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Provident Bancorp, Inc. Reports Earnings of the September 30, 2017 Quarter

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AMESBURY, Mass., Oct. 19, 2017 (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 September 30, 2017 of $2.8 million, or $.30 per diluted share, compared to $1.8 million, or $.19 per diluted share, for the three months ended September 30, 2016. Net income for the nine months ended September 30, 2017 was $6.2 million, or $.67 per diluted share, compared to $4.6 million, or $.50 per diluted share, for the nine months ended September 30, 2016.

"We are very pleased with the third quarter's results. Along with maintaining a strong Net Interest Margin, our C&I loan growth is $66 million, which represents an increase of 40% for the year. Our continued focus on commercial and specialty financing enabled The Provident to capture the New Hampshire U.S. Small Business Administration Leading 7(a) Loan Program Lender in Total Dollars for the fourth year in a row. We also received the Community Leader of the Year by the Export-Import Bank of the United States this year. These distinctions validate the momentum of The Provident's strategy and business model. We will continue to innovate and invest in resources to differentiate the Bank, empower our customers and, in turn, help strengthen the overall economy in the regions we serve," said David Mansfield, Chief Executive Officer of The Provident.

Net interest income before provision for loan losses increased by $1.5 million, or 22.7%, compared to the three months ended September 30, 2016 and increased by $4.2 million, or 21.5%, compared to the nine months ending September 30, 2016. The growth in net interest income this quarter over the prior year's third quarter is primarily the result of an increase in our average interest earning assets of $124.5 million or 17.3% and an increase in net interest margin of 17 basis points to 3.89%. The growth in net interest income for the nine months ended September 30, 2017 compared to the nine months ended in the same period 2016 is primarily the result of an increase in average interest earning assets of $101.2 million or 14.3% and an increase of the net interest margin of 23 basis points to 3.87% for the nine months ended September 30, 2017.

Provision for loan losses of $1.0 million were booked for the three months ended September 30, 2017 compared to $163,000 for the same period in 2016. For the nine months ended September 30, 2017 $2.5 million of provisions were recognized compared to $484,000 for the nine months ended September 30, 2016. The changes in the provision and the allowance for loan losses 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 1.44% as of September 30, 2017 compared to 1.36% as of December 31, 2016. The allowance for loan losses as a percent of non-performing loans was 193.59% as of September 30, 2017 compared to 542.98% as of December 31, 2016. Non-performing assets were $5.6 million, or 0.61%, to total assets as of September 30, 2017 compared to $1.4 million, or 0.18%, to total assets for the same period 2016. The Bank endeavors to work constructively to resolve its non-performing loans. The non-accrual loans as of September 30, 2017 is primarily composed of one commercial real estate property totaling $5.2 million. Based on management's most recent evaluation, the Bank has assigned a specific reserve of $809,000 as of September 30, 2017.

Noninterest income increased $1.5 million, or 112.5% to $2.9 million for the three months ended September 30, 2017. For the nine months ended September 30, 2017, noninterest income increased $2.2 million, or 67.5%, to $5.5 million. The increases in both periods are primarily due to increased gains on sales of securities and income from service fees. Effective January 2018, the Company is adopting ASU (Accounting Standards Update) No. 2016-01, Financial Instruments – Overall (Subtopic 825-10): "Recognition and Measurement of Financial Assets and Financial Liabilities." This standard will require us to measure our equity investments at fair value with changes in fair value recognized in net income. In order to reduce potential quarterly volatility, the Company may divest more equity securities. As of September 30, 2017, the Company had securities with a total fair value of $12.6 million with a net unrealized gain of $2.7 million.

Noninterest expense increased $702,000, or 13.5%, to $5.9 million for the three months ended September 30, 2017. For the nine months ended September 30, 2017, noninterest expense increased $2.2 million, or 14.4%, to $17.4 million. The primary reason for the increase was salary expense. The increase in salary and employee benefits was $724,000, or 22.5%, for the three months ended September 30, 2017 and $1.8 million, or 19.4%, for the nine months ended September 30, 2017. The primary reason for the increase in salary and employee benefits was due to adding additional lenders and stock based compensation expense compared to the prior year.

As of September 30, 2017, total assets have increased $133.0 million, or 16.7%, to $928.6 million compared to $795.5 million at December 31, 2016. The primary reason for the increase is due to net loans with an increase of $124.1 million, or 19.9%. The increase in net loans was due to an increase in commercial loans of $66.4 million, or 39.9%, an increase in commercial real estate loans of $50.0 million, or 14.9%, and an increase in consumer loans of $8.7 million, or 140.3%. Total liabilities increased $126.1 million, or 18.4%, due to higher deposits and borrowings. Deposits were $725.3 million as of September 30, 2017 representing an increase of $97.3 million, or 15.5%, compared to December 31, 2016. The primary reason for the increase in deposits was due to an increase in time deposits of $41.7 million, or 45.9%, an increase of $50.8 million, or 35.0%, in money market deposits, and an increase of $6.5 million, or 5.9%, in savings deposits. Borrowings increased $28.5 million, or 57.2%, to $78.4 million as of September 30, 2017.

As of September 30, 2017, shareholders' equity was $116.1 million compared to $109.1 million at December 31, 2016 representing an increase of $6.9 million, or 6.3%. The increases are primarily due to year-to-date net income of $6.2 million.

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 52.2% of Provident Bancorp, Inc. outstanding shares are owned by Provident Bancorp, a Massachusetts corporation and a mutual holding company. The Provident Bank is an innovative, commercial bank that finds solutions for our business clients. We are committed to strengthening the economic development of the regions we serve, by working closely with businesses 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 borrower to repay their loans, 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 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
  September 30,   December 31,
(In thousands)   2017       2016  
Assets (unaudited)    
Cash and due from banks $ 8,720     $ 7,939  
Interest-bearing demand deposits with other banks   8,827       2,637  
Money market mutual funds   30       129  
Cash and cash equivalents   17,577       10,705  
Investments in available-for-sale securities (at fair value)   109,684       117,867  
Federal Home Loan Bank stock, at cost   3,737       2,787  
Loans, net   748,537       624,425  
Assets held-for-sale   3,213       -  
Bank owned life insurance   25,362       19,395  
Premises and equipment, net   11,156       11,587  
Accrued interest receivable   2,635       2,320  
Deferred tax asset, net   4,809       4,913  
Other assets   1,869       1,544  
Total assets $ 928,579     $ 795,543  
       
Liabilities and Equity      
Deposits:      
Noninterest-bearing $ 170,089     $ 158,075  
Interest-bearing   555,184       469,907  
Total deposits   725,273       627,982  
Federal Home Loan Bank advances   78,365       49,858  
Other liabilities   8,887       8,554  
Total liabilities   812,525       686,394  
Shareholders' equity:      
Preferred stock; authorized 50,000 shares:      
no shares issued and outstanding   -       -  
Common stock, no par value: 30,000,000 shares authorized;      
9,652,448 shares issued, 9,627,988 shares      
outstanding at September 30, 2017 and 9,652,448 issued      
and outstanding at December 31, 2016   -       -  
Additional paid-in capital   44,274       43,393  
Retained earnings   72,403       66,229  
Accumulated other comprehensive income   2,786       2,622  
Unearned compensation - ESOP   (2,917 )     (3,095 )
Treasury stock: 24,460 shares at September 30, 2017   (492 )     -  
Total shareholders' equity   116,054       109,149  
Total liabilities and shareholders' equity $ 928,579     $ 795,543  
       

 

Provident Bancorp, Inc.
Consolidated Income Statements
 
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
(Dollars in thousands, except per share data)   2017     2016     2017     2016
Interest and dividend income: (unaudited)
Interest and fees on loans $ 8,403   $ 6,611   $ 23,547   $ 18,861
Interest and dividends on securities   822     807     2,597     2,549
Interest on interest-bearing deposits   14     8     23     22
Total interest and dividend income   9,239     7,426     26,167     21,432
Interest expense:              
Interest on deposits   783     539     2,031     1,623
Interest on Federal Home Loan Bank advances   222     174     633     468
Total interest expense   1,005     713     2,664     2,091
Net interest and dividend income   8,234     6,713     23,503     19,341
Provision for loan losses   1,012     163     2,467     484
Net interest and dividend income after provision for loan losses   7,222     6,550     21,036     18,857
Noninterest income:              
Customer service fees on deposit accounts   380     339     1,064     936
Service charges and fees - other   488     427     1,471     1,293
Gain on sale of securities, net   1,851     438     2,391     475
Bank owned life insurance income   167     147     467     460
Other income   11     12     75     101
Total noninterest income   2,897     1,363     5,468     3,265
Noninterest expense:              
Salaries and employee benefits   3,943     3,219     11,346     9,500
Occupancy expense   411     412     1,332     1,194
Equipment expense   149     162     456     471
FDIC assessment   75     103     216     293
Data processing   177     163     543     491
Marketing expense   81     70     231     178
Professional fees   227     299     656     876
Directors' fees   133     81     433     226
Other   718     703     2,197     1,987
Total noninterest expense   5,914     5,212     17,410     15,216
Income before income tax expense   4,205     2,701     9,094     6,906
Income tax expense   1,434     940     2,920     2,295
 Net income  $ 2,771   $ 1,761   $ 6,174   $ 4,611
               
Income per share:              
Basic $ 0.30   $ 0.19   $ 0.67   $ 0.50
Diluted $ 0.30   $ 0.19   $ 0.67   $ 0.50
               
Weighted Average Shares:              
Basic   9,201,634     9,179,269     9,196,046     9,173,331
Diluted   9,213,056     9,179,269     9,196,046     9,173,331
               

 

Provident Bancorp, Inc.
Selected Financial Ratios
 
  At or for the three   At or for the nine
  months ended   months ended
  September 30,   September 30,
  2017 2016   2017  2016
(unaudited)          
Performance Ratios:          
Return on average assets (1) 1.24 % 0.93 %   0.96 % 0.82 %
Return on average equity (1) 9.59 % 6.52 %   7.16 % 5.85 %
Interest rate spread (1) (3) 3.70 % 3.53 %   3.69 % 3.46 %
Net interest margin (1) (4) 3.89 % 3.72 %   3.87 % 3.64 %
Non-interest expense to average assets (1) 2.65 % 2.74 %   2.72 % 2.72 %
Efficiency ratio  (5) 53.13 % 64.54 %   60.09 % 67.31 %
Average interest-earning assets to          
average interest-bearing liabilities 141.03 % 148.84 %   141.72 % 147.28 %
Average equity to average assets 12.97 % 14.21 %   13.45 % 14.07 %
           


    At   At   At
    September 30,   December 31,   September 30,
(unaudited)   2017   2016   2016
Asset Quality Ratios:            
Allowance for loan losses as a percent of total loans (2)   1.44 %   1.36 %   1.40 %
Allowance for loan losses as a percent of non-performing loans   193.59 %   542.98 %   590.56 %
Non-performing loans as a percent of total loans (2)   0.74 %   0.25 %   0.24 %
Non-performing loans as a percent of total assets   0.61 %   0.20 %   0.18 %
Non-performing assets as a percent of total assets (6)   0.61 %   0.20 %   0.18 %
             
             
             
(1) Annualized.            
(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, including    
gains on securities available for sale, net.            
(6) Represents non-accrual loans plus loans accruing but 90 days overdue and OREO.        
             

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