10-Q

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

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

For the quarterly period ended December 31, 2008

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 ID No.)

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

(845) 369-8040

(Registrant’s Telephone Number including area code)

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

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

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

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

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

Classes of Common Stock	Shares Outstanding as of February 2, 2009
$0.01 per share	39,856,586

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

QUARTERLY PERIOD ENDED DECEMBER 31, 2008

	PART I. FINANCIAL INFORMATION
Item 1.	Financial Statements
	Consolidated Statements of Financial Condition (unaudited) at December 31, 2008 and September 30, 2008	3
	Consolidated Statements of Income (unaudited) for the Three Months Ended December 31, 2008 and December 31, 2007	4
	Consolidated Statements of Changes in Stockholders’ Equity (unaudited) for the Three months Ended December 31, 2008	5
	Consolidated Statements of Cash Flows (unaudited) for the Three Months Ended December 31, 2008 and 2007	6
	Consolidated Statements of Comprehensive Income (loss) (unaudited) for the Three Months Ended December 31, 2008 and 2007.	7
	Notes to Consolidated Financial Statements (unaudited)	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	29
Item 4.	Controls and Procedures	30
	PART II. OTHER INFORMATION
Item 1.	Legal Proceedings	31
Item 1.A.	Risk Factors	31
Item 2.	Unregistered Sale of Equity Securities and Use of Proceeds	31
Item 3.	Defaults Upon Senior Securities	31
Item 4.	Submission of Matters to a Vote of Security Holders	31
Item 5.	Other Information	31
Item 6.	Exhibits	32
	Signatures	33

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF FINANCIAL CONDITION (unaudited)

(In thousands, except share data)

	Dec. 31, 2008			Sep. 30, 2008
ASSETS
Cash and due from banks	$	41,186		$	125,810
Securities (note 7)
Available for sale (including $570,857 and $765,334 pledged as collateral for borrowings and deposits at December 31, 2008 and September 30, 2008 respectively)		795,017			791,688
Held to maturity, at amortized cost (fair value of $51,105 and $42,899 at December 31, 2008 and September 30, 2008, respectively)		50,561			43,013
Total securities		845,578			834,701
Loans held for sale		485			189
Loans (notes 4 and 5):
One to four family residential mortgage loans		510,991			513,381
Commercial real estate, commercial business and construction loans		983,504			969,432
Consumer loans		252,110			248,740
Gross loans		1,746,605			1,731,553
Allowance for loan losses		(23,645	)		(23,101	)
Total loans, net		1,722,960			1,708,452
Federal Home Loan Bank (“FHLB”) stock, at cost		29,156			28,675
Accrued interest receivable		10,550			10,881
Premises and equipment, net		37,226			36,716
Goodwill		160,861			160,861
Core deposit and other intangible assets		7,090			7,674
Bank owned life insurance		48,163			47,650
Other assets		18,296			22,762
Total assets	$	2,921,551		$	2,984,371
LIABILITIES AND STOCKHOLDERS’ EQUITY
LIABILITIES
Deposits (note 8)	$	1,898,142		$	1,989,197
FHLB and other borrowings (including repurchase agreements of $245,065 and $260,166 at December 31, 2008 and September 30, 2008, respectively) (note 9)		566,519			566,008
Mortgage escrow funds		15,178			7,272
Other liabilities		24,714			22,736
Total liabilities		2,504,553			2,585,213
STOCKHOLDERS’ EQUITY :
Preferred stock (par value $0.01 per share; 10,000,000 shares authorized; none issued or outstanding)		—			—
Common stock (par value $0.01 per share; 75,000,000 shares authorized; 45,929,552 issued; 39,832,857 and 39,815,213 shares outstanding at December 31, 2008 and September 30, 2008, respectively)		459			459
Additional paid-in capital		353,961			352,882
Unallocated common stock held by employee stock ownership plan (“ESOP”)		(7,511	)		(7,635	)
Treasury stock, at cost (6,096,695 and 6,114,339 shares at December 31, 2008 and September 30, 2008, respectively)		(75,480	)		(75,687	)
Retained earnings		142,545			138,720
Accumulated other comprehensive income (loss), net of taxes (notes 6 and 11)		3,024			(9,581	)
Total stockholders’ equity		416,998			399,158
Total liabilities and stockholders’ equity	$	2,921,551		$	2,984,371

See accompanying notes to unaudited consolidated financial statements

3

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME (unaudited)

(Dollars in thousands, except share data)

	For the Three Months Ended December 31,
	2008		2007
Interest and dividend income:
Loans	$	25,827	$	28,631
Taxable securities		7,893		7,916
Non-taxable securities		1,854		1,634
Other earning assets		297		664
Total interest and dividend income		35,871		38,845
Interest expense:
Deposits		5,807		8,923
Borrowings		5,018		7,548
Total interest expense		10,825		16,471
Net interest income		25,046		22,374
Provision for loan losses (note 5)		2,500		700
Net interest income after provision for loan losses		22,546		21,674
Non-interest income:
Deposit fees and service charges		3,138		3,022
Net gain on sale of securities available for sale (note 7)		331		—
Title insurance fees		212		269
Bank owned life insurance		513		434
Gain on sale of premises and equipment		517		—
Investment management fees		608		763
Other		452		471
Total non-interest income		5,771		4,959
Non-interest expense:
Compensation and employee benefits (note 12)		9,711		8,630
Stock-based compensation plans (note 2)		857		996
Occupancy and office operations		3,079		2,925
Advertising and promotion		826		867
Professional fees		706		883
Data and check processing		565		573
Amortization of intangible assets		584		690
FDIC insurance and regulatory assessments		431		199
ATM/debit card expense		518		501
Other		1,958		1,858
Total non-interest expense		19,235		18,122
Income before income tax expense		9,082		8,511
Income tax expense		2,791		2,617
Net Income	$	6,291	$	5,894
Weighted average common shares:
Basic		38,583,580		39,469,995
Diluted		38,818,569		39,805,026
Per common share (note 10)
Basic	$	0.16	$	0.15
Diluted	$	0.16	$	0.15

See accompanying notes to unaudited consolidated financial statements

4

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS’ EQUITY (unaudited)

(In thousands, except share data)

	Number of Shares		Common Stock		Additional Paid-In Capital		Unallocated ESOP Shares			Treasury Stock			Retained Earnings			Accumulated Other Comprehensive Income (Loss)			Total Stockholders’ Equity
Balance at September 30, 2008	39,815,213		$	459	$	352,882	$	(7,635	)	$	(75,687	)	$	138,720		$	(9,581	)	$	399,158
Net income	—			—		—		—			—			6,291			—			6,291
Other comprehensive income	—			—		—		—			—			—			12,605			12,605
Total comprehensive income																				18,896
Deferred compensation transactions	—			—		36		—			—			—			—			36
Stock option transactions, net	30,945			—		600		—			336			(247	)		—			689
ESOP shares allocated or committed to be released for allocation (12,483 shares)	—			—		21		124			—			—			—			145
Vesting of RRP Awards	—			—		422		—			—			—			—			422
Purchase of treasury shares	(13,301	)		—		—		—			(129	)		—			—			(129	)
Cash dividends paid ($0.06 per common share)	—			—		—		—			—			(2,219	)		—			(2,219	)
Balance at December 31, 2008	39,832,857		$	459	$	353,961	$	(7,511	)	$	(75,480	)	$	142,545		$	3,024		$	416,998

See accompanying notes to unaudited consolidated financial statements.

5

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(In thousands, except share data)

	For the Three Months Ended December 31,
	2008			2007
Cash flows from operating activities:
Net income	$	6,291		$	5,894
Adjustments to reconcile net income to net cash provided by operating activities
Provision for loan losses		2,500			700
Depreciation and amortization of premises and equipment		1,165			1,175
Amortization of intangibles		584			717
Gain on sales of loans held for sale		(6	)		—
Gain on sale of securities available for sale		(331	)		—
Gain on sales of fixed assets		(517	)		—
Net amortization (accretion) of premium and discounts on securities		129			(79	)
Amortization of premiums on borrowings (includes calls on borrowings)		(120	)		(250	)
ESOP and RRP expense		558			1,035
ESOP forfeitures		(4	)		(293	)
Stock option compensation expense		303			256
Originations of loans held for sale		(1,500	)		—
Proceeds from sales of loans held for sale		1,204			—
Increase in cash surrender value of bank owned life insurance		(513	)		(434	)
Deferred income tax (expense)		(6,096	)		(6,202	)
Net changes in accrued interest receivable and payable		532			1,762
Other adjustments (principally net changes in other assets and other liabilities)		4,273			10,744
Net cash provided by operating activities		8,452			15,025
Cash flows from investing activities
Purchases of securities:
Available for sale		(72,641	)		(61,278	)
Held to maturity		(11,257	)		(1,252	)
Proceeds from maturities, calls and other principal payments on securities:
Available for sale		49,740			84,756
Held to maturity		3,701			3,113
Proceeds from sales of securities available for sale		40,453			—
Loan originations		(118,319	)		(151,224	)
Loan principal payments		101,317			133,895
Purchase of FHLB stock		(481	)		(1,148	)
Purchases of premises and equipment		(1,876	)		(2,434	)
Proceeds from the sale of premises		718			—
Net cash (used in) provided by investing activities		(8,645	)		4,428
Cash flows from financing activities
Net decrease in transaction, savings and money market deposits		(107,424	)		(35,641	)
Net (decrease) increase in time deposits		16,369			(5,500	)
Net increase in short-term borrowings		(10,795	)		(23,507	)
Gross repayments of long-term borrowings		(1,414	)		(977	)
Gross proceeds from long-term borrowings		12,840			50,000
Net increase in mortgage escrow funds		7,906			7,561
Treasury shares purchased		(129	)		(13,926	)
Stock option transactions		399			508
Other stock-based compensation transactions		36			289
Cash dividends paid		(2,219	)		(2,320	)
Net cash used in financing activities		(84,431	)		(23,513	)
Net decrease in cash and cash equivalents		(84,624	)		(4,060	)
Cash and cash equivalents at beginning of period		125,810			47,291
Cash and cash equivalents at end of period	$	41,186		$	43,231
Supplemental information:
Interest payments	$	10,622		$	16,454
Income tax payments		279			107
Net change in unrealized gains recorded on securities available for sale		21,002			9,108
Change in deferred taxes on unrealized gains on securities available for sale		(8,512	)		(3,714	)
Number of RRP shares issued		—			1,000

See accompanying notes to unaudited consolidated financial statements.

6

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(In thousands, except share data)

	For the Three Months Ended December 31,
	2008		2007
Net Income:
Other Comprehensive income :	$	6,291	$	5,894
Net unrealized holding gain on securities available for sale net of related tax expense of $8,512 and $3,709, respectively		12,490		5,393
Change in funded status of defined benefit plans, net of related income tax expense of $78		115		—
		12,605		5,393
Total Comprehensive Income	$	18,896	$	11,287

See accompanying notes to unaudited consolidated financial statements.

7

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

1. Basis of Presentation

The consolidated financial statements include the accounts of Provident New York Bancorp (“Provident Bancorp” or “the Company”), Hardenburgh Abstract Title Company, which provides title searches and insurance for residential and commercial real estate, Hudson Valley Investment Advisors, LLC, (“HVIA”) a registered investment advisor, 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. Intercompany transactions and balances are eliminated in consolidation.

The Company’s off-balance sheet activities are limited to loan origination commitments, loan commitments pending sale, lines of credit extended to customers and for letters of credit, on behalf of customers, which all are in the ordinary course of its lending activities. The Company does not engage in off-balance sheet financing transactions or other activities involving the use of special-purpose or variable interest entities.

The consolidated financial statements have been prepared by management without audit, but, in the opinion of management, include all adjustments, consisting of normal recurring accruals, necessary for a fair presentation of the Company’s financial position and results of operations as of the dates and for the periods presented. Although certain information and footnote disclosures have been condensed or omitted pursuant to the rules and regulations of the Securities and Exchange Commission applicable to quarterly reports on Form 10-Q, the Company believes that the disclosures are adequate to make the information presented clear. The results of operations for the three months ended December 31, 2008 are not necessarily indicative of results to be expected for other interim periods or the entire fiscal year ending September 30, 2009. The unaudited consolidated financial statements presented herein should be read in conjunction with the annual audited financial statements included in the Company’s Form 10-K for the fiscal year ended September 30, 2008.

The consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America. In preparing the consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, income and expense. Actual results could differ significantly from these estimates. A material estimate that is particularly susceptible to near-term change is the allowance for loan losses (see note 5), which reflects the application of a critical accounting policy.

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

2. Stock-Based Compensation

The Company applies Statement of Financial Accounting Standards (“SFAS”) No. 123R, “Accounting for Stock-Based Compensation”, and related interpretations in accounting for its stock-based compensation plans The Company’s stock-based compensation plans allow for accelerated vesting when an employee reaches retirement age and ceases continuous service. Under SFAS No. 123R, grants issued subsequent to the adoption of SFAS 123R that are subject to such an accelerated vesting upon the recipient’s attainment of retirement age 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 far less than the plan’s five-year vesting period depending on the age of the grantee. As of December 31, 2008, 148,540 shares of total options granted were subject to this potential accelerated vesting. The Company expensed $7 for accelerated vesting of stock options during the three months ended December 31, 2008. There was no additional expense for accelerated vesting of stock options during the three months ended December 31, 2007.

The Company elected the modified prospective transition method in adopting SFAS No. 123R. Under this method, the provisions of SFAS No. 123R apply to all awards granted or modified after the date of adoption. Under the Company’s 2000 and 2004 stock plans there are a total of 306,254 shares available for future grant as of December 31, 2008. 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 and for the mandatory withholding of income taxes. The 2004 Plan options do not contain reload options. However, the 2004 plan allows for the grant of stock appreciation rights (none have been granted). 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. The Company issued 5,898 shares of stock-based option awards including reload options for the three month period ended December 31, 2008. The Company recognized total non-cash stock-based compensation

8

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

cost of $303 and $256 associated with stock options for the three month period ended December 31, 2008 and 2007, respectively. As of December 31, 2008, the total remaining unrecognized compensation cost related to non-vested stock options was $1.7 million. The following table shows information regarding outstanding and exercisable options as of December 31, 2008:

	December 31, 2008
	Outstanding				Exercisable
	Number of Stock Options	Weighted-Average			Number of Stock Options	Weighted-Average
		Exercise Price		Life (in Years)		Exercise Price
Range of Exercise Price
$3.50 to $7.31	495,436	$	3.84	1.2	495,436	$	3.84
$7.32 to $11.85	164,655		11.60	4.4	158,655		11.62
$11.86 to $15.66	1,789,327		12.94	6.1	1,271,287		12.90
	2,449,418	$	11.01	5.0	1,925,378	$	10.47

The following table summarizes the Company’s stock option activity for the three months ended December 31, 2008:

	Number of Shares		Weighted Average Exercise Price
Outstanding at October 1, 2008	2,481,163		$	10.91
Granted	5,898			11.74
Exercised	(36,843	)		4.29
Forfeited	(800	)		12.84
Outstanding at December 31, 2008	2,449,418		$	11.01
Exercisable at December 31, 2008	1,925,378		$	10.47
Weighted average estimated fair value of options granted during the period			$	2.57

The fair value for grants during the three month period ended December 31, 2008 was estimated at the date of grant using a Black-Scholes option pricing model with the following assumptions:

Risk-free interest rate	2.6	%
Dividend yield	2.1	%
Volatility of the market price	51.1	%
Weighted-average expected life of options	1.2 yrs

The aggregate intrinsic value of options outstanding as of December 31, 2008 was $4.4 million. The intrinsic value represents total pre-tax intrinsic value (the difference between the Company’s closing stock price on the last trading date of the three-month period ended December 31, 2008 and the exercise price, multiplied by the number of in-the-money options).

9

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Under the Company’s 2000 and 2004 restricted stock plans, 49,620 shares of restricted stock are reserved for issuance as of December 31, 2008. The Company can also 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 five-year vesting period of the underlying shares. Compensation expense related to the restricted stock plan was $422 and $431 for the three months ended December 31, 2008 and 2007, respectively. The remaining unearned compensation cost was $2.2 million and $4.0 million as of December 31, 2008 and 2007, respectively. On the 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.

The terms of issued restricted stock allow for accelerated vesting when an employee reaches retirement age and ceases continuous service. Under SFAS No. 123R, grants issued subsequent to adoption of SFAS 123R that are subject to such an accelerated vesting upon the recipient’s attainment of retirement age 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 shorter than the plan’s five-year vesting period depending on the age of the grantee. As of December 31, 2008, 92,200 shares of the awards granted were subject to this accelerated vesting. Nonvested shares outstanding were 205,950 at December 31, 2008 and September 30, 2008.

There was no additional expense recognized for accelerated vesting of restricted stock during the three months ended December 31, 2008 and 2007, respectively.

The Company maintains an ESOP. The Company’s first ESOP loan was paid off in December 2007. The second loan that funded the ESOP was initiated in connection with the second step public offering. The loan matures in December 2023 and results in the release of 49,932 shares annually. The ESOP expense for the shares released under the loans totaled $141 and $311 for the three month period ended December 31, 2008 and 2007, respectively. The Company reduced ESOP expense by $4 and $293 related to forfeitures from the plan during the same respective periods.

3. Critical Accounting Policies

The accounting and reporting policies of the Company are prepared in accordance with accounting principles generally accepted within the United States of America and conform to general practices within the banking industry. Accounting policies considered critical to the Company’s financial results include calculating the allowance for loan losses, accounting for goodwill and the recognition of interest income. The methodology for determining the allowance for loan losses is considered by management 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. Application of assumptions different than those used by management could result in material changes in the Company’s financial position or results of operations. Accounting for goodwill is considered to be a critical policy because goodwill must be tested for impairment at least annually using a “two-step” approach that 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 utilized. Interest income on loans, securities and other interest-earning assets is accrued monthly unless management considers the collection of interest to be doubtful. In accounting for the recognition of interest income, a loan is placed on non-accrual status when management has determined that the borrower is unlikely to meet contractual principal or interest obligations, or when payments are 90 days or more past due, unless well secured and in the process of collection. Accrual of interest ceases and, in general, uncollected past due interest is reversed and charged against current interest income, if such unpaid interest relates to the current year. Prior years’ non-accrual interest 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. Footnote 1 (Summary of Significant Accounting Policies) of the Annual Report on Form 10-K for the year ended September 30, 2008 provides additional detail regarding the Company’s accounting policies.

10

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

4. Loans

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

	December 31, 2008		September 30, 2008
Real estate - residential mortgage	$	510,991	$	513,381
Real estate - commercial mortgage		551,716		554,811
Acquisition, development & construction loans		182,086		170,979
Commercial business loans		249,702		243,642
Consumer loans		252,110		248,740
Total	$	1,746,605	$	1,731,553

5. Allowance for Loan Losses and Non-Performing Assets

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

Activity in the allowance for loan losses for the periods indicated is summarized below:

	Three Months Ended December 31,
	2008			2007
Balance at beginning of period	$	23,101		$	20,389
Charge-offs		(2,004	)		(863	)
Recoveries		48			99
Net charge-offs		(1,956	)		(764	)
Provision for loan losses		2,500			700
Balance at end of period	$	23,645		$	20,325
Net charge-offs to average loans outstanding (annualized)		0.45	%		0.19	%

11

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

The following table sets forth the amounts and categories of the Company’s non-performing assets at the dates indicated. At both dates, the Company had no troubled debt restructurings (loans for which a portion of interest or principal has been forgiven and loans modified at interest rates materially less than current market rates).

	December 31, 2008					September 30, 2008
	90 days past due Still accruing		Non- Accrual			90 days past due Still accruing		Non- Accrual
Non-performing loans:
One- to four- family	$	3,216	$	1,731		$	2,487	$	1,731
Commercial real estate		770		3,713			732		3,100
Commercial business		—		3,099			—		2,811
Acquisition, development and construction loans		—		4,573			—		5,596
Consumer		575		370			70		351
Total non-performing loans	$	4,561	$	13,486		$	3,289	$	13,589
Real estate owned:
Land loan				1,690					—
One- to four-family				84					84
Total real estate owned				1,774					84
Total non-performing assets			$	19,821				$	16,962
Ratios:
Non-performing loans to total loans				1.03	%				0.97	%
Non-performing assets to total assets				0.68	%				0.57	%
Allowance for loan losses to total non-performing loans				131	%				137	%
Allowance for loan losses to average loans				1.36	%				1.35	%

The Company’s recorded investment in impaired loans, as defined by SFAS No. 114, was $13.1 million and $13.2 million at December 31, 2008 and September 30, 2008, respectively. The allowance for loan losses associated with impaired loans was $4.3 million and $1.3 million at December 31, 2008 and September 30, 2008, respectively.

12

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

6. Fair value measurements

Effective October 1, 2008, the Company adopted SFAS No. 157, “Fair Value Measurements,” for fair value measurements of certain of its financial instruments. The provisions of SFAS No. 157 that pertain to measurement of non-financial assets and liabilities have been deferred by the Financial Accounting Standards Board (“FASB”) until October 1, 2009.

The provisions of SFAS No. 159, “The Fair Value Option for Financial Assets and Financial Liabilities,” which permit an entity to choose to measure eligible financial instruments and other items at fair value, also became effective October 1, 2008. The Company has elected not to adopt any fair value provisions under FAS 159 for any of its financial assets or financial liabilities as of December 31, 2008.

The definition of fair value is clarified by SFAS No. 157 to be the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value excludes incremental direct selling or transfer costs but considers the condition and/or location of the asset or liability and any restrictions on the use of the asset as of the measurement date. SFAS No. 157 establishes a three-level hierarchy for fair value measurements based upon the inputs to the valuation of an asset or liability.

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

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

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

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

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 and other investments

Securities classified as available for sale and other investments (included in “Other assets” on the consolidated balance sheet) are generally reported at fair value using Level 1 and Level 2 inputs. The Company utilizes an outside vendor to obtain valuations for its traded securities as well as information received from a third party investment advisor. Certain investments are actively traded and therefore have been classified as Level 1 valuations (U.S. Treasuries and certain government sponsored agencies). The majority of the Company’s available for sale investment securities (mortgage backed securities issued by US government corporations and government sponsored entities) have been valued by reference to prices for similar securities or through model-based techniques in which all significant inputs are observable (Level 2). The Company utilizes prices from a leading provider of market data information and compares them to dealer indicative bids from the Company’s external investment advisor. For securities where there is limited trading activity (local municipals and thinly traded equities) or less observable valuation inputs, the Company has classified such valuations as Level 2. For these securities the Company values by reference to the market closing price (last trade) on the measurement date or by quoted prices for similar assets in active markets. In the event that no trade occurred on the measurement date, reference would be made to an indicative bid or the last trade nearest to the measurement date.

Real estate loans held for sale

The Company utilizes commitments to sell real estate loans to hedge the exposure to changes in fair value of loans held for sale. The carrying value of the hedged real estate loan held for sale includes changes in estimated fair value during the hedge period, which is usually from the date that the loan closes through the sale date. The fair value of these loans is calculated by reference to quoted prices in the secondary markets for commitments to sell real estate loans with similar characteristics (Level 2).

13

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

Commitments to sell real estate loans:

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

Interest rate swap agreements

The Company can utilize interest rate swap agreements as part of the management of its interest rate risk. The fair value of interest rate swap agreements is obtained using externally developed pricing models which are based on market observable inputs and are therefore classified as Level 2. The Company had no interest rate swap agreements at December 31, 2008.

A summary of assets and liabilities at December 31, 2008 measured at estimated fair value on a recurring basis were as follows:

	December 31, 2008		Level 1		Level 2		Level 3
Investment securities available for sale	$	795,017	$	32,179	$	762,838	$	—
Real estate loans held for sale		489		—		489		—
Total Assets	$	795,506	$	32,179	$	763,327	$	—

The Company did not have any Level 3 assets or liabilities to report changes for the three month period ending December 31, 2008.

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

Loans

Loans are not generally recorded at fair value on a recurring basis. The Company may record nonrecurring adjustments to the carrying value of loans based on fair value measurements for partial charge-offs of the uncollectible portions of these loans. Nonrecurring adjustments also include certain impairment amounts for collateral dependant loans calculated in accordance with SFAS No. 114, “Accounting by Creditors for Impairment of a loan”, when establishing the allowance for credit losses. Such amounts are generally based on the fair value of the underlying collateral supporting the loan and, as a result, the carrying value of the loan less the calculated valuation amount does not necessarily represent the fair value of the loan. Real estate collateral is valued using independent appraisals or other indications of value based upon recent comparable sales of similar properties. Any fair value adjustments for loans categorized here are classified as Level 2. Estimates of fair value used for other collateral supporting commercial loans generally are based on assumptions not observable in the market place and therefore such valuations have been classified as Level 3. Loans subject to nonrecurring fair value measurements were $13.1 million which equals the carrying value at December 31, 2008, of which all have been classified as Level 2. Changes in fair value recognized on partial charge-offs on loans held by the company for the three months ended December 31, 2008 were $78. The allowance for loan losses associated with impaired loans was $4.3 million at December 31, 2008.

Mortgage servicing rights

The company utilizes the amortization method to subsequently measure its servicing asset. In accordance with Statement of Financial Accounting Standard No. 156, “Accounting for Servicing of Financial Assets – an amendment to FASB no. 140” (“SFAS 156”), 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, who considers the market prices for similar assets and the present value of expected future cash flows associated with the servicing rights. Assumptions utilized include estimates of the cost of servicing, loan default rates, an appropriate discount rate and prepayment speeds. The determination of fair value of servicing rights is considered a Level 3 valuation. At December 31, 2008, $583 of mortgage servicing rights had a carrying value equal to their fair value. Changes in fair value of mortgage servicing rights recognized for the three months ended December 31, 2008 was a decrease of $72.

14

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

7. Securities

The following is a summary of securities available for sale at December 31, 2008 and September 30, 2008:

	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
December 31, 2008
Mortgage-backed securities
Mortgage-backed pass-through securities	$	557,937	$	14,644	$	(381	)	$	572,200
Collateralized mortgage obligations		33,829		1,093		(4,019	)		30,903
Total mortgage-backed securities		591,766		15,737		(4,400	)		603,103
Investment securities
U.S. Government Federal Agency Securities		30,846		1,379		(1	)		32,224
State and municipal securities		160,143		1,536		(2,951	)		158,728
Equities		1,146		—		(184	)		962
Total investment securities		192,135		2,915		(3,136	)		191,914
Total available for sale	$	783,901	$	18,652	$	(7,536	)	$	795,017
September 30, 2008
Mortgage-backed securities
Mortgage-backed pass-through securities	$	576,551	$	3,427	$	(3,017	)	$	576,961
Collateralized mortgage obligations		34,521		636		(1,102	)		34,055
Total mortgage-backed securities		611,072		4,063		(4,119	)		611,016
Investment securities
U.S. Government Federal Agency Securities		30,022		19		—			30,041
State and municipal securities		159,334		125		(9,858	)		149,601
Equities		1,146		—		(116	)		1,030
Total investment securities		190,502		144		(9,974	)		180,672
Total available for sale	$	801,574	$	4,207	$	(14,093	)	$	791,688
The following is a summary of securities held to maturity at December 31, 2008 and September 30, 2008:
	Amortized Cost		Gross Unrecognized Gains		Gross Unrecognized Losses			Fair Value
December 31, 2008
Mortgage-backed securities
Mortgage-backed pass-through securities	$	8,513	$	128	$	(87	)	$	8,554
Collateralized mortgage obligations		1,005		—		(16	)		989
Total mortgage-backed securities		9,518		128		(103	)		9,543
Investment securities
State and municipal securities		40,984		681		(166	)		41,499
Other investments		59		4		—			63
Total investment securities		41,043		685		(166	)		41,562
Total held to maturity	$	50,561	$	813	$	(269	)	$	51,105
September 30, 2008
Mortgage-backed securities
Mortgage-backed pass-through securities	$	9,313	$	133	$	(35	)	$	9,411
Collateralized mortgage obligations		1,038		—		(1	)		1,037
Total mortgage-backed securities		10,351		133		(36	)		10,448
Investment securities
State and municipal securities		32,604		236		(449	)		32,391
Other investments		58		2		—			60
Total investment securities		32,662		238		(449	)		32,451
Total held to maturity	$	43,013	$	371	$	(485	)	$	42,899

15

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

At December 31, 2008 and September 30, 2008, the accumulated unrealized net gain / (loss) on securities available for sale, net of tax expense / (benefit) was $6.6 million and $(5.9) million, respectively. There were realized gains of $331 and no realized losses for the three months ended December 31, 2008.

Securities, including held-to-maturity securities, with carrying amounts of $302.6 million and $323.7 million were pledged as collateral for borrowings and securities repurchase agreements at December 31, 2008 and September 30, 2008, respectively. Securities with carrying amounts of $268.3 million and $441.6 million were pledged as collateral for municipal deposits and other purposes at December 31, 2008 and September 30, 2008, respectively.

The following tables summarize, for all securities in an unrealized loss position at December 31, 2008 and September 30, 2008, respectively, the aggregate fair value and gross unrealized loss by length of time those securities have continuously been in an unrealized loss position:

	Less than 12 months					12 months or longer					Total
	Unrecognized Losses			Fair Value		Unrecognized Losses			Fair Value		Unrecognized Losses			Fair Value
As of December 31, 2008
Available For Sale:
Mortgage-backed securities	$	(350	)	$	55,905	$	(31	)	$	869	$	(381	)	$	56,774
Collateralized mortgage obligations		(2,758	)		5,958		(1,261	)		2,974		(4,019	)		8,932
U.S. Government agency securities		—			—		(1	)		45		(1	)		45
Municipal securities		(1,581	)		57,460		(1,370	)		20,320		(2,951	)		77,780
Equity securities		(164	)		877		(20	)		85		(184	)		962
Total available-for-sale:		(4,853	)		120,200		(2,683	)		24,293		(7,536	)		144,493
Held to Maturity:
Mortgage-backed securities		(68	)		3,772		(29	)		1,259		(97	)		5,031
Collateralized mortgage obligations		(6	)		989		—			—		(6	)		989
State and municipal securities		(142	)		3,107		(24	)		431		(166	)		3,538
Total held to maturity:		(216	)		7,868		(53	)		1,690		(269	)		9,558
Total securities:	$	(5,069	)	$	128,068	$	(2,736	)	$	25,983	$	(7,805	)	$	154,051

16

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

	Less than 12 months					12 months or longer					Total
	Unrecognized Losses			Fair Value		Unrecognized Losses			Fair Value		Unrecognized Losses			Fair Value
As of September 30, 2008
Available For Sale:
Mortgage-backed securities	$	(2,575	)	$	245,362	$	(442	)	$	22,492	$	(3,017	)	$	267,854
Collateralized mortgage obligations		(1,100	)		13,885		(2	)		250		(1,102	)		14,135
U.S. Government agency securities		—			—		—			47		—			47
Municipal securities		(7,535	)		113,509		(2,323	)		19,241		(9,858	)		132,750
Equity securities		(115	)		926		(1	)		104		(116	)		1,030
Total available-for-sale:		(11,325	)		373,682		(2,768	)		42,134		(14,093	)		415,816
Held to Maturity:
Mortgage-backed securities		(4	)		2,617		(31	)		1,282		(35	)		3,899
Collateralized mortgage obligations		(1	)		1,037		—			—		(1	)		1,037
State and municipal securities		(420	)		13,136		(29	)		540		(449	)		13,676
Total held to maturity:		(425	)		16,790		(60	)		1,822		(485	)		18,612
Total securities:	$	(11,750	)	$	390,472	$	(2,828	)	$	43,956	$	(14,578	)	$	434,428

Substantially all of the unrealized losses at December 31, 2008 relate to investment grade securities, attributable to changes in market interest rates subsequent to purchase. There were no individual securities with unrealized losses of significant dollar amounts at December 31, 2008. A total of 288 securities were in a continuous unrealized loss position for less than 12 months, and 92 securities for 12 months or longer. For 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. The Company has the ability and intent to hold securities with unrealized losses until a market price recovery (which, for securities with fixed maturities, may be until maturity); therefore, the Company did not consider these investments to be other-than-temporarily impaired at December 31, 2008. The Company does not own any preferred stock with Federal National Mortgage Association or Federal Home Loan Mortgage Corporation. Private label CMO’s have an amortized cost of $13.5 million and a fair value (carrying value) of $9.5 million at December 31, 2008. These securities were all performing as of December 31, 2008 and are expected to perform based on current information.

8. Deposits

Major classifications of deposits are summarized below:

	December 31, 2008		September 30, 2008
Demand Deposits
Retail	$	154,802	$	162,161
Commercial and municipal		225,664		325,729
Business and municipal NOW deposits		98,097		217,462
Personal NOW deposits		115,996		115,442
Total transaction accounts		594,559		820,794
Savings		336,139		335,986
Money market		300,890		306,504
Certificates of deposit		666,554		525,913
Total deposits	$	1,898,142	$	1,989,197

Municipal deposits of $335.2 million and $460.8 million were included in total deposits at December 31, 2008 and September 30, 2008, respectively. Certificates of deposit include $32.9 million in brokered deposits at December 31, 2008 and $16.6 million at September 30, 2008.

17

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

9. FHLB and Other Borrowings

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

	December 31, 2008				September 30, 2008
	Amount		Rate		Amount		Rate
By type of borrowing:
Advances	$	321,454	2.88	%	$	305,842	3.20	%
Repurchase agreements		245,065	3.97	%		260,166	3.85
Total borrowings	$	566,519	3.35	%	$	566,008	3.50	%
By remaining period to maturity:
One year or less	$	157,631	1.51	%	$	153,893	2.16	%
One to two years		55,730	4.23	%		52,961	3.62	%
Two to three years		42,117	3.87	%		32,129	3.88	%
Three to four years		12,500	4.03	%		22,500	4.03	%
Four to five years		29,674	3.84	%		35,424	3.96	%
Five years or greater		268,867	4.09	%		269,101	4.09	%
Total borrowings	$	566,519	3.35	%	$	566,008	3.50	%

As a member of the FHLB of New York, the Bank may borrow in the form of term and overnight borrowings up to the amount of eligible mortgages and securities that have been pledged as collateral under a blanket security agreement. As of December 31, 2008 and September 30, 2008, the Bank had pledged mortgages totaling $391,338 and $385,279, respectively. The Bank had also pledged securities with carrying amounts of $302,561 and $323,694 as of December 31, 2008 and September 30, 2008, respectively, to secure borrowings. Based on total outstanding borrowings with the FHLB, which totaled $565,947 and $555,252 as of December 31, 2008 and September 30, 2008, the bank had unused borrowing capacity under the FHLB Line of Credit of $199.2 million and $142.0 million, respectively. As of December 31, 2008, the Bank may borrow additional amounts by pledging securities not required to be pledged for other purposes with a market value of $167.0 million. FHLB advances are subject to prepayment penalties, if repaid prior to maturity.

The Bank had $100.8 million in overnight and floating rate borrowings that reprice daily, as of December 31, 2008. During the three months ended December 31, 2008 no borrowings were called. Of the $408.9 million in borrowings due in greater than one year, $283.0 are callable quarterly after an initial lockout period through their respective maturities. The remaining premium recorded from prior acquisitions, but not accreted into income at December 31, 2008 was $572.

18

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

10. Earnings Per Common Share

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

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

Basic earnings per common share are computed as follows:

	For the Three Months Ended December 31,
	2008		2007
Weighted average common shares outstanding (basic), in ‘000s		38,584		39,470
Net Income	$	6,291	$	5,894
Basic earnings per common share	$	0.16	$	0.15

Diluted earnings per common share are computed as follows:

	For the Three Months Ended December 31,
	2008		2007
Weighted average common shares outstanding (basic), in ‘000s		38,584		39,470
Effect of common stock equivalents		235		335
		38,819		39,805
Net Income	$	6,291	$	5,894
Diluted earnings per common share	$	0.16	$	0.15

As of December 31, 2008, 1,910,810 weighted average shares were anti-dilutive for the three month period ending December 31, 2008.

11. Guarantor’s Obligations Under Guarantees

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

As of December 31, 2008, the Company had $30.8 million in outstanding letters of credit, of which $12.9 million were secured by cash collateral.

19

PROVIDENT NEW YORK BANCORP AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (unaudited)

(In thousands, except share data)

12. Pension and Other Post-Retirement Plans

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

	Pension Plan						Other Post Retirement Plans
	Three months Ended December 31,						Three months Ended December 31,
	2008			2007			2008			2007
Service Cost	$	—		$	—		$	5		$	5
Interest Cost		398			397			23			8
Expected return on plan assets		(445	)		(537	)		—			—
Amortization net transition obligation		—			—			3			3
Amortization of prior service cost		—			—			12			1
Amortization of (gain) or loss		207			—			(29	)		(20	)
	$	160		$	(140	)	$	14		$	(3	)

As of December 31, 2008, a contribution of $1.5 million had been deposited into the pension plan. The Company anticipates an additional contribution of $3.7 million during the 2009 fiscal year.

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 $23 and $21 for the three months ended December 31, 2008 and 2007, respectively. As of December 31, 2008, contributions of $9 were deposited to fund benefit payments related to the SERP. The company anticipates funding the SERP during the quarter ending March 31, 2009 in the amount of $2.0 million. The remaining liability of $463 is expected to stay unfunded.

20

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

Forward-Looking Statements

We make statements in this Report, and we may from time to time make other statements, regarding our outlook or expectations for earnings, revenues, expenses and/or other matters regarding or affecting Provident New York Bancorp that are forward-looking statements within the meaning of the Private Securities Litigation Reform Act. Forward-looking statements are typically identified by words such as “believe,” “expect,” “anticipate,” “intend,” “outlook,” “estimate,” “forecast,” “project” and other similar words and expressions.

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.

Our forward-looking statements are subject to the following principal risks and uncertainties. We provide greater detail regarding some of these factors elsewhere in other documents filed with the SEC. Our forward-looking statements may also be subject to other risks and uncertainties, including those discussed elsewhere in this Report or in our other filings with the SEC.

• Our business and operating results are affected by business and economic conditions generally or specifically in the principal markets in which we do business. We are affected by changes in our customers’ and counterparties’ financial performance, as well as changes in customer preferences and behavior, including as a result of changing business and economic conditions.

• The values of our assets and liabilities, as well as our overall financial performance, are also affected by changes in interest rates or in valuations in the debt and equity markets. Actions by the Federal Reserve and other government agencies, including those that impact money supply and market interest rates, can affect our activities and financial results.

• Competition can have an impact on customer acquisition, growth and retention, as well as on our credit spreads and product pricing, which can affect market share, deposits and revenues.

• Our ability to implement our business initiatives and strategies could affect our financial performance over the next several years.

• Our ability to grow successfully through acquisitions is impacted by a number of risks and uncertainties related both to the acquisition transactions themselves and to the integration of the acquired businesses into our Company after closing.

• Legal and regulatory developments could have an impact on our ability to operate our businesses or our financial condition or results of operations or our competitive position or reputation. Reputational impacts, in turn, could affect matters such as business generation and retention, our ability to attract and retain management, liquidity and funding. These legal and regulatory developments could include: (a) the unfavorable resolution of legal proceedings or regulatory and other governmental inquiries; (b) increased litigation risk from recent regulatory and other governmental developments; (c) the results of the regulatory examination process, our failure to satisfy the requirements of agreements with governmental agencies, and regulators’ future use of supervisory and enforcement tools; (d) legislative and regulatory reforms, including changes to laws and regulations involving tax, pension, and the protection of confidential customer information; and (e) changes in accounting policies and principles.

• Our business and operating results are affected by our ability to identify and effectively manage risks inherent in our businesses, including, where appropriate, through the effective use of third-party insurance and capital management techniques.

• Our ability to anticipate and respond to technological changes can have an impact on our ability to respond to customer needs and to meet competitive demands.

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

• Recent and future legislation and regulatory actions responding to instability and volatility in the credit market may significantly affect our operations, financial condition and earnings. Future legislative or regulatory actions could impair our rights against borrowers, result in increased credit losses, and significantly increase our operating expenses.

• The current levels of volatility in the market are unprecedented and have adversely affected us and the financial services industry as a whole. The market turmoil and tightening of credit have led to an increased level of commercial and consumer delinquencies, lack of consumer confidence, increased market volatility and widespread reduction of business activity generally. The resulting economic pressure on consumers and lack of confidence in the financial markets affect our business, financial condition and results of operations.

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Overview

The Company provides financial services to individuals and businesses primarily in New York and New Jersey. The Company’s business is primarily accepting deposits from customers through its banking centers and investing those deposits, together with funds generated from operations and borrowings, in commercial real estate loans, commercial business loans, residential mortgages, consumer loans, and investment securities. Additionally, the Company offers investment management services.

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. Non-interest income consists primarily of banking fees and service charges, net increases in the cash surrender value of bank-owned life insurance (“BOLI”) contracts, investment management fees and realized gains and losses on available for sale securities. The three months ended December 31, 2008 also included a gain on the sale of premises and equipment. Our 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 and data processing expenses. Results of operations are also significantly affected by general economic and competitive conditions, particularly changes in market interest rates, government policies and actions of regulatory authorities.

Management Strategy

We operate as an independent community bank that offers a broad range of customer-focused financial services as an alternative to large regional, multi-state and international banks in our market area. Management has invested in the infrastructure and staffing to support our strategy of serving the financial needs of businesses, individuals and municipalities in our market area. We focus our efforts on core deposit generation, especially transaction accounts and quality loan growth with emphasis on growing commercial loan balances. We seek to maintain a disciplined pricing strategy on deposit generation that will allow us to compete for high quality loans while maintaining an appropriate spread over funding assets.

Comparison of Financial Condition at December 31, 2008 and September 30, 2008

Total assets as of December 31, 2008 were $2.9 billion, a decrease of $62.8 million, or 2.1% compared to September 30, 2008 levels. The decrease in assets is primarily due to an $84.6 decrease in cash and due from banks as a result of a large deferred cash letter received on September 30, 2008. This decrease was partially offset by an increase in net loans of $14.5 million. Provident Bank does not originate or hold subprime mortgage loans, which we consider to be loans to borrowers with subprime credit scores combined with either high loan-to-value or high debt-to-income ratios. We also hold no subprime loans through our investment portfolio.

Net Loans as of December 31, 2008 were $1.7 billion, an increase of $14.5 million, or 0.8%, over net loan balances of $1.7 billion at September 30, 2008. Commercial loans increased by $14.1 million, or 1.5%, over balances at September 30, 2008, as the Company has increased its emphasis on commercial and industrial (“C&I”) lending. Consumer loans increased by $3.4 million, or 01.4%, during the three month period ended December 31, 2008, while residential mortgage loans decreased by $2.4 million, or 0.5%. Total loan originations, excluding loans originated for sale, were $118.3 million for the three months ended December 31, 2008 and repayments were $101.6 million during the same time period.

Net charge-offs of $2.0 million for the three months ended December 31, 2008 represent 0.45% of average loans outstanding on an annualized basis. Non-performing loans increased $1.2 million from September 30, 2008, primarily due to the current economic slow down to $18.0 million. Non-performing loans as a percentage of total loans was 1.03%, as compared to 0.97% at September 30, 2008, and 0.57% at December 31, 2007. The allowance for loan losses represents 1.36% of average loans and 131% of non-performing loans, at December 31, 2008 compared to 1.35% of average loans and 137% of non-performing loans at September 30, 2008.

Total securities increased by $10.9 million, or 1.3%, to $845.6 million at December 31, 2008 due to improvements in market value of $21.0 million from $834.7 million at September 30, 2008. Mortgage-backed securities at an amortized cost decreased by $22.1 million primarily due to pay-downs totaling $20.0 million. These decreases were partially offset by increases in state and municipal securities of $9.2 million primarily due to purchases and U.S. Government federal agency securities increased $824,000. The Company owns $13.5 million at cost of private label CMO’s with a carrying value of $9.5 million. These securities are all currently performing and the Company does not believe any of these securities are other than temporarily impaired.

Deposits as of December 31, 2008 were $1.9 billion, a decrease of $91.1 million, or 4.6%, from September 30, 2008. Retail and commercial transaction accounts were 31.3% of deposits at December 31, 2008 and 41.3% at September 30, 2008. The decrease in demand deposits of $107.4 million, or 22.0%, and retail and commercial NOW accounts of $118.8 million or 35.7% were offset by an increase in

22

certificate of deposit accounts of $140.6 million. Money Market deposits decreased by $5.6 million or 1.8% and savings deposits increased by $153,000. Within the categories above, municipal transaction accounts decreased by $228.7 million, (of which $242.3 million relates to seasonal tax collections), municipal money market increased by $7.7 million, municipal savings accounts increased by $100,000 and municipal certificates of deposits increased by $95.4 million. We added staff resources to our municipal business, which has resulted in increased municipal relationships.

Borrowings were relatively unchanged increasing by $511,000, or 0.1%, from September 2008, to $566.5 million.

Stockholders’ equity increased $17.8 million from September 30, 2008 to $417.0 million at December 31, 2008, primarily due to an increase in other comprehensive income of $12.6 million. An increase of $3.8 million in the Company’s retained earnings to $142.5 million and stock based compensation transactions of $1.3 million added to the overall increase in capital. Stock repurchases were undertaken at lower levels than in recent quarters. As of December 31, 2008, 1,152,600 shares remain available for repurchase under the Company’s current stock repurchase program.

Bank Tier I capital to adjusted total assets was at 8.3% at December 31, 2008. Tangible capital on a consolidated basis is 9.0% of tangible assets.

Credit Quality

Net charge-offs for the quarter were $2.0 million (0.45% of average loans on an annualized basis) compared to $1.0 million in the prior linked quarter and $764,000 for the quarter ended December 31, 2007. Losses continue to be concentrated in the credit-scored community business loan portfolio. Net charge-offs in the community business loan portfolio for the first quarter were $1.5 million on average outstandings of $107.3 million. During the quarter the Company provided $2.5 million in loan loss provisions, which was $544,000 in excess of net charge-offs. This resulted in an increase in the allowance for loan losses to $23.6 million, or 1.35% of loans outstanding, and 131% of non-performing loans. The primary reasons for increasing the allowance for loan losses continue to be the growth in the commercial and industrial and construction loan portfolios and the general economic slowdown. Nonperforming loans increased $1.2 million in the first quarter to $18.0 million (1.03% of loans) compared to September 30, 2008, primarily in the area of commercial loans and residential mortgages. Non performing assets increased $2.9 million to $19.8 million (0.68% of assets) at December 31, 2008 compared to September 30, 2008 as the company completed the foreclosure of a property for $1.7 million in addition to the increase in non performing loans.

Comparison of Operating Results for the Three Months Ended December 31, 2008 and December 31, 2007

Net income for the three months ended December 31, 2008 was $6.3 million, an increase of $397,000, compared to $5.9 million for the same period in fiscal 2007. Net interest income before provision for loan losses for the three months ended December 31, 2008 increased by $2.7 million, or 12.0%, to $25.0 million, compared to $22.4 million for the same period in the prior year. The provision for loan losses for the three months ended December 31, 2008 increased $1.8 million, or 257%, to $2.5 million, compared to $700,000 for the same period in the prior year due to growth in the loan portfolio, weaker economic conditions and recent loss experience in the portfolios. Net interest margin on a tax equivalent basis for the three months ended December 31, 2008 increased 26 basis points compared to the same period last year from 3.74% to 4.00%, primarily due to increases in loans funded by maturing lower rate investments, and significant reductions in the average cost of deposits and borrowings, partially offset by approximately $664.7 million in floating rate loans that have reduced rates as a result of decreases in the prime rate. Non-interest income for the three months ended December 31, 2008, was $5.8 million, an increase of $812,000, compared to $5.0 million for the same period in fiscal 2008 due to gains on sale of premises and securities of $848,000. Non-interest expense increased $1.1 million, or 6.1%, to $19.2 million for the three months ended December 31, 2008, compared to $18.1 million for the same period in the prior year primarily due to higher salary and benefit costs of $1.1 million. Compensation and employee benefits increased due to employee related benefit costs and additional employees hired during fiscal 2008, as the Company added resources to its municipal business and opened a branch location in Tarrytown, Westchester County, New York.

The relevant operating results performance measures follow:

	Three Months Ended December 31,
	2008			2007
Per common share:
Basic earnings	$	0.16		$	0.15
Diluted earnings		0.16			0.15
Dividends declared		0.06			0.06
Return on average (annualized):
Assets		0.86	%		0.84	%
Equity		6.22	%		5.80	%

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

	Three Months Ended December 31,
	2008								2007
	Average Outstanding Balance			Interest			Average Yield Rate		Average Outstanding Balance			Interest			Average Yield Rate
Interest earning assets:
Commercial and commercial mortgage loans	$	957,907		$	15,121		6.26	%	$	885,639		$	17,090		7.66	%
Consumer loans		248,924			3,136		5.00			242,169			4,100		6.72
Residential mortgage loans		505,988			7,570		5.94			495,399			7,441		5.96
Total loans 1		1,712,819			25,827		5.98			1,623,207			28,631		7.00
Securities-taxable		647,414			7,892		4.84			644,336			7,916		4.87
Securities-tax exempt 2		189,316			2,853		5.98			164,144			2,514		6.08
Other earning assets		32,856			297		3.59			35,968			664		7.32
Total securities and other earning assets		869,586			11,042		5.04			844,448			11,094		5.21
Total interest-earning assets		2,582,405			36,869		5.66			2,467,655			39,725		6.39
Non-interest-earning assets		325,543								312,705
Total assets	$	2,907,948							$	2,780,360
Interest bearing liabilities:
NOW Checking	$	231,807			335		0.57	%	$	143,396			193		0.53	%
Savings, clubs and escrow		347,826			275		0.31			348,670			334		0.38
Money market accounts		304,346			999		1.30			259,931			1,739		2.65
Certificate accounts		595,595			4,198		2.80			581,204			6,657		4.54
Total interest-bearing deposits		1,479,574			5,807		1.56			1,333,201			8,923		2.66
Borrowings		628,988			5,018		3.17			665,380			7,548		4.50
Total interest-bearing liabilities		2,108,562			10,825		2.04			1,998,581			16,471		3.27
Non-interest bearing deposits		380,021								357,246
Other non-interest-bearing liabilities		18,261								21,387
Total liabilities		2,506,844								2,377,214
Stockholders’ equity		401,104								403,146
Total liabilities and equity	$	2,907,948							$	2,780,360
Net interest rate spread							3.63	%							3.12	%
Net earning assets	$	473,843							$	469,074
Net interest margin					26,044		4.00	%					23,254		3.74	%
Less tax equivalent adjustment 2					(998	)							(880	)
Net interest income				$	25,046							$	22,374
Ratio of average interest-earning assets to average interest bearing liabilities		122.47	%							123.47	%

¹ Includes non-accrual loans

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

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

	Three Months Ended December 31, 2008 vs. 2007 Increase / (Decrease) Due to
	Volume1			Rate1			Total
Interest earning assets
Commercial and commercial mortgage loans	$	1,306		$	(3,275	)	$	(1,969	)
Consumer loans		109			(1,073	)		(964	)
Residential mortgage loans		155			(26	)		129
Securities-taxable		31			(55	)		(24	)
Securities-tax exempt2		380			(41	)		339
Other earning assets		(53	)		(314	)		(367	)
Total interest income		1,928			(4,784	)		(2,856	)
Interest-bearing liabilities
NOW checking		127			15			142
Savings		(1	)		(58	)		(59	)
Money market		255			(995	)		(740	)
Certificates of deposit		157			(2,616	)		(2,459	)
Borrowings		(395	)		(2,135	)		(2,530	)
Total interest expense		143			(5,789	)		(5,646	)
Net interest margin		1,785			1,005			2,790
Less tax equivalent adjustment2		(134	)		16			(118	)
Net interest income	$	1,651		$	1,021		$	2,672

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

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

Net interest income for the three months ended December 31, 2008 increased by $2.7 million, or 11.9%, to $25.0 million, compared to $22.4 million for the quarter ended December 31, 2007. Net interest income on a tax-equivalent basis increased by $2.8 million, or 12.0%, to $26.0 million for the quarter ended December 31, 2008, compared to $23.3 million for the same three months in 2007. The target fed funds rate averaged 1.1% for the quarter ended December 31, 2008 versus an average of 4.53% for the same quarter in the prior year. Comparable declines were experienced in the prime rate to which $663.7 million in loans reprice and $100.8 million in overnight and floating rate borrowings reprice. Interest expense decreased by $5.6 million, or 34.3% to $10.8 million for the quarter, compared to $16.5 million for the same quarter in 2007. Average interest-bearing liabilities increased by $110.0 million and the average cost of interest-bearing liabilities decreased by 123 basis points. The average yields on the loan portfolio decreased by 102 basis points. Average yields on investment securities and other earning assets on a tax-equivalent basis decreased by 17 basis points. Interest-bearing deposit accounts decreased 110 basis points primarily in the certificate of deposit and money market category. The Company employs a disciplined pricing strategy, which allows us to compete effectively in the market place without matching competitors’ promotional rates or terms in order to retain or grow deposit balances. Average borrowings costs decreased 133 basis points primarily due to floating rate borrowings repricing downward in response to the Federal Reserves’ lowering of the target federal funds rate. The tax equivalent net interest margin, therefore, increased by 26 basis points to 4.00%, while net interest spread increased by 51 basis points as compared to 2007 to 3.63%.

Provision for Loan Losses. The Company records provisions for loan losses, which are charged to earnings, in order to maintain the allowance for loan losses at a level necessary to absorb probable incurred loan losses inherent in the existing portfolio. The Company recorded $2.5 million in loan loss provisions for the quarter ended December 31, 2008, and recognized net charge-offs of $2.0 million in the quarter. This compares to $700,000 in loan loss provisions and $764,000 in net charge-offs for the quarter ended December 31, 2007. The primary driver of the increased charge-offs in the current quarter is the performance of the small business credit-scored portfolio. Net charge-offs for this portfolio were $1.5 million of the $107.3 million of average outstanding balances for the quarter. We continued to increase reserves in the quarter due to increases in the total loans outstanding, particularly commercial and industrial loans and construction loans and weakened economic conditions.

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Non-interest income for the three months ended December 31, 2008 increased by $812,000, or 16.4% to $5.8 million. Contributing to the increase were a $517,000 gain on the sale of premises and equipment, $331,000 in gains on sales of securities and increases in deposit service charges and fees of $116,000 or 3.8%, primarily in overdraft and debit card fees. These increases offset declines in title insurance and asset management fees, which decreased consistent with lower activity and asset valuation levels resulting from economic and market conditions.

Non-interest expense for the three months ended December 31, 2008 increased by $1.1 million, or 6.1%, to $19.2 million, primarily due to an increase of $1.1 million or 12.5% in compensation and employee benefits. This increase is primarily due to increases in salaries as a result of the Company adding resources to its municipal bank business, opening of the Tarrytown, Westchester office, pension expense and medical expenses. Increases were also experienced in occupancy and office operations, FDIC insurance and regulatory assessments as credits for FDIC assessments expired and other expense. FDIC insurance premiums are scheduled to increase from 5 basis points to 12 basis points effective for the quarter ending March 31, 2009. In addition, transaction accounts and NOW accounts paying 50 basis points or less, receive unlimited FDIC insurance through December 31, 2009. Amounts in excess of $250,000 per account are subject to an additional FDIC insurance premium of 10 basis points at December 31, 2008. Deposits in excess of $250,000 subject to additional FDIC assessments were $144.8 million. These increases were only partially offset by decreases in professional fees due to decreased consulting and administration fees, stock based compensation plans (ESOP loan maturity) and amortization of intangible assets.

Income Tax expense increased $174,000 to $2.8 million for the three months ended December 31, 2008, as compared to $2.6 million for December 31, 2007. The effective tax rate was 30.7% for both the first fiscal quarter of 2009 and 2008.

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Liquidity and Capital Resources

The objective of the Company’s liquidity management is to ensure the availability of sufficient cash flows to meet all financial commitments and to capitalize on opportunities for expansion. Liquidity management addresses the Company’s ability 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.

The Company’s primary sources of funds, in addition to net income, are deposits, proceeds from principal and interest payments on loans and securities, wholesale borrowings, the proceeds from maturities of securities and short-term investments, and proceeds from sales of loans originated for sale and securities available for sale. Maturities and scheduled amortization of loans and securities, as well as proceeds from borrowings, are predictable sources of funds. Other funding sources, however, such as deposit inflows and mortgage prepayments are greatly influenced by market interest rates, economic conditions and competition.

The Company’s primary investing activities are the origination of commercial mortgage loans, acquisition, development and construction loans, commercial and industrial loans, one- to four-family residential mortgage loans, home equity loans and the purchase of investment and mortgage-backed securities. During the three months ended December 31, 2008 and 2007, loan originations, excluding loans originated for sale, totaled $119.8 million and $151.2 million, respectively, and purchases of securities totaled $83.9 million and $62.5 million, respectively. Paydowns, maturities and sales on securities totaled $93.9 million and $87.9 million during the three months ended December 31, 2008 and 2007, respectively. Loan origination commitments and undrawn lines of credit totaled $446.8 million at December 31, 2008. The Company anticipates that it will have sufficient funds available to meet current loan commitments based upon past experiences of funding such commitments. The Company had investments totaling $48.2 million in BOLI contracts at December 31, 2008. Such investments are 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.

Deposit flows are generally affected by the level of interest rates, the products and interest rates offered by local competitors, the appeal of non-deposit investments, and other factors. During the three month period ended December 31, 2008 short-term interest rates were significantly reduced. The target federal funds rate at 0% to 0.25% has dropped 175 basis points since September 2008, and was an average of 2.949% for the prior fiscal year. The interest rate yield curve has finally regained a positive slope as the ten-year US Treasury yield at 2.21% was higher than the two-year note with a 0.77% yield.

Total deposits decreased by $91.1 million for the three months ended December 31, 2008. Within the deposit categories, total transaction accounts decreased by $226.2 million, of which municipal transaction accounts decreased $228.7 million or 71.8%. Certificates of deposit increased $140.6 million with municipal certificates increasing $95.4 million. Savings accounts increased by $153,000. The trends seen in deposit categories as of December 31, 2008 are consistent with those that the Company historically experiences in the first three months of the fiscal year. The decrease in municipal deposits is a result of September deposits including $242.3 million in seasonal tax deposits. Municipal deposits in New York State are required to be collateralized for amounts in excess of FDIC insurance limits with exception of non-interest checking and NOW accounts earning less than 50 basis points.

The Company monitors its liquidity position on a daily basis. It generally remains fully invested and utilizes additional sources of funds through Federal Home Loan Bank of New York advances and repurchase agreements, of which $566.5 million was outstanding at December 31, 2008. At December 31, 2008, we had additional borrowing capacity of $366.2 million under all credit facilities with the Federal Home Loan Bank. The Company may utilize brokered certificates of deposit as well, and as of December 31, 2008 there was $32.9 million outstanding. Management believes that the Company’s available sources of liquidity are adequate to meet its anticipated funding needs.

At December 31, 2008, the Bank exceeded all of its regulatory capital requirements with a Tier 1 capital (leverage) level of $229.4 million, or 8.3% of adjusted assets (which is above the minimum required level of $110.0 million, or 4.0%) and a total risk-based capital level of $253.0 million, or 13.1% of risk-weighted assets (which is above the required level of $154.4 million, or 8.0%). Regulations require leverage and total risk-based capital ratios of 5.0% and 10.0%, respectively, in order to be classified as well-capitalized. In performing this calculation, the intangible assets recorded as a result of acquisitions are deducted from capital and from total adjusted assets for purposes of regulatory capital measures. At December 31, 2008, the Bank exceeded all capital requirements for the well-capitalized classification. These capital requirements, which are applicable to the Bank only, do not consider additional capital retained at the holding company level. Provident Bank has elected not to participate in the US Treasury Department’s Capital Purchase Program (“CPP”). Provident decided not to participate because we have a strong, well capitalized balance sheet and believes that we are positioned to withstand the current economic headwinds.

The Company declared a dividend of $0.06 per share payable on February 19, 2009 to stockholders of record on February 5, 2009.

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The following table sets forth the Bank’s regulatory capital position at December 31, 2008 and September 30, 2008, compared to OTS requirements:

					OTS requirements
	Bank actual				Minimum capital adequacy				Classification as well capitalized
	Amount		Ratio		Amount		Ratio		Amount		Ratio
December 31, 2008:
Tangible capital	$	229,395	8.3	%	$	41,251	1.5	%	$	—	—
Tier 1 (core) capital		229,395	8.3			110,002	4.0			137,503	5.0	%
Risk-based capital:
Tier 1		229,395	11.9			—	—			115,820	6.0
Total		253,040	13.1			154,426	8.0			193,033	10.0
September 30, 2008:
Tangible capital	$	226,053	8.0	%	$	42,357	1.5	%	$	—	—
Tier 1 (core) capital		226,053	8.0			112,952	4.0			141,191	5.0	%
Risk-based capital:
Tier 1		226,053	11.6			—				116,709	6.0
Total		249,154	12.8			155,612	8.0			194,515	10.0

Recent Accounting Standards

In March 2008, the FASB issued Statement of Financial Accounting Standard No. 161, “Disclosures about Derivative Instruments and Hedging Activities” (“SFAS No. 161”). This statement requires enhanced disclosures regarding an entity’s derivative and hedging activities. The Statement is effective as of the beginning of an entity’s first fiscal year that begins after November 15, 2008. The adoption of SFAS 161 is not expected to have a material impact on the consolidated earnings or financial position of the Company.

In February 2007, the FASB issued Statement of Financial Accounting Standard No. 159, “The Fair Value Option of Financial Assets and Financial Liabilities” (“SFAS No. 159”). The fair value option established by this statement permits entities to choose to measure eligible items at fair value at specified election dates. The Statement became October 1, 2008. The Company has elected not to adopt any fair value provisions under SFAS 159 for any of its financial assets or financial liabilities as of December 31, 2008.

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 158, Employers’ Accounting for Defined Benefit Pension and Other Post-retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and 132(R) (“SFAS 158”). For defined benefit post-retirement plans, SFAS 158 requires that the funded status be recognized in the statement of financial position, that assets and obligations that determine funded status be measured as of the end of the employer’s fiscal year and that changes in funded status be recognized in comprehensive income in the year the changes occur. SFAS 158 does not change the amount of net periodic benefit cost included in net income or address measurement issues related to defined benefit post-retirement plans. The requirement to recognize funded status is effective for fiscal years ending after December 15, 2006. The requirement to measure assets and obligations as of the end of the employer’s fiscal year is effective for fiscal years ending after December 15, 2008. The unrecognized components of defined benefit pension plans and retiree medical plans in the amount of $3.7 million, net of taxes of $115, were recorded as an adjustment to accumulated other comprehensive income (loss) with an offset to Pension Funded Status as of September 30, 2008.

In September 2006, the FASB issued Statement of Financial Accounting Standard No. 157, Fair Value Measurements (“SFAS 157”). This statement defines fair value, establishes a framework for measuring fair value under generally accepted accounting principles, and expands disclosures about fair value measurements. SFAS 157 is effective for financial statements issued for fiscal years beginning after November 15, 2007. In February 2008, the FASB issued Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157. This FSP delays the effective date of SFAS 157 for all nonfinancial assets and nonfinancial liabilities, except those that are recognized or disclosed at fair value on a recurring basis (at least annually) to fiscal years beginning after November 15, 2008, and interim periods within those fiscal years. The adoption of SFAS 157 did not have a material impact on the consolidated earnings or financial position of the Company.

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Item 3. Quantitative and Qualitative Disclosures about Market Risk

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

We actively evaluate interest rate risk in connection with our lending, investing, and deposit activities. We emphasize the origination of commercial mortgage loans, commercial business loans and residential fixed-rate mortgage loans that are repaid monthly and bi-weekly, fixed-rate commercial mortgage loans, adjustable-rate residential loans 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 all, or a portion of such longer-term loans, generally on a servicing-retained basis. We also invest in short-term securities, which generally have lower yields compared to longer-term investments. In addition, the Company invests in long-term municipal bonds when market conditions are favorable due to the tax advantaged nature of such securities somewhat offsetting the longer duration of such assets. Shortening the average maturity of our interest-earning assets by increasing our investments in shorter-term loans and securities helps 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 (“NPV”) over a range of interest rate scenarios. NPV is the present value of expected cash flows from assets, liabilities and off-balance sheet contracts. Both models assume estimated loan prepayment rates, reinvestment rates and deposit decay rates that seem reasonable, based on historical experience during prior interest rate changes.

Estimated Changes in NPV and NII. The table below sets forth, as of December 31, 2008, the estimated changes in our NPV and our net interest income that would result from the designated instantaneous changes in the U.S. Treasury yield curve or Federal Home loan advance rates, as applicable. 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.

Quarterly Report - Quantitative Analysis - NPV

December 31, 2008

	NPV							Net Interest Income
			Estimated Increase					Estimated		Estimated Increase (Decrease) in
	Estimated		(decrease) NPV					Net Interest		Net Interest Income
Change in Interest Rates	NPV		Amount			Percent		Income		Amount		Percent
	dollars in thousands
300	$	339,888	$	(73,153	)	-17.7	%	$	95,868	$	4,896	5.4	%
200		380,491		(32,550	)	-7.9	%		95,335		4,363	4.8	%
100		415,219		2,178		0.5	%		93,363		2,391	2.6	%
0		413,041		—		0.0	%		90,972		—	0.0	%

The table set forth above indicates that at December 31, 2008, in the event of an immediate 100 basis point increase in interest rates, we would be expected to experience a 0.5% increase in NPV and a 2.6% increase in net interest income. Due to the current level of interest rates management is unable to model the impact of decreases in interest rates on NPV and net interest income.

Certain shortcomings are inherent in the methodology used in the above interest rate risk measurements. Modeling changes in NPV and net interest income requires making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. The NPV and net interest income 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

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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 repricing characteristics of specific assets and liabilities. Accordingly, although the NPV and net interest income 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.

The federal funds target rate fluctuated during the fiscal year 2008. The average rate during 2008 was 2.95%. During the first three months of fiscal 2009, the Federal Open Market Committee (“FOMC”) decreased the target fed funds rate an additional 175 basis points leaving a target range of 0.00% to 0.25%. During the same period, U.S. Treasury rates in the two year maturities have decreased 124 basis points from 2.00% to 0.76% and U.S. Treasury 10 year notes have decreased 160 basis points from 3.85% to 2.25%.

The disproportional higher rate of decrease on longer term maturities has resulted in the two to ten year treasury yield curve being less steep at December 31, 2008 than it was at fiscal year end 2008. The positively sloped yield curve has caused a reduction in rates paid on deposits and short-term borrowings as well as rates charged on loans and other assets tied to the prime rate and similar indices. Further, the gradual thawing of the credit markets has finally enabled financial institutions to lower deposit rates significantly in accordance with the FOMC’s rate reductions. Should credit markets stabilize, the FOMC could reverse direction and increase the target federal funds rate. This could cause the shorter end of the yield curve to rise disproportionally more than the longer end thereby resulting in margin compression.

Item 4. Controls and Procedures

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

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

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PART II

OTHER INFORMATION

Item 1. Legal Proceedings

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

Item 1A. Risk Factors

There have been no material changes in risk factors described in the Company’s Annual Report on Form 10-K for the year ended September 30, 2008.

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

(a) Not applicable.

(b) Not applicable

(c) Issuer Purchases of Equity Securities

	Total Number of shares (or Units) Purchased (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 Approximated Dollar Value) of Shares (or Units) that may yet be Purchased Under the Plans or Programs (2)
October 1- October 31	—	$	—	—	1,165,901
November 1- November 30	14,832		9.81	13,301	1,152,600
December 1- December 31	4,367		12.01	—	1,152,600
Total	19,199	$	10.31	13,301

¹ The total number of shares purchased during the periods includes shares deemed to have been received from employees who exercised stock options( 5,898) by submitting previously acquired shares of common stock in satisfaction of the exercise price, as is permitted under the Company’s stock benefit plans.

² The Company announced its fourth repurchase program on August 24, 2007 authorizing the repurchase of 2,000,000 shares.

Item 3. Defaults Upon Senior Securities

None

Item 4. Submission of Matters to a Vote of Security Holders

None

Item 5. Other Information

None

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Item 6. Exhibits

Exhibit Number	Description
10.1	Employment Agreement with Richard Jones
31.1	Certification of the Principal Executive Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2	Certification of the Principal Financial Officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1	Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

.

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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: February 6, 2009	By:	/s/ George Strayton
		George Strayton
		President, Chief Executive Officer and Director
		(Principal Executive Officer)
Date: February 6, 2009	By:	/s/ Paul A. Maisch
		Paul A. Maisch
		Executive Vice President
		Chief Financial Officer
		Principal Accounting Officer
		(Principal Financial Officer)

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EX-10.1

Exhibit 10.1

AMENDED AND RESTATED

EMPLOYMENT AGREEMENT

This Amended and Restated Employment Agreement (“Agreement”) is made and entered into as of the 15th day of December, 2008 (“Effective Date”), by and between Provident Bank, a savings bank organized and existing under the laws of the United States of America and having its executive offices at 400 Rella Boulevard, Montebello, New York 10901 (“Bank”), and Richard O. Jones (“Executive”). The Bank is the wholly-owned subsidiary of Provident New York Bancorp (“Company”).

WITNESSETH:

WHEREAS, Executive currently serves as an executive officer of the Bank pursuant to the Employment Agreement entered into as of October [31], 2006 (the “Prior Agreement”); and

WHEREAS, in order to comply with new Internal Revenue Code Section 409A, the Prior Agreement is being amended and restated in its entirety as herein set forth.

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

1. Employment. The Bank hereby agrees to continue the employment of the Executive and the Executive hereby agrees to continue such employment, during the period and upon the terms and conditions set forth in this Agreement. All actions that may be undertaken by the Bank with respect to the Executive’s employment with the Bank pursuant to this Agreement may be undertaken by the Chief Executive Officer of the Bank (“CEO”), provided that the CEO shall report such actions to the Bank’s Board of Directors (“Board”) and such actions shall be subject to ratification by the Board in accordance with the Bank’s by-laws.

2. Employment Period.

Two Year Contract; Daily Renewal. The Executive’s period of employment with the Bank (“Employment Period”) shall begin on the Effective Date and shall renew daily such that the remaining unexpired term of the Agreement shall be twenty-four (24) months, until the date that the Bank gives the Executive written notice of non-renewal (“Non-Renewal Notice”). The Employment Period shall end on the date that is twenty-four (24) months after the date of the Non-Renewal Notice, unless that parties agree that the Employment Period shall end on an earlier date. Notwithstanding the preceding provisions of this Section 2(a), the Employment Period under this Agreement shall automatically terminate on the last day of the calendar month in which the Executive attains age 65.

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(b) Annual Performance Evaluation. On either a fiscal year or calendar year basis, (consistently applied from year to year), the Bank shall conduct an annual performance evaluation of the Executive’s performance, unless notice of non-renewal has been given. The annual performance evaluation proceedings shall be included in the minutes of the Board meeting that next follows such annual performance review.

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

3. Duties.

(a) Title; Reporting Responsibility. The Executive shall serve as the Executive Vice President, Business Services of the Bank, with power, authority and responsibility commensurate with those of a senior officer. The Executive shall directly report to the CEO.

(b) Time Commitment. The Executive shall devote his full business time and attention to the business and affairs of the Bank and shall use his best efforts to advance the interests of the Bank.

4. Annual Compensation.

(a) Base Salary.

(i) Annual Salary. In consideration for the services performed by the Executive under this Agreement, the Bank shall pay to the Executive an annual salary (“Base Salary”). The Base Salary shall be paid in approximately equal installments in accordance with the Bank’s customary payroll practices. The Bank shall review the Executive’s Base Salary at least annually for possible upward adjustment, but the Executive’s Base Salary shall not be reduced without the Executive’s consent. For the fiscal year that began on October 1, 2005, the Executive’s Base Salary is $212,000.

(ii) Automatic Adjustment Following a Change in Control. For each calendar year that begins on or after the date on which a Change in Control (as defined in Section 9) occurs, and continuing through the remainder of the Employment Period, the Executive’s Base Salary shall automatically increase by the greater of (1) six percent (6%) or (2) the average annual rate of base salary increases provided for the immediately preceding calendar year to individuals employed by the Bank at the level of assistant vice president or above (but excluding the Executive from the determination of such average).

(b) Incentive Compensation. The Executive shall be eligible to participate in any bonus and incentive compensation programs (not including equity compensation programs, which are covered by Section 4(c) of this Agreement) established by the Bank from time to time for senior executive officers, including the Bank’s Executive Officer Management Incentive Program. Compensation payable pursuant to such programs shall be referred to herein as “Incentive Compensation.” For the fiscal year that ended on September 30, 2005, the Executive received Incentive Compensation of $25,100.

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(c) Equity Compensation. The Executive shall be eligible to participate in any equity compensation programs established by the Bank from time to time for senior executive officers, including, but not limited to, the 2004 Stock Incentive Plan.

(d) Employee Benefit Plans; Paid Time Off

(i) Benefit Plans. During the Employment Period, the Executive shall be an employee of the Bank and shall be entitled to participate in the Bank’s (i) tax-qualified retirement plans, (i.e., the Bank’s Defined Benefit Pension Plan, 401(k) Plan and Employee Stock Ownership Plan (including, for purposes of this Agreement, any successor plans thereto)); (ii) nonqualified retirement plans (i.e., the Bank’s 2005 Supplemental Executive Retirement Plan (including any predecessor or successor plan thereto, the “SERP”)); (iii) group life, health and disability insurance plans; and (iv) any other employee benefit plans and programs in accordance with the Bank’s customary practices, provided he is a member of the class of employees authorized to participate in such plans or programs.

(ii) Paid Time Off. The Executive shall be entitled to a minimum of 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 Bank’s usual practices), as well as sick leave, holidays and other paid absences in accordance with the Bank’s policies and procedures for senior executives. Any unused paid time off during an annual period shall expire at the end of that period, such that unused paid time off shall not be carried forward into the following year and the Executive shall not be compensated for unused paid time off.

5. Outside Activities and Board Memberships

During the term of this Agreement, the Executive shall not, directly or indirectly, provide services on behalf of any competitive financial institutions, any insurance company or agency, any mortgage or loan broker or any other competitive entity or on behalf of any subsidiary or affiliate of any such competitive entity, as an employee, consultant, independent contractor, agent, sole proprietor, partner, joint venturer, corporate officer or director; nor shall the Executive acquire by reason of purchase during the term of this Agreement the ownership of more than 5% of the outstanding equity interest in any such competitive entity. In addition, during the term of this Agreement, the Executive shall not, directly or indirectly, acquire a beneficial interest, or engage in any joint venture in real estate with the Bank. Subject to the foregoing, and to the Executive’s right to continue to serve as an officer and/or director or trustee of any business organization as to which he was so serving on the Effective Date of this Agreement, the Executive may serve on boards of directors of unaffiliated corporations, subject to Board approval, which shall not be unreasonably withheld, and such services shall be presumed for these purposes to be for the benefit of the Bank. Except as specifically set forth herein, the Executive may engage in personal business and investment activities, including real estate investments and personal investments in the stocks, securities and obligations of other financial institutions (or their holding companies).

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Notwithstanding the foregoing, in no event shall the Executive’s outside activities, services, personal business and investments materially interfere with the performance of his duties under this Agreement.

6. Working Facilities and Expenses

(a) Working Facilities. The Executive’s principal place of employment shall be at the Bank’s principal executive office or at such other location upon which the Bank and the Executive may mutually agree.

(b) Expenses. The Bank shall reimburse the Executive for his 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 the Bank of an itemized account of such expenses in such form as the Bank may reasonably require and subject to the following conditions: (A) the expenses reimbursed by the Bank in one calendar year shall not affect the expenses paid or reimbursed by the Bank in another calendar year, (B) reimbursement for an expense shall be made within a reasonable period of time following the date on which the Bank receives the Executive’s documentation of the expense, provided that no reimbursement for an expense shall be made after the last day of the calendar year following the calendar year in which the expense was incurred.

7. Termination of Employment with Bank Liability

(a) Reasons for Termination. In the event that the Executive’s employment with the Bank shall terminate during the Employment Period on account of:

(i) The Executive’s voluntary resignation from employment with the Bank within one year after any event constituting “Good Reason”, where “Good Reason” means any of the following events (provided that, in the case of (A), (B) and (D), no such event shall constitute “Good Reason” unless the Executive shall have given written notice of such event to the Bank within ninety (90) days after the initial occurrence thereof 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)):

(A) the failure to re-appoint the Executive to the position set forth under Section 3;

(B) a material change in Executive’s functions, duties, or responsibilities, including those with respect to the Company, which change would cause Executive’s position to become one of lesser responsibility, importance, or scope;

4

(C) liquidation or dissolution of the Bank or the Company other than liquidations or dissolutions that are caused by reorganizations that do not affect the status of the Executive;

(D) a material breach of this Agreement by the Bank; or

(E) a Change in Control Date of the Bank as defined in Section 9, except to the extent that Section 7(c) hereof would apply to the Executive’s termination of employment, in which event Executive will be deemed to have terminated his employment pursuant to the provision of Section 7(c) instead; or

(ii) the discharge of the Executive by the Bank for any reason other than for “Cause” as defined in Section 8(a); or

(iii) the termination of the Executive’s employment with the Bank as a result of the Executive’s “total and permanent disability” which, for purposes of this Agreement, shall be determined by the Bank, based upon competent and independent medical evidence that the Executive’s physical or mental condition is such that he is totally and permanently incapable of performing the essential tasks of his position hereunder, and, to the extent that any payments hereunder on account of disability are subject to Section 409A of the Internal Revenue Code of 1986 (“Code”), “disability” shall have the meaning set forth in Code Section 409A and the regulations thereunder;

then the Bank shall provide the benefits and pay to the Executive the amounts provided for under Section 7(b).

(b) Severance Pay. Subject to the limitations set forth in Sections 7(e) and (f) below, upon the termination of the Executive’s employment with the Bank under circumstances described in Section 7(a) of this Agreement, the Bank shall pay to the Executive (or, in the event of the Executive’s death after the event described in Section 7(a) has occurred, the Bank shall pay to the Executive’s surviving spouse, beneficiary or estate) an amount equal to the following, provided that, in each case where an amount to be paid below is the “present value” of an amount, such “present value” shall be determined using a discount rate that is equal to the short-term “applicable federal rate” with monthly compounding published by the Internal Revenue Service for the month preceding the Executive’s termination of employment:

(i) within 60 days following his termination of employment, his earned but unpaid Base Salary as of the date of his termination of employment with the Bank;

(ii) the benefits, if any, to which he is entitled as a former employee under the Bank’s employee benefit plans, payable in accordance with the terms of such plans;

5

(iii) continued life insurance coverage and non-taxable health insurance benefits which will provide the Executive with coverage for the remaining unexpired Employment Period equivalent to the coverage to which he would have been entitled if he had continued working for the Bank during the remaining unexpired Employment Period with the same Base Salary as was in effect on the date of his termination of employment;

(iv) within 60 days following his termination of employment, a lump sum payment, as liquidated damages, in an amount equal to the present value of the Base Salary that the Executive would have earned (but offset by any payments made under any short-term or long-term disability plan or program maintained by the Bank) if he had continued working for the Bank for the remaining unexpired Employment Period at his final rate of Base Salary;

(v) within 60 days following his termination of employment with the Bank, a lump sum payment in an amount equal to the excess, if any, of: (A) the present value of the benefits to which the Executive would be entitled under the Bank’s Defined Benefit Pension Plan if he had the additional years of service that he would have had accrued if he had continued working for the Bank during the remaining unexpired Employment Period earning his final rate of Base Salary during that period, over (B) the present value of the benefits to which he is actually entitled under the Bank’s Defined Benefit Pension Plan as of the date of his termination;

(vi) within 60 days following his termination of employment with the Bank, a lump sum payment in an amount equal to the present value of the Bank’s contributions that would have been made on his behalf under the Bank’s 401(k) Plan and Employee Stock Ownership Plan if the Executive had continued working for the Bank for the remaining unexpired Employment Period assuming (A) the Executive earned his final rate of Base Salary during that period; (B) the Executive made the maximum amount of employee contributions permitted, if any, under such plans; and (C) the Bank’s contributions are at least equal to the rate of contributions made to the Plan during the plan year immediately preceding his termination of employment;

(vii) within 60 days following his termination of employment with the Bank, a lump sum payment in an amount equal to the excess, if any, of (A) the present value of the benefits to which he would be entitled under the SERP (and any other deferred compensation plan for management or highly compensated employees that are maintained by the Bank), if he had continued working for the Bank for the remaining unexpired Employment Period following his termination of employment earning his final rate of Base Salary during the remaining unexpired Employment Period, over (B) the present value of the benefits to which he is actually entitled under any such plan, as of the date of his termination of employment with the Bank;

6

(viii) within 60 days following his termination of employment with the Bank, a lump sum payment in an amount equal to two (2) times the average of the prior two (2) years Incentive Compensation earned or received by him under all incentive compensation plans or programs adopted and maintained by the Bank; and

(ix) stock options shall vest in accordance with the terms of the stock plan under which they were granted.

(c) Change in Control. Notwithstanding the foregoing, upon the termination of the Executive’s employment with the Bank following a Change in Control, the Bank: (1) shall provide the employee benefits described in Section 7(b)(iii) for a period of thirty-six (36) months following the termination of employment date; (2) shall pay the Executive (or in the event of his death, to his surviving spouse or such other beneficiary as the Executive may designate in writing, or if there is neither, to his estate), the amounts described in Sections 7(b)(iv) through 7(b)(viii) above as if the “remaining unexpired Employment Period” under the Agreement is thirty-six (36) months from the termination of employment date; and (3) shall credit the Executive with full vesting of all stock or stock-based awards granted to the Executive under any plan adopted by the Bank or the Company. Notwithstanding anything to the contrary herein, to the extent that payments and benefits are payable pursuant to this Section 7(c), no payments or benefits shall be paid to Executive under Sections 7(b)(iii) through 7(b)(viii).

(d) Damages. The Bank and the Executive hereby stipulate that the damages which may be incurred by the Executive following any such termination of employment are not capable of accurate measurement as of the Effective Date of this Agreement and that such liquidated damages constitute reasonable damages under the circumstances.

(e) OTS Limitation on Severance Pay. Notwithstanding the foregoing, to the extent required by regulations or interpretations of the Office of Thrift Supervision, all severance payments under the Agreement shall be reduced not to exceed three (3) times the Executive’s average annual compensation (as defined in such regulations or interpretations) over the most recent five (5) taxable years.

(f) Section 409A Delay in Payment.

(i) Notwithstanding the foregoing provisions of this Agreement, if a payment under this Agreement is due to a “separation from service” for purposes of the rules under Title 26 of the Code of Federal Regulations (the “Treasury Regulations”) Section 1.409A-3(i)(2) (the “Six Month Delay Rule”) and the Executive is determined to be a “specified employee” (as determined under Treasury Regulation Section 1.409A-1(i) and related Company procedures), such payment shall, to the extent necessary to comply with the requirements

7

of Code Section 409A, be made on the later of the date specified by the foregoing provisions of this Section 7 or the date that is six months after the date of the Executive’s separation from service. If any cash payment is delayed pursuant to this Section 7(f)(i), interest on such delayed payment (determined using the short-term “applicable federal rate” compounded monthly as published by the Internal Revenue Service for the month preceding the Executive’s separation from service) shall accrue and be paid at the same time as the delayed payment.

(ii) To the extent that the Six Month Delay Rule applies to the provision of life insurance coverage to the Executive as described in Section 7(b)(iii) (the “Life Insurance Coverage”), such Life Insurance Coverage shall nonetheless be provided to the Executive during the first six months following his separation from service (the “Six Month Period”), provided that, during such Six-Month Period, the Executive pays to the Bank, on a monthly basis in advance, an amount equal to the monthly cost of such Life Insurance Coverage. The Bank shall reimburse the Executive for any such payments made by the Executive in a lump sum not later than 60 days following the sixth month anniversary of the Executive’s separation from service. For purposes of this Section 7(f)(ii), “monthly cost” means the minimum dollar amount which, if paid by the Executive on a monthly basis in advance, results in the Executive not being required to recognize any federal income tax on receipt of the Life Insurance Coverage during the Six Month Period.

8. Termination without Bank Liability

(a) Termination for Cause.

(i) The Bank may terminate the Executive’s employment at any time, but any termination other than termination for “cause,” as defined herein, shall not prejudice the Executive’s right to compensation or other benefits under the Agreement. The Executive shall have no right to receive compensation or other benefits for any period after termination for “cause.” Termination for “cause” shall include termination because of the Executive’s personal dishonesty, incompetence, willful misconduct, breach of fiduciary duty involving personal profit, breach of the Bank’s Code of Ethics, material violation of the Sarbanes-Oxley requirements for officers of public companies that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the reputation of the Company or the Bank, willfully engaging in actions that in the reasonable opinion of the Board will likely cause substantial financial harm or substantial injury to the business reputation of the Company or Bank, intentional failure to perform stated duties, 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 the contract. The Bank shall furnish the Executive with a statement of the grounds for termination for cause and shall afford the Executive a reasonable opportunity to refute the grounds for the proposed termination.

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(ii) For purposes of this Section, no act or failure to act, on the part of the Executive, shall be considered “willful” unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive’s action or omission was in the best interests of the Bank. Any act, or failure to act, based upon the direction of the CEO or based upon the advice of counsel for the Bank shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Bank.

(b) Death; Voluntary Resignation Without Good Reason; Retirement. In the event that the Executive’s employment with the Bank shall terminate during the Employment Period on account of any of the reasons set forth in this Section 8(b), then the Bank shall have no further obligations under this Agreement, other than the payment to the Executive, within sixty (60) days after the termination of his employment, of his earned but unpaid salary as of the date of the termination of his employment, and the provision of such benefits, if any, to which he is entitled as a former employee under the Bank’s employee benefit plans and programs and compensation plans and programs in accordance with the terms of such plans and programs. Termination of employment under this Section 8(b) shall mean termination of employment due to the following events:

(i) The Executive’s death;

(ii) The Executive’s voluntary resignation from employment with the Bank for any reason other than the “Good Reasons” specified in Section 7(a)(i); or

(iii) The automatic termination of the Employment Period as of the last day of the calendar month following the Executive’s attainment of age 65, which shall be treated as his “retirement date” (i.e., “retirement” is not a “Good Reason” termination as described in Section 7(a)(i) that would entitle the Executive to severance benefits under Section 7(b)).

9. Change in Control

(a) For purposes of this Agreement, the term “Change in Control” shall mean:

(i) a change in control of a nature that would be required to be reported in response to Item 5.01(a) of the current report on Form 8-K, as in effect on the date hereof, pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 (the “Exchange Act”); or

(ii) a change in control of the Bank or the Company within the meaning of the Home Owners Loan Act, as amended (“HOLA”), and applicable rules and regulations promulgated thereunder, as in effect at the time of the Change in Control; or

(iii) any of the following events, upon which a Change in Control shall be deemed to have occurred:

(A) any “person” (as the term is used in Sections 13(d) and 14(d) of the Exchange Act) 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 except for any securities purchased by the Bank’s employee stock ownership plan or trust; or

9

(B) 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 same Nominating Committee serving under an Incumbent Board, shall be, for purposes of this subsection (B), considered as though he were a member of the Incumbent Board; or

(C) a plan of reorganization, merger, consolidation, sale of all or substantially all the assets of the Bank or the Company or similar transaction occurs in which the Bank or Company is not the surviving institution; or

(D) a proxy statement is issued soliciting proxies from stockholders of the Company by someone other than the current management of the Company, seeking stockholder approval of a plan of reorganization, merger or consolidation of the Company or similar transaction with one or more corporations as a result of which the outstanding shares of the class of securities then subject to the plan are to be exchanged for or converted into cash or property or securities not issued by the Company; or

(E) a tender offer is made for 25% or more of the voting securities of the Company and the shareholders owning beneficially or of record 25% or more of the outstanding securities of the Company have tendered or offered to sell their shares pursuant to such tender offer and such tendered shares have been accepted by the tender offeror.

(b) For purposes of this Agreement, the term “Change in Control Date” shall mean the first date during the Employment Period on which a Change in Control occurs. Anything in this Agreement to the contrary notwithstanding, if the Executive’s employment with the Bank is terminated and if it is reasonably demonstrated by the Executive that such termination of Employment (i) was at the request of a third party who has taken steps reasonably calculated to effect a Change in Control or (ii) otherwise arose in connection with or anticipation of a Change in Control, then for all purposes of this Agreement the “Change in Control Date” shall mean the date immediately prior to the date of such termination of employment.

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10. Confidentiality. Unless he obtains prior written consent from the Bank, the Executive shall keep confidential and shall refrain from using for the benefit of himself, or any person or entity other than the Bank, the Company or any entity which is a subsidiary or affiliate of the Bank or the Company or of which the Bank or the Company is a subsidiary or affiliate, any material document or information obtained from the Bank, the Company or from any of their respective parents, subsidiaries or affiliates, in the course of his 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 his own) until the same ceases to be material (or becomes so ascertainable or available); provided, however, that nothing in this Section shall prevent the 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.

11. Non-Solicitation; Non-Competition; Post-Termination Cooperation.

(a) The Executive hereby covenants and agrees that, for a period of one year following his termination of employment with the Bank, he shall not, without the prior written consent of the Bank, 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 Bank, the Company 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 business whatsoever that competes with the business of the Bank or the Company or any of their direct or indirect subsidiaries or affiliates or has headquarters or offices within the counties in which the Bank or the Company has business operations or has filed an application for regulatory approval to establish an office;

(ii) become an officer, employee, consultant, director, independent contractor, agent, sole proprietor, joint venturer, greater than 5% equity-owner or stockholder, partner or trustee of any savings bank, savings and loan association, savings and loan holding company, credit union, bank or bank holding company, insurance company or agency, any mortgage or loan broker or any other entity competing with the Bank or its affiliates in the same geographic locations where Provident Bank or its affiliates has material business interests; provided, however, that this restriction shall not apply if the Executive’s employment is terminated following a Change in Control ; or

(iii) 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 Bank or the Company to terminate an existing business or commercial relationship with the Bank or the Company.

(b) Executive shall, upon reasonable notice, furnish such information and assistance to the Bank and/or the Company, as may reasonably be required by the Bank and/or the Company, in

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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 the Executive and the Bank, the Company or any of its subsidiaries or affiliates.

(c) All payments and benefits to the Executive under this Agreement shall be subject to the Executive’s compliance with this Section. The parties hereto, recognizing that irreparable injury will result to the Bank, its business and property in the event of the Executive’s breach of this Section, agree that, in the event of any such breach by the Executive, the Bank will be entitled, in addition to any other remedies and damages available, to an injunction to restrain the violation hereof by the Executive and all persons acting for or with the Executive. The Executive represents and admits that the Executive’s experience and capabilities are such that the Executive can obtain employment in a business engaged in other lines and/or of a different nature than the Bank, and that the enforcement of a remedy by way of injunction will not prevent the Executive from earning a livelihood. Nothing herein will be construed as prohibiting the Bank and the Company from pursuing any other remedies available to them for such breach or threatened breach, including the recovery of damages from the Executive.

12. Additional Termination and Suspension Provisions

(a) If the 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 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 Bank may in its discretion (but subject in all events to the requirements of Code Section 409A), (i) pay the Executive all of the compensation withheld while the Bank’s obligations under this Agreement were suspended and (ii) reinstate (in whole) any of the Bank’s obligations which were suspended, and in exercising such discretion, 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 the Executive and to reinstate any suspended obligations of the Bank.

(b) If the 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 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 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 Director of the OTS (the “Director”) or his designee, at the time the FDIC enters into an agreement to provide assistance to or on behalf of the Bank under the authority contained in

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Section 13(c) of the Federal Deposit Insurance Act, as amended; or (ii) by the Director or his designee, at the time the Director or his designee approves a supervisory merger to resolve problems related to operation of the Bank or when the Bank is determined by the Director 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 Bank shall hereafter be adopted, amended or modified or if any new regulation applicable to 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 the 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.

13. Arbitration. Any dispute or controversy arising out of, under, in connection with, or relating to this Agreement and any amendment hereof shall be submitted to binding arbitration before one arbitrator in Rockland County 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.

14. Indemnification and Insurance.

(a) The Bank shall provide the Executive (including his heirs, executors and administrators) with coverage under a standard directors’ and officers’ liability insurance policy at the Bank’s expense, and shall indemnify Executive (and his heirs, executors and administrators) to the fullest extent permitted under applicable law against all expenses and liabilities reasonably incurred by him in connection with or arising out of any action, suit or proceeding in which he may be involved by reason of his having been an officer of the Bank (whether or not he continues to be an officer at the time of incurring such expenses or liabilities and for a period of six years following his termination of employment with the Bank), such expenses and liabilities to include, but not be limited to, judgments, court costs and attorneys’ fees and the cost of reasonable settlements (such settlements must be approved by the CEO). Any such indemnification shall be made consistent with OTS Regulations and Section 18(k) of the Federal Deposit Insurance Act, 12 U.S.C. §1828(k), and the regulations issued thereunder in 12 C.F.R. Part 359.

(b) Notwithstanding the foregoing, no indemnification shall be made by the Bank unless the Bank gives the OTS at least 60 days’ notice of its intention to make such indemnification. Such notice shall state the facts on which the action arose, the terms of any settlement, and any

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disposition of the action by a court. Such notice, a copy thereof, and a certified copy of the resolution containing the required determination by the Board shall be sent to the Regional Director of the OTS, who shall promptly acknowledge receipt thereof. The notice period shall run from the date of such receipt. No such indemnification shall be made if the OTS advises the Bank in writing within such notice period, of its objection thereto.

15. 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 (i) if sent by messenger, upon personal delivery to the party to whom the notice is directed; (ii) if sent by reputable overnight courier, one business day after delivery to such courier; (iii) if sent by facsimile, upon electronic or telephonic confirmation of receipt from the receiving facsimile machine and (iv) 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 the Executive:
If to the Bank:	Provident Bank
	400 Rella Boulevard
	Montebello, New York 10901
	Attention: George Strayton, President & Chief Executive Officer

16. Amendment. No modifications of this Agreement shall be valid unless made in writing and signed by the parties hereto.

17. Miscellaneous.

(a) Successors and Assigns. This Agreement will inure to the benefit of and be binding upon the Executive, his legal representatives and estate and intestate distributees, and the Bank, its 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 Bank may be sold or otherwise transferred. Any such successor of the Bank shall be deemed to have assumed this Agreement and to have become obligated hereunder to the same extent as the Bank, and the 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.

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(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 the Executive pursuant to this Agreement or otherwise are subject to all applicable banking laws and regulations, including, without limitation, 12 USC 1828 (i) and any regulations promulgated thereunder.

(f) 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.

(g) 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 without limitation, the employment agreement between the Executive and the Bank and the Company dated as of October [31], 2006.

(h) Source of Payments. All payments provided in this Agreement shall be timely paid in cash or check from the general funds of the Bank.

[Signatures on next page]

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IN WITNESS WHEREOF, the Bank has caused this Agreement to be executed and the Executive has hereunto set his hand, all as of the Effective Date specified above.

	EXECUTIVE
December 15, 2008	/s/ Richard O. Jones
Date	Richard O. Jones

	PROVIDENT BANK
December 15, 2008	By:	/s/ George Strayton
Date		George Strayton, President and Chief Executive Officer

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EX-31.1

Exhibit 31.1

Certification of Principal Executive Officer

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

I, George Strayton, certify that:

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

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

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

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: February 6, 2009	By:	/s/ George Strayton
		George Strayton
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

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EX-31.2

Exhibit 31.2

Certification of Principal Financial Officer

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

I, Paul A. Maisch, certify that:

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

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

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

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: February 6, 2009	By:	/s/ Paul A. Maisch
		Paul A. Maisch
		Executive Vice President
		Chief Financial Officer
		Principal Accounting Officer
		(Principal Financial Officer)

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EX-32.1

Exhibit 32.1

Certification of Principal Executive Officer and Principal Financial Officer

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

George Strayton, Chief Executive Officer and Paul A. Maisch, Chief Financial Officer of Provident New York Bancorp (the “Company”) each certify in his capacity as an officer of the Company that he has reviewed the quarterly report on Form 10-Q for the quarter ended December 31, 2008 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: February 6, 2009	By:	/s/ George Strayton
		George Strayton
		President, Chief Executive Officer and Director
		(Principal Executive Officer)
Date: February 6, 2009	By:	/s/ Paul A. Maisch
		Paul A. Maisch
		Executive Vice President
		Chief Financial Officer
		Principal Accounting Officer
		(Principal Financial Officer)

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

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