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Provident Bancorp, Inc. Reports Earnings for the March 31, 2019 Quarter

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AMESBURY, Mass., April 18, 2019 (GLOBE NEWSWIRE) -- Provident Bancorp, Inc. (the "Company") (NasdaqCM: PVBC), the holding company for The Provident Bank (the "Bank"), reported net income for the three months ended March 31, 2019 of $2.2 million, or $0.24 per diluted share, compared to $2.0 million, or $0.22 per diluted share, for the three months ended March 31, 2018.

Dave Mansfield, Chief Executive Officer said, "I am pleased with our first quarter results. Loan growth remains strong, and ongoing efforts to implement a continuous improvement culture based on lean principals have enhanced both our employee and customer experience. In the first quarter, we took steps to establish technology partnerships, which may enable us to roll out unique deposit offerings later in the year. These efforts and initiatives are essential to growing low-cost, stable deposits that will greatly benefit the Bank's liquidity and net interest margin."

Net interest and dividend income before provision for loan losses increased by $1.4 million, or 16.5%, compared to the three months ended March 31, 2018. The growth in net interest and dividend income this quarter over the prior year's first quarter is primarily the result of an increase in our average interest-earning assets of $86.8 million, or 10.4%, and an increase in net interest margin of 23 basis points to 4.40%.

Provisions for loan losses of $1.5 million were recognized for the three months ended March 31, 2019 compared to $656,000 for the same period in 2018. 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 March 31, 2019 compared to 1.38% as of December 31, 2018. The allowance for loan losses as a percentage of non-performing loans was 141.58% as of March 31, 2019 compared to 186.55% as of December 31, 2018. Non-performing loans were $8.4 million, or 0.84% of total assets as of March 31, 2019, compared to $6.3 million, or 0.64% of total assets as of December 31, 2018. The non-performing loans at March 31, 2019 consist primarily of four commercial and industrial loan relationships. Impairment was evaluated and specific reserves of $886,000 were allocated to impaired loans as of March 31, 2019.  

During the quarter ended March 31, 2019, the Bank charged-off a commercial and industrial loan that was originated through the BancAlliance network totaling $917,000. BancAlliance has a membership of approximately 200 community banks that together participate in middle market commercial and industrial loans as a way to diversify their commercial portfolio. As of March 31, 2019, the Bank has ten BancAlliance loan relationships remaining totaling $13.9 million. Out of the ten relationships, five totaling $6.8 million are pass rated, two totaling $3.4 million are on watch and three totaling $3.7 million are substandard. Two relationships totaling $3.2 million are on non-accrual and deemed impaired. We have allocated specific reserves totaling $345,000 for these impaired loans. Our last BancAlliance loan origination was in February 2017 and at this time we are not anticipating originating any new loans through this network.

Noninterest income increased $33,000, or 3.3%, and was $1.0 million for each of the three months ended March 31, 2019 and 2018. The increase is primarily due to an increase in gains on sales of securities of $113,000, partially offset by decreases of $33,000, or 9.1%, in customer service fees on deposit accounts and $43,000, or 9.5%, in other service charges and fees.

Noninterest expense increased $370,000, or 5.8%, to $6.7 million for the three months ended March 31, 2019 compared to $6.4 million for the three months ended March 31, 2018. The primary increases for the three months ended March 31, 2019 were salary and employee benefits expense, occupancy expense, and professional fees, offset by a decrease in other expense. The increase of $130,000, or 3.1%, for the three months ended March 31, 2019 in salary and employee benefits was primarily due to a higher number of sales and operations positions compared to the same period in 2018. The increase of $194,000, or 43.1%, in occupancy expense for the three months ended March 31, 2019 was primarily due to the acceleration of our leasehold improvements amortization related to the closure of our Hampton, New Hampshire branch in May 2019. The increase of $174,000, or 70.2%, for the three months ended March 31, 2019 in professional fees was due to increased consulting services and 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 decrease of $131,000, or 13.5%, in other expense was primarily due to FDIC assessment credits received and decreased loan workout expenses.

As of March 31, 2019, total assets have increased $24.4 million, or 2.5%, to $998.5 million compared to $974.1 million at December 31, 2018. The primary reasons for the increase are due to increases in net loans and premises and equipment, partially offset by decreases in cash and cash equivalents and investments in available-for-sale securities. Net loans increased $23.7 million, or 2.8%, to $859.3 million as of March 31, 2019 compared to $835.5 million at December 31, 2018. The increase in net loans was due to an increase in commercial loans of $20.8 million, or 5.7%, and an increase in commercial real estate loans of $8.6 million, or 2.3%, offset by a decrease of $2.5 million, or 4.3%, in residential real estate loans and a decrease of $2.2 million, or 4.9%, in construction and land development loans. The increase in premises and equipment of $5.4 million, or 33.5%, was primarily due to increases in construction in progress costs of $1.6 million, or 28.1%, and the adoption of ASU (Accounting Standards Update) No. 2016-02, Leases (Topic 842).  This standard was effective January 1, 2019 and required us to recognize on our balance sheet right-of-use assets, which approximate the present value of our remaining lease payments. As of March 31, 2019, the balance of the right-of-use assets was $3.8 million. The decrease in cash and cash equivalents of $4.9 million, or 17.1%, was due to utilizing funds for loan growth. The decrease in investments in available-for-sale securities of $1.7 million, or 3.4%, resulted primarily from principal pay downs and also a decrease in the fair value of the securities.

Total liabilities increased $21.8 million, or 2.6%, due to increased deposits, borrowings, and operating lease liabilities. Deposits were $775.3 million as of March 31, 2019, representing an increase of $7.2 million, or 0.9%, compared to December 31, 2018. The primary reason for the increase in deposits was due to an increase of $22.7 million, or 23.3%, in time deposits and an increase of $6.3 million, or 5.8%, in savings accounts, partially offset by a decrease in NOW and demand deposits of $19.8 million, or 6.0%. The increase in time deposits is primarily due to increases in brokered certificates of deposit of $13.3 million, or 23.9%, and an increase of $9.9 million, or 190.6%, from Qwickrate, where we gather certificates of deposit nationwide by posting rates we will pay on these deposits. The increase in savings accounts is primarily due to municipal deposits transferring from NOW and demand deposits to a savings account product. In addition to the municipal deposit transfer, NOW and demand deposits decreased due to the seasonality of municipal deposit balances as well as a decrease in some of our high rate relationships. Borrowings increased $11.9 million, or 17.5%, to $79.9 million as of March 31, 2019 primarily due to loan growth funding. Operating lease liabilities were $3.9 million as of March 31, 2019 due to the adoption of ASU No. 2016-02.

As of December 31, 2018, shareholders' equity was $128.3 million compared to $125.6 million at December 31, 2018, representing an increase of $2.7 million, or 2.1%. The increase is primarily due to net income of $2.2 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 52.3% of Provident Bancorp, Inc.'s 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, the effects of the recent federal government shutdown, 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
  March 31,   December 31,
(In thousands)   2019       2018  
Assets (unaudited)    
Cash and due from banks $ 9,151     $ 10,941  
Short-term investments   14,575       17,672  
Cash and cash equivalents   23,726       28,613  
Investments in available-for-sale securities (at fair value)   49,662       51,403  
Federal Home Loan Bank stock, at cost   3,515       2,650  
Loans, net   859,269       835,528  
Bank owned life insurance   26,403       26,226  
Premises and equipment, net   21,467       16,086  
Other real estate owned   1,720       1,676  
Accrued interest receivable   3,171       2,638  
Deferred tax asset, net   6,589       6,437  
Other assets   2,997       2,822  
Total assets $ 998,519     $ 974,079  
       
Liabilities and Shareholders' Equity      
Deposits:      
Noninterest-bearing $ 198,733     $ 195,293  
Interest-bearing   576,544       572,803  
Total deposits   775,277       768,096  
Borrowings   79,942       68,022  
Operating lease liabilities   3,919       -  
Other liabilities   11,109       12,377  
Total liabilities   870,247       848,495  
Shareholders' equity:      
Preferred stock; authorized 50,000 shares:      
no shares issued and outstanding   -       -  
Common stock, no par value: 30,000,000 shares authorized;      
9,662,181 shares issued, 9,625,719 shares outstanding      
at March 31, 2019 and December 31, 2018   -       -  
Additional paid-in capital   46,236       45,895  
Retained earnings   85,569       83,351  
Accumulated other comprehensive (loss) income   (186 )     (255 )
Unearned compensation - ESOP   (2,559 )     (2,619 )
Treasury stock: 36,462 shares   (788 )     (788 )
Total shareholders' equity   128,272       125,584  
Total liabilities and shareholders' equity $ 998,519     $ 974,079  
       
       

Provident Bancorp, Inc.
Consolidated Income Statements

  Three Months Ended
  March 31,
(Dollars in thousands, except per share data)   2019     2018
   
Interest and dividend income: (unaudited)
Interest and fees on loans $ 11,699   $ 9,276
Interest and dividends on securities   404     435
Interest on short-term investments   26     42
Total interest and dividend income   12,129     9,753
Interest expense:      
Interest on deposits   1,437     920
Interest on borrowings   534     114
Total interest expense   1,971     1,034
Net interest and dividend income   10,158     8,719
Provision for loan losses   1,462     656
Net interest and dividend income after provision for loan losses   8,696     8,063
Noninterest income:      
Customer service fees on deposit accounts   329     362
Service charges and fees - other   412     455
Gain on sale of securities, net   113     -
Bank owned life insurance income   177     171
Other income   15     25
Total noninterest income   1,046     1,013
Noninterest expense:      
Salaries and employee benefits   4,294     4,164
Occupancy expense   644     450
Equipment expense   106     122
Data processing   203     204
Marketing expense   55     53
Professional fees   422     248
Directors' fees   181     163
Other   841     972
Total noninterest expense   6,746     6,376
Income before income tax expense   2,996     2,700
Income tax expense   778     678
 Net income $ 2,218   $ 2,022
       
Earnings per share:      
Basic $ 0.24   $ 0.22
Diluted $ 0.24   $ 0.22
       
Weighted Average Shares:      
Basic   9,267,106     9,219,865
Diluted   9,305,284     9,295,003
       
       

Provident Bancorp, Inc.
Selected Financial Ratios

  For the three
  months ended
  March 31,
  2019 2018
(unaudited)    
Performance Ratios:    
Return on average assets (1) 0.90% 0.91%
Return on average equity (1) 6.75% 6.92%
Interest rate spread (1) (3) 4.04% 3.95%
Net interest margin (1) (4) 4.40% 4.17%
Non-interest expense to average assets (1) 2.73% 2.88%
Efficiency ratio  (5) 60.82% 65.52%
Average interest-earning assets to    
average interest-bearing liabilities 142.11% 144.55%
Average equity to average assets 13.30% 13.17%
     


    At   At   At
    March 31,   December 31,   March 31,
(unaudited)   2019   2018   2018
Asset Quality Ratios:            
Allowance for loan losses as a percent of total loans (2)   1.36%   1.38%   1.33%
Allowance for loan losses as a percent of non-performing loans   141.58%   186.55%   106.80%
Non-performing loans as a percent of total loans (2)   0.96%   0.74%   1.24%
Non-performing loans as a percent of total assets   0.84%   0.64%   1.08%
Non-performing assets as a percent of total assets (6)   1.01%   0.81%   1.08%
             
             
(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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