Provident Bancorp, Inc. Reports Earnings for the June 30, 2022 Quarter and Continues Payment of Quarterly Cash Dividends of $0.04 per Share

Company Release – 7/28/2022



Amesbury, Massachusetts — Provident Bancorp, Inc. (the “Company”) (NasdaqCM: PVBC), the holding company for The Provident Bank (the “Bank”), reported net income for the quarter ended June 30,  2022 of $5.6 million, or $0.33 per diluted share, compared to  $5.5 million, or $0.32 per diluted share for the quarter ended March  31, 2022 and $3.2 million, or $0.18 per diluted share, for the quarter ended June 30, 2021. Net income for the six months ended June 30, 2022 was $11.1 million, or $0.66 per diluted share, compared to $7.5 million, or $0.43 per diluted share, for the six months ended June 30, 2021.



The Company also announced that its Board of Directors declared a quarterly cash dividend of $0.04 per share, which will be paid on August 26, 2022 to stockholders of record as of August 12, 2022.



In reporting these results, Dave Mansfield, Chief Executive Officer said, “I am pleased by the momentum we are seeing at BankProv. We are partnering with some of the most innovative Fintech companies in the nation, and when the crypto market is experiencing a downturn, it provides digital asset companies with the opportunity to build a better experience for their clients. Because of this, we are experiencing an increased demand for Banking as  a Service related service offerings and have positioned the Company as the premier Banking as a Service bank for the digital asset industry. We are onboarding clients to our BankProv APIs in collaboration with our technology partners and have increased adoption of the ProvXchange network. We continue to advance our goals and strategic initiatives in the most safe and sound manner.”



Income Statement Results



Quarter Ended June 30, 2022 Compared to Quarter Ended March 31, 2022



For the quarter ended June 30, 2022,  net interest and dividend income was $18.6 million, which represents an increase of $680,000,  or 3.8%, when compared to the quarter ended March 31, 2022.  This increase was primarily attributable to rising interest rates which resulted in increased yields on loans and short-term investments.  The yield on loans increased 11 basis points to 5.07% for the quarter ended June 30, 2022 compared to 4.96% for the quarter ended March 31, 2022. The yield on short-term investments increased 56 basis points to 0.73% for the quarter ended June 30, 2022 compared to 0.17% for the quarter ended March 31, 2022. Net interest and dividend income was further supported by an increase in  average interest earning assets of $75.8 million, or 4.6%, which was primarily due to an increase in average short-term investments of $82.6 million, or 60.3%, partially offset by a decrease in the average loan balance of $4.3 million, or 0.3%. The increase in net interest and dividend income for the quarter ended June 30, 2022 was partially offset by an increase in interest expense of $22,000, or 4.2%, to $547,000 compared to $525,000 for the quarter ended March 31, 2022. Interest expense increased primarily due to an increase in average interest-bearing deposits of $8.2 million, or 1.0%  when compared to the quarter ended March 31, 2022. The increase in interest-bearing deposits was the result of an increase in NOW accounts.   



Provision for loan losses of $1.0 million were recognized for the quarter ended June 30, 2022 compared to $83,000 for the quarter ended March 31, 2022.  The changes in the provision were based on management’s assessment of various factors affecting the loan portfolio, including loan growth, portfolio composition, delinquent and non-accrual loans, national and local business and economic conditions and loss experience as well as an overall evaluation of the quality of the underlying collateral. The primary reason for the increase in the provision for the quarter ended June 30, 2022 is an increase in total loans of $76.5 million, or 5.25%, when compared to March 31, 2022.



For the quarter ended June 30, 2022,  noninterest income was $1.6 million, which represents an increase of  $232,000, or 17.6%, when compared to the quarter ended March 31, 2022. The increase is primarily due to an increase in net gains on loans sold, other service charges and fees and customer service fees on deposit accounts. Net gains on loans sold increased $90,000, or 92.8%, primarily due to the sale of residential mortgage loans in June. Other service charges and fees increased $76,000, or 20.2%, primarily due to late charges and fees on commercial and commercial real estate loans.  Customer service fees on deposit accounts increased $38,000, or 6.5%, primarily due to fees generated from cash vault services for our customers who operate Bitcoin ATMs as well as implementation fees charged to Banking as a Service (“BaaS”) customers. 



For the quarter ended June 30, 2022, noninterest expense was $11.3 million, which represents a decrease of $68,000, or 0.6%, when compared to the quarter ended March  31, 2022. The decrease was primarily due to a decrease in write downs of other assets and receivables, partially offset by an increase in other expenses and salaries and employee benefits. There was a write down of an SBA receivable in the first quarter of 2022 after the Company evaluated the collectability and determined that $395,000 was uncollectible; there were no write downs of other assets and receivables in the second quarter of 2022. Salaries and employee benefits increased $133,000, or 1.9% primarily due to an increase in staff to support business growth, including the development and implementation of new technologies and specialty lending products.  Other expense increased $247,000, or 27.0%, primarily due to costs related to referral fees for digital asset loans,  recruitment expenses, and costs paid for employees to attend trainings and conferences.



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Quarter Ended June 30, 2022 Compared to Quarter Ended June 30, 2021



For the quarter ended June 30, 2022, net interest and dividend income was $18.6 million, which represents an increase of $4.0 million, or 27.4% from the quarter ended June 30, 2021.  The primary reason for the increase was an increase in interest and dividend income of $3.6 million, or 23.5%. Interest and dividend income increased due to an increase in average interest earning assets of $240.3 million when compared to the quarter ended June 30, 2021.  The increase in average interest earnings assets was primarily due to an increase in the average loan balances of $162.3 million, or 12.5% and an increase in short term investments of $78.6 million, or 55.7%. The increase in interest and dividend income was further supported by an increase in the yield on interest earning assets of 26 basis points to 4.46% for the quarter ended June 30, 2022 compared to 4.20%  for the quarter ended June 30, 2021. Also contributing to the increase in net interest and dividend income for the quarter ended June 30, 2022 was a decrease in interest expense of $363,000, or 39.9%, to $547,000 compared to $910,000 for the quarter ended June 30, 2021. Interest expense decreased primarily due to a decrease in average interest-bearing deposits of $19.2 million, or 2.3%, which was the result of strategic initiatives of the Bank. Also contributing to the decrease in interest expense was a decrease in the cost of interest-bearing deposits of 17 basis points to 0.24% for the quarter ended June 30, 2022 when compared to the same quarter in 2021.



Provision for loan losses of $1.0 million were recognized for the quarter ended June 30, 2022 compared to $1.7 million for the quarter ended June 30, 2021.  The changes in the provision were based on management’s assessment of various factors affecting the loan portfolio, including loan growth, portfolio composition, delinquent and non-accrual loans, national and local business and economic conditions and loss experience as well as an overall evaluation of the quality of the underlying collateral.



For the quarter ended June 30, 2022, noninterest income was $1.6 million, which represents an increase of $449,000, or 40.7%, when compared to the quarter ended June 30, 2021. The increase is primarily due to an increase in net gains on loans sold and customer service fees on deposit accounts. Net gains on loans sold totaled $187,000 for the quarter ended June 30, 2022 and were primarily due to the sale of residential mortgage loans; there were no gains on loans sold for the quarter ended June 30, 2021. Customer service fees on deposit accounts increased $186,000, or 43.0%, which is primarily attributable to fees generated from cash vault services for our customers who operate Bitcoin ATMs, as well as growth in our business accounts related to our expanded product offerings to digital asset and BaaS customers.



For the quarter ended June 30, 2022, noninterest expense was $11.3 million, which represents an increase of  $1.8 million, or 19.0% when compared to the quarter ended June 30, 2021. The increase in noninterest expense is primarily due to an increase in salaries and employee benefits, insurance expense, other expense and professional fees. The increase of $618,000, or 9.2%, in salary and employee benefits was primarily due to an increase in staff to support business growth, including the development and implementation of new technologies and specialty lending products. The increase in insurance expense of $410,000, or 1,078.9%, is due to a renewal and reassessment that incorporates consideration of our digital asset product strategies.  Other expense increased $396,000, or 51.8%, primarily due to costs related to the onboarding of new lending customers in the digital asset space, recruitment expenses, and costs paid for employees to attend trainings and conferences. Professional fees increased $240,000, or 51.2%, primarily due to increased legal fees,  audit and compliance, and fees paid for contracted employees. 



Six Months Ended June 30, 2022 Compared to Six Months Ended June 30, 2021



For the six months ended June 30, 2022, net interest and dividend income was $36.5 million, which represents an increase of $7.0 million, or 23.8% from the six months ended June 30, 2021.  The primary reason for the increase was an increase in interest and dividend income of $6.2 million, or 19.7%. Interest and dividend income increased due to an increase in average interest earning assets of $210.7 million when compared to the six months ended June 30, 2021. The increase in average interest earnings assets was primarily due to an increase in the average loan balances of $157.0 million, or 12.0% and an increase in short term investments of $51.8 million, or 40.9%. The increase in interest and dividend income was further supported by an increase in the yield on interest earning assets of 20 basis points to 4.47% for the six months ended June 30, 2022 compared to 4.27%  for the six months ended June 30, 2021. Also contributing to the increase in net interest and dividend income for the six months ended June 30, 2022 was a decrease in interest expense of $819,000, or 43.3%, to $1.1 million compared to  $1.9 million for the six months ended June 30, 2021. Interest expense decreased primarily due to a decrease in average interest-bearing deposits of $32.9 million, or 3.9%, which was the result of strategic initiatives of the Bank. Also contributing to the decrease in interest expense was a decrease in the cost of interest-bearing deposits of 19 basis points to 0.23% for the six months ended June 30, 2022 when compared to the same period in 2021.



Provision for loan losses of $1.1 million were recognized for the six months ended June 30, 2022 compared to $2.4 million for the six months ended June 30, 2021.  The changes in the provision were based on management’s assessment of economic conditions, 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 1.24% as of June 30, 2022 compared to 1.43% as of June 30, 2021. The allowance for loan losses provided 31.20 times coverage of non-performing loans as of June 30, 2022 compared to 4.16 times as of June 30,  2021. Non-performing loans were $608,000,  or 0.03%, of total assets as of June 30, 2022 compared to $4.7 million, or 0.29%, of total assets as of June 30, 2021.

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For the six months ended June 30, 2022, noninterest income was $2.9 million, which represents an increase of $751,000, or 35.4% from the six months ended June 30, 2021. The increase was primarily due to an increase in customer service fees on deposit accounts of $388,000, or 47.8%, an increase of $275,000, or 3,055.6% in net gains on sold loans,  and an increase in bank owned life insurance income of $72,000, or 16.3%. The increase in customer service fees on deposit accounts is attributable to fees generated from cash vault services for our customers who operate Bitcoin ATMs, as well as growth in our business accounts related to our expanded product offerings to digital asset and BaaS customers. The increase in net gains on sold loans was primarily due to the sale of residential mortgage loans in June. The increase in bank owned life insurance income is primarily due to the purchase of additional insurance policies in the fourth quarter of 2021.



For the six months ended June 30, 2022, noninterest expense was $22.8 million, which represents an increase of  $4.0 million, or 21.4% when compared to the six months ended June 30, 2021. The increase in noninterest expense is primarily due to an increase in salaries and employee benefits, insurance expense, professional fees and other expenses well as a write down of a receivable balance in the first half of 2022. The increase of $1.3 million, or 10.1%, in salary and employee benefits was primarily due to an increase in staff to support business growth, including the development and implementation of new technologies and specialty lending products. The increase in insurance expense of $823,000, or 1,143.1%, is due to a renewal and reassessment that incorporates consideration of our digital asset product strategies. The increase in professional fees of $537,000, or 59.7%, was primarily due to increased legal fees, audit and compliance, and fees paid for contracted employees. The increase in other expenses of $537,000, or 34.9%, was primarily due to costs related to the onboarding of new lending customers in the digital asset space, recruitment expenses, and costs paid for employees to attend trainings and conferences.  Also contributing to the increase in noninterest expense was the write down of an SBA receivable in the first quarter of 2022 that occurred after the Company evaluated the collectability and determined that $395,000 was uncollectible.



Balance Sheet Results



June 30, 2022 Compared to March 31, 2022



As of June 30, 2022,  total assets have decreased $4.0 million, or 0.2%, to $1.788 billion compared to $1.792 billion at March 31, 2022.  The primary reasons for the decrease were decreases in cash and cash equivalents and loans held for sale, partially offset by an increase in net loans. The decrease in cash and cash equivalents of $61.3 million, or 28.4% is primarily due to a decrease in deposits. The decrease in loans held for sale is due to the sale of residential mortgages in June of 2022 and the reclassification of the unsold loans to held for investment.  Net loans increased $76.8 million, or 5.3%, and were $1.51 billion as of June 30, 2022 compared to $1.44 billion at March 31, 2022.  The increase in net loans was due to an increase in commercial loans of $43.1 million, or 5.7%, mortgage warehouse loans of $16.2 million, or 7.2%, and construction and land development loans of $16.1 million, or 31.2%, and residential loans of $9.5 million, or 2,357.1%, due to the reclassification noted above. These increases were partially offset by decreases in commercial real estate loans of $7.7 million, or 1.8% and consumer loans of $302,000, or 29.5%. Our commercial loan growth was primarily due to growth in our digital asset and enterprise value portfolios offset by a decrease in our renewable energy portfolio. The digital asset portfolio increased $26.7 million, or 23.9%, and the enterprise value portfolio increased  $24.0 million, or 6.7%, while our renewable energy portfolio decreased $2.8 million, or 4.4%. Residential loans previously held for sale were reclassified back to held for investment as of June 30, 2022 resulting in a $9.5 million increase in our residential portfolio.



Total liabilities decreased $7.3 million, or 0.5%, from March 31, 2022 primarily due to decreased deposits offset by an increase in short-term borrowings. Deposits were $1.44 billion as of June 30, 2022, representing a decrease of $82.4 million, or 5.4%, compared to March 31, 2022.  The decrease in deposits is primarily attributable to a $74.7 million, or 41.6%, decrease in deposits related to digital asset customers.  This decrease is primarily related to two customer accounts that were closed after they were deemed to fall outside of the Bank’s risk tolerance related to the war in Ukraine.  Short-term borrowings increased due to overnight borrowings used to fund loan growth.  



As of June 30, 2022, shareholders’ equity was $239.9 million compared to $236.5 million at March  31, 2022, representing an increase of $3.4 million, or 1.4%. The increase was primarily due to net income of $5.6 million, stock based compensation expense of $468,000 and employee stock ownership plan shares earned of $349,000, partially offset by the repurchase of 85,205 shares of common stock for  $1.3 million,  other comprehensive loss of $1.0 million, and $668,000 from dividends paid.



June 30, 2022 Compared to December 31, 2021



As of June 30, 2022,  total assets have increased $58.7 million, or 3.4%, to $1.79 billion compared to $1.73 billion at December 31, 2021.  The primary reason for the increase was an increase in net loans, partially offset by a decrease in loans held for sale.  Net loans increased $80.4 million, or 5.6%, and were $1.51 billion as of June 30, 2022 compared to $1.43 billion at December 31, 2021.  The increase in net loans was primarily due to an increase in commercial loans of $70.1 million, or 9.7%, and construction and land development loans of $24.7 million, or 57.8%, and residential loans of $9.1 million, or 1,119.5%, partially offset by decreases in mortgage warehouse loans of $14.0 million, or 5.5%, and commercial real estate loans of $10.1 million, or 2.3%. Our commercial loan growth was primarily due to growth in our enterprise value portfolio of $39.5 million, or 11.6%, and our digital asset loan portfolio of $18.1 million, or 15.0%.

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These increases in commercial loan growth were offset by a decrease in PPP loans of $11.9 million, or 96.0%, as these loans continue to be forgiven, and a decrease in our renewable energy portfolio of $713,000, or 1.1%.  Loans held for sale decreased due to the sale of residential mortgage loans in June and the reclassification of the unsold loans to held for investment.  



Total liabilities increased $52.6 million, or 3.5%, from December 31, 2021 primarily due to an increase in short-term borrowings, offset by a decrease in deposits.  Short-term borrowings increased $78.0 million due to overnight borrowings used to fund loan growth.  Deposits were $1.44 billion as of June 30, 2022, representing a decrease of $20.0 million, or 1.4%, compared to December 31, 2021. The decrease in deposits was primarily related to a decrease in traditional deposits of $37.1 million, or 3.3%, and a $14.0 million decrease in deposits from enterprise value customers. These decreases were partially offset by an increase in deposits from our BaaS customers of $37.0 million, or 61.8%, and a $5.1 million, or 5.1%, increase in our deposits related to digital asset customers. Deposit relationships with BaaS customers totaled $96.9 million and deposit relationships with digital asset customers totaled $104.7 million at June 30, 2022.  In addition, the Bank has increased its focus on growing noninterest-bearing deposit balances and as of June 30, 2022 noninterest-bearing deposits represented 46.9% of total deposits compared to 42.9% at December 31, 2021. 



As of June 30, 2022, shareholders’ equity was $239.9 million compared to $233.8 million at December 31, 2021, representing an increase of $6.1 million, or 2.6%. The increase was primarily due to net income of $11.1 million, stock based compensation expense of $913,000 and employee stock ownership plan shares earned of $732,000, partially offset by the repurchase of 180,434 shares of common stock for $2.9 million, other comprehensive loss of $2.3 million, and $1.3 million from dividends paid.  



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 state-of-the-art APIs (application programming interfaces) for all business clients and BaaS (Banking 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; global and national war and terrorism; 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













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