment risk, and interest rates.

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Available for Sale Portfolio. The following table sets forth the composition of our available for sale portfolio at the dates indicated.

	September 30,
	2012				2011				2010
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Investment Securities:
U.S. Government securities	$	—	$	—	$	—	$	—	$	71,071	$	72,293
Federal agency obligations	404,820		408,823		199,741		204,648		344,154		346,019
Corporate Bonds	—		—		16,984		17,062		29,406		30,540
State and municipal securities	146,136		156,481		177,666		188,684		180,879		191,657
Equity securities	1,087		1,059		1,192		1,192		1,146		889
Total investment securities available for sale	552,043		566,363		395,583		411,586		626,656		641,398
Mortgage-Backed Securities:
Pass-through securities:
Fannie Mae	155,601		161,407		136,699		139,991		149,084		153,188
Freddie Mac	81,509		85,260		98,511		100,675		56,632		58,452
Ginnie Mae	4,488		4,778		4,973		5,180		9,047		9,315
CMOs and REMICs	191,867		193,064		81,170		82,412		38,338		38,659
Total mortgage-backed securities available for sale	433,465		444,509		321,353		328,258		253,101		259,614
Total securities available for sale	$	985,508	$	1,010,872	$	716,936	$	739,844	$	879,757	$	901,012

At September 30, 2012, our available for sale federal agency securities portfolio, at fair value, totaled $408.8 million, or 10.20% of total assets. Of the federal agency portfolio, based on amortized cost, none had maturities of one year or less, and $404.8 million had maturities of between one and ten years and a weighted average yield of 1.56%. The agency securities portfolio currently includes both callable debentures and non callable debentures.

At September 30, 2012, our available for sale state and municipal notes securities portfolio, at fair value totaled $156.5 million or 3.9% of total assets. Of the state and municipal note securities portfolio, based on amortized cost, had $2.4 million in securities with a final maturity of one year or less and a weighted average yield of 2.58%; $19.9 million maturing in one to five years with a weighted average yield of 3.44%; $86.4 million maturing in five to ten years with a weighted average yield of 3.54% and $37.5 million maturing in greater than ten years with a weighted average yield of 3.97%. Equity securities available for sale at September 30, 2012 had a fair value of $1.1 million.

At September 30, 2012, $444.5 million of our available for sale mortgage-backed securities, at fair value, consisted of pass-through securities, which totaled 11.0% of total assets and $193.1 million of CMO securities, at fair value. The total amortized cost of these pass- through securities was $241.6 million and consisted of $155.6 million, $81.5 million and $4.5 million of Fannie Mae, Freddie Mac and Ginnie Mae mortgage-backed securities, respectively, with respective weighted average yields of 2.47%, 2.70% and 2.63%. At the same date, the fair value of our available for sale CMO portfolio totaled $193.1 million, or 4.8% of total assets, and consisted of CMOs issued by government sponsored agencies such as Fannie Mae, Freddie Mac and $4.6 million sold by private party issuers. The amortized cost of these CMOs result in a weighted average yield of 2.06%. We own both fixed-rate and floating-rate CMOs. The underlying mortgage collateral for our portfolio of CMOs available for sale at September 30, 2012 had contractual maturities of over five years. However, as with mortgage-backed pass-through securities, the actual maturity of a CMO may be less than its stated contractual maturity due to prepayments of the underlying mortgages and the terms of the CMO tranche owned.

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Held to Maturity Portfolio. The following table sets forth the composition of our held to maturity portfolio at the dates indicated.

	September 30,
	2012				2011				2010
	Amortized Cost		Fair Value		Amortized Cost		Fair Value		Amortized Cost		Fair Value
	(Dollars in thousands)
Investment Securities:
Federal agencies	$	22,236	$	22,342	$	29,973	$	29,857	$	—	$	—
State and municipal securities	19,376		20,435		18,583		19,691		27,879		28,815
Other	1,500		1,526		1,500		1,539		1,000		1,038
Total investment securities held to maturity	43,112		44,303		50,056		51,087		28,879		29,853
Mortgage-Backed Securities:
Pass-through securities:
Fannie Mae	28,637		29,849		1,298		1,361		1,835		1,931
Freddie Mac	42,706		44,053		32,858		32,841		2,389		2,513
Ginnie Mae	—		—		—		—		16		17
CMOs and REMICs	27,921		28,119		25,828		25,983		729		748
Total mortgage-backed securities held to maturity	99,264		102,021		59,984		60,185		4,969		5,209
Total securities held to maturity	$	142,376	$	146,324	$	110,040	$	111,272	$	33,848	$	35,062

At September 30, 2012, our held to maturity federal agency securities portfolio, at amortized cost, totaled $22.2 million, or 0.6% of total assets. Of the federal agency portfolio, based on amortized cost, none had maturities of five years or less, and $22.2 million had maturities of between five and ten years and a weighted average yield of 2.11%. The agency securities portfolio currently includes only callable debentures.

State and municipal securities totaled $19.4 million at amortized cost (primarily unrated obligations) and consisted of $9.9 million, with a final maturity of one year or less and a weighted average yield of 2.38%; $1.9 million maturing in one to five years, with a weighted average yield of 3.77%; $3.4 million maturing in five to ten years, with a weighted average yield of 4.18% and $4.2 million maturing in greater than ten years, with a weighted average yield of 4.24%.

At September 30, 2012, our held to maturity mortgage-backed securities portfolio totaled $99.3 million at amortized cost, consisting of: none with contractual maturities of one year or less, $282,000 with a weighted average yield of 5.63% and contractual maturities within five years, and $99.0 million with a weighted average yield of 2.58% with contractual maturities of greater than ten years; CMOs of $27.9 million are included in this portfolio. While the contractual maturity of the CMOs underlying collateral is greater than ten years, the actual period to maturity of the CMOs may be shorter due to prepayments on the underlying mortgages and the terms of the CMO tranche owned.

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Portfolio Maturities and Yields. The following table summarizes the composition and maturities of the investment debt securities portfolio and the mortgage-backed securities portfolio at September 30, 2012. Maturities are based on the final contractual payment dates, and do not reflect the impact of prepayments or early redemptions that may occur. State and municipal securities yields have not been adjusted to a tax-equivalent basis. ($ in thousands)

	One Year or Less				More than One Year through Five Years				More than Five Years through Ten Years				More than Ten Years				Total Securities
	Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Weighted Average Yield		Amortized Cost		Fair Value		Weighted Average Yield
	(Dollars in thousands)
Available for Sale:
Mortgage-Backed Securities
Fannie Mae	$	108	4.14	%	$	5,688	2.13	%	$	33,201	2.27	%	$	116,604	2.54	%	$	155,601	$	161,407	2.47	%
Freddie Mac	168		3.71		393		3.80		—		—		80,948		2.69		81,509		85,260		2.70
Ginnie Mae	—		—		—		—		—		—		4,488		2.63		4,488		4,778		2.63
CMOs and REMICs	—		—		—		—		9,628		1.99		182,239		2.06		191,867		193,064		2.06
Total	276		3.88		6,081		2.24		42,829		2.21		384,279		2.35		433,465		444,509		2.33
Investment Securities
U.S. Government and agency securities	—		—		107,391		1.33		297,429		1.64		—		—		404,820		408,823		1.56
State and municipal	2,365		2.58		19,850		3.44		86,439		3.54		37,482		3.97		146,136		156,481		3.62
Total	2,365		2.58		127,241		1.66		383,868		2.07		37,482		3.97		550,956		565,304		2.10	%
Total debt securities available for sale	$	2,641	2.72	%	$	133,322	1.68	%	$	426,697	2.08	%	$	421,761	2.49	%	$	984,421	$	1,009,813	2.20	%
Held to Maturity:
Mortgage-Backed Securities
Fannie Mae	$	—	—	%	$	76	4.81	%	$	—	—	%	$	28,561	2.93	%	$	28,637	$	29,849	2.93	%
Freddie Mac	—		—		206		5.93		—		—		42,500		2.59		42,706		44,053		2.61	%
CMOs and REMICs	—		—		—		—		—		—		27,921		2.18		27,921		28,119		2.18	%
Total	—		—		282		5.63		—		—		98,982		2.57		99,264		102,021		2.58	%
Investment Securities
U.S. Government and agency securities	—		—	%	—		—		22,236		2.11		—		—		22,236		22,342		2.11	%
State and municipal	9,867		2.38		1,930		3.77		3,375		4.18		4,204		4.24		19,376		20,435		3.24	%
Other	250		1.51		1,250		2.53		—		—		—		—		1,500		1,526		2.36	%
Total	10,117		2.36		3,180		3.28		25,611		2.38		4,204		4.24		43,112		44,303		5.42	%
Total debt securities held to maturity	$	10,117	2.36	%	$	3,462	3.47	%	$	25,611	2.38	%	$	103,186	2.64	%	$	142,376	$	146,324	3.07	%

Sources of Funds

General. Deposits, borrowings, repayments and prepayments of loans and securities, proceeds from sales of loans and securities, proceeds from maturing securities and cash flows from operations are the primary sources of our funds for use in lending, investing and for other general corporate purposes.

Deposits. We offer a variety of deposit accounts with a range of interest rates and terms. Our deposit accounts consist of savings accounts, NOW accounts, checking accounts, money market accounts, club accounts, certificates of deposit and IRAs and other qualified plan accounts. We provide a variety of commercial checking accounts and other products for businesses.

At September 30, 2012, our deposits totaled $3.1 billion. Interest-bearing deposits totaled $2.2 billion, and non-interest-bearing demand deposits totaled $947.3 million. NOW, savings and money market deposits totaled $1.8 billion at September 30, 2012. Also at that date, we had a total of $387.5 million in certificates of deposit, of which $344.0 million had maturities of one year or

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less. Although we have a significant portion of our deposits in shorter-term certificates of deposit, we monitor activity on these accounts and, based on historical experience and our current pricing strategy, we believe we will retain a large portion of such accounts upon maturity, although we may have to match competitive rates to retain many of these accounts.

Our deposits are obtained predominantly from the areas in which our branch offices are located. We rely on our favorable locations, customer service and competitive pricing to attract and retain these deposits. While we accept certificates of deposit in excess of $100,000 for which we may provide preferential rates, we do not actively solicit such deposits as they are more difficult to retain than core deposits. Our limited purpose commercial bank subsidiary, Provident Municipal Bank, accepts municipal deposits. Municipal time accounts (certificates of deposit) are generally obtained through a bidding process, and tend to carry higher average interest rates than retail certificates of deposit of similar term.

We utilize brokered deposits on a limited basis as a diversification of wholesale funding on a secured basis. We maintain limits for the use of wholesale deposit and other short term funding in general less than 10% of total assets. Most of the brokered deposit funding maintained by the bank has a maturity to coincide with the anticipated inflows of deposits through municipal tax collections.

Listed below are the Company’s brokered deposits:

	September 30, 2012		September 30, 2011
	(Dollars in thousands)
Savings	$	13,344	$	—
Money market	46,566		5,725
Reciprocal CDAR’s 1	1,354		2,746
CDAR’s one way	764		3,366
Total brokered deposits	$	62,028	$	11,837

¹  Certificate of deposit account registry service

Distribution of Deposit Accounts by Type. The following table sets forth the distribution of total deposit accounts, by account type, at the dates indicated.

	For the year ended September 30,
	2012				2011				2010
	Amount		Percent		Amount		Percent		Amount		Percent
	(Dollars in thousands)
Demand deposits:
Retail	$	167,050	5.4	%	$	194,299	8.5	%	$	174,731	8.2	%
Commercial & municipal	780,254		25.0		456,927		19.8		355,126		16.6
Total demand deposits	947,304		30.4		651,226		28.3		529,857		24.8
Business & municipal NOW deposits	234,368		7.5		237,865		10.4		276,100		12.9
Personal NOW deposits	213,755		6.9		164,637		7.2		139,517		6.5
Savings deposits	506,538		16.3		429,825		18.7		392,321		18.3
Money market deposits	821,704		26.4		509,483		22.2		427,334		19.9
Subtotal	2,723,669		87.5		1,993,036		86.8		1,765,129		82.4
Certificates of deposit	387,482		12.5		303,659		13.2		377,573		17.6
Total deposits	$	3,111,151	100.0	%	$	2,296,695	100.0	%	$	2,142,702	100.0	%

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As of September 30, 2012 and September 30, 2011 the Company had $901.7 million and $614.8 million, respectively, in municipal deposits. Of these amounts, approximately $425.0 million and $284.0 million were deposits related to school district tax deposits due on September 30, 2012 and 2011, respectively, which we generally retain only for a short period. The following table sets forth the distribution of average deposit accounts by account category with the average rates paid at the dates indicated.

	September 30,
	2012						2011						2010
	Average Balance		Interest		Average Rate Paid		Average Balance		Interest		Average Rate Paid		Average Balance		Interest		Average Rate Paid
	(Dollars in thousands)
Non interest bearing deposits	$	520,265	$	—	—	%	$	472,388	$	—	—	%	$	429,655	$	—	—	%
NOW deposits	399,819		483		0.12	%	315,623		595		0.19	%	280,304		579		0.21	%
Savings deposits (1)	485,624		393		0.08	%	432,227		444		0.10	%	397,760		403		0.10	%
Money market deposits	671,325		2,194		0.33	%	489,347		1,595		0.33	%	419,152		1,456		0.35	%
Certificates of deposit	289,230		2,511		0.87	%	373,142		3,470		0.93	%	451,509		6,079		1.35	%
Total interest bearing deposits	1,845,998		$	5,581	0.30	%	1,610,339		$	6,104	0.38	%	1,548,725		$	8,517	0.55	%
Total deposits	$	2,366,263					$	2,082,727					$	1,978,380

(1) Includes club accounts and mortgage escrow balances

Certificates of Deposit by Interest Rate Range. The following table sets forth information concerning certificates of deposit by interest rate ranges at the dates indicated.

	At September 30, 2012
	Period to Maturity												Total at September 30,
	Less than One Year		One to Two Years		Two to Three Years		More than Three Years		Total		Percent of Total		2011		2010
	(Dollars in thousands)
Interest Rate Range:
1.00% and below	$	224,994	$	7,703	$	4,396	$	2,056	$	239,149	61.7	%	$	245,777	$	285,923
1.01% to 2.00%	108,115		2,634		220		3,867		114,836		29.6	%	15,024		35,527
2.01% to 3.00%	1,046		4,020		5,985		518		11,569		3.0	%	16,842		21,261
3.01% to 4.00%	3,303		5,798		—		—		9,101		2.4	%	10,526		17,092
4.01% to 5.00%	6,272		6,252		—		—		12,524		3.2	%	15,002		17,115
5.01% to 6.00%	303		—		—		—		303		0.1	%	488		655
Total	$	344,033	$	26,407	$	10,601	$	6,441	$	387,482	100	%	$	303,659	$	377,573

Certificates of Deposit by Time to Maturity. The following table sets forth certificates of deposit by time remaining until maturity as of September 30, 2012.

	Maturity
	3 months or Less		Over 3 to 6 Months		Over 6 to 12 Months		Over 12 Months		Total
	(Dollars in thousands)
Certificates of deposit less than $100,000	$	67,692	$	42,852	$	46,422	$	27,000	$	183,966
Certificates of deposit of $100,000 or more (¹)	99,036		45,839		42,192		16,449		203,516
	$	166,728	$	88,691	$	88,614	$	43,449	$	387,482

 __________________

⁽¹⁾ The weighted interest rates for these accounts, by maturity period, are 1.08% for 3 months or less; 1.06% for 3 to 6 months; 1.04% for 6 to 12 months; and 2.37% for over 12 months. The overall weighted average interest rate for accounts of $100,000 or more was 1.17%

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Short-term Borrowings. Our short-term borrowings (less than one year) consist of advances and overnight borrowings, and in 2011 includes $51.5 million of debt guaranteed by the FDIC which matured in February 2012. At September 30, 2012, we had access to additional Federal Home Loan Bank advances of up to an additional $200 million in overnight advances on a collateralized basis. The following table sets forth information concerning balances and interest rates on our short-term borrowings at the dates and for the years indicated.

	At or For the Years Ended September 30,
	2012			2011			2010
	(Dollars in thousands)
Balance at end of year	$	10,136		$	61,500		$	44,873
Average balance during year	27,286			55,098			91,442
Maximum outstanding at any month end	103,500			128,200			184,040
Weighted average interest rate at end of year	1.88		%	2.96		%	3.82		%
Weighted average interest rate during year	0.78		%	1.67		%	2.33		%

Competition

The greater New York metropolitan area is a highly-competitive market area. The New York metropolitan area has a high concentration of financial institutions, many of which are significantly larger institutions with greater financial resources than us, and many of which are our competitors to varying degrees. Our competition for loans comes principally from commercial banks, savings banks, mortgage banking companies, credit unions, insurance companies and other financial service companies. Our most direct competition for deposits has historically come from commercial banks, savings banks and credit unions. We face additional competition for deposits from non-depository competitors such as the mutual fund industry, securities and brokerage firms and insurance companies. We have emphasized personalized banking and the advantage of local decision-making in our banking business and this strategy appears to have been well-received in our market area. We do not rely on any individual, group, or entity for a material portion of our deposits. Although we have not done so in the past, net interest income could be adversely affected should competitive pressures cause us to increase our interest rates paid on deposits in order to maintain our market share.

Employees

As of September 30, 2012, we had 456 full-time employees and 66 part-time employees. The employees are not represented by a collective bargaining unit and we consider our relationship with our employees to be good.

Regulation

General

As a savings and loan holding company, Provident Bancorp is supervised and regulated by the Board of Governors of the Federal Reserve System (“Federal Reserve”). Its federal savings bank subsidiary, Provident Bank, is supervised and regulated by the Office of the Comptroller of the Currency (“OCC”). As a state-chartered, FDIC-insured bank, Provident Municipal Bank is regulated by the New York State Department of Financial Services and the Federal Deposit Insurance Corporation (“FDIC”). Because it is an FDIC-insured institution, Provident Bank also is subject to regulation by the FDIC. Provident Bank's relationship with its depositors and borrowers is governed to a great extent by both federal and state laws, especially in matters concerning the ownership of deposit accounts and the form and content of Provident Bank's loan documents. As a regulated financial services firm, our relationships and good standing with regulators are of fundamental importance to the continuation and growth of our businesses. The Federal Reserve, OCC, FDIC, SEC, and other regulators have broad enforcement powers, and powers to approve, deny, or refuse to act upon our applications or notices to conduct new activities, acquire or divest businesses or assets, or reconfigure existing operations.

Certain federal banking laws have been amended by the Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”). See “Regulation - Financial Reform Legislation” below. Among the more significant changes made by the Dodd-Frank Act, effective July 21, 2011, the Office of Thrift Supervision (“OTS”) ceased to exist as a separate entity and was merged into the OCC. The OCC has assumed the OTS' role as primary federal regulator and supervisor of Provident Bank. The Federal Reserve has become the primary supervisor and regulator with respect to Provident Bancorp. Some of the numerous governmental regulations to which Provident Bancorp and its subsidiaries are subject are summarized below. These summaries are not complete and you should refer to these laws and regulations for more information. Failure to comply with applicable laws and regulations could result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders. Applicable laws and regulations may change in the future and any such change could have a material adverse impact on Provident Bancorp, Provident Bank or Provident Municipal Bank.

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In addition, Provident Bancorp and its subsidiaries are subject to examination by regulators, which results in examination reports and ratings (which are not publicly available) that can impact the conduct and growth of our businesses. These examinations consider not only compliance with applicable laws and regulations, but also capital levels, asset quality and risk, management ability and performance, earnings, liquidity, and various other factors. An examination downgrade by any of our federal bank regulators potentially can result in the imposition of significant limitations on our activities and growth. These regulatory agencies generally have broad discretion to impose restrictions and limitations on the operations of a regulated entity where the agencies determine, among other things, that such operations are unsafe or unsound, fail to comply with applicable law or are otherwise inconsistent with laws and regulations or with the supervisory policies of these agencies. This supervisory framework could materially impact the conduct, growth and profitability of our operations.

Holding Company Regulation

Provident Bancorp is a unitary savings and loan holding company because it owns only one savings association. The Federal Reserve has supervisory and enforcement authority over Provident Bancorp and its non-bank subsidiaries. Among other things, this authority permits the Federal Reserve to restrict or prohibit activities that are determined to be a risk to Provident Bank.

Provident Bancorp must generally limit its activities to those permissible for (i) financial holding companies under section 4(k) of the Bank Holding Company Act, or (ii) multiple savings and loan holding companies under the Savings and Loan Holding Company Act. Activities in which a financial holding company may engage are those considered financial in nature or those incidentals or complementary to financial activities. These activities include lending, trust and investment advisory activities, insurance agency activities, and securities and insurance underwriting activities. Activities permitted to multiple savings and loan holding companies include certain real estate investment activities, and other activities permitted to bank holding companies under the Bank Holding Company Act, as implemented by the Federal Reserve's Regulation Y.

Federal law prohibits Provident Bancorp, directly or indirectly, or through one or more subsidiaries, from acquiring control of another savings association, another bank, a savings and loan holding company, or a bank holding company without prior written approval of the Federal Reserve Bank. It also prohibits the acquisition or retention of, with specified exceptions, more than 5% of the voting shares of a savings association or savings and loan holding company that is not already a subsidiary, without prior written approval of the Federal Reserve Bank. In evaluating applications for acquisition, the Federal Reserve Bank must consider the financial and managerial resources and future prospects of the company and association involved the effect of the acquisition on the association, the risk to the Deposit Insurance Fund, the convenience and needs of the community to be served, and competitive factors.

As a public company with securities registered under the Securities Exchange Act of 1934, Provident Bancorp also is subject to that statute and to the Sarbanes-Oxley Act.

Dividends

Provident Bancorp is a legal entity separate and distinct from its savings association and other subsidiaries, and its principal sources of funds are cash dividends paid by these subsidiaries. OCC regulations limit the amount of capital distributions, including cash dividends, stock repurchases, and other transactions charged to the institution's capital account, that can be made by Provident Bank. Furthermore, because Provident Bank is a subsidiary of a holding company, it must file a notice with the Federal Reserve at least 30 days before Provident Bank's Board of Directors declares a dividend. This notice may be disapproved if the Federal Reserve finds that:

• the savings association would be undercapitalized or worse following the dividend;

• the proposed dividend raises safety and soundness concerns; or

• the dividend would violate a prohibition contained in any statute, regulation, enforcement action, or agreement with or condition imposed by an appropriate federal banking agency.

Provident Bank must file an application (rather than a notice) with the OCC if, among other things, the total amount of all capital distributions, including the proposed distribution, for the calendar year exceeds the institution's net income for that year, plus retained net income for the preceding two years.

As of October 1, 2012, the maximum amount of dividends that could be declared by Provident Bank for fiscal year 2012, without regulatory approval, is net retained income for calendar year 2012, plus $10.0 million.

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Capital Requirements

As a federal savings association, Provident Bank is subject to OCC capital requirements. The OCC regulations require savings associations to meet three minimum capital standards: at least an 8% risk-based capital ratio, a 4% leverage ratio (3% for institutions receiving the highest supervisory rating), and at least a 1.5% tangible capital ratio.

The OCC's risk-based capital standards require a savings association to maintain a Tier 1 (core) capital to risk-weighted assets ratio of at least 4%, and a total (core plus supplementary) capital to risk-weighted assets ratio of at least 8%. To determine these ratios, the regulations define core capital as common stockholders' equity (including retained earnings), certain non-cumulative perpetual preferred stock and related surplus, and minority interests in equity accounts of fully consolidated subsidiaries, less intangible capital, other than certain mortgage servicing rights and credit card relationships. Supplementary capital is defined as including cumulative perpetual preferred stock, mandatory convertible securities, subordinated debt, intermediate preferred stock, allowance for loan and lease losses up to a maximum of 1.25% of risk-weighted assets, and up to 45% of net unrealized gains on available-for-sale equity securities with readily determinable fair market values. The amount of supplementary capital included as part of total capital cannot exceed 100% of core capital. In determining the amount of risk-weighted assets, all assets, including certain off-balance sheet assets, are multiplied by a risk-weight factor ranging from 0% to 100%, assigned by the OCC capital regulation based on the risks inherent in the type of asset. The OCC's leverage ratio is defined as the ratio of core capital to adjusted total assets. The tangible capital ratio is defined as the ratio of tangible capital (the components of which are very similar to those of core capital) to adjusted total assets.

In addition to generally applicable capital requirements, Provident Bank has committed to the OCC to have an 8% Tier 1 leverage ratio upon consummation of the Gotham Bank merger and thereafter to maintain capital at comparable levels consistent with its capital management policy. At the time of the merger with Gotham Bank, Provident Bank's Tier 1 leverage ratio exceeded 8% and Provident Bank believes it continues to be in compliance with this commitment under the OCC's average asset calculation method.

The FDIC-insured bank, Provident Municipal Bank is subject to the risk-based capital and leverage capital requirements of the FDIC. These requirements are similar to the OCC risk-based capital and leverage capital requirements described above.

The Dodd-Frank Act contains a number of provisions that affect the capital requirements applicable to Provident Bank and to Provident Bancorp, including the requirement that thrift holding companies be subject to consolidated capital requirements. See “Regulation - Financial Reform Legislation,” below. In addition, on September 12, 2010, the Basel Committee adopted the Basel III capital rules. These rules, which will be phased in over a period of years, set new standards for common equity, Tier 1 and total capital, determined on a risk-weighted basis. The U.S. federal banking agencies issued three notices of proposed rulemaking (NPRs) in June 2012 that would revise and replace the current regulatory capital rules to adopt the Basel III capital rules. The NPRs proposed, among other rules, to revise risk-based and leverage capital requirements for all insured banks and savings associations, and top-tier savings and loan holding companies domiciled in the United States. The proposals suggested an effective date of January 1, 2013, but on November 9, 2012 the U.S. federal banking agencies announced that they do not expect any of the Basel III proposed rules to be implemented by the suggested January 2013 date. The enactment of the Basel III rules could increase the required capital levels of Provident Bank and Provident Bancorp.

The OCC, the FDIC and other federal banking agencies have broad powers under current federal law to take “prompt corrective action” in connection with depository institutions that do not meet minimum capital requirements. For this purpose, the law establishes five capital categories for insured depository institution: “well-capitalized”, “adequately capitalized,” “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized.” To be considered “well capitalized,” an institution must maintain a total risk-based capital ratio of 10% or greater, a Tier 1 risk-based capital ratio of 6% or greater, a leverage capital ratio of 5% or greater, and not be subject to any order or written directive to meet and maintain a specific capital level for any capital measure. An “adequately capitalized” institution must have a Tier 1 capital ratio of at least 4%, a total risk- based capital ratio of at least 8%, and a leverage capital ratio of at least 4%.

If an institution fails to meet these capital requirements, progressively more severe restrictions are placed on the institution's operations, management and capital distributions, depending on the capital category in which an institution is placed. Any institution that is “adequately capitalized” is, absent a waiver from the FDIC, prohibited from accepting or renewing brokered deposits. Any institution that is determined to be “undercapitalized,” “significantly undercapitalized,” or “critically undercapitalized” is required to raise additional capital and may not accept or renew brokered deposits. In addition, numerous mandatory supervisory actions become immediately applicable to the insured depository institution, including, but not limited to, restrictions on growth, investment activities, capital distributions, and affiliate transactions. The federal banking agencies also may take any one of a number of discretionary supervisory actions against undercapitalized institutions, including the replacement of senior executive officers and directors. The agencies also may appoint a receiver or conservator for a savings association that is “critically undercapitalized”.

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At September 30, 2012, the capital of Provident Bank and Provident Municipal Bank exceeded all applicable capital requirements, and each met the requirements to be treated as a “well-capitalized” institution.

Deposit Insurance

The FDIC insures deposit accounts in Provident Bank and Provident Municipal Bank generally up to a maximum of $250,000 per ownership category of each separately-insured depositor. As FDIC-insured depository institutions, Provident Bank and Provident Municipal Bank are required to pay deposit insurance premiums based on the risk each institution poses to the Deposit Insurance Fund. Currently, the annual FDIC assessment rate ranges from $0.025 to $0.45 (not including the depository institution debt adjustment) per $100 of the institution's assessment base, based on the institution's relative risk to the Deposit Insurance Fund, as measured by the institution's regulatory capital position and other supervisory factors. The FDIC also has the authority to raise or lower assessment rates on insured deposits, subject to limits, and to impose special additional assessments.

The Dodd-Frank Act also temporarily increases the maximum amount of federal deposit insurance coverage for non-interest bearing transaction accounts to an unlimited amount from December 31, 2010 through December 31, 2012. The Dodd-Frank Act also broadens the base for FDIC deposit insurance assessments. Assessments are now based on the average consolidated total assets less tangible equity of an insured depository institution. In addition, the Dodd-Frank Act raises the minimum designated reserve ratio, which the FDIC is required to set each year for the Deposit Insurance Fund, to 1.35% and requires that the Deposit Insurance Fund meets that minimum ratio by September 30, 2020. It eliminates the requirement that the FDIC pay dividends to depository institutions when the reserve ratio exceeds certain thresholds. The FDIC is required to offset the effect of the increased reserve ratio for depository institutions with assets of less than $10 billion. The FDIC has issued regulations to implement these provisions of the Dodd-Frank Act. It has, in addition, established a higher reserve ratio of 2% as a long-term goal beyond what is required by statute. There is no implementation deadline for the 2% ratio.

In addition, the FDIC collects funds from insured institutions sufficient to pay interest on debt obligations of the Financing Corporation ("FICO"). FICO is a government-sponsored entity that was formed to borrow the money necessary to carry out the closing and ultimate disposition of failed thrift institutions by the Resolution Trust Corporation. For the quarter ended September 30, 2012, the annualized FICO assessment was equal to $0.01 for each $100 of insured domestic deposits maintained at an institution.

Regulation of Provident Bank

Business Activities. As a federal savings association, Provident Bank derives its deposit, lending and investment powers from the Home Owners' Loan Act (the “HOLA”) and the regulations of the OCC. Under these laws and regulations, Provident Bank may offer any type of deposit accounts, make or invest in mortgage loans secured by residential and commercial real estate, make and invest in commercial and consumer loans, certain types of debt securities and certain other loans and assets, subject in certain cases to certain limits. Provident Bank also may establish and operate subsidiaries that engage in activities permissible for Provident Bank, as well as service corporation subsidiaries that engage in activities not permissible for Provident Bank to engage in directly (such as real estate investment, and securities and insurance brokerage). Pursuant to this authority, Provident Bank operates certain subsidiaries, including Provest Services Corp. I, which holds an investment in a limited partnership that operates an assisted living facility; Provest Services Corp. II, a licensed insurance agency, which contracts with LPL Financial Corp. in order to offer annuities and insurance products to customers of Provident Bank. Provident Bank also controls Provident REIT, Inc. and WSB Funding Corp. to hold residential and commercial real estate loans and the Bank maintains several corporations which hold foreclosed properties acquired by Provident Bank. Certain of Provident Bank's subsidiaries are subject to separate regulatory requirements, such as those applicable to insurance agencies and investment advisors. Hardenburgh Abstract Company Inc., a title insurance agency; Provident Risk Management Inc., a captive insurance company insuring Provident affiliated risk; and Hudson Valley Investment Advisors, LLC (HVIA), an investment advisory firm are subsidiaries of Provident Bancorp. However, on November 16, 2012 substantially all of the assets of HVIA were sold to a nonaffiliated party.

Qualified Thrift Lender Test. As a federal savings association, Provident Bank must meet the qualified thrift lender (“QTL”) test. Under the QTL test, Provident Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” in at least nine months of the most recent 12-month period. “Portfolio assets” generally means total assets of a savings association, less the sum of certain specified liquid assets, goodwill and other intangible assets, and the value of property used in the conduct of the savings association's business. “Qualified thrift investments” are primarily mortgage loans and securities, and other investments related to housing, home equity loans, credit card loans, education loans and other consumer loans up to a certain percentage of assets. Provident Bank also may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code of 1986. If Provident Bank were to fail the QTL test, it would be immediately required to operate under specified restrictions.

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Loans to One Borrower. Provident Bank generally may not make loans or extend credit to a single or related group of borrowers in excess of 15% of unimpaired capital and surplus. An additional amount may be loaned, up to 10% of unimpaired capital and surplus, if the loan is secured by readily marketable collateral, which generally does not include real estate. As of September 30, 2012, Provident Bank was in compliance with the loans-to-one-borrower limitations.

Transactions with Affiliates. Provident Bank is subject to restrictions on transactions with affiliates that are the same as those applicable to commercial banks under Sections 23A and 23B of the Federal Reserve Act, as implemented by the Federal Reserve's Regulation W, as well as certain additional restrictions imposed on federal savings associations by the Home Owners' Loan Act. The term “affiliate” under these laws means any company that controls or is under common control with a savings association and includes Provident Bancorp and its non-bank subsidiaries. Transactions between Provident Bank and certain affiliates are restricted to an aggregate percentage of Provident Bank's capital, and certain transactions must be collateralized with certain specified assets. The HOLA further prohibits a savings association from lending to any affiliate that is engaged in activities not permissible for a bank holding company and from purchasing or investing in securities issued by any affiliate other than with respect to shares of a subsidiary. Permissible transactions with affiliates must be on terms that are at least as favorable to the savings association as comparable transactions with non-affiliates.

Provident Bank also is restricted in its ability to extend credit to its directors, executive officers and 10% shareholders, as well as to entities controlled by such persons, to the same extent as such restrictions apply to commercial banks. Extensions of credit to insiders must (i) be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons; (ii) not involve more than the normal risk of repayment or present other unfavorable features; and (iii) not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate. In addition, extensions of credit in excess of certain limits must be approved by Provident Bank's Board of Directors.

The Dodd-Frank Act imposes further restrictions on transactions with affiliates and extensions of credit to executive officers, director and principal shareholders, by, among other things, expanding the types of transactions covered by the law to include securities lending, repurchase agreement and derivatives activities with affiliates. These changes became effective on July 21, 2012. See “Regulation - Financial Reform Legislation”.

Safety and Soundness Regulations. Federal law requires each federal banking agency to prescribe certain safety and soundness standards for all insured depository institutions. These standards relate to, among other things, internal controls, information systems, and audit systems; loan documentation; credit underwriting; interest rate risk exposure; asset growth; compensation; and other operational and managerial standards as the agency deems appropriate. The federal banking agencies adopted Interagency Guidelines Establishing Standards for Safety and Soundness to implement the safety and soundness requirements of federal law. The guidelines set forth the safety and soundness standards that the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired. If the appropriate federal banking agency determines that an institution fails to meet any standard prescribed by the guidelines, the agency may require the institution to submit to the agency an acceptable plan to achieve compliance with the standard. If a deficiency persists, the agency must issue an order that requires the institution to correct the deficiency, in addition to taking other statutorily-mandated or discretionary actions.

Enforcement. The OCC has primary enforcement responsibility over federal savings associations such as Provident Bank, and has the authority to bring enforcement action against all “institution-affiliated parties,” including controlling stockholders, agents, and attorneys, appraisers, and accountants who knowingly or recklessly participate in wrongful action likely to have a significant adverse effect on an insured institution. Formal enforcement action may range from the issuance of a capital directive or cease and desist order, to removal of officers or directors of the institution, receivership, conservatorship, or the termination of deposit insurance. Civil money penalties may be imposed for a wide range of violations and actions. The FDIC also has the authority to recommend to the OCC that enforcement action be taken with respect to a particular savings association. If action is not taken by the OCC, the FDIC has authority to take action under specified circumstances.

Community Reinvestment Act and Fair Lending Laws. All savings associations have a responsibility under the Community Reinvestment Act (“CRA”) and related regulations of the OCC to help meet the credit needs of their communities, including low-and moderate-income neighborhoods, consistent with safe and sound operations. The OCC is required to assess the savings association's record of compliance with the CRA, and to assign one of four possible ratings to an institution's CRA performance, including “outstanding,” “satisfactory,” “needs to improve,” and “substantial noncompliance.” In addition, the Equal Credit Opportunity Act and the Fair Housing Act prohibit lenders from discriminating in their lending practices on the basis of characteristics specified in those statutes. A savings association's failure to comply with the provisions of the CRA could, at a

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minimum, result in regulatory restrictions on its activities. The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice. Provident Bank received an “satisfactory” Community Reinvestment Act rating in its most recent federal examination.

Federal Home Loan Bank System. Provident Bank is a member of the Federal Home Loan Bank System, which consists of 12 regional Federal Home Loan Banks. The Federal Home Loan Bank System provides a central credit facility primarily for member institutions. As a member of the Federal Home Loan Bank of New York, Provident Bank is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of New York in an amount at least equal to 1% of the aggregate principal amount of its unpaid residential mortgage loans and similar obligations at the beginning of each year, or 1/20 of its borrowings from the Federal Home Loan Bank, whichever is greater. As of September 30, 2012, Provident Bank was in compliance with this requirement.

Other Regulations. Provident Bank is subject to federal consumer protection statutes and regulations promulgated under these laws, including, but not limited to, the:

• Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers;

• Home Mortgage Disclosure Act, requiring financial institutions to provide certain information about home mortgage and refinanced loans;

• Fair Credit Reporting Act, governing the provision of consumer information to credit reporting agencies and the use of consumer information;

• Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; and

• Electronic Funds Transfer Act, governing automatic deposits to and withdrawals from deposit accounts and customers' rights and liabilities arising from the use of automated teller machines and other electronic banking services.

Provident Bank also is subject to federal laws protecting the confidentiality of consumer financial records and limiting the ability of the institution to share non-public personal information with third parties. Finally, Provident Bank is subject to extensive anti-money laundering provisions and requirements, which require the institution to have in place a comprehensive customer identification program and an anti-money laundering program and procedures. These laws and regulations also prohibit financial institutions from engaging in business with foreign shell banks; require financial institutions to have due diligence procedures and, in some cases, enhanced due diligence procedures for foreign correspondent and private banking accounts; and improve information sharing between financial institutions and the U.S. government. Provident Bank has established policies and procedures intended to comply with these provisions.

Possible Charter Conversion. The Company currently is considering the possibility of converting Provident Bank from a federal savings bank to a national bank. At present, there is no assurance when, or if, a conversion will ultimately occur. Although, as a national bank, Provident Bank would no longer need to satisfy the QTL test, its powers to conduct its business and the regulatory restrictions on those power otherwise would generally remain the same. In addition, Provident Bancorp and Provident Bank would continue to be regulated by the Federal Reserve and the OCC, respectively. Accordingly, we believe that even if the conversion occurs it will not materially affect the business or operations of either Provident Bancorp or Provident Bank.

Recent Regulatory Initiatives

TLGP. Provident Bancorp and Provident Bank decided to opt-out of the TLGP effective July 1, 2010. As a result, Provident Bank's non-interest-bearing transaction deposits accounts (such as business checking accounts), interest bearing transaction accounts, and IOLTA accounts were insured up to $250,000 from July 1, 2010 through December 30, 2010. From December 31, 2010 through December 31, 2012, non-interest bearing transaction accounts and IOLTA accounts are fully insured beyond the $250,000 limit under the Dodd-Frank Act. Beginning January 1, 2013, insurance coverage for non-interest bearing transaction accounts and IOLTA accounts will revert to the standard FDIC limit of $250,000, unless the U.S. Congress passes further legislation extending the unlimited coverage before December 31, 2012, which does not appear likely at this time.

In addition, the FDIC guaranteed all newly issued senior unsecured debt (e.g., promissory notes, unsubordinated unsecured notes and commercial paper) up to prescribed limits issued by participating entities between October 14, 2008 and October 31, 2009. For eligible debt issued by that date, the FDIC provides the guarantee coverage until the earlier of the maturity date of the debt or December 31, 2012. Provident Bank issued $51.5 million senior unsecured debt in a pooled security in February 2009. This debt matured in February 2012. Provident prepaid $1.00 of insurance premiums for each $100 (on a per annum basis) of debt that was guaranteed.

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Financial Reform Legislation

On July 21, 2010, the President signed the Dodd-Frank Act into law. This law is significantly changing the current bank regulatory structure and affecting the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies, including Provident Bank and Provident Bancorp. It requires various federal agencies to adopt a broad range of new implementing rules and regulations, and to prepare numerous studies and reports for Congress. The federal agencies are given significant discretion in drafting the implementing rules and regulations, and consequently, many of the details and much of the impact of the Act may not be known for many months or years.

One change that has been particularly significant to Provident Bancorp and Provident Bank is the abolition of the OTS, their historical federal financial institution regulator, on July 21, 2011. Supervision and regulation of Provident Bancorp have moved to the Federal Reserve and supervision and regulation of Provident Bank have moved to the OCC. The HOLA remains the main statute applicable to Provident Bancorp and Provident Bank, but it has been amended by the Dodd-Frank Act, as described below and by the implementing regulations that are being adopted and interpreted by the Federal Reserve and the OCC, respectively.

The Dodd-Frank Act contains a number of provisions intended to strengthen capital. For example, the federal banking agencies are directed to establish minimum leverage and risk-based capital requirements that are at least as stringent as those currently in effect. Provident Bancorp for the first time will be subject to consolidated capital requirements and must to serve as a source of strength to Provident Bank.

The Dodd-Frank Act also expands the affiliate transaction rules in Sections 23A and 23B of the Federal Reserve Act to broaden the definition of affiliate and to apply to securities lending, repurchase agreement and derivatives activities that Provident Bank may have with an affiliate, as well as to strengthen collateral requirements and limit Federal Reserve exemptive authority. Also, the definition of “extension of credit” for transactions with executive officers, directors and principal shareholders is being expanded to include credit exposure arising from a derivative transaction, a repurchase or reverse repurchase agreement and a securities lending or borrowing transaction. These expansions became effective on July 21, 2012. At this time, we do not anticipate that being subject to any of these provisions will have a material effect on Provident Bancorp or Provident Bank.

The Dodd-Frank Act also contains provisions that expand the insurance assessment base and increase the scope of deposit insurance coverage. See “Regulation-Deposit Insurance”.

The Dodd-Frank Act requires publicly traded companies to give stockholders a non-binding vote on executive compensation and so-called “golden parachute” payments, and authorizes the Securities and Exchange Commission to promulgate rules that would allow stockholders to nominate their own candidates for election as directors using a company's proxy materials. The legislation also directs the federal financial institution regulatory agencies to promulgate rules prohibiting excessive compensation being paid to financial institution executives.

The Dodd-Frank Act also created a new Consumer Financial Protection Bureau (CFPB), which took over responsibility over the principal federal consumer protection laws, such as the Truth in Lending Act, the Equal Credit Opportunity Act, the Real Estate Settlement Procedures Act and the Truth in Saving Act, among others, on July 21, 2011. Institutions that have assets of $10 billion or less, such as the Bank, will continue to be supervised in this area by their primary federal regulators (in the case of Provident Bank, the OCC). The Act also gives the CFPB expanded data collecting powers for fair lending purposes for both small business and mortgage loans, as well as expanded authority to prevent unfair, deceptive and abusive practices. The Dodd-Frank Act also provides that the same standards for federal preemption of state laws apply to both national banks and federal savings banks. As a result it is likely the Bank would be subject to a wider array of State laws going forward.

The scope and impact of many of the Dodd-Frank Act's provisions will be determined over time as regulations are issued and become effective. As a result, we cannot predict the ultimate impact of the Act on Provident Bancorp or Provident Bank at this time, including the extent to which it could increase costs or limit our ability to pursue business opportunities in an efficient manner, or otherwise adversely affect our business, financial condition and results of operations. Nor can we predict the impact or substance of other future legislation or regulation. However, it is expected that they at a minimum will increase our operating and compliance costs.

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ITEM 1A.Risk Factors

Recent legislative and regulatory initiatives to support the financial services industry have been coupled with numerous restrictions and requirements that could detrimentally affect our business.

The Dodd-Frank Act is significantly changing the current bank regulatory structure and affecting the lending, deposit, investment, trading and operating activities of financial institutions and their holding companies.

One change that has been particularly significant to us is the abolition of the OTS, our historical federal financial institution regulator, which was effective on July 21, 2011. Supervision and regulation of Provident Bancorp has moved to the Federal Reserve and supervision and regulation of Provident Bank has moved to the OCC. Except as described below, however, the laws and regulations applicable to us have not generally changed - the Home Owners Loan Act and the regulations issued under the Dodd-Frank Act generally still apply (although these laws and regulations are now interpreted by the Federal Reserve and the OCC, respectively). However, the application of the laws and regulations may vary as administered by the Federal Reserve and the OCC. It is possible that the OCC may evaluate the activities of Provident Bank in ways that are more restrictive than the OTS has. This might cause us to incur increased costs or become more restrictive in certain activities than we have been in the past.

In addition, Provident Bancorp for the first time will be subject to consolidated capital requirements and must serve as a source of strength to Provident Bank. It is possible such requirements may limit our capacity to pay dividends or repurchase shares. Provident Bank also will be subject to the same lending limits as national banks. In addition, the affiliate transaction rules in Section 23A of the Federal Reserve Act, as implemented by the Federal Reserve's Regulation W, will apply to securities lending, repurchase agreement and derivatives activities that Provident Bank may have with an affiliate.

The Dodd-Frank Act also broadens the base for FDIC insurance assessments. The FDIC insures deposits at FDIC-insured financial institutions, including Provident Bank. The FDIC charges insured financial institutions premiums to maintain the DIF at a specific level. The Bank's FDIC insurance premiums increased substantially beginning in 2009, and we expect to pay significantly higher premiums in the future. Current economic conditions have increased bank failures and additional failures are expected, all of which decrease the DIF. In order to restore the DIF to its statutorily mandated minimum of 1.15% over a period of several years, the FDIC increased deposit insurance premium rates at the beginning of 2009 and imposed a special assessment on June 30, 2009. The Dodd-Frank Act increased the minimum target Deposit Insurance Fund ratio from 1.15% of estimated insured deposits to 1.35% of estimated insured deposits. The FDIC must seek to achieve the 1.35% ratio by September 30, 2020. Insured institutions with assets of $10 billion or more are supposed to fund the increase. The FDIC has issued regulations to implement these provisions of the Dodd Frank Act. It has, in addition, established a higher reserve ratio of 2% as a long-term goal beyond what is required by statute. There is no implementation deadline for the 2% ratio. The FDIC may increase the assessment rates or impose additional special assessments in the future to keep the DIF at the statutory target level. Any increase in our FDIC premiums could have an adverse effect on Provident Bank's profits and financial condition.

The Dodd-Frank Act created a new CFPB which took over responsibility for the principal federal consumer protection laws, such as the Truth in Lending Act, the Equal Credit Opportunity Act, the Real Estate Settlement Procedures Act and the Truth in Savings Act, among others, on July 21, 2011. However, institutions such as Provident Bank, which have assets of $10 billion or less, will continue to be supervised in this area by their primary federal regulators (in the case of Provident Bank, the OCC).

In addition, the Dodd-Frank Act significantly rolls back the federal preemption of state consumer protection laws that was enjoyed by federal savings associations and national banks by (1) requiring that a state consumer financial law prevent or significantly interfere with the exercise of a federal savings association's or national bank's powers before it can be preempted, (2) mandating that any preemption decision be made on a case by case basis rather than a blanket rule, and (3) ending the applicability of preemption to subsidiaries and affiliates of national banks and federal savings associations. As a result, we may now be subject to state consumer protection laws in each state where we do business, and those laws may be interpreted and enforced differently in different states.

The scope and impact of many of the Dodd-Frank Act's provisions will be determined over time as regulations are issued and become effective. As a result, we cannot predict the ultimate impact of the Dodd-Frank Act on us at this time, including the extent to which it could increase costs or limit our ability to pursue business opportunities in an efficient manner, or otherwise adversely affect our business, financial condition and results of operations. However, it is expected that at a minimum they will increase our operating and compliance costs.

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Difficult market conditions have adversely affected our industry.

We are operating in a challenging economic environment, including generally uncertain national and local conditions. Additional concerns from some of the countries in the European Union and elsewhere have to strained the financial markets both abroad and domestically. Although there appears to be evidence of some improvements in the overall situation during 2012, financial institutions continue to be affected by declines in the real estate market and the constrained financial markets. Declines in the housing market over the past three years, with falling home prices and elevated foreclosure, unemployment and under-employment statistics, have negatively impacted the credit performance of mortgage loans and resulted in significant write-downs of asset values by financial institutions , reflecting concern over economic conditions, many lenders and institutional investors have reduced or ceased providing funding to borrowers, although we have observed some increases in lending activity over the past few months. This tightening of credit has led to an increased level of commercial and consumer delinquencies, lowered consumer confidence, and reduction of business activity generally. The resulting economic pressure on consumers and lack of confidence in the financial markets has adversely affected our business, financial condition and results of operations. If these conditions were to worsen, this would likely exacerbate the adverse effects of these market conditions on us and others in the financial services industry. In particular, we may face the following risks in connection with these events:

• Loan delinquencies could increase further;

• Problem assets and foreclosures could increase further;

• Demand for our products and services could decline;

• Collateral for loans made by us, especially real estate, could decline further in value, in turn reducing a customer's borrowing power, and reducing the value of assets and collateral associated with our loans; and

• Investments in mortgage-backed securities could decline in value as a result of performance of the underlying loans or the diminution of the value of the underlying real estate collateral pressing the government sponsored agencies to honor its guarantees to principal and interest.

An inadequate allowance for loan losses would negatively impact our results of operations.

We are exposed to the risk that our customers will be unable to repay their loans according to their terms and that any collateral securing the payment of their loans will not be sufficient to avoid losses. Credit losses are inherent in the lending business and could have a material adverse effect on our operating results. Volatility and deterioration in the broader economy may also increase our risk of credit losses. The determination of an appropriate level of allowance for loan losses is an inherently uncertain process and is based on numerous assumptions. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, that may be beyond our control, and charge-offs may exceed current estimates. We evaluate the collectability of our loan portfolio and provide an allowance for loan losses that we believe is adequate based upon such factors as, including, but not limited to: the risk characteristics of various classifications of loans; previous loan loss experience; specific loans that have loss potential; delinquency trends; the estimated fair market value of the collateral; current economic conditions; the views of our regulators; and geographic and industry loan concentrations. If any of our evaluations are incorrect and borrower defaults result in losses exceeding our allowance for loan losses, our results of operations could be significantly and adversely affected. We cannot assure you that our allowance will be adequate to cover probable loan losses inherent in our portfolio.

The need to account for assets at market prices may adversely affect our results of operations.

We report certain assets, including investments and securities, at fair value. Generally, for assets that are reported at fair value we use quoted market prices or valuation models that utilize market data inputs to estimate fair value. Because we carry these assets on our books at their fair value, we may incur losses even if the asset in question presents minimal credit risk. We may be required to recognize other-than-temporary impairments in future periods with respect to securities in our portfolio. The amount and timing of any impairment recognized will depend on the severity and duration of the decline in fair value of the securities and our estimation of the anticipated recovery period.

Acquisition, development, and construction (ADC) loans, commercial real estate and commercial and industrial (C&I) loans expose us to increased risk and earnings volatility.

We consider our commercial real estate loans, C&I loans and ADC loans to be the higher risk categories in our loan portfolio. These loans are particularly sensitive to economic conditions. At September 30, 2012, our portfolio of commercial real estate loans totaled $1.1 billion, or 50.6% of total loans, our commercial and industrial business loan portfolio totaled $343.3 million, or 16.2% of total loans, and our portfolio of ADC loans totaled $144.1 million, or 6.8 % of total loans. We plan to continue to emphasize the origination of these types of loans other than ADC loans, which we now make only on an exception basis. In the case of C&I loans, which we are emphasizing throughout our market area, although we strive to maintain high credit standards and limit exposure to any one borrower, the collateral for these loans often consists of accounts receivable, inventory and equipment. This type of collateral typically does not yield substantial recovery in the event we need to foreclose on it and may rapidly deteriorate, disappear, or be misdirected in advance of foreclosure. This adds to the potential that our charge-offs will be more volatile than we have experienced in the past, which could significantly negatively affect our earnings in any quarter.

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In addition, many of our borrowers also have more than one commercial real estate, commercial business or ADC loan outstanding with us. Consequently, an adverse development with respect to one loan or one credit relationship may expose us to significantly greater risk of loss. In particular, many of our ADC loans continue to pose higher risk levels than the levels expected at origination. Many projects are stalled or are selling at prices lower than expected. While we continue to seek pay downs on loans with or without sales activity, this portfolio may cause us to incur additional bad debt expense even if losses are not realized. Additionally, the balance on over half of our ADC loans is maturing within one year, which may expose us to greater risk of loss or to report increased levels of loans considered troubled debt restructures.

Changes in the value of goodwill and intangible assets could reduce our earnings.

The Company accounts for goodwill and other intangible assets in accordance with GAAP, which, in general, requires that goodwill not be amortized, but rather that it be tested for impairment at least annually at the reporting unit level using the two step approach. Testing for impairment of goodwill and intangible assets is performed annually and involves the identification of reporting units and the estimation of fair values. The estimation of fair values involves a high degree of judgment and subjectivity in the assumptions used. As of September 30, 2012, the fair value of Provident Bancorp shares exceed recorded book value by 9%. Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.

Our continuing concentration of loans in our primary market area may increase our risk.

Our success depends primarily on the general economic conditions in the counties in which we have historically conducted most of our business, and in the New York metropolitan area in general. Most of the loans and deposits we hold arise from customers primarily in Rockland and Orange Counties, New York. We also have a branch presence in Ulster, Sullivan, Westchester and Putnam Counties in New York and in Bergen County, New Jersey. Also, during fiscal 2012 we have expanded into New York City through the creation of commercial banking teams for the New York City marketplace and the acquisition of Gotham Bank, which among other things, has provided us with a branch in the City. Although our recent expansion into New York City and continued growth in Westchester County, New York help us diversify, the economic conditions in Rockland and Orange counties continue to have a significant impact on our loans, the ability of the borrowers to repay these loans and the value of the collateral securing these loans. A deterioration in those conditions would adversely affect our results of operations and financial condition.

Changes in market interest rates could adversely affect our financial condition and results of operations.

Our financial condition and result of operations are significantly affected by changes in market interest rates. Our results of operations substantially depend on our net interest income, which is the difference between the interest income that we earn on our interest-earning assets and the interest expense that we pay on our interest-bearing liabilities. In recent years, the structure of the balance sheet has become more asset sensitive in which assets either mature or re-price at a faster pace than liabilities and in particular borrowings. If general levels of interest rates were to continue at existing levels or decline further, net interest income would be adversely affected as asset yields would be expected to decline at faster rates than deposit or borrowing costs. A decline in net interest income may also occur offsetting a portion or all gains in net interest income from assets re-pricing and increases in volume, if competitive market pressures limit our ability to maintain or lag deposit costs. Wholesale funding costs may also increase at a faster pace than asset re-pricing and in this regard we have $220.0 million in structured/convertible advances with the FHLB at an average cost of 4.17%. If interest rates were to approach or exceed this level, it would be expected that the FHLB would call for conversion of those funds at then current market rates which potentially would be higher.

We also are subject to reinvestment risk associated with changes in interest rates. Changes in interest rates may affect the average life of loans and mortgage-related securities. Decreases in interest rates often result in increased prepayments of loans and mortgage- related securities, as borrowers refinance their loans to reduce borrowings costs. Under these circumstances, we are subject to reinvestment risk to the extent that we are unable to reinvest the cash received from such prepayments in loans or other investments that have interest rates that are comparable to the interest rates on existing loans and securities. Additionally, increases in interest rates may decrease loan demand and/or may make it more difficult for borrowers to repay adjustable rate loans.

Changes in interest rates also affect the value of our interest earning assets and in particular our securities portfolio. Generally, the value of securities fluctuates inversely with changes in interest rates. At September 30, 2012, our investment and mortgage-backed securities available for sale totaled $1.0 billion. Unrealized gains on securities available for sale, net of tax, amounted to $15.1 million and are reported as part of other comprehensive income, included as a separate component of stockholders' equity. Further, decreases in the fair value of securities available for sale, therefore, could have an adverse effect on stockholders' equity.

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Our ability to pay dividends is subject to regulatory limitations and other limitations which may affect our ability to pay dividends to our stockholders or to repurchase our common stock.

Provident Bancorp is a separate legal entity from its subsidiary, Provident Bank, and does not have significant operations of its own. The availability of dividends from Provident Bank is limited by various statutes and regulations. It is possible, depending upon the financial condition of Provident Bank and other factors that Provident Bank's regulator could assert that payment of dividends or other payments may result in an unsafe or unsound practice. In addition, under the Dodd-Frank Act, Provident Bancorp will be subjected to consolidated capital requirements and must serve as a source of strength to Provident Bank. If Provident Bank is unable to pay dividends to Provident Bancorp or Provident Bancorp is required to retain capital or contribute capital to Provident Bank, we may not be able to pay dividends on our common stock or to repurchase shares of common stock.

A breach of information security could negatively affect our earnings.

Increasingly, we depend upon data processing, communication and information exchange on a variety of computing platforms and networks, and over the Internet. While to date we have not been subject to cyber attacks or other cyber incidents, we cannot be certain all our systems are entirely free from vulnerability to attack, despite safeguards we have instituted. In addition, we rely on the services of a variety of vendors to meet our data processing and communication needs. Disruptions to our vendors' systems may arise from events that are wholly or partially beyond our vendors' control (including, for example, computer viruses or electrical or telecommunications outages). If information security is breached, despite the controls we and our third party vendors have instituted, information can be lost or misappropriated, resulting in financial loss or costs to us or damages to others. These costs or losses could materially exceed the amount of insurance coverage, if any, which would adversely affect our earnings. In addition, our reputation could be damaged which could result in loss of customers, greater difficulty in attracting new customers, or an adverse affect on the value of our common stock.

Our management has concluded that we did not maintain effective internal control over financial reporting as of September 30, 2012.

We have identified material weaknesses in our internal control over financial reporting as of September 30, 2012. These material weaknesses are described in Item 9A, "Controls and Procedures" in this Form 10-K, together with a discussion of our remedial efforts.

 Our failure to maintain effective internal control over financial reporting could adversely affect our ability to report our financial results on a timely and accurate basis, which could result in a loss of investor confidence in our financial reports or have a material adverse effect on our ability to operate our business or access sources of liquidity. Furthermore, because of the inherent limitations of any system of internal control over financial reporting, including the possibility of human error, the circumvention or overriding of controls and fraud, even effective internal controls may not prevent or detect all misstatements.

We are subject to extensive regulatory oversight.

We and our subsidiaries are subject to extensive regulation and supervision. Regulators have intensified their focus on bank lending criteria and controls, and on the USA PATRIOT Act's anti-money laundering and Bank Secrecy Act compliance requirements. There is also increased scrutiny of our compliance with the rules enforced by the Office of Foreign Assets Control. In order to comply with regulations, guidelines and examination procedures in the anti-money laundering area, we have been required to adopt new policies and procedures and to install new systems. We cannot be certain that the policies, procedures and systems we have in place are flawless. Therefore, there is no assurance that in every instance we are in full compliance with these requirements. Our failure to comply with these and other regulatory requirements can lead to, among other remedies, administrative enforcement actions, and legal proceedings.

Failure to comply with applicable laws and regulations also could result in a range of sanctions and enforcement actions, including the imposition of civil money penalties, formal agreements and cease and desist orders. In addition, the OCC and the FDIC have specific authority to take “prompt corrective action,” depending on our capital level. Currently, we are considered “well-capitalized” for prompt corrective action purposes. If we were designated by the OCC as “adequately capitalized,” our ability to take brokered deposits would become limited. If we were to be designated by the OCC in one of the lower capital levels - “undercapitalized,” “significantly undercapitalized” and “critically undercapitalized” - we would be required to raise additional capital and also would be subject to progressively more severe restrictions on our operations, management and capital distributions; replacement of senior executive officers and directors; and, if we became “critically undercapitalized,” to the appointment of a conservator or receiver. Also, in addition to generally applicable capital requirements, Provident Bank has committed to maintain an 8% Tier 1 leverage ratio at comparable levels consistent with its capital management policy. While we believe that Provident Bank has been and continues to be in compliance with this commitment, if the OCC were to conclude otherwise it could seek to impose sanctions on Provident Bank.

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In addition, recently enacted, proposed and future legislation and regulations (including the Dodd-Frank Act, which is discussed above), have had, will continue to have or may have significant impact on the financial services industry. Regulatory or legislative changes could make regulatory compliance more difficult or expensive for us, could cause us to change or limit some of our products and services or the way we operate our business, and could limit our ability to pursue business opportunities.

We are subject to competition from both banks and non-banking companies.

The financial services industry, including commercial banking, is highly competitive, and we encounter strong competition for deposits, loans and other financial services in our market area. Our principal competitors include commercial banks, other savings banks and savings and loan associations, mutual funds, money market funds, finance companies, trust companies, insurers, leasing companies, credit unions, mortgage companies, real estate investment trusts (REITs), private issuers of debt obligations, venture capital firms, and suppliers of other investment alternatives, such as securities firms. Many of our non-bank competitors are not subject to the same degree of regulation as we are and have advantages over us in providing certain services. Many of our competitors are significantly larger than we are and have greater access to capital and other resources. Also, our ability to compete effectively is dependent on our ability to adapt successfully to technological changes within the banking and financial services industry.

Various factors may make takeover attempts more difficult to achieve.

Our Board of Directors has no current intention to sell control of Provident Bancorp. Provisions of our certificate of incorporation and bylaws, federal regulations, Delaware law and various other factors may make it more difficult for companies or persons to acquire control of Provident Bancorp without the consent of our Board of Directors. One may want a take over attempt to succeed because, for example, a potential acquirer could offer a premium over the then prevailing market price of our common stock. The factors that may discourage takeover attempts or make them more difficult include:

(a)Certificate of Incorporation and statutory provisions.

Provisions of the certificate of incorporation and bylaws of Provident Bancorp and Delaware law may make it more difficult and expensive to pursue a takeover attempt that management opposes. These provisions also would make it more difficult to remove our current Board of Directors or management, or to elect new directors. These provisions also include limitations on voting rights of beneficial owners of more than 10% of our common stock, super majority voting requirements for certain business combinations, the election of directors to staggered terms of three years and plurality voting. Our bylaws also contain provisions regarding the timing and content of stockholder proposals and nominations and qualification for service on the Board of Directors.

(b) Required change in control payments and issuance of stock options and recognition and retention plan shares

We have entered into employment agreements with executive officers, which require payments to be made to them in the event their employment is terminated following a change in control of Provident Bancorp or Provident Bank. We have issued stock grants and stock options in accordance with the 2004 Provident Bancorp Inc. Stock Incentive Plan. In the event of a change in control, the vesting of stock and option grants accelerate. In 2006 we adopted the Provident Bank & Affiliates Transition Benefit Plan. The plan calls for severance payments ranging from 12 weeks to one year for employees not covered by separate agreements if they are terminated in connection with a change in control of the Company. These payments and the acceleration of grants would increase the cost of acquiring Provident Bancorp, thereby discouraging future takeover attempts.

Our ability to make opportunistic acquisitions and participation in FDIC-assisted acquisitions or assumption of deposits from a troubled institution is subject to significant risks, including the risk that regulators will not provide the requisite approvals.

We may make opportunistic whole or partial acquisitions of other banks, branches, financial institutions, or related businesses from time to time that we expect may further business strategy, including through participation in FDIC-assisted acquisitions or assumption of deposits from troubled institutions. Any possible acquisition will be subject to regulatory approval, and there can be no assurance that we will be able to obtain such approval in a timely manner or at all. Even if we obtain regulatory approval, these acquisitions could involve numerous risks, including lower than expected performance or higher than expected costs, difficulties related to integration, diversion of management's attention from other business activities, changes in relationships with customers, and the potential loss of key employees. In addition, we may not be successful in identifying acquisition candidates, integrating acquired institutions, or preventing deposit erosion or loan quality deterioration at acquired institutions. Competition for acquisitions can be highly competitive, and we may not be able to acquire other institutions on attractive terms. There can be no assurance that we will be successful in completing or will even pursue future acquisitions, or if such transactions are completed, that we will be successful in integrating acquired businesses into operations. Ability to grow may be limited if we choose not to pursue or are unable to successfully make acquisitions in the future.

Our results of operations, financial condition or liquidity may be adversely impacted by issues arising from certain industry deficiencies in foreclosure practices, including delays and challenges in the foreclosure process.

Over the past few years, foreclosure time lines have increased due to, among other reasons, delays associated with the significant increase in the number of foreclosure cases as a result of the economic downturn, federal and state legal and regulatory actions, including additional consumer protection initiatives related to the foreclosure process and voluntary and, in some cases, mandatory

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programs intended to permit or require lenders to consider loan modifications or other alternatives to foreclosure. Further increases in the foreclosure time-line may have an adverse effect on collateral values and our ability to minimize our losses.

Unresolved Staff Comments

Not Applicable.

ITEM 2. Properties

We maintain our executive offices, commercial lending division and investment management and trust department at a leased facility located at 400 Rella Boulevard, Montebello, NY consisting of 48,623 square feet. At September 30, 2012, we conducted our business through 35 full-service financial centers which serve the greater New York City metropolitan area. Of these financial centers, 12 are located in Orange County, New York, 13 in Rockland County, New York. We operate 8 offices in Ulster, Sullivan, Westchester and Putnam Counties in New York, 1 office in New York City, and 1 office in Bergen County, NJ which operates under the name PBNY Bank, a division of Provident Bank, New York. Additionally, 18 of our financial centers are owned and 17 are leased.

In addition to our branch network and corporate headquarters we lease 2 and own 1 additional properties which are held for general corporate purposes and 24 foreclosed properties located in Putnam, Orange, Rockland, Sullivan and Ulster counties. See Note 6 of the “Notes to Consolidated Financial Statements” for further detail on our premises and equipment.

ITEM 3. Legal Proceedings

Provident Bancorp is not involved in any pending legal proceedings other than routine legal proceedings occurring in the ordinary course of business which, in the aggregate, involve amounts that are believed by management to be immaterial to Provident Bancorp’s financial condition and results of operations.

ITEM 4. Mine Safety Disclosures

Not Applicable.

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PART II

ITEM 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

(A)

The shares of common stock of Provident Bancorp are quoted on the New York Stock Exchange (“NYSE”) under the symbol “PBNY.” As of September 30, 2012, Provident Bancorp has one designated registered market maker, 5,280 stockholders of record (excluding the number of persons or entities holding stock in street name through various brokerage firms), and 44,173,470 shares outstanding.

Market Price and Dividends. The following table sets forth market price and dividend information for the common stock for the past two fiscal years.

Quarter Ended	High		Low		Cash Dividends Declared
September 30, 2012	$	9.65	$	7.44	$	0.06
June 30, 2012	8.72		7.24		0.06
March 31, 2012	9.21		6.70		0.06
December 31, 2011	7.63		5.51		0.06
September 30, 2011	$	8.49	$	5.82	$	0.06
June 30, 2011	10.15		8.26		0.06
March 31, 2011	10.93		9.11		0.06
December 31, 2010	10.64		8.48		0.06

Payment of dividends on Provident Bancorp’s common stock is subject to determination and declaration by the Board of Directors and depends on a number of factors, including capital requirements, legal, and regulatory limitations on the payment of dividends, the results of operations and financial condition, tax considerations and general economic conditions. No assurance can be given that dividends will be declared or, if declared, what the amount of dividends will be, or whether such dividends will continue. Repurchases of the Company’s shares of common stock during the fourth quarter of the fiscal year ended September 30, 2012 are detailed in (C) below. There were no sales of unregistered securities during the quarter ended September 30, 2012.

Set forth below is a stock performance graph comparing the yearly total return on our shares of common stock, commencing with the closing price on September 30, 2007, with (a) the cumulative total return on stocks included in the NASDAQ Composite Index, and (b) the cumulative total return on stocks included in the SNL Mid-Atlantic Thrift Index.

There can be no assurance that our stock performance in the future will continue with the same or similar trend depicted in the graph below. We will not make or endorse any predictions as to future stock performance.

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PROVIDENT NEW YORK BANCORP

	Period Ending
Index	9/30/2007	9/30/2008	9/30/2009	9/30/2010	9/30/2011	9/30/2012
Provident New York Bancorp	100.00	102.72	76.10	68.64	48.93	81.56
NASDAQ Composite	100.00	78.08	80.06	90.26	92.97	121.46
SNL Mid-Atlantic Thrift Index	100.00	85.91	63.66	71.94	56.47	74.79

This stock performance graph shall not be deemed incorporated by reference by any general statement incorporating by reference this Form 10-K under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that Provident New York Bancorp specifically incorporates this information by reference, and shall not otherwise be deemed filed under such Acts.

(B)

Not Applicable

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(C)

Issuer Purchases of Equity Securities

	Total Number of Shares (or Units) Purchased (1)	Average Price Paid per share (or Unit)		Total Number of Shares (or Units) Purchased as Part of Publicly Announced Plans or Programs (2)	Maximum Number (or Approximate Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs (2)
Period (2012)
July 1 — July 31	2,724	$	7.77	—	776,713
August 1 — August 31	420	8.29		—	776,713
September 1 — September 30	2,897	9.41		—	776,713
Total	6,041	$	8.59	—

¹  The total number of shares purchased during the periods includes shares deemed to have been received from employees who exercised stock options by submitting previously acquired shares of common stock in satisfaction of the exercise price, or shares withheld for tax purposes ($51,907, or 6,041shares), as is permitted under the Company’s stock benefit plans and shares repurchased as part of a previously authorized repurchase program.

²  The Company announced its fifth repurchase program on December 17, 2009 authorizing the repurchase of 2,000,000 shares of which 776,713 remain available for repurchase.

ITEM 6. Selected Financial Data

The following financial condition and operating data are derived from the audited consolidated financial statements of Provident Bancorp. Additional information is provided in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and the Consolidated Financial Statements and related notes included as Item 7 and Item 8 of this report respectively.

	At September 30,
	2012		2011		2010		2009		2008
	(Dollars in thousands)
Selected Financial Condition Data:
Total assets	$	4,022,982	$	3,137,402	$	3,021,025	$	3,021,893	$	2,984,371
Loans, net (1)	2,091,190		1,675,882		1,670,698		1,673,207		1,708,452
Securities available for sale	1,010,872		739,844		901,012		832,583		791,688
Securities held to maturity	142,376		110,040		33,848		44,614		43,013
Deposits	3,111,151		2,296,695		2,142,702		2,082,282		1,989,197
Borrowings	345,176		323,522		363,751		430,628		566,008
Equity	491,122		431,134		430,955		427,456		399,158

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	Years Ended September 30,
	2012		2011		2010		2009		2008
	(Dollars in thousands)
Selected Operating Data:
Interest and dividend income	$	115,037	$	112,614	$	119,774	$	131,590	$	148,982
Interest expense	18,573		21,324		26,440		37,720		53,642
Net interest income	96,464		91,290		93,334		93,870		95,340
Provision for loan losses	10,612		16,584		10,000		17,600		7,200
Net interest income after provision for loan losses	85,852		74,706		83,334		76,270		88,140
Non-interest income	32,152		29,951		27,201		39,953		21,042
Non-interest expense	91,957		90,111		83,170		80,187		75,500
Income before income tax expense	26,047		14,546		27,365		36,036		33,682
Income tax expense	6,159		2,807		6,873		10,175		9,904
Net income	$	19,888	$	11,739	$	20,492	$	25,861	$	23,778

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	At or For the Years Ended September 30,
	2012			2011			2010			2009			2008
Selected Financial Ratios and Other Data:
Performance Ratios:
Return on assets (ratio of net income to average total assets)	0.62		%	0.40		%	0.70		%	0.89		%	0.84		%
Return on equity (ratio of net income to average equity)	4.45			2.75			4.82			6.22			5.88
Average interest rate spread (2)	3.33			3.42			3.51			3.46			3.49
Net interest margin (3)	3.51			3.65			3.78			3.81			3.96
Efficiency ratio (4)	68.34			71.00			68.96			65.11			61.20
Non-interest expense to average total assets	2.88			3.06			2.85			2.77			2.68
Ratio of average interest-earning assets to average interest-bearing liabilities	129.13			128.36			126.66			123.54			122.26
Per Share Related Data:
Basic earnings per share	$	0.52		$	0.31		$	0.54		$	0.67		$	0.61
Diluted earnings per share	0.52			0.31			0.54			0.67			0.61
Dividends per share	0.24			0.24			0.24			0.24			0.24
Book value per share (6)	11.12			11.39			11.26			10.81			10.03
Dividend payout ratio (5)	46.15		%	77.42		%	44.44		%	35.82		%	39.34		%
Asset Quality Ratios:
Non-performing assets to total assets (1)	1.15		%	1.46		%	1.02		%	0.93		%	0.57		%
Non-performing loans to total loans (1)	1.88			2.38			1.58			1.55			0.97
Allowance for loan losses to non-performing loans	71			69			115			114			137
Allowance for loan losses to total loans	1.47			1.64			1.81			1.76			1.33
Capital Ratios:
Equity to total assets at end of year	12.21		%	13.74		%	14.27		%	14.15		%	13.37		%
Average equity to average assets	13.99			14.49			14.60			14.36			14.34
Tier 1 leverage ratio (bank only)	7.5			8.1			8.4			8.6			8.0
Other Data:
Number of full service offices	35			37			35			33			33

_________________________

^{(1)  Excludes loans held for sale.} 

^{(2)  The average interest rate spread represents the difference between the weighted-average yield on interest-earning assets and the weighted-average cost of interest-bearing liabilities for the period.} 

^{(3)  The net interest margin represents net interest income as a percent of average interest-earning assets for the period. Net interest income is commonly presented on a tax-equivalent basis. This is to the extent that some component of the institution’s net interest income will be exempt from taxation (e.g. was received as a result of its holdings of state or municipal obligations), an amount equal to the tax benefit derived from that component is added back to the net interest income total. This adjustment is considered helpful in comparing one financial institution’s net interest income (pre-tax) to that of another institution, as each will have a different proportion of tax-exempt items in their portfolios. Moreover, net interest income is itself a component of a second financial measure commonly used by financial institutions, net interest margin, which is the ratio of net interest income to average earning assets. For purposes of this measure as well, tax-equivalent net interest income is generally used by financial institutions, again to provide a better basis of comparison from institution to institution. We follow these practices.} 

^{(4)  The efficiency ratio represents non-interest expense divided by the sum of net interest income and non-interest income. As in the case of net interest income, generally, net interest income as utilized in calculating the efficiency ratio is typically expressed on a tax-equivalent basis. Moreover, most financial institutions, in calculating the efficiency ratio, also adjust both non-interest expense and non-interest income to exclude from these items (as calculated under generally accepted accounting principles) certain component elements, such as non-recurring charges, other real estate expense and amortization of intangibles (deducted from non-interest expense) and securities transactions and other non-recurring items (excluded from non-interest income). We follow these practices.} 

^{(5)  The dividend payout ratio represents dividends per share divided by basic earnings per share.} 

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^{(6)  Book value per share is based on total stockholders’ equity and 44,173,470; 37,864,008; 38,262,288; 39,547,207; and 39,815,213 outstanding common shares at September 30, 2012, 2011, 2010, 2009 and 2008, respectively. For this purpose, common shares include unallocated employee stock ownership plan shares but exclude treasury shares.} 

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ITEM 7. Management's Discussion and Analysis of Financial Condition and Results of Operations

Overview

We specialize in the delivery of service solutions to business owners, their families and consumers within our marketplace through a team based approach. 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. The Company's strategic objectives include growing revenue and earnings by expanding client acquisitions, and improving credit metrics and efficiency levels. To achieve these goals we will continue to 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 protectively manage enterprise risk.

The Company's results reflect the effects of the implementation of our strategies as a result of our focus on strong, consistent execution. This year, we restructured the organization around markets and have hired or promoted leadership to assume the roles of market presidents. We also announced our expansion into New York City which follows through on our strategic objective of expanding our reach into the greater New York City marketplace. In addition, we have hired 6 seasoned commercial banking teams for the New York City marketplace, all with proven track records of delivering superior service to their clients, as well as restructured the legacy market teams bringing the total teams to 16. Along with the restructuring we have introduced a measurement and accountability system for the teams that align incentives with shareholder objectives.

In line with our strategies, during the month of August we acquired Gotham Bank of New York. Gotham Bank provides an attractive platform in the New York City marketplace from which to grow our franchise. The Company has also launched a new Wealth Management Services division designed to provide a full array of wealth management options to our growing and sophisticated client base. This service has already begun to fill a key need for our clients.

Our results of operations depend primarily on our net interest income, which is the difference between the interest income on our earning assets, such as loans and securities, and the interest expense paid on our deposits and borrowings. Results of operations are also affected by non-interest income and expense, the provision for loan losses and income tax expense. Results of operations are also significantly affected by general economic and competitive conditions, as well as changes in market interest rates, government policies and actions of regulatory authorities.

We continue to experience pressure on net interest income as low rates cause many assets to prepay or to be called. 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 remain low, and may have an affect on our reinvestment opportunities.

The following is an analysis of the financial condition and results of the Company’s operations. This item should be read in conjunction with the consolidated financial statements and related notes filed herewith in Part II, Item 8, “Financial Statements and Supplementary Data” and the description of the Company’s business filed here within Part I, Item 1, “Business.”

Critical Accounting Policies

Our accounting and reporting policies are prepared in accordance with accounting principles generally accepted in the United States of America and conform to general practices within the banking industry. Accounting policies considered critical to our financial results include the allowance for loan losses, accounting for goodwill and other intangible assets, accounting for deferred income taxes and the recognition of interest income.

Allowance for Loan Losses. The methodology for determining the allowance for loan losses is considered by the Company to be a critical accounting policy due to the high degree of judgment involved, the subjectivity of the assumptions utilized and the potential for changes in the economic environment that could result in changes to the amount of the allowance for loan losses considered necessary. We evaluate our loans at least quarterly, and review their risk components as a part of that evaluation. See Note 1, “Basis of Financial Statement Presentation and Summary of Significant Accounting Policies” in our “Notes to Consolidated Financial Statements” for a discussion of the risk components. We consistently review the risk components to identify any changes in trends. At September 30, 2012 Provident has recorded $28.3 million in its allowance for loan losses.

Goodwill and Other Intangible Assets. The Company accounts for goodwill and other intangible assets in accordance with GAAP, which, in general, requires that goodwill not be amortized, but rather that it be tested for impairment at least annually at the reporting unit level using the two step approach. Testing for impairment of goodwill and intangible assets is performed annually and involves the identification of reporting units and the estimation of fair values. The estimation of fair values involves a high degree of judgment and subjectivity in the assumptions used.  Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such

40

as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.

We also use judgment in the valuation of other intangible assets. A core deposit base intangible asset has been recorded for core deposits (defined as checking, money market and savings deposits) that were acquired in acquisitions that were accounted for as purchase business combinations. The core deposit base intangible asset has been recorded using the assumption that the acquired deposits provide a more favorable source of funding than more expensive wholesale borrowings. An intangible asset has been recorded for the present value of the difference between the expected interest to be incurred on these deposits and interest expense that would be expected if these deposits were replaced by wholesale borrowings, over the expected lives of the core deposits. If we find these deposits have a shorter life than was estimated, we will write down the asset by expensing the amount that is impaired. At September 30, 2012 the Bank had $2.1 million in naming rights net of amortization included in other intangibles related to Provident Bank Ball Park and $1.6 million in mortgage servicing rights included in other assets.

Income Taxes. We use the asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases. If current available information raises doubt as to the realization of the deferred tax assets, a valuation allowance is established. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax liabilities and assets, including projections of future taxable income. These judgments and estimates are reviewed on a continual basis as regulatory and business factors change. At September 30, 2012, Provident Bancorp has net deferred tax assets of $504,000.

Interest income. Interest income on loans, securities and other interest-earning assets is accrued monthly unless the Company considers the collection of interest to be doubtful. Loans are placed on non-accrual status when payments are contractually past due 90 days or more, or when we have determined that the borrower is unlikely to meet contractual principal or interest obligations, unless the assets are well secured and in the process of collection. At such time, unpaid interest is reversed by charging interest income for interest in the current fiscal year or the allowance for loan losses with respect to prior year income. Interest payments received on non-accrual loans (including impaired loans) are not recognized as income unless future collections are reasonably assured. Loans are returned to accrual status when collectability is no longer considered doubtful. At September 30, 2012, Provident has $35.4 million in loans in non-accrual status.

Comparison of Financial Condition at September 30, 2012 and September 30, 2011

Total assets as of September 30, 2012 were $4.0 billion, an increase of $885.6 million compared to September 30, 2011. Significant causes for the increase were the August acquisition of Gotham Bank whose assets totaled $431.4 million on the acquisition date, as well as, seasonal monies received from municipal tax collection activity. Core deposit and other intangibles increased $2.5 million as a result of the Gotham Bank acquisition offset by decreases in other intangibles relating to the pending sale of HVIA.

Net loans as of September 30, 2012 were $2.1 billion, an increase of $415.3 million, or 24.8%, over net loan balances of $1.7 billion at September 30, 2011. Approximately half of this increase is due to the loans acquired from Gotham Bank. Commercial real estate loans increased $369.1 million, or 52.5%, commercial business loans increased $133.4 million, or 63.5%, and ADC loans decreased $31.9 million or 18.1% to $144.1 million compared to $175.9 million as of September 30, 2011, reflecting our decision to decrease ADC lending and increase commercial lending. Consumer loans decreased by $15.2 million, or 6.8%, during the fiscal year ended September 30, 2012, residential loans decreased by $39.7 million, or 10.2%. Total loan originations, excluding loans originated for sale were $735.7 million for the fiscal year ended September 30, 2012, while repayments were $509.1 million for the fiscal year ended September 30, 2012. The allowance for loan loss increased from $27.9 million to $28.3 million as a result of provisions to loan losses of $10.6 million and net charge offs of $10.2 million.

Total securities increased by $303.4 million, to $1.2 billion at September 30, 2012 from $849.9 million at September 30, 2011. Security purchases were $774.7 million, sales of securities were $344.4 million, and maturities, calls, and repayments were $237.5 million.

Goodwill and other intangibles totaled $170.4 million at September 30, 2012 an increase of $4.9 million. The increase is a mainly related to the August 2012 acquisition of Gotham Bank off set by decreases relating to the pending sale of HVIA.

Depositsas of September 30, 2012 were $3.1 billion, an increase of $814.5 million, or 35.5%, from September 30, 2011. Included in deposits for September 30, 2012 were approximately $425.0 million in short-term seasonal municipal deposits compared to $284.0 million at September 30, 2011. As of September 30, 2012, transaction accounts were 44.9% of deposits, or $1.4 billion compared to $1.1 billion or 45.9% at September 30, 2011. As of September 30, 2012, savings deposits were $506.5 million, an

increase of $76.7 million or 17.8%. Money market accounts increased $312.2 million or 61.3% to $821.7 million at September 30, 2012 and certificate of deposits increased $83.8 million or 27.6% to $387.5 million.

Borrowings decreased by $29.8 million, or 8.0%, from September 2011, to $345.2 million primarily due to the maturity of the Company's FDIC guaranteed borrowing. The company restructured of $5.0 million of FHLBNY advances during the first quarter of fiscal 2012 which had a weighted average rate of 4.04 percent and duration of 1.5 years, into new borrowings with a weighted average rate of 2.37 percent, and duration of 1.6 years. Prepayment penalties of $278,500 associated with the modifications are being amortized into interest expense over the modification period on a level yield basis.

Stockholders’ equity increased $60.0 million from September 30, 2011 to $491.1 million at September 30, 2012. The increase was primarily due to an increase of $46.5 million in additional paid in capital from the issuance of 6,258,504 shares of common stock at a price of $7.35 per share . The Company received net proceeds of approximately $46.0 million. The Company's retained earnings increased $10.8 million, additionally accumulated other comprehensive income improved by $1.8 million, after realizing securities gains in fiscal year 2012 of $10.5 million. During fiscal 2012, the Company did not repurchase shares of common stock under the treasury repurchase program.

As of September 30, 2012 the Company had authorization to purchase up to additional 776, 713 shares of common stock. Bank Tier I capital to assets was 7.5% at September 30, 2012. Tangible capital as a percentage of tangible assets at the holding company level was 8.3%.

Credit Quality

Nonperforming loans ("NPLs") decreased slightly to $39.8 million at September 30, 2012 compared to $40.6 million at September 30, 2011.  However, non performing loans peaked during the year at $52.0 million at March 31, 2012.  The increase primarily resulted from deterioration in our ADC portfolio combined with some increase in nonperforming commercial real estate loans.  Through a combination of restructuring and loan sales, along with partial charge-offs, we reduced the balance during the second half of the fiscal year. 

The Allowance for Loan Losses increased from $27.9 million to $28.3 million as the provisions exceeded net charge-offs by $365,000. The allowance for loan losses at September 30, 2012 was $28.3 million, 71 percent of nonperforming loans and 1.48 percent of Provident loan portfolio. Net charge-offs for the year ended September 30, 2012 were $10.2 million, or .56% of average loans, compared to net charge-offs of $19.5 million, or 1.17% of average loans for the prior year. The decrease in net charge-offs is mostly due to decreases in net charge offs in commercial business loans and ADC loans.  The prior year included $8.9 million of net charges in the ADC portfolio of which $7.5 million was from one relationship.

Our classified loans,  those rated substandard or worse, declined from $94.0 million at September 30, 2011 to $88.7 million at September 30, 2012 primarily driven by a reduction in our ADC loans commensurate with the reduction in the non performing loans from this segment.  Special mention loans, however, increased from $23.0 million at September 30, 2011 to $42.4 million at September 30 2012, driven by increases in our commercial business and commercial real estate portfolios.  The increase in the commercial business portfolio was primarily caused by a downgrade of a loan to a substantial borrower that was used to partially finance a residential housing development that has been paying according to terms.  The increase in the Commercial real estate portfolio primarily resulted from upgrades from the substandard category.

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Average Balances

The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. Tax exempt securities are reported on a tax-equivalent basis, using a 35% federal tax rate. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accreted to interest income or expense.

	Years Ended September 30,
	2012							2011							2010
	Average Outstanding Balance		Interest			Yield/Rate		Average Outstanding Balance		Interest			Yield/Rate		Average Outstanding Balance		Interest			Yield/Rate
	(Dollars in thousands)
Interest Earning Assets:
Loans (1)	$	1,806,136	91,010			5.04	%	$	1,665,360	$	89,500		5.37	%	$	1,656,016	$	92,542		5.59	%
Securities taxable	778,994		16,537			2.12		695,961		14,493			2.08		662,914		18,208			2.75
Securities-tax exempt	188,520		9,996			5.30		213,450		11,448			5.36		216,119		11,959			5.53
Federal Reserve Bank	51,351		127			0.25		14,044		32			0.23		20,009		52			0.26
Other	18,901		865			4.58		20,933		1,148			5.48		25,007		1,198			4.79
Total Interest-earnings assets	2,843,902		118,535			4.17		2,609,748		116,621			4.47		2,580,065		123,959			4.80
Non-interest earning assets	351,397							339,503							333,495
Total assets	$	3,195,299						$	2,949,251						$	2,913,560
Interest Bearing Liabilities:
NOW deposits	$	399,819	483			0.12		$	315,623	595			0.19		$	280,304	579			0.21
Savings deposits (2)	485,624		393			0.08		432,227		444			0.10		397,760		403			0.10
Money market deposits	671,325		2,194			0.33		489,347		1,595			0.33		419,152		1,456			0.35
Certificates of deposit	289,230		2,511			0.87		373,142		3,470			0.93		451,509		6,079			1.35
Senior debt	19,136		753			3.93		51,498		2,017			3.92		51,495		2,029			3.94
Borrowings	337,160		12,239			3.63		371,318		13,203			3.56		436,835		15,894			3.64
Total interest-bearing liabilities	2,202,294		18,573			0.84		2,033,155		21,324			1.05		2,037,055		26,440			1.30
Non-interest bearing deposits	520,265							472,388							429,655
Other non-interest bearing liabilities	25,675							16,418							21,442
Total liabilities	2,748,234							2,521,961							2,488,152
Stockholders’ equity	447,065							427,290							425,408
Total liabilities and Stockholders’ equity	$	3,195,299						$	2,949,251						$	2,913,560
Net interest rate spread (3)						3.33	%						3.42	%						3.51	%
Net Interest-earning assets (4)	$	641,608						$	576,593						$	543,010
Net interest margin (5)			99,962			3.51	%			95,297			3.65	%			97,519			3.78	%
Less tax equivalent adjustment			(3,498		)					(4,007		)					(4,185		)
Net Interest income			$	96,464						$	91,290						$	93,334
Ratio of interest-earning assets to interest bearing liabilities			129.13		%					128.36		%					126.66		%

(1) Balances include the effect of net deferred loan origination fees and costs, the allowance for the loan losses, and non accrual loans. Includes prepayment fees and late charges.

(2) Includes club accounts and interest-bearing mortgage escrow balances.

(3) Net interest rate spread represents the difference between the tax equivalent yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5) Net interest margin represents net interest income (tax equivalent) divided by average total interest-earning assets.

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The following table presents the dollar amount of changes in interest income (on a fully tax-equivalent basis) and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

	2012 vs. 2011									2011 vs. 2010
	Increase (Decrease) Due to						Total Increase			Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	(Dollars in thousands)
Interest-earning assets:
Loans	$	7,367		$	(5,857	)	$	1,510		$	670		$	(3,712	)	$	(3,042	)
Securities taxable	1,761			283			2,044			878			(4,593		)	(3,715		)
Securities tax exempt	(1,325		)	(127		)	(1,452		)	(147		)	(364		)	(511		)
Federal Reserve Bank	92			3			95			(15		)	(5		)	(20		)
Other earning assets	(90		)	(193		)	(283		)	(191		)	141			(50		)
Total interest-earning assets	7,805			(5,891		)	1,914			1,195			(8,533		)	(7,338		)
Interest-bearing
Liabilities:
NOW deposits	139			(251		)	(112		)	73			(57		)	16
Savings deposits	46			(97		)	(51		)	41			—			41
Money market deposits	599			—			599			229			(90		)	139
Certificates of deposit	(745		)	(214		)	(959		)	(934		)	(1,675		)	(2,609		)
Senior Debt	(1,269		)	5			(1,264		)	—			(12		)	(12		)
Borrowings	(1,223		)	259			(964		)	(2,347		)	(344		)	(2,691		)
Total interest-bearing liabilities	(2,453		)	(298		)	(2,751		)	(2,938		)	(2,178		)	(5,116		)
Less tax equivalent adjustment	(466		)	(43		)	(509		)	(51		)	(127		)	(178		)
Change in net interest income	$	10,724		$	(5,550	)	$	5,174		$	4,184		$	(6,228	)	$	(2,044	)

Net Interest Income

Net interest income is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them, respectively.

Comparison of Operating Results for the Years Ended September 30, 2012 and September 30, 2011

Net income for the year ended September 30, 2012 was $19.9 million or $0.52 per diluted share. This compares to net income of $11.7 million, or $0.31 per diluted share for the year ended September 30, 2011.

Interest Income. Interest income on a tax equivalent basis for the year ended September 30, 2012 increased to $100.0 million, a increase of $4.7 million, or 4.9 %, compared to the prior year. Average interest-earning assets for the year ended September 30, 2012 were $2.8 billion, an increase of $234.2 million, or 9.0%, over average interest-earning assets for the year ended September 30, 2011. Average loan balances increased by $140.8 million, average balances at the Federal Reserve Bank increased $37.3 million and average balances of other earning assets decreased by $2.0 million, primarily FHLB stock. On a tax-equivalent basis, average yields on interest earning assets decreased by 30 basis points to 4.17% for the year ended September 30, 2012, from 4.47% for the year ended September 30, 2011. The primary reasons for the decrease in asset yields are declines in general market interest rates on new lending activity, and the sale of securities with subsequent reinvestment at lower yields.

Interest income on loans for the year ended September 30, 2012 increased $1.5 million to $91.0 million from $89.5 million for the prior fiscal year. Interest income on commercial loans for the year ended September 30, 2012 increased to $61.2 million, as compared to commercial loan interest income of $57.4 million for the prior fiscal year. Average balances of commercial loans

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grew $173.4 million to $1.2 billion, with a 47 basis point decrease in the average yield. Prime rate remained at 3.25% during fiscal year 2012. Commercial loans adjustable with the prime rate totaled $354.7 million at September 30, 2012. Interest income on consumer loans decreased to $10.1 million, as compared to consumer loan interest income of $10.5 million for the prior fiscal year. Average balances of consumer loans decreased $11.9 million to $221.4 million, with a increase of 5 basis points in the average yield. Consumer loans adjustable with the prime rate totaled $162.2 million at September 30, 2012. Income earned on residential mortgage loans was $19.7 million for the year ended September 30, 2012, down $1.9 million, from the prior year as a result of refinancing activity at lower rates and lower outstanding average balances.

Tax-equivalent interest income on securities, balances at Federal Reserve Bank and other earning assets increased to $27.5 million for the year ended September 30, 2012, compared to $27.1 million for the prior year. This was due to a tax-equivalent decrease of 22 basis points in yields. The Company sold $344.4 million in securities and recorded $10.5 million in gains on the sales. Further during fiscal 2012, proceeds totaling $237.5 million in security maturities and repayments were reinvested at current market rates with a minor increase in duration.

Interest Expense. Interest expense for the year ended September 30, 2011 decreased by $2.8 million to $18.6 million, a decrease of 12.9% compared to interest expense of $21.3 million for the prior fiscal year. The decrease in interest expense was primarily due to the decreases in balances on average borrowings as well as lower rates paid on interest bearing deposits at September 30, 2012. Rates paid on interest bearing liabilities decreased to 0.84% from 1.05% in fiscal 2011. The average interest rate paid on certificates of deposit decreased by 6 basis points to 0.87% for the year ended September 30, 2012, from 0.93% for the prior year. The rates paid on NOW accounts decreased 7 basis points for fiscal 2012 as compared to fiscal 2011. The average cost of borrowings increased to 3.63% at September 30, 2012 from 3.56% in 2011, average balances decreased by $34.2 million. Further, during the year, the bank restructured $5.0 million in FHLB advances and paid $278,000 in prepayment fees as part of the modification.

Net Interest Income for the fiscal year ended September 30, 2012 was $96.5 million, compared to $91.3 million for the year ended September 30, 2011. The tax equivalent net interest margin decreased by 14 basis points to 3.51%, while the net interest spread decreased by 9 basis points to 3.33%. The main components of this decrease relates to the fact that the Bank's cash position throughout the year was higher than normal, and that cash was placed in lower yielding investments. Additionally, the loans originated during the year were at lower yields than the historical weighted book yield.

Provision for Loan Losses. We recorded $10.6 million in loan loss provisions for the year ended September 30, 2012 compared to $16.6 million in the prior year, a decrease of $6.0 million. We decreased the provision due to decreased net charge-offs, which were $10.2 million for the year ended September 30, 2012, compared to $19.5 million in the previous year.The ADC loan segment continues to experience higher levels of charge offs in comparison to the other segments as a result of the slow moving real estate market. The remaining charge offs were concentrated in write downs of mortgage secured non performing loans based on declining appraisal values. Prior year net charge-offs were at an all time high due to recording $8.9 million of charges in the ADC portfolio, including $7.5 million in one relationship, as sale activity in residential housing subdivisions dropped sharply in the second half of fiscal year 2011.

During the year, our special mention loans increased from $23.0 million at September 30, 2011 to $42.4 million at September 30, 2012, while our substandard and doubtful loans decreased from $94.0 million to $88.7 million, respectively. All significant loans classified substandard or special mention are reviewed for impairment. As a result of our review we may establish a specific reserve, which totaled $3.2 million at September 30, 2012. A specific reserve is established when current information indicates that the carrying value of a loan is probably not recoverable, but there is sufficient uncertainty about the actual occurrence of a loss, or the amount thereof.

Non-interest income was $32.2 million for the fiscal year ended September 30, 2012 compared to $29.9 million at September 30, 2011. Income on securities sales, deposit fees and service charges, investment management fees, net increases in the cash surrender value of bank-owned life insurance (“BOLI”) contracts, and net gains on the sale of loans made up the majority of non interest income. During the year ended September 30, 2012, the Company recorded gains on sales of investment securities totaling $10.5 million compared to $10.0 million for the prior year. Deposit fees and service charges increased by $566,000, or 5.24%. During fiscal 2012 the Company originated and sold $80.6 million in residential mortgage loans and recorded $1.9 million in gains compared to $49.8 million in loans sold with $1.0 million in gains at September 30, 2011.

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Non-interest expense for the fiscal year ended September 30, 2012 increased by $1.8 million, or 2.0% to $92.0 million, compared to $90.1 million for the same period in 2011. The largest components of non-interest expense consists primarily of salaries and employee benefits, occupancy and office expenses, merger related expense and professional fees. The increase was primarily attributable to merger expense of $5.9 million related to the acquisition of Gotham Bank and increased compensation and employee benefits of $2.4 million to $46.0 compared to $43.7 in the prior year. These increases were off set by decreases of $1.5 million to advertising and promotion and prior year restructuring charges of $3.2 million and deferred benefit settlement / CEO transition charges of $1.8 million.

Income Taxes. Income tax expense was $6.2 million for the fiscal year ended September 30, 2012 compared to $2.8 million for fiscal 2011, representing effective tax rates of 23.65% and 19.29%, respectively. The lower tax rate in 2011 was primarily due to the high proportion of tax-free income, BOLI and insurance relative to the total levels of pre-tax income.

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

Total assets as of September 30, 2011 were $3.1 billion, an increase of $116.4 million compared to September 30, 2010. Cash and due from banks increased $190.6 million to $281.5 million at September 30, 2011 due primarily to deposits received on September 30, 2011 and high levels of balances maintained at the Federal Reserve in 2011 due to municipal tax collection activity. Core deposit and other intangibles increased by $1.0 million resulting from naming rights acquired on Provident Ballpark stadium. Goodwill was unchanged. The Company had $4.2 million in loans held for sale as of September 30, 2011 and $5.9 million at September 30, 2010. Premises and equipment decreased $2.7 million primarily related to depreciation and amortization exceeding new investment in premises and equipment.

Net loans as of September 30, 2011 were $1.7 billion, an increase of $5.2 million, or 0.3%, over net loan balances of $1.7 billion at September 30, 2010. Commercial real estate loans increased $124.1 million, or 21.4%, and ADC loans decreased $55.3 million or 23.9% to $175.9 million compared to $231.3 million as of September, 2010. Consumer loans decreased by $13.4 million, or 5.6%, during the fiscal year ended September 30, 2011, residential loans decreased by $45.1 million, or 10.4%. Total loan originations, excluding loans originated for sale were $578.6 million for the fiscal year ended September 30, 2011, while repayments were $553.2 million for the fiscal year ended September 30, 2011. The allowance for loan loss decreased from $30.8 million to $27.9 million as a result of provisions to loan losses of $16.6 million and net charge offs of $19.5 million. There were increases in the reserves for ADC, commercial business loans and home equity lines of credit, with decreases in commercial real estate and residential mortgages. The variances were driven by modifications in reserve factors as well as changes in loan balances.

Total securities decreased by $85.0 million, to $849.9 million at September 30, 2011 from $934.9 million at September 30, 2010. Securities purchases were $716.3 million, sales of securities were $540.5 million, and maturities, calls, and repayments were $269.0 million.

Goodwill and other intangibles totaled $165.5 million at September 30, 2011 an increase of $989,000. The increase is a result of Provident Bank entering into a naming rights contract for $2.4 million in May 2011 partially offset by amortization.

Deposits as of September 30, 2011 were $2.3 billion, an increase of $154.0 million, or 7.2%, from September 30, 2010. Included in deposits for September 30, 2011 were approximately $284.0 million in short-term seasonal municipal deposits compared to $212.0 million at September 30, 2010. As of September 30, 2011 transaction accounts were 45.9% of deposits, or $1.1 billion compared to $945.5 million or 44.1% at September 30, 2010. As of September 30, 2011, savings deposits were $429.8 million, an increase of $37.5 million or 9.56%. Money market accounts increased $82.1 million or 19.2% to $509.5 million at September 30, 2011. Offsetting the increases in savings and money market accounts was a decrease of $73.9 million, or 19.6% in certificates of deposits as the Company, while maintaining competitive rate structures, did not compete with the highest pricing in the market place. The Company attributes the change in mix and net increases to customers unwilling to place significant amounts of deposits in term maturities in the current rate environment as well as the success of its marketing efforts.

Borrowings decreased by $40.2 million, or 9.7%, from September 2010, to $375.0 million. The decrease is related to the borrowings being paid down by maturing investment securities and deposits.

Stockholders’ equity increased $179,000 from September 30, 2010 to $431.1 million at September 30, 2011. The increase was due to $2.8 million increase in the Company’s retained earnings and a $12,000 improvement in accumulated other comprehensive income, after realizing securities gains in the fiscal year of $10.0 million. During fiscal 2011, the Company repurchased 457,454 shares of its common stock at a cost of $3.8 million under the treasury repurchase program and issued a net 47,046 shares from its stock based compensation plans.

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As of September 30, 2011 the Company had authorization to purchase up to additional 776, 713 shares of common stock. Bank Tier I capital to assets was 8.14% at September 30, 2011. Tangible capital as a percentage of tangible assets at the holding company level was 8.94%.

Credit Quality

The Allowance for Loan Losses decreased from $30.8 million to $27.9 million as net charge-offs exceeded provisions by $3.0 million . Net charge-offs for the year ended September 30, 2011 were $19.4 million, or 1.17% of average loans, compared to net charge-offs of $9.2 million, or .56% of average loans for the prior year. The increase in net charge-offs came about as we recorded $8.9 million of charges in our ADC portfolio, including $7.5 million in one relationship. Sales activity in a residential housing subdivision dropped sharply in the second half of the year, causing us to re-evaluate cash flow expectations and collateral values in the related projects. We also experienced net charge-offs of $4.6 million in the C&I portion of our Community Business Loan portfolio and $2.3 million in our Residential Mortgage Loan portfolio. During September 2011 we completed the sale of $1.2 million in non performing residential mortgages, which accounted for $1.1 million of the residential charge-off total.

Non-performing Loans increased from $26.8 million to $40.6 million primarily driven by an increase in the ADC portfolio of $11.3 million. As at September 30, 2011, non performing loans consisted of ADC loans of $17.0 million, Commercial mortgages including CBL of $13.2 million, residential mortgages of $8.0 million, consumer of $2.2 million and $243,000 in commercial business loans. In addition, other real estate owned consisted of 17 properties totaling $5.4 million dollars. However, we were able to reduce classified (substandard/doubtful) loans during the year from $132.1 million at September 30, 2010 to $94.0 million at September 30 2011. Loans carried as criticized (special mention) similarly went from $37.9 million down to $23.0 million at September 30 2011.

Impaired loans increased from $42.1 million at September 30, 2010 to $55.0 million at September 30, 2011. At September 30, 2011 impaired loans with no related valuation allowance totaled $35.2 million and impaired loans with a valuation allowance were $19.8 million before specific reserves of $3.8 million. Included in impaired loans are $9.3 million of Troubled Debt Restructured Loans at September 30, 2011 that are in performing status compared to $16.0 million at prior fiscal year end. The decrease was caused by moving the ADC relationship referred to above to non-performing status offset in part by new troubled debt restructure.

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Average Balances

The following table sets forth average balance sheets, average yields and costs, and certain other information for the years indicated. Tax-exempt securities are reported on a tax-equivalent basis, using a 35% federal tax rate. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances, but have been reflected in the table as loans carrying a zero yield. The yields set forth below include the effect of deferred fees, discounts and premiums that are amortized or accredited to interest income or expense.

	Years Ended September 30,
	2011							2010							2009
	Average Outstanding Balance		Interest			Yield/Rate		Average Outstanding Balance		Interest			Yield/Rate		Average Outstanding Balance		Interest			Yield/Rate
	(Dollars in thousands)
Interest Earning Assets:
Loans (1)	$	1,665,360	$	89,500		5.37	%	$	1,656,016	$	92,542		5.59	%	$	1,700,383	$	97,149		5.71	%
Securities taxable	695,961		14,493			2.08	%	662,914		18,208			2.75	%	592,071		25,552			4.32	%
Securities-tax exempt	213,450		11,448			5.36	%	216,119		11,959			5.53	%	194,028		11,569			5.96	%
Federal Reserve Bank	14,044		32			0.23	%	20,009		52			0.26	%	56,639		144			0.25	%
Other	20,933		1,148			5.48	%	25,007		1,198			4.79	%	27,061		1,225			4.53	%
Total Interest-earnings assets	2,609,748		116,621			4.47	%	2,580,065		123,959			4.80	%	2,570,182		135,639			5.28	%
Non-interest earning assets	339,503							333,495							325,322
Total assets	$	2,949,251						$	2,913,560						$	2,895,504
Interest Bearing Liabilities:
NOW deposits	$	315,623	595			0.19	%	$	280,304	579			0.21	%	$	232,164	670			0.29	%
Savings deposits (2)	432,227		444			0.10	%	397,760		403			0.10	%	366,355		758			0.21	%
Money market deposits	489,347		1,595			0.33	%	419,152		1,456			0.35	%	374,507		2,707			0.72	%
Certificates of deposit	373,142		3,470			0.93	%	451,509		6,079			1.35	%	577,723		14,240			2.46	%
Senior Debt	51,498		2,017			3.92	%	51,495		2,029			3.94	%	32,730		1,269			3.88	%
Borrowings	371,318		13,203			3.56	%	436,835		15,894			3.64	%	496,884		18,076			3.64	%
Total interest-bearing liabilities	2,033,155		21,324			1.05	%	2,037,055		26,440			1.30	%	2,080,363		37,720			1.81	%
Non-interest bearing deposits	472,388							429,655							380,571
Other non-interest bearing liabilities	16,418							21,442							18,683
Total liabilities	2,521,961							2,488,152							2,479,617
Stockholders’ equity	427,290							425,408							415,887
Total liabilities and Stockholders’ equity	$	2,949,251						$	2,913,560						$	2,895,504
Net interest rate spread (3)						3.42	%						3.51	%						3.46	%
Net Interest-earning assets (4)	$	576,593						$	543,010						$	489,819
Net interest margin (5)			95,297			3.65	%			97,519			3.78	%			97,919			3.81	%
Less tax equivalent adjustment			(4,007		)					(4,185		)					(4,049		)
Net Interest income			$	91,290						$	93,334						$	93,870
Ratio of interest-earning assets to interest bearing liabilities			128.36		%					126.66		%					123.54		%

(1) Balances include the effect of net deferred loan origination fees and costs, the allowance for the loan losses, and non accrual loans. Includes prepayment fees and late charges.

(2) ^{Includes club accounts and interest-bearing mortgage escrow balances.} 

(3) Net interest rate spread represents the difference between the tax equivalent yield on average interest-earning assets and the cost of average interest-bearing liabilities.

(4) Net interest-earning assets represents total interest-earning assets less total interest-bearing liabilities.

(5) Net interest margin represents net interest income (tax equivalent) divided by average total interest-earning assets.

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The following table presents the dollar amount of changes in interest income (on a fully tax-equivalent basis) and interest expense for the major categories of our interest-earning assets and interest-bearing liabilities. Information is provided for each category of interest-earning assets and interest-bearing liabilities with respect to (i) changes attributable to changes in volume (i.e., changes in average balances multiplied by the prior-period average rate) and (ii) changes attributable to rate (i.e., changes in average rate multiplied by prior-period average balances). For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately to the change due to volume and the change due to rate.

	2011 vs. 2010									2010 vs. 2009
	Increase (Decrease) Due to						Total Increase			Increase (Decrease) Due to						Total Increase
	Volume			Rate			(Decrease)			Volume			Rate			(Decrease)
	(Dollars in thousands)
Interest-earning assets:
Loans	$	670		$	(3,712	)	$	(3,042	)	$	(2,546	)	$	(2,061	)	$	(4,607	)
Securities taxable	878			(4,593		)	(3,715		)	2,786			(10,130		)	(7,344		)
Securities tax exempt	(147		)	(364		)	(511		)	1,260			(870		)	390
Federal Reserve Bank	(15		)	(5		)	(20		)	(98		)	6			(92		)
Other earning assets	(191		)	141			(50		)	(127		)	100			(27		)
Total interest-earning assets	1,195			(8,533		)	(7,338		)	1,275			(12,955		)	(11,680		)
Interest-bearing
Liabilities:
NOW deposits	73			(57		)	16			121			(212		)	(91		)
Savings deposits	41			—			41			63			(418		)	(355		)
Money market deposits	229			(90		)	139			286			(1,537		)	(1,251		)
Certificates of deposit	(934		)	(1,675		)	(2,609		)	(2,662		)	(5,499		)	(8,161		)
Senior Debt	—			(12		)	(12		)	740			20			760
Borrowings	(2,347		)	(344		)	(2,691		)	(2,182		)	—			(2,182		)
Total interest-bearing liabilities	(2,938		)	(2,178		)	(5,116		)	(3,634		)	(7,646		)	(11,280		)
Less tax equivalent adjustment	(51		)	(127		)	(178		)	441			(305		)	136
Change in net interest income	$	4,184		$	(6,228	)	$	(2,044	)	$	4,468		$	(5,004	)	$	(536	)

Analysis of Net Interest Income

Net interest income is the difference between interest income on interest-earning assets and interest expense on interest-bearing liabilities. Net interest income depends on the relative amounts of interest-earning assets and interest-bearing liabilities and the interest rates earned or paid on them, respectively.

Comparison of Operating Results for the Years Ended September 30, 2011 and September 30, 2010

Net income for the year ended September 30, 2011 was $11.7 million or $0.31 per diluted share. This compares to net income of $20.5 million, or $0.54 per diluted share for the year ended September 30, 2010.

Interest Income. Interest income on a tax equivalent basis for the year ended September 30, 2011 decreased to $116.6 million, a decrease of $7.3 million, or 5.9%, compared to the prior year. The decrease was primarily due to declines in general market interest rates on new lending activity, impact of loans being classified as non accrual, sales of taxable securities in which gains of $9.7 million were realized and the proceeds reinvested at lower rates. Average interest-earning assets for the year ended September 30, 2011 were $2.6 billion, an increase of $29.7 million, or 1.2%, over average interest-earning assets for the year ended September 30, 2010. Average loan balances increased by $9.3 million, average balances at the Federal Reserve Bank decreased $6.0 million and average balances of other earning assets decreased by $4.1 million, primarily FHLB stock. On a tax-equivalent basis, average yields on interest earning assets decreased by 33 basis points to 4.47% for the year ended September 30, 2011, from 4.80% for the year ended September 30, 2010. Loan activity, the sale of securities with subsequent reinvestment and lower loan balances were the primary reasons for the decrease in asset yields.

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Interest income on loans for the year ended September 30, 2011 decreased $3.0 million to $89.5 million from $92.5 million for the prior fiscal year. Interest income on commercial loans for the year ended September 30, 2011 increased to $57.4 million, as compared to commercial loan interest income of $56.5 million for the prior fiscal year. Average balances of commercial loans grew $63.1 million to $1.0 billion, with a 26 basis point decrease in the average yield. There was no change in the prime rate during fiscal year 2011. Commercial loans adjustable with the prime rate totaled $290.0 million at September 30, 2011. Interest income on consumer loans decreased to $10.5 million, as compared to consumer loan interest income of $11.1 million for the prior fiscal year. Average balances of consumer loans decreased $13.3 million to $233.2 million, with no change in basis point in the average yield. Consumer loans adjustable with the prime rate totaled $169.6 million at September 30, 2011. Income earned on residential mortgage loans was $21.6 million for the year ended September 30, 2011, down $3.3 million, from the prior year as a result of refinancing activity and lower outstanding average balances.

Tax-equivalent interest income on securities, balances at Federal Reserve Bank and other earning assets decreased to $27.1 million for the year ended September 30, 2011, compared to $31.4 million for the prior year. This was due to a tax-equivalent decrease of 53 basis points in yields. The Company sold $540.5 million in securities and recorded $10.0 million in gains on the sales. Further during fiscal 2011, proceeds totaling $269.0 million in security maturities and repayments were reinvested at current market rates with a minor increase in duration.

Interest Expense. Interest expense for the year ended September 30, 2011 decreased by $5.1 million to $21.3 million, a decrease of 19.3% compared to interest expense of $26.4 million for the prior fiscal year. The decrease in interest expense was primarily due to the significant decrease in the average rates paid on interest-bearing deposits for the year ended September 30, 2011. Rates paid on interest bearing liabilities decreased to 1.05% from 1.30% in fiscal 2010. The average interest rate paid on certificates of deposit decreased by 42 basis points to .93% for the year ended September 30, 2011, from 1.35% for the prior year. The rates paid on NOW accounts and money market accounts each decreased 2 basis points for fiscal 2011 as compared to fiscal 2010. The average cost of borrowings decreased to 3.56% at September 30, 2011 from 3.64% in 2010, with average balances also decreased by $65.5 million. Further, during the year, the bank restructured $89.0 million in FHLB advances and paid $5.2 million in prepayment fees as part of the modification. This modification resulted in a decrease of 106 basis points in the average cost of the $89.1 million in restructured borrowings.

Net Interest Income for the fiscal year ended September 30, 2011 was $91.3 million, compared to $93.3 million for the year ended September 30, 2010. The tax equivalent net interest margin decreased by 13 basis points to 3.65%, while the net interest spread decreased by 9 basis points to 3.42%. The Bank’s average cost of interest-bearing liabilities has decreased, although the average asset yields decreased faster due to lending activity, impact of non accrual loan increases and sales of securities during 2011. Further, the greater increase of interest earning assets compared to interest bearing liabilities partially offset the decline in net interest income.

Provision for Loan Losses. We recorded $16.6 million in loan loss provisions for the year ended September 30, 2011 compared to $10.0 million in the prior year, an increase of $6.6 million. We increased the provision due to increased net charge-offs, which were $19.5 million at September 30, 2011 compared to $9.2 million in the previous year. Our charge-offs were centered in our ADC portfolio, which incurred $8.9 million on average outstanding loans of $224.1 million. Of the $8.9 million in ADC charge-offs one relationship accounted for $7.5 million due to a dramatic reduction in sales activity in the second half of our fiscal year on a particular property which resulted in a reduction in collateral value. We incurred $5.6 million in net charge-offs in our CBL C&I portfolio on average outstanding of $84.3 million. The other significant component of net charge-offs was our residential mortgage portfolio, in which we recorded $2.1 million in net charge-offs as the foreclosure process has extended on average to three or more years, home prices have continued to be weak, and taxes continue to accrue. We sold a portion of these loans in foreclosure to reduce a portion of this exposure. We recorded a loss of $1.1 million included above, on the sale of $1.3 million in the book value of loans.

Net charge-offs exceeded our provision by $2.9 million for the year ended September 30, 2011. During the year, our special mention loans decreased from $37.9 million at September 30, 2010 to $23.0 million at September 30, 2011, while our substandard and doubtful loans decreased from $132.1 million to $94.0 million respectively. All significant loans classified substandard or special mention are reviewed for impairment. As a result of our review we may establish a specific reserve, which totaled $3.8 million at September 30, 2011. A specific reserve is established when current information indicates that the carrying value of a loan is probably not recoverable, but there is sufficient uncertainty about the actual occurrence of a loss, or the amount thereof.

Non-interest income consists primarily of income on securities sales, deposit fees and service charges, net increases in the cash surrender value of bank-owned life insurance (“BOLI”) contracts, title insurance fees and investment management fees. Non-interest income was $30.0 million for the fiscal year ended September 30, 2011 compared to $27.2 million at September 30, 2010. During the year ended September 30, 2011, the Company recorded gains on sales of investment securities totaling $10.0 million compared to $8.2 million for the prior year. Deposit fees and service charges decreased by $417,000, or 3.71%. Title insurance

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fee income derived from the Hardenburgh Abstract Company, Inc. increased $67,000 due to an increase in residential mortgage originations. Investment management fees increased $10,000 which is related to increased market values on assets under management. During fiscal 2011 the Company originated and sold $49.8 million in residential mortgage loans and recorded $1.0 million in gains compared to $52.8 million in loans sold with $867,000 in gains at September 30, 2010.

Non-interest expense consists primarily of salaries and employee benefits, stock-based compensation, occupancy and office expenses, advertising and promotion expense, professional fees, intangible assets amortization, data processing expenses and FDIC/other regulatory assessments. Non-interest expense for the fiscal year ended September 30, 2011 increased by $6.9 million, or 8.3% to $90.1 million, compared to $83.2 million for the same period in 2010. The increase was primarily attributable to $3.2 million in restructuring charge and $1.8 million from charges relating to the CEO transition, including defined benefit settlements. The $3.2 million in restructuring charge consisted of $1.1 million in severances which are expected to result in a pretax savings in salaries and benefits of $4.2 million, and $2.1 million related to the consolidation of two branches, which will result in an annual pre-tax savings of $900,000. Occupancy and office operations increased $1.1 million, or 8.0%, a full year of operations in the Yonkers and Nyack offices during the fiscal year 2011. Professional fees increased $370,000 due to increased consulting fees as well as elevated external costs of collection for problem loans. Stock-based compensation decreased by $381,000 mainly due to the vesting of stock based compensation awards in addition to lower ESOP expense. FDIC insurance decreased by $765,000 or 20.8% due to declines in FDIC assessments.

Income Taxes. Income tax expense was $2.8 million for the fiscal year ended September 30, 2011 compared to $6.9 million for fiscal 2010, representing effective tax rates of 19.3% and 25.1%, respectively. The lower tax rate in 2011 was primarily due to the high proportion of tax-free income, BOLI and insurance relative to the total levels of pre-tax income and the full year of the

Off-Balance Sheet Arrangements and Aggregate Contractual Obligations

In the normal course of operations, the Company engages in a variety of financial transactions that, in accordance with generally accepted accounting principles, are not recorded in the financial statements, or are recorded in amounts that differ from the notional amounts. These transactions involve, to varying degrees, elements of credit, interest rate, and liquidity risk. Such transactions are used by the Company for general corporate purposes or for customer needs.

The Company’s off-balance sheet arrangements, which principally include lending commitments, are described below. At September 30, 2012 and 2011, the Company had no interests in non-consolidated special purpose entities.

Lending Commitments. Lending commitments include loan commitments, unused credit lines, and letters of credit. These instruments are not recorded in the consolidated balance sheet until funds are advanced under the commitments. The Company provides these lending commitments to customers in the normal course of business.

For our non-real estate commercial customers, loan commitments generally take the form of revolving credit arrangements to finance customers’ working capital requirements. At September 30, 2012, these commitments totaled $126.3 million. For our real estate businesses, loan commitments are generally for development and construction, and these totaled $125.7 million, at September 30, 2012. Loan commitments for our retail customers are generally lines of credit secured by residential property. At September 30, 2012, our retail loan commitments and unused credit lines totaled $127.6 million. In addition loan commitments for overdrafts were $12.0 million. Letters of credit issued by the Company generally 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. Standby letters of credit are conditional commitments to support performance, typically of a contract or the financial integrity, of a customer to a third party, and represent an independent undertaking by the Company to the third party. Letters of credit as of September 30, 2012 totaled $26.4 million.

Provident Bank applies essentially the same credit policies and standards as it does in the lending process when making these commitments. See Note 15 to “Consolidated Financial Statements” in Item 8 hereof for additional information regarding lending commitments.

Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations. Such obligations include operating leases for premises and equipment.

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Payments Due by Period. The following table summarizes our significant fixed and determinable contractual obligations and other funding needs by payment date at September 30, 2012. The payment amounts represent those amounts due to the recipient.

	Payments Due by Period
Contractual Obligations	Less than One Year		One to Three Years		Three to Five Years		More Than Five Years		Total
	(Dollars in thousands)
FHLB and other borrowings	$	10,136	$	109,512	$	202,587	$	22,941	$	345,176
Time deposits	344,033		37,008		6,441		—		387,482
Letters of credits	9,537		8,382		285		8,237		26,441
Undrawn lines of credit	265,940		—		—		—		265,940
Operating leases	2,782		5,029		4,899		13,024		25,734
Total	$	632,428	$	159,931	$	214,212	$	44,202	$	1,050,773
Commitments to extend credit	$	125,729	—		—		—		$	125,729

Impact of Inflation and Changing Prices

The consolidated financial statements and related notes of Provident Bancorp have been prepared in accordance with U.S. GAAP. U.S. GAAP generally requires the measurement of financial position and operating results in terms of historical dollars without consideration for changes in the relative purchasing power of money over time due to inflation. The impact of inflation is reflected in the increased cost of our operations. Unlike industrial companies, our assets and liabilities are primarily monetary in nature. As a result, changes in market interest rates have a greater impact on performance than the effects of inflation.

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 mortgage loans, and the purchase of investment securities and mortgage-backed securities. During the years ended September 30, 2012, 2011 and 2010, our loan originations totaled $ 810.1 million, $578.6 million, and $472.1 million, respectively. Purchases of securities available for sale totaled $679.6 million, $622.6 million and $830.6 million for the years ended September 30, 2012, 2011 and 2010, respectively. Purchases of securities held to maturity totaled $95.2 million, $93.8 million and $23.0 million for the years ended September 30, 2012, 2011 and 2010, respectively. These activities were funded primarily by borrowings and by principal repayments on loans and securities. Loan origination commitments totaled $125.7 million at September 30, 2012, and consisted of $117.1 million at adjustable or variable rates and $8.6 million at fixed rates. Unused lines of credit granted to customers were $265.9 million at September 30, 2012. 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 $59.0 million and $57.0 million at September 30, 2012 and September 30, 2011, 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 increase / (decrease) in total deposits was $814.5 million, $154.0 million and $60.4 million, for the years ended September 30, 2012, 2011 and 2010, respectively. Certificates of deposit that are scheduled to mature in one year or less from September 30, 2012 totaled $344.0 million. Based upon prior experience and our

51

current pricing strategy, we believe that a significant portion of such deposits will remain with us, although we may be required to compete for many of the maturing certificates in a highly competitive environment.

Credit spreads narrowed steadily during the past year and many are very near historically low levels. Furthermore, the extremely low interest rate environment caused our deposits to remain at elevated levels which have 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. The preference of depositors to stay short could lead to potential liquidity reductions in the future if we do not raise rates 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 $345.2 million was outstanding at September 30, 2012. At September 30, 2012, we had the ability to borrow an additional $488.5 million under our credit facilities with the Federal Home Loan Bank. The Bank may borrow up to an additional $380.4 million by pledging securities not required to be pledged for other purposes as of September 30, 2012. Further, at September 30, 2012 we had $62.0 million in Brokered Certificates of Deposit (including certificates of deposit accounts registry service (CDAR’s) reciprocal CD’s of $1.4 million and Money Market of $46.6 million) and have relationships with several brokers to utilize these sources of funding should conditions warrant further sources of funds. Provident Bank is subject to regulatory capital requirements that are discussed in “Capital Requirements” under “Regulation”.

Cash and short-term borrowing capacity at September 30, 2012 is summarized below:

	(Dollars in thousands)
Cash and Due from Banks	$	437,982
Unpledged investment Securities	380,437
Unpledged mortgage collateral	488,534
Total immediate funding available	$	1,306,953

The Company’s tangible capital to tangible asset ratio is 8.32% as of September 30, 2012. The Bank’s regulatory capital ratios as of September 30,2012 were as follows:

Tier I leverage*	7.5	%
Tier I risk based capital	12.1	%
Total risk based capital	13.3	%

*Calculated using the OCC's rules for a thrift institution, which requires the Tier I leverage ratio to be calculated on period end balances. However, if the OCC's rules for a national bank were used, which uses average assets for the period, the Tier I leverage ratio would have been 8.8%.

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

Provident Bank has committed to the OCC to have an 8% Tier 1 leverage ratio consistent with its capital management policy. At the time of the acquisition with Gotham Bank, Provident Bank's Tier 1 leverage ratio exceeded 8% and Provident Bank believes it continues to be in compliance with this commitment under its capital policy. Consistent with these commitments and to help support the acquisition of Gotham Bank and future growth, the Company raised $46 million in common equity on August 7, 2012.

The Company has an effective shelf registration covering $14 million of debt and equity securities remaining available for use, subject to Board authorization and market conditions, to issue equity or debt securities at our discretion. While we seek to preserve flexibility with respect to cash requirements, there can be no assurance that market conditions would permit us to sell securities on acceptable terms at any given time or at all.

52

CAUTIONARY STATEMENT REGARDING FORWARD-LOOKING INFORMATION

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 and/or other financial, business or strategic matters regarding or affecting Provident 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:

• the timely implementation of our new business strategy, including customer acceptance of our products and services and the perceived overall value, pricing and quality of them, compared to our competitors;

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

• general economic conditions, either nationally, internationally, or in our market areas, including fluctuations in real estate values and constrained financial markets;

• the effects of and changes in monetary and fiscal policies of the Board of Governors of the Federal Reserve System and the U.S. Government;

• 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;

• 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;

• changes in other economic, competitive, governmental, regulatory, and technological factors affecting our markets, operations, pricing, products, services and fees;

• our Company’s ability to successfully implement growth, expense reduction and other strategic initiatives and to complete merger and acquisition activities and realize expected strategic and operating efficiencies associated with suchmatters;

• our success at managing the risks involved in the foregoing and managing our business; and

• the timing and occurrence or non-occurrence of events that may be subject to circumstances beyond our control.

Additional factors that may affect our results are discussed in this 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.

53

ITEM 7A. 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's and the Bank’s net portfolio value (“EVE”) over a range of interest rate scenarios. EVE 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 EVE and NII. The table below sets forth, as of September 30, 2012, the estimated changes in our (1) EVE that would result from the designated instantaneous changes in the forward rates curve, 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.

			Changes in EVE							Changes in NII
Interest Rates (basis points)	Estimated EVE		Amount			Percent		Estimated NII		Amount			Percent
(Dollars in thousands)
+300	$	445,806	$	(30,474	)	-6.4	%	$	119,121	$	11,299		10.5	%
+200	465,091		(11,189		)	-2.3	%	115,200		7,378			6.8	%
+100	488,527		12,247			2.6	%	111,522		3,700			3.4	%
0	476,280		—			—	%	107,822		—			—	%
-100	462,631		(13,649		)	-2.9	%	101,116		(6,706		)	-6.2	%

The table set forth above indicates that at September 30, 2012, in the event of an immediate 200 basis point increase in interest rates, we would expect to experience an 2.3% decrease in EVE and a 6.8% 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 EVE and NII beyond -100 basis points.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in EVE 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 EVE 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 EVE 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.

54

Since December 2008, the federal funds target rate remained in a range of 0.00 – 0.25% as the Federal Open Market Committee (“FOMC”) did not change the target overnight lending rate. U.S. Treasury yields in the two year maturities decreased by 2 basis points from 0.25% to 0.23% during fiscal year 2012 while the yield on U.S. Treasury 10 year notes decreased 27 basis points from 1.92% to 1.65% over the same time period. The greater rate of decrease on longer term maturities has resulted in the 2-10 year treasury yield curve being flatter at the end of the past fiscal year than it was when the year began. The overall lower yield curve caused a significant reduction in rates paid on deposits and short-term borrowings as well as rates charged on loans and other assets. To fight the economic downturn the FOMC declared a willingness to keep the federal funds target low for an “extended period”. Furthermore, during the fourth quarter of the current fiscal year the FOMC stated that it anticipates that economic conditions are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2015. However, 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 disproportionately 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.

ITEM 8. Financial Statements and Supplementary Data

The following are included in this item:

(A) Report of Management on Internal Control Over Financial Reporting

(B) Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

(C) Report of Independent Registered Public Accounting Firm on Financial Statements

(D) Consolidated Statements of Financial Condition as of September 30, 2012 and 2011

(E) Consolidated Statements of Income for the years ended September 30, 2012, 2011 and 2010

(F) Consolidated Statements of Changes in Stockholders’ Equity for the years ended September 30, 2012, 2011 and 2010

(G) Consolidated Statements of Cash Flows for the years ended September 30, 2012, 2011 and 2010

(H) Notes to Consolidated Financial Statements

The supplementary data required by this item (selected quarterly financial data) is provided in Note 21 of the Notes to Consolidated Financial Statements.

55

Report of Management on Internal Control Over Financial Reporting

Board of Directors and Stockholders

Provident New York Bancorp:

The management of Provident New York Bancorp (“the Company”) is responsible for establishing and maintaining effective internal control over financial reporting. The Company's system of internal controls is designed to provide reasonable assurance to the Company's management and board of directors regarding the preparation and fair presentation of published financial statements in accordance with U.S. generally accepted accounting principles. Management regularly monitors its internal control over financial reporting and takes appropriate action to correct any deficiencies that may be identified.

All internal control systems have inherent limitations. Therefore, even those systems determined to be effective can provide only reasonable assurance with respect to financial statement preparation and presentation. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management assessed the Company's internal control over financial reporting as of September 30, 2012. This assessment was based on criteria for effective internal control over financial reporting established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the Company's annual or interim financial statements will not be prevented or detected in a timely basis by the Company's internal controls.

Based on our assessment, we identified the following two deficiencies in internal control over financial reporting as of September 30, 2012 that we consider to be material weaknesses:

1. The Company did not maintain effective controls to ensure the accuracy of the provision for income taxes or deferred taxes. Specifically, this control deficiency was the result of inadequate staffing and technical expertise in key positions related to accounting for provision for income taxes and deferred income taxes.

2. The Company did not maintain effective controls to ensure that pension accounting matters were properly recorded and presented on the Balance Sheet or the Statement of Other Comprehensive Income.

Based on the material weaknesses identified herein, Management has enacted the following action plans to enhance the Company's internal control over financial reporting:

1. Management will increase the Company's personnel resources and technical accounting expertise within the accounting function. In addition, management has instituted additional specific training for existing accounting personnel.

2. Management has enhanced its written policies and checklists setting forth procedures for accounting and financial reporting with respect to the requirements and application of US GAAP and SEC disclosure requirements.

Based on our identification of the material weakness described above, we believe that, as of September 30, 2012, the Company's internal control over financial control did not meet the criteria for effective internal control over financial reporting and thus was not effective.

We do not believe the material weaknesses described above caused any meaningful or significant misreporting of our financial condition and results of operations for the fiscal year ended September 30, 2012. Any audit adjustments arising from these deficiencies were recorded in our audited financial statements for the fiscal year ended September 30, 2012 and are included in this Annual Report on Form 10-K

The Company's independent registered public accounting firm has issued an audit report on the effective operation of the Company's internal control over financial reporting as of September 30, 2012. This report appears on the following page.

By:	/s/ Jack Kopnisky
	Jack Kopnisky
	President and Chief Executive Officer
	(Principal Executive Officer)
	December 14, 2012

By:	/s/ Stephen Masterson
	Stephen Masterson
	Executive Vice President and Chief Financial Officer
	(Principal Financial and Accounting Officer)
	December 14, 2012

56

Report of Independent Registered Public Accounting Firm on Internal Control Over Financial Reporting

Board of Directors and Stockholders

Provident New York Bancorp

We have audited Provident New York Bancorp's (“the Company”) internal control over financial reporting as of September 30, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO). Provident New York Bancorp's management is responsible for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Report of Management on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company's internal control over financial reporting based on our audit.

We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

A company's internal control over financial reporting is a process designed 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. A company's internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company's assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting, such that there is a reasonable possibility that a material misstatement of the company's annual or interim financial statements will not be prevented or detected on a timely basis. The following material weaknesses have been identified and included in management's report.

• The Company did not maintain effective controls to ensure the accuracy of the provision for income taxes and related current and deferred income tax assets and liabilities. Specifically, this control deficiency was the result of inadequate staffing and technical expertise in key positions related to accounting for income taxes.

• The Company did not maintain effective controls to ensure that pension accounting matters were properly recorded and presented on the balance sheet or the statement of comprehensive income.

These material weaknesses were considered in determining the nature, timing and extent of audit tests applied in our audit of the September 30, 2012 financial statements and this report does not affect our report dated December 14, 2012 on those financial statements.

In our opinion, because of the effects of the material weaknesses described above, Provident New York Bancorp has not maintained effective internal control over financial reporting as of September 30, 2012, based on Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial condition of Provident New York Bancorp and subsidiaries as of September 30, 2012 and 2011 and the related consolidated statements of income, statements of comprehensive income, changes in stockholders' equity and cash flows for each of the three years ended September 30, 2012 and our report dated December 14, 2012 expressed an unqualified opinion on those consolidated financial statements.

/s/Crowe Horwath LLP

New York, New York

December 14, 2012

57

Report of Independent Registered Public Accounting Firm on Financial Statements

Board of Directors and Stockholders

Provident New York Bancorp

We have audited the accompanying consolidated statements of financial condition of Provident New York Bancorp and subsidiaries (“the Company”) as of September 30, 2012 and 2011 and the related consolidated statements of income, statements of comprehensive income, changes in stockholders' equity, and cash flows for each of the three years in the period ended September 30, 2012. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Provident New York Bancorp and subsidiaries as of September 30, 2012 and 2011 and the results of its operations and its cash flows for each of the three years in the period ended September 30, 2012 in conformity with accounting principles generally accepted in the United States of America.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the effectiveness of Provident New York Bancorp's internal control over financial reporting as of September 30, 2012, based on criteria established in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission and our report dated December 14, 2012 expressed an adverse opinion thereon.

/s/Crowe Horwath LLP

New York, New York

December 14, 2012

58

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES Consolidated Statements of Financial Condition (Dollars in thousands, except per share data)
	September 30,
	2012			2011
ASSETS
Cash and due from banks	$	437,982		$	281,512
Securities
Available for sale, at fair value	1,010,872			739,844
Held to maturity, at amortized cost (fair value of $146,324 and $111,272 in 2012 and 2011, respectively)	142,376			110,040
Total securities	1,153,248			849,884
Assets held for sale	4,550			—
Loans held for sale	7,505			4,176
Gross loans	2,119,472			1,703,799
Allowance for loan losses	(28,282		)	(27,917		)
Total loans, net	2,091,190			1,675,882
Federal Home Loan Bank (“FHLB”) stock, at cost	19,249			17,584
Accrued interest receivable	10,513			9,904
Premises and equipment, net	38,483			40,886
Goodwill	163,247			160,861
Core deposit and other intangible assets	7,164			4,629
Bank owned life insurance	59,017			56,967
Foreclosed properties	6,403			5,391
Other assets	24,431			29,726
Total assets	$	4,022,982		$	3,137,402
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES:
Deposits	$	3,111,151		$	2,296,695
FHLB and other borrowings	345,176			323,522
Borrowing senior unsecured note (FDIC insured)	—			51,499
Mortgage escrow funds	11,919			9,701
Other liabilities	63,614			24,851
Total liabilities	3,531,860			2,706,268
Commitments and Contingent liabilities	—			—
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; 52,188,056 and 45,929,552 issued for 2012 and 2011, respectively; 44,173,470 and 37,864,008 shares outstanding in 2012 and 2011 respectively)	522			459
Additional paid-in capital	403,541			357,063
Unallocated common stock held by employee stock ownership plan (“ESOP”); 563,826 and 611,677 unallocated shares outstanding in 2012 and 2011, respectively	(5,638		)	(6,138		)
Treasury stock, at cost (8,014,586 shares in 2012 and 8,065,544 shares in 2011)	(90,173		)	(90,585		)
Retained earnings	175,971			165,199
Accumulated other comprehensive income, net of taxes of $4,688 in 2012 and $3,522 in 2011	6,899			5,136
Total stockholders’ equity	491,122			431,134
Total liabilities and stockholders’ equity	$	4,022,982		$	3,137,402

See accompanying notes to consolidated financial statements.

59

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES Consolidated Statements of Income For the years ended September 30, (Dollars in thousands, except per share data)
	2012			2011			2010
Interest and dividend income:
Loans, including fees	$	91,010		$	89,500		$	92,542
Taxable securities	16,538			14,493			18,208
Non-taxable securities	6,497			7,441			7,774
Other earning assets	992			1,180			1,250
Total interest and dividend income	115,037			112,614			119,774
Interest expense:
Deposits	5,581			6,104			8,517
Borrowings	12,992			15,220			17,923
Total interest expense	18,573			21,324			26,440
Net interest income	96,464			91,290			93,334
Provision for loan losses	10,612			16,584			10,000
Net interest income after provision for loan losses	85,852			74,706			83,334
Non-interest income:
Deposit fees and service charges	11,377			10,811			11,228
Net gain on sale of securities	10,452			10,011			8,157
Other than temporary impairment on securities:
Total impairment loss	(90		)	(787		)	—
Loss recognized in other comprehensive income	43			509			—
Net impairment loss recognized in earnings	(47		)	(278		)	—
Title insurance fees	1,106			1,224			1,157
Bank owned life insurance	2,050			2,049			2,044
Gain (loss) on sale of premises and equipment	75			—			(54		)
Net gain on sales of loans	1,897			1,027			867
Loss on sale of HVIA	(135		)	—			—
Investment management fees	3,143			3,080			3,070
Fair value loss on interest rate caps	(63		)	(197		)	(1,106		)
Other	2,297			2,224			1,838
Total non-interest income	32,152			29,951			27,201
Non-interest expense:
Compensation and employee benefits	46,038			43,662			43,589
Defined benefit settlement charge / CEO transition	—			1,772			—
Restructuring charge (severance / branch relocation)	—			3,201			—
Stock-based compensation plans	1,187			1,162			1,543
Merger related expense	5,925			255			—
Occupancy and office operations	14,457			14,508			13,434
Advertising and promotion	1,849			3,328			3,252
Professional fees	4,247			4,389			4,019
Data and check processing	2,802			2,763			2,285
Amortization of intangible assets	1,245			1,426			1,849
ATM/debit card expense	1,711			1,584			1,601
Foreclosed property expense	1,618			1,171			137
FDIC insurance and regulatory assessments	3,096			2,910			3,675
Other	7,782			7,980			7,786
Total non-interest expense	91,957			90,111			83,170
Income before income tax expense	26,047			14,546			27,365
Income tax expense	6,159			2,807			6,873
Net income	$	19,888		$	11,739		$	20,492
Weighted average common shares:
Basic	38,227,653			37,452,596			38,161,180
Diluted	38,248,046			37,453,542			38,185,122
Earnings per common share
Basic	$	0.52		$	0.31		$	0.54
Diluted	$	0.52		$	0.31		$	0.54

See accompanying notes to consolidated financial statements.

60

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Consolidated Statements of Comprehensive Income

For the years ended September 30, 2012, 2011 and 2010

(in thousands, except share data)

	2012			2011			2010
Net income:	$	19,888		$	11,739		$	20,492
Other comprehensive income:
Net unrealized holding gains on securities available for sale net of related tax expense of $5,220, $4,624 and $5,435	7,641			6,762			7,963
Less:
Reclassification adjustment for net realized gains included in net income, net of related income tax expense of $4,245, $4,065 and $3,313	6,206			5,946			4,844
Reclassification adjustment for other than temporary losses included in net income, net of related income tax benefit of $19, $113, and $0	(28		)	(165		)	—
	1,463			981			3,119
Change in funded status of defined benefit plans, net of related income tax expense (benefit) of $205, $(665), and $(327)	300			(969		)	(472		)
Other comprehensive income	1,763			12			2,647
Total comprehensive income	$	21,651		$	11,751		$	23,139

See accompanying notes to consolidated financial statements.

61

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Consolidated Statements of Changes in Stockholders’ Equity

Years Ended September 30, 2012, 2011 and 2010

(Dollars in thousands, except per 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 October 1, 2009	39,547,207		$	459	$	355,753		$	(7,136	)	$	(77,290	)	$	153,193		$	2,477	$	427,456
Net income														20,492					20,492
Other comprehensive income																	2,647		2,647
Deferred compensation transactions	—		—		87			—			—			—			—		87
Stock option transactions, net	249,953		—		247			—			3,016			(2,036		)	—		1,227
ESOP shares allocated or committed to be released for allocation (49,932 shares)	—		—		(58		)	499			—			—			—		441
Vesting of RRP shares	—		—		883			—						—			—		883
Other RRP transactions	(18,949	)	—		—			—			(177		)	—			—		(177		)
Purchase of treasury stock	(1,515,923	)	—		—			—			(12,885		)	—			—		(12,885		)
Cash dividends paid ($0.24 per common share)	—		—		—			—			—			(9,216		)	—		(9,216		)
Balance at September 30, 2010	38,262,288		459		356,912			(6,637		)	(87,336		)	162,433			5,124		430,955
Net income														11,739					11,739
Other comprehensive income																	12		12
Deferred compensation transactions	—		—		45			—			—			—			—		45
Stock option transactions, net	—		—		558			—			—			—			—		558
ESOP shares allocated or committed to be released for allocation (49,932 shares)	—		—		(59		)	499			—			—			—		440
RRP awards	63,870		—		(561		)	—			561			—			—		—
Vesting of RRP shares	—		—		168			—			—			—			—		168
Other RRP transactions	(4,696	)	—		—			—			(30		)	—			—		(30		)
Purchase of treasury stock	(457,454	)	—		—			—			(3,780		)	—			—		(3,780		)
Cash dividends paid ($0.24 per common share)	—		—		—			—			—			(8,973		)	—		(8,973		)
Balance at September 30, 2011	37,864,008		459		357,063			(6,138		)	(90,585		)	165,199			5,136		431,134
Net income														19,888			—		19,888
Other comprehensive income																	1,763		1,763
Deferred compensation transactions	—		—		164			—			—			—			—		164
Stock option transactions, net	—		—		521			—			—			—			—		521
ESOP shares allocated or committed to be released for allocation (49,932 shares)	—		—		43			500			—			—			—		543
RRP awards	58,000		—		(463		)	—			474			—			—		11
Vesting of RRP shares	—		—		276			—			—			—			—		276
Other RRP transactions	(7,042	)	—		—			—			(62		)	—			—		(62		)
Capital raise	6,258,504		63		45,937														46,000
Cash dividends paid ($0.24 per common share)	—		—		—			—			—			(9,100		)	—		(9,100		)
Other														(16		)			$	(16	)
Balance at September 30, 2012	44,173,470		$	522	$	403,541		$	(5,638	)	$	(90,173	)	$	175,971		$	6,899	$	491,122

See accompanying notes to consolidated financial statements.

62

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES Consolidated Statements of Cash Flows Years Ended September 30, 2012, 2011 and 2010 (Dollars in thousands)
	2012			2011			2010
Cash flows from operating activities:
Net income	$	19,888		$	11,739		$	20,492
Adjustments to reconcile net income to net cash provided by operating activities
Provisions for loan losses	10,612			16,584			10,000
(Gain) loss on other real estate owned	694			869			(18		)
Depreciation of premises and equipment	4,746			6,177			5,144
Amortization of intangibles	1,245			1,426			1,849
Net gain on sale of securities	(10,452		)	(10,011		)	(8,157		)
Other than temporary impairment (credit loss)	47			278			—
Fair value loss on interest rate cap	63			197			1,106
Write down on assets held for sale	135			—			—
Net gains on loans held for sale	(1,897		)	(1,027		)	(867		)
(Gain) loss on sale of premises and equipment	(75		)	—			54
Net amortization of premium and discounts on securities	(1,006		)	3,181			3,209
Accrued restructuring expense	—			3,201			—
Accretion of premiums on borrowings (includes calls on borrowings)	(67		)	(30		)	(223		)
Amortization of payment fees on restructured borrowings	1,459			1,033			—
ESOP and RRP expense	667			607			1,325
ESOP forfeitures	(1		)	(3		)	(29		)
Stock option compensation expense	521			558			247
Originations of loans held for sale	(80,579		)	(49,807		)	(52,839		)
Proceeds from sales of loans held for sale	79,147			52,548			49,029
Increase in cash surrender value of bank owned life insurance	(2,050		)	(2,049		)	(1,327		)
Increase in assets held for sale	—			—			—
Deferred income tax (benefit) expense	(64		)	118			26
Net changes in accrued interest receivable and payable	(66		)	674			(1,536		)
Trade date securities	—			—			—
Other adjustments (principally net changes in other assets and other liabilities)	2,059			(9,785		)	(5,624		)
Net cash provided by operating activities	25,026			26,478			21,861
Cash flows from investing activities:
Purchases of securities:
Available for sale	(679,553		)	(622,551		)	(830,613		)
Held to maturity	(95,157		)	(93,764		)	(23,023		)
Proceeds from maturities, calls and other principal payments on securities
Available for sale	174,497			251,774			328,993
Held to maturity	63,037			17,220			33,780
Proceeds from sales of securities available for sale	344,431			540,145			443,389
Proceeds from sales of securities held to maturity	—			357			—
Loan originations	(735,676		)	(578,631		)	(472,066		)

63

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES Consolidated Statements of Cash Flows Continued Years Ended September 30, 2011, 2010 and 2009 (Dollars in thousands)
Loan principal payments	509,060			553,235			461,632
Purchase of interest rate cap derivatives	—			—			(1,368		)
Proceeds from sale of FHLB stock, net	(620		)	1,988			3,605
Proceeds from sales of other real estate owned	3,468			301			—
Purchases of premises and equipment	(1,853		)	(3,465		)	(8,152		)
Proceeds from the sale of fixed assets	75			—			48
Purchases of bank owned life insurance	—			(3,980		)	—
Cash received from Gotham acquisition	126,818			—			—
Net cash provided by (used in) investing activities	(291,473		)	62,629			(63,775		)
Cash flows from financing activities
Net increase in transaction, savings and money market deposits	499,340			227,907			177,808
Net decrease in time deposits	(53,786		)	(73,914		)	(117,388		)
Net decrease in short-term borrowings	(10,000		)	(34,840		)	(62,500		)
Gross repayments of long-term borrowings	(5,244		)	(1,238		)	(4,152		)
Restructured Debt	5,000			—			—
Repayment of senior unsecured note	(51,499		)	—			—
Payments of pre-payment fees on FHLBNY advances	(278		)	(5,151		)	—
Net (decrease) increase in mortgage escrow funds	2,218			1,503			(207		)
Treasury shares purchased	—			(3,810		)	(13,062		)
Stock option transactions	102			4			1,008
Other stock-based compensation transactions	164			45			87
Capital raise	46,000			—			—
Cash dividends paid	(9,100		)	(8,973		)	(9,216		)
Net cash provided by (used in) financing activities	422,917			101,533			(27,622		)
Net increase (decrease) in cash and cash equivalents	156,470			190,640			(69,536		)
Cash and cash equivalents at beginning of year	281,512			90,872			160,408
Cash and cash equivalents at end of year	$	437,982		$	281,512		$	90,872
Supplemental cash flow information:
Interest payments	$	18,447		$	21,815		$	27,379
Income tax payments	1,873			9,070			7,993
Loans transferred to other real estate owned	6,148			1,932			2,943
Securities purchases settled in subsequent periods	41,758			—			—
Acquisitions:
Non-cash assets acquired:
Investments available for sale	54,994			—			—
Total loans, net	205,453			—			—
Loans FHLB Stock	1,045			—			—
Accrued interest receivable	417			—			—
Goodwill	5,665			—			—
Core deposit intangibles	4,818			—			—
Premises and equipment, net	490			—			—
Other assets	1,663			—			—

64

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES Consolidated Statements of Cash Flows Continued Years Ended September 30, 2011, 2010 and 2009 (Dollars in thousands)
Total non-cash assets acquired	274,545		—	—
Liabilities assumed:
Deposits	368,902		—	—
FHLB and other borrowings	30,784		—	—
Other liabilities	1,677		—	—
Total liabilities assumed	401,363		—	—
Net non-cash assets (liabilities) acquired	(126,818	)	—	—
Cash and cash equivalents acquired (paid) in acquisitions	126,818		—	—

See accompanying notes to consolidated financial statements.

65

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(1) Basis of Financial Statement Presentation and Summary of Significant Accounting Policies

The consolidated financial statements include the accounts of Provident New York Bancorp (“Provident Bancorp” or “the Company”), Hardenburgh Abstract Title Company, 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, and (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) Limited Liability Companies, which hold foreclosed properties acquired by the bank. Intercompany transactions and balances are eliminated in consolidation.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. Certain amounts from prior years have been reclassified to conform to the current fiscal year presentation. Reclassifications had no affect on prior year net income or shareholders’ equity.

(a)Nature of Business

Provident New York Bancorp (“Provident Bancorp” or the “Company”), a unitary savings and loan holding company, is a Delaware corporation that owns all of the outstanding shares of Provident Bank (the “Bank”). Provident Bancorp was formed in connection with the second step offering on January 14, 2004.

On June 29, 2005, Provident Bancorp, Inc. changed its name to Provident New York Bancorp in order to differentiate itself from the numerous bank holding companies with similar names. It began trading on the NASDAQ under the stock symbol “PBNY” on that date. Prior to that date, from January 7, 1999 its common stock traded under the stock symbol “PBCP.” On December 28, 2011, Provident Bancorp changed from trading on the NASDAQ to the New York Stock Exchange (NYSE) under the same symbol PBNY.

Provident Bank, an independent, full-service bank founded in 1888, is headquartered in Montebello, New York and is the principal bank subsidiary of Provident Bancorp. Provident Bank accounts for substantially all of Provident Bancorp’s consolidated assets and net income. We operate financial centers which serve the greater New York metropolitan area . There are offices located in Rockland County, New York, Orange County, New York, Sullivan, Ulster, Westchester and Putnam Counties,New York City, and Bergen County, New Jersey which operate under the name PBNY Bank, a division of Provident Bank, New York. Provident Bank offers a complete line of commercial, business banking (small business), wealth management, and consumer banking products and services. The Bank’s principal business is accepting deposits and, together with funds generated from operations and borrowings, investing in various types of loans and securities. The Bank is a federally-chartered savings association and its deposits are insured up to applicable limits by the Deposit Insurance Fund of the Federal Deposit Insurance Corporation (FDIC). The Office of the Comptroller of the Currency (“OCC”) and the Federal Reserve Bank is the primary regulator for Provident Bancorp.

At September 30, 2012, the Company had $4.5 million of assets held for sale that represented the assets of HVIA. The Company entered into an agreement to sell HVIA subsequent to September 30, 2012. The transaction closed on November 16, 2012.

(b)Use of estimates

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, the Company 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. An estimate that is particularly susceptible to significant near-term change is the allowance for loan losses, which is discussed below. Also subject to change are estimates involving goodwill impairment evaluations, mortgage servicing rights, benefit plans, deferred income taxes and fair values of financial instruments.

66

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(c)Cash Flows

For purposes of reporting cash flows, cash equivalents include highly liquid, short-term investments such as overnight federal funds, as well as cash and deposits with other financial institutions. Net cash flows are reported for customer loan and deposit transactions and short-term borrowings with an original maturity of 90 days or less.

(d) Restrictions on Cash

Cash on hand or on deposit with the Federal Reserve Bank was required to meet regulatory reserve and clearing requirements.

(e)Long Term Assets

Premises and equipment, core deposit and other intangible assets are reviewed annually for impairment or when events indicate their carrying amount may not be recoverable from future undiscounted cash flows. If impaired, the assets are recorded at fair value.

(f)Fair Values of Financial Instruments

Fair values of financial instruments are estimated using relevant market information and other assumptions, as more fully disclosed in a separate note. Fair value estimates involve uncertainties and matters of significant judgment regarding interest rates, credit risk, prepayments, and other factors, especially in the absence of broad markets for particular items. Changes in assumptions or in market conditions could significantly affect the estimates. (See note 18)

(g)Adoption of New Accounting Standards

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 was effective for the Company on January 1, 2012 and did not 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 IFRS. This standard was effective for the Company on January 1, 2012 and did not 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. The adoption of this amendment had no impact on the consolidated financial statements as the prior presentation of comprehensive income was in compliance with this amendment.

(h)Securities

Securities include U.S. Treasury, U.S. Government Agency and Government Sponsored Agencies, municipal and corporate bonds, mortgage-backed securities, collateralized mortgage obligations and marketable equity securities.

The Company can classify its securities among three categories: held to maturity, trading, and available-for-sale. We determine the appropriate classification of the Company’s securities at the time of purchase.

Held-to-maturity securities are limited to debt securities for which we have the intent and the Company has the ability to hold to maturity. These securities are reported at amortized cost.

Trading securities are debt and equity securities held principally for the purpose of selling them in the near term. These securities are reported at fair value, with unrealized gains and losses included in earnings. The Company does not engage in securities trading activities.

All other debt and marketable equity securities are classified as available for sale. These securities are reported at fair value, with unrealized gains and losses (net of the related deferred income tax effect) excluded from earnings and reported in a separate component of stockholders’ equity (accumulated other comprehensive income or loss). Available-for-sale securities include securities that we intend to hold for an indefinite period of time, such as securities to be used as part

67

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

of the Company’s asset/liability management strategy or securities that may be sold in response to changes in interest rates, changes in prepayment risks, the need to increase capital, or similar factors.

Premiums and discounts on debt securities are recognized in interest income on a level yield basis over the period to maturity. Amortization of premiums and accretion of discounts on mortgage-backed securities are based on the estimated cash flows of the mortgage-backed securities, periodically adjusted for changes in estimated lives, on a level yield basis. The cost of securities sold is determined using the specific identification method.

Securities are evaluated at least quarterly, and more frequently when economic and market conditions warrant such an evaluation. For securities in an unrealized loss position, we consider the extent and duration of the unrealized loss, and the financial condition of the issuer. The Company also assesses whether it intends to sell, or is more likely than not that it will be required to sell, a security in an unrealized loss position before recovery of its amortized cost basis. If either criteria regarding intent to sell is met, the entire difference between amortized cost and fair value is recognized as impairment through earnings. If the Company does not expect to recover the entire amortized cost basis of the security, the Company does not intend to sell the security and it is not more likely than not that the Company will be required to sell the security before recovery of its amortized cost basis, the other than temporary impairment is separated into a) the amount representing the credit loss and b) the amount related to all other factors. The amount of other than temporary impairment related to credit loss is recognized in earnings while the amount related to other factors is recognized in other comprehensive income, net of applicable taxes. The cost basis of individual equity securities is written down to estimated fair value through a charge to earnings when declines in value below cost are considered to be other than temporary. As of September 30, 2012 the Company does not intend to sell nor is it more likely than not that it would be required to sell any of its debt securities with unrealized losses prior to recovery of its amortized cost basis less any current period credit loss.

(i)Loans Held For Sale

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value, as determined by outstanding commitments from investors. In the absence of commitments from investors, fair value is based on current investor yield requirements. Net unrealized losses, if any, are recorded as a valuation allowance and charged to earnings.

Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of mortgage loans sold is reduced by the amount allocated to the value of the servicing right which is its fair value. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

(j)Servicing Rights

When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income. All classes of servicing assets are subsequently measured using the amortization method which requires servicing rights to be amortized into non-interest income in proportion to, and over the period of, the estimated future net servicing income of the underlying loans.

Under the amortization measurement method, the Company subsequently measures servicing rights at fair value at each reporting date and records any impairment in value of servicing assets in earnings in the period in which the impairment occurs. The fair values of servicing rights are subject to significant fluctuations as a result of changes in estimated and actual prepayment speeds and default rates and losses.

Servicing fee income, which is reported on the income statement as other income, is recorded for fees earned for servicing loans. The fees are based on a contractual percentage of the outstanding principal; or a fixed amount per loan and are recorded as income when earned. Servicing fees totaled $695, $623 and $507 for the years ended September 30, 2012, 2011 and 2010, respectively. Late fees and ancillary fees related to loan servicing are not material.

(k)Loans

Loans where we have the intent and ability to hold for the foreseeable future or until maturity or payoff (other than loans held for sale) are reported at amortized cost less the allowance for loan losses. Interest income on loans is accrued on the unpaid principal balance.

A loan is placed on non-accrual status when we have determined that the borrower may likely be unable to meet contractual principal or interest obligations, or when payments are 90 days or more past due, unless well secured and in the process

68

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

of collection. Accrual of interest ceases and, in general, uncollected past due interest is reversed and charged against current interest income, related to the current year while interest recorded in the prior year is charged to the allowance for loan losses. Interest payments received on non-accrual loans, including impaired loans, are not recognized as income unless warranted based on the borrower’s financial condition and payment record. Furthermore, negative tax escrow will be included in the unpaid principal for loans individually evaluated for impairment, as this is part of the customer's legal obligation to the company.

The Company defers nonrefundable loan origination and commitment fees, and certain direct loan origination costs, and amortizes the net amount as an adjustment of the yield over the estimated life of the loan. If a loan is prepaid or sold, the net deferred amount is recognized in the statement of income at that time. Interest and fees on loans include prepayment fees and late charges collected.

(l)Allowance for Loan Losses

The allowance for loan losses is a valuation allowance for probable incurred credit losses.  Loan losses are charged against the allowance when the Company believes the uncollectibility of a loan balance is confirmed. The Company analyzes loans by two broad segments or classes: real estate secured loans and loans that are either unsecured or secured by other collateral.

The segments or classes considered real estate secured are: residential mortgage loans; commercial mortgage loans; commercial mortgage community business loans; acquisition, development and construction (“ADC”) loans; homeowner loans, and equity lines of credit. The segments or classes considered unsecured or secured by other than real estate collateral are: commercial business loans, commercial community business loans, and consumer loans. In all segments or classes, loans are reviewed for impairment once they are past due 90 days or more, or are classified substandard or doubtful. If a loan is deemed to be impaired in one of the real estate secured segments, it is generally considered collateral dependent. If the value of the collateral securing a collateral dependent impaired loan is less than the loan's carrying value, a charge-off is recognized equal to the difference between the appraised value and the book value of the loan. Additionally impairment reserves are recognized for estimated costs to hold and to liquidate and a 10% discount of the appraisal value. The ranges for the costs to hold and liquidate are 12-22% for the following segments: commercial mortgage loans, commercial mortgage community business mortgage loans and ADC loans and 7-13 % for homeowner loans, equity lines of credit, and residential mortgage loans. Impaired loans in the real estate secured segments are re-appraised using a summary or drive-by appraisal report every six to nine months.

For loans in the commercial community business loans segmentwe charge off the full amount of the loan when it becomes 90 days or more past due, or earlier in the case of bankruptcy, after giving effect to any cash or marketable securities pledged as collateral for the loan.  For loans in the commercial business loan segment, we conduct a cash flow projection, and charge off the difference between the net present value of the cash flows discounted at the effective note rate and the carrying value of the loan, and generally recognize a 10% impairment reserve to account for the imprecision of our estimates.  However, for most of these cases receipt of future cash flows is too unreliable to be considered probable, resulting in the charge off of the entire balance of the loan.  For unsecured consumer loans, charge offs are recognized once the loan is 90 days or more past due or the borrower files for bankruptcy protection.

Subsequent recoveries, if any, are credited to the allowance. The allowance for loan losses consists of amounts specifically allocated to non-performing loans and other criticized or classified loans (if any), as well as allowances determined for the pass rated loans in each major loan category. After we establish a provision for loans that are known to be non-performing, criticized or classified, we calculate a percentage to apply to the remaining loan portfolio to estimate the probable incurred losses inherent in that portion of the portfolio. These percentages are determined by management, based on historical loss experience for the applicable loan category, and are adjusted to reflect our evaluation of:

•levels of, and trends in, delinquencies and non-accruals;

•trends in volume and terms of loans;

•effects of any changes in lending policies and procedures;

•experience, ability, and depth of lending management and staff;

•national and local economic trends and conditions;

•concentrations of credit by such factors as location, industry, inter-relationships, and borrower; and for commercial loans, trends in risk ratings.

69

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Land acquisition, development and construction lending is considered higher risk and exposes us to greater credit risk than permanent mortgage financing. The repayment of land acquisition, development and construction loans depends upon the sale of the property to third parties or the availability of permanent financing upon completion of all improvements. In the event we make an acquisition loan on property that is not yet approved for the planned development, there is the risk that approvals will not be granted or will be delayed. These events may adversely affect the borrower and the collateral value of the property. Development and construction loans also expose us to the risk that improvements will not be completed on time in accordance with specifications and projected costs. In addition, the ultimate sale or rental of the property may not occur as anticipated. All of these factors are considered as part of the underwriting, structuring and pricing of the loan. We have deemphasized this type of loan.

Commercial real estate loans subject us to the risks that the property securing the loan may not generate sufficient cash flow to service the debt or the borrower may use the cash flow for other purposes. In addition, the foreclosure process, if necessary may be slow and properties may deteriorate in the process. The market values are also subject to a wide variety of factors, including general economic conditions, industry specific factors, environmental factors, interest rates and the availability and terms of credit.

Commercial business lending is also higher risk because repayment depends on the successful operation of the business which is subject to a wide range of risks and uncertainties. In addition, the ability to successfully liquidate collateral, if any, is subject to a variety of risks because we must gain control of assets used in the borrower's business before foreclosing which we cannot be assured of doing, and the value in a foreclosure sale or other means of liquidation is subject to downward pressure.

When we evaluate residential mortgage loans and equity loans we weigh both the credit capacity of the borrower and the collateral value of the home. As unemployment and underemployment increases, and liquidity reserves if any, diminish, the credit capacity of the borrower decreases, which increases our risk. Also, after a period of years of stable or increasing home values in our market, home prices have declined from a high in 2005 and 2006. We are exposed to risk in both our first mortgage and equity lending programs due to declines in values in recent years. We are also exposed to risk because the time to foreclose is significant and has become longer under current conditions.

The carrying value of loans is periodically evaluated and the allowance is adjusted accordingly. While management uses the best information available to make evaluations, future adjustments to the allowance may be necessary if conditions differ substantially from the information used in making the evaluations. In addition, as an integral part of their examination process, our regulatory agencies periodically review the allowance for loan losses. Such agencies may require us to recognize additions to the allowance based on their judgments of information available to them at the time of their examination.

(m) Troubled Debt Restructure

Troubled debt restructures ("TDR") 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. Not all loans that are restructured as a TDR are classified as non accrual before the restructuring occurs. Restructured loans can convert from non accrual to accrual status when said 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.

(n) Federal Home Loan Bank Stock

As a member of the Federal Home Loan Bank (FHLB) of New York, the Bank is required to hold a certain amount of FHLB stock. This stock is a non-marketable equity security and, accordingly, is reported at cost.

(o) Premises and Equipment

Land is reported at cost, while premises and equipment are reported at cost, less accumulated depreciation and amortization. Depreciation is computed using the straight-line method over the estimated useful lives of the related assets, which range from three years for equipment and 40 years for premises. Leasehold improvements are amortized on a straight-line basis over the terms of the respective leases, including renewal options, or the estimated useful lives of the improvements, whichever is shorter. Routine holding costs are charged to expense as incurred, while significant improvements are capitalized.

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PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(p) Goodwill and Other Intangible Assets

Goodwill resulting from business combinations represents the excess of the purchase price over the fair value of the net assets of businesses acquired. Goodwill and intangible assets acquired in a purchase business combination and determined to have an indefinite useful life are not amortized, but tested for impairment at least annually. Goodwill is the only intangible asset with an indefinite life on our balance sheet.

The Company accounts for goodwill and other intangible assets in accordance with GAAP, which, in general, requires that goodwill not be amortized, but rather that it be tested for impairment at least annually at the reporting unit level. There are two steps to the process:

1. Identify potential impairments by comparing the fair value of a reporting unit to its carrying amount, including goodwill. Goodwill is not considered impaired as long as the fair value of the reporting unit is greater than its carrying value. The second step is only required if a potential impairment to goodwill is identified in step one.

2. Compare the implied fair value of goodwill to its carrying amount, where the implied fair value of goodwill is computed on a residual basis, that is, by subtracting the sum of the fair values of the individual asset categories (tangible and intangible) from the indicated fair value of the reporting unit as determined under step one. If the carrying amount of goodwill exceeds its implied fair value, an impairment loss is recognized. That loss is equal to the carrying amount of goodwill that is in excess of its implied fair value, and it must be presented as a separate line item on financial statements.

The Company estimated the fair value of the reporting unit, Provident Bank, utilizing four valuation methodologies including, (1) the Comparable Transactions approach based on pricing ratios recently paid in the sale or merger of comparable banking franchises; (2) the Control Premium approach based on the Company’s trading price followed by the application of an industry based control premium; (3) the Public Market Peers approach based on the trading prices of similar publicly-traded companies as measured by standard valuation ratios followed by application of an industry based control premium; and, (4) the Discounted Cash Flow approach where value is estimated based on the present value of projected dividends and a terminal value. These approaches were weighted to determine if impairment existed and the Company determined as of September 30, 2012 the aggregate fair value of the reporting unit exceeded the carrying value and therefore no impairment was recorded and the step two analysis for determining the impairment was not necessary. Changes in the local and national economy, the federal and state legislative and regulatory environments for financial institutions, the stock market, interest rates and other external factors (such as natural disasters or significant world events) may occur from time to time, often with great unpredictability, and may materially impact the fair value of publicly traded financial institutions and could result in an impairment charge at a future date.

The core deposit intangibles recorded in acquisitions are amortized to expense using an accelerated method over their estimated lives of approximately eight years. Intangibles related to the naming rights on Provident Bank Ball Park are amortized over 10 years on a straight-line basis. Impairment losses on intangible assets are charged to expense, if and when they occur.

(q) Real Estate Owned

Real estate properties acquired through loan foreclosures are recorded initially at estimated fair value, less expected sales costs, with any resulting write-down charged to the allowance for loan losses. Subsequent valuations are performed by management, and the carrying amount of a property is adjusted by a charge to expense to reflect any subsequent declines in estimated fair value. Fair value estimates are based on recent appraisals and other available information. Routine holding costs are charged to expense as incurred, while significant improvements are capitalized. Gains and losses on sales of real estate owned properties are recognized upon disposition. Foreclosed properties totaled $6.4 million and $5.4 million at September 30, 2012 and 2011, respectively.

(r) Securities Repurchase Agreements

In securities repurchase agreements, the Company transfers securities to counterparty under an agreement to repurchase the identical securities at a fixed price on a future date. These agreements are accounted for as secured financing transactions since the Company maintains effective control over the transferred securities and the transfer meets other specified criteria. Accordingly, the transaction proceeds are recorded as borrowings and the underlying securities continue to be carried in the Company’s securities portfolio. Disclosure of the pledged securities is made in the consolidated statements of financial condition if the counterparty has the right by contract to sell or re-pledge such collateral.

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(s)Income Taxes

Net deferred taxes are recognized for the estimated future tax effects attributable to “temporary differences” between the financial statement carrying amounts and the tax bases of existing assets and liabilities. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which the temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax laws or rates is recognized in income tax expense in the period that includes the enactment date of the change.

A deferred tax liability is recognized for all temporary differences that will result in future taxable income. A deferred tax asset is recognized for all temporary differences that will result in future tax deductions, subject to reduction of the asset by a valuation allowance in certain circumstances. This valuation allowance is recognized if, based on an analysis of available evidence, we determine that it is more likely than not that some portion, or all of the deferred tax asset will not be realized. The valuation allowance is subject to ongoing adjustment based on changes in circumstances that affect management’s judgment about the realizability of the deferred tax asset. Adjustments to increase or decrease the valuation allowance are charged or credited, respectively, to income tax expense. The Company recognizes interest and/or penalties related to income tax matters in income tax expense.

The Company evaluates uncertain tax positions in a two step process. The first step is recognition, which requires a determination of whether it is more likely than not that a tax position will be sustained upon examination. The second step is measurement. Under the measurement step, a tax position that meets the more likely than not recognition threshold is measured at the largest amount of benefit that is greater than fifty percent likely of being realized upon ultimate settlement. Tax positions that previously failed to meet the more likely than not recognition threshold should be recognized in the first subsequent financial reporting period in which that threshold is met. Previously recognized tax position that no longer meet the more likely than not recognition threshold should be derecognized in the first subsequent financial reporting period in which the threshold is no longer met. The Company did not have any such position as of September 30, 2012. See note 11 of the “Notes to Consolidated Financial Statements”.

(t) Bank Owned Life Insurance (BOLI)

The Company has purchased life insurance policies on certain key executives. Bank owned life insurance is recorded at its cash surrender value (or the amount that can be realized).

(u) Stock-Based Compensation Plans

Compensation expense is recognized for the Employee stock ownership plan (“ESOP”) equal to the fair value of shares that have been allocated or committed to be released for allocation to participants. Any difference between the fair value at that time and the ESOP’s original acquisition cost is charged or credited to stockholders’ equity (additional paid-in capital). The cost of ESOP shares that have not yet been allocated or committed to be released for allocation is deducted from stockholders’ equity.

Compensation cost is recognized for stock options issued to employees, based on the fair value of these awards at the date of grant.  A Black-Scholes model is utilized to estimate the fair value of stock options.  Compensation cost is recognized over the required service period, generally defined as the vesting period. 

During 2012, 2011 and 2010 the Company issued 515,000, 119,526 and 321,976 new stock-based option awards and recognized total non-cash stock-based compensation cost of $521, $558 and $247. As of September 30, 2012, the total remaining unrecognized compensation cost related to non-vested stock options was $1,177. Options granted in 2012 have 3 to 4 year vesting periods.

The Company also has a restricted stock plan in which shares awarded are transferred from treasury stock at cost with the difference between the fair market value on the grant date and the cost basis of the shares recorded as a reduction to retained earnings or an increase to additional paid-in capital, as applicable. The expense is amortized over the vesting period of the awards. The Company issued 58,000 shares during 2012 and 63,870 during 2011 and no shares were issued in 2010. The total restricted stock compensation cost recognized during 2012, 2011 and 2010 was $276, $168, and $883, respectively. As of September 30, 2012, the total remaining unrecognized compensation cost related to restricted stock was $665. Options granted in 2012 have a two through four year vesting periods.

The Company’s stock-based compensation plans allow for accelerated vesting when employees retire under circumstances in accordance with the terms of the plans. Grants issued subsequent to adoption of FASB ASC Topic 718 (October 1, 2005), which are subject to such accelerated vesting, are expensed over the shorter of the time to retirement age or the vesting schedule in accordance with the grant. Thus the vesting period can be less than the vesting period expressed in the option agreement, depending upon the age of the grantee. As of September 30, 2012, 5,333 restricted shares and 23,183 stock options were potentially subject to accelerated vesting, and have been fully expensed. The Company did not recognize expense associated with the acceleration of restricted shares in 2012, 2011 and 2010. The

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Company recognized expense associated with the acceleration of 0 shares in 2012, 2011 and 27,000 stock option shares 2010, respectively.

(v) Earnings Per Share

Basic earnings per share (EPS) is computed by dividing net income applicable to common stock by the weighted average number of common shares outstanding during the period.

Diluted EPS is computed in a similar manner, except that the weighted average number of common shares is increased to include incremental shares (computed using the treasury stock method) that would have been outstanding if all potentially dilutive stock options were exercised and unvested RRP shares became vested during the periods. For purposes of computing both basic and diluted EPS, outstanding shares exclude unallocated ESOP shares.

(w) Segment Information

Public companies are required to report certain financial information about significant revenue- producing segments of the business for which such information is available and utilized by the chief operating decision maker. As a community-oriented financial institution, substantially all of the Company’s operations involve the delivery of loan and deposit products to customers. Management makes operating decisions and assesses performance based on an ongoing review of the community banking operation, which constitutes the Company’s only operating segment for financial reporting purposes.

(x) Loss Contingencies

Loss contingencies, including claims and legal actions arising in the ordinary course of business, are recorded as liabilities when the likelihood of loss is probable and an amount or range of loss can be reasonably estimated. The Company does not believe there are such matters that will have a material effect on the financial statements.

(y) Derivatives

At the inception of a derivative contract, the Company designates the derivative as one of three types based on the Company's intentions and belief as to likely effectiveness as a hedge. These three types are (1) a hedge of the fair value of a recognized asset or liability or of an unrecognized firm commitment ("fair value hedge"), (2) a hedge of a forecasted transaction or the variability of cash flows to be received or paid related to a recognized asset or liability ("cash flow hedge"), or (3) an instrument with no hedging designation ("stand-alone derivative"). For a fair value hedge, the gain or loss on the derivative, as well as the offsetting loss or gain on the hedged item, are recognized in current earnings as fair values change. For a cash flow hedge, the gain or loss on the derivative is reported in other comprehensive income and is reclassified into earnings in the same periods during which the hedged transaction affects earnings. For both types of hedges, changes in the fair value of derivatives that are not highly effective in hedging the changes in fair value or expected cash flows of the hedged item are recognized immediately in current earnings. Changes in the fair value of derivatives that do not qualify for hedge accounting are reported currently in earnings, as noninterest income. Net cash settlements on derivatives that qualify for hedge accounting are recorded in interest income or interest expense, based on the item being hedged. Net cash settlements on derivatives that do not qualify for hedge accounting are reported in noninterest income. Cash flows on hedges are classified in the cash flow statement the same as the cash flows of the items being hedged.

The Company formally documents the relationship between derivatives and hedged items, as well as the risk-management objective and the strategy for undertaking hedge transactions at the inception of the hedging relationship. This documentation includes linking fair value or cash flow hedges to specific assets and liabilities on the balance sheet or to specific firm commitments or forecasted transactions. The Company also formally assesses, both at the hedge's inception and on an ongoing basis, whether the derivative instruments that are used are highly effective in offsetting changes in fair values or cash flows of the hedged items. The Company discontinues hedge accounting when it determines that the derivative is no longer effective in offsetting changes in the fair value or cash flows of the hedged item, the derivative is settled or terminates, a hedged forecasted transaction is no longer probable, a hedged firm commitment is no longer firm, or treatment of the derivative as a hedge is no longer appropriate or intended.

When hedge accounting is discontinued, subsequent changes in fair value of the derivative are recorded as noninterest income. When a fair value hedge is discontinued, the hedged asset or liability is no longer adjusted for changes in fair value and the existing basis adjustment is amortized or accreted over the remaining life of the asset or liability. When a cash flow hedge is discontinued but the hedged cash flows or forecasted transactions are still expected to occur, gains

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PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

or losses that were accumulated in other comprehensive income are amortized into earnings over the same periods which the hedged transactions will affect earnings.

(z) Loan Commitments and Related Financial Instruments

Financial instruments include off-balance sheet credit instruments, such as commitments to make loans and commercial letters of credit, issued to meet customer financing needs.  The face amount for these items represents the exposure to loss, before considering customer collateral or ability to repay. Such financial instruments are recorded when they are funded. 

(2) Acquisitions

On August 10, 2012 the Company acquired 100% of the outstanding common shares of Gotham Bank of New York ("Gotham")in exchange for $40,510 in cash. Under the terms of the acquisition, common shareholders received cash equal to 125% of adjusted tangible net worth. The acquisition of Gotham provides a strategic expansion into the metropolitan New York City market, enabling the Company to grow middle market business. Gotham delivered a core asset and deposit base, a long-term client base, advantageous location in midtown Manhattan and an initial client relationship team. Gotham's results of operations were included in the Company's results beginning August 10, 2012. Acquisition-related costs of $5,925 are included in non-interest expense in the Company's income statement for the year ended September 30, 2012.

The following table summarizes the consideration paid for Gotham and the amounts of the assets acquired and liabilities assumed recognized at the acquisition date:

August 10, 2012
Cash and due from banks	$	167,328
Securities, available for sale	54,994
Total loans, net	205,453
Federal Home Loan Bank ("FHLB") stock	1,045
Accrued interest receivable	417
Premises and equipment, net	490
Other assets	1,663
Total Assets acquired	$	431,390
Deposits	368,902
FHLB and other borrowings	30,784
Other liabilities	1,677
Total liabilities acquired	$	401,363
Total identifiable net assets	30,027
Core deposit intangible	4,818
Goodwill	5,665
Cash paid	$	40,510

The following table presents proforma information as if the acquisition had occurred at October 1, 2010. The proforma information includes adjustments for interest income on loans and securities acquired, amortization of intangibles arising from the transaction, interest expense on deposits acquired and the related income tax effects. The proforma financial information is not necessarily indicative of the results of operations that would have occurred had the transactions been effected on the assumed dates.

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

	2012		2011
Net interest income	$	103,999	$	102,447
Net income	22,914		16,068
Basic earnings per share	$	0.60	$	0.37
Diluted earnings per share	$	0.60	$	0.37

Summary of Acquisition Transactions. Below is the summary of the acquisition transactions for Warwick Community Bancorp (2005) “WSB”, Ellenville National Bank (2004) “ENB”, National Bank of Florida (2002) “NBF”, one purchase in 2005 of a branch office of HSBC Bank USA, National Association (“HSBC”), Hudson Valley Investment Advisors (“HVIA”) and Gotham Bank of New York (2012) "Gotham".

	HVIA		HSBC			WSB		ENB		NBF		Gotham		Total
At Acquisition Date
Number of shares issued	208,331		—			6,257,896		3,969,676		—		—		10,435,903
Loans acquired	$	—	$	2,045		$	284,522	$	213,730	$	23,112	$	207,513	$	730,922
Deposits assumed	—		23,319			475,150		327,284		88,182		368,545		1,282,480
Cash paid/(received)	2,500		(18,938		)	72,601		36,773		28,100		40,510		161,546
Goodwill	2,531		—			91,576		51,794		13,063		5,665		164,629
Core deposit/other intangibles	2,830		1,690			10,395		6,624		1,787		4,818		28,144
At September 30, 2012
Goodwill	$	—	$	—		$	92,145	$	52,101	$	13,336	$	5,665	$	163,247
Accumulated core deposit/other amortization	2,830		1,690			10,098		6,624		1,787		63		23,092
Net core deposit/other intangible	—		—			297		—		—		4,755		5,052

Future Amortization of Core Deposit and Other Intangible Assets. The following table sets forth the future amortization of core deposit and other intangible assets, including naming rights of $2,112 at September 30, 2012:

Amortization Schedule	September 30, 2012		September 30, 2011
Less than one year	$	853	$	1,183
One to two years	960		821
Two to three years	814		524
Three to four years	751		524
Four to five years	714		430
Beyond five years	3,072		1,147
Total	$	7,164	$	4,629

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(3) Securities Available for Sale

The following is a summary of securities available for sale:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2012
Mortgage-backed securities-residential
Fannie Mae	$	155,601	$	5,806	$	—		$	161,407
Freddie Mac	81,509		3,751		—			85,260
Ginnie Mae	4,488		290		—			4,778
CMO/Other MBS	191,867		1,787		(590		)	193,064
	433,465		11,634		(590		)	444,509
Investment securities
Federal agencies	404,820		4,013		(10		)	408,823
State and municipal securities	146,136		10,349		(4		)	156,481
Equities	1,087		—		(28		)	1,059
	552,043		14,362		(42		)	566,363
Total available for sale	$	985,508	$	25,996	$	(632	)	$	1,010,872
September 30, 2011
Mortgage-backed securities-residential
Fannie Mae	$	136,699	$	3,292	$	—		$	139,991
Freddie Mac	98,511		2,205		(41		)	100,675
Ginnie Mae	4,973		207		—			5,180
CMO/Other MBS	81,170		1,764		(522		)	82,412
	321,353		7,468		(563		)	328,258
Investment securities
Federal agencies	199,741		4,986		(79		)	204,648
Corporate bonds	16,984		257		(179		)	17,062
State and municipal securities	177,666		11,018		—			188,684
Equities	1,192		—		—			1,192
	395,583		16,261		(258		)	411,586
Total available for sale	$	716,936	$	23,729	$	(821	)	$	739,844

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.

	September 30, 2012
	Amortized Cost		Fair Value
Remaining period to contractual maturity
Less than one year	$	2,367	$	2,389
One to five years	127,240		130,510
Five to ten years	383,867		392,094
Greater than ten years	37,482		40,311
Total investment securities	550,956		565,304
Mortgage-backed securities-residential	433,465		444,509
Equity securities	1,087		1,059
Total available for sale securities	$	985,508	$	1,010,872

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Proceeds from sales of securities available for sale during the years ended September 30, 2012, 2011 and 2010 totaled $344,431, $540,145 and $443,389 respectively. These sales resulted in gross realized gains of $10,468, $10,000, and $8,518 for the years ended September 30, 2012, 2011 and 2010 respectively, and gross realized losses of $16, $7 and $361, in fiscal years 2012, 2011, and 2010 respectively. The Company’s accumulated other income included in stockholders equity at September 30, 2012 and 2011 consist of net unrealized gain, on available for sale securities of $15,066 and $13,603, respectively, net of tax liabilities of $10,298 and $9,302 respectively.

Securities, including held to maturity securities, with carrying amounts of $245,989 and $206,829 were pledged as collateral for borrowings at September 30, 2012 and 2011, respectively. Securities with carrying amounts of $506,079 and $438,081 were pledged as collateral for municipal deposits and other purposes at September 30, 2012 and 2011, 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 September 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
CMO/Other MBS	64,065		(590		)	—		—			64,065		(590		)
Total mortgage-backed securities — residential	64,065		(590		)	—		—			64,065		(590		)
U.S. Government and agency securities	4,993		(10		)	—		—			4,993		(10		)
State and municipal securities	716		(4		)	—		$	—		716		(4		)
Equities	—		—			809		$	(28	)	809		(28		)
Total	$	69,774	$	(604	)	$	809	$	(28	)	$	70,583	$	(632	)

	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer					Total
As of September 30, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Freddie Mac	$	10,262	$	(41	)	$	—	$	—		$	10,262	$	(41	)
CMO/Other MBS	3,037		(257		)	1,813		(265		)	4,850		(522		)
Total mortgage-backed securities — residential	13,299		(298		)	1,813		(265		)	15,112		(563		)
U.S. Government and agency securities	9,914		(79		)	—		—			9,914		(79		)
Corporate bonds	1,886		(179		)	—		—			1,886		(179		)
Total	$	25,099	$	(556	)	$	1,813	$	(265	)	$	26,912	$	(821	)

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 September 30, 2012, the Company concluded that it expects to recover the amortized cost basis of its investments on all but two private label CMO securities for which incurred impairment charges recognized totaled $47 and $75, for September 30, 2012 and September 30, 2011, respectively. The total cumulative impairment charges for these private label CMO securities was $122. There were $419 of unrealized gains recorded in other comprehensive income for the fiscal year ending September 30, 2012 for the two CMOs that were determined other than temporarily impaired. At September 30, 2011, there was one equity security that had an impairment charge of $203. As of September 30, 2012, 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 applicable credit losses.

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The losses related to privately issued residential CMOs were recognized in light of deterioration of housing values in the residential real estate market and a rise in delinquencies and charge-offs of underlying mortgage loans collateralizing those securities. The Company uses a discounted cash flow analysis to provide an estimate of an other than temporary impairment loss. Inputs to the discount model included known defaults and interest deferrals, projected additional default rates, projected additional deferrals of interest, over collateralization tests, interest coverage tests and other factors. Expected default and deferral rates were weighted toward the near future to reflect the current adverse economic environment affecting the banking industry. The discount rate was based upon the yield expected from the related securities.

Substantially all of the unrealized losses at September 30, 2012 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 September 30, 2012. A total of 16 available for sale securities were in a continuous unrealized loss position for less than 12 months and 1 security 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 $4,665 and a fair value (carrying value) of $4,630 as of September 30, 2012. Two of the four securities are considered to be impaired as noted above and are below investment grade. The impaired private label CMO securities have an amortized cost of $4,240 and a fair value of $4,197 at September 30, 2012. The remaining two securities in this category are performing as of September 30, 2012 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.

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Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(4) Securities Held to Maturity

The following is a summary of securities held to maturity:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2012
Mortgage-backed securities-residential
Fannie Mae	$	28,637	$	1,212	$	—		$	29,849
Freddie Mac	42,706		1,347		—			44,053
CMO/Other MBS	27,921		226		(28		)	28,119
	99,264		2,785		(28		)	102,021
Investment securities
Federal agencies	22,236		106		—			22,342
State and municipal securities	19,376		1,059		—			20,435
Other	1,500		26		—			1,526
	43,112		1,191		—			44,303
Total held to maturity	$	142,376	$	3,976	$	(28	)	$	146,324
September 30, 2011
Mortgage-backed securities-residential
Fannie Mae	$	1,298	$	63	$	—		$	1,361
Freddie Mac	32,858		103		(120		)	32,841
CMO/Other MBS	25,828		155		—			25,983
	59,984		321		(120		)	60,185
Investment securities
Federal agencies	29,973		25		(141		)	29,857
State and municipal securities	18,583		1,108		—			19,691
Other	1,500		39		—			1,539
	50,056		1,172		(141		)	51,087
Total held to maturity	$	110,040	$	1,493	$	(261	)	$	111,272

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.

	September 30, 2012
	Amortized Cost		Fair Value
Remaining period to contractual maturity
Less than one year	$	10,117	$	10,151
One to five years	3,180		3,336
Five to ten years	25,611		26,148
Greater than ten years	4,204		4,668
Total investment securities	43,112		44,303
Mortgage-backed securities-residential	99,264		102,021
Total held to maturity securities	$	142,376	$	146,324

Proceeds from sales of securities held to maturity during the years ended September 30, 2012, 2011 and 2010 totaled $0, $357, and $0 respectively. These sales resulted in gross realized gains of $0, $18, and $0 for the years ended September 30, 2012, 2011, and 2010 respectively, and no gross realized losses in fiscal years 2012, 2011, and 2010. These securities can be

79

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

considered maturities per FASB ASC Topic 320, Investments — Debt and Equitysecurities, as the sale of the securities occurred after at least 85% of the principal outstanding had been collected since acquisition.

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 September 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
CMO other MBS	13,189		(28		)	—		—		13,189		(28		)
Total	$	13,189	$	(28	)	$	—	$	—	$	13,189	$	(28	)

	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer				Total
As of September 30, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses		Fair Value		Unrealized Losses
Freddie Mac MBS-residential	25,770		(120		)	—		—		25,770		(120		)
Federal Agencies	24,831		(141		)	—		—		24,831		(141		)
Total	$	50,601	$	(261	)	$	—	$	—	$	50,601	$	(261	)

All of the unrealized losses on held to maturity securities at September 30, 2012 are attributable to changes in market interest rates and credit risk spreads subsequent to purchase. There were no securities with unrealized losses that were individually significant dollar amounts at September 30, 2012. There were 0 held-to-maturity securities in a continuous unrealized loss position for less than 12 months, and no 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. 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 September 30, 2012.

(5) Loans

The components of the loan portfolio, excluding loans held for sale, were as follows:

	September 30,
	2012			2011
Real estate-residential mortgage loans	$	350,022		$	389,765
Commercial real estate loans	1,072,504			703,356
Commercial business loans	343,307			209,923
Acquisition, development & construction loans	144,061			175,931
Total commercial loans	1,559,872			1,089,210
Consumer loans:
Home equity lines of credit	165,200			174,521
Homeowner loans	34,999			40,969
Other consumer loans, including overdrafts	9,379			9,334
	209,578			224,824
Total loans	2,119,472			1,703,799
Allowance for loan losses	(28,282		)	(27,917		)
Total loans, net	$	2,091,190		$	1,675,882

Total loans include net deferred loan origination (fees)/costs of $(310) and $308 at September 30, 2012 and 2011, respectively.

80

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

A substantial portion of the Company’s loan portfolio is secured by residential and commercial real estate located in Rockland and Orange Counties of New York and contiguous areas such as Ulster, Sullivan, Putnam and Westchester Counties of New York, New York City, and Bergen County, New Jersey. The ability of the Company’s borrowers to make principal and interest payments is dependent upon, among other things, the level of overall economic activity and the real estate market conditions prevailing within the Company’s concentrated lending area. Commercial real estate and acquisition, development and construction loans are considered by management to be of somewhat greater credit risk than loans to fund the purchase of a primary residence due to the generally larger loan amounts and dependency on income production or sale of the real estate. Substantially all of these loans are collateralized by real estate located in the Company’s primary market area.

Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for September 30, 2012 are summarized below:

	For the year ended September 30, 2012
	Beginning Allowance for loan losses		Charge-offs			Recoveries		Net Charge-offs			Provision for losses			Ending Allowance for Loan Losses
Loans by segment:
Real estate — residential mortgage	$	3,498	$	(2,551	)	$	356	$	(2,195	)	$	3,056		$	4,359
Real estate — commercial mortgage	5,568		(2,707		)	528		(2,179		)	3,841			7,230
Commercial business loans	5,945		(1,526		)	1,116		(410		)	(932		)	4,603
Acquisition, development & construction	9,895		(4,124		)	299		(3,825		)	2,456			8,526
Consumer, including home equity	3,011		(1,901		)	263		(1,638		)	2,191			3,564
Total Loans	$	27,917	$	(12,809	)	$	2,562	$	(10,247	)	$	10,612		$	28,282
Net charge-offs to average loans outstanding														0.56		%

Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for September 30, 2011 are summarized below:

	For the year ended September 30, 2011
	Beginning Allowance for loan losses		Charge-offs			Recoveries		Net Charge-offs			Provision for losses		Ending Allowance for Loan Losses
Loans by segment:
Real estate — residential mortgage	$	2,641	$	(2,140	)	$	15	$	(2,125	)	$	2,982	$	3,498
Real estate — commercial mortgage	5,915		(1,802		)	2		(1,800		)	1,453		5,568
Commercial business loans	8,970		(5,400		)	605		(4,795		)	1,770		5,945
Acquisition, development & construction	9,752		(8,939		)	10		(8,929		)	9,072		9,895
Consumer, including home equity	3,565		(1,989		)	128		(1,861		)	1,307		3,011
Total Loans	$	30,843	$	(20,270	)	$	760	$	(19,510	)	$	16,584	$	27,917
Net charge-offs to average loans outstanding													1.17		%

81

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Activity in the allowance for loan losses and the recorded investments in loans by portfolio segment based on impairment method for September 30, 2010 are summarized below:

	For the year ended September 30, 2010
	Beginning Allowance for loan losses		Charge-offs			Recoveries		Net Charge-offs			Provision for losses			Ending Allowance for Loan Losses
Loans by segment:
Real estate — residential mortgage	$	3,106	$	(749	)	$	3	$	(746	)	$	281		$	2,641
Real estate — commercial mortgage	7,695		(987		)	23		(964		)	(816		)	5,915
Commercial business loans	8,928		(6,578		)	670		(5,908		)	5,950			8,970
Acquisition, development & construction	7,680		(848		)	261		(587		)	2,659			9,752
Consumer, including home equity	2,641		(1,168		)	166		(1,002		)	1,926			3,565
Total Loans	$	30,050	$	(10,330	)	$	1,123	$	(9,207	)	$	10,000		$	30,843
Net charge-offs to average loans outstanding														0.56		%

The following table sets forth the loans evaluated for impairment by segment at September 30, 2012 :

	Gotham acquired loans		Individually evaluated for impairment		Collectively evaluated for impairment		Total ending loans balance
Loans by segment:
Real estate — residential mortgage	$	640	$	12,739	$	336,643	$	350,022
Real estate — commercial mortgage	103,801		13,017		955,686		1,072,504
Commercial business loans	101,065		357		241,885		343,307
Acquisition, development & construction	—		24,880		119,181		144,061
Consumer, including home equity	258		2,299		207,021		209,578
Total Loans	$	205,764	$	53,292	$	1,860,416	$	2,119,472

The acquired Gotham loans are primarily collectively evaluated for impairment.

The following table sets forth the loans evaluated for impairment by segment at September 30, 2011

	Individually evaluated for impairment		Collectively evaluated for impairment		Total ending loans balance
Loans by segment:
Real estate — residential mortgage	$	8,573	$	381,192	$	389,765
Real estate — commercial mortgage	15,130		$	688,226	703,356
Commercial business loans	531		$	209,392	209,923
Acquisition, development & construction	28,223		$	147,708	175,931
Consumer, including home equity	2,504		222,320		224,824
Total Loans	$	54,961	$	1,648,838	$	1,703,799

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PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table sets forth the allowance evaluated for impairment by segment at September 30, 2012

	Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance balance
Ending allowance by segment:
Real estate — residential mortgage	$	871	$	3,488	$	4,359
Real estate — commercial mortgage	1,036		6,194		7,230
Commercial business loans	48		4,555		4,603
Acquisition, development & construction	996		7,530		8,526
Consumer, including home equity	263		3,301		3,564
Total allowance	$	3,214	$	25,068	$	28,282

The following table sets forth the allowance evaluated for impairment by segment at September 30, 2011

	Individually evaluated for impairment		Collectively evaluated for impairment		Total allowance balance
Ending allowance by segment:
Real estate — residential mortgage	$	1,069	$	2,429	$	3,498
Real estate — commercial mortgage	1,068		4,500		5,568
Commercial business loans	—		5,945		5,945
Acquisition, development & construction	1,409		8,486		9,895
Consumer, including home equity	260		2,751		3,011
Total allowance	$	3,806	$	24,111	$	27,917

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 non-performing 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.

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PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents loans individually evaluated for impairment by segment of loans as of September 30, 2012:

	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	$	6,193	$	5,413	$	—	$	5,493	$	310	$	137
Real estate — commercial mortgage	9,296		7,837		—		7,869		520		291
Acquisition, development and construction	24,144		20,597		—		22,043		636		367
Commercial business loans	262		262		—		467		26		26
Consumer loans, including home equity	1,146		1,122		—		1,113		28		8
Subtotal	41,041		35,231		—		36,985		1,520		829
With an allowance recorded:
Real estate — residential mortgage	8,485		7,326		871		7,770		180		141
Real estate — commercial mortgage	5,942		5,180		1,036		5,970		84		84
Acquisition, development & construction	7,159		4,283		996		5,868		76		76
Commercial business loans	95		95		48		99		18		6
Consumer loans, including home equity	1,400		1,177		263		1,503		—		—
Subtotal	23,081		18,061		3,214		21,210		358		307
Total	$	64,122	$	53,292	$	3,214	$	58,195	$	1,878	$	1,136

84

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents loans individually evaluated for impairment by segment of loans as of September 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	$	2,437	$	2,577	$	—	$	2,702	$	92	$	51
Real estate — commercial mortgage	8,765		8,873		—		8,917		497		248
Acquisition, development & construction	20,914		21,316		—		26,111		1,892		1,454
Commercial business loans	531		531		—		862		42		42
Consumer loans, including home equity	1,879		1,885		—		1,860		61		13
Subtotal	34,526		35,182		—		40,452		2,584		1,808
With an allowance recorded:
Real estate — residential mortgage	5,836		5,996		1,069		6,319		159		159
Real estate — commercial mortgage	6,024		6,257		1,068		6,505		199		144
Acquisition, development & construction	6,900		6,907		1,409		6,963		114		96
Consumer loans, including home equity	619		619		260		642		33		22
Subtotal	19,379		19,779		3,806		20,429		505		421
Total	$	53,905	$	54,961	$	3,806	$	60,881	$	3,089	$	2,229

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

Interest income recognized during impairment	1,975
Cash basis interest income recognized	1,157
Average impaired loans	27,032

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PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following tables set forth the amounts and status of the Company’s loans and troubled debt restructures at September 30, 2012 and September 30, 2011:

	September 30, 2012
	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual		Total Loans
Loans by segment:
Real estate — residential mortgage	$	337,356	$	855	$	497	$	2,263	$	9,051	$	350,022
Real estate — commercial mortgage	1,060,176		902		973		1,638		8,815		1,072,504
Commercial business loans	342,726		96		141		—		344		343,307
Acquisition, development & construction loans	121,590		7,067		—		—		15,404		144,061
Consumer, including home equity loans	205,463		1,551		265		469		1,830		209,578
Total	$	2,067,311	$	10,471	$	1,876	$	4,370	$	35,444	$	2,119,472
Total troubled debt restructures included above	$	13,543	$	270	$	264	$	—	$	10,870	$	24,947
Non performing loans:
Loans 90+ and still accruing									$	4,370
Non-accrual loans									35,444
Total non performing loans									39,814

	September 30, 2011
	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual		Total Loans
Loans by segment:
Real estate — residential mortgage	$	380,577	$	868	$	344	$	491	$	7,485	$	389,765
Real estate — commercial mortgage	689,037		768		337		1,989		11,225		703,356
Commercial business loans	209,190		490		—		—		243		209,923
Acquisition, development & construction loans	154,682		3,859		406		446		16,538		175,931
Consumer, including home equity loans	221,880		494		300		1,164		986		224,824
Total	$	1,655,366	$	6,479	$	1,387	$	4,090	$	36,477	$	1,703,799
Total troubled debt restructures included above	$	9,060	$	266	$	—	$	446	$	7,792	$	17,564
Non performing loans:
Loans 90+ and still accruing									$	4,090
Non-accrual loans									36,477
Total non performing loans									40,567

86

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Troubled Debt Restructures:

Troubled debt restructures are renegotiated loans for which concessions have been granted to the borrower that the Company would not have otherwise have granted and the borrower is experiencing financial difficulty. In order to determine whether a borrower is experiencing financial difficulty, an evaluation is performed of the probability that the borrower will be in payment default on any of its debt in the foreseeable future without modification. This evaluation is performed under the company’s internal underwriting policy. The modification of the terms of such loans include one or a combination of the following: a reduction of the stated interest rate of the loan; an extension of the maturity date at a stated rate of interest lower than the current market rate for new debt with similar risk; or a permanent reduction of the recorded investment in the loan. Modifications involving a reduction of the stated interest rate of the loan were for period ranging from 3 months to 30 years. Modifications involving an extension of the maturity date were for periods ranging from 3months to 30 years. 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.

Not all loans that are restructured as a TDR are classified as non accrual before the restructuring occurs. If the subsequent TDR designation of these accruing loans has been assigned because of a below market interest rate or an extension of time, the new restructured loan will remain on accrual. As noted all other loan restructures requires a minimum of 6 months of performance in accordance with the regulatory guideline.

Troubled debt restructures at September 30, 2012 were as follows:

	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual		Total TDRs
Real estate—residential mortgage	$	1,226	$	—	$	264	$	—	$	2,178	$	3,668
Real estate—commercial mortgage	2,640		270		—		—		—		2,910
Acquisition, development & construction	9,677		—		—		—		8,692		18,369
Total	$	13,543	$	270	$	264	$	—	$	10,870	$	24,947
Allowance	$	—	$	—	$	41	$	—	$	955	$	996

Troubled debt restructures at September 30, 2011 were as follows:

	Current Loans		30-59 Days Past Due		60-89 Days Past Due		90+ Days Past Due		Non- Accrual		Total TDRs
Real estate—residential mortgage	$	485	$	—	$	—	$	—	$	1,226	$	1,711
Real estate—commercial mortgage	1,439		—		—		—		—		1,439
Acquisition, development & construction	6,975		266		—		446		6,566		14,253
Consumer loans, including home equity	161		—		—		—		—		161
Total	$	9,060	$	266	$	—	$	446	$	7,792	$	17,564
Allowance	$	7	$	56	$	—	$	—	$	346	$	409

The Company has committed to lend additional amounts totaling up to $4,225 as of September 30, 2012 and September 30, 2011 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.

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PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following table presents loans by segment modified as troubled debt restructurings that occurred during the twelve months ending September 30, 2012, is as follows:

		Recorded Investment
	Number	Pre- Modification		Post- Modification
Restructured Loans:
Real estate — residential mortgage	5	$	1,525	$	1,295
Real estate — commercial mortgage	3	2,336		2,351
Acquisition, development & construction loans	4	5,299		5,299
Total restructured loans	12	$	9,160	$	8,945

The troubled debt restructurings described above increased the allowance for loan losses by $134 for the twelve months ending September 30, 2012. There were no charge offs as a result of the above troubled debt restructurings.

A loan is considered to be in default once it is 90 days contractually past due under the modified terms. The following table presents by class loans that were modified as troubled debt restructurings during the last twelve months that have subsequently defaulted during September 30, 2012 and September 30, 2011:

	September 30, 2012			September 30, 2011
	Number of Loans	Recorded Investment		Number of Loans	Recorded Investment
Acquisition, development & construction	5	$	2,050	—	$	—
Total	5	$	2,050	—	$	—

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 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.

88

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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 September 30, 2012 and September 30, 2011, the risk category of loans by segment of gross loans is as follows:

	September 30, 2012
	Special Mention		Substandard		Doubtful
Real estate — residential mortgage	$	830	$	11,314	$	—
Real estate — commercial mortgage	20,729		27,674		—
Acquisition, development & construction	5,669		42,871		—
Commercial business loans	14,920		3,995		338
Consumer loans, including home equity loans	274		2,482		—
Total	$	42,422	$	88,336	$	338

	September 30, 2011
	Special Mention		Substandard		Doubtful
Real estate — residential mortgage	$	3,701	$	8,525	$	—
Real estate — commercial mortgage	11,072		29,996		—
Acquisition, development & construction	5,170		49,294		—
Commercial business loans	2,472		3,651		—
Consumer loans, including home equity loans	611		2,523		—
Total	$	23,026	$	93,989	$	—

(6) Premises and Equipment, Net

Premises and equipment are summarized as follows:

	September 30,
	2012			2011
Land and land improvements	$	7,331		$	7,331
Buildings	31,903			31,511
Leasehold improvements	7,931			7,858
Furniture, fixtures and equipment	38,292			36,869
Total premises and equipment, gross	85,457			83,569
Accumulated depreciation and amortization	(46,974		)	(42,683		)
Total premises and equipment, net	$	38,483		$	40,886

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PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(7) Goodwill and Intangible Assets

The change in goodwill during the year is as follows:

	September 30,
	2012			2011		2010
Beginning of year	$	160,861		$	160,861	$	160,861
Acquisitions	5,665			—		—
Disposals	(3,279		)	—		—
Impairment	0			—		—
End of year	$	163,247		$	160,861	$	160,861

(8) Deposits

Deposit balances at September 30, 2012 and 2011 are summarized as follows:

	September 30,
	2012		2011
	Amount		Amount
Demand Deposits
Retail	$	167,050	$	194,299
Commercial	412,630		296,505
Municipal	367,624		160,422
Total Non-interest bearing deposits	947,304		651,226
NOW Deposits
Retail	213,755		164,637
Commercial	38,486		37,092
Municipal	195,882		200,773
Total Transaction deposits	1,395,427		1,053,728
Savings deposits	506,538		429,825
Money market deposits	821,704		509,483
Certificates of deposit	387,482		303,659
Total deposits	$	3,111,151	$	2,296,695

Municipal deposits held by PMB totaled $901,739 and $614,834 at September 30, 2012 and September 30, 2011, respectively. See Note 3, “Securities Available for Sale,” for the amount of securities that are pledged as collateral for municipal deposits and other purposes. Municipal deposits received for tax receipts were approximately $425,000 and $284,000 at September 30, 2012 and 2011, respectively.

Certificates of deposit had remaining periods to contractual maturity as follows:

	September 30,
	2012		2011
Remaining period to contractual maturity:
Less than one year	$	344,033	$	250,769
One to two years	26,407		22,784
Two to three years	10,601		19,584
Three to four years	3,261		7,203
Four to five years	3,180		3,319
Total certificates of deposit	$	387,482	$	303,659

90

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Certificate of deposit accounts with a denomination of $100 or more totaled $203,516 and $82,345 at September 30, 2012 and 2011, respectively. Listed below are the Company’s brokered deposits:

	September 30, 2012		September 30, 2011
Savings	$	13,344	$	—
Money market	46,566		5,725
Reciprocal CDAR’s 1	1,354		2,746
CDAR’s one way	764		3,366
Total brokered deposits	$	62,028	$	11,837

^{1 Certificate of deposit account registry service} 

(9) FHLB and Other Borrowings

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

	September 30,
	2012				2011
	Amount		Rate		Amount		Rate
By type of borrowing:
Advances	$	106,904	3.89	%	$	111,828	3.83	%
Repurchase agreements	238,272		3.49	%	211,694		3.61	%
Senior unsecured debt (FDIC insured)	—		—	%	51,499		2.75	%
Total borrowings	$	345,176	3.61	%	$	375,021	3.56	%
By remaining period to maturity:
Less than one year	$	10,136	1.88	%	$	61,500	2.96	%
One to two years	56,819		2.44	%	5,066		4.04	%
Two to three years	52,693		2.89	%	35,795		2.37	%
Three to four years	201		5.32	%	49,312		2.28	%
Four to five years	202,386		4.21	%	211		5.32	%
Greater than five years	22,941		3.74	%	223,137		4.18	%
Total borrowings	$	345,176	3.61	%	$	375,021	3.56	%

As a member of the FHLB, the Bank may borrow in the form of term and overnight borrowings up to the amount of eligible residential mortgage loans and securities that have been pledged as collateral under a blanket security agreement. As of September 30, 2012 and 2011, the Bank had pledged residential mortgage loans totaling $613,554 and $464,900, respectively. The Bank had also pledged securities with carrying amounts of $245,989 and $206,829 as of September 30, 2012 and September 30, 2011, respectively, to secure repurchase agreements. As of September 30, 2012, 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 $488,534. FHLB advances are subject to prepayment penalties if repaid prior to maturity.

Securities repurchase agreements had weighted average remaining terms to maturity of approximately 3.65 years and 4.77 years at September 30, 2012 and 2011, respectively. Average borrowings under securities repurchase agreements were $215,352 and $216,875 during the years ended September 30, 2012 and 2011, respectively, and the maximum outstanding month-end balance was $238,272 and $222,500, at September 30, 2012 and 2011, respectively.

FHLB borrowings (includes advance and repurchase agreements) of $200,000 at September 30, 2012 and 2011 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 4.56 year and 5.56 years and weighted average interest rates of 4.23% at September 30, 2012 and 2011, respectively. An additional $20,000 are putable on a one time basis after initial lockout period in February 2013 with a weighted average interest rate of 3.57% and a weighted average remaining term to contractual maturity of 5.42 years.

91

In November 2011 the Company restructured $5,000 of its FHLBNY advances which had a weighted average rate of 4.04% and a duration of 1.5 years, into new borrowings with a weighted average rate of 2.37%, net of prepayment penalties, duration of 1.6 years. Prepayment fees of $278 associated with the modifications are being amortized to maturity on a level yield basis.

During 2011 the Company restructured $89,135 of its FHLBNY advances which had a weighted average rate of 3.69% and duration of 2.2 years, into new borrowings with a weighted average rate of 2.63%, duration of 1.43 years and an annualized interest expense savings of approximately $945 net of prepayment fees. Prepayment fees of $5,151 associated with the modifications are being amortized over the new duration of 1.43 years on a level yield basis.

92

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(10) 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 3.5% and 4.0%. These caps are stand alone derivatives and therefore changes in fair value are reported in current period earnings, the amount for fiscal year 2012 is a loss of $63 and a loss of $197 in fiscal 2011. The fair value of the interest rate caps at September 30, 2012, 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 fiscal year 2012. Interest rate swaps are recorded on our consolidated statements of financial condition as an other asset or other liability at estimated fair value.

At September 30, 2012, summary information regarding these derivatives is presented below:

	Notional Amount			Average Maturity	Weighted Average Rate Fixed		Weighted Average Variable Rate	Fair Value
Interest Rate Caps	$	50,000		2.18	3.75	%	NA	$	2
3rd party interest rate swap	42,332			7.30	4.29		1 m Libor + 2.28	2,485
Customer interest rate swap	(42,332		)	7.30	4.29		1 m Libor + 2.28	(2,485		)

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

	Notional Amount			Average Maturity	Weighted Average Rate Fixed		Weighted Average Variable Rate	Fair Value
Interest Rate Caps	$	50,000		3.18	3.75	%	NA	$	65
3rd party interest rate swap	12,009			10.23	5.28		1 m Libor + 2.15	1,114
Customer interest rate swap	(12,009		)	10.23	5.28		1 m Libor + 2.15	(1,114		)

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 fair values of these commitments are not considered material.

(11) Income Taxes

Income tax expense consists of the following:

	Years ended September 30,
	2012			2011			2010
Current tax expense:
Federal	$	5,538		$	1,912		$	5,410
State	685			777			1,437
	6,223			2,689			6,847
Deferred tax expense (benefit):
Federal	(261		)	282			375
State	197			(164		)	(349		)
	(64		)	118			26
Total income tax expense	$	6,159		$	2,807		$	6,873

93

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Actual income tax expense differs from the tax computed based on pre-tax income and the applicable statutory Federal tax rate, for the following reasons:

	Years ended September 30,
	2012			2011			2010
Tax at Federal statutory rate of 35%	$	9,116		$	5,090		$	9,578
State income taxes, net of Federal tax benefit	573			430			652
Tax-exempt interest	(2,448		)	(2,551		)	(2,645		)
BOLI income	(718		)	(714		)	(715		)
Non deductible compensation expense	—			594			—
Non deductible acquisition costs	418			—			—
Other, net	(782		)	(42		)	3
Actual income tax expense	$	6,159		$	2,807		$	6,873
Effective income tax rate	23.6		%	19.3		%	25.1		%

94

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

	September 30,
	2012		2011
Deferred tax assets:
Allowance for loan losses	$	11,566	$	11,362
Deferred compensation	1,429		3,011
Accrued post retirement expense	1,512		1,343
Core deposit intangibles	109		315
Other comprehensive income (defined benefits)	5,612		5,780
Other	5,566		1,497
Total deferred tax assets	25,794		23,308
Deferred tax liabilities:
Undistributed earnings of subsidiary not consolidated for tax return purposes (REIT Income)	5,195		5,801
Prepaid pension costs	4,189		4,846
Purchase accounting adjustments	597		193
Depreciation of premises and equipment	2,822		486
Other comprehensive income (securities)	10,300		9,302
Other	2,187		810
Total deferred tax liabilities	25,290		21,438
Net deferred tax asset	$	504	$	1,870

Based on the Company’s consideration of historical and anticipated future pre-tax income, as well as the reversal period for the items giving rise to the deferred tax assets and liabilities, a valuation allowance for deferred tax assets was not considered necessary at September 30, 2012 and 2011.

Retained earnings at September 30, 2012 and 2011 include approximately $9,313 for which no provision for federal income taxes has been made. This amount represents the tax bad debt reserve at December 31, 1987, which is the end of the Bank's base year for purposes of calculating the bad debt deduction for tax purposes. If this portion of retained earnings is used in the future for any purposes other than to absorb bad debts, the amount will be added to future taxable income. The unrecorded deferred tax liability on the above amount at September 30, 2012 and 2011 was approximately $3,260.

As of September 30, 2012 and 2011, the Company had no unrecognized tax benefits or accrued interest and penalties recorded. the Company does not expect the total amount of unrecognized tax benefits to significantly increase within the next twelve months. The Company records interest and penalties as a component of income tax expense.

Provident New York Bancorp and its subsidiaries are subject to the U.S. federal income tax as well as income tax of the state of New York and various other state income taxes. The company is no longer subject to examination by federal and New York taxing authorities for tax years prior to 2009.

(12) Employee Benefit Plans and Stock-Based Compensation Plans

(a)Pension Plans

The Company has a noncontributory defined benefit pension plan covering employees that were eligible as of September 30, 2006. In July, 2006 the Board of Directors of the Company approved a curtailment to the Provident Bank Defined Benefit Pension Plan (“the Plan”) as of September 30, 2006. At that time, all benefit accruals for future service ceased and no new participants may enter the plan. The purpose of the Plan curtailment was to afford flexibility in the retirement benefits the Company provides, while preserving all retirement plan participants’ earned and vested benefits, and to manage the increasing costs associated with the defined benefit pension plan. The Company’s funding policy is to contribute annually an amount sufficient to meet statutory minimum funding requirements, but not in excess of the maximum amount deductible for Federal income tax purposes. Contributions are intended to provide not only for benefits attributed to service to date, but also for benefits expected to be earned in the future.

The following is a summary of changes in the projected benefit obligation and fair value of plan assets. The Company uses a September 30th measurement date for its pension plans.

95

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

	September 30,
	2012			2011
Changes in projected benefit obligation:
Beginning of year	$	30,612		$	31,109
Service cost	—			—
Interest cost	1,501			1,498
Actuarial loss	4,961			647
Benefits and distributions paid	(1,603		)	(2,642		)
End of year	35,471			30,612
Changes in fair value of plan assets:
Beginning of year	28,312			26,796
Actual gain (loss) on plan assets	5,948			(242		)
Employer contributions	—			4,400
Benefits and distributions paid	(1,603		)	(2,642		)
End of year	32,657			28,312
Funded status at end of year	$	(2,814	)	$	(2,300	)

Included in the $2,642 benefit and distributions paid during fiscal year 2011 was $490 in settlement charges related the retirement of the Company's prior CEO.

Amounts recognized in accumulated other comprehensive income (loss) at September 30, 2012 and 2011 consisted of:

	2012			2011
Unrecognized actuarial loss	$	(13,056	)	$	(14,234	)
Deferred tax asset	5,612			5,780
Net amount recognized in accumulated other comprehensive income (loss)	$	(7,444	)	$	(8,454	)

Discount rates of 4.1%, 5.0% and 5.0% were used in determining the actuarial present value of the projected benefit obligation at September 30, 2012, 2011 and 2010, respectively. No compensation increases were used as the plan is frozen. The weighted average long-term rate of return on plan assets was 7.8% for fiscal years ended 2012 and 2011. The accumulated benefit obligation was $35,471 and $30,612 at year end September 30, 2012 and 2011 respectively. The discount rate used in the determination of net periodic pension expense were 4.1%, 5.0% and 5.0%, for the years ending September 30, 2012, 2011 and 2010, respectively.

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2013	$	1,406
2014	1,492
2015	1,773
2016	1,723
2017	1,662
2018 - 2021	9,975

96

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The components of the net periodic pension expense (benefit) were as follows:

	Years ended September 30,
	2012			2011			2010
Service cost	$	—		$	—		$	—
Interest cost	1,501			1,498			1,555
Expected return on plan assets	(2,125		)	(2,343		)	(1,890		)
Amortization of unrecognized loss	2,316			1,667			1,509
Settlement Charge	—			490			—
Net periodic pension expense	$	1,692		$	1,312		$	1,174

Unrecognized actuarial loss and prior service cost totaling $1.7 million is expected to be amortized to pension expense during the next fiscal year ending September 30, 2013.

Equity, Debt, Invest Funds and Other Securities: The fair values for investment securities are determined by quoted market prices, if available (Level 1). For securities where quoted prices are not readily available, fair values are calculated based on market prices of similar securities (Level 2). For securities where quoted prices or market prices of similar securities are not available, fair values are calculated using discounted cash flows or other market indicators (Level 3).

The fair value of the plan assets consisting of various mutual funds and pooled investment funds at September 30, 2012, by asset category, is as follows:

	Fair Value Measurements at September 30, 2012		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Asset Category
Large U.S. equity	$	14,358	$	—	$	14,358	$	—
Small Mid U.S. equity	3,672		—		3,672		—
International Equity	3,284		—		3,284		—
Total Equity	21,314		—		21,314		—
Moderate Allocation	1,646		1,646		—		—
Total Balanced Asset Allocation	1,646		1,646		—		—
High yield bond	981		981		—		—
Intermediate term bond	8,716		—		8,716		—
Inflation protected bond	—		—		—		—
Total Fixed Income	9,697		981		8,716		—
Cash	—		—		—		—
Total Assets	$	32,657	$	2,627	$	30,030	$	—

97

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The fair value of the plan assets consisting of various mutual funds and pooled investment funds at September 30, 2011, by asset category, is as follows:

	Fair Value Measurements at September 30, 2011		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Asset Category
Large U.S. equity	$	13,549	$	—	$	13,549	$	—
Small Mid U.S. equity	3,238		—		3,238		—
International Equity	2,607		—		2,607		—
Total Equity	19,394		—		19,394		—
High yield bond	914		—		914		—
Intermediate term bond	6,447		—		6,447		—
Inflation protected bond	1,557		—		1,557		—
Total Fixed Income	8,918		—		8,918		—
Cash	—		—		—		—
Total Assets	$	28,312	$	—	$	28,312	$	—

The Company’s policy is to invest the pension plan assets in a prudent manner for the purpose of providing benefit payments to participants and mitigating reasonable expenses of administration. The Company’s investment strategy is designed to provide a total return that, over the long-term, places a strong emphasis on the preservation of capital. The strategy attempts to maximize investment returns on assets at a level of risk deemed appropriate by the Company while complying with applicable regulations and laws. The Plan’s investment policy prohibits the direct investment in real estate but does allow the Plan’s mutual funds to include a small percentage of real estate related investments. The investment strategy utilizes asset allocation as a principal determinant for establishing an appropriate risk profile. Weighted-average pension plan asset allocations based on the fair value of such assets at September 30, 2011, and September 30, 2010 and target allocations for 2012, by asset category, are as follows:

	September 30, 2011		September 30, 2012		Target Allocation Range 2012	Weighted Average Expected Rate of Return
Large U.S. equity securities	48	%	44	%		3.55	%
Small mid U.S. equity securities	11	%	11	%		1.04	%
International equity securities	9	%	10	%		1.39	%
Total equity securities	68	%	65	%	45% - 70%	2.78	%
Moderate allocation	—	%	5	%		0.35	%
Total balanced asset allocation	—	%	5	%		0.35	%
High yield bond	3	%	3	%		0.28	%
Intermediate term bond	23	%	27	%		1.85	%
Inflation protected bond	6	%	—	%		—	%
Total fixed income	32	%	30	%	20% - 40%	1.69	%
Cash	—	%	—	%	0% - 20%	—	%

The expected long-term rate of return assumption as of each measurement date was determined by taking into consideration asset allocations as of each such date, historical returns on the types of assets held, and current economic factors. Under this method, historical investment returns for each major asset category are applied to the expected future investment allocation in that category as a percentage of total plan assets, and a weighted average is determined. The Company’s investment policy for determining the asset allocation targets was developed based on the desire to optimize total return while placing a strong emphasis on preservation of capital. In general, it is hoped that, in the aggregate, changes in the fair value of plan assets will be less volatile than similar changes in appropriate market indices. Returns on invested assets are periodically compared with target market indices for each asset type to aid us in evaluating such returns.

98

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

There were no pension plan assets consisting of Provident Bancorp equity securities (common stock) at September 30, 2012 or at September 30, 2011.

The Company makes contributions to its funded qualified pension plans as required by government regulation or as deemed appropriate by management after considering the fair value of plan assets, expected returns on such assets, and the present value of benefit obligations of the plans. At this time, the Company has not determined whether contributions in 2012 will be made.

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 $41, $44 and $87 for the years ended September 30, 2012, 2011 and 2010, respectively. Additionally, a settlement charge of $278 in 2011 was recorded reflecting the partial settlement of the defined benefit portion of the SERP relating to the former CEO benefit obligation. The actuarial present value of the projected benefit obligation and the vested benefit obligation was $1,016 and $912 at September 30, 2012 and 2011, respectively, and the vested benefit obligation was $1,016 and $912 for the same periods, respectively, all of which is unfunded. Discount rates of 2.5% and 3.3% were used in determining the actuarial projected benefit at September 30, 2012 and 4.8% and 4.50% for September 30, 2011.

(b) Other Post retirement Benefit Plans

The Company’s postretirement plans, which are unfunded, provide optional medical, dental and life insurance benefits to retirees or death benefit payments to beneficiaries of employees covered by the Company and Bank Owned Life Insurance policies. The Company has elected to amortize the transition obligation for accumulated benefits to retirees as an expense over a 20 year period.

Data relating to the postretirement benefit plan follows:

	September 30,
	2012			2011
Change in accumulated postretirement benefit obligation:
Beginning of year	$	2,509		$	2,261
Service cost	46			38
Interest cost	125			107
Actuarial loss	548			209
Plan participants’ contributions	—			—
Amendments	—			—
Benefits paid	(125		)	(106		)
End of year	$	3,103		$	2,509
Changes in fair value of plan assets:
Beginning of year	$	—		$	—
Employer contributions	125			106
Plan participants’ contributions	—			—
Benefits paid	(125		)	(106		)
End of year	$	—		$	—
Funded status	$	(3,103	)	$	(2,509	)

99

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Components of net periodic benefit expense (benefit):

	For years ended September 30,
	2012			2011			2010
Service Cost	$	46		$	38		$	28
Interest Cost	125			107			107
Amortization of transition obligation	24			24			24
Amortization of prior service cost	47			48			49
Amortization of net actuarial gain	(25		)	(60		)	(95		)
Total	$	217		$	157		$	113

There is $16 unrecognized actuarial gain and prior service cost expected to be amortized out of accumulated other comprehensive income in 2013.

Estimated Future Benefit Payments

The following benefit payments are expected to be paid in future years:

2013	$	186
2014	188
2015	191
2016	193
2017	197
2018 - 2021	1,012

Assumptions used for plan	2012		2011
Medical trend rate next year	4.5	%	4.5	%
Ultimate trend rate	4.5	%	4.5	%
Discount rate	4.1	%	4.3	%
Discount rate used to value periodic cost	4.3	%	4.5	%

There is no impact of a 1% increase or decrease in health care trend rate due to the Company’s cap on cost.

Amounts recognized in accumulated other comprehensive income (loss) at September 30, 2012 and 2011 consisted of:

	2012			2011
Postretirement plan unrecognized gain	$	175		$	771
Postretirement plan unrecognized service cost	(317		)	(364		)
Postretirement unrecognized transition obligation	(30		)	(41		)
Postretirement SERP	(400		)	(244		)
Postemployment BOLI	(122		)	(144		)
Subtotal	(694		)	(22		)
Deferred tax asset (liability)	282			9
Net amount recognized in accumulated other comprehensive income (loss)	$	(412	)	$	(13	)

(c) Employee Savings Plan

The Company also sponsors a defined contribution plan established under Section 401(k) of the IRS Code. Eligible employees may elect to contribute up to 50.0% of their compensation to the plan. The Company currently makes matching contributions equal to 50.0% of a participant’s contributions up to a maximum matching contribution of 3.0% of eligible compensation. Effective after September 30, 2006, the Bank amended the plan to include a discretionary profit sharing component, in addition to the matching contributions. Fiscal year 2012 did not include a profit sharing component. Voluntary matching and profit

100

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

sharing contributions are invested, in accordance with the participant’s direction, in one or a number of investment options. Savings plan expense was $1,029, $1,875 and $1,751 for the years ended September 30, 2012, 2011 and 2010, respectively.

(d) Employee Stock Ownership Plan

In connection with the reorganization and initial common stock offering in 1999, the Company established an ESOP for eligible employees who meet certain age and service requirements. The ESOP borrowed $3,760 from the Bank and used the funds to purchase1,370,112 shares of common stock in the open market subsequent to the Offering. The Bank made periodic contributions to the ESOP sufficient to satisfy the debt service requirements of the loan which matured December 31, 2007. The ESOP used these contributions, any dividends received by the ESOP on unallocated shares and forfeitures beginning in 2007, to make principal and interest payments on the loan.

In connection with the Second-Step Stock Conversion and Offering in January 2004, the Company established an ESOP loan for eligible employees. The ESOP borrowed $9,987 from Provident Bancorp and used the funds to purchase 998,650 shares of common stock in the offering. The term of the second ESOP loan is twenty years.

ESOP shares are held by the plan trustee in a suspense account until allocated to participant accounts. Shares released from the suspense account are allocated to participants on the basis of their relative compensation in the year of allocation. Participants become vested in the allocated shares over a period not to exceed five years. Any forfeited shares were allocated to other participants in the same proportion as contributions through 2006 and beginning in 2007 are used by the plan to reduce debt service. A total of $0, $4 and $29 related to plan forfeitures were reversed against expense for the years ended September 30, 2012, 2011, and 2010 respectively.

ESOP expense (net of forfeitures) was $390, $436, and $413 for the years ended September 30, 2012, 2011 and 2010, respectively. Through September 30, 2012 and 2011, a cumulative total of 1,804,942 and 1,755,010 shares, respectively, have been allocated to participants or committed to be released for allocation, respectively. The cost of ESOP shares that have not yet been allocated to participants or committed to be released for allocation is deducted from stockholders’ equity; 563,826 shares with a cost of $5,638 and a fair value of approximately $5,306 at September 30, 2012 and 613,758 shares with a cost of $6,138 and a fair value of approximately $3,572 at September 30, 2011, respectively.

A supplemental savings plan has also been established for certain senior officers to compensate executives for benefits provided under the Bank’s tax qualified plans (employee’s savings plan and ESOP) that are limited by the IRS Code. Expense recognized for this plan including the defined benefit component was $0, $340, and $146, for the years ended September 30, 2012, 2011 and 2010, respectively. Amounts accrued and recorded in other liabilities at September 30, 2012 and 2011, including the defined benefit component were $1.2 million and $1.6 million respectively.

(e) Recognition and Retention Plan

In February 2000, the Company’s stockholders approved the Provident Bank 2000 Recognition and Retention Plan (the RRP). The principal purpose of the RRP is to provide executive officers and directors a proprietary interest in the Company in a manner designed to encourage their continued performance and service. The awards vested at a rate of 20% on each of five annual vesting dates, the first of which was September 30, 2000. As of February 2010, 27,413 shares remaining from this plan were no longer eligible to be granted.

In January 2005, the Company’s stockholders approved the Provident Bancorp, Inc. 2004 Stock Incentive Plan, under the terms of which the Company is authorized to issue up to 798,920 shares of common stock as restricted stock awards. Employees who retire under circumstances in accordance with the terms of the Plan may be entitled to accelerate the vesting of individual awards. Such acceleration would require a charge to earnings for the award shares that would then vest. As of September 30, 2012, 5,333 shares were potentially subject to accelerated vesting.

Under the 2004 restricted stock plan, 2,120 shares of authorized but un-issued shares remain available for future grant at September 30, 2011. Forfeited shares are available for re-issuance. The Company also can fund the restricted stock plan with treasury stock. The fair market value of the shares awarded under the restricted stock plan is being amortized to expense on a straight-line basis over the vesting period of the underlying shares. In addition, 41,370 shares of restricted stock were issued as inducement shares, which have three and four year vesting periods. Compensation expense related to the restricted stock plan was $276, $168, and $883 for the years ended September 30, 2012, 2011 and 2010, respectively. The remaining unearned compensation cost of $665 as of September 30, 2012 is recorded as a reduction of additional paid in capital and will be expensed over three years. On grant date, shares awarded under the restricted stock plan were transferred from treasury stock at cost with the difference between the fair market value on the grant date and the cost basis of the shares recorded as a reduction to retained earnings or an increase to additional paid-in capital, as applicable.

101

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

A summary of restricted stock award activity under the plan for the year ended September 30, 2012, is presented below:

	Number of Shares		Weighted Average Grant-Date Fair Value
Nonvested shares at September 30, 2011	57,520		$	8.77
Granted	58,000		7.91
Vested	(16,703	)	9.27
Forfeited	(1,000	)	9.85
Nonvested shares at September 30, 2012	97,817		$	8.31

The total fair value of restricted stock vested for fiscal year ended September 30, 2012, 2011 and 2010 was $157, $73, and $575, respectively.

(f) Stock Option Plan

The Company’s stockholders approved the Provident Bank 2000 Stock Option Plan (the Stock Option Plan) in February 2000. A total of 1,712,640 shares of authorized but unissued common stock was reserved for issuance under the Stock Option Plan, although the Company may also fund option exercises using treasury shares. The Company’s stockholders also approved the Provident Bancorp, Inc. 2004 Stock Incentive Plan, in February 2005. Under this plan 0 shares of authorized but unissued remain available for future grant at September 30, 2012. Under terms of the plan, a total of 1,997,300 shares of authorized but unissued common stock were reserved for issuance under the Stock Option Plan. Under both plans, options have a ten-year term and may be either non-qualified stock options or incentive stock options. Reload options may be granted under the terms of the 2000 Stock Option Plan and provide for the automatic grant of a new option at the then-current market price in exchange for each previously owned share tendered by an employee in a stock-for-stock exercise. In February 2010, the 2000 Stock Option Plan expired with 338,594 options un-granted and no longer eligible for grant. The 2004 Plan options do not contain reload options. However, the 2004 plan allows for the grant of stock appreciation rights. Each option entitles the holder to purchase one share of common stock at an exercise price equal to the fair market value of the stock on the grant date. Employees who retire under circumstances, in accordance with the terms of the Plan, may be entitled to accelerate the vesting of individual awards. In addition, 107,526 shares of stock options were issued as inducement shares, which have a four year vesting period.

The Company’s shareholders approved the 2012 Stock Incentive Plan (stock option plan) on February 16, 2012. The plan permits the grant of share options to employees for up to 2,749,300 shares of common stock as of September 30, 2012. The plan allows for the following type of stock based awards to be issued: options, stock appreciation rights, restricted stock awards, performance based restricted stock awards, restricted stock unit awards, deferred stock awards, performance unit awards or other stock based awards. Option awards are generally granted with an exercise price equal to the market price of the Company’s common stock at the date of grant; those option awards have vesting periods ranging from 2 to 5 years and have 10 year contractual terms. The Company has a policy of using shares held as treasury stock to satisfy share option exercises. Currently, the Company has a sufficient number of treasury shares to satisfy expected share option exercises.

As of September 30, 2012, 24,383 shares were potentially subject to accelerated vesting. Substantially, all stock options outstanding are expected to vest. Compensation expense related to stock option plans was $521, $558 and $247 for the years ended September 30, 2012, 2011 and 2010, respectively.

102

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The following is a summary of activity in the Stock Option Plan:

	Shares subject to option		Weighted Average exercise price
Outstanding shares at September 30, 2011	1,906,020		$	12.20
Granted	515,000		7.82
Exercised	—		—
Forfeited	(448,540	)	12.29
Outstanding shares at September 30, 2012	1,972,480		$	11.04

The total intrinsic value of stock options vested (exercisable) for fiscal years ended September 30, 2012, 2011 and 2010 was $0, respectively. The unrecognized compensation cost associated with stock options was $1,177 as of September 30, 2012 and is expected to be recognized in expense over a period of 3 years.

At September 30, 2012 and 2011, respectively, there were 2,873,757 and 207,607 shares available for future grant. The aggregate intrinsic value of options outstanding as of September 30, 2012 was $946. The aggregate intrinsic value represents the total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading date of the year ended September 30, 2012 and the exercise price, multiplied by the number of in the money options). The cash received from option exercises was $0 for fiscal 2012 and 2011, respectively. There was no tax benefit recorded in the results of operations to the Company from the exercise of options for either fiscal 2012 or fiscal 2011.

A summary of stock options at September 30, 2012 follows:

	Outstanding				Exercisable
		Weighted-Average				Weighted-Average
	Number of Stock Options	Exercise Price		Life (in Years)	Number of Stock Options	Exercise Price		Life (in Years)
Range of Exercise Price
$6.71 to $10.03	796,526	$	8.35	8.9	196,881	$	9.77	8.9
$10.85 to $12.64	72,124	11.87		2.3	70,124	11.85		2.3
$12.84 to $15.66	1,103,830	12.92		2.7	1,083,030	12.91		2.7
	1,972,480	$	11.04	5.2	1,350,035	$	12.40	5.2

The aggregate intrinsic value of options currently exercisable as of September 30, 2012 was $33. All non vested shares are expected to vest.

The Company uses an option pricing model to estimate the grant date fair value of stock options granted. The weighted-average estimated value per option granted was $2.31 in 2012, $2.27 in 2011, and $2.69 in 2010.

The fair value of options granted was determined using the following weighted-average assumptions as of the grant date:

	2012		2011		2010
Risk-free interest rate (1)	1.42	%	2.2	%	2.2	%
Expected stock price volatility	40.0	%	34.5	%	33.2	%
Dividend yield (2)	3.03	%	2.8	%	1.9	%
Expected term in years	5.82		5.9		7.7

^{(1)  represents the yield on a risk free rate of return (either the US Treasury curve or the SWAP curve, in periods with high volatility in US Treasury securities) with a remaining term equal to the expected option term} 

^{(2)  represents the approximate annualized cash dividend rate paid with respect to a share of common stock at or near the grant date} 

103

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(13) Earnings Per Common Share

The following is a summary of the calculation of earnings per share (EPS):

	Years ended September 30,
	2012		2011		2010
Net income	$	19,888	$	11,739	$	20,492
Weighted average common shares outstanding for computation of basic EPS (1)	38,227,653		37,452,596		38,161,180
Common-equivalent shares due to the dilutive effect of stock options (2)	20,393		946		23,942
Weighted average common shares for computation of diluted EPS	38,248,046		37,453,542		38,185,122
Earnings per common share:
Basic	$	0.52	$	0.31	$	0.54
Diluted	$	0.52	$	0.31	$	0.54

(1) Excludes unallocated ESOP shares.

(2) Represents incremental shares computed using the treasury stock method.

As of September 30, 2012, 2011 and 2010 there were 1,771,132, 1,871,299 and 1,826,519 stock options, respectively, that were considered anti-dilutive for these periods and were not included in common-equivalent shares.

(14) Stockholders’ Equity

(a) Regulatory Capital

OCC regulations require banks to maintain a minimum ratio of tangible capital to total adjusted assets of 1.5%, a minimum ratio of Tier 1 (core) capital to total adjusted assets of 4.0%, and a minimum ratio of total (core and supplementary) capital to risk-weighted assets of 8.0%. The bank has met these capital requirements as of September 30, 2012.

Provident Bank committed to the OCC to have an 8.0% Tier 1 leverage ratio upon consummation of the Gotham Bank merger and thereafter to maintain comparable levels consistent with its capital management policy. At the time of the merger with Gotham Bank, Provident Bank's Tier 1 leverage ratio exceeded 8.0%.

Under its prompt corrective action regulations, the OCC is required to take certain supervisory actions (and may take additional discretionary actions) with respect to an undercapitalized institution. Such actions could have a direct material effect on the institution’s financial statements.

The regulations establish a framework for the classification of banks into five categories: well capitalized; adequately capitalized; undercapitalized; significantly undercapitalized; and critically undercapitalized. Generally, an institution is considered well-capitalized if it has a Tier 1 (core) capital to total adjusted assets ratio of at least 5.0%, a Tier 1 risk-based capital ratio of at least 6.0%, and a total risk-based capital ratio of at least 10.0%.

The foregoing capital ratios are based, in part, on specific quantitative measures of assets, liabilities and certain off-balance-sheet items, as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgments by the OCC about capital components, risk weightings and other factors. These capital requirements apply only to the Bank, and do not consider additional capital retained by Provident Bancorp.

We believe that, as of September 30, 2012 and 2011 the Bank met all capital adequacy requirements to which it was subject. Further, the most recent OCC notification categorized the Bank as a well-capitalized institution under the prompt corrective action regulations. There have been no conditions or events since that notification that we believe have changed the Bank’s capital classification.

The following is a summary of the Bank’s actual regulatory capital amounts and ratios at September 30, 2012 and 2011, compared to the OCC requirements for minimum capital adequacy and for classification as a well-capitalized institution. PMB is also subject to certain regulatory capital requirements, which it satisfied as of September 30, 2012 and 2011.

104

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

					OCC requirements
	Bank actual				Minimum capital adequacy				Classification as  well capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
September 30, 2012:
Tangible capital	$	289,441	7.5	%	$	57,551	1.5	%	$	—	—	%
Tier 1 (core) capital	289,441		7.5		153,469		4.0		191,836		5.0
Risk-based capital:
Tier 1	289,441		12.1		—		—		143,085		6.0
Total	$	317,929	13.3		$	190,780	8.0		$	238,475	10.0
September 30, 2011:
Tangible capital	$	241,196	8.1	%	$	44,460	1.5	%	$	—	—
Tier 1 (core) capital	241,196		8.1		118,559		4.0		148,199		5.0	%
Risk-based capital:
Tier 1	241,196		11.8		—		—		122,126		6.0
Total	$	265,307	13.0		$	162,835	8.0		$	203,544	10.0

Tangible and Tier 1 capital amounts represent the stockholder’s equity of the Bank, less intangible assets and after-tax net unrealized gains (losses) on securities available for sale and any other disallowed assets, such as deferred income taxes. Total capital represents Tier 1 capital plus the allowance for loan losses up to a maximum amount equal to 1.3% of risk-weighted assets.

The following is a reconciliation of the Bank’s total stockholder’s equity under accounting principles generally accepted in the United States of America (“GAAP”) and its regulatory capital:

	September 30,
	2012			2011
Total GAAP stockholder’s equity (Provident Bank)	$	466,037		$	405,638
Goodwill and certain intangible assets	(169,525		)	(159,306		)
Unrealized gains on securities available for sale included in other accumulated comprehensive income	(15,077		)	(13,604		)
Disallowed servicing asset	(162		)	—
Other Comprehensive loss	8,168			8,468
Tangible, tier 1 core and
Tier 1 risk-based capital	289,441			241,196
Allowance for loan losses	28,488			24,111
Total risk-based capital	$	317,929		$	265,307

(b) Dividend Payments

OCC regulations limit the amount of cash dividends that can be made by the Bank to the Company. Furthermore, because the Bank is a subsidiary of a holding company, it must file a notice with the Federal Reserve at least 30 days before the Bank’s Board of Directors declares a dividend. This notice may be disapproved if the Federal Reserve finds that:

• the savings association would be undercapitalized or worse following the dividend;

• the proposed dividend raises safety and soundness concerns; or

• the dividend would violate a prohibition contained in any statute, regulation, enforcement action, or agreement with or condition imposed by an appropriate federal banking agency.

Under OCC regulations, savings associations such as the Bank generally may declare annual cash dividends up to an amount equal to the sum of net income for the current calendar year and net income retained for the two preceding calendar years. Dividend payments in excess of this amount require OCC approval. After September 30, 2012 the amount that can be paid to Provident Bancorp by Provident Bank is $10.0 million plus earnings for the remainder of calendar year 2012.

105

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The Bank paid $6.0 million in dividends to Provident Bancorp during the fiscal year ended September 30, 2012 ($10.0 million during the year ended 2011 and $29.4 million during the year ended September 30, 2010).

Unlike the Bank, Provident Bancorp is not subject to OCC regulatory limitations on the payment of dividends to its stockholders.

(c) Stock Repurchase Programs

The Company announced its fifth stock repurchase program December 17, 2009, authorizing the repurchase of 2,000,000 common stock shares, of which 776,713 shares remain available to be purchased at September 30, 2012.

There were no shares repurchased under the repurchase programs during the fiscal year ended September 30, 2012. The total number of shares repurchased under repurchase programs during the fiscal year ending 2011, and 2010, was 457,454 and 1,515,923, respectively at a total cost of $3.8 million and $12.9 million, respectively.

(d) Liquidation Rights

Upon completion of the second-step conversion in January 2004, the Bank established a special “liquidation account” in accordance with OCC regulations. The account was established for the benefit of Eligible Account Holders and Supplemental Eligible Account Holders (as defined in the plan of conversion) in an amount equal to the greater of (i) the Mutual Holding Company’s ownership interest in the retained earnings of Provident Federal as of the date of its latest balance sheet contained in the prospectus, or (ii) the retained earnings of the Bank at the time that the Bank reorganized into the Mutual Holding Company in 1999. Each Eligible Account Holder and Supplemental Eligible Account Holder that continues to maintain his or her deposit account at the Bank would be entitled, in the event of a complete liquidation of the Bank, to a pro rata interest in the liquidation account prior to any payment to the stockholders of the Holding Company. The liquidation account is reduced annually on September 30 to the extent that Eligible Account Holders and Supplemental Eligible Account Holders have reduced their qualifying deposits as of each anniversary date. At September 30, 2012 the liquidation account had a balance of $15.0 million. Subsequent increases in deposits do not restore such account holder’s interest in the liquidation account. The Bank may not pay cash dividends or make other capital distributions if the effect thereof would be to reduce its stockholder’s equity below the amount of the liquidation account.

(15) Off-Balance-Sheet Financial Instruments

In the normal course of business, the Company is a party to off-balance-sheet financial instruments that involve, to varying degrees, elements of credit risk and interest rate risk in addition to the amounts recognized in the consolidated financial statements.

The contractual or notional amounts of these instruments, which reflect the extent of the Company’s involvement in particular classes of off-balance-sheet financial instruments, are summarized as follows:

	September 30,
	2012		2011
Lending-related instruments:
Loan origination commitments	$	125,729	$	127,307
Unused lines of credit	265,940		239,387
Letters of credit	26,441		16,972

As of September 30, 2012 and 2011, 91.0%, and 88.0%, respectively of lending related off balance sheet instruments were held at variable rates.

The contractual amounts of loan origination commitments, unused lines of credit and letters of credit represent the Company’s maximum potential exposure to credit loss, assuming (i) the instruments are fully funded at a later date, (ii) the borrowers do not meet the contractual payment obligations, and (iii) any collateral or other security proves to be worthless. The contractual amounts of these instruments do not necessarily represent future cash requirements since certain of these instruments may expire without being funded and others may not be fully drawn upon. Substantially all of these lending-related instruments have been entered into with customers located in the Company’s primary market area described in Note 5 (“Loans”).

106

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Loan origination commitments are legally-binding agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments have fixed expiration dates (generally ranging up to 60 days) or other termination clauses, and may require payment of a fee by the customer. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral, if any, obtained by the Company upon extension of credit, is based on our credit evaluation of the borrower. Collateral varies but may include mortgages on residential and commercial real estate, deposit accounts with the Company, and other property. The Company’s loan origination commitments at September 30, 2012 provide for interest rates ranging principally from 2.75% to 5.5%.

Unused lines of credit are legally-binding agreements to lend to a customer as long as there is no violation of any condition established in the contract. Lines of credit generally have fixed expiration dates or other termination clauses. The amount of collateral obtained, if deemed necessary by the Company, is based on our credit evaluation of the borrower.

Letters of credit are commitments issued by the Company on behalf of its customer 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 nearly all standby letters of credit and 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 September 30, 2012, the Company had $26,441 in outstanding letters of credit, of which $10,300 were secured by collateral.

(16) Commitments and 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. Future minimum rental payments due under non-cancelable operating leases with initial or remaining terms of more than one year at September 30, 2012 were as follows (for fiscal years ending September 30^th):

2013	$	2,782
2014	2,554
2015	2,475
2016	2,445
2017	2,454
2018 and thereafter	13,024
	$	25,734

Occupancy and office operations expense include net rent expense of $2,952, $2,845 and $2,802 for the years ended September 30, 2012, 2011 and 2010, respectively. The consolidation of two leased branches resulted in a restructuring charge of $2.1 million at September 30, 2011.

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

(17) 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.

107

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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.

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. U.S. Treasuries are actively traded and therefore have been classified as Level 1 valuations. As of October 1, 2010, the Company determined that government sponsored agencies totaling $346,019 previously reported as Level 1 securities were not classified based on the lowest level within the fair value hierarchy and deemed it appropriate to transfer the securities to Level 2.

The Company utilizes an outside vendor to obtain valuations for its traded securities as well as information received from a third party investment adviser. 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 financial market data and compares them to dealer indicative bids from the Company’s external investment adviser. The Company does not make adjustments to these prices unless it is determined there is limited trading activity. 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 September 30, 2012, these securities have an amortized cost of $4,665 and a fair value of $4,630. 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. Significant increases (decreases) in any of the unobservable inputs would result in a significantly lower (higher) fair value measurement of the securities. Generally, a change in the assumption used for the default rate is accompanied by a directionally similar change in the assumption used for the loss severity and a directionally opposite change in the assumption used for prepayment rates. Present value estimated cash flow models were used discounted at a the securities rate 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 September 30, 2012. The Company’s Chief Financial Officer ultimately determines the fair value of level 3 investment securities. These securities have a weighted average coupon rate of 3.0%, a weighted average life of 5.3 years , a weighted average 1 month prepayment history of 17.37 years and a weighted average twelve month default rate of 2.37 CDR. It was determined that two of these securities with a carrying amount of $4,197 and an amortized cost of $4,240 had an other than temporary loss which resulted in a $47 other than temporary impairment charge as of September 30, 2012. The calculation of the other than temporary charges is determined by performing a present value of credit loss using the securities book yields of 3.4% and 2.9%.

108

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The investment grades of these securities are as follows:

	Amortized Cost		Fair Value
Investment Rating:
Aa3	$	300	$	309
Ba1	125		124
B1	2,567		2,524
B3	1,673		1,673
Total private label CMOs	$	4,665	$	4,630

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 six interest rate swaps (see footnote 10).

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 statements of financial condition. 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 September 30, 2012 measured at estimated fair value on a recurring basis were as follows:

	Fair Value Measurements at September 30, 2012		Quoted Prices in Active markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	161,407	$	—	$	161,407	$	—
Freddie Mac	85,260		—		85,260		—
Ginnie Mae	4,778		—		4,778		—
CMO/Other MBS	188,434		—		188,434		—
Privately issued collateralized mortgage obligations	4,630		—		—		4,630
	444,509		—		439,879		4,630
Investment securities
Federal agencies	408,823		—		408,823		—
Obligations of states and political subdivisions	156,481		—		156,481		—
Equities	1,059		—		1,059		—
Total investment securities available for sale	566,363		—		566,363		—
Total available for sale securities	1,010,872		—		1,006,242		4,630
Interest rate caps and swaps	2,488		—		2,488		—
Total assets	$	1,013,360	$	—	$	1,008,730	$	4,630
Swaps	$	2,485	$	—	$	2,485	$	—
Total Liabilities	$	2,485	$	—	$	2,485	$	—

109

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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

	Fair Value Measurements at September 30, 2011		Quoted Prices in Active markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	139,991	$	—	$	139,991	$	—
Freddie Mac	100,675		—		100,675		—
Ginnie Mae	5,180		—		5,180		—
CMO/Other MBS	77,561		—		77,561		—
Privately issued collateralized mortgage obligation	4,851		—		—		4,851
	328,258		—		323,407		4,851
Investment securities
Federal agencies	204,648		—		204,648		—
Corporate debt securities	17,062		—		17,062		—
Obligations of states and political subdivisions	188,684		—		188,684		—
Equities	1,192		—		1,192		—
Total investment securities available for sale	411,586		—		411,586		—
Total available for sale securities	739,844		—		734,993		4,851
Interest rate caps and swaps	1,180		—		1,180		—
Total assets	$	741,024	$	—	$	736,173	$	4,851
Swaps	$	1,114	$	—	$	1,114	$	—
Total Liabilities	$	1,114	$	—	$	1,114	$	—

110

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows for the period ending September 30, 2012:

	Fair Value Measurement September 30, 2012 Using significant Unobservable Inputs Level 3
Private Label CMO Available for Sale
Balance at September 30, 2009	$	10,411
Pay downs	(1,946		)
(Amortization) and accretion, net	49
Change in fair value	380
Loss recognized on sale	(186		)
Sale	(2,712		)
Balance at September 30, 2010	5,996
Pay downs	(908		)
(Amortization) and accretion, net	1
Change in fair value	(75		)
Loss recognized on sale	(163		)
Balance at September 30, 2011	4,851
Pay downs	(675		)
(Amortization) and accretion, net	15
Credit loss write down (OTTI)	(47		)
Change in fair value	486
Balance at September 30, 2012	$	4,630

Changes in fair value are included as part of net unrealized holding gains (losses) on securities available for sale net of related tax expense on the Consolidated Statements of Comprehensive Income (Loss).

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 Impaired Loans

Mortgage loans originated and intended for sale in the secondary market are carried at the lower of aggregate cost or fair value as determined by outstanding commitments from investors. Fair value of loans held for sale is determined using quoted prices for similar assets (Level 2).

111

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Mortgage loans held for sale are generally sold with servicing rights retained. The carrying value of mortgage loans sold is reduced by the amount allocated to the value of the servicing right which is its fair value. Gains and losses on sales of mortgage loans are based on the difference between the selling price and the carrying value of the related loan sold.

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 dependent loans calculated in accordance with FASB ASC Topic 310 – Receivables, when establishing the allowance for loan 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. Impaired loans are evaluated on a quarterly basis for additional impairment and their carrying values are adjusted as needed. Loans subject to nonrecurring fair value measurements were $50,078 and $51,155 which equals the carrying value less the allowance for loan losses allocated to these loans at September 30, 2012 and 2011, 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 $5,088 and $9,492 for the twelve months ended September 30, 2012 and 2011, respectively.

When valuing impaired loans that are collateral dependent, the Company charges off the difference between the recorded investment in the loan and the discounted appraisal value, which is generally less than 12 months old.  A discount for estimated costs to dispose of the asset is used when evaluating the impaired loan.  These discounts range from 7.0% to 13.0% for ELOCs and homeowners and 12.0% to 22.0% for commercial mortgages and ADC loans.  Nearly all of our impaired loans are considered collateral dependent. 

A summary of impaired loans at September 30, 2012 measured at estimated fair value on a nonrecurring basis were as follows:

	Fair Value Measurements at September 30, 2012		Quoted Prices in Active  Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Real estate — residential mortgage	$	8,628	$	—	$	—	$	8,628
Real estate — commercial mortgage	6,537		—		—		6,537
Commercial business loans	95		—		—		95
Acquisition, development and construction	8,232		—		—		8,232
Consumer loans	1,215		—		—		1,215
Total impaired loans with specific allowance allocations	$	24,707	$	—	$	—	$	24,707

A summary of impaired loans at September 30, 2011 measured at estimated fair value on a nonrecurring basis were as follows:

	Fair Value Measurements at September 30, 2011		Quoted Prices in Active  Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Real estate—residential mortgage	$	6,469	$	—	$	—	$	6,469
Real estate—commercial mortgage	3,741		—		—		3,741
Commercial business loans (CBL)	2,119		—		—		2,119
Acquisition, development and construction	2,126		—		—		2,126
Consumer loans	569		—		—		569
Total impaired loans with specific allowance allocations	$	15,024	$	—	$	—	$	15,024

112

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Mortgage servicing rights

When mortgage loans are sold with servicing retained, servicing rights are initially recorded at fair value with the income statement effect recorded in gains on sales of loans. Fair value is based on market prices for comparable mortgage servicing contracts, when available, or alternatively, is based on a valuation model that calculates the present value of estimated future net servicing income.

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 on a quarterly basis, 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 for impairment purposes is considered a Level 3 valuation. The fair value of mortgage servicing rights a September 30, 2012 and 2011 were $1,624 and $1,456 thousand, respectively. Changes in fair value of mortgage servicing rights, which required an impairment charge and were subsequently recognized in income, as of September 30, 2012 and 2011 respectively, were $156 and $0, respectively. These amounts are considered immaterial for any previous periods.

Assets taken in foreclosure of defaulted loans

Assets taken in foreclosure of defaulted loans are initially recorded at fair value less costs to sell when acquired, which establishes the new cost basis. These loans are subsequently accounted for at the lower of cost or fair value less costs to sell 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. Adjustments are routinely made in the appraisal process by the independent appraisers to adjust for differences between comparable sales and income data available. Such adjustments have generally been classified as Level 3. Appraisals are reviewed and verified by the Chief Credit Officer and/or Chief Risk Officer. Assets taken in foreclosure of defaulted loans subject to nonrecurring fair value measurement were $6,403 and $5,391 at September 30, 2012 and 2011. There were $1,098 and $869 changes in fair value recognized through income for those foreclosed assets held by the Company during the twelve months ending September 30, 2012 and 2011, respectively.

Assets taken in foreclosure of loans of $5,828 were transferred between Level 2 and Level 3 as of March 31, 2012. The valuation of these properties involves judgments of the individual appraisers as well as adjustments for differences due to the availability of data on the properties, which classifies as Level 3.

113

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

Significant unobservable inputs to level 3 measurements

The following table presents quantitative information about significant unobservable inputs used in the fair value measurements for Level 3 assets non recurring measurements at September 30, 2012:

Non Recurring fair value measurements	Fair Value		Valuation Techniques	Unobservable input / assumptions	Range
Real estate—residential mortgage (impaired)	$	8,628	Appraisal	Adjustments for comparable properties	17% - 23%
Real estate—commercial mortgage(impaired)	6,537		Appraisal	Adjustments for comparable properties	22% - 32%
Commercial business loans (impaired)	95		Appraisal	Adjustments for comparable properties	22% - 32%
Acquisition, development and construction (impaired)	8,232		Appraisal	Adjustments for comparable properties	22% - 32%
Consumer loans (impaired)	1,215		Appraisal	Adjustments for comparable properties	17% - 23%
Assets taken in foreclosure:
Real estate - residential mortgage	832		Appraisal	Adjustments by management to reflect current conditions/selling costs	17% - 23%
Real estate - commercial mortgage	2,482		Appraisal	Adjustments by management to reflect current conditions/selling costs	22% - 32%
Acquisition, development and construction	3,089		Appraisal	Adjustments by management to reflect current conditions/selling costs	22% - 32%
Mortgage servicing rights	1,624		Third Party Valuation	Discount rates	9.25% - 12.75%
			Third Party Valuation	Prepayment speeds	100 - 968 ( Weighted average of 224)

(18) 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.

114

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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) as of September 30, 2012:

	September 30, 2012
	Carrying amount			Quoted Prices in Active  Markets for Identical Assets Level 1			Significant Other Observable Inputs Level 2			Significant Unobservable Inputs Level 3
Financial assets:
Cash and due from banks	$	437,982		$	437,982		$	—		$	—
Securities available for sale	1,010,872			—			1,006,242			4,630
Securities held to maturity	142,376			—			146,324			—
Loans	2,091,190			—			—			2,157,133
Loans held for sale	7,505			—			7,505			—
Accrued interest receivable on securities	4,011			—			4,011			—
Accrued interest receivable on loans	6,502			—			—			6,502
FHLB of New York stock	19,249			—			19,249			—
Financial liabilities:
Non-maturity deposits	(2,723,669		)	(2,723,669		)	—			—
Certificates of Deposit	(387,482		)	—			(389,031		)	—
FHLB and other borrowings	(345,176		)	—			(377,906		)	—
Mortgage escrow funds	(11,919		)	—			(11,917		)	—
Accrued interest payable on deposits including escrow	(500		)	—			(500		)	—
Accrued interest payable on borrowings	(1,442		)				(1,442		)

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) as of September 30, 2011:

	September 30, 2011
	Carrying amount			Quoted Prices in Active  Markets for Identical Assets Level 1			Significant Other Observable Inputs Level 2			Significant Unobservable Inputs Level 3
Financial assets:
Cash and due from banks	$	281,512		$	281,512		$	—		$	—
Securities available for sale	739,844			—			734,993			4,851
Securities held to maturity	110,040			—			111,272			—
Loans	1,675,882			—			—			1,718,372
Loans held for sale	4,176			—			4,176			—
Accrued interest receivable securities	4,446			—			4,446			—
Accrued interest receivable loans	5,458									5,458
FHLB of New York stock	17,584			—			17,584			—
Financial liabilities:
Non-maturity deposits	(1,993,036		)	(1,993,036		)	—			—
Certificates of Deposit	(303,659		)	—			(305,940		)	—
FHLB and other borrowings	(375,021		)	—			(417,879		)	—
Mortgage escrow funds	(9,701		)	—			(9,701		)	—
Accrued interest payable deposits	(425		)	—			(425		)	—
Accrued interest payable borrowings	(1,391		)				(1,391		)	—

115

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

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

(a) 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.

(b) 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.

(c) FHLB of New York Stock

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

(d) 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. We believe 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.

(e) 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.

(f) 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 described in Note 15 (“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 September 30, 2012 and September 30, 2011, the estimated fair values of these instruments approximated the related carrying amounts, which were insignificant.

116

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(19) Recently Issued Accounting Standards Not Yet Adopted

Accounting Standards Update (ASU) 2012-04- Technical Corrections and Improvements - (Various Topics) has been issued. This standard is effective for the Company October 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2012-06- Business combinations (Topic 805) - Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government Assisted Acquisition of a Financial Institution has been issued. This standard was issued to record the subsequent change in the cash flows expected to be collected on the indemnification asset. This standard is effective for the Company January 1, 2013 and is not expected to have a material effect on the Company’s consolidated financial statements.

See Note 1 for a discussion of adoption of new accounting standards.

(20) Condensed Parent Company Financial Statements

Set forth below are the condensed statements of financial condition of Provident Bancorp and the related condensed statements of income and cash flows:

Condensed Statements of Financial Condition	September 30,
	2012		2011
Assets:
Cash	$	6,716	$	6,692
Loan receivable from ESOP	6,896		7,338
Securities available for sale at fair value	809		837
Investment in Provident Bank	467,295		406,838
Non-bank subsidiaries	5,482		9,082
Other assets	5,371		1,680
Total assets	$	492,569	$	432,467
Liabilities	$	1,447	$	1,333
Stockholders’ equity	491,122		431,134
Total liabilities & stockholders’ equity	$	492,569	$	432,467

	Year ended September 30,
	2012			2011			2010
Condensed Statements of Income
Interest income	$	282		$	304		$	326
Dividend income on equity securities	30			31			28
Dividends from Provident Bank	6,000			10,000			29,400
Dividends from non-bank subsidiaries	500			500			400
Bank owned life insurance income	10			91			—
Non-interest expense	(1,838		)	(1,819		)	(2,262		)
Income tax benefit	87			157			321
Income before equity in undistributed earnings of subsidiaries	5,071			9,264			28,213
Equity in undistributed (excess distributed) earnings of:
Provident Bank	13,739			1,498			(8,257		)
Non-bank subsidiaries	1,078			977			536
Net income	$	19,888		$	11,739		$	20,492

117

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

	Year ended September 30,
	2012			2011			2010
Condensed Statements of Cash Flows
Cash flows from operating activities:
Net income	$	19,888		$	11,739		$	20,492
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (undistributed) excess distributed earnings of
Provident Bank	(13,739		)	(1,498		)	8,257
Non-bank subsidiaries	(1,078		)	(977		)	(536		)
Other adjustments, net	380			(1,444		)	(1,077		)
Net cash provided by operating activities	5,451			7,820			27,136
Cash flows from investing activities:
Purchase of equity securities, available for sale	(105		)	—			—
Sales of securities	103			—			—
Investment in subsidiaries	(44,203		)	—			(350		)
ESOP loan principal repayments	441			424			408
Net cash provided by investing activities	(43,764		)	424			58
Cash flows from financing activities:
Treasury shares purchased	—			(3,810		)	(13,062		)
Capital raise	46,000			—			—
Cash dividends paid	(9,100		)	(8,973		)	(9,216		)
Stock option transactions including RRP	910			770			2,196
Other equity transactions	527			441			442
Net cash used in financing activities	38,337			(11,572		)	(19,640		)
Net increase (decrease) in cash	24			(3,328		)	7,554
Cash at beginning of year	6,692			10,020			2,466
Cash at end of year	$	6,716		$	6,692		$	10,020

118

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

Notes to Consolidated Financial Statements

(Dollars in thousands, except per share data)

(21) Quarterly Results of Operations (Unaudited)

The following is a condensed summary of quarterly results of operations for the years ended 2012 and 2011:

	First quarter		Second quarter		Third quarter			Fourth quarter
Year Ended September 30, 2012
Interest and dividend income	$	28,168	$	28,411	$	28,345		$	30,113
Interest expense	4,930		4,506		4,263			4,874
Net interest income	23,238		23,905		24,082			25,239
Provision for loan losses	1,950		2,850		2,312			3,500
Non-interest income	7,176		7,971		7,979			9,026
Non-interest expense	20,721		21,290		21,162			28,784
Income before income tax expense	7,743		7,736		8,587			1,981
Income tax expense	2,026		2,035		2,378			(280		)
Net income	$	5,717	$	5,701	$	6,209		$	2,261
Earnings per common share:
Basic	$	0.15	$	0.15	$	0.17		$	0.06
Diluted	$	0.15	$	0.15	$	0.17		$	0.06
Year Ended September 30, 2011
Interest and dividend income	$	29,060	$	27,803	$	27,934		$	27,817
Interest expense	5,876		5,292		5,130			5,026
Net interest income	23,184		22,511		22,804			22,791
Provision for loan losses	2,100		2,100		3,600			8,784
Non-interest income	9,883		5,795		5,217			9,056
Non-interest expense	21,269		21,791		22,669			24,382
Income before income tax expense	9,698		4,415		1,752			(1,319		)
Income tax expense	2,978		842		(187		)	(826		)
Net income	$	6,720	$	3,573	$	1,939		$	(493	)
Earnings per common share:
Basic	$	0.18	$	0.10	$	0.05		$	(0.01	)
Diluted	$	0.18	$	0.10	$	0.05		$	(0.01	)

119

ITEM 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

Not Applicable.

ITEM 9A. Controls and Procedures

Evaluation of Disclosure Controls and Procedures

As of September 30, 2012, under the supervision and with the participation of Provident Bancorp's Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), management has evaluated the effectiveness of the design and operation of the Company's disclosure controls and procedures. As discussed below, management identified two deficiencies in internal control over financial reporting as of September 30, 2012 that it considers to be material weaknesses. Accordingly, the CEO and CFO concluded that the Company's disclosure controls and procedures were not effective at September 30, 2012.

Management's Report on Internal Control over Financial Reporting (see “Report of Management on Internal Control Over Financial Reporting”)

Provident Bancorp's management is responsible for establishing and maintaining adequate internal control over financial reporting, as such term is defined in Exchange Act Rules 13a-15(f) and 15d-15(f). Management's assessment of the effectiveness of internal control over financial reporting is expressed at the level of reasonable assurance because a control system, no matter how well designed and operated, can provide only reasonable, but not absolute, assurance that the control system's objectives will be met. Under the supervision and with the participation of the management of Provident Bancorp, including its CEO and CFO, conducted an evaluation of the effectiveness of the Company's internal control over financial reporting as of September 30, 2012 based on the framework in Internal Control - Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission, which is also referred to as “COSO.” Based on that evaluation, management identified the following two deficiencies in internal control over financial reporting as of September 30, 2012 that management considers to be material weaknesses:

1. The Company did not maintain effective controls to ensure the accuracy of the provision for income taxes or deferred taxes. Specifically, this control deficiency was the result of inadequate staffing and technical expertise in key positions related to accounting for provision for income taxes and deferred income taxes.

2. The Company did not maintain effective controls to ensure that pension accounting matters were properly recorded and presented on the Balance Sheet or the Statement of Other Comprehensive Income.

Based on its identification of the material weakness described above, management concluded that, as of September 30, 2012, the Company's internal control over financial control did not meet the criteria for effective internal control over financial reporting and thus was not effective.

The effectiveness of the Company's internal control over financial reporting as of September 30, 2012 has been audited by Crowe Horwath LLP, as stated in their report which is included elsewhere herein.

There were no changes in the Company's internal control over financial reporting during the fourth fiscal quarter of 2012 that have materially affected or are reasonably likely to materially affect the Company's internal control over financial reporting. However, as a result of the deficiencies described above and in the Report of Management on Internal Control Over Financial Reporting, management is taking steps to enhance the Company's control environment.

ITEM 9B. Other Information

Not applicable.

120

PART III

ITEM 10. Directors, Executive Officers, and Corporate Governance

“Proposal I — Election of Directors” and “Section 169(a) Beneficial Ownership Reporting Compliance” sections of Provident Bancorp’s Proxy Statement for the Annual Meeting of Stockholders to be held in February 2013 (the “Proxy Statement”) is incorporated herein by reference.

ITEM 11. Executive Compensation

“Proposal I — Election of Directors” section of the Proxy Statement is incorporated herein by reference.

ITEM 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Provident Bancorp does not have any equity compensation programs that were not approved by stockholders, other than its employee stock ownership plan.

Set forth below is certain information as of September 30, 2012, regarding equity compensation that has been approved by stockholders.

Equity compensation plans approved by stockholders	Number of securities to be issued upon exercise of outstanding options and rights	Weighted average Exercise  price		Number of securities remaining available for issuance under  plan
Stock Option Plans	1,972,480	$	11.04	2,749,300
Recognition and Retention Plan (1)	97,817	N/A		2,120
Total (2)	2,070,297	11.04		2,751,420

(1) Represents shares that have been granted but have not yet vested.

(2) Weighted average exercise price represents Stock Option Plan only, since RRP shares have no exercise price.

The “Proposal I — Election of Directors” section of the Proxy Statement is incorporated herein by reference.

ITEM 13. Certain Relationships and Related Transactions and Director Independence

The “Transactions with Certain Related Persons” section of the Proxy Statement is incorporated herein by reference.

ITEM 14. Principal Accountant Fees and Services

Proposal III - Ratification of appointment of “Independent Registered Public Accounting Firm” section of the proxy statement is incorporated herein by reference.

121

PART IV

ITEM 15. Exhibits and Financial Statement Schedules

(1) Financial Statements

The financial statements filed in Item 8 of this Form 10-K are as follows:

(A) Report of Independent Registered Public Accounting Firm on Financial Statements

(B) Consolidated Statements of Financial Condition as of September 30, 2012 and 2011

(C) Consolidated Statements of Income for the years ended September 30, 2012, 2011 and 2010

(D) Consolidated Statements of Changes in Stockholders’ Equity for the years ended September 30, 2012, 2011 and 2010

(E) Consolidated Statements of Cash Flows for the years ended September 30, 2012, 2011 and 2010

(F) Notes to Consolidated Financial Statements

(G) Financial Statement Schedules

All financial statement schedules have been omitted as the required information is inapplicable or has been included in the Notes to Consolidated Financial Statements.

(3) Exhibits

2.1	Purchase Agreement 1
3.1	Certificate of Incorporation of Provident Bancorp2
3.2	Bylaws of Provident Bancorp, as amended 3
4.1	Corporate Governance Agreement 4
10.1	Employment Agreement with Daniel Rothstein5*
10.3	Provident Amended and Restated 1995 Supplemental Executive Retirement Plan 6*
10.4	Provident 2005 Supplemental Executive Retirement Plan 7*
10.5	Provident Bank 2000 Stock Option Plan 8*
10.7	Separation Agreement among Provident New York Bancorp, Provident Bank and Paul A. Maisch9*
10.8	Provident Bancorp, Inc. 2004 Stock Incentive Plan10*
10.9	Form of Separation Agreement between Provident New York Bancorp, Provident Bank and Richard O. Jones 11*
10.10	Employment Agreement with Jack L. Kopnisky12*
10.10.1	Form of Non-Renewal Notice of Employment Agreement13*
10.10.2	Form of Amendment to Employment Agreement with Jack L. Kopnisky14*
10.11	Employment Agreement with David Bagatelle(filed herewith) *
10.11.1	Reinstated Employment Agreement with David Bagatelle15*
10.12	Employment Agreement among Provident New York Bancorp, Provident Bank and Stephen V. Masterson 16*
10.12.1	Separation Agreement among Provident New York Bancorp, Provident Bank and Stephen V. Masterson 17*
10.13	Form of Stock Option Agreement between Provident New York Bancorp and Jack L. Kopnisky (grant date July 6, 2011) 18*
10.14	Form of Restricted Stock Award Notice between Provident New York Bancorp and Jack L. Kopnisky (grant date July 6, 2011) 19*
10.15	Form of Performance-based Restricted Stock Award Notice between Provident New York Bancorp and Jack L. Kopnisky (grant date July 6,2011) 20*
10.16	Separation Agreement between Provident New York Bancorp, Provident Bank, and Stephen G. Dormer 21
10.17	Provident New York Bancorp 2012 Stock Incentive Plan 22
10.18	Provident Short-term Incentive Plan 23*
10.19	Employment Agreement with James R. Peoples (filed herewith)
10.19.1	Form of Amendment to Employment Agreement with James R. Peoples 24*
10.20	Employment Agreement with Rodney Whitwell (filed herewith)

122

10.20.1	Reinstated Employment Agreement with Rodney Whitwell 25*
21	Subsidiaries of Registrant (filed herewith)
23	Consent of Crowe Horwath LLP (filed herewith)
31.1	Certification of Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
31.2	Certification of Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith)
32	Certification Pursuant to 18 U.S.C. Section 1350, as amended by Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith)
101.INS	XBRL Instance Document32 (filed herewith)
101.SCH	XBRL Taxonomy Extension Schema Document32 (filed herewith)
101.CAL	XBRL Taxonomy Extension Calculation Linkbase Document32 (filed herewith)
101.LAB	XBRL Taxonomy Extension Label Linkbase Document32 (filed herewith)
101.PRE	XBRL Taxonomy Extension Presentation Linkbase Document32 (filed herewith)
101.DEF	XBRL Taxonomy Extension Definition Linkbase Document32 (filed herewith)
1	Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 0-25233) filed with the Commission on August 7, 2012
2	Incorporated by reference to Exhibit 3.1 of the Registration Statement on Form S-1 (File No. 333-108795), originally filed with the Commission on September 15, 2003.
3	Incorporated by reference to Exhibit 3.1 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on October 31, 2012.
4	Incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K (File No. 0-25233) filed with the Commission on August 7, 2012.
5	Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on July 2, 2012.
6	Incorporated by reference to Exhibit 10.1 of the Quarterly Report on Form 10-Q (File No. 0-25233), filed with the Commission on August 11, 2008
7	Incorporated by reference to Exhibit 10.2 of the Quarterly Report on Form 10-Q (File No. 0-25233), filed with the Commission on August 11, 2008
8	Incorporated by reference to Appendix A of the Proxy Statement for the 2000 Annual Meeting of Stockholders of Provident Bancorp Inc., (File No. 0-25233), filed with the Commission on January 18, 2000.
9	Incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K (File No. 0-25233) filed with the Commission on January 10, 2012.
10	Incorporated by reference to Appendix A to the Proxy Statement for the 2005 Annual Meeting of Stockholders of Provident Bancorp Inc., (File No. 0-25233), filed with the Commission on January 19, 2005.
11	Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 0-25233) filed with the Commission on August 24, 2012.
12	Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on June 21, 2011.
13	Incorporated by reference to Exhibit 10.22 of the Annual Report on Form 10-K (File No. 0-25233) filed with the Commission on December 13, 2011.
14	Incorporated by reference to Exhibit 10.3 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on November 27, 2012.
15	Incorporated by reference to Exhibit 10.6 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on November 27, 2012.
16	Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on January 10, 2012.
17	Incorporated by reference to Exhibit 10.2 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on November 27, 2012.
18	Incorporated by reference to Exhibit 10.3 of the Quarterly Report on Form 10-Q (File No. 0-25233), filed with the Commission on August 9, 2011.

123

19	Incorporated by reference to Exhibit 10.4 of the Quarterly Report on Form 10-Q (File No. 0-25233), filed with the Commission on August 9, 2011.
20	Incorporated by reference to Exhibit 10.5 of the Quarterly Report on Form 10-Q (File No. 0-25233), filed with the Commission on August 9, 2011.
21	Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 0-25233) filed with the Commission on October 13, 2011.
22	Incorporated by reference to Appendix A of the Company's Proxy Statement for the 2012 Annual Meeting of Stockholders, filed on January 6, 2012
23	Incorporated by reference to Exhibit 10.1 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on November 1, 2011.
24	Incorporated by reference to Exhibit 10.4 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on November 27, 2012.
25	Incorporated by reference to Exhibit 10.5 of the Current Report on Form 8-K (File No. 0-25233), filed with the Commission on November 27, 2012.
32	In accordance with Rule 406T of Regulation S-T, these interactive data files are deemed “not filed” for purposes of section 18 of the exchange Act, and otherwise are not subject to liability under that section.
*	Indicates management contract or compensatory plan or arrangement.

124

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:	December 14, 2012	By:	/s/ Jack Kopnisky
			Jack Kopnisky
			President, Chief Executive Officer and Director (Principal Executive Officer)

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.

By:	/s/ Jack Kopnisky	By:	/s/ Stephen Masterson
	Jack Kopnisky		Stephen Masterson
	President, Chief Executive Officer and		Executive Vice President
	Director		Chief Financial Officer
	Principal Executive Officer		Principal Accounting Officer
Date:	December 14, 2012		Principal Financial Officer
		Date:	December 14, 2012
By:	/s/William F. Helmer	By:	/s/ Dennis L. Coyle
	William F. Helmer		Dennis L. Coyle
	Chairman of the Board		Vice Chairman
Date:	December 14, 2012	Date:	December 14, 2012

By:	/s/ Navy Djonovic	By:	/s/ Burt Steinberg	By:	/s/ Thomas F. Jauntig, Jr.
	Navy Djonovic		Burt Steinberg		Thomas F. Jauntig, Jr.
	Director		Director		Director
Date:	December 14, 2012	Date:	December 14, 2012	Date:	December 14, 2012
By:	/s/ Thomas G. Kahn	By:	/s/ R. Michael Kennedy	By:	/s/ Victoria Kossover
	Thomas G. Kahn		R. Michael Kennedy		Victoria Kossover
	Director		Director		Director
Date:	December 14, 2012	Date:	December 14, 2012	Date:	December 14, 2012
By:	/s/ Donald T. McNelis	By:	/s/ Carl Rosenstock	By:	/s/ George Strayton
	Donald T. McNelis		Carl Rosenstock		George Strayton
	Director		Director		Director
Date:	December 14, 2012	Date:	December 14, 2012	Date:	December 14, 2012
By:	/s/ James F. Deutsch	By:	/s/ Richard O'Toole
	James F. Deutsch		Richard O'Toole
	Director		Director
Date:	December 14, 2012	Date:	December 14, 2012

125

EX-10.11

13

54330926v8

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made and entered into as of the 31st day of October 2011 (“Effective Date”), by and among Provident New York Bancorp, a Delaware corporation (the “Company), Provident Bank, a savings bank organized and existing under the laws of the United States of America (the “Bank”; and together with the Company, “Provident”), and David S. Bagatelle (“Executive”).

WITNESSETH:

WHEREAS, the Company and the Bank desire to employ Executive as Executive Vice President of the Company and the Bank and President of the Bank's New York City market; and

WHEREAS, Executive desires to serve in such positions;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the Company, the Bank and Executive hereby agree as follows:

1.Employment.

Subject to the terms set forth herein, Executive will be employed as Executive Vice President of the Company and the Bank and President of the Bank's New York City market. Executive shall have such authority, perform such duties and fulfill such responsibilities commonly incident to such positions or which are delegated to Executive by the President and Chief Executive Officer of the Company and the Bank. While employed, Executive shall devote his full business time and attention to the business and affairs of Provident and shall use his best efforts to advance the interests of Provident.

2.Employment Period

(a)Duration. Executive's period of employment with Provident shall begin on the Effective Date and shall continue until the first anniversary of such date (or if a Change in Control occurs prior to such first anniversary, the one year anniversary of the date of the Change in Control), unless terminated prior thereto by either Provident or Executive in accordance with Section 6 hereof (such period of employment being the “Employment Period”).

(b)Employment Following Termination of Employment Period. Nothing in this Agreement shall mandate or prohibit a continuation of Executive's employment following the expiration of the Employment Period upon such terms and conditions as the Company, the Bank, and Executive may agree.

3.Compensation

(a)Base Salary. In consideration for the services performed by Executive during the Employment Period, Provident shall pay to Executive an annual salary (“Base Salary”) of $400,000. The Base Salary shall be paid in approximately equal installments in accordance with the Bank's customary payroll practices.

(b)Annual Bonus. During the Employment Period, Executive shall be eligible to participate in Provident's Short-Term Incentive Plan (or any successor thereto) (the “Annual Bonus Plan”). Executive's target annual bonus under the Annual Bonus Plan shall be 35% of Executive's Base Salary (the “Target Bonus”).  The actual amount of Executive's annual bonus shall depend upon the achievement of performance goals established by the Executive Compensation Committee of the Board and may range from 0% of the Target Bonus to 200% of the Target Bonus. 

(c)Long-Term Compensation. During the Employment Period, Executive shall be eligible to participate in any equity and/or other long-term compensation programs established by Provident from time to time for senior executive officers on a basis consistent with Executive's status as an Executive Vice President of the Company and the Bank. 

(d)Employee Benefit Plans; Paid Time Off.

(i)Benefit Plans. During the Employment Period, Executive shall be an employee of the Company and the Bank and shall be entitled to participate in Provident's (A) tax-qualified retirement plans (as of the date hereof, Provident's 401(k) and Profit Sharing Plan and Employee Stock Ownership Plan); (B) group life, health and disability insurance plans; and (C) any other employee benefit plans and programs, in accordance with Provident's customary practices, provided that Executive's participation shall be subject to the terms of such plans and programs (including being a member of the class of employees authorized to participate in the plan or program), and provided further that nothing herein shall limit Provident's right to amend or terminate any such plans or programs.

(ii)Paid Time Off. Executive shall be entitled to four (4) weeks of paid vacation time each year during the Employment Period (measured on a fiscal or calendar year basis, in accordance with the Provident's usual practices), as well as sick leave, holidays and other paid absences in accordance with the Provident's policies and procedures for senior executives. Any unused paid time off during an annual period may be carried forward into the following year to the extent permitted under Provident's policies and procedures and Executive shall not be compensated for any unused paid time off.

(e)Expenses. Provident shall reimburse Executive for Executive's ordinary and necessary business expenses and travel and entertainment expenses incurred in connection with the performance of his duties under this Agreement upon presentation to Provident of an itemized account of such expenses in such form as Provident may reasonably require.

4.Principal Place of Employment

Executive's principal place of employment during the Employment Period shall be at the Company's principal executive offices in Manhattan for the Bank's New York City market or at such other location upon which the Company and Executive may mutually agree.

5.Outside Activities and Board Memberships

Except with the prior written consent of the Company, Executive will not, during the term of Executive's employment, undertake or engage in any other employment, occupation or business enterprise that would interfere with Executive's responsibilities and the performance of Executive's duties hereunder; provided, however, that Executive will be permitted to serve as a director of other for-profit and not-for-profit organizations and corporations so long as (a) such services does not interfere with the performance of Executive's obligations hereunder, (b) such organizations and corporations are not competitive in any business area in which the Company or the Bank is engaged and (c) such service is approved by the Board of Directors of the Company (“the Board”) prior to the commencement of such service.

6.Termination of Employment

(a)Termination by the Company Without Cause.

(i)Provident shall have the right to terminate Executive's employment at any time during the Employment Period without Cause by giving notice to Executive as described in Section 6(f). For sake of clarity, neither termination of Executive's employment pursuant to Section 6(e) nor upon or after expiration of the Employment Period shall constitute a termination without Cause for purposes of this Section 6.

(ii)In the event that Provident terminates Executive's employment during the Employment Period without Cause:

(A)Provident shall pay or provide to Executive any Accrued Obligations;

(B)If such termination of employment occurs within one year after a Change in Control, subject to Section 6(g), Provident shall (I) pay to Executive [within sixty (60) days following the date of termination] a lump sum cash payment (the “CIC Severance Payment”) equal to Executive's Base Salary immediately prior to termination of employment and (II) pay to Executive on a monthly basis commencing with the first month following Executive's termination of employment and continuing until the eighteenth month following Executive's termination of employment a cash payment (subject to reduction

for applicable withholding taxes) equal to the monthly COBRA premium in effect as of the date of Executive's termination of employment for the level of coverage in effect for Executive under Provident's group health plan (the “CIC COBRA Payments”);

(b)Termination by the Company for Cause. Provident shall have the right to terminate Executive's employment at any time during the Employment Period for Cause by giving notice to Executive as provided in Section 6(f) hereof. In the event Executive's employment is terminated for Cause, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(c)Resignation by Executive Without Good Reason. Executive may resign from employment during the Employment Period without Good Reason at any time by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment without Good Reason, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(d)Resignation by Executive for Good Reason. Executive may resign from employment under this Agreement for Good Reason by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment for Good Reason, Provident shall pay or provide to Executive the same payments and benefits subject to the same terms and conditions, as described in Sections 6(a)(ii)(A)-(B) as if Executive's employment was terminated by Provident without Cause pursuant to Section 6(a) as of the date of Executive's termination of employment for Good Reason.

(e)Termination by Reason of Death or Disability of Executive.

(i)In the event of Executive's death during the Employment Period, Provident's sole obligation shall be to pay to Executive's legal representatives any Accrued Obligations.

(ii)The Company shall be entitled to terminate Executive's employment due to Executive's Disability. If Executive's employment hereunder is terminated due to Executive's Disability, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(f)Notice; Effective Date of Termination. Notice of termination of employment under this Agreement shall be communicated by or to Executive (on one hand) or the Company (on the other hand) in writing in accordance with Section 13. Termination of Executive's employment pursuant to this Agreement shall be effective on the earliest of:

(i)immediately after Provident gives notice to Executive of Executive's termination without Cause, unless the parties agree to a later date, in which case, termination shall be effective as of such later date;

(ii)immediately upon approval by the Board of termination of Executive's employment for Cause;

(iii)immediately upon Executive's death;

(iv)in the case of termination by reason of Executive's Disability, the date on which Executive is determined to be permanently disabled for purposes of Provident's long-term disability plan or policy that covers Executive; or

(v)thirty (30) days after Executive gives written notice to Provident of Executive's resignation from employment under this Agreement (including for Good Reason), provided that the Company or the Bank may set an earlier termination date at any time prior to the date of termination of employment, in which case Executive's resignation shall be effective as of such other date.

(g)General Release of Claims. Executive shall not be entitled to the CIC Severance Payment or the CIC COBRA Payments (together, the CIC Severance Benefits”) pursuant to Section 6(a) or 6(d) hereof unless (i) Executive has executed and delivered to the Company a general release of claims (in such form as the Company shall specify) (the “Release”) and such Release has become irrevocable under the Age Discrimination in Employment Act (ADEA) not later than fifty-six (56) days after the date of Executive's termination of employment hereunder. Executive's entitlement to any CIC Severance Benefits is further conditioned upon Executive returning to Provident all property of Provident on or prior to the date of Executive's termination of employment with Provident and complying with the terms of Sections 5, 8, and 9 hereof and the Release. Provident shall deliver to Executive a copy of the Release not later than three (3)

days after Executive's termination of employment hereunder after a Change in Control pursuant to Section 6(a) or 6(d) hereof.

(h)No Other Severance Benefits. Executive acknowledges that any of the CIC Severance Benefits paid hereunder are in lieu of, and not in addition to, any payments and/or benefits to which Executive may otherwise be entitled under any severance plan, policy or program of Provident.

(i)Payment of Obligations. Notwithstanding anything to the contrary herein, any payment obligation of the Company or the Bank under this Agreement may be satisfied in whole or in part by payment by the Company, the Bank, or any affiliate and any such payment shall, for purposes of this Agreement, be treated as if made by the Company or the Bank (as applicable).

(j)Resignation from Positions. Upon termination of Executive's employment for any reason, Executive shall promptly (i) resign from all positions (including, without limitation, any management, officer, or director position) with Provident and (ii) relinquish any power of attorney, signing authority, trust authorization, or bank account signatory authorization that Executive may hold on behalf of Provident. Executive's execution of this Agreement shall be deemed the grant by Executive to the officers of the Company and the Bank of a limited power of attorney to sign in Executive's name and on Executive's behalf such documentation as may be necessary or appropriate for the limited purposes of effectuating such resignations and relinquishments.

(k)Golden Parachute Limit. (i) Notwithstanding any other provision of this Agreement, in the event that any portion of the CIC Severance Benefits or any other payment or benefit received or to be received by Executive (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (collectively, the "Total Benefits") would be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (the “Excise Tax”), the Total Benefits shall be reduced to the extent necessary so that no portion of the Total Benefits is subject to the Excise Tax; provided, however, that no such reduction in the Total Benefits shall be made if by not making such reduction, Executive's Retained Amount (as hereinafter defined) would be greater than Executive's Retained Amount if the Total Benefits are so reduced. All determinations required to be made under this Section 6(k) shall be made by tax counsel selected by Provident and reasonably acceptable to Executive (“Tax Counsel”), which determinations shall be conclusive and binding on Executive and Provident absent manifest error. All fees and expenses of Tax Counsel shall be borne solely by Provident. Prior to any reduction in Executive's Total Benefits pursuant to this Section 6(k), Tax Counsel shall provide Executive and the Company with a report setting forth its calculations and containing related supporting information. In the event any such reduction is required, the Total Benefits shall be reduced in the following order: (i) the CIC COBRA Payments, (ii) the CIC Severance Payment, (iii) any other portion of the Total Benefits that are not subject to Section 409A of the Code (other than Total Benefits resulting from any accelerated vesting of equity awards), (iv) Total Benefits that are subject to Section 409A of the Code in reverse order of payment, and (v) Total Benefits that are not subject to Section 409A and arise from any accelerated vesting of any equity awards. The parties hereto hereby elect to use the applicable Federal rate that is in effect on the date this Agreement is entered into for purposes of determining the present value of any payments provided for hereunder for purposes of Section 280G of the Code. “Retained Amount” shall mean the present value (as determined in accordance with sections 280G(b)(2)(A)(ii) and 290G(d)(4) of the Code) of the Total Benefits net of all federal, state and local taxes imposed on Executive with respect thereto.

7.Certain Definitions.

(a)“Accrued Obligations” means (i) any accrued and unpaid Base Salary of Executive through the date of termination of employment, payable pursuant to the Bank's standard payroll policies, (ii) any compensation and benefits to the extent payable to Executive based on Executive's participation in any compensation or benefit plan, program or arrangement of Provident through the date of termination of employment, payable in accordance with the terms of such plan, program or arrangement, and (iii) any expense reimbursement to which Executive is entitled under Provident's standard expense reimbursement policy (as applicable) and Sections 3(e) and 10 hereof.

(b)“Cause” means Executive's failure or refusal to substantially perform his duties hereunder, personal dishonesty, incompetence, misconduct, breach of fiduciary duty to the Company or the Bank, breach of the Bank's Code of Ethics, material violation of the Sarbanes-Oxley or other legal requirements for officers of public companies that in the reasonable opinion of the Board will likely cause material financial harm or material injury to the reputation of the Company or the Bank, engaging in actions that in the reasonable opinion of the Board will likely cause material financial harm or material injury to the business reputation of the Company or Bank, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.

(c)“Change in Control” means the occurrence of any of the following:

(i)any “person” (as the term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than any employee benefit plan of Provident or any affiliate, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company's outstanding securities; or

(ii)individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board; or

(iii)the Company consummates a merger, consolidation, share exchange, division or other reorganization or transaction of the Company (a “Fundamental  Transaction”) with any other corporation, other than a Fundamental Transaction that  results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined Voting Power immediately after such Fundamental Transaction of (i) the Company's outstanding  securities, (ii) the surviving entity's outstanding securities or (iii) in the case of a division, the outstanding securities of each entity resulting from the division; or

(iv)the shareholders of the Company approve a plan of complete liquidation or winding up of the Company; or

(v)the consummation of an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of the Company's or the Bank's assets.

(d)“Disability” means that Executive is deemed disabled for purposes of Provident's long-term disability plan or  policy that covers Executive.

(e)“Good Reason” means the occurrence of any of the following events (without Executive's consent):

(i)a material adverse change in Executive's functions, duties, or responsibilities with the Company and the Bank, which change would cause Executive's position to become one of materially lesser responsibility, importance, or scope; or

(ii)a material breach of this Agreement by the Company or the Bank.

Notwithstanding the foregoing, no such event shall constitute “Good Reason” unless (a) Executive shall have given written notice of such event to the Company within ninety (90) days after the initial occurrence thereof, (b) the Company and the Bank shall have failed to cure the situation within thirty (30) days following the delivery of such notice (or such longer cure period as may be agreed upon by the parties), and (c) Executive terminates employment within thirty (30) days after expiration of such cure period.

8.Confidentiality. Unless Executive obtains prior written consent from the Company or the Bank, Executive shall keep confidential and shall refrain from using for the benefit of Executive, or any person or entity other than the Company, the Bank or any entity which is a subsidiary or affiliate

of the Company or the Bank or of which the Company or the Bank is a subsidiary or affiliate, any document or information obtained from the Company, the Bank or from any of their respective parents, subsidiaries or affiliates, in the course of Executive's employment with any of them concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of Executive) until the same becomes so ascertainable or available; provided, however, that nothing in this Section shall prevent Executive, with or without the Bank's or the Company's consent, from participating in or disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceeding to the extent that such participation or disclosure is required under applicable law.

9.Non-Solicitation; Post-Termination Cooperation

(a)Executive hereby covenants and agrees that, while employed by Provident and for a period of one year following Executive's termination of employment with Provident (whether or not during the Employment Period), Executive shall not, without the prior written consent of the Company, either directly or indirectly:

(i)solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Company, the Bank or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever, to any other person, business or entity; or

(ii)solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Company or the Bank or any of their affiliates to terminate an existing business or commercial relationship with the Company or the Bank or any of their affiliates.

(b)Executive shall, upon reasonable notice, furnish such information and assistance to the Company and/or the Bank, as may reasonably be required by the Company and/or the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between Executive and the Company, the Bank or any of their subsidiaries or affiliates.

(c)All payments and benefits to Executive under this Agreement shall be subject to Executive's compliance with this Section. The parties hereto, recognizing that irreparable injury will result to the Company, the Bank and/or their affiliates, and their business and property in the event of Executive's breach of this Section, agree that, in the event of any such breach by Executive, the Company and the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive and all persons acting for or with Executive. Nothing herein will be construed as prohibiting the Company and the Bank from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from Executive.

10.Section 409A of the Code.

(a)This Agreement is intended to comply with the requirements of Section 409A of the Code (including the exceptions thereto), to the extent applicable, and the Company shall administer and interpret this Agreement in accordance with such requirements.  If any provision contained in the Agreement conflicts with the requirements of Section 409A of the Code (or the exemptions intended to apply under the Agreement), the Agreement shall be deemed to be reformed to comply with the requirements of Section 409A of the Code (or the applicable exemptions thereto).  Notwithstanding anything to the contrary herein, for purposes of determining any entitlement of Executive to the CIC Severance Benefits, (i) Executive's employment shall not be deemed to have terminated unless and until Executive incurs a “separation from service” as defined in Section 409A of the Code.   Reimbursement of any expenses provided for in this Agreement shall be made promptly upon presentation of documentation in accordance with Provident's policies with respect thereto as in effect from time to time (but in no event later than the end of calendar year following the year such

expenses were incurred); provided, however, that in no event shall the amount of expenses eligible for reimbursement hereunder during a calendar year affect the expenses eligible for reimbursement in any other taxable year.  Notwithstanding anything to the contrary herein, if a payment or benefit under this Agreement is due to a “separation from service” for purposes of the rules under Treas. Reg. § 1.409A-3(i)(2) (payments to specified employees upon a separation from service) and Executive is determined to be a “specified employee” (as determined under Treas. Reg. § 1.409A-1(i) and related Company procedures), such payment shall, to the extent necessary to comply with the requirements of Section 409A of the Code, be made on the later of (x) the date specified by the foregoing provisions of this Agreement or (y) the date that is six (6) months after the date of Executive's separation from service (or, if earlier, the date of Executive's death).  Any installment payments that are delayed pursuant to this Section 10 shall be accumulated and paid in a lump sum on the first day of the seventh month following the Date of Termination (or, if earlier, upon Executive's death) and the remaining installment payments shall begin on such date in accordance with the schedule provided in this Agreement.  Each installment of the CIC COBRA Payments shall be deemed to be a separate payment for purposes of Section 409A of the Code. The CIC Severance Benefits are intended not to constitute deferred compensation subject to Section 409A of the Code.  

11.Additional Termination and Suspension Provisions

(a)If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818(e)(3) and (g)(1)), all obligations of the Company and the Bank under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company and the Bank may in their discretion (but subject in all events to the requirements of Code Section 409A), (i) pay Executive all of the compensation withheld while the Company's and the Bank's obligations under this Agreement were suspended and (ii) reinstate (in whole) any of the Company's and the Bank's obligations which were suspended, and in exercising such discretion, the Company and the Bank shall consider the facts and make a decision promptly following such dismissal of charges and act in good faith in deciding whether to pay any withheld compensation to Executive and to reinstate any suspended obligations of the Company and the Bank.

(b)If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818(e)(4) or (g)(1)), all obligations of the Company and the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.

(c)If the Bank is in default, as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. § 1813(x)(1)), all obligations of the Company and the Bank under this Agreement shall terminate as of the date of default, but this provision shall not affect any vested rights of the parties.

(d)All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the OTS or other applicable banking regulator (the “Regulator”), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, as amended; or (ii) by the Regulator, at the time the Regulator approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Regulator to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(e)If any regulation applicable to the Company or the Bank shall hereafter be adopted, amended or modified or if any new regulation applicable to the Company or the Bank and effective after the date of this Agreement:

(i)shall require the inclusion in this Agreement of a provision not presently included in this Agreement, then the foregoing provisions of this Section shall be deemed amended

to the extent necessary to give effect in this Agreement to any such amended, modified or new regulation; and

(ii)shall permit the exclusion of a limitation in this Agreement on the payment to Executive of an amount or benefit provided for presently in this Agreement, then the foregoing provisions of this Section shall be deemed amended to the extent permissible to exclude from this Agreement any such limitation previously required to be included in this Agreement by a regulation prior to its amendment, modification or repeal.

12.Arbitration. Any dispute or controversy arising out of, under, in connection with, or relating to this Agreement or any amendment hereof shall be submitted to binding arbitration before one arbitrator in Rockland County, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association for expedited arbitration, and any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

13.Notices. The persons or addresses to which mailings or deliveries shall be made may change from time to time by notice given pursuant to the provisions of this Section. Any notice or other communication given pursuant to the provisions of this Section shall be deemed to have been given (a) if sent by messenger, upon personal delivery to the party to whom the notice is directed; (b) if sent by reputable overnight courier, one business day after delivery to such courier; (c) if sent by facsimile, upon electronic or telephonic confirmation of receipt from the receiving facsimile machine and (d) if sent by mail, three business days following deposit in the United States mail, properly addressed, postage prepaid, certified or registered mail with return receipt requested. All notices required or permitted to be given hereunder shall be addressed as follows:

If to Executive:	David S. Bagatelle
	52 Walsh Drive
	Mahwah, New Jersey, 07430
If to the Company or the Bank:	Provident New York Bancorp or Provident Bank as applicable 400 Rella Boulevard
	Montebello, New York 10901
	Attention: Chief Executive Officer

14.Amendment. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

15.Miscellaneous

(a)Successors and Assigns. This Agreement will inure to the benefit of and be binding upon Executive, his legal representatives and estate and intestate distributees, and the Company and the Bank, their successors and assigns, including any successor by merger or consolidation or a statutory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company or the Bank, as applicable, may be sold or otherwise transferred. Any such successor of the Company or the Bank shall be deemed to have assumed this Agreement and to have become obligated hereunder to the same extent as the Company or the Bank, as applicable, and Executive's obligations hereunder shall continue in favor of such successor.

(b)Severability. A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

(c)Waiver. Failure to insist upon strict compliance with any terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of this

Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment or any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

(d)Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

(e)Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without reference to conflicts of law principles, except to the extent governed by federal law in which case federal law shall govern. Any payments made to Executive pursuant to this Agreement or otherwise are subject to all applicable banking laws and regulations, including, without limitation, 12 U.S.C. § 1828 (k) and any regulations promulgated thereunder.

(f)Withholding. The Company and the Bank may withhold from any amounts payable to Executive hereunder all federal, state, city or other taxes that the Company or the Bank may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood, that Executive shall be responsible for payment of all taxes in respect of the payments and benefits provided herein).

(g)Headings and Construction. The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any Section. Any reference to a Section number shall refer to a Section of this Agreement, unless otherwise specified.

(h)Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or representations relating to the subject matter hereof.

[Signatures on next page]

IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to be executed and Executive has hereunto set his hand, all as of the Effective Date specified above.

			EXECUTIVE
Date:	October 31, 2011	By:	/s/ David S. Bagatelle
			David S. Bagatelle

			PROVIDENT NEW YORK BANCORP
Date:	October 31, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky

			PROVIDENT BANK
Date:	October 31, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky

EX-10.19

13

54825716v3

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made and entered into as of the 30th day of November 2011 (“Effective Date”), by and among Provident New York Bancorp, a Delaware corporation (the “Company), Provident Bank, a savings bank organized and existing under the laws of the United States of America (the “Bank”; and together with the Company, “Provident”), and James R. Peoples (“Executive”).

WITNESSETH:

WHEREAS, the Company and the Bank desire to employ Executive as Executive Vice President of the Company and the Bank and Market President of the Bank's Central Region; and

WHEREAS, Executive desires to serve in such positions;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the Company, the Bank and Executive hereby agree as follows:

1.Employment.

Subject to the terms set forth herein, Executive will be employed as Executive Vice President of the Company and the Bank and Market President of the Bank's Central Region. Executive shall have such authority, perform such duties and fulfill such responsibilities commonly incident to such positions or which are delegated to Executive by the President and Chief Executive Officer of the Company and the Bank. While employed, Executive shall devote his full business time and attention to the business and affairs of Provident and shall use his best efforts to advance the interests of Provident.

2.Employment Period

(a)Duration. Executive's period of employment with Provident shall begin on the Effective Date and shall continue until the first anniversary of such date (or if a Change in Control occurs prior to such first anniversary, the one year anniversary of the date of the Change in Control), unless terminated prior thereto by either Provident or Executive in accordance with Section 6 hereof (such period of employment being the “Employment Period”).

(b)Employment Following Termination of Employment Period. Nothing in this Agreement shall mandate or prohibit a continuation of Executive's employment following the expiration of the Employment Period upon such terms and conditions as the Company, the Bank, and Executive may agree.

3.Compensation

(a)Base Salary. In consideration for the services performed by Executive during the Employment Period, Provident shall pay to Executive an annual salary (“Base Salary”) of $325,000. The Base Salary shall be paid in approximately equal installments in accordance with the Bank's customary payroll practices.

(b)Annual Bonus. During the Employment Period, Executive shall be eligible to participate in Provident's Short-Term Incentive Plan (or any successor thereto). 

(c)Long-Term Compensation. During the Employment Period, Executive shall be eligible to participate in any equity and/or other long-term compensation programs established by Provident from time to time for senior executive officers on a basis consistent with Executive's status as an Executive Vice President of the Company and the Bank. 

(d)Employee Benefit Plans; Paid Time Off.

(i)Benefit Plans. During the Employment Period, Executive shall be an employee of the Company and the Bank and shall be entitled to participate in Provident's (A) tax-qualified retirement plans (as of the date hereof, Provident's 401(k) and Profit Sharing Plan and Employee Stock Ownership Plan); (B) group life, health and disability insurance plans; and (C) any other employee benefit plans and programs, in accordance with Provident's customary practices, provided that Executive's participation shall be subject to the terms of such plans and programs (including being a member of the class of employees authorized to participate in the plan or program), and provided further that nothing herein shall limit Provident's right to amend or terminate any such plans or programs.

(ii)Paid Time Off. Executive shall be entitled to four (4) weeks of paid vacation time each year during the Employment Period (measured on a fiscal or calendar year basis, in accordance with the Provident's usual practices), as well as sick leave, holidays and other paid absences in accordance with the Provident's policies and procedures for senior executives. Any unused paid time off during an annual period may be carried forward into the following year to the extent permitted under Provident's policies and procedures and Executive shall not be compensated for any unused paid time off.

(e)Expenses. Provident shall reimburse Executive for Executive's ordinary and necessary business expenses and travel and entertainment expenses incurred in connection with the performance of his duties under this Agreement upon presentation to Provident of an itemized account of such expenses in such form as Provident may reasonably require.

4.Principal Place of Employment

Executive's principal place of employment during the Employment Period shall be at the Company's principal executive offices or at such other location upon which the Company and Executive may mutually agree.

5.Outside Activities and Board Memberships

Except with the prior written consent of the Company, Executive will not, during the term of Executive's employment, undertake or engage in any other employment, occupation or business enterprise that would interfere with Executive's responsibilities and the performance of Executive's duties hereunder; provided, however, that Executive will be permitted to serve as a director of other for-profit and not-for-profit organizations and corporations so long as (a) such services does not interfere with the performance of Executive's obligations hereunder, (b) such organizations and corporations are not competitive in any business area in which the Company or the Bank is engaged and (c) such service is approved by the Board of Directors of the Company (“the Board”) prior to the commencement of such service.

6.Termination of Employment

(a)Termination by the Company Without Cause.

(i)Provident shall have the right to terminate Executive's employment at any time during the Employment Period without Cause by giving notice to Executive as described in Section 6(f). For sake of clarity, neither termination of Executive's employment pursuant to Section 6(e) nor upon or after expiration of the Employment Period shall constitute a termination without Cause for purposes of this Section 6.

(ii)In the event that Provident terminates Executive's employment during the Employment Period without Cause:

(A)Provident shall pay or provide to Executive any Accrued Obligations;

(B)If such termination of employment occurs within one year after a Change in Control, subject to Section 6(g), Provident shall (I) pay to Executive within sixty (60) days following the date of termination a lump sum cash payment (the “CIC Severance Payment”) equal to Executive's Base Salary immediately prior to termination of employment and (II) pay to Executive on a monthly basis commencing with the first month following Executive's termination of employment and continuing until the eighteenth month following Executive's termination of employment a cash payment (subject to reduction for applicable withholding taxes) equal to the monthly COBRA premium in effect as of the date of Executive's

termination of employment for the level of coverage in effect for Executive under Provident's group health plan (the “CIC COBRA Payments”);

(b)Termination by the Company for Cause. Provident shall have the right to terminate Executive's employment at any time during the Employment Period for Cause by giving notice to Executive as provided in Section 6(f) hereof. In the event Executive's employment is terminated for Cause, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(c)Resignation by Executive Without Good Reason. Executive may resign from employment during the Employment Period without Good Reason at any time by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment without Good Reason, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(d)Resignation by Executive for Good Reason. Executive may resign from employment under this Agreement for Good Reason by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment for Good Reason, Provident shall pay or provide to Executive the same payments and benefits subject to the same terms and conditions, as described in Sections 6(a)(ii)(A)-(B) as if Executive's employment was terminated by Provident without Cause pursuant to Section 6(a) as of the date of Executive's termination of employment for Good Reason.

(e)Termination by Reason of Death or Disability of Executive.

(i)In the event of Executive's death during the Employment Period, Provident's sole obligation shall be to pay to Executive's legal representatives any Accrued Obligations.

(ii)The Company shall be entitled to terminate Executive's employment due to Executive's Disability. If Executive's employment hereunder is terminated due to Executive's Disability, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(f)Notice; Effective Date of Termination. Notice of termination of employment under this Agreement shall be communicated by or to Executive (on one hand) or the Company (on the other hand) in writing in accordance with Section 13. Termination of Executive's employment pursuant to this Agreement shall be effective on the earliest of:

(i)immediately after Provident gives notice to Executive of Executive's termination without Cause, unless the parties agree to a later date, in which case, termination shall be effective as of such later date;

(ii)immediately upon approval by the Board of termination of Executive's employment for Cause;

(iii)immediately upon Executive's death;

(iv)in the case of termination by reason of Executive's Disability, the date on which Executive is determined to be permanently disabled for purposes of Provident's long-term disability plan or policy that covers Executive; or

(v)thirty (30) days after Executive gives written notice to Provident of Executive's resignation from employment under this Agreement (including for Good Reason), provided that the Company or the Bank may set an earlier termination date at any time prior to the date of termination of employment, in which case Executive's resignation shall be effective as of such other date.

(g)General Release of Claims. Executive shall not be entitled to the CIC Severance Payment or the CIC COBRA Payments (together, the CIC Severance Benefits”) pursuant to Section 6(a) or 6(d) hereof unless (i) Executive has executed and delivered to the Company a general release of claims (in such form as the Company shall specify) (the “Release”) and such Release has become irrevocable under the Age Discrimination in Employment Act (ADEA) not later than fifty-six (56) days after the date of Executive's termination of employment hereunder. Executive's entitlement to any CIC Severance Benefits is further conditioned upon Executive returning to Provident all property of Provident on or prior to the date of Executive's termination of employment with Provident and complying with the terms of Sections 5, 8, and 9 hereof and the Release. Provident shall deliver to Executive a copy of the Release not later than three (3)

days after Executive's termination of employment hereunder after a Change in Control pursuant to Section 6(a) or 6(d) hereof.

(h)No Other Severance Benefits. Executive acknowledges that any of the CIC Severance Benefits paid hereunder are in lieu of, and not in addition to, any payments and/or benefits to which Executive may otherwise be entitled under any severance plan, policy or program of Provident.

(i)Payment of Obligations. Notwithstanding anything to the contrary herein, any payment obligation of the Company or the Bank under this Agreement may be satisfied in whole or in part by payment by the Company, the Bank, or any affiliate and any such payment shall, for purposes of this Agreement, be treated as if made by the Company or the Bank (as applicable).

(j)Resignation from Positions. Upon termination of Executive's employment for any reason, Executive shall promptly (i) resign from all positions (including, without limitation, any management, officer, or director position) with Provident and (ii) relinquish any power of attorney, signing authority, trust authorization, or bank account signatory authorization that Executive may hold on behalf of Provident. Executive's execution of this Agreement shall be deemed the grant by Executive to the officers of the Company and the Bank of a limited power of attorney to sign in Executive's name and on Executive's behalf such documentation as may be necessary or appropriate for the limited purposes of effectuating such resignations and relinquishments.

(k)Golden Parachute Limit. (i) Notwithstanding any other provision of this Agreement, in the event that any portion of the CIC Severance Benefits or any other payment or benefit received or to be received by Executive (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (collectively, the "Total Benefits") would be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (the “Excise Tax”), the Total Benefits shall be reduced to the extent necessary so that no portion of the Total Benefits is subject to the Excise Tax; provided, however, that no such reduction in the Total Benefits shall be made if by not making such reduction, Executive's Retained Amount (as hereinafter defined) would be greater than Executive's Retained Amount if the Total Benefits are so reduced. All determinations required to be made under this Section 6(k) shall be made by tax counsel selected by Provident and reasonably acceptable to Executive (“Tax Counsel”), which determinations shall be conclusive and binding on Executive and Provident absent manifest error. All fees and expenses of Tax Counsel shall be borne solely by Provident. Prior to any reduction in Executive's Total Benefits pursuant to this Section 6(k), Tax Counsel shall provide Executive and the Company with a report setting forth its calculations and containing related supporting information. In the event any such reduction is required, the Total Benefits shall be reduced in the following order: (i) the CIC COBRA Payments, (ii) the CIC Severance Payment, (iii) any other portion of the Total Benefits that are not subject to Section 409A of the Code (other than Total Benefits resulting from any accelerated vesting of equity awards), (iv) Total Benefits that are subject to Section 409A of the Code in reverse order of payment, and (v) Total Benefits that are not subject to Section 409A and arise from any accelerated vesting of any equity awards. The parties hereto hereby elect to use the applicable Federal rate that is in effect on the date this Agreement is entered into for purposes of determining the present value of any payments provided for hereunder for purposes of Section 280G of the Code. “Retained Amount” shall mean the present value (as determined in accordance with sections 280G(b)(2)(A)(ii) and 290G(d)(4) of the Code) of the Total Benefits net of all federal, state and local taxes imposed on Executive with respect thereto.

7.Certain Definitions.

(a)“Accrued Obligations” means (i) any accrued and unpaid Base Salary of Executive through the date of termination of employment, payable pursuant to the Bank's standard payroll policies, (ii) any compensation and benefits to the extent payable to Executive based on Executive's participation in any compensation or benefit plan, program or arrangement of Provident through the date of termination of employment, payable in accordance with the terms of such plan, program or arrangement, and (iii) any expense reimbursement to which Executive is entitled under Provident's standard expense reimbursement policy (as applicable) and Sections 3(e) and 10 hereof.

(b)“Cause” means Executive's failure or refusal to substantially perform his duties hereunder, personal dishonesty, incompetence, misconduct, breach of fiduciary duty to the Company or the Bank, breach of the Bank's Code of Ethics, material violation of the Sarbanes-Oxley or other legal requirements for officers of public companies that in the reasonable opinion of the Board will likely cause material financial harm or material injury to the reputation of the Company or the Bank, engaging in actions that in the reasonable opinion of the Board will likely cause material financial harm or material injury to the business reputation of the Company or Bank, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.

(c)“Change in Control” means the occurrence of any of the following:

(i)any “person” (as the term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than any employee benefit plan of Provident or any affiliate, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company's outstanding securities; or

(ii)individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board; or

(iii)the Company consummates a merger, consolidation, share exchange, division or other reorganization or transaction of the Company (a “Fundamental  Transaction”) with any other corporation, other than a Fundamental Transaction that  results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined Voting Power immediately after such Fundamental Transaction of (i) the Company's outstanding  securities, (ii) the surviving entity's outstanding securities or (iii) in the case of a division, the outstanding securities of each entity resulting from the division; or

(iv)the shareholders of the Company approve a plan of complete liquidation or winding up of the Company; or

(v)the consummation of an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of the Company's or the Bank's assets.

(d)“Disability” means that Executive is deemed disabled for purposes of Provident's long-term disability plan or  policy that covers Executive.

(e)“Good Reason” means the occurrence of any of the following events (without Executive's consent):

(i)a material adverse change in Executive's functions, duties, or responsibilities with the Company and the Bank, which change would cause Executive's position to become one of materially lesser responsibility, importance, or scope; or

(ii)a material breach of this Agreement by the Company or the Bank.

Notwithstanding the foregoing, no such event shall constitute “Good Reason” unless (a) Executive shall have given written notice of such event to the Company within ninety (90) days after the initial occurrence thereof, (b) the Company and the Bank shall have failed to cure the situation within thirty (30) days following the delivery of such notice (or such longer cure period as may be agreed upon by the parties), and (c) Executive terminates employment within thirty (30) days after expiration of such cure period.

8.Confidentiality. Unless Executive obtains prior written consent from the Company or the Bank, Executive shall keep confidential and shall refrain from using for the benefit of Executive, or any person or entity other than the Company, the Bank or any entity which is a subsidiary or affiliate

of the Company or the Bank or of which the Company or the Bank is a subsidiary or affiliate, any document or information obtained from the Company, the Bank or from any of their respective parents, subsidiaries or affiliates, in the course of Executive's employment with any of them concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of Executive) until the same becomes so ascertainable or available; provided, however, that nothing in this Section shall prevent Executive, with or without the Bank's or the Company's consent, from participating in or disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceeding to the extent that such participation or disclosure is required under applicable law.

9.Non-Solicitation; Post-Termination Cooperation

(a)Executive hereby covenants and agrees that, while employed by Provident and for a period of one year following Executive's termination of employment with Provident (whether or not during the Employment Period), Executive shall not, without the prior written consent of the Company, either directly or indirectly:

(i)solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Company, the Bank or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever, to anyother person, business or entity; or

(ii)solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Company or the Bank or any of their affiliates to terminate an existing business or commercial relationship with the Company or the Bank or any of their affiliates.

(b)Executive shall, upon reasonable notice, furnish such information and assistance to the Company and/or the Bank, as may reasonably be required by the Company and/or the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between Executive and the Company, the Bank or any of their subsidiaries or affiliates.

(c)All payments and benefits to Executive under this Agreement shall be subject to Executive's compliance with this Section. The parties hereto, recognizing that irreparable injury will result to the Company, the Bank and/or their affiliates, and their business and property in the event of Executive's breach of this Section, agree that, in the event of any such breach by Executive, the Company and the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive and all persons acting for or with Executive. Nothing herein will be construed as prohibiting the Company and the Bank from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from Executive.

10.Section 409A of the Code.

(a)This Agreement is intended to comply with the requirements of Section 409A of the Code (including the exceptions thereto), to the extent applicable, and the Company shall administer and interpret this Agreement in accordance with such requirements.  If any provision contained in the Agreement conflicts with the requirements of Section 409A of the Code (or the exemptions intended to apply under the Agreement), the Agreement shall be deemed to be reformed to comply with the requirements of Section 409A of the Code (or the applicable exemptions thereto).  Notwithstanding anything to the contrary herein, for purposes of determining any entitlement of Executive to the CIC Severance Benefits, (i) Executive's employment shall not be deemed to have terminated unless and until Executive incurs a “separation from service” as defined in Section 409A of the Code.   Reimbursement of any expenses provided for in this Agreement shall be made promptly upon presentation of documentation in accordance with Provident's policies with respect thereto as in effect from time to time (but in no event later than the end of calendar year following the year such

expenses were incurred); provided, however, that in no event shall the amount of expenses eligible for reimbursement hereunder during a calendar year affect the expenses eligible for reimbursement in any other taxable year.  Notwithstanding anything to the contrary herein, if a payment or benefit under this Agreement is due to a “separation from service” for purposes of the rules under Treas. Reg. § 1.409A-3(i)(2) (payments to specified employees upon a separation from service) and Executive is determined to be a “specified employee” (as determined under Treas. Reg. § 1.409A-1(i) and related Company procedures), such payment shall, to the extent necessary to comply with the requirements of Section 409A of the Code, be made on the later of (x) the date specified by the foregoing provisions of this Agreement or (y) the date that is six (6) months after the date of Executive's separation from service (or, if earlier, the date of Executive's death).  Any installment payments that are delayed pursuant to this Section 10 shall be accumulated and paid in a lump sum on the first day of the seventh month following the Date of Termination (or, if earlier, upon Executive's death) and the remaining installment payments shall begin on such date in accordance with the schedule provided in this Agreement.  Each installment of the CIC COBRA Payments shall be deemed to be a separate payment for purposes of Section 409A of the Code. The CIC Severance Benefits are intended not to constitute deferred compensation subject to Section 409A of the Code.  

11.Additional Termination and Suspension Provisions

(a)If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818(e)(3) and (g)(1)), all obligations of the Company and the Bank under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company and the Bank may in their discretion (but subject in all events to the requirements of Code Section 409A), (i) pay Executive all of the compensation withheld while the Company's and the Bank's obligations under this Agreement were suspended and (ii) reinstate (in whole) any of the Company's and the Bank's obligations which were suspended, and in exercising such discretion, the Company and the Bank shall consider the facts and make a decision promptly following such dismissal of charges and act in good faith in deciding whether to pay any withheld compensation to Executive and to reinstate any suspended obligations of the Company and the Bank.

(b)If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818(e)(4) or (g)(1)), all obligations of the Company and the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.

(c)If the Bank is in default, as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. § 1813(x)(1)), all obligations of the Company and the Bank under this Agreement shall terminate as of the date of default, but this provision shall not affect any vested rights of the parties.

(d)All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the OTS or other applicable banking regulator (the “Regulator”), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, as amended; or (ii) by the Regulator, at the time the Regulator approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Regulator to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(e)If any regulation applicable to the Company or the Bank shall hereafter be adopted, amended or modified or if any new regulation applicable to the Company or the Bank and effective after the date of this Agreement:

(i)shall require the inclusion in this Agreement of a provision not presently included in this Agreement, then the foregoing provisions of this Section shall be deemed amended

to the extent necessary to give effect in this Agreement to any such amended, modified or new regulation; and

(ii)shall permit the exclusion of a limitation in this Agreement on the payment to Executive of an amount or benefit provided for presently in this Agreement, then the foregoing provisions of this Section shall be deemed amended to the extent permissible to exclude from this Agreement any such limitation previously required to be included in this Agreement by a regulation prior to its amendment, modification or repeal.

12.Arbitration. Any dispute or controversy arising out of, under, in connection with, or relating to this Agreement or any amendment hereof shall be submitted to binding arbitration before one arbitrator in Rockland County, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association for expedited arbitration, and any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

13.Notices. The persons or addresses to which mailings or deliveries shall be made may change from time to time by notice given pursuant to the provisions of this Section. Any notice or other communication given pursuant to the provisions of this Section shall be deemed to have been given (a) if sent by messenger, upon personal delivery to the party to whom the notice is directed; (b) if sent by reputable overnight courier, one business day after delivery to such courier; (c) if sent by facsimile, upon electronic or telephonic confirmation of receipt from the receiving facsimile machine and (d) if sent by mail, three business days following deposit in the United States mail, properly addressed, postage prepaid, certified or registered mail with return receipt requested. All notices required or permitted to be given hereunder shall be addressed as follows:

If to Executive:	James R. Peoples
	__________________________
	__________________________
If to the Company or the Bank:	Provident New York Bancorp or Provident Bank as applicable 400 Rella Boulevard
	Montebello, New York 10901
	Attention: Chief Executive Officer

14.Amendment. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

15.Miscellaneous

(a)Successors and Assigns. This Agreement will inure to the benefit of and be binding upon Executive, his legal representatives and estate and intestate distributees, and the Company and the Bank, their successors and assigns, including any successor by merger or consolidation or a statutory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company or the Bank, as applicable, may be sold or otherwise transferred. Any such successor of the Company or the Bank shall be deemed to have assumed this Agreement and to have become obligated hereunder to the same extent as the Company or the Bank, as applicable, and Executive's obligations hereunder shall continue in favor of such successor.

(b)Severability. A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

(c)Waiver. Failure to insist upon strict compliance with any terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of this

Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment or any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

(d)Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

(e)Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without reference to conflicts of law principles, except to the extent governed by federal law in which case federal law shall govern. Any payments made to Executive pursuant to this Agreement or otherwise are subject to all applicable banking laws and regulations, including, without limitation, 12 U.S.C. § 1828 (k) and any regulations promulgated thereunder.

(f)Withholding. The Company and the Bank may withhold from any amounts payable to Executive hereunder all federal, state, city or other taxes that the Company or the Bank may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood, that Executive shall be responsible for payment of all taxes in respect of the payments and benefits provided herein).

(g)Headings and Construction. The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any Section. Any reference to a Section number shall refer to a Section of this Agreement, unless otherwise specified.

(h)Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or representations relating to the subject matter hereof.

[Signatures on next page]

IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to be executed and Executive has hereunto set his hand, all as of the Effective Date specified above.

			EXECUTIVE
Date:	December 1, 2011	By:	/s/James R. Peoples
			James R. Peoples

			PROVIDENT NEW YORK BANCORP
Date:	December 1, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky

			PROVIDENT BANK
Date:	December 1, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky

EX-10.20

EMPLOYMENT AGREEMENT

This Employment Agreement (“Agreement”) is made and entered into as of the 22nd day of November 2011 (“Effective Date”), by and among Provident New York Bancorp, a Delaware corporation (the “Company), Provident Bank, a savings bank organized and existing under the laws of the United States of America (the “Bank”; and together with the Company, “Provident”), and Rodney Whitwell (“Executive”).

WITNESSETH:

WHEREAS, the Company and the Bank desire to employ Executive as Executive Vice President and Chief Operating Officer of the Company and the Bank; and

WHEREAS, Executive desires to serve in such positions;

NOW, THEREFORE, in consideration of the premises and the mutual covenants and obligations hereinafter set forth, the Company, the Bank and Executive hereby agree as follows:

1.Employment.

Subject to the terms set forth herein, Executive will be employed as Executive Vice President and Chief Operating Officer of the Company and the Bank. Executive shall have such authority, perform such duties and fulfill such responsibilities commonly incident to such positions or which are delegated to Executive by the President and Chief Executive Officer of the Company and the Bank. While employed, Executive shall devote his full business time and attention to the business and affairs of Provident and shall use his best efforts to advance the interests of Provident.

2.Employment Period

(a)Duration. Executive's period of employment with Provident shall begin on the Effective Date and shall continue until the first anniversary of such date (or if a Change in Control occurs prior to such first anniversary, the one year anniversary of the date of the Change in Control), unless terminated prior thereto by either Provident or Executive in accordance with Section 6 hereof (such period of employment being the “Employment Period”).

(b)Employment Following Termination of Employment Period. Nothing in this Agreement shall mandate or prohibit a continuation of Executive's employment following the expiration of the Employment Period upon such terms and conditions as the Company, the Bank, and Executive may agree.

3.Compensation

(a)Base Salary. In consideration for the services performed by Executive during the Employment Period, Provident shall pay to Executive an annual salary (“Base Salary”) of $265,000. The Base Salary shall be paid in approximately equal installments in accordance with the Bank's customary payroll practices.

(b)Annual Bonus. During the Employment Period, Executive shall be eligible to participate in Provident's Short-Term Incentive Plan (or any successor thereto). 

(c)Long-Term Compensation. During the Employment Period, Executive shall be eligible to participate in any equity and/or other long-term compensation programs established by Provident from time to time for senior executive officers on a basis consistent with Executive's status as an Executive Vice President of the Company and the Bank. 

(d)Employee Benefit Plans; Paid Time Off.

(i)Benefit Plans. During the Employment Period, Executive shall be an employee of the Company and the Bank and shall be entitled to participate in Provident's (A) tax-qualified retirement plans (as of the date hereof, Provident's 401(k) and Profit Sharing Plan and Employee Stock Ownership Plan); (B) group life, health and disability insurance plans; and (C) any other employee benefit plans and programs, in accordance with Provident's customary practices, provided that Executive's participation shall be subject to the terms of such plans and programs (including being a member of the class of employees authorized to participate in the plan or program), and provided further that nothing herein shall limit Provident's right to amend or terminate any such plans or programs.

(ii)Paid Time Off. Executive shall be entitled to four (4) weeks of paid vacation time each year during the Employment Period (measured on a fiscal or calendar year basis, in accordance with the Provident's usual practices), as well as sick leave, holidays and other paid absences in accordance with the Provident's policies and procedures for senior executives. Any unused paid time off during an annual period may be carried forward into the following year to the extent permitted under Provident's policies and procedures and Executive shall not be compensated for any unused paid time off.

(e)Expenses. Provident shall reimburse Executive for Executive's ordinary and necessary business expenses and travel and entertainment expenses incurred in connection with the performance of his duties under this Agreement upon presentation to Provident of an itemized account of such expenses in such form as Provident may reasonably require.

4.Principal Place of Employment

Executive's principal place of employment during the Employment Period shall be at the Company's principal executive offices or at such other location upon which the Company and Executive may mutually agree.

5.Outside Activities and Board Memberships

Except with the prior written consent of the Company, Executive will not, during the term of Executive's employment, undertake or engage in any other employment, occupation or business enterprise that would interfere with Executive's responsibilities and the performance of Executive's duties hereunder; provided, however, that Executive will be permitted to serve as a director of other for-profit and not-for-profit organizations and corporations so long as (a) such services does not interfere with the performance of Executive's obligations hereunder, (b) such organizations and corporations are not competitive in any business area in which the Company or the Bank is engaged and (c) such service is approved by the Board of Directors of the Company (“the Board”) prior to the commencement of such service.

6.Termination of Employment

(a)Termination by the Company Without Cause.

(i)Provident shall have the right to terminate Executive's employment at any time during the Employment Period without Cause by giving notice to Executive as described in Section 6(f). For sake of clarity, neither termination of Executive's employment pursuant to Section 6(e) nor upon or after expiration of the Employment Period shall constitute a termination without Cause for purposes of this Section 6.

(ii)In the event that Provident terminates Executive's employment during the Employment Period without Cause:

(A)Provident shall pay or provide to Executive any Accrued Obligations;

(B)If such termination of employment occurs within one year after a Change in Control, subject to Section 6(g), Provident shall (I) pay to Executive within sixty (60) days following the date of termination a lump sum cash payment (the “CIC Severance Payment”) equal to Executive's Base Salary immediately prior to termination of employment and (II) pay to Executive on a monthly basis commencing with the first month following Executive's termination of employment and continuing until the eighteenth month following Executive's termination of employment a cash payment (subject to reduction for applicable withholding taxes) equal to the monthly COBRA premium in effect as of the date of Executive's

termination of employment for the level of coverage in effect for Executive under Provident's group health plan (the “CIC COBRA Payments”);

(b)Termination by the Company for Cause. Provident shall have the right to terminate Executive's employment at any time during the Employment Period for Cause by giving notice to Executive as provided in Section 6(f) hereof. In the event Executive's employment is terminated for Cause, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(c)Resignation by Executive Without Good Reason. Executive may resign from employment during the Employment Period without Good Reason at any time by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment without Good Reason, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(d)Resignation by Executive for Good Reason. Executive may resign from employment under this Agreement for Good Reason by giving notice to the Company as described in Section 6(f). In the event Executive resigns from employment for Good Reason, Provident shall pay or provide to Executive the same payments and benefits subject to the same terms and conditions, as described in Sections 6(a)(ii)(A)-(B) as if Executive's employment was terminated by Provident without Cause pursuant to Section 6(a) as of the date of Executive's termination of employment for Good Reason.

(e)Termination by Reason of Death or Disability of Executive.

(i)In the event of Executive's death during the Employment Period, Provident's sole obligation shall be to pay to Executive's legal representatives any Accrued Obligations.

(ii)The Company shall be entitled to terminate Executive's employment due to Executive's Disability. If Executive's employment hereunder is terminated due to Executive's Disability, Provident's sole obligation shall be to pay or provide to Executive any Accrued Obligations.

(f)Notice; Effective Date of Termination. Notice of termination of employment under this Agreement shall be communicated by or to Executive (on one hand) or the Company (on the other hand) in writing in accordance with Section 13. Termination of Executive's employment pursuant to this Agreement shall be effective on the earliest of:

(i)immediately after Provident gives notice to Executive of Executive's termination without Cause, unless the parties agree to a later date, in which case, termination shall be effective as of such later date;

(ii)immediately upon approval by the Board of termination of Executive's employment for Cause;

(iii)immediately upon Executive's death;

(iv)in the case of termination by reason of Executive's Disability, the date on which Executive is determined to be permanently disabled for purposes of Provident's long-term disability plan or policy that covers Executive; or

(v)thirty (30) days after Executive gives written notice to Provident of Executive's resignation from employment under this Agreement (including for Good Reason), provided that the Company or the Bank may set an earlier termination date at any time prior to the date of termination of employment, in which case Executive's resignation shall be effective as of such other date.

(g)General Release of Claims. Executive shall not be entitled to the CIC Severance Payment or the CIC COBRA Payments (together, the CIC Severance Benefits”) pursuant to Section 6(a) or 6(d) hereof unless (i) Executive has executed and delivered to the Company a general release of claims (in such form as the Company shall specify) (the “Release”) and such Release has become irrevocable under the Age Discrimination in Employment Act (ADEA) not later than fifty-six (56) days after the date of Executive's termination of employment hereunder. Executive's entitlement to any CIC Severance Benefits is further conditioned upon Executive returning to Provident all property of Provident on or prior to the date of Executive's termination of employment with Provident and complying with the terms of Sections 5, 8, and 9 hereof and the Release. Provident shall deliver to Executive a copy of the Release not later than three (3)

days after Executive's termination of employment hereunder after a Change in Control pursuant to Section 6(a) or 6(d) hereof.

(h)No Other Severance Benefits. Executive acknowledges that any of the CIC Severance Benefits paid hereunder are in lieu of, and not in addition to, any payments and/or benefits to which Executive may otherwise be entitled under any severance plan, policy or program of Provident.

(i)Payment of Obligations. Notwithstanding anything to the contrary herein, any payment obligation of the Company or the Bank under this Agreement may be satisfied in whole or in part by payment by the Company, the Bank, or any affiliate and any such payment shall, for purposes of this Agreement, be treated as if made by the Company or the Bank (as applicable).

(j)Resignation from Positions. Upon termination of Executive's employment for any reason, Executive shall promptly (i) resign from all positions (including, without limitation, any management, officer, or director position) with Provident and (ii) relinquish any power of attorney, signing authority, trust authorization, or bank account signatory authorization that Executive may hold on behalf of Provident. Executive's execution of this Agreement shall be deemed the grant by Executive to the officers of the Company and the Bank of a limited power of attorney to sign in Executive's name and on Executive's behalf such documentation as may be necessary or appropriate for the limited purposes of effectuating such resignations and relinquishments.

(k)Golden Parachute Limit. (i) Notwithstanding any other provision of this Agreement, in the event that any portion of the CIC Severance Benefits or any other payment or benefit received or to be received by Executive (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement) (collectively, the "Total Benefits") would be subject to the excise tax imposed under Section 4999 of the Internal Revenue Code of 1986, as amended (the “Code”) (the “Excise Tax”), the Total Benefits shall be reduced to the extent necessary so that no portion of the Total Benefits is subject to the Excise Tax; provided, however, that no such reduction in the Total Benefits shall be made if by not making such reduction, Executive's Retained Amount (as hereinafter defined) would be greater than Executive's Retained Amount if the Total Benefits are so reduced. All determinations required to be made under this Section 6(k) shall be made by tax counsel selected by Provident and reasonably acceptable to Executive (“Tax Counsel”), which determinations shall be conclusive and binding on Executive and Provident absent manifest error. All fees and expenses of Tax Counsel shall be borne solely by Provident. Prior to any reduction in Executive's Total Benefits pursuant to this Section 6(k), Tax Counsel shall provide Executive and the Company with a report setting forth its calculations and containing related supporting information. In the event any such reduction is required, the Total Benefits shall be reduced in the following order: (i) the CIC COBRA Payments, (ii) the CIC Severance Payment, (iii) any other portion of the Total Benefits that are not subject to Section 409A of the Code (other than Total Benefits resulting from any accelerated vesting of equity awards), (iv) Total Benefits that are subject to Section 409A of the Code in reverse order of payment, and (v) Total Benefits that are not subject to Section 409A and arise from any accelerated vesting of any equity awards. The parties hereto hereby elect to use the applicable Federal rate that is in effect on the date this Agreement is entered into for purposes of determining the present value of any payments provided for hereunder for purposes of Section 280G of the Code. “Retained Amount” shall mean the present value (as determined in accordance with sections 280G(b)(2)(A)(ii) and 290G(d)(4) of the Code) of the Total Benefits net of all federal, state and local taxes imposed on Executive with respect thereto.

7.Certain Definitions.

(a)“Accrued Obligations” means (i) any accrued and unpaid Base Salary of Executive through the date of termination of employment, payable pursuant to the Bank's standard payroll policies, (ii) any compensation and benefits to the extent payable to Executive based on Executive's participation in any compensation or benefit plan, program or arrangement of Provident through the date of termination of employment, payable in accordance with the terms of such plan, program or arrangement, and (iii) any expense reimbursement to which Executive is entitled under Provident's standard expense reimbursement policy (as applicable) and Sections 3(e) and 10 hereof.

(b)“Cause” means Executive's failure or refusal to substantially perform his duties hereunder, personal dishonesty, incompetence, misconduct, breach of fiduciary duty to the Company or the Bank, breach of the Bank's Code of Ethics, material violation of the Sarbanes-Oxley or other legal requirements for officers of public companies that in the reasonable opinion of the Board will likely cause material financial harm or material injury to the reputation of the Company or the Bank, engaging in actions that in the reasonable opinion of the Board will likely cause material financial harm or material injury to the business reputation of the Company or Bank, willful violation of any law, rule or regulation (other than routine traffic violations or similar offenses) or final cease-and-desist order, or material breach of any provision of this Agreement.

(c)“Change in Control” means the occurrence of any of the following:

(i)any “person” (as the term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”)), other than any employee benefit plan of Provident or any affiliate, is or becomes the “beneficial owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 25% or more of the combined voting power of Company's outstanding securities; or

(ii)individuals who constitute the Board on the date hereof (the “Incumbent Board”) cease for any reason to constitute at least a majority thereof, provided that any person becoming a director subsequent to the date hereof whose election was approved by a vote of at least three-quarters of the directors comprising the Incumbent Board, or whose nomination for election by the Company's stockholders was approved by the Nominating Committee serving under an Incumbent Board, shall be, for purposes of this clause (ii), considered as though such person were a member of the Incumbent Board; or

(iii)the Company consummates a merger, consolidation, share exchange, division or other reorganization or transaction of the Company (a “Fundamental  Transaction”) with any other corporation, other than a Fundamental Transaction that  results in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than fifty percent (50%) of the combined Voting Power immediately after such Fundamental Transaction of (i) the Company's outstanding  securities, (ii) the surviving entity's outstanding securities or (iii) in the case of a division, the outstanding securities of each entity resulting from the division; or

(iv)the shareholders of the Company approve a plan of complete liquidation or winding up of the Company; or

(v)the consummation of an agreement for the sale or disposition (in one transaction or a series of transactions) of all or substantially all of the Company's or the Bank's assets.

(d)“Disability” means that Executive is deemed disabled for purposes of Provident's long-term disability plan or  policy that covers Executive.

(e)“Good Reason” means the occurrence of any of the following events (without Executive's consent):

(i)a material adverse change in Executive's functions, duties, or responsibilities with the Company and the Bank, which change would cause Executive's position to become one of materially lesser responsibility, importance, or scope; or

(ii)a material breach of this Agreement by the Company or the Bank.

Notwithstanding the foregoing, no such event shall constitute “Good Reason” unless (a) Executive shall have given written notice of such event to the Company within ninety (90) days after the initial occurrence thereof, (b) the Company and the Bank shall have failed to cure the situation within thirty (30) days following the delivery of such notice (or such longer cure period as may be agreed upon by the parties), and (c) Executive terminates employment within thirty (30) days after expiration of such cure period.

8.Confidentiality. Unless Executive obtains prior written consent from the Company or the Bank, Executive shall keep confidential and shall refrain from using for the benefit of Executive, or any person or entity other than the Company, the Bank or any entity which is a subsidiary or affiliate

of the Company or the Bank or of which the Company or the Bank is a subsidiary or affiliate, any document or information obtained from the Company, the Bank or from any of their respective parents, subsidiaries or affiliates, in the course of Executive's employment with any of them concerning their properties, operations or business (unless such document or information is readily ascertainable from public or published information or trade sources or has otherwise been made available to the public through no fault of Executive) until the same becomes so ascertainable or available; provided, however, that nothing in this Section shall prevent Executive, with or without the Bank's or the Company's consent, from participating in or disclosing documents or information in connection with any judicial or administrative investigation, inquiry or proceeding to the extent that such participation or disclosure is required under applicable law.

9.Non-Solicitation; Post-Termination Cooperation

(a)Executive hereby covenants and agrees that, while employed by Provident and for a period of one year following Executive's termination of employment with Provident (whether or not during the Employment Period), Executive shall not, without the prior written consent of the Company, either directly or indirectly:

(i)solicit, offer employment to, or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any officer or employee of the Company, the Bank or any of their respective subsidiaries or affiliates to terminate his or her employment and accept employment or become affiliated with, or provide services for compensation in any capacity whatsoever to, any other person, business or entity; or

(ii)solicit, provide any information, advice or recommendation or take any other action intended (or that a reasonable person acting in like circumstances would expect) to have the effect of causing any customer of the Company or the Bank or any of their affiliates to terminate an existing business or commercial relationship with the Company or the Bank or any of their affiliates.

(b)Executive shall, upon reasonable notice, furnish such information and assistance to the Company and/or the Bank, as may reasonably be required by the Company and/or the Bank, in connection with any litigation in which it or any of its subsidiaries or affiliates is, or may become, a party; provided, however, that Executive shall not be required to provide information or assistance with respect to any litigation between Executive and the Company, the Bank or any of their subsidiaries or affiliates.

(c)All payments and benefits to Executive under this Agreement shall be subject to Executive's compliance with this Section. The parties hereto, recognizing that irreparable injury will result to the Company, the Bank and/or their affiliates, and their business and property in the event of Executive's breach of this Section, agree that, in the event of any such breach by Executive, the Company and the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by Executive and all persons acting for or with Executive. Nothing herein will be construed as prohibiting the Company and the Bank from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from Executive.

10.Section 409A of the Code.

(a)This Agreement is intended to comply with the requirements of Section 409A of the Code (including the exceptions thereto), to the extent applicable, and the Company shall administer and interpret this Agreement in accordance with such requirements.  If any provision contained in the Agreement conflicts with the requirements of Section 409A of the Code (or the exemptions intended to apply under the Agreement), the Agreement shall be deemed to be reformed to comply with the requirements of Section 409A of the Code (or the applicable exemptions thereto).  Notwithstanding anything to the contrary herein, for purposes of determining any entitlement of Executive to the CIC Severance Benefits, (i) Executive's employment shall not be deemed to have terminated unless and until Executive incurs a “separation from service” as defined in Section 409A of the Code.   Reimbursement of any expenses provided for in this Agreement shall be made

promptly upon presentation of documentation in accordance with Provident's policies with respect thereto as in effect from time to time (but in no event later than the end of calendar year following the year such expenses were incurred); provided, however, that in no event shall the amount of expenses eligible for reimbursement hereunder during a calendar year affect the expenses eligible for reimbursement in any other taxable year.  Notwithstanding anything to the contrary herein, if a payment or benefit under this Agreement is due to a “separation from service” for purposes of the rules under Treas. Reg. § 1.409A-3(i)(2) (payments to specified employees upon a separation from service) and Executive is determined to be a “specified employee” (as determined under Treas. Reg. § 1.409A-1(i) and related Company procedures), such payment shall, to the extent necessary to comply with the requirements of Section 409A of the Code, be made on the later of (x) the date specified by the foregoing provisions of this Agreement or (y) the date that is six (6) months after the date of Executive's separation from service (or, if earlier, the date of Executive's death).  Any installment payments that are delayed pursuant to this Section 10 shall be accumulated and paid in a lump sum on the first day of the seventh month following the Date of Termination (or, if earlier, upon Executive's death) and the remaining installment payments shall begin on such date in accordance with the schedule provided in this Agreement.  Each installment of the CIC COBRA Payments shall be deemed to be a separate payment for purposes of Section 409A of the Code. The CIC Severance Benefits are intended not to constitute deferred compensation subject to Section 409A of the Code.  

11.Additional Termination and Suspension Provisions

(a)If Executive is suspended and/or temporarily prohibited from participating in the conduct of the Bank's affairs by a notice served under Section 8(e)(3) or (g)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818(e)(3) and (g)(1)), all obligations of the Company and the Bank under this Agreement shall be suspended as of the date of service unless stayed by appropriate proceedings. If the charges in the notice are dismissed, the Company and the Bank may in their discretion (but subject in all events to the requirements of Code Section 409A), (i) pay Executive all of the compensation withheld while the Company's and the Bank's obligations under this Agreement were suspended and (ii) reinstate (in whole) any of the Company's and the Bank's obligations which were suspended, and in exercising such discretion, the Company and the Bank shall consider the facts and make a decision promptly following such dismissal of charges and act in good faith in deciding whether to pay any withheld compensation to Executive and to reinstate any suspended obligations of the Company and the Bank.

(b)If Executive is removed and/or permanently prohibited from participating in the conduct of the Bank's affairs by an order issued under Section 8(e)(4) or (g)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. §§ 1818(e)(4) or (g)(1)), all obligations of the Company and the Bank under this Agreement shall terminate as of the effective date of the order, but vested rights of the parties shall not be affected.

(c)If the Bank is in default, as defined in Section 3(x)(1) of the Federal Deposit Insurance Act, as amended (12 U.S.C. § 1813(x)(1)), all obligations of the Company and the Bank under this Agreement shall terminate as of the date of default, but this provision shall not affect any vested rights of the parties.

(d)All obligations under this Agreement shall be terminated, except to the extent determined that continuation of this Agreement is necessary for the continued operation of the Bank, (i) by the OTS or other applicable banking regulator (the “Regulator”), at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in Section 13(c) of the Federal Deposit Insurance Act, as amended; or (ii) by the Regulator, at the time the Regulator approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Regulator to be in an unsafe or unsound condition. Any rights of the parties that have already vested, however, shall not be affected by such action.

(e)If any regulation applicable to the Company or the Bank shall hereafter be adopted, amended or modified or if any new regulation applicable to the Company or the Bank and effective after the date of this Agreement:

(i)shall require the inclusion in this Agreement of a provision not presently included in this Agreement, then the foregoing provisions of this Section shall be deemed amended to the extent necessary to give effect in this Agreement to any such amended, modified or new regulation; and

(ii)shall permit the exclusion of a limitation in this Agreement on the payment to Executive of an amount or benefit provided for presently in this Agreement, then the foregoing provisions of this Section shall be deemed amended to the extent permissible to exclude from this Agreement any such limitation previously required to be included in this Agreement by a regulation prior to its amendment, modification or repeal.

12.Arbitration. Any dispute or controversy arising out of, under, in connection with, or relating to this Agreement or any amendment hereof shall be submitted to binding arbitration before one arbitrator in Rockland County, New York in accordance with the Commercial Arbitration Rules of the American Arbitration Association for expedited arbitration, and any judgment upon the award rendered by the arbitrator may be entered in any court having jurisdiction thereof.

13.Notices. The persons or addresses to which mailings or deliveries shall be made may change from time to time by notice given pursuant to the provisions of this Section. Any notice or other communication given pursuant to the provisions of this Section shall be deemed to have been given (a) if sent by messenger, upon personal delivery to the party to whom the notice is directed; (b) if sent by reputable overnight courier, one business day after delivery to such courier; (c) if sent by facsimile, upon electronic or telephonic confirmation of receipt from the receiving facsimile machine and (d) if sent by mail, three business days following deposit in the United States mail, properly addressed, postage prepaid, certified or registered mail with return receipt requested. All notices required or permitted to be given hereunder shall be addressed as follows:

If to Executive:	Rodney Whitwell
	__________________________
	__________________________
If to the Company or the Bank:	Provident New York Bancorp or Provident Bank as applicable 400 Rella Boulevard
	Montebello, New York 10901
	Attention: Chief Executive Officer

14.Amendment. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

15.Miscellaneous

(a)Successors and Assigns. This Agreement will inure to the benefit of and be binding upon Executive, his legal representatives and estate and intestate distributees, and the Company and the Bank, their successors and assigns, including any successor by merger or consolidation or a statutory receiver or any other person or firm or corporation to which all or substantially all of the assets and business of the Company or the Bank, as applicable, may be sold or otherwise transferred. Any such successor of the Company or the Bank shall be deemed to have assumed this Agreement and to have become obligated hereunder to the same extent as the Company or the Bank, as applicable, and Executive's obligations hereunder shall continue in favor of such successor.

(b)Severability. A determination that any provision of this Agreement is invalid or unenforceable shall not affect the validity or enforceability of any other provision hereof.

(c)Waiver. Failure to insist upon strict compliance with any terms, covenants or conditions hereof shall not be deemed a waiver of such term, covenant or condition. A waiver of any provision of this Agreement must be made in writing, designated as a waiver, and signed by the party against whom its enforcement is sought. Any waiver or relinquishment or any right or power hereunder at any one or more times shall not be deemed a waiver or relinquishment of such right or power at any other time or times.

(d)Counterparts. This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, and all of which shall constitute one and the same Agreement.

(e)Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of New York, without reference to conflicts of law principles, except to the extent governed by federal law in which case federal law shall govern. Any payments made to Executive pursuant to this Agreement or otherwise are subject to all applicable banking laws and regulations, including, without limitation, 12 U.S.C. § 1828 (k) and any regulations promulgated thereunder.

(f)Withholding. The Company and the Bank may withhold from any amounts payable to Executive hereunder all federal, state, city or other taxes that the Company or the Bank may reasonably determine are required to be withheld pursuant to any applicable law or regulation (it being understood, that Executive shall be responsible for payment of all taxes in respect of the payments and benefits provided herein).

(g)Headings and Construction. The headings of sections in this Agreement are for convenience of reference only and are not intended to qualify the meaning of any Section. Any reference to a Section number shall refer to a Section of this Agreement, unless otherwise specified.

(h)Entire Agreement. This instrument contains the entire agreement of the parties relating to the subject matter hereof, and supersedes in its entirety any and all prior agreements, understandings or representations relating to the subject matter hereof, including but not limited to, the letter agreement, dated as of August 15, 2011 between Executive and the Bank.

[Signatures on next page]

IN WITNESS WHEREOF, the Company and the Bank have caused this Agreement to be executed and Executive has hereunto set his hand, all as of the Effective Date specified above.

			EXECUTIVE
Date:	November 22, 2011	By:	/s/ Rodney Whitwell
			Rodney Whitwell

			PROVIDENT NEW YORK BANCORP
Date:	November 22, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky

			PROVIDENT BANK
Date:	November 22, 2011	By:	/s/ Jack Kopnisky
			Jack Kopnisky

EX-21

Exhibit 21

Subsidiaries of the Registrant

The following is a list of the subsidiaries of Provident New York Bancorp:

Name	State of Incorporation
Hardenburgh Abstract Company, Inc.	New York
High Barney Road, LLC	New York
Hudson Valley Investment Advisors, LLC	Delaware
Provident Bank	United States of America
Provest Services Corp.	New York (inactive)
Provest Services Corp. I	New York
Provest Services Corp. II	New York
Provident REIT, Inc.	New York
Provident Municipal Bank	New York
Warsave Development, Inc.	New York
WSB Funding Corp.	Delaware
Provident Risk Management, Inc.	Vermont
HudSave Development, Inc.	New York
AllSave Development, LLC	New York
ProSave Development, Inc.	New York
Godfrey Road, LLC	New York

EX-23

EXHIBIT 23

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in Registration Statement Nos. 333-183663, 333-123089, 333-123079, 333-112171, 333-153276, and 333-49344 of Provident New York Bancorp, on Form S-8; Registration Statement No. 333-125855 of Provident New York Bancorp, on Form S-3D; and Registration Statement No. 333-179575 of Provident New York Bancorp, on Form S-3 of our reports dated December 14, 2012, with respect to the consolidated financial statements of Provident New York Bancorp, and the effectiveness of internal control over financial reporting, which reports appear in this Annual Report on Form 10-K of Provident New York Bancorp for the year ended September 30, 2012.

Crowe Horwath LLP

New York, New York

December 14, 2012

EX-31.1

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 Annual Report on Form 10-K 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;

4. 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:

a) 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;

b) 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;

c) 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

d) 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):

a) 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

b) 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:	December 14, 2012	By:	/s/ Jack Kopnisky
			Jack Kopnisky
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

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

I, Stephen Masterson, certify that:

1. I have reviewed this Annual Report on Form 10-K 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;

4. 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:

a) 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;

b) 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;

c) 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

d) 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):

a) 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

b) 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:	December 14, 2012	By:	/s/ Stephen Masterson
			Stephen Masterson
			Executive Vice President
			Chief Financial Officer
			Principal Accounting Officer
			(Principal Financial Officer)

EX-32

Exhibit 32

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 Stephen Masterson, 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 Annual report on Form 10-K for the year ended September 30, 2012 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:	December 14, 2012	By:	/s/ Jack Kopnisky
			Jack Kopnisky
			President, Chief Executive Officer and Director
			(Principal Executive Officer)

Date:	December 14, 2012	By:	/s/ Stephen Masterson
			Stephen Masterson
			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.

XML

FHLB and Other Borrowings (Tables)

12 Months Ended

Sep. 30, 2012

Debt Instruments [Abstract]

Schedule of debt

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

	September 30,
	2012				2011
	Amount		Rate		Amount		Rate
By type of borrowing:
Advances	$	106,904	3.89	%	$	111,828	3.83	%
Repurchase agreements	238,272		3.49	%	211,694		3.61	%
Senior unsecured debt (FDIC insured)	—		—	%	51,499		2.75	%
Total borrowings	$	345,176	3.61	%	$	375,021	3.56	%
By remaining period to maturity:
Less than one year	$	10,136	1.88	%	$	61,500	2.96	%
One to two years	56,819		2.44	%	5,066		4.04	%
Two to three years	52,693		2.89	%	35,795		2.37	%
Three to four years	201		5.32	%	49,312		2.28	%
Four to five years	202,386		4.21	%	211		5.32	%
Greater than five years	22,941		3.74	%	223,137		4.18	%
Total borrowings	$	345,176	3.61	%	$	375,021	3.56	%

XML

Off-Balance-Sheet Financial Instruments (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Loan origination commitments [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Lending-related instruments	$ 125,729	$ 127,307
Unused lines of credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Lending-related instruments	265,940	239,387
Letters of credit [Member]
Fair Value, Off-balance Sheet Risks, Disclosure Information [Line Items]
Lending-related instruments	$ 26,441	$ 16,972

XML

Basis of Presentation - Other Intangible Assets (Details)	12 Months Ended
	Sep. 30, 2012
Core Deposits [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Acquired intangible assets, weighted average useful life	8 years
Naming Rights [Member]
Acquired Finite-Lived Intangible Assets [Line Items]
Finite-lived intangible assets, useful life	10 years

XML

Fair Values Of Financial Instruments (Tables)

12 Months Ended

Sep. 30, 2012

Sep. 30, 2011

Fair value measurements [Abstract]

Fair Value, by Balance Sheet Grouping

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) as of September 30, 2012:

	September 30, 2012
	Carrying amount			Quoted Prices in Active  Markets for Identical Assets Level 1			Significant Other Observable Inputs Level 2			Significant Unobservable Inputs Level 3
Financial assets:
Cash and due from banks	$	437,982		$	437,982		$	—		$	—
Securities available for sale	1,010,872			—			1,006,242			4,630
Securities held to maturity	142,376			—			146,324			—
Loans	2,091,190			—			—			2,157,133
Loans held for sale	7,505			—			7,505			—
Accrued interest receivable on securities	4,011			—			4,011			—
Accrued interest receivable on loans	6,502			—			—			6,502
FHLB of New York stock	19,249			—			19,249			—
Financial liabilities:
Non-maturity deposits	(2,723,669		)	(2,723,669		)	—			—
Certificates of Deposit	(387,482		)	—			(389,031		)	—
FHLB and other borrowings	(345,176		)	—			(377,906		)	—
Mortgage escrow funds	(11,919		)	—			(11,917		)	—
Accrued interest payable on deposits including escrow	(500		)	—			(500		)	—
Accrued interest payable on borrowings	(1,442		)				(1,442		)

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) as of September 30, 2011:

	September 30, 2011
	Carrying amount			Quoted Prices in Active  Markets for Identical Assets Level 1			Significant Other Observable Inputs Level 2			Significant Unobservable Inputs Level 3
Financial assets:
Cash and due from banks	$	281,512		$	281,512		$	—		$	—
Securities available for sale	739,844			—			734,993			4,851
Securities held to maturity	110,040			—			111,272			—
Loans	1,675,882			—			—			1,718,372
Loans held for sale	4,176			—			4,176			—
Accrued interest receivable securities	4,446			—			4,446			—
Accrued interest receivable loans	5,458									5,458
FHLB of New York stock	17,584			—			17,584			—
Financial liabilities:
Non-maturity deposits	(1,993,036		)	(1,993,036		)	—			—
Certificates of Deposit	(303,659		)	—			(305,940		)	—
FHLB and other borrowings	(375,021		)	—			(417,879		)	—
Mortgage escrow funds	(9,701		)	—			(9,701		)	—
Accrued interest payable deposits	(425		)	—			(425		)	—
Accrued interest payable borrowings	(1,391		)				(1,391		)	—

XML

Fair Value Measurements (Details Textual 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended																0 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Fair Value, Measurements, Recurring [Member]	Sep. 30, 2011 Fair Value, Measurements, Recurring [Member]	Sep. 30, 2011 Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2011 Fair Value, Measurements, Nonrecurring [Member] Real estate-residential mortgage [Member]	Sep. 30, 2011 Fair Value, Measurements, Nonrecurring [Member] Real estate-commercial mortgage [Member]	Sep. 30, 2012 Significant Unobservable Inputs Level 3 [Member]	Sep. 30, 2011 Significant Unobservable Inputs Level 3 [Member]	Sep. 30, 2012 Significant Unobservable Inputs Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2011 Significant Unobservable Inputs Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2012 Significant Unobservable Inputs Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member] Real estate-residential mortgage [Member]	Sep. 30, 2011 Significant Unobservable Inputs Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member] Real estate-residential mortgage [Member]	Sep. 30, 2012 Significant Unobservable Inputs Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member] Real estate-commercial mortgage [Member]	Sep. 30, 2011 Significant Unobservable Inputs Level 3 [Member] Fair Value, Measurements, Nonrecurring [Member] Real estate-commercial mortgage [Member]	Sep. 30, 2012 Acquisition Development & Construction [Member] Significant Unobservable Inputs Level 3 [Member] Market Approach Valuation Technique [Member] Impaired [Member] Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2012 Acquisition Development & Construction [Member] Maximum [Member] Significant Unobservable Inputs Level 3 [Member] Market Approach Valuation Technique [Member] Impaired [Member] Fair Value, Measurements, Nonrecurring [Member]	Sep. 30, 2012 Acquisition Development & Construction [Member] Minimum [Member] Significant Unobservable Inputs Level 3 [Member] Market Approach Valuation Technique [Member] Impaired [Member] Fair Value, Measurements, Nonrecurring [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Loans			$ 50,078	$ 51,155	$ 15,024	$ 6,469	$ 3,741	$ 2,157,133	$ 1,718,372	$ 24,707	$ 15,024	$ 8,628	$ 6,469	$ 6,537	$ 3,741	$ 8,232
Changes in fair value recognized on provisions on loans held by the Company	$ 5,088	$ 9,492
Comparability adjustments																	32.00%	22.00%

XML

Loans (Details 1) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Summary of activity in allowance for loan losses and recorded investments in loans by portfolio segment based on impairment method
Beginning Allowance for loan losses	$ 27,917	$ 30,843	$ 30,050
Charge-offs	(12,809)	(20,270)	(10,330)
Recoveries	2,562	760	1,123
Net Charge-offs	(10,247)	(19,510)	(9,207)
Provision for losses	10,612	16,584	10,000
Ending Allowance for Loan Losses	28,282	27,917	30,843
Net charge-offs to average gross loans outstanding annualized	0.56%	1.17%	0.56%
Real estate - residential mortgage [Member]
Summary of activity in allowance for loan losses and recorded investments in loans by portfolio segment based on impairment method
Beginning Allowance for loan losses	3,498	2,641	3,106
Charge-offs	(2,551)	(2,140)	(749)
Recoveries	356	15	3
Net Charge-offs	(2,195)	(2,125)	(746)
Provision for losses	3,056	2,982	281
Ending Allowance for Loan Losses	4,359	3,498	2,641
Real estate - commercial mortgage [Member]
Summary of activity in allowance for loan losses and recorded investments in loans by portfolio segment based on impairment method
Beginning Allowance for loan losses	5,568	5,915	7,695
Charge-offs	(2,707)	(1,802)	(987)
Recoveries	528	2	23
Net Charge-offs	(2,179)	(1,800)	(964)
Provision for losses	3,841	1,453	(816)
Ending Allowance for Loan Losses	7,230	5,568	5,915
Commercial business loans [Member]
Summary of activity in allowance for loan losses and recorded investments in loans by portfolio segment based on impairment method
Beginning Allowance for loan losses	5,945	8,970	8,928
Charge-offs	(1,526)	(5,400)	(6,578)
Recoveries	1,116	605	670
Net Charge-offs	(410)	(4,795)	(5,908)
Provision for losses	(932)	1,770	5,950
Ending Allowance for Loan Losses	4,603	5,945	8,970
Acquisition, development & construction [Member]
Summary of activity in allowance for loan losses and recorded investments in loans by portfolio segment based on impairment method
Beginning Allowance for loan losses	9,895	9,752	7,680
Charge-offs	(4,124)	(8,939)	(848)
Recoveries	299	10	261
Net Charge-offs	(3,825)	(8,929)	(587)
Provision for losses	2,456	9,072	2,659
Ending Allowance for Loan Losses	8,526	9,895	9,752
Consumer loans, including home equity [Member]
Summary of activity in allowance for loan losses and recorded investments in loans by portfolio segment based on impairment method
Beginning Allowance for loan losses	3,011	3,565	2,641
Charge-offs	(1,901)	(1,989)	(1,168)
Recoveries	263	128	166
Net Charge-offs	(1,638)	(1,861)	(1,002)
Provision for losses	2,191	1,307	1,926
Ending Allowance for Loan Losses	$ 3,564	$ 3,011	$ 3,565

XML

Condensed Parent Company Financial Statements - Statements of Financial Condition (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2009
Condensed Financial Statements, Captions [Line Items]
Cash	$ 437,982	$ 281,512	$ 90,872	$ 160,408
Available-for-sale Securities	1,010,872	739,844
Other assets	24,431	29,726
Total assets	4,022,982	3,137,402
Liabilities	3,531,860	2,706,268
Stockholders' equity	491,122	431,134	430,955	427,456
Total liabilities and stockholders’ equity	4,022,982	3,137,402
Provident Bancorp [Member]
Condensed Financial Statements, Captions [Line Items]
Cash	6,716	6,692	10,020	2,466
Loan receivable from ESOP	6,896	7,338
Available-for-sale Securities	809	837
Other assets	5,371	1,680
Total assets	492,569	432,467
Liabilities	1,447	1,333
Stockholders' equity	491,122	431,134
Total liabilities and stockholders’ equity	492,569	432,467
Provident Bank [Member] | Provident Bancorp [Member]
Condensed Financial Statements, Captions [Line Items]
Investment in subsidiaries	467,295	406,838
Non-bank Subsidiaries[Member] | Provident Bancorp [Member]
Condensed Financial Statements, Captions [Line Items]
Investment in subsidiaries	$ 5,482	$ 9,082

XML

Basis of Presentation - Stock Based Compensation (Details) (USD $) In Thousands, except Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Grants in period, options, (in shares)	515,000	120,000	321,976
Stock option compensation expense	$ 521	$ 558	$ 247
Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for awards	3 years
Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for awards	4 years
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option compensation expense	521	558	247
Unearned compensation cost	1,177
Number of shares subject to accelerated vesting	23,000
Shares associated with accelerated vesting expense	0	0	27,000
Restricted Stock [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Stock option compensation expense	276	168	883
Unearned compensation cost	$ 665
Grants in period, other than options (in shares)	58,000	64,000	0
Number of shares subject to accelerated vesting	5,000
Shares associated with accelerated vesting expense	0	0	0
Restricted Stock [Member] | Minimum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for awards	2 years
Restricted Stock [Member] | Maximum [Member]
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]
Vesting period for awards	4 years

XML

Loans (Details 9) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Special Mention [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	$ 42,422	$ 23,026
Substandard [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	88,336	93,989
Doubtful [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	338	0
Real estate - residential mortgage [Member] | Special Mention [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	830	3,701
Real estate - residential mortgage [Member] | Substandard [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	11,314	8,525
Real estate - residential mortgage [Member] | Doubtful [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	0	0
Real estate - commercial mortgage [Member] | Special Mention [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	20,729	11,072
Real estate - commercial mortgage [Member] | Substandard [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	27,674	29,996
Real estate - commercial mortgage [Member] | Doubtful [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	0	0
Acquisition, development & construction [Member] | Special Mention [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	5,669	5,170
Acquisition, development & construction [Member] | Substandard [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	42,871	49,294
Acquisition, development & construction [Member] | Doubtful [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	0	0
Commercial business loans [Member] | Special Mention [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	14,920	2,472
Commercial business loans [Member] | Substandard [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	3,995	3,651
Commercial business loans [Member] | Doubtful [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	338	0
Consumer loans, including home equity [Member] | Special Mention [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	274	611
Consumer loans, including home equity [Member] | Substandard [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	2,482	2,523
Consumer loans, including home equity [Member] | Doubtful [Member]
Risk category of loans by segment of gross loans
Risk Category of loans by Segment of loans	$ 0	$ 0

XML

Employee Benefit Plans And Stock-Based Compensation Plans (Details 13) (USD $)			12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012 Stock Option Plan [Member]	Sep. 30, 2012 $6.71 to $10.03 [Member] Stock Option Plan [Member]	Sep. 30, 2012 $10.85 to $12.64 [Member] Stock Option Plan [Member]	Sep. 30, 2012 $12.84 to $15.66 [Member] Stock Option Plan [Member]
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range [Line Items]
Range of Exercise Price, lower range limit				$ 6.71	$ 10.85	$ 12.84
Range of Exercise Price, upper range limit				$ 10.03	$ 12.64	$ 15.66
Share-based Compensation, Shares Authorized under Stock Option Plans, Exercise Price Range, End of Period [Abstract]
Outstanding, Number of Stock Options	563,826	611,677	1,972,480	796,526	72,124	1,103,830
Outstanding, Weighted-Average Exercise Price			$ 10	$ 8.35	$ 11.87	$ 12.92
Outstanding, Weighted-Average Life (in Years)			5 years 2 months 12 days	8 years 10 months 24 days	2 years 3 months 18 days	2 years 8 months 12 days
Exercisable, Number of Stock Options			1,350,035	196,881	70,124	1,083,030
Exercisable, Weighted-Average Exercise Price			$ 12.40	$ 9.77	$ 11.85	$ 12.91
Exercisable, Weighted-Average Life (in Years)			5 years 2 months 12 days	8 years 10 months 24 days	2 years 3 months 18 days	2 years 8 months 12 days

XML

Commitment and Contingencies (Tables)

12 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Schedule of Future Minimum Rental Payments for Operating Leases

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. Future minimum rental payments due under non-cancelable operating leases with initial or remaining terms of more than one year at September 30, 2012 were as follows (for fiscal years ending September 30^th):

2013	$	2,782
2014	2,554
2015	2,475
2016	2,445
2017	2,454
2018 and thereafter	13,024
	$	25,734

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Securities Available for Sale (Tables)

12 Months Ended

Sep. 30, 2012

Available-for-sale Securities [Abstract]

Summary of securities available for sale

The following is a summary of securities available for sale:

	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
September 30, 2012
Mortgage-backed securities-residential
Fannie Mae	$	155,601	$	5,806	$	—		$	161,407
Freddie Mac	81,509		3,751		—			85,260
Ginnie Mae	4,488		290		—			4,778
CMO/Other MBS	191,867		1,787		(590		)	193,064
	433,465		11,634		(590		)	444,509
Investment securities
Federal agencies	404,820		4,013		(10		)	408,823
State and municipal securities	146,136		10,349		(4		)	156,481
Equities	1,087		—		(28		)	1,059
	552,043		14,362		(42		)	566,363
Total available for sale	$	985,508	$	25,996	$	(632	)	$	1,010,872
September 30, 2011
Mortgage-backed securities-residential
Fannie Mae	$	136,699	$	3,292	$	—		$	139,991
Freddie Mac	98,511		2,205		(41		)	100,675
Ginnie Mae	4,973		207		—			5,180
CMO/Other MBS	81,170		1,764		(522		)	82,412
	321,353		7,468		(563		)	328,258
Investment securities
Federal agencies	199,741		4,986		(79		)	204,648
Corporate bonds	16,984		257		(179		)	17,062
State and municipal securities	177,666		11,018		—			188,684
Equities	1,192		—		—			1,192
	395,583		16,261		(258		)	411,586
Total available for sale	$	716,936	$	23,729	$	(821	)	$	739,844

Gain (Loss) on Investments [Line Items]

Securities available for sale with unrealized losses, by length of time in continuous unrealized loss position

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 September 30, 2012	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
CMO/Other MBS	64,065		(590		)	—		—			64,065		(590		)
Total mortgage-backed securities — residential	64,065		(590		)	—		—			64,065		(590		)
U.S. Government and agency securities	4,993		(10		)	—		—			4,993		(10		)
State and municipal securities	716		(4		)	—		$	—		716		(4		)
Equities	—		—			809		$	(28	)	809		(28		)
Total	$	69,774	$	(604	)	$	809	$	(28	)	$	70,583	$	(632	)

	Continuous Unrealized Loss Position
	Less Than 12 Months					12 Months or Longer					Total
As of September 30, 2011	Fair Value		Unrealized Losses			Fair Value		Unrealized Losses			Fair Value		Unrealized Losses
Freddie Mac	$	10,262	$	(41	)	$	—	$	—		$	10,262	$	(41	)
CMO/Other MBS	3,037		(257		)	1,813		(265		)	4,850		(522		)
Total mortgage-backed securities — residential	13,299		(298		)	1,813		(265		)	15,112		(563		)
U.S. Government and agency securities	9,914		(79		)	—		—			9,914		(79		)
Corporate bonds	1,886		(179		)	—		—			1,886		(179		)
Total	$	25,099	$	(556	)	$	1,813	$	(265	)	$	26,912	$	(821	)

Categories of Investments, Marketable Securities, Available-for-sale Securities [Member]

Gain (Loss) on Investments [Line Items]

Summary of amortized cost and fair value of investment securities available for sale by remaining period to contractual maturity

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.

	September 30, 2012
	Amortized Cost		Fair Value
Remaining period to contractual maturity
Less than one year	$	2,367	$	2,389
One to five years	127,240		130,510
Five to ten years	383,867		392,094
Greater than ten years	37,482		40,311
Total investment securities	550,956		565,304
Mortgage-backed securities-residential	433,465		444,509
Equity securities	1,087		1,059
Total available for sale securities	$	985,508	$	1,010,872

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Loans (Details Textual) (USD $) In Thousands, unless otherwise specified	3 Months Ended	12 Months Ended
	Jun. 30, 2012	Sep. 30, 2012	Sep. 30, 2011
Loans (Textual) [Abstract]
Net deferred loan origination Fees and Costs		$ 310	$ (308)
Minimum duration of performance required by loan resturctures	6 months
Increased allowance for loan losses		134
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan and Lease losses period		90 days
Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan and Lease losses delinquency period		90 days
Loans assessedfor full or partial charge-off period		90 days
TDR interest rate modifications period		3 months
TDR maturity date modifications period		3 months
Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Allowance for Loan and Lease losses delinquency period		120 days
Loans assessedfor full or partial charge-off period		120 days
TDR interest rate modifications period		30 years
TDR maturity date modifications period		30 years
Additional restricted loan [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Additional restricted loan		$ 4,225	$ 4,225

XML

Fair Value Measurements (Details 3) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	$ 0	$ 0
Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	2,157,133	1,718,372
Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		15,024
Fair Value, Measurements, Nonrecurring [Member] | Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	24,707
Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	24,707	15,024
Real estate-residential mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		6,469
Real estate-residential mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	8,628
Real estate-residential mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Real estate-residential mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Real estate-residential mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	8,628	6,469
Real estate-commercial mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		3,741
Real estate-commercial mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	6,537
Real estate-commercial mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Real estate-commercial mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Real estate-commercial mortgage [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	6,537	3,741
Commercial business loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	95
Commercial business loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0
Commercial business loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0
Commercial business loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	95
Commercial business loans (CBL) [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		2,119
Commercial business loans (CBL) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		0
Commercial business loans (CBL) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		0
Commercial business loans (CBL) [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		2,119
Acquisition Development & Construction [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		2,126
Acquisition Development & Construction [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	8,232
Acquisition Development & Construction [Member] | Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Acquisition Development & Construction [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Acquisition Development & Construction [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	8,232	2,126
Consumer loans [Member] | Fair Value, Measurements, Nonrecurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans		569
Consumer loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Fair Value Measurements [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	1,215
Consumer loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Consumer loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Other Observable Inputs Level 2 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	0	0
Consumer loans [Member] | Fair Value, Measurements, Nonrecurring [Member] | Significant Unobservable Inputs Level 3 [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Loans	$ 1,215	$ 569

XML

Quarterly Results Of Operations (Unaudited) (Details) (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended								12 Months Ended
	Sep. 30, 2012	Jun. 30, 2012	Mar. 31, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Mar. 31, 2011	Dec. 31, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Quarterly Financial Information Disclosure [Abstract]
Interest and dividend income	$ 30,113	$ 28,345	$ 28,411	$ 28,168	$ 27,817	$ 27,934	$ 27,803	$ 29,060	$ 115,037	$ 112,614	$ 119,774
Interest expense	4,874	4,263	4,506	4,930	5,026	5,130	5,292	5,876	18,573	21,324	26,440
Net interest income	25,239	24,082	23,905	23,238	22,791	22,804	22,511	23,184	96,464	91,290	93,334
Provision for loan losses	3,500	2,312	2,850	1,950	8,784	3,600	2,100	2,100	10,612	16,584	10,000
Non-interest income	9,026	7,979	7,971	7,176	9,056	5,217	5,795	9,883	32,152	29,951	27,201
Non-interest expense	28,784	21,162	21,290	20,721	24,382	22,669	21,791	21,269	91,957	90,111	83,170
Income before income tax expense	1,981	8,587	7,736	7,743	(1,319)	1,752	4,415	9,698	26,047	14,546	27,365
Income tax expense	(280)	2,378	2,035	2,026	(826)	(187)	842	2,978	6,159	2,807	6,873
Net income	$ 2,261	$ 6,209	$ 5,701	$ 5,717	$ (493)	$ 1,939	$ 3,573	$ 6,720	$ 19,888	$ 11,739	$ 20,492
Basic (USD per share)	$ 0.06	$ 0.17	$ 0.15	$ 0.15	$ (0.01)	$ 0.05	$ 0.10	$ 0.18	$ 0.52	$ 0.31	$ 0.54
Diluted (USD per share)	$ 0.06	$ 0.17	$ 0.15	$ 0.15	$ (0.01)	$ 0.05	$ 0.10	$ 0.18	$ 0.52	$ 0.31	$ 0.54

XML

Loans (Details 4) (USD $) In Thousands, unless otherwise specified	0 Months Ended	12 Months Ended
	Sep. 30, 2010	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2009
Financing Receivable, Impaired [Line Items]
Allowance for loan losses	$ 30,843	$ 28,282	$ 27,917	$ 30,050
With no related allowance recorded:
Unpaid Principal Balance with no related allowance recorded		41,041	34,526
Recorded Investment with no related allowance recorded		35,231	35,182
YTD Average Impaired Loans with no allowance recorded		36,985	40,452
Interest Income Recognized with no allowance recorded		1,520	2,584
Cash-basis Interest Income Recognized with no allowance recorded		829	1,808
With an allowance recorded:
Unpaid Principal Balance with an allowance recorded		23,081	19,379
Recorded Investment with an allowance recorded		18,061	19,779
Allowance for Loan Losses Allocated with an allowance recorded		3,214	3,806
YTD Average Impaired Loans with an allowance recorded		21,210	20,429
Interest Income Recognized with an allowance recorded		358	505
Cash-basis Interest Income Recognized with an allowance recorded		307	421
Unpaid Principal Balance Total		64,122	53,905
Recorded Investment Total		53,292	54,961
Allowance for Loan Losses Allocated Total		3,214	3,806
YTD Average Impaired Loans Total	27,032	58,195	60,881
Interest Income Recognized Total	1,975	1,878	3,089
Cash-basis Interest Income Recognized Total	1,157	1,136	2,229
Real estate - residential mortgage [Member]
Financing Receivable, Impaired [Line Items]
Allowance for loan losses	2,641	4,359	3,498	3,106
With no related allowance recorded:
Unpaid Principal Balance with no related allowance recorded		6,193	2,437
Recorded Investment with no related allowance recorded		5,413	2,577
YTD Average Impaired Loans with no allowance recorded		5,493	2,702
Interest Income Recognized with no allowance recorded		310	92
Cash-basis Interest Income Recognized with no allowance recorded		137	51
With an allowance recorded:
Unpaid Principal Balance with an allowance recorded		8,485	5,836
Recorded Investment with an allowance recorded		7,326	5,996
Allowance for Loan Losses Allocated with an allowance recorded		871	1,069
YTD Average Impaired Loans with an allowance recorded		7,770	6,319
Interest Income Recognized with an allowance recorded		180	159
Cash-basis Interest Income Recognized with an allowance recorded		141	159
Real estate - commercial mortgage [Member]
Financing Receivable, Impaired [Line Items]
Allowance for loan losses	5,915	7,230	5,568	7,695
With no related allowance recorded:
Unpaid Principal Balance with no related allowance recorded		9,296	8,765
Recorded Investment with no related allowance recorded		7,837	8,873
YTD Average Impaired Loans with no allowance recorded		7,869	8,917
Interest Income Recognized with no allowance recorded		520	497
Cash-basis Interest Income Recognized with no allowance recorded		291	248
With an allowance recorded:
Unpaid Principal Balance with an allowance recorded		5,942	6,024
Recorded Investment with an allowance recorded		5,180	6,257
Allowance for Loan Losses Allocated with an allowance recorded		1,036	1,068
YTD Average Impaired Loans with an allowance recorded		5,970	6,505
Interest Income Recognized with an allowance recorded		84	199
Cash-basis Interest Income Recognized with an allowance recorded		84	144
Acquisition, development & construction [Member]
Financing Receivable, Impaired [Line Items]
Allowance for loan losses	9,752	8,526	9,895	7,680
With no related allowance recorded:
Unpaid Principal Balance with no related allowance recorded		24,144	20,914
Recorded Investment with no related allowance recorded		20,597	21,316
YTD Average Impaired Loans with no allowance recorded		22,043	26,111
Interest Income Recognized with no allowance recorded		636	1,892
Cash-basis Interest Income Recognized with no allowance recorded		367	1,454
With an allowance recorded:
Unpaid Principal Balance with an allowance recorded		7,159	6,900
Recorded Investment with an allowance recorded		4,283	6,907
Allowance for Loan Losses Allocated with an allowance recorded		996	1,409
YTD Average Impaired Loans with an allowance recorded		5,868	6,963
Interest Income Recognized with an allowance recorded		76	114
Cash-basis Interest Income Recognized with an allowance recorded		76	96
Commercial business loans [Member]
Financing Receivable, Impaired [Line Items]
Allowance for loan losses	8,970	4,603	5,945	8,928
With no related allowance recorded:
Unpaid Principal Balance with no related allowance recorded		262	531
Recorded Investment with no related allowance recorded		262	531
YTD Average Impaired Loans with no allowance recorded		467	862
Interest Income Recognized with no allowance recorded		26	42
Cash-basis Interest Income Recognized with no allowance recorded		26	42
With an allowance recorded:
Unpaid Principal Balance with an allowance recorded		95
Recorded Investment with an allowance recorded		95
Allowance for Loan Losses Allocated with an allowance recorded		48
YTD Average Impaired Loans with an allowance recorded		99
Interest Income Recognized with an allowance recorded		18
Cash-basis Interest Income Recognized with an allowance recorded		6
Consumer loans, including home equity [Member]
Financing Receivable, Impaired [Line Items]
Allowance for loan losses	3,565	3,564	3,011	2,641
With no related allowance recorded:
Unpaid Principal Balance with no related allowance recorded		1,146	1,879
Recorded Investment with no related allowance recorded		1,122	1,885
YTD Average Impaired Loans with no allowance recorded		1,113	1,860
Interest Income Recognized with no allowance recorded		28	61
Cash-basis Interest Income Recognized with no allowance recorded		8	13
With an allowance recorded:
Unpaid Principal Balance with an allowance recorded		1,400	619
Recorded Investment with an allowance recorded		1,177	619
Allowance for Loan Losses Allocated with an allowance recorded		263	260
YTD Average Impaired Loans with an allowance recorded		1,503	642
Interest Income Recognized with an allowance recorded		0	33
Cash-basis Interest Income Recognized with an allowance recorded		$ 0	$ 22

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Derivatives (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Dec. 31, 2010 Derivatives
Interest Rate Caps [Member]
Credit Derivatives [Line Items]
Number of interest rate derivatives held			2
Changes in fair value: loss	$ 63	$ 197
Interest Rate Cap 1 [Member]
Credit Derivatives [Line Items]
Strike price	3.50%
Interest Rate Cap 2 [Member]
Credit Derivatives [Line Items]
Strike price	4.00%

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Acquisitions (Details 1) (Gotham Bank of New York [Member], USD $) In Thousands, except Per Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Gotham Bank of New York [Member]
Business Acquisition, Pro Forma Information, Nonrecurring Adjustment [Line Items]
Net interest income	$ 103,999	$ 102,447
Net income	$ 22,914	$ 16,068
Basic earnings per share (in dollars per share)	$ 0.60	$ 0.37
Diluted earnings per share (in dollars per share)	$ 0.60	$ 0.37

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Stockholders' Equity - Equity Transactions (Narrative) (Details) (USD $) In Millions, except Share data, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	Dec. 17, 2009
Payments of Dividends [Abstract]
Minimum notice required by the Federal Reserve before any dividend to parent company is declared	30 days
Provident Bancorp [Member]
Disclosure of Stock Repurchase Programs [Abstract]
Number of shares authorized to be repurchased under the repurchase program				2,000,000
Remaining number of shares authorized to be repurchased under the repurchase program	776,713
Stock repurchased during period, shares	0	457,454	1,515,923
Stock repurchased during period, value		$ 3.8	$ 12.9
Provident Bank [Member]
Payments of Dividends [Abstract]
Maximum dividend (excluding earnings for the remainder of calendar year 2012) allowed to be paid to parent company without pproval, under OCC regulations	10.0
Dividends to parent company	6.0	10.0	29.4
Liquidation account balance	15.0

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Loans (Details 7) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Troubled debt restructurings
Current Loans	$ 13,543	$ 9,060
30-59 days past due	270	266
60-89 days past due	264	0
90+ days past due	0	446
Non-Accrual	10,870	7,792
Total TDR's	24,947	17,564
Allowance, Current Loans	0	(7)
Allowance, 30-59 days past due	0	56
Allowance, 60-89 days past due	41	0
Allowance, 90+ days past due	0	0
Allowance, Non-Accrual	955	346
Allowance, Total TDR's	996	409
Real estate - residential mortgage [Member]
Troubled debt restructurings
Current Loans	1,226	485
30-59 days past due	0	0
60-89 days past due	264	0
90+ days past due	0	0
Non-Accrual	2,178	1,226
Total TDR's	3,668	1,711
Real estate - commercial mortgage [Member]
Troubled debt restructurings
Current Loans	2,640	1,439
30-59 days past due	270	0
60-89 days past due	0	0
90+ days past due	0	0
Non-Accrual	0	0
Total TDR's	2,910	1,439
Acquisition, development & construction [Member]
Troubled debt restructurings
Current Loans	9,677	6,975
30-59 days past due	0	266
60-89 days past due	0	0
90+ days past due	0	446
Non-Accrual	8,692	6,566
Total TDR's	18,369	14,253
Consumer Other Financing Receivable [Member]
Troubled debt restructurings
Current Loans		161
30-59 days past due		0
60-89 days past due		0
90+ days past due		0
Non-Accrual		0
Total TDR's		$ 161

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FHLB and Other Borrowings (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
By period to maturity:
Less than one year, Amount	$ 10,136	$ 61,500
Less than one year, Rate	1.88%	2.96%
One to two years, Amount	56,819	5,066
One to two years, Rate	2.44%	4.04%
Two to three years, Amount	52,693	35,795
Two to three years, Rate	2.89%	2.37%
Three to four years, Amount	201	49,312
Three to four years, Rate	5.32%	2.28%
Four to five years, Amount	202,386	211
Four to five years, Rate	4.21%	5.32%
Greater than five years, Amount	22,941	223,137
Greater than five years, Rate	3.74%	4.18%
Total borrowings, Amount	345,176	375,021
Total borrowings, Rate	3.61%	3.56%
FHLB Advances [Member]
By period to maturity:
Total borrowings, Amount	106,904	111,828
Total borrowings, Rate	3.89%	3.83%
FHLB Repurchase Agreements [Member]
By period to maturity:
Total borrowings, Amount	238,272	211,694
Total borrowings, Rate	3.49%	3.61%
Senior Debt (FDIC Insured) [Member]
By period to maturity:
Total borrowings, Amount	$ 0	$ 51,499
Total borrowings, Rate	0.00%	2.75%

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Goodwill and Intangible Assets (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	Aug. 10, 2012
Goodwill [Roll Forward]
Beginning of year	$ 160,861	$ 160,861	$ 160,861	$ 164,629
Acquired goodwill	5,665	0	0
Goodwill disposed	(3,279)	0	0
Impairment	0	0	0
End of year	$ 163,247	$ 160,861	$ 160,861	$ 164,629

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FHLB and Other Borrowings (Details Textual) (USD $) In Thousands, unless otherwise specified	1 Months Ended	12 Months Ended
	Nov. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Restructuring Cost and Reserve [Line Items]
Bank pledged mortgages		$ 613,554	$ 464,900
Pledged securities with carrying amounts		245,989	206,829
Increased borrowing capacity by pledging securities		488,534
Long term debt weighted average remaining term		4 years 6 months 22 days	5 years 6 months 22 days
Federal home loan bank borrowings		200,000	200,000
Weighted average interest rates		4.23%	4.23%
Federal home loan bank additional borrowings		20,000
Effective Percentage		3.57%
Restructured FHLBNY advances	5,000		89,135
Prepayment penalties	278		5,151
Annualized interest expense savings net of prepayment fees			945
Before Restructuring [Member]
Restructuring Cost and Reserve [Line Items]
FHLB advances weighted average interest rate	4.04%		3.69%
FHLB advances duration after restructuring	1 year 6 months		2 years 2 months 12 days
After Restructuring [Member]
Restructuring Cost and Reserve [Line Items]
FHLB advances weighted average interest rate	2.37%		2.63%
FHLB advances duration after restructuring	1 year 7 months 6 days		1 year 5 months 5 days
Federal Home Loan Bank Advances and Securities Sold under Agreements to Repurchase [Member]
Restructuring Cost and Reserve [Line Items]
Long term debt weighted average remaining term		5 years 5 months 1 day
FHLB Repurchase Agreements [Member]
Restructuring Cost and Reserve [Line Items]
Long term debt weighted average remaining term		3 years 7 months 24 days	4 years 9 months 7 days
Average outstanding amount		215,352	216,875
Maximum month-end outstanding amount		$ 238,272	$ 222,500

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Loans (Details 8) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012 loans	Sep. 30, 2011 loans	Sep. 30, 2012
Restructured Loans:
Number	12
Pre-Modification			$ 9,160
Post-Modification	8,945
Number of loans	0	0
Recorded Investment	2,050	0
Real estate - residential mortgage [Member]
Restructured Loans:
Number	5		5
Pre-Modification			1,525
Post-Modification	1,295		1,295
Real estate - commercial mortgage [Member]
Restructured Loans:
Number	3		3
Pre-Modification			2,336
Post-Modification	2,351		2,351
Acquisition, development & construction [Member]
Restructured Loans:
Number	4
Pre-Modification			5,299
Post-Modification	5,299
Number of loans	0	0
Recorded Investment	$ 2,050	$ 0

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Loans (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Loans evaluated for impairment by segment
Gotham acquired loans	$ 205,764
Individually evaluated for impairment	53,292	54,961
Collectively evaluated for impairment	1,860,416	1,648,838
Total loans	2,119,472	1,703,799
Real estate - residential mortgage [Member]
Loans evaluated for impairment by segment
Gotham acquired loans	640
Individually evaluated for impairment	12,739	8,573
Collectively evaluated for impairment	336,643	381,192
Total loans	350,022	389,765
Real estate - commercial mortgage [Member]
Loans evaluated for impairment by segment
Gotham acquired loans	103,801
Individually evaluated for impairment	13,017	15,130
Collectively evaluated for impairment	955,686	688,226
Total loans	1,072,504	703,356
Commercial business loans [Member]
Loans evaluated for impairment by segment
Gotham acquired loans	101,065
Individually evaluated for impairment	357	531
Collectively evaluated for impairment	241,885	209,392
Total loans	343,307	209,923
Acquisition, development & construction [Member]
Loans evaluated for impairment by segment
Gotham acquired loans	0
Individually evaluated for impairment	24,880	28,223
Collectively evaluated for impairment	119,181	147,708
Total loans	144,061	175,931
Consumer loans, including home equity [Member]
Loans evaluated for impairment by segment
Gotham acquired loans	258
Individually evaluated for impairment	2,299	2,504
Collectively evaluated for impairment	207,021	222,320
Total loans	$ 209,578	$ 224,824

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Commitment and Contingencies

12 Months Ended

Sep. 30, 2012

Commitments and Contingencies Disclosure [Abstract]

Commitments and Contingencies

Commitments and 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. Future minimum rental payments due under non-cancelable operating leases with initial or remaining terms of more than one year at September 30, 2012 were as follows (for fiscal years ending September 30^th):

2013	$	2,782
2014	2,554
2015	2,475
2016	2,445
2017	2,454
2018 and thereafter	13,024
	$	25,734

Occupancy and office operations expense include net rent expense of $2,952, $2,845 and $2,802 for the years ended September 30, 2012, 2011 and 2010, respectively. The consolidation of two leased branches resulted in a restructuring charge of $2.1 million at September 30, 2011.

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

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Quarterly Results Of Operations (Unaudited) (Tables)

12 Months Ended

Sep. 30, 2012

Quarterly Financial Information Disclosure [Abstract]

Schedule of Quarterly Financial Information

The following is a condensed summary of quarterly results of operations for the years ended 2012 and 2011:

	First quarter		Second quarter		Third quarter			Fourth quarter
Year Ended September 30, 2012
Interest and dividend income	$	28,168	$	28,411	$	28,345		$	30,113
Interest expense	4,930		4,506		4,263			4,874
Net interest income	23,238		23,905		24,082			25,239
Provision for loan losses	1,950		2,850		2,312			3,500
Non-interest income	7,176		7,971		7,979			9,026
Non-interest expense	20,721		21,290		21,162			28,784
Income before income tax expense	7,743		7,736		8,587			1,981
Income tax expense	2,026		2,035		2,378			(280		)
Net income	$	5,717	$	5,701	$	6,209		$	2,261
Earnings per common share:
Basic	$	0.15	$	0.15	$	0.17		$	0.06
Diluted	$	0.15	$	0.15	$	0.17		$	0.06
Year Ended September 30, 2011
Interest and dividend income	$	29,060	$	27,803	$	27,934		$	27,817
Interest expense	5,876		5,292		5,130			5,026
Net interest income	23,184		22,511		22,804			22,791
Provision for loan losses	2,100		2,100		3,600			8,784
Non-interest income	9,883		5,795		5,217			9,056
Non-interest expense	21,269		21,791		22,669			24,382
Income before income tax expense	9,698		4,415		1,752			(1,319		)
Income tax expense	2,978		842		(187		)	(826		)
Net income	$	6,720	$	3,573	$	1,939		$	(493	)
Earnings per common share:
Basic	$	0.18	$	0.10	$	0.05		$	(0.01	)
Diluted	$	0.18	$	0.10	$	0.05		$	(0.01	)

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Employee Benefit Plans And Stock-Based Compensation Plans (Tables)

12 Months Ended

Sep. 30, 2012

Schedule of Employee Benefit Plans And Stock-Based Compensation Plans [Line Items]

Schedule of fair value of plan assets and allocation

Weighted-average pension plan asset allocations based on the fair value of such assets at September 30, 2011, and September 30, 2010 and target allocations for 2012, by asset category, are as follows:

	September 30, 2011		September 30, 2012		Target Allocation Range 2012	Weighted Average Expected Rate of Return
Large U.S. equity securities	48	%	44	%		3.55	%
Small mid U.S. equity securities	11	%	11	%		1.04	%
International equity securities	9	%	10	%		1.39	%
Total equity securities	68	%	65	%	45% - 70%	2.78	%
Moderate allocation	—	%	5	%		0.35	%
Total balanced asset allocation	—	%	5	%		0.35	%
High yield bond	3	%	3	%		0.28	%
Intermediate term bond	23	%	27	%		1.85	%
Inflation protected bond	6	%	—	%		—	%
Total fixed income	32	%	30	%	20% - 40%	1.69	%
Cash	—	%	—	%	0% - 20%	—	%

The fair value of the plan assets consisting of various mutual funds and pooled investment funds at September 30, 2012, by asset category, is as follows:

	Fair Value Measurements at September 30, 2012		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Asset Category
Large U.S. equity	$	14,358	$	—	$	14,358	$	—
Small Mid U.S. equity	3,672		—		3,672		—
International Equity	3,284		—		3,284		—
Total Equity	21,314		—		21,314		—
Moderate Allocation	1,646		1,646		—		—
Total Balanced Asset Allocation	1,646		1,646		—		—
High yield bond	981		981		—		—
Intermediate term bond	8,716		—		8,716		—
Inflation protected bond	—		—		—		—
Total Fixed Income	9,697		981		8,716		—
Cash	—		—		—		—
Total Assets	$	32,657	$	2,627	$	30,030	$	—

The fair value of the plan assets consisting of various mutual funds and pooled investment funds at September 30, 2011, by asset category, is as follows:

	Fair Value Measurements at September 30, 2011		Quoted Prices in Active Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Asset Category
Large U.S. equity	$	13,549	$	—	$	13,549	$	—
Small Mid U.S. equity	3,238		—		3,238		—
International Equity	2,607		—		2,607		—
Total Equity	19,394		—		19,394		—
High yield bond	914		—		914		—
Intermediate term bond	6,447		—		6,447		—
Inflation protected bond	1,557		—		1,557		—
Total Fixed Income	8,918		—		8,918		—
Cash	—		—		—		—
Total Assets	$	28,312	$	—	$	28,312	$	—

Schedule of assumptions used for plan

Assumptions used for plan	2012		2011
Medical trend rate next year	4.5	%	4.5	%
Ultimate trend rate	4.5	%	4.5	%
Discount rate	4.1	%	4.3	%
Discount rate used to value periodic cost	4.3	%	4.5	%

Summary of restricted stock award activity

A summary of restricted stock award activity under the plan for the year ended September 30, 2012, is presented below:

	Number of Shares		Weighted Average Grant-Date Fair Value
Nonvested shares at September 30, 2011	57,520		$	8.77
Granted	58,000		7.91
Vested	(16,703	)	9.27
Forfeited	(1,000	)	9.85
Nonvested shares at September 30, 2012	97,817		$	8.31

Summary of Company's stock option activity

The following is a summary of activity in the Stock Option Plan:

	Shares subject to option		Weighted Average exercise price
Outstanding shares at September 30, 2011	1,906,020		$	12.20
Granted	515,000		7.82
Exercised	—		—
Forfeited	(448,540	)	12.29
Outstanding shares at September 30, 2012	1,972,480		$	11.04

Summary of stock options

The fair value of options granted was determined using the following weighted-average assumptions as of the grant date:

	2012		2011		2010
Risk-free interest rate (1)	1.42	%	2.2	%	2.2	%
Expected stock price volatility	40.0	%	34.5	%	33.2	%
Dividend yield (2)	3.03	%	2.8	%	1.9	%
Expected term in years	5.82		5.9		7.7

^{(1)  represents the yield on a risk free rate of return (either the US Treasury curve or the SWAP curve, in periods with high volatility in US Treasury securities) with a remaining term equal to the expected option term} 

^{(2)  represents the approximate annualized cash dividend rate paid with respect to a share of common stock at or near the grant date}

Schedule of weighted-average assumptions as of grant date for options

A summary of stock options at September 30, 2012 follows:

	Outstanding				Exercisable
		Weighted-Average				Weighted-Average
	Number of Stock Options	Exercise Price		Life (in Years)	Number of Stock Options	Exercise Price		Life (in Years)
Range of Exercise Price
$6.71 to $10.03	796,526	$	8.35	8.9	196,881	$	9.77	8.9
$10.85 to $12.64	72,124	11.87		2.3	70,124	11.85		2.3
$12.84 to $15.66	1,103,830	12.92		2.7	1,083,030	12.91		2.7
	1,972,480	$	11.04	5.2	1,350,035	$	12.40	5.2

Pension Plans [Member]

Schedule of Employee Benefit Plans And Stock-Based Compensation Plans [Line Items]

Summary of changes in the projected benefit obligation and fair value of plan assets

The following is a summary of changes in the projected benefit obligation and fair value of plan assets. The Company uses a September 30th measurement date for its pension plans.

	September 30,
	2012			2011
Changes in projected benefit obligation:
Beginning of year	$	30,612		$	31,109
Service cost	—			—
Interest cost	1,501			1,498
Actuarial loss	4,961			647
Benefits and distributions paid	(1,603		)	(2,642		)
End of year	35,471			30,612
Changes in fair value of plan assets:
Beginning of year	28,312			26,796
Actual gain (loss) on plan assets	5,948			(242		)
Employer contributions	—			4,400
Benefits and distributions paid	(1,603		)	(2,642		)
End of year	32,657			28,312
Funded status at end of year	$	(2,814	)	$	(2,300	)

Schedule of amounts recognized in accumulated other comprehensive income (loss)

Amounts recognized in accumulated other comprehensive income (loss) at September 30, 2012 and 2011 consisted of:

	2012			2011
Unrecognized actuarial loss	$	(13,056	)	$	(14,234	)
Deferred tax asset	5,612			5,780
Net amount recognized in accumulated other comprehensive income (loss)	$	(7,444	)	$	(8,454	)

Schedule of expected benefit payments

The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:

2013	$	1,406
2014	1,492
2015	1,773
2016	1,723
2017	1,662
2018 - 2021	9,975

Components of the net periodic pension expense (benefit)

The components of the net periodic pension expense (benefit) were as follows:

	Years ended September 30,
	2012			2011			2010
Service cost	$	—		$	—		$	—
Interest cost	1,501			1,498			1,555
Expected return on plan assets	(2,125		)	(2,343		)	(1,890		)
Amortization of unrecognized loss	2,316			1,667			1,509
Settlement Charge	—			490			—
Net periodic pension expense	$	1,692		$	1,312		$	1,174

Other Post retirement Benefit Plans [Member]

Schedule of Employee Benefit Plans And Stock-Based Compensation Plans [Line Items]

Summary of changes in the projected benefit obligation and fair value of plan assets

Data relating to the postretirement benefit plan follows:

	September 30,
	2012			2011
Change in accumulated postretirement benefit obligation:
Beginning of year	$	2,509		$	2,261
Service cost	46			38
Interest cost	125			107
Actuarial loss	548			209
Plan participants’ contributions	—			—
Amendments	—			—
Benefits paid	(125		)	(106		)
End of year	$	3,103		$	2,509
Changes in fair value of plan assets:
Beginning of year	$	—		$	—
Employer contributions	125			106
Plan participants’ contributions	—			—
Benefits paid	(125		)	(106		)
End of year	$	—		$	—
Funded status	$	(3,103	)	$	(2,509	)

Schedule of amounts recognized in accumulated other comprehensive income (loss)

Amounts recognized in accumulated other comprehensive income (loss) at September 30, 2012 and 2011 consisted of:

	2012			2011
Postretirement plan unrecognized gain	$	175		$	771
Postretirement plan unrecognized service cost	(317		)	(364		)
Postretirement unrecognized transition obligation	(30		)	(41		)
Postretirement SERP	(400		)	(244		)
Postemployment BOLI	(122		)	(144		)
Subtotal	(694		)	(22		)
Deferred tax asset (liability)	282			9
Net amount recognized in accumulated other comprehensive income (loss)	$	(412	)	$	(13	)

Schedule of expected benefit payments

Estimated Future Benefit Payments

The following benefit payments are expected to be paid in future years:

2013	$	186
2014	188
2015	191
2016	193
2017	197
2018 - 2021	1,012

Components of the net periodic pension expense (benefit)

Components of net periodic benefit expense (benefit):

	For years ended September 30,
	2012			2011			2010
Service Cost	$	46		$	38		$	28
Interest Cost	125			107			107
Amortization of transition obligation	24			24			24
Amortization of prior service cost	47			48			49
Amortization of net actuarial gain	(25		)	(60		)	(95		)
Total	$	217		$	157		$	113

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Loans (Details 6) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Non-Performing loans:
Current Loans	$ 2,067,311	$ 1,655,366
Non-performing loans, 30-59 Days Past Due	10,471	6,479
Non-performing loans, 60-89 Days Past Due	1,876	1,387
Non-performing loans, 90+ Days Past Due	4,370	4,090
Non accrual loans	35,444	36,477
Total Loans	2,119,472	1,703,799
Current Loans under Troubled debt restructuring	13,543	9,060
Thirty To Fifty Nine Days Past Due Under Troubled debt restructurings	270	266
Sixty Eighty To Nine Days Past Due Under Troubled debt restructurings	264	0
Ninety Plus Days Past Due Under Troubled debt restructurings	0	446
Non-Accrual	10,870	7,792
Total TDR's	24,947	17,564
Non performing loans [Member]
Non-Performing loans:
Non accrual loans	35,444	36,477
Non Performing Assets
Loans 90+ and still accruing	4,370	4,090
Total non performing loans	39,814	40,567
Real estate - residential mortgage [Member]
Non-Performing loans:
Current Loans	337,356	380,577
Non-performing loans, 30-59 Days Past Due	855	868
Non-performing loans, 60-89 Days Past Due	497	344
Non-performing loans, 90+ Days Past Due	2,263	491
Non accrual loans	9,051	7,485
Total Loans	350,022	389,765
Real estate - commercial mortgage [Member]
Non-Performing loans:
Current Loans	1,060,176	689,037
Non-performing loans, 30-59 Days Past Due	902	768
Non-performing loans, 60-89 Days Past Due	973	337
Non-performing loans, 90+ Days Past Due	1,638	1,989
Non accrual loans	8,815	11,225
Total Loans	1,072,504	703,356
Acquisition, development & construction [Member]
Non-Performing loans:
Current Loans	121,590	154,682
Non-performing loans, 30-59 Days Past Due	7,067	3,859
Non-performing loans, 60-89 Days Past Due	0	406
Non-performing loans, 90+ Days Past Due	0	446
Non accrual loans	15,404	16,538
Total Loans	144,061	175,931
Commercial business loans [Member]
Non-Performing loans:
Current Loans	342,726	209,190
Non-performing loans, 30-59 Days Past Due	96	490
Non-performing loans, 60-89 Days Past Due	141	0
Non-performing loans, 90+ Days Past Due	0	0
Non accrual loans	344	243
Total Loans	343,307	209,923
Consumer loans, including home equity [Member]
Non-Performing loans:
Current Loans	205,463	221,880
Non-performing loans, 30-59 Days Past Due	1,551	494
Non-performing loans, 60-89 Days Past Due	265	300
Non-performing loans, 90+ Days Past Due	469	1,164
Non accrual loans	1,830	986
Total Loans	$ 209,578	$ 224,824

XML

Employee Benefit Plans And Stock-Based Compensation Plans (Details 6) (Other Post retirement Benefit Plans [Member], USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Other Post retirement Benefit Plans [Member]
Changes in projected benefit obligation:
Beginning of year	$ 2,509	$ 2,261
Service cost	46	38	28
Interest cost	125	107	107
Actuarial loss	548	209
Plan participants' contributions	0	0
Amendments	0	0
Benefits and distributions paid	(125)	(106)
End of year	3,103	2,509	2,261
Changes in fair value of plan assets:
Beginning of year	0	0
Employer contributions	125	106
Plan participants' contributions	0	0
Benefits and distributions paid	(125)	(106)
End of year	0	0	0
Funded status at end of year	$ (3,103)	$ (2,509)

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Goodwill and Intangible Assets (Tables)

12 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Change in goodwill

The change in goodwill during the year is as follows:

	September 30,
	2012			2011		2010
Beginning of year	$	160,861		$	160,861	$	160,861
Acquisitions	5,665			—		—
Disposals	(3,279		)	—		—
Impairment	0			—		—
End of year	$	163,247		$	160,861	$	160,861

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Basis of Presentation - Allowance for Loan Losses (Details)	12 Months Ended
	Sep. 30, 2012
Financing Receivable, Allowance for Credit Losses [Line Items]
Minimum duration past due for impairment review	90 days
Percentage discount of appraised value for costs to hold and liquidate	10.00%
Percentage of loan carrying value used for impairment review	10.00%
Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Duration until re-appraisal	6 months
Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Duration until re-appraisal	9 months
Real estate - commercial mortgage [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	1200.00%
Real estate - commercial mortgage [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	2200.00%
Commercial business loans [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Minimum duration past due until chargeoff	90 days
Commercial business loans [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	12.00%
Commercial business loans [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	22.00%
Acquisition, development & construction [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	12.00%
Acquisition, development & construction [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	22.00%
Homeowner loans [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	700.00%
Homeowner loans [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	1300.00%
Consumer loans, including home equity [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Minimum duration past due until chargeoff	90 days
Consumer loans, including home equity [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	7.00%
Consumer loans, including home equity [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	13.00%
Real estate - residential mortgage [Member] | Minimum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	7.00%
Real estate - residential mortgage [Member] | Maximum [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Percentage of costs to hold and liquidate	13.00%

XML

Securities Available for Sale (Details Textual) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012 Securities	Sep. 30, 2011	Sep. 30, 2010
Schedule of Available-for-sale Securities [Line Items]
Proceeds from sales of securities available for sale	$ 344,431	$ 540,145	$ 443,389
Available-for-sale securities, gross realized gains	10,468	10,000	8,518
Available-for-sale securities, gross realized losses	16	7	361
Accumulated other comprehensive income, available-for-sale securities adjustment, net of tax	15,066	13,603
Accumulated other comprehensive income, available-for-sale securities adjustment, tax liabilities	10,298	9,302
Held-to-maturity securities pledged as collateral	245,989	206,829
Securities pledged as collateral for municipal deposits	506,079	438,081
Temporary impairment charge for the securities due to Temporary losses to securities	47
Number of securities which were in continuous unrealized loss position for less than 12 months	16
Number of securities which were in continuous unrealized loss position for 12 months or more	1
Amortized Cost	985,508	716,936
Securities available for sale at fair value	1,010,872	739,844
CMO/Other MBS [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of available-for-sale securities impaired	2
Temporary impairment charge for the securities due to Temporary losses to securities	47	75
Total cumulative impairment charges recognized, other than temporary impairment, debt securities	122
Unrealized gains recognized, other than temporary impairment, debt securities	419
Number of individual private label available for sale portfolio securities	4
Amortized Cost	4,665
Securities available for sale at fair value	4,630
Number Of Individual Private Label Available For Sale Portfolio Securities Considered At or Above Ba1	2
Impaired Available For Sale Securities Amortized Cost	4,240
Impaired Available For Sale Securities Fair Value	4,197
Equities [Member]
Schedule of Available-for-sale Securities [Line Items]
Number of available-for-sale securities impaired		1
Temporary impairment charge for the securities due to Temporary losses to securities		$ 203

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Stockholders' Equity - Reconciliation of Stockholders' Equity to Bank Regulatory Capital (Details) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010	Sep. 30, 2009
Reconciliation of Stockholders' Equity To Bank Regulatory Capital [Line Items]
Total GAAP stockholders' equity (Provident Bank)	$ 491,122	$ 431,134	$ 430,955	$ 427,456
Unrealized gains on securities available for sale included in other accumulated comprehensive income	7,641	6,762	7,963
Allowance for loan losses	28,282	27,917	30,843	30,050
Provident Bancorp [Member]
Reconciliation of Stockholders' Equity To Bank Regulatory Capital [Line Items]
Total GAAP stockholders' equity (Provident Bank)	491,122	431,134
Provident Bank [Member]
Reconciliation of Stockholders' Equity To Bank Regulatory Capital [Line Items]
Total GAAP stockholders' equity (Provident Bank)	466,037	405,638
Goodwill and certain intangible assets	(169,525)	(159,306)
Unrealized gains on securities available for sale included in other accumulated comprehensive income	(15,077)	(13,604)
Disallowed servicing asset	(162)	0
Other comprehensive loss	8,168	8,468
Tangible, Tier 1 core and Tier 1 risk-based capital	289,441	241,196
Allowance for loan losses	28,488	24,111
Total risk-based capital	$ 317,929	$ 265,307

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Securities Available for Sale (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	$ 985,508	$ 716,936
Gross Unrealized Gains	25,996	23,729
Gross Unrealized Losses	(632)	(821)
Fair Value	1,010,872	739,844
Mortgage-backed securities-residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	433,465	321,353
Gross Unrealized Gains	11,634	7,468
Gross Unrealized Losses	(590)	(563)
Fair Value	444,509	328,258
Investment securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	552,043	395,583
Gross Unrealized Gains	14,362	16,261
Gross Unrealized Losses	(42)	(258)
Fair Value	566,363	411,586
Fannie Mae [Member] | Mortgage-backed securities-residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	155,601	136,699
Gross Unrealized Gains	5,806	3,292
Gross Unrealized Losses	0	0
Fair Value	161,407	139,991
Freddie Mac [Member] | Mortgage-backed securities-residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	81,509	98,511
Gross Unrealized Gains	3,751	2,205
Gross Unrealized Losses	0	(41)
Fair Value	85,260	100,675
Ginnie Mae [Member] | Mortgage-backed securities-residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	4,488	4,973
Gross Unrealized Gains	290	207
Gross Unrealized Losses	0	0
Fair Value	4,778	5,180
CMO/Other MBS [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	4,665
Fair Value	4,630
CMO/Other MBS [Member] | Mortgage-backed securities-residential [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	191,867	81,170
Gross Unrealized Gains	1,787	1,764
Gross Unrealized Losses	(590)	(522)
Fair Value	193,064	82,412
Federal agencies [Member] | Investment securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	404,820	199,741
Gross Unrealized Gains	4,013	4,986
Gross Unrealized Losses	(10)	(79)
Fair Value	408,823	204,648
Corporate bonds [Member] | Investment securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost		16,984
Gross Unrealized Gains		257
Gross Unrealized Losses		(179)
Fair Value		17,062
State and municipal securities [Member] | Investment securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	146,136	177,666
Gross Unrealized Gains	10,349	11,018
Gross Unrealized Losses	(4)	0
Fair Value	156,481	188,684
Equities [Member] | Investment securities [Member]
Schedule of Available-for-sale Securities [Line Items]
Amortized Cost	1,087	1,192
Gross Unrealized Gains	0	0
Gross Unrealized Losses	(28)	0
Fair Value	$ 1,059	$ 1,192

XML

Fair Value Measurements (Tables)

12 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Investment grades of securities

The investment grades of these securities are as follows:

	Amortized Cost		Fair Value
Investment Rating:
Aa3	$	300	$	309
Ba1	125		124
B1	2,567		2,524
B3	1,673		1,673
Total private label CMOs	$	4,665	$	4,630

Estimated fair value on a recurring basis

summary of assets and liabilities at September 30, 2012 measured at estimated fair value on a recurring basis were as follows:

	Fair Value Measurements at September 30, 2012		Quoted Prices in Active markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	161,407	$	—	$	161,407	$	—
Freddie Mac	85,260		—		85,260		—
Ginnie Mae	4,778		—		4,778		—
CMO/Other MBS	188,434		—		188,434		—
Privately issued collateralized mortgage obligations	4,630		—		—		4,630
	444,509		—		439,879		4,630
Investment securities
Federal agencies	408,823		—		408,823		—
Obligations of states and political subdivisions	156,481		—		156,481		—
Equities	1,059		—		1,059		—
Total investment securities available for sale	566,363		—		566,363		—
Total available for sale securities	1,010,872		—		1,006,242		4,630
Interest rate caps and swaps	2,488		—		2,488		—
Total assets	$	1,013,360	$	—	$	1,008,730	$	4,630
Swaps	$	2,485	$	—	$	2,485	$	—
Total Liabilities	$	2,485	$	—	$	2,485	$	—

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

	Fair Value Measurements at September 30, 2011		Quoted Prices in Active markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Investment securities available for sale:
Mortgage-backed securities-residential
Fannie Mae	$	139,991	$	—	$	139,991	$	—
Freddie Mac	100,675		—		100,675		—
Ginnie Mae	5,180		—		5,180		—
CMO/Other MBS	77,561		—		77,561		—
Privately issued collateralized mortgage obligation	4,851		—		—		4,851
	328,258		—		323,407		4,851
Investment securities
Federal agencies	204,648		—		204,648		—
Corporate debt securities	17,062		—		17,062		—
Obligations of states and political subdivisions	188,684		—		188,684		—
Equities	1,192		—		1,192		—
Total investment securities available for sale	411,586		—		411,586		—
Total available for sale securities	739,844		—		734,993		4,851
Interest rate caps and swaps	1,180		—		1,180		—
Total assets	$	741,024	$	—	$	736,173	$	4,851
Swaps	$	1,114	$	—	$	1,114	$	—
Total Liabilities	$	1,114	$	—	$	1,114	$	—

Changes in Level 3 assets measured at fair value on a recurring basis

The changes in Level 3 assets measured at fair value on a recurring basis are summarized as follows for the period ending September 30, 2012:

	Fair Value Measurement September 30, 2012 Using significant Unobservable Inputs Level 3
Private Label CMO Available for Sale
Balance at September 30, 2009	$	10,411
Pay downs	(1,946		)
(Amortization) and accretion, net	49
Change in fair value	380
Loss recognized on sale	(186		)
Sale	(2,712		)
Balance at September 30, 2010	5,996
Pay downs	(908		)
(Amortization) and accretion, net	1
Change in fair value	(75		)
Loss recognized on sale	(163		)
Balance at September 30, 2011	4,851
Pay downs	(675		)
(Amortization) and accretion, net	15
Credit loss write down (OTTI)	(47		)
Change in fair value	486
Balance at September 30, 2012	$	4,630

Impaired loans measured at estimated fair value on nonrecurring basis

A summary of impaired loans at September 30, 2012 measured at estimated fair value on a nonrecurring basis were as follows:

	Fair Value Measurements at September 30, 2012		Quoted Prices in Active  Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Real estate — residential mortgage	$	8,628	$	—	$	—	$	8,628
Real estate — commercial mortgage	6,537		—		—		6,537
Commercial business loans	95		—		—		95
Acquisition, development and construction	8,232		—		—		8,232
Consumer loans	1,215		—		—		1,215
Total impaired loans with specific allowance allocations	$	24,707	$	—	$	—	$	24,707

A summary of impaired loans at September 30, 2011 measured at estimated fair value on a nonrecurring basis were as follows:

	Fair Value Measurements at September 30, 2011		Quoted Prices in Active  Markets for Identical Assets Level 1		Significant Other Observable Inputs Level 2		Significant Unobservable Inputs Level 3
Real estate—residential mortgage	$	6,469	$	—	$	—	$	6,469
Real estate—commercial mortgage	3,741		—		—		3,741
Commercial business loans (CBL)	2,119		—		—		2,119
Acquisition, development and construction	2,126		—		—		2,126
Consumer loans	569		—		—		569
Total impaired loans with specific allowance allocations	$	15,024	$	—	$	—	$	15,024

Quantitative information of Level 3 assets

The following table presents quantitative information about significant unobservable inputs used in the fair value measurements for Level 3 assets non recurring measurements at September 30, 2012:

Non Recurring fair value measurements	Fair Value		Valuation Techniques	Unobservable input / assumptions	Range
Real estate—residential mortgage (impaired)	$	8,628	Appraisal	Adjustments for comparable properties	17% - 23%
Real estate—commercial mortgage(impaired)	6,537		Appraisal	Adjustments for comparable properties	22% - 32%
Commercial business loans (impaired)	95		Appraisal	Adjustments for comparable properties	22% - 32%
Acquisition, development and construction (impaired)	8,232		Appraisal	Adjustments for comparable properties	22% - 32%
Consumer loans (impaired)	1,215		Appraisal	Adjustments for comparable properties	17% - 23%
Assets taken in foreclosure:
Real estate - residential mortgage	832		Appraisal	Adjustments by management to reflect current conditions/selling costs	17% - 23%
Real estate - commercial mortgage	2,482		Appraisal	Adjustments by management to reflect current conditions/selling costs	22% - 32%
Acquisition, development and construction	3,089		Appraisal	Adjustments by management to reflect current conditions/selling costs	22% - 32%
Mortgage servicing rights	1,624		Third Party Valuation	Discount rates	9.25% - 12.75%
			Third Party Valuation	Prepayment speeds	100 - 968 ( Weighted average of 224)

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Consolidated Statements of Cash Flows (Unaudited) (USD $) In Thousands, unless otherwise specified	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2010
Cash flows from operating activities:
Net income	$ 19,888	$ 11,739	$ 20,492
Adjustments to reconcile net income to net cash provided by operating activities
Provisions for loan losses	10,612	16,584	10,000
(Gain) loss on other real estate owned	694	869	(18)
Depreciation of premises and equipment	4,746	6,177	5,144
Amortization of intangibles	1,245	1,426	1,849
Net gain on sale of securities	(10,452)	(10,011)	(8,157)
Other than temporary impairment (credit loss)	47	278	0
Fair value loss on interest rate cap	63	197	1,106
Write down on assets held for sale	135	0	0
Net gains on loans held for sale	(1,897)	(1,027)	(867)
(Gain) loss on sale of premises and equipment	(75)	0	54
Accretion of premiums on borrowings (includes calls on borrowings)	(1,006)	3,181	3,209
Amortization of payment fees on restructured borrowings	0	3,201	0
Accretion of premiums on borrowings (includes calls on borrowings)	(67)	(30)	(223)
Amortization of payment fees on restructured borrowings	1,459	1,033	0
ESOP and RRP expense	667	607	1,325
ESOP forfeitures	(1)	(3)	(29)
Stock option compensation expense	521	558	247
Originations of loans held for sale	(80,579)	(49,807)	(52,839)
Proceeds from sales of loans held for sale	79,147	52,548	49,029
Increase in cash surrender value of bank owned life insurance	(2,050)	(2,049)	(1,327)
Increase in assets held for sale	0	0	0
Deferred income tax (benefit) expense	(64)	118	26
Net changes in accrued interest receivable and payable	(66)	674	(1,536)
Trade date securities	0	0	0
Other adjustments (principally net changes in other assets and other liabilities)	2,059	(9,785)	(5,624)
Net cash provided by operating activities	25,026	26,478	21,861
Cash flows from investing activities:
Available for sale	(679,553)	(622,551)	(830,613)
Held to maturity	(95,157)	(93,764)	(23,023)
Proceeds from maturities, calls and other principal payments on securities
Available for sale	174,497	251,774	328,993
Held to maturity	63,037	17,220	33,780
Proceeds from sales of securities available for sale	344,431	540,145	443,389
Proceeds from sales of securities held to maturity	0	357	0
Loan originations	(735,676)	(578,631)	(472,066)
Loan principal payments	509,060	553,235	461,632
Purchase of interest rate cap derivatives	0	0	(1,368)
Proceeds from sale of FHLB stock, net	(620)	1,988	3,605
Proceeds from sales of other real estate owned	3,468	301	0
Purchases of premises and equipment	(1,853)	(3,465)	(8,152)
Proceeds from the sale of fixed assets	75	0	48
Purchases of bank owned life insurance	0	(3,980)	0
Cash received from Gotham acquisition	126,818	0	0
Net cash provided by (used in) investing activities	(291,473)	62,629	(63,775)
Cash flows from financing activities
Net increase in transaction, savings and money market deposits	499,340	227,907	177,808
Net decrease in time deposits	(53,786)	(73,914)	(117,388)
Net decrease in short-term borrowings	(10,000)	(34,840)	(62,500)
Gross repayments of long-term borrowings	(5,244)	(1,238)	(4,152)
Restructured Debt	5,000	0	0
Repayment of senior unsecured note	(51,499)	0	0
Payments of pre-payment fees on FHLBNY advances	(278)	(5,151)	0
Net (decrease) increase in mortgage escrow funds	2,218	1,503	(207)
Treasury shares purchased	0	(3,810)	(13,062)
Stock option transactions	102	4	1,008
Other stock-based compensation transactions	164	45	87
Capital raise	46,000	0	0
Cash dividends paid	(9,100)	(8,973)	(9,216)
Net cash provided by (used in) financing activities	422,917	101,533	(27,622)
Net increase (decrease) in cash and cash equivalents	156,470	190,640	(69,536)
Cash and cash equivalents at beginning of year	281,512	90,872	160,408
Cash and cash equivalents at end of year	437,982	281,512	90,872
Supplemental cash flow information:
Interest payments	18,447	21,815	27,379
Income tax payments	1,873	9,070	7,993
Loans transferred to other real estate owned	6,148	1,932	2,943
Securities purchases settled in subsequent periods	41,758	0	0
Non-cash assets acquired:
Investments available for sale	54,994	0	0
Total loans, net	205,453	0	0
Loans FHLB Stock	1,045	0	0
Accrued interest receivable	417	0	0
Goodwill	5,665	0	0
Core deposit intangibles	4,818	0	0
Premises and equipment, net	490	0	0
Other assets	1,663	0	0
Total non-cash assets acquired	274,545	0	0
Liabilities assumed:
Deposits	368,902	0	0
FHLB and other borrowings	30,784	0	0
Other liabilities	1,677	0	0
Total liabilities assumed	401,363	0	0
Net non-cash assets (liabilities) acquired	(126,818)	0	0
Cash and cash equivalents acquired (paid) in acquisitions	$ 126,818	$ 0	$ 0

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Fair Value Measurements (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Investment securities
Fair Value	$ 1,010,872	$ 739,844
Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	444,509
Investment securities
Total investment securities available for sale	566,363
Fair Value	1,010,872
Interest rate caps and swaps	2,488
Total Assets	1,013,360
Swaps	2,485
Total Liabilities	2,485
Fannie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	161,407
Freddie Mac [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	85,260
Ginnie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	4,778
CMO/Other MBS [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	188,434
Privately issued collateralized mortgage obligations [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	4,630
Federal Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	408,823
Obligations of states and political subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	156,481
Equities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	1,059
Fair Value Measurements [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential		328,258
Investment securities
Total investment securities available for sale		411,586
Fair Value		739,844
Interest rate caps and swaps		1,180
Total Assets		741,024
Swaps		1,114
Total Liabilities		1,114
Fair Value Measurements [Member] | Fannie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential		139,991
Fair Value Measurements [Member] | Freddie Mac [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential		100,675
Fair Value Measurements [Member] | Ginnie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential		5,180
Fair Value Measurements [Member] | CMO/Other MBS [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential		77,561
Fair Value Measurements [Member] | Privately issued collateralized mortgage obligations [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential		4,851
Fair Value Measurements [Member] | Federal Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale		204,648
Fair Value Measurements [Member] | Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale		17,062
Fair Value Measurements [Member] | Obligations of states and political subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale		188,684
Fair Value Measurements [Member] | Equities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale		1,192
Quoted Prices in Active markets for Identical Assets Level 1 [Member]
Investment securities
Fair Value	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Investment securities
Total investment securities available for sale	0	0
Fair Value	0	0
Interest rate caps and swaps	0	0
Total Assets	0	0
Swaps	0	0
Total Liabilities	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Fannie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Freddie Mac [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Ginnie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | CMO/Other MBS [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Privately issued collateralized mortgage obligations [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Federal Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale		0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Obligations of states and political subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	0	0
Quoted Prices in Active markets for Identical Assets Level 1 [Member] | Equities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	0	0
Significant Other Observable Inputs Level 2 [Member]
Investment securities
Fair Value	1,006,242	734,993
Significant Other Observable Inputs Level 2 [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	439,879	323,407
Investment securities
Total investment securities available for sale	566,363	411,586
Fair Value	1,006,242	734,993
Interest rate caps and swaps	2,488	1,180
Total Assets	1,008,730	736,173
Swaps	2,485	1,114
Total Liabilities	2,485	1,114
Significant Other Observable Inputs Level 2 [Member] | Fannie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	161,407	139,991
Significant Other Observable Inputs Level 2 [Member] | Freddie Mac [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	85,260	100,675
Significant Other Observable Inputs Level 2 [Member] | Ginnie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	4,778	5,180
Significant Other Observable Inputs Level 2 [Member] | CMO/Other MBS [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	188,434	77,561
Significant Other Observable Inputs Level 2 [Member] | Privately issued collateralized mortgage obligations [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Significant Other Observable Inputs Level 2 [Member] | Federal Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	408,823	204,648
Significant Other Observable Inputs Level 2 [Member] | Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale		17,062
Significant Other Observable Inputs Level 2 [Member] | Obligations of states and political subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	156,481	188,684
Significant Other Observable Inputs Level 2 [Member] | Equities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	1,059	1,192
Significant Unobservable Inputs Level 3 [Member]
Investment securities
Fair Value	4,630	4,851
Significant Unobservable Inputs Level 3 [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	4,630	4,851
Investment securities
Total investment securities available for sale	0	0
Fair Value	4,630	4,851
Interest rate caps and swaps	0	0
Total Assets	4,630	4,851
Swaps	0	0
Total Liabilities	0	0
Significant Unobservable Inputs Level 3 [Member] | Fannie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Significant Unobservable Inputs Level 3 [Member] | Freddie Mac [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Significant Unobservable Inputs Level 3 [Member] | Ginnie Mae [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Significant Unobservable Inputs Level 3 [Member] | CMO/Other MBS [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	0	0
Significant Unobservable Inputs Level 3 [Member] | Privately issued collateralized mortgage obligations [Member] | Fair Value, Measurements, Recurring [Member]
Mortgage-backed securities-residential
Mortgage-backed securities-residential	4,630	4,851
Significant Unobservable Inputs Level 3 [Member] | Federal Agencies [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	0	0
Significant Unobservable Inputs Level 3 [Member] | Corporate Debt Securities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale		0
Significant Unobservable Inputs Level 3 [Member] | Obligations of states and political subdivisions [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	0	0
Significant Unobservable Inputs Level 3 [Member] | Equities [Member] | Fair Value, Measurements, Recurring [Member]
Investment securities
Total investment securities available for sale	$ 0	$ 0

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Securities Held to Maturity (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Sep. 30, 2011
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	$ 142,376	$ 110,040
Gross Unrealized Gains	3,976	1,493
Gross Unrealized Losses	(28)	(261)
Fair Value	146,324	111,272
Mortgage-backed securities-residential [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	99,264	59,984
Gross Unrealized Gains	2,785	321
Gross Unrealized Losses	(28)	(120)
Fair Value	102,021	60,185
Securities Investment [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	43,112	50,056
Gross Unrealized Gains	1,191	1,172
Gross Unrealized Losses	0	(141)
Fair Value	44,303	51,087
Fannie Mae [Member] | Mortgage-backed securities-residential [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	28,637	1,298
Gross Unrealized Gains	1,212	63
Gross Unrealized Losses	0	0
Fair Value	29,849	1,361
Freddie Mac [Member] | Mortgage-backed securities-residential [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	42,706	32,858
Gross Unrealized Gains	1,347	103
Gross Unrealized Losses	0	(120)
Fair Value	44,053	32,841
CMO/Other MBS [Member] | Mortgage-backed securities-residential [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	27,921	25,828
Gross Unrealized Gains	226	155
Gross Unrealized Losses	(28)	0
Fair Value	28,119	25,983
Federal agencies [Member] | Securities Investment [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	22,236	29,973
Gross Unrealized Gains	106	25
Gross Unrealized Losses	0	(141)
Fair Value	22,342	29,857
State and municipal securities [Member] | Securities Investment [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	19,376	18,583
Gross Unrealized Gains	1,059	1,108
Gross Unrealized Losses	0	0
Fair Value	20,435	19,691
Other [Member] | Securities Investment [Member]
Schedule of Held-to-maturity Securities [Line Items]
Amortized Cost	1,500	1,500
Gross Unrealized Gains	26	39
Gross Unrealized Losses	0	0
Fair Value	$ 1,526	$ 1,539

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Earnings Per Common Share (Tables)

12 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Computation of basic and diluted earnings per share

The following is a summary of the calculation of earnings per share (EPS):

	Years ended September 30,
	2012		2011		2010
Net income	$	19,888	$	11,739	$	20,492
Weighted average common shares outstanding for computation of basic EPS (1)	38,227,653		37,452,596		38,161,180
Common-equivalent shares due to the dilutive effect of stock options (2)	20,393		946		23,942
Weighted average common shares for computation of diluted EPS	38,248,046		37,453,542		38,185,122
Earnings per common share:
Basic	$	0.52	$	0.31	$	0.54
Diluted	$	0.52	$	0.31	$	0.54

(1) Excludes unallocated ESOP shares.

(2) Represents incremental shares computed using the treasury stock method.

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Condensed Parent Company Financial Statements

12 Months Ended

Sep. 30, 2012

Condensed Financial Information of Parent Company Only Disclosure [Abstract]

Condensed Parent Company Financial Statements

Condensed Parent Company Financial Statements

Set forth below are the condensed statements of financial condition of Provident Bancorp and the related condensed statements of income and cash flows:

Condensed Statements of Financial Condition	September 30,
	2012		2011
Assets:
Cash	$	6,716	$	6,692
Loan receivable from ESOP	6,896		7,338
Securities available for sale at fair value	809		837
Investment in Provident Bank	467,295		406,838
Non-bank subsidiaries	5,482		9,082
Other assets	5,371		1,680
Total assets	$	492,569	$	432,467
Liabilities	$	1,447	$	1,333
Stockholders’ equity	491,122		431,134
Total liabilities & stockholders’ equity	$	492,569	$	432,467

	Year ended September 30,
	2012			2011			2010
Condensed Statements of Income
Interest income	$	282		$	304		$	326
Dividend income on equity securities	30			31			28
Dividends from Provident Bank	6,000			10,000			29,400
Dividends from non-bank subsidiaries	500			500			400
Bank owned life insurance income	10			91			—
Non-interest expense	(1,838		)	(1,819		)	(2,262		)
Income tax benefit	87			157			321
Income before equity in undistributed earnings of subsidiaries	5,071			9,264			28,213
Equity in undistributed (excess distributed) earnings of:
Provident Bank	13,739			1,498			(8,257		)
Non-bank subsidiaries	1,078			977			536
Net income	$	19,888		$	11,739		$	20,492

	Year ended September 30,
	2012			2011			2010
Condensed Statements of Cash Flows
Cash flows from operating activities:
Net income	$	19,888		$	11,739		$	20,492
Adjustments to reconcile net income to net cash provided by operating activities:
Equity in (undistributed) excess distributed earnings of
Provident Bank	(13,739		)	(1,498		)	8,257
Non-bank subsidiaries	(1,078		)	(977		)	(536		)
Other adjustments, net	380			(1,444		)	(1,077		)
Net cash provided by operating activities	5,451			7,820			27,136
Cash flows from investing activities:
Purchase of equity securities, available for sale	(105		)	—			—
Sales of securities	103			—			—
Investment in subsidiaries	(44,203		)	—			(350		)
ESOP loan principal repayments	441			424			408
Net cash provided by investing activities	(43,764		)	424			58
Cash flows from financing activities:
Treasury shares purchased	—			(3,810		)	(13,062		)
Capital raise	46,000			—			—
Cash dividends paid	(9,100		)	(8,973		)	(9,216		)
Stock option transactions including RRP	910			770			2,196
Other equity transactions	527			441			442
Net cash used in financing activities	38,337			(11,572		)	(19,640		)
Net increase (decrease) in cash	24			(3,328		)	7,554
Cash at beginning of year	6,692			10,020			2,466
Cash at end of year	$	6,716		$	6,692		$	10,020

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Recent Accounting Standards, Not Yet Adopted

12 Months Ended

Sep. 30, 2012

Accounting Changes and Error Corrections [Abstract]

Recently Issued Accounting Standards Not Yet Adopted

Recently Issued Accounting Standards Not Yet Adopted

Accounting Standards Update (ASU) 2012-04- Technical Corrections and Improvements - (Various Topics) has been issued. This standard is effective for the Company October 1, 2012 and is not expected to have a material effect on the Company’s consolidated financial statements.

Accounting Standards Update (ASU) 2012-06- Business combinations (Topic 805) - Subsequent Accounting for an Indemnification Asset Recognized at the Acquisition Date as a Result of a Government Assisted Acquisition of a Financial Institution has been issued. This standard was issued to record the subsequent change in the cash flows expected to be collected on the indemnification asset. This standard is effective for the Company January 1, 2013 and is not expected to have a material effect on the Company’s consolidated financial statements.

See Note 1 for a discussion of adoption of new accounting standards.

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Employee Benefit Plans And Stock-Based Compensation Plans (Details 9) (Other Post retirement Benefit Plans [Member])	12 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Other Post retirement Benefit Plans [Member]
Defined Benefit Plan Disclosure [Line Items]
Medical trend rate next year	4.50%	4.50%
Ultimate trend rate	4.50%	4.50%
Discount rate	4.10%	4.30%
Discount rate used to value periodic cost	4.30%	4.50%