AMESBURY, Mass., April 22, 2021 (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, 2021 of $4.3 million, or $0.24 per diluted share, compared to $1.2 million, or $0.07 per diluted share, for the three months ended March 31, 2020. The increase in net income is primarily attributable to the impact COVID-19 had on the 2020 provision for loan losses which were $3.1 million for the three months ended March 31, 2020 compared to $753,000 for the same period in 2021.
The Company also announced that its Board of Directors has declared a quarterly cash dividend of $0.04 per share, which will be paid on May 21, 2021 to stockholders of record as of May 7, 2021.
In announcing these results, Dave Mansfield, Chief Executive Officer said, “We entered this year eager to embrace the future of banking and excited to form new relationships and explore potential business opportunities. We have been particularly focused on meeting the full-service banking needs of our growing list of digital asset customers. In the first quarter we have nearly doubled our digital asset deposit portfolio. We are optimistic about putting this deposit growth to work on our robust pipeline of loans. I am very proud of our first quarter’s financial results and am encouraged by the increase in economic activity we are currently seeing and expect to continue to see as more people are vaccinated against COVID-19 and businesses are able to return to normal operations. We are excited to share our financial success and announce an increase in this quarter’s cash dividend to $0.04 per share.”
COVID–19 Response
Since the distribution of the first COVID-19 vaccination began in December, additional vaccines have been approved for use and the Company’s market area has progressed through different phases of the vaccine rollout. As larger percentages of the population become fully vaccinated, and warmer weather has begun, there has been an uptick in economic activity, particularly in those industries that had been most heavily impacted by the economic downturn caused by the COVID-19 pandemic.
In December 2020, Congress approved a bill which allocated additional funds to the Small Business Administration (“SBA”) for a second round of Paycheck Protection Program (“PPP”) loans to assist with the economic fall out caused by the COVID-19 pandemic. The SBA, in consultation with the U.S. Treasury department, announced that the PPP was to resume in January of 2021 and has since extended the program through May 31, 2021. During the first round of the PPP, which ran from March to August 2020, the Company originated $78.0 million in PPP loans. As of March 31, 2021, the Company has originated an additional $42.7 million under the second round of the PPP. The Company continues to work with customers who received PPP loans on applying for loan forgiveness, and as of March 31, 2021, of the $120.7 million in PPP loans issued, only $57.5 million remained outstanding.
The Company’s focus has been on meeting the needs of its customers through the height of the pandemic and now through the economic recovery. We continue to maintain close communication with commercial customers, especially in those industries most heavily impacted by the pandemic and continue to allow for loan deferral extensions on an as-needed and case-by-case basis. Most loans that were modified under the Coronavirus Aid, Relief, and Economic Security (“CARES”) Act have resumed repayment or have been paid off. We have not experienced any significant delinquencies related to these loans. As of Mach 31, 2021, remaining loan modifications that were made under the CARES Act totaled $35.2 million, or 2.7% of total loans, compared to $44.0 million, or 3.3% of total loans at December 31, 2020.
Financial Results
Net interest and dividend income before provision for loan losses increased by $2.8 million, or 23.5%, compared to the three months ended March 31, 2020. The growth in net interest and dividend income is primarily the result of an increase in our average interest-earning assets of $330.2 million, or 29.2%, offset by an increase in average interest-bearing liabilities of $145.7 million, or 20.4%, and a decrease in net interest margin of 19 basis points to 4.08%. The decrease in the net interest margin is the result of a combination of factors including a decreasing rate environment and an increase in mortgage warehouse loan balances, which have lower rates than our traditional commercial loans. The net interest margin benefitted from the accretion of fee income related to the forgiveness of the SBA PPP loans. The amount of income recognized from the forgiveness totaled $625,000 for the three months ended March 31, 2021. Excluding this income, net interest margin would be 3.91% for the three months ended March 31, 2021. As of March 31, 2021, there was $1.8 million in SBA PPP fee income remaining to be accreted.
Provision for loan losses of $753,000 were recognized for the three months ended March 31, 2021 compared to $3.1 million for the same period in 2020. The changes in the provision were based on management’s assessment of economic conditions, including the impact of the COVID-19 pandemic, 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 1.43% as of March 31, 2021 compared to 1.39% as of December 31, 2020. The primary reason for the increase was a $2.4 million loan relationship that was placed on nonaccrual status and downgraded to doubtful status in the first quarter of 2021 with specific reserves of $1.5 million. This increase was partially offset by a slight decrease in the provision allocated across the portfolio due to a reduction in economic factors. In addition, there was a decrease in the provision allocated to mortgage warehouse loan balances resulting from the Bank’s seasoning experience with this line of lending. There were $244.1 million and $265.4 million in outstanding mortgage warehouse loan balances at March 31, 2021 and December 31, 2020, respectively. Loans in this segment are facility lines to non-bank mortgage origination companies for sale into secondary markets, which is typically within 15 days of the loan closure. Due to their short-term nature, these loans are assessed at a lower credit risk and do not carry the same allocation as traditional loans. Included in total loans is $57.5 million in PPP loans originated as part of the CARES Act that we believe have no credit risk due to a government guarantee, therefore we have not provided for losses for these loans. Excluding PPP loans, the allowance for loan losses as a percentage of total loans was 1.50% as of March 31, 2021 compared to 1.43% at December 31, 2020. The allowance for loan losses as a percentage of non-performing loans was 255.29% as of March 31, 2021 compared to 341.72% as of December 31, 2020. Non-performing loans were $7.5 million, or 0.48% of total assets as of March 31, 2021, compared to $5.4 million, or 0.36% of total assets, as of December 31, 2020. As of March 31, 2021, non-performing loans consist primarily of three commercial relationships totaling $5.9 million. These loan relationships were evaluated for impairment and specific reserves of $3.3 million were allocated as of March 31, 2021.
Noninterest income increased $8,000, or 0.8%, and was $1.0 million for each of the three months ended March 31, 2021 and 2020. The increase is primarily due to an increase in bank owned life insurance income and other income partially offset by a decrease in other service charges and fees. Other income increased $51,000, or 268.4% primarily due to a one-time incentive payment on a service contract. Bank owned life insurance income increased $40,000, or 22.3%, due to the purchase of additional insurance policies in 2020. Other service charges and fees decreased $110,000, or 23.9% primarily due to higher average deposit balances, which resulted in decreased overdraft fees.
Noninterest expense increased $907,000, or 10.9%, to $9.2 million for the three months ended March 31, 2021 compared to $8.3 million for the three months ended March 31, 2020. The increase is primarily due to an increase in salaries and employee benefits expense, deposit insurance expenses, data processing fees and other expenses, partially offset by a decrease in write downs of other assets and receivables. The increase of $1.1 million, or 19.9%, for the three months ended March 31, 2021 when compared to the same period in 2020 in salary and employee benefits was primarily due to stock based compensation expense and a higher number of sales and operations positions compared to the same period in 2020. Deposit insurance expenses increased $75,000, or 241.9%, primarily due to one-time credits that were recognized in the first quarter of 2020 that resulted in a lower expense. Data processing fees increased $96,000 or 42.7%, primarily due to new contracts for deposit services. These increases were offset by a decrease in write downs of other assets and receivables of $500,000. In the first quarter of 2020 a write-down of a notes receivable balance was completed after the Company evaluated the collectability and determined that $500,000 was uncollectible.
As of March 31, 2021, total assets have increased $46.1 million, or 3.1%, to $1.55 billion compared to $1.51 billion at December 31, 2020. The primary reasons for the increase are increases in cash and cash equivalents, debt securities available-for-sale and other assets, partially offset by a decrease in net loans. The increase in cash and cash equivalents of $49.1 million, or 58.5% is primarily due to an increase in deposits and loan payoffs. The increase in debt securities available-for-sale of $2.4 million, or 7.5%, resulted primarily from the purchase of a $5.0 million bond offset by principal pay downs on government mortgage-backed securities. Net loans decreased $6.7 million, or 0.5%, and was $1.31 billion as of March 31, 2021 and December 31, 2020. The decrease in net loans was due to a decreases in mortgage warehouse loans of $21.3 million, or 8.0%, commercial real estate loans of $3.9 million, or 0.9%, residential real estate loans of $2.9 million, or 8.8% and consumer loans of $1.4 million, or 25.4%, partially offset by increases in commercial loans of $19.4 million, or 3.4% and construction and land development loans of $4.9 million, or 16.8%. Included in commercial loans at March 31, 2021and December 31, 2020 are $57.4 million and $41.8 million in SBA PPP loans, respectively.
Total liabilities increased $47.8 million, or 3.8%, due to increased deposits. Deposits were $1.29 billion as of March 31, 2021, representing an increase of $47.8 million, or 3.9%, compared to December 31, 2020. The increase in deposits was due to an increase of $30.6 million, or 5.5%, in NOW and demand deposits, an increase of $33.0 million, or 9.3% in money market accounts, an increase of $4.1 million, or 2.7%, in savings accounts, partially offset by a decrease of $19.9 million, or 11.2%, in time deposits. NOW and demand deposits and money market deposits increased primarily due to funds from the origination of PPP loans and increased deposit balances from new and expanded relationships with digital asset customers, which totaled $53.7 million at March 31, 2021. The increase in savings accounts is primarily caused by increased consumer savings. The decrease in time deposits is primarily due to roll-off of brokered certificates of deposit. In addition, the Bank has increased focused on growing non-interest bearing deposit balances and as of March 31, 2021 non-interest bearing deposits represented 33.5% of total deposits compared to 31.0% at December 31, 2020.
As of March 31, 2021, shareholders’ equity was $234.1 million compared to $235.9 million at December 31, 2020, representing a decrease of $1.7 million, or 0.7%. The decrease was primarily due to the repurchase of common stock of $6.2 million, $532,000 from dividends paid and a decrease in other comprehensive income of $185,000, partially offset by net income of $4.3 million, stock-based compensation expense of $604,000 and employee stock ownership plan shares earned of $286,000.
About Provident Bancorp, Inc.
BankProv, legally operating as The Provident Bank, is a subsidiary of Provident Bancorp, Inc. (NASDAQ: PVBC). BankProv is a future-ready commercial bank for corporate clients, specializing in offering adaptive and technology-first banking solutions to niche markets, including cryptocurrency, renewable energy, fin-tech and search fund lending. We are committed to offering a state-of-the-art API suite for all business clients and BaaS (Bank as a Service) partners. Through our offerings, BankProv 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 about BankProv please visit our website www.bankprov.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; the effects of any pandemic; 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@bankprov.com
Provident Bancorp, Inc.
Consolidated Balance Sheet
| At | At | ||||||
| March 31, | December 31, | ||||||
| 2021 | 2020 | ||||||
| (Dollars in thousands) | (unaudited) | ||||||
| Assets | |||||||
| Cash and due from banks | $ | 17,560 | $ | 11,830 | |||
| Short-term investments | 115,313 | 71,989 | |||||
| Cash and cash equivalents | 132,873 | 83,819 | |||||
| Debt securities available-for-sale (at fair value) | 34,629 | 32,215 | |||||
| Federal Home Loan Bank stock, at cost | 895 | 895 | |||||
| Loans, net of allowance for loan losses of $19,032 and $18,518 as of March 31, 2021 and December 31, 2020, respectively | 1,308,136 | 1,314,810 | |||||
| Bank owned life insurance | 36,903 | 36,684 | |||||
| Premises and equipment, net | 14,655 | 14,716 | |||||
| Accrued interest receivable | 6,456 | 6,371 | |||||
| Right-of-use assets | 4,219 | 4,258 | |||||
| Other assets | 13,126 | 12,013 | |||||
| Total assets | $ | 1,551,892 | $ | 1,505,781 | |||
| Liabilities and Shareholders' Equity | |||||||
| Deposits: | |||||||
| Noninterest-bearing | $ | 431,028 | $ | 383,079 | |||
| Interest-bearing | 854,196 | 854,349 | |||||
| Total deposits | 1,285,224 | 1,237,428 | |||||
| Long-term borrowings | 13,500 | 13,500 | |||||
| Operating lease liabilities | 4,463 | 4,488 | |||||
| Other liabilities | 14,563 | 14,509 | |||||
| Total liabilities | 1,317,750 | 1,269,925 | |||||
| Shareholders' equity: | |||||||
| Preferred stock; authorized 50,000 shares: no shares issued and outstanding | — | — | |||||
| Common stock, $0.01 par value, 100,000,000 shares authorized; 18,574,127 and 19,047,544 shares issued and outstanding at March 31, 2021 and December 31, 2020, respectively | 186 | 191 | |||||
| Additional paid-in capital | 133,981 | 139,450 | |||||
| Retained earnings | 108,273 | 104,508 | |||||
| Accumulated other comprehensive income | 873 | 1,058 | |||||
| Unearned compensation - ESOP | (9,171 | ) | (9,351 | ) | |||
| Total shareholders' equity | 234,142 | 235,856 | |||||
| Total liabilities and shareholders' equity | $ | 1,551,892 | $ | 1,505,781 | |||
Provident Bancorp, Inc.
Consolidated Income Statements
| Three Months Ended | |||||
| March 31, | |||||
| 2021 | 2020 | ||||
| (Dollars in thousands, except per share data) | (unaudited) | ||||
| Interest and dividend income: | |||||
| Interest and fees on loans | $ | 15,697 | $ | 13,760 | |
| Interest and dividends on debt securities available-for-sale | 169 | 258 | |||
| Interest on short-term investments | 23 | 71 | |||
| Total interest and dividend income | 15,889 | 14,089 | |||
| Interest expense: | |||||
| Interest on deposits | 911 | 1,646 | |||
| Interest on borrowings | 70 | 371 | |||
| Total interest expense | 981 | 2,017 | |||
| Net interest and dividend income | 14,908 | 12,072 | |||
| Provision for loan losses | 753 | 3,099 | |||
| Net interest and dividend income after provision for loan losses | 14,155 | 8,973 | |||
| Noninterest income: | |||||
| Customer service fees on deposit accounts | 379 | 352 | |||
| Service charges and fees - other | 350 | 460 | |||
| Bank owned life insurance income | 219 | 179 | |||
| Other income | 70 | 19 | |||
| Total noninterest income | 1,018 | 1,010 | |||
| Noninterest expense: | |||||
| Salaries and employee benefits | 6,477 | 5,402 | |||
| Occupancy expense | 412 | 441 | |||
| Equipment expense | 122 | 137 | |||
| Deposit insurance | 106 | 31 | |||
| Data processing | 321 | 225 | |||
| Marketing expense | 37 | 64 | |||
| Professional fees | 431 | 386 | |||
| Directors' compensation | 254 | 194 | |||
| Software depreciation and implementation | 246 | 200 | |||
| Write down of other assets and receivables | — | 500 | |||
| Other | 807 | 726 | |||
| Total noninterest expense | 9,213 | 8,306 | |||
| Income before income tax expense | 5,960 | 1,677 | |||
| Income tax expense | 1,663 | 446 | |||
| Net income | $ | 4,297 | $ | 1,231 | |
| Earnings per share: | |||||
| Basic | $ | 0.25 | $ | 0.07 | |
| Diluted | $ | 0.24 | $ | 0.07 | |
| Weighted Average Shares: | |||||
| Basic | 17,263,759 | 18,115,970 | |||
| Diluted | 17,558,160 | 18,261,282 | |||
Provident Bancorp, Inc.
Net Interest Income Analysis
(Unaudited)
| For the Three Months Ended March 31, | |||||||||||||||||||
| 2021 | 2020 | ||||||||||||||||||
| Interest | Interest | ||||||||||||||||||
| Average | Earned/ | Yield/ | Average | Earned/ | Yield/ | ||||||||||||||
| Balance | Paid | Rate | Balance | Paid | Rate | ||||||||||||||
| (Dollars in thousands) | |||||||||||||||||||
| Assets: | |||||||||||||||||||
| Interest-earning assets: | |||||||||||||||||||
| Loans | $ | 1,317,638 | $ | 15,697 | 4.77 | % | $ | 1,068,525 | $ | 13,760 | 5.15 | % | |||||||
| Short-term investments | 112,198 | 23 | 0.08 | % | 19,176 | 71 | 1.48 | % | |||||||||||
| Debt securities available-for-sale | 31,344 | 166 | 2.12 | % | 41,031 | 237 | 2.31 | % | |||||||||||
| Federal Home Loan Bank stock | 895 | 3 | 1.34 | % | 3,161 | 21 | 2.66 | % | |||||||||||
| Total interest-earning assets | 1,462,075 | 15,889 | 4.35 | % | 1,131,893 | 14,089 | 4.98 | % | |||||||||||
| Non-interest earning assets | 66,157 | 57,183 | |||||||||||||||||
| Total assets | $ | 1,528,232 | $ | 1,189,076 | |||||||||||||||
| Liabilities and shareholders' equity: | |||||||||||||||||||
| Interest-bearing liabilities: | |||||||||||||||||||
| Savings accounts | $ | 151,375 | 55 | 0.15 | % | $ | 121,106 | 105 | 0.35 | % | |||||||||
| Money market accounts | 375,078 | 477 | 0.51 | % | 255,883 | 705 | 1.10 | % | |||||||||||
| NOW accounts | 153,294 | 98 | 0.26 | % | 124,286 | 155 | 0.50 | % | |||||||||||
| Certificates of deposit | 166,388 | 281 | 0.68 | % | 133,819 | 681 | 2.04 | % | |||||||||||
| Total interest-bearing deposits | 846,135 | 911 | 0.43 | % | 635,094 | 1,646 | 1.04 | % | |||||||||||
| Borrowings | 13,500 | 70 | 2.07 | % | 78,869 | 371 | 1.88 | % | |||||||||||
| Total interest-bearing liabilities | 859,635 | 981 | 0.46 | % | 713,963 | 2,017 | 1.13 | % | |||||||||||
| Noninterest-bearing liabilities: | |||||||||||||||||||
| Noninterest-bearing deposits | 412,350 | 226,440 | |||||||||||||||||
| Other noninterest-bearing liabilities | 17,987 | 15,731 | |||||||||||||||||
| Total liabilities | 1,289,972 | 956,134 | |||||||||||||||||
| Total equity | 238,260 | 232,942 | |||||||||||||||||
| Total liabilities and equity | $ | 1,528,232 | $ | 1,189,076 | |||||||||||||||
| Net interest income | $ | 14,908 | $ | 12,072 | |||||||||||||||
| Interest rate spread (1) | 3.89 | % | 3.85 | % | |||||||||||||||
| Net interest-earning assets (2) | $ | 602,440 | $ | 417,930 | |||||||||||||||
| Net interest margin (3) | 4.08 | % | 4.27 | % | |||||||||||||||
| Average interest-earning assets to interest-bearing liabilities | 170.08 | % | 158.54 | % | |||||||||||||||
(1) Net interest rate spread represents the difference between the weighted average yield on interest-bearing assets and the weighted average rate of interest-bearing liabilities.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
Provident Bancorp, Inc.
Select Financial Highlights
| Three Months Ended | |||||
| March 31, | |||||
| 2021 | 2020 | ||||
| (unaudited) | |||||
| Performance Ratios: | |||||
| Return on average assets (1) | 1.12 | % | 0.41 | % | |
| Return on average equity (1) | 7.21 | % | 2.11 | % | |
| Interest rate spread (1) (3) | 3.89 | % | 3.85 | % | |
| Net interest margin (1) (4) | 4.08 | % | 4.27 | % | |
| Non-interest expense to average assets (1) | 2.41 | % | 2.79 | % | |
| Efficiency ratio (5) | 57.85 | % | 63.49 | % | |
| Average interest-earning assets to average interest-bearing liabilities | 170.08 | % | 158.54 | % | |
| Average equity to average assets | 15.59 | % | 19.59 | % | |
| At | At | At | |||||||||
| March 31, | December 31, | March 31, | |||||||||
| 2021 | 2020 | 2020 | |||||||||
| Asset Quality | |||||||||||
| Non-accrual loans: | |||||||||||
| Real estate: | |||||||||||
| Commercial | $ | — | $ | — | $ | 21,199 | |||||
| Residential | 969 | 1,156 | 732 | ||||||||
| Construction and land development | — | — | 165 | ||||||||
| Commercial | 6,469 | 4,198 | 2,754 | ||||||||
| Consumer | 17 | 65 | 84 | ||||||||
| Mortgage warehouse | — | — | — | ||||||||
| Total non-accrual loans | 7,455 | 5,419 | 24,934 | ||||||||
| Accruing loans past due 90 days or more | — | — | — | ||||||||
| Other real estate owned | — | — | — | ||||||||
| Total non-performing assets | $ | 7,455 | $ | 5,419 | $ | 24,934 | |||||
| Asset Quality Ratios | |||||||||||
| Allowance for loan losses as a percent of total loans (2) | 1.43 | % | 1.39 | % | 1.46 | % | |||||
| Allowance for loan losses as a percent of non-performing loans | 255.29 | % | 341.72 | % | 66.87 | % | |||||
| Non-performing loans as a percent of total loans (2) | 0.56 | % | 0.41 | % | 2.18 | % | |||||
| Non-performing loans as a percent of total assets | 0.48 | % | 0.36 | % | 2.22 | % | |||||
| Non-performing assets as a percent of total assets (6) | 0.48 | % | 0.36 | % | 2.22 | % | |||||
| Capital and Share Related | |||||||||||
| Stockholders' equity to total assets | 15.1 | % | 15.7 | % | 20.7 | % | |||||
| Book value per share | $ | 12.61 | $ | 12.38 | $ | 11.95 | |||||
| Market value per share | $ | 14.40 | $ | 12.00 | $ | 8.62 | |||||
| Shares outstanding | 18,574,127 | 19,047,544 | 19,476,248 | ||||||||
(1) Annualized
(2) Loans are presented before the allowance but include deferred costs/fees.
(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.