Provident Bancorp, Inc. Reports First Quarter Net Income of $5.0 Million



Company Release

04/25/2024



Amesbury, Massachusetts — Provident Bancorp, Inc. (the “Company”) (NasdaqCM: PVBC), the holding company for BankProv (the “Bank”), reported net income for the quarter ended March 31, 2024 of $5.0 million, or $0.30 per diluted share, compared to $2.9 million, or $0.18 per diluted share, for the quarter ended December 31,2023 and $2.1 million, or $0.13 per diluted share, for the quarter ended March 31, 2023.  The Company’s return on average assets was 1.26% for the quarter ended March 31, 2024, compared to 0.70% for the quarter ended December 31, 2023, and 0.53% for the quarter ended March 31, 2023. The Company’s return on average equity was 8.93% for the quarter ended March 31, 2024, compared to 5.33% for the quarter ended December 31, 2023, and 4.01% for the quarter ended March 31, 2023.



In announcing these results, Joseph Reilly, Chief Executive Officer, said,  “The banking industry continues to face pressure from a challenging interest rate environment, so we are excited to report earnings for the quarter of $5.0 million. These earnings highlight the Bank’s successful efforts to improve asset quality, stabilize our net interest margin and reduce certain large, recurring expenses.  We are happy to report that in early April 2024, the Bank exited our one remaining digital asset lending relationship,  fully eliminating our lending exposure in this area. We look forward to experiencing continued benefits from successfully executing the Company’s strategic plan by mindfully managing our balance sheet in response to market conditions and seeking opportunities to reduce operating expenses.”



For the quarter ended March 31, 2024, net interest and dividend income was $12.5 million, a decrease of $1.1 million, or 8.0%, from the quarter ended December 31, 2023, and a decrease of $3.3 million, or 21.1%, compared to the quarter ended March 31, 2023. The interest rate spread and net interest margin were 2.28% and 3.38%, respectively, for the quarter ended March 31, 2024, compared to 2.36% and 3.45%, respectively, for the quarter ended December 31, 2023, and 3.38% and 4.32%, respectively, for the quarter ended March 31, 2023.  The decreases in net interest income for the quarter ended March 31, 2024, compared to the respective prior periods, are illustrative of the general challenges faced by the banking industry due to the current interest rate environment. 



Total interest and dividend income was $22.0 million for the quarter ended March 31, 2024, a decrease of $1.5 million, or 6.5%, from the quarter ended December 31, 2023, and an increase of $1.4 million, or 6.8%, from the quarter ended March 31, 2023. The Company’s yield on interest-earning assets was 5.97% for the quarter ended March 31, 2024, a decrease of two basis points from the quarter ended December 31, 2023, and an increase of 34 basis points from the quarter ended March 31, 2023. 



Total interest expense was $9.5 million for the quarter ended March 31, 2024, a decrease of $452,000, or 4.5%, from the quarter ended December 31, 2023, and an increase of $4.7 million, or 98.5% from the quarter ended March 31, 2023. Interest expense on deposits was $9.3 million for the quarter ended March 31, 2024, a decrease of $565,000, or 5.7%, from the quarter ended December 31, 2023, and an increase of $5.4 million, or 139.4% from the quarter ended March 31, 2023. The decrease in interest expense on deposits from the prior quarter was primarily due to a $73.1 million, or 6.7%, decrease in the average balance of interest-bearing deposits.  The increase in interest expense from the prior year quarter was due to both an increase in the average balance of interest-bearing deposits of $244.4 million, or 31.8%, and an increase in the cost of interest-bearing deposits of 166 basis points. Interest expense on borrowings totaled $209,000 for the quarter ended March 31, 2024, an increase of $113,000, or 117.7%, from the prior quarter, and a decrease of $701,000 over the prior year quarter. The increase in interest expense on borrowings from the prior quarter was primarily driven by an increase in the average balance of borrowings of $6.1 million, or 39.0%. The decrease in interest expense on borrowings from the prior year quarter was primarily driven by a decrease in the average balance of borrowings of $66.1 million, or 75.2%. The Company’s total cost of funds was 3.69% for the quarter ended March 31, 2024, which is an increase of six basis points, from 3.63%, for the quarter ended December 31, 2023, and an increase of 144 basis points from 2.25% for the quarter ended March 31, 2023.



Mr. Reilly noted, “The ongoing ‘higher for longer’ interest rate environment continues to drive heavy competition in attracting low-cost deposits to the Bank.  In response, we have enhanced our connection to the local markets in which we operate, understanding that the long, successful history of the Bank has only been made possible by the support of these communities. This engagement has resulted in a market presence that cultivates our most valued relationships and opportunities, rooted in trust and mutual benefit, where the Bank has established itself as a leading reliable, local banking partner.”



The Company recognized a credit loss benefit of $5.6 million for the quarter ended March 31, 2024, compared to a $1.2 million credit loss benefit recognized for the quarter ended December 31, 2023, and a $1.8 million provision for credit losses recognized for the quarter ended March 31, 2023. The allowance for credit losses on loans was $16.0 million, or 1.18% of total loans, as of March 31, 2024, compared to $21.6 million, or 1.61% of total loans, as of December 31, 2023, and $24.8 million, or 1.84% of total loans, as of March 31, 2023. The $5.6 million credit loss benefit and the resulting reduction in the allowance for credit losses is primarily due to a reduction in reserves on individually analyzed loans totaling $4.9 million and a general provision reversal of $675,000. An enterprise value loan, totaling $2.0 million, that was individually analyzed for reserves, paid off during the quarter, resulting in the elimination of $1.1 million in related reserves. The remaining $3.8 million reduction in the individually analyzed reserves was driven by the Company reaching a settlement with a digital asset borrower, which closed subsequent to quarter end.

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The reserves and loan balance at March 31, 2024 represent the remaining exposure on this digital asset loan.



Net charge-offs totaled $22,000 for the quarter ended March 31, 2024, compared to $1.2 million for the quarter ended December 31, 2023, and $3.6 million for the quarter ended March 31, 2023. Non-performing assets were $12.4 million, or 0.74% of total assets, as of March 31, 2024, compared to $16.5 million, or 0.99% of total assets, as of December 31, 2023 and $31.5 million, or 1.85% of total assets, as of March 31, 2023.  These improvements were primarily a result of the reduction in individually analyzed loans and associated reserves, and indicative of the Bank’s continued efforts to improve asset quality.



Mr. Reilly noted “Management has been successful in reducing our exposure to non-performing assets, which decreased approximately 25% since December 31, 2023.  We will continue to focus on lowering our risk profile by directing our growth towards traditional lending segments, including commercial real estate, and proactively resolving troubled credits.”



Noninterest income was $1.4 million for the quarter ended March 31, 2024, compared to $1.6 million for the quarter ended December 31, 2023, and $1.9 million for the quarter ended March 31, 2023. The decrease of $291,000, or 17.7%, compared to the prior quarter was primarily due to a decrease in customer service fees on deposit accounts. The decrease of $591,000, or 30.4% from the prior year quarter was primarily due to decreases in customer service fees on deposit accounts and gains on sale of other repossessed assets in the first quarter of 2023.  



Noninterest expense was $12.7 million for the quarter ended March 31, 2024, compared to $12.5 million for the quarter ended December 31, 2023 and $13.2 million for the quarter ended March 31, 2023. The increase of $279,000, or 2.2%, compared to prior quarter was primarily due to a $1.3 million, or 19.1%, increase in salaries and employee benefits, which includes $577,000 in expenses related to the Company’s separation with a former executive.  This increase was partially offset by a  decrease in other expense of $358,000, or 35.3%, a decrease in marketing expense of $175,000, or 90.7%, a decrease in professional fees of $173,000, or 11.6%, a decrease in insurance expense of $150,000, or 33.3%, and a decrease in service fees of $123,000, or 33.7%. The decrease in noninterest expense of $476,000, or 3.6%, from the prior year quarter, was primarily due to a $399,000 decrease in salaries and employee benefits. The decreases over prior periods represent the Bank’s continued endeavor to decrease its noninterest expenses, including the termination of certain vendor partnerships and consulting agreements.



Mr. Reilly noted, “We have focused on reducing our expenses by thoroughly analyzing recurring costs and eliminating unnecessary spend, through renegotiating contracts and reviewing the necessity of other expenses with a higher level of scrutiny.  We will continue to review our processes to identify cost save opportunities and lower our recurring noninterest expenses.”



The Company recorded a provision for income taxes of $1.7 million for the quarter ended March 31, 2024, reflecting an effective tax rate of 25.5%, compared to $1.1 million, or an effective tax rate of 26.7%, for the quarter ended December 31, 2023, and $670,000, or an effective tax rate of 24.2% for the quarter ended March 31, 2023.



Total assets were $1.66 billion at March 31, 2024, a decrease of $11.6 million, or 0.7%, from $1.67 billion at December 31, 2023. Cash and cash equivalents decreased $29.5 million, or 13.4%, totaling $190.9 million at March 31, 2024 compared to $220.3 million at December 31, 2023, primarily due to an increase in net loans and a decrease in borrowings. Net loans were $1.34 billion at March 31, 2024, an increase of $19.4 million, or 1.5%, from December 31, 2023, primarily due to increases of $45.8 million in mortgage warehouse loans and $9.4 million in commercial real estate loans, partially offset by decreases of $26.4 million in enterprise value loans and $11.3 million in commercial loans.  The allowance for credit losses on loans decreased $5.6 million, or 25.8%, to $16.0 million during the quarter ended March 31, 2024, related to the previously discussed reductions to reserves on individually analyzed loans.  



Total deposits were $1.332 billion at March 31, 2024, an increase of $856,000, or 0.1%, from $1.331 billion at December 31, 2023. Deposits obtained through a national exchange increased $29.0 million, or 21.2% and enterprise value deposits increased $2.9 million, or 2.4%. These increases were offset by decreases in retail deposits of $16.7 million, or 2.3%, and brokered deposits of $15.4 million, or 7.9%. Total borrowings were $89.7 million at March 31, 2024, a decrease of $15.0 million, or 14.4%, when compared to December 31, 2023. 



As of March 31, 2024, shareholders’ equity increased $5.3 million, or 2.4%, to  $227.2 million compared to $221.9 million at December 31, 2023. The increase was primarily due to first quarter net income of $5.0 million. Stockholders’ equity to total assets was 13.7% at March 31, 2024, compared to 13.3% at December 31, 2023. Book value per share increased to $12.87 at March 31, 2024, from $12.55 at December 31, 2023. Market value per share decreased 9.6% to $9.10 at March 31, 2024, from $10.07 at December 31, 2023. As of March 31, 2024, the Federal Deposit Insurance Corporation categorized the Bank as well capitalized under the regulatory framework for prompt corrective action.



Mr. Reilly concluded, “The Company is executing its strategic plan into 2024, and has successfully done so through the first quarter, proving its resiliency in a difficult market. We will continue to work hard to reinforce the pillars of our strong foundation and face our challenges with the same resolve that has brought us almost 200 years of successfully serving our communities and stakeholders.”

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About Provident Bancorp, Inc.



Provident Bancorp, Inc. (NASDAQ:PVBC) is the holding company for BankProv, a full-service commercial bank headquartered in Massachusetts. With retail branches in the Seacoast Region of Northeastern Massachusetts and New Hampshire, as well as commercial banking offices in the Manchester/Concord market in Central New Hampshire, BankProv delivers a unique combination of traditional banking services and innovative financial solutions to its markets. Founded in Amesbury, Massachusetts in 1828, BankProv holds the honor of being the 10th oldest bank in the nation. The Bank insures 100% of deposits through a combination of insurance provided by the Federal Deposit Insurance Corporation (FDIC) and the Depositors Insurance Fund (DIF). For more information, visit bankprov.com.



Forward-looking statements



This news release may contain certain forward-looking statements, such as statements of the Company’s or the Bank’s plans, objectives, expectations, estimates and intentions. Forward-looking statements may be identified by the use of words such as, “expects,” “subject,” “believe,” “will,” “intends,” “may,” “will be” or “would.” These statements are subject to change based on various important factors (some of which are beyond the Company’s or the Bank’s control), and actual results may differ materially. Accordingly, readers should not place undue reliance on any forward-looking statements (which reflect management’s analysis of factors only as of the date on  which they are given). These factors include: general economic conditions; interest rates; inflation; potential recessionary conditions; levels of unemployment; legislative, regulatory and accounting changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve Bank; deposit flows; our ability to access cost-effective funding; changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; changes in consumer spending, borrowing and savings habits; competition; real estate values in the market area; loan demand; the adequacy of our level and methodology for calculating our allowance for credit losses; changes in the quality of our loan and securities portfolios; the ability of our borrowers to repay their loans; an unexpected adverse financial, regulatory or bankruptcy event experienced by our cryptocurrency, digital asset or financial technology (“fintech”) customers; our ability to retain key employees; failures or breaches of our IT systems, including cyberattacks; the failure to maintain current technologies; the ability of the Company or the Bank to effectively manage its growth; global and national war and terrorism; the impact of the COVID-19 pandemic or any other pandemic on our operations and financial results and those of our customers; and results of regulatory examinations, among other factors. The foregoing list of important factors is not exclusive. Readers should carefully review the risk factors described in other documents that the Company files from time to time with the Securities and Exchange Commission, including Annual and Quarterly Reports on Forms 10-K and 10-Q, and Current Reports on Form 8-K.



Provident Bancorp, Inc.

Joseph Reilly,  603-494-8552

President and Chief Executive Officer

jreilly@bankprov.com



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