Provident Bancorp, Inc. Reports Earnings for the June 30, 2018 Quarter

 

 

AMESBURY, Mass., July 19, 2018 (GLOBE NEWSWIRE) -- Provident Bancorp, Inc. (the "Company") (NASDAQ:PVBC), the holding company for The Provident Bank (the "Bank"), reported net income for the three months ended June 30, 2018 of $2.4 million, or $0.26 per diluted share, compared to $1.6 million, or $0.17 per diluted share, for the three months ended June 30, 2017. Net income for the six months ended June 30, 2018 was $4.4 million, or $0.47 per diluted share, compared to $3.4 million, or $0.37 per diluted share, for the six months ended June 30, 2017.

David P. Mansfield, Chief Executive Officer, said "I am pleased by this quarter's earnings results, most notably our return on assets of 1.07%, continued improvement to our efficiency ratio and strong net interest margin. We continue to experience steady growth within our commercial loan portfolio, which now represents over 89% of the Bank's total loans.  Our commercial and industrial portfolio has grown by $34 million, or 4.6% of total loans year-to-date. We did, however experience a decrease in our commercial real estate lending due to a combination of an expected payoff and unexpected prepayments." Mansfield added, "The addition of Joe Reilly to our Board of Directors in June is another positive move for the company. Founder of Centrix Bank, the first dedicated commercial bank in NH, Joe is a highly respected member of the banking community and brings critical insight, sound judgement and hands-on experience to the company. Joe will add significant value as we continue to grow and thrive as a commercial bank."

Net interest and dividend income before provision for loan losses increased by $1.2 million, or 15.5%, compared to the three months ended June 30, 2017 and increased by $2.6 million, or 17.1%, compared to the six months ending June 30, 2017. The growth in net interest and dividend income this quarter over the prior year's second quarter is primarily the result of an increase in our average interest earning assets of $36.9 million, or 4.6%, and an increase in net interest margin of 41 basis points to 4.35%. The growth in net interest income for the six months ended June 30, 2018 compared to the same period in 2017 is primarily the result of an increase in average interest earning assets of $49.5 million, or 6.3%, and an increase of the net interest margin of 40 basis points to 4.26%.

Provisions for loan losses of $638,000 were booked for the three months ended June 30, 2018 compared to $892,000 for the same period in 2017. For the six months ended June 30, 2018, $1.3 million of provisions were recognized compared to $1.5 million for the six months ended June 30, 2017. The changes in the provision were based on management's assessment of loan portfolio growth and composition changes, historical charge-off trends, levels of problem loans and other asset quality trends.

The allowance for loan losses as a percentage of total loans was 1.36% as of June 30, 2018 compared to 1.30% as of December 31, 2017. The allowance for loan losses as a percentage of non-performing loans was 149.13% as of June 30, 2018 compared to 108.02% as of December 31, 2017. Non-performing assets were $7.1 million, or 0.77% of total assets as of June 30, 2018 compared to $9.0 million, or 1.00% of total assets as of December 31, 2017. The non-performing assets at June 30, 2018 consist primarily of two commercial and industrial relationships and one commercial real estate. Impairment was evaluated and specific reserves of $315,000 were allocated during the three months ended June 30, 2018. No additional impairment was recorded on existing impaired loans in the six months ended June 30, 2018.

Noninterest income increased $48,000, or 4.5% to $1.1 million for the three months ended June 30, 2018 compared to $1.0 million for the three months ended June 30, 2017. The increase is primarily due to an increase in service fees of $109,000, or 22.5%, partially offset by a decrease in gains on sales of securities of $58,000. For the six months ended June 30, 2018, noninterest income decreased $440,000, or 17.1%, to $2.1 million compared to $2.6 million for the six months ended June 30, 2017. The decrease is primarily due to decreased gains on sales of securities of $540,000.

Noninterest expense increased $536,000, or 9.1%, to $6.4 million for the three months ended June 30, 2018 compared to $5.9 million for the three months ended June 30, 2017. For the six months ended June 30, 2018, noninterest expense increased $1.3 million, or 11.2%, to $12.8 million compared to $11.5 million for the six months ended June 30, 2017. The primary reason for the increase for the three months ended June 30, 2018 is salary and employee benefits expense and professional fees. For the six months ended June 30, 2018, the primary reason for the increase is salaries and employee benefits expense, professional fees, and other expense. The increase of $538,000, or 14.4%, for the three months ended June 30, 2018 and the increase of $1.0 million, or 13.8%, for the six months ended June 30, 2018 in salary and employee benefits was primarily due to a higher number of lenders compared to June 30, 2017. The increase of $114,000, or 53.0%, for the three months ended June 30, 2018 and the increase of $148,000, or 34.5%, for the six months ended June 30, 2018 in professional fees was primarily due to increased legal expenses related to certain subordinated lienholders that are disputing the priority of the Bank's liens and the right of the Bank to retain proceeds from a foreclosure sale. The increase of $210,000, or 14.3%, for the six months ended June 30, 2018 in other expense is primarily related to costs incurred working out nonperforming loans.

As of June 30, 2018, total assets have increased $23.2 million, or 2.6%, to $925.4 million compared to $902.3 million at December 31, 2017. The primary reason for the increase is due to an increase in net loans partially offset by a decrease in investments in available-for-sale securities. Net loans increased $28.0 million, or 3.8%, to $770.1 million as of June 30, 2018 compared to $742.1 million at December 31, 2017. The increase in net loans was due to an increase in commercial loans of $34.5 million, or 14.3%. The decrease in investments in available-for-sale securities of $6.1 million, or 9.9%, resulted from a decrease in the fair value of the securities.

Total liabilities increased $19.0 million, or 2.4%, due to increased borrowings and deposits. Deposits were $754.3 million as of June 30, 2018 representing an increase of $4.2 million, or 0.6%, compared to December 31, 2017. The primary reason for the increase in deposits was due to an increase of $16.0 million, or 5.2%, in NOW and demand deposits partially offset by a decrease in time deposits of $13.4 million, or 13.1%. The increase in the NOW and demand deposits occurred primarily in municipal deposits. Time deposits decreased primarily due to the roll-off of brokered certificates of deposit. Borrowings increased $13.0 million, or 48.6%, to $39.9 million as of June 30, 2018 primarily due to loan growth funding.

As of June 30, 2018, shareholders' equity was $120.0 million compared to $115.8 million at December 31, 2017, representing an increase of $4.2 million, or 3.6%. The increase is primarily due to net income of $4.4 million for the current year.

About Provident Bancorp, Inc.
Provident Bancorp, Inc. is a Massachusetts corporation that was formed in 2011 by The Provident Bank to be its holding company. Approximately 52.1% of Provident Bancorp, Inc. outstanding shares are owned by Provident Bancorp, a Massachusetts corporation and a mutual holding company. The Provident Bank, a subsidiary of Provident Bancorp, Inc., is an innovative, commercial bank that finds solutions for our business and private clients. We are committed to strengthening the economic development of the regions we serve, by working closely with businesses and private clients and delivering superior products and high-touch services to meet their banking needs. The Provident has offices in Massachusetts and New Hampshire. All deposits are insured in full through a combination of insurance provided by the Federal Deposit Insurance Corporation (FDIC) and the Depositors Insurance Fund (DIF). For more information about The Provident Bank please visit our website www.theprovidentbank.com or call 877-487-2977.

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 of which they are given). These factors include general economic conditions, trends in interest rates, the ability of our borrowers to repay their loans, and the ability of the Company or the Bank to effectively manage its growth 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 of 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.
Carol Houle, 978-834-8534
Executive Vice President/CFO
choule@theprovidentbank.com

Provident Bancorp, Inc.
Consolidated Balance Sheet

  At   At  
  June 30,   December 31,  
(In thousands) 2018   2017  
Assets (unaudited)      
Cash and due from banks $   12,268     $   10,326    
Short-term investments     35,537         37,363    
Cash and cash equivalents     47,805         47,689    
Investments in available-for-sale securities (at fair value)     55,322         61,429    
Federal Home Loan Bank stock, at cost     2,156         1,854    
Loans, net     770,105         742,138    
Assets held-for-sale     -         3,286    
Bank owned life insurance     25,883         25,540    
Premises and equipment, net     14,338         10,981    
Accrued interest receivable     2,494         2,345    
Deferred tax asset, net     5,247         4,920    
Other assets     2,090         2,083    
Total assets $   925,440     $   902,265    
         
Liabilities and Shareholders' Equity        
Deposits:        
Noninterest-bearing $   197,851     $   186,222    
Interest-bearing     556,418         563,835    
Total deposits     754,269         750,057    
Federal Home Loan Bank advances     39,881         26,841    
Other liabilities     11,302         9,590    
Total liabilities     805,452         786,488    
Shareholders' equity:        
Preferred stock; authorized 50,000 shares:         
no shares issued and outstanding     -         -    
Common stock, no par value: 30,000,000 shares authorized;        
9,657,319 shares issued, 9,628,496 shares        
outstanding at June 30, 2018 and December 31, 2017     -         -    
Additional paid-in capital     45,250         44,592    
Retained earnings     78,459         74,047    
Accumulated other comprehensive (loss) income     (389 )       589    
Unearned compensation - ESOP      (2,738 )       (2,857 )  
Treasury stock: 28,823 shares at June 30, 2018 and December 31, 2017     (594 )       (594 )  
Total shareholders' equity     119,988         115,777    
Total liabilities and shareholders' equity $   925,440     $   902,265    
         

Provident Bancorp, Inc.
Consolidated Income Statements

  Three Months Ended   Six Months Ended  
  June 30,   June 30,  
(Dollars in thousands, except per share data) 2018   2017   2018   2017  
                         
Interest and dividend income: (unaudited)  
Interest and fees on loans $   9,925   $   7,911   $   19,201   $   15,144  
Interest and dividends on securities     410       902       845       1,775  
Interest on interest-bearing deposits     42       3       84       9  
Total interest and dividend income     10,377       8,816       20,130       16,928  
Interest expense:                
Interest on deposits     1,009       678       1,929       1,248  
Interest on Federal Home Loan Bank advances     204       201       318       411  
Total interest expense     1,213       879       2,247       1,659  
Net interest and dividend income     9,164       7,937       17,883       15,269  
Provision for loan losses     638       892       1,294       1,455  
Net interest and dividend income after provision for loan losses     8,526       7,045       16,589       13,814  
Noninterest income:                
Customer service fees on deposit accounts     339       342       701       677  
Service charges and fees - other     594       485       1,049       990  
Gain on sale of securities, net     -       58       -       540  
Bank owned life insurance income     172       150       343       300  
Other income     13       35       38       64  
 Total noninterest income     1,118       1,070       2,131       2,571  
Noninterest expense:                
Salaries and employee benefits     4,269       3,731       8,433       7,413  
Occupancy expense     417       450       867       921  
Equipment expense     121       157       243       307  
FDIC assessment     69       73       151       141  
Data processing     193       176       397       366  
Marketing expense     61       100       114       150  
Professional fees     329       215       577       429  
Directors' fees     163       155       326       300  
Other     789       818       1,679       1,469  
Total noninterest expense     6,411       5,875       12,787       11,496  
Income before income tax expense     3,233       2,240       5,933       4,889  
Income tax expense     843       639       1,521       1,486  
 Net income  $   2,390   $   1,601   $   4,412   $   3,403  
                 
Earnings per share:                
Basic $   0.26   $   0.17   $   0.48   $   0.37  
Diluted $   0.26   $   0.17   $   0.47   $   0.37  
                 
Weighted Average Shares:                
Basic     9,233,745       9,193,836       9,226,244       9,193,206  
Diluted     9,302,425       9,198,286       9,294,317       9,193,206  
                 

Provident Bancorp, Inc.
Selected Financial Ratios

  For the three   For the six  
  months ended   months ended  
  June 30,   June 30,  
  2018 2017   2018 2017  
(unaudited)            
Performance Ratios:            
Return on average assets (1) 1.07 % 0.75 %   0.99 % 0.81 %  
Return on average equity (1) 8.04 % 5.68 %   7.49 % 5.94 %  
Interest rate spread (1) (3) 4.09 % 3.76 %   4.01 % 3.69 %  
Net interest margin (1) (4) 4.35 % 3.94 %   4.26 % 3.86 %  
Non-interest expense to average assets (1) 2.87 % 2.77 %   2.88 % 2.75 %  
Efficiency ratio (5) 62.35 % 65.65 %   63.89 % 66.45 %  
Average interest-earning assets to             
average interest-bearing liabilities 146.29 % 142.50 %   145.42 % 142.10 %  
Average equity to average assets 13.32 % 13.28 %   13.25 % 13.71 %  
             

 

    At   At   At
    June 30,   December 31,   June 30,
(unaudited)   2018   2017   2017
Asset Quality Ratios:            
Allowance for loan losses as a percent of total loans (2)   1.36 %   1.30 %   1.40 %
Allowance for loan losses as a percent of non-performing loans   149.13 %   108.02 %   235.05 %
Non-performing loans as a percent of total loans (2)   0.91 %   1.20 %   0.59 %
Non-performing loans as a percent of total assets   0.77 %   1.00 %   0.48 %
Non-performing assets as a percent of total assets (6)   0.77 %   1.00 %   0.48 %
             
             
(1) Annualized for the three months periods.
(2) Loans are presented before the allowance but include deferred costs/fees.  Loans held-for-sale are excluded.
(3) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average
cost of interest-bearing liabilities.
(4) Represents net interest income as a percent of average interest-earning assets.
(5) Represents noninterest expense divided by the sum of net interest income and noninterest income, excluding 
gains on securities available for sale, net.
(6) Non-performing assets consists of non-accrual loans plus loans accruing but 90 days overdue and OREO.
             

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