Provident Bancorp, Inc. (PVBC) is a Maryland-based bank holding company that operates through its wholly-owned subsidiary, BankProv, a Massachusetts-chartered stock savings bank. BankProv offers a range of traditional and technology-driven banking solutions to its consumer and commercial customers, primarily in the Northeastern United States.
Business Overview
BankProv's core business activities include commercial real estate lending, commercial lending, mortgage warehouse lending, and enterprise value lending. The bank also has a digital asset lending segment, which it is in the process of exiting. BankProv operates from its main office in Amesbury, Massachusetts, as well as two branch offices in Northeastern Massachusetts, three branch offices in Southeastern New Hampshire, and one branch in Bedford, New Hampshire. The bank also has a loan production office in Ponte Vedra, Florida.Financials
For the full year 2023, Provident Bancorp reported net income of $10.7 million, a decrease from the $21.5 million net loss reported in 2022. The company's annual revenue for 2023 was $97.4 million, while its annual operating cash flow and free cash flow were $5.6 million and $5.2 million, respectively.In the first quarter of 2024, the company reported net income of $5.0 million, or $0.30 per diluted share, compared to $2.1 million, or $0.13 per diluted share, in the first quarter of 2023. This represents a significant increase of 136.9% year-over-year. The company's return on average assets was 1.26% for the first quarter of 2024, compared to 0.53% for the same period in 2023, while its return on average equity was 8.93% and 4.01%, respectively.
Net Interest Income and Margin
Net interest and dividend income for the first quarter of 2024 was $12.5 million, a decrease of $3.3 million, or 21.1%, compared to the first quarter of 2023. The interest rate spread and net interest margin were 2.28% and 3.38%, respectively, for the first quarter of 2024, compared to 3.38% and 4.32%, respectively, for the same period in 2023. The decrease in net interest income and margin reflects the challenges faced by the banking industry due to the current interest rate environment.Credit Quality and Allowance for Credit Losses
The company recognized a credit loss benefit of $5.6 million for the first quarter of 2024, compared to a $1.8 million provision for credit losses in the first quarter of 2023. The allowance for credit losses on loans was $16.0 million, or 1.18% of total loans, as of March 31, 2024, compared to $24.8 million, or 1.84% of total loans, as of March 31, 2023.The significant credit loss benefit was primarily due to a reduction in reserves on individually analyzed loans totaling $4.9 million and a general provision reversal of $675,000. An enterprise value loan, totaling $2.0 million, that was individually analyzed for reserves, was paid off during the quarter, resulting in the elimination of $1.1 million in related reserves. The remaining $3.8 million reduction in the individually analyzed reserves was driven by the company reaching a settlement with a digital asset borrower, which closed subsequent to quarter end.
Noninterest Income and Expense
Noninterest income was $1.4 million for the first quarter of 2024, compared to $1.9 million for the first quarter of 2023, a decrease of $591,000, or 30.4%. This decrease was primarily due to decreases in customer service fees on deposit accounts and gains on sale of other repossessed assets in the first three months of 2023.Noninterest expense was $12.7 million for the first quarter of 2024, compared to $13.2 million for the first quarter of 2023, a decrease of $476,000, or 3.6%. The decrease was primarily due to a $399,000, or 4.7%, decrease in salaries and employee benefits, reflecting the bank's continued efforts to manage its noninterest expenses.
Liquidity
As of March 31, 2024, the company had cash and cash equivalents totaling $190.9 million and debt securities classified as available-for-sale totaling $27.9 million, providing ample liquidity. The company also had a borrowing capacity of $120.1 million with the Federal Home Loan Bank of Boston, of which $89.7 million was outstanding as of that date.At March 31, 2024, the Federal Deposit Insurance Corporation categorized the bank as well capitalized under the regulatory framework for prompt corrective action. The bank's total capital ratio was 14.12%, its Tier 1 capital ratio was 13.05%, and its common equity Tier 1 capital ratio was 13.05%, all of which exceeded the well-capitalized thresholds.