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Provident Bancorp, Inc. Reports Earnings for the September 30, 2019 Quarter

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AMESBURY, Mass., Oct. 17, 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 September 30, 2019 of $3.5 million, or $0.37 per diluted share, compared to $2.1 million, or $0.22 per diluted share, for the three months ended September 30, 2018. Net income for the nine months ended September 30, 2019 was $8.3 million, or $0.88 per diluted share, compared to $6.5 million, or $0.70 per diluted share, for the nine months ended September 30, 2018.

David Mansfield, CEO of The Provident Bank, said, "I am extremely pleased with the third-quarter results. Year-to-date net loan growth of $91 million, a strong net interest margin of 4.44%, and an efficiency ratio of 53.40% resulted in our 1.32% return on assets results this quarter, the highest we've seen since going partially public in 2015. Yesterday, we completed our conversion from a mutual holding company to a fully stock holding company. The capital raised through the offering will allow the Bank to continue executing its growth strategy in both specialized commercial lending and deposit initiatives. We are proud of our quarterly and year-to-date results, as they reflect the success of our strategic execution. We look forward to building upon this success."

Net interest and dividend income before provision for loan losses increased by $1.7 million, or 17.6%, compared to the three months ended September 30, 2018, and increased by $4.5 million, or 16.6%, compared to the nine months ended September 30, 2018. The growth in net interest and dividend income this quarter over the prior year's third quarter is primarily the result of an increase in our average interest earning assets of $122.7 million, or 14.0%, and an increase in net interest margin of 13 basis points to 4.44%. The growth in net interest income for the nine months ended September 30, 2019 compared to the same period in 2018 is primarily the result of an increase in average interest earning assets of $103.3 million, or 12.1%, and an increase of the net interest margin of 17 basis points to 4.44%.

Provisions for loan losses of $833,000 were recognized for the three months ended September 30, 2019 compared to $1.4 million for the same period in 2018. For the nine months ended September 30, 2019, $3.6 million of provisions were recognized compared to $2.7 million for the nine months ended September 30, 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. We had $2.6 million in loan net charge-offs year-to-date compared to net charge-offs of $1.3 million for the same period 2018. Charge-offs in 2019 primarily resulted from three commercial relationships that the Bank charged-off in the first six months of 2019.

The allowance for loan losses as a percentage of total loans was 1.32% as of September 30, 2019 compared to 1.38% as of December 31, 2018. The allowance for loan losses as a percentage of non-performing loans was 207.73% as of September 30, 2019 compared to 186.55% as of December 31, 2018. Non-performing loans were $6.0 million, or 0.56% of total assets as of September 30, 2019, compared to $6.3 million, or 0.64% of total assets, as of December 31, 2018. The non-performing loans at September 30, 2019 consisted primarily of two commercial and industrial loan relationships. Impairment was evaluated and specific reserves of $133,000 were allocated to impaired loans as of September 30, 2019.

In May 2011, the Bank joined the BancAlliance Network. 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. During the nine months ended September 30, 2019, the Bank charged-off one commercial and industrial loan totaling $917,000 and accepted a short-sale of another loan, each of which was originated through the BancAlliance Network. The accepted short-sale resulted in a charge-off of $589,000 on a $1.2 million loan relationship. As of September 30, 2019, the Bank has seven BancAlliance loan relationships remaining totaling $9.2 million. Out of the seven relationships, four totaling $4.7 million are pass rated and three totaling $4.5 million are substandard. Included in our substandard loans is one relationship totaling $1.9 million that is on non-accrual and deemed impaired. We have allocated specific reserves totaling $133,000 for this relationship. 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 decreased $19,000, or 1.8%, to $1.0 million for the three months ended September 30, 2019 compared to $1.1 million for the three months ended September 30, 2018. The decrease is primarily due to a decrease in other service charges and fees of $52,000, or 10.4%, partially offset by an increase of $24,000, or 6.3%, in customer service fees on deposit accounts. For the nine months ended September 30, 2019, noninterest income decreased $48,000, or 1.5%, $3.1 million for the nine months ended September 30, 2019 compared to $3.2 million for the nine months ended September 30, 2018. The decrease is primarily due to a decrease in other service charges and fees of $183,000, or 11.8%, partially offset by an increase of $113,000 in gains on sales of securities.

Noninterest expense increased $237,000, or 3.8%, to $6.5 million for the three months ended September 30, 2019 compared to $6.2 million for the three months ended September 30, 2018. The increase is primarily due to an increase in salaries and employee benefits expense, partially offset by a decrease in professional fees. The increase of $328,000, or 7.9%, for the three months ended September 30, 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 decrease of $154,000, or 56.2%, for the three months ended September 30, 2019 in professional fees was due to legal expenses incurred in 2018 related to certain subordinated lienholders that disputed the priority of the Bank's liens and the right of the Bank to retain proceeds from a foreclosure sale. For the nine months ended September 30, 2019, noninterest expense increased $1.1 million, or 5.7%, to $20.1 million compared to $19.0 million for the nine months ended September 30, 2018. The primary increases for the nine months ended September 30, 2019 were salary and employee benefits expense, occupancy expense, professional fees, and other expense. The increase of $463,000, or 3.7%, for the nine months ended September 30, 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 $244,000, or 18.4%, in occupancy expense for the nine months ended September 30, 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 $187,000, or 22.0%, for the nine months ended September 30, 2019 in professional fees was primarily due to increased consulting services to aid in our efforts to implement a continuous improvement culture and our development of deposit products and services. The increase of $120,000, or 4.5%, in other expense was primarily due to other real estate owned expenses and increased telecommunication expenses.

As of September 30, 2019, total assets have increased $104.3 million, or 10.7%, to $1.1 billion compared to $974.1 million at December 31, 2018. The primary reasons for the increase are increases in net loans, cash and cash equivalents, premises and equipment, and other assets, partially offset by a decrease in investments in available-for-sale securities. Net loans increased $90.8 million, or 10.9%, to $926.3 million as of September 30, 2019 compared to $835.5 million at December 31, 2018. The increase in net loans was due to an increase in commercial loans of $61.2 million, or 16.9%, and an increase in commercial real estate loans of $47.3 million, or 13.0%, offset by a decrease of $8.3 million, or 14.4%, in residential real estate loans and a decrease of $4.5 million, or 22.8%, in consumer loans. The increase in cash and cash equivalents of $10.4 million, or 36.2%, resulted from the receipt of stock subscription orders pending completion of the stock offering. The increase in premises and equipment of $8.0 million, or 49.6%, was primarily due to increases in construction in progress costs of $4.3 million, or 77.3%, 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 September 30, 2019, the balance of our right-of-use assets was $3.7 million. The increase in other assets of $1.9 million, or 66.2%, is primarily due to an increase in receivables and deferred expenses from our second-step conversion and related stock offering. The decrease in investments in available-for-sale securities of $6.1 million, or 11.8%, resulted primarily from principal pay downs partially offset by an increase in the fair value of the securities.

Total liabilities increased $94.0 million, or 11.1%, due to increased deposits and operating lease liabilities, partially offset by a decrease in borrowings. Deposits were $897.3 million as of September 30, 2019, representing an increase of $129.2 million, or 16.8%, compared to December 31, 2018. The primary reason for the increase in deposits was due to an increase of $92.6 million, or 84.7%, in savings accounts, an increase of $17.3 million, or 17.7%, in time deposits, and an increase in money market accounts of $28.2 million, or 12.3%, partially offset by a decrease in NOW and demand deposits of $8.8 million, or 2.7%. The increase in savings accounts is primarily due to the receipt of stock subscription orders pending completion of the stock offering. The increase in time deposits is primarily due to increases in brokered certificates of deposit of $6.8 million, or 12.1%, and an increase of $8.8 million, or 169.6%, from Qwickrate, where we gather certificates of deposit nationwide by posting rates we will pay on these deposits. Money market deposits increased due to deposit initiatives. NOW and demand deposits decreased due to the decrease in some of our high rate relationships. Borrowings decreased $38.0 million, or 55.9%, to $30.0 million as of September 30, 2019 primarily due to the receipt of stock subscription orders pending completion of the stock offering. Operating lease liabilities were $3.9 million as of September 30, 2019 due to the adoption of ASU No. 2016-02.

As of September 30, 2019, shareholders' equity was $135.9 million compared to $125.6 million at December 31, 2018, representing an increase of $10.3 million, or 8.2%. The increase is primarily due to net income of $8.3 million for the current year.

About Provident Bancorp, Inc.
Provident Bancorp, Inc. is a Maryland corporation that was formed in 2019 to be the successor corporation to Provident Bancorp, Inc., a Massachusetts corporation, and the holding company for The Provident Bank. 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, 603-334-1253
Executive Vice President/CFO
choule@theprovidentbank.com

 
Provident Bancorp, Inc.
Consolidated Balance Sheet
       
  At   At
  September 30,   December 31,
(In thousands) 2019   2018
Assets (unaudited)    
Cash and due from banks $ 13,729     $ 10,941  
Short-term investments   25,238       17,672  
Cash and cash equivalents   38,967       28,613  
Investments in available-for-sale securities (at fair value)   45,328       51,403  
Federal Home Loan Bank stock, at cost   1,636       2,650  
Loans, net   926,281       835,528  
Bank owned life insurance   26,752       26,226  
Premises and equipment, net   24,057       16,086  
Other real estate owned   1,740       1,676  
Accrued interest receivable   2,567       2,638  
Deferred tax asset, net   6,347       6,437  
Other assets   4,690       2,822  
Total assets $ 1,078,365     $ 974,079  
       
Liabilities and Shareholders' Equity      
Deposits:      
Noninterest-bearing $ 235,082     $ 195,293  
Interest-bearing   662,198       572,803  
Total deposits   897,280       768,096  
Borrowings   29,983       68,022  
Operating lease liabilities   3,881       -  
Other liabilities   11,370       12,377  
Total liabilities   942,514       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;      
9,658,284 shares issued, 9,621,822 shares outstanding      
at September 30, 2019 and 9,662,181 shares issued,      
9,625,719 shares outstanding at December 31, 2018   -       -  
Additional paid-in capital   46,911       45,895  
Retained earnings   91,609       83,351  
Accumulated other comprehensive income (loss)   559       (255 )
Unearned compensation - ESOP   (2,440 )     (2,619 )
Treasury stock: 36,462 shares   (788 )     (788 )
Total shareholders' equity   135,851       125,584  
Total liabilities and shareholders' equity $ 1,078,365     $ 974,079  
       


 
Provident Bancorp, Inc.
Consolidated Income Statements
       
  Three Months Ended   Nine Months Ended
  September 30,   September 30,
(Dollars in thousands, except per share data) 2019   2018   2019   2018
               
Interest and dividend income: (unaudited)        
Interest and fees on loans $ 12,841     $ 10,219     $ 36,810     $ 29,420  
Interest and dividends on securities   406       411       1,230       1,256  
Interest on short-term investments   69       203       136       287  
Total interest and dividend income   13,316       10,833       38,176       30,963  
Interest expense:              
Interest on deposits   1,691       1,225       4,659       3,154  
Interest on borrowings   568       204       1,701       522  
Total interest expense   2,259       1,429       6,360       3,676  
Net interest and dividend income   11,057       9,404       31,816       27,287  
Provision for loan losses   833       1,421       3,649       2,715  
Net interest and dividend income after provision for loan losses   10,224       7,983       28,167       24,572  
Noninterest income:              
Customer service fees on deposit accounts   404       380       1,089       1,081  
Service charges and fees - other   450       502       1,368       1,551  
Gain on sale of securities, net   -       -       113       -  
Bank owned life insurance income   175       172       525       515  
Other income   11       5       47       43  
Total noninterest income   1,040       1,059       3,142       3,190  
Noninterest expense:              
Salaries and employee benefits   4,478       4,150       13,046       12,583  
Occupancy expense   373       456       1,567       1,323  
Equipment expense   105       118       320       361  
Data processing   188       200       542       597  
Marketing expense   115       54       239       168  
Professional fees   120       274       1,038       851  
Directors' fees   188       141       557       467  
Other   893       830       2,780       2,660  
Total noninterest expense   6,460       6,223       20,089       19,010  
Income before income tax expense   4,804       2,819       11,220       8,752  
Income tax expense   1,295       741       2,962       2,262  
 Net income $ 3,509     $ 2,078     $ 8,258     $ 6,490  
               
Earnings per share:              
Basic $ 0.38     $ 0.22     $ 0.89     $ 0.70  
Diluted $ 0.37     $ 0.22     $ 0.88     $ 0.70  
               
Weighted Average Shares:              
Basic   9,294,821       9,247,367       9,281,073       9,233,760  
Diluted   9,383,497       9,355,410       9,338,413       9,309,712  
               


 
Provident Bancorp, Inc.
Selected Financial Ratios
       
  For the three   For the nine
  months ended   months ended
  September 30,   September 30,
  2019   2018   2019   2018
(unaudited)          
Performance Ratios:          
Return on average assets (1) 1.32 %   0.90 %   1.08 %   0.96 %
Return on average equity (1) 10.47 %   6.82 %   8.35 %   7.26 %
Interest rate spread (1) (3) 4.04 %   4.00 %   4.06 %   4.01 %
Net interest margin (1) (4) 4.44 %   4.31 %   4.44 %   4.27 %
Non-interest expense to average assets (1) 2.44 %   2.70 %   2.63 %   2.81 %
Efficiency ratio (5) 53.40 %   59.48 %   57.65 %   62.37 %
Average interest-earning assets to          
average interest-bearing liabilities 144.23 %   146.08 %   143.44 %   145.65 %
Average equity to average assets 12.64 %   13.20 %   12.97 %   13.24 %
           


             
    At   At   At
    September 30,   December 31,   September 30,
(unaudited)   2019   2018   2018
Asset Quality Ratios:            
Allowance for loan losses as a percent of total loans (2)   1.32 %   1.38 %   1.40 %
Allowance for loan losses as a percent of non-performing loans   207.73 %   186.55 %   151.40 %
Non-performing loans as a percent of total loans (2)   0.64 %   0.74 %   0.93 %
Non-performing loans as a percent of total assets   0.56 %   0.64 %   0.80 %
Non-performing assets as a percent of total assets (6)   0.72 %   0.81 %   0.80 %
             
             
(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, 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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