Provident Bancorp, Inc. (the “Company”) (NasdaqCM: PVBC), the holding company for BankProv (the “Bank”), reported net income for the quarter ended December 31, 2024 of $4.9 million, or $0.29 per diluted share, compared to net income of $716,000, or $0.04 per diluted share, for the quarter ended September 30, 2024, and net income of $2.9 million, or $0.18 per diluted share, for the quarter ended December 31, 2023. For the year ended December 31, 2024, net income was $7.3 million, or $0.43 per diluted share, compared to $11.0 million, or $0.66 per diluted share, for the year ended December 31, 2023. The Company's return on average assets was 1.22% for the quarter ended December 31, 2024, compared to 0.18% for the quarter ended September 30, 2024, and 0.70% for the quarter ended December 31, 2023. For the year ended December 31, 2024, the Company's return on average assets was 0.46%, compared to 0.66% for the year ended December 31, 2023. The Company's return on average equity was 8.54% for the quarter ended December 31, 2024, compared to 1.27% for the quarter ended September 30, 2024, and 5.33% for the quarter ended December 31, 2023. For the year ended December 31, 2024, the Company's return on average equity was 3.21%, compared to 5.10% for the year ended December 31, 2023.
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In announcing these results, Joseph Reilly, Chief Executive Officer, said, “We are pleased to report net income of $4.9 million for the fourth quarter of 2024. These earnings reflect the success we have seen in the execution of our strategic plan, which is focused on repositioning our balance sheet to reduce risk as well as strengthening our ties with, and providing financing to, the communities we serve. We believe these efforts have resulted in a more efficient operation with improved asset quality and liquidity, and we are confident our proactive management of funding costs and operating expenses will set the foundation for a strong 2025.”
For the quarter ended December 31, 2024, net interest and dividend income was $13.6 million, an increase of $1.2 million, or 9.9%, from the quarter ended September 30, 2024, and an increase of $78,000, or 0.6%, compared to the quarter ended December 31, 2023. The interest rate spread and net interest margin were 2.53% and 3.62%, respectively, for the quarter ended December 31, 2024, compared to 2.19% and 3.38%, respectively, for the quarter ended September 30, 2024, and 2.36% and 3.45%, respectively, for the quarter ended December 31, 2023. The increases in net interest income and margin during the fourth quarter of 2024 are primarily reflective of the Company's improved liquidity position, as well asdecreases in interest expenses the Bank realized by proactively seeking opportunities to reduce its cost of funds during the period the Federal Reserve Bank was easing rates. For theyear ended December 31, 2024, net interest and dividend income was $50.5 million, a decrease of$7.7million, or 13.2%,compared to $58.2 million fortheyear ended December 31, 2023. The interest rate spreadand net interest margin were 2.27% and 3.42%, respectively, for theyear ended December 31, 2024,compared to2.63%, and 3.71%, respectively, for theyear ended December 31, 2023.
Total interest and dividend income was $23.1 million for the quarter ended December 31, 2024, an increase of $692,000, or 3.1%, from the quarter ended September 30, 2024, and a decreaseof $445,000, or 1.9%, from the quarter ended December 31, 2023. The Company's yield on interest-earning assets was 6.14% for the quarter ended December 31, 2024, an increase of threebasis points from the quarter ended September 30, 2024, and an increase of 15 basis points from the quarter ended December 31, 2023.For theyear ended December 31, 2024, total interest and dividendincome was $89.5 million, a decrease of $840,000, or 0.9%, from theyear ended December 31, 2023.The Company's yield on interest-earning assets was 6.05% for theyear ended December 31, 2024, anincrease of 29 basis points from theyear ended December 31, 2023.
Total interest expense was $9.5 million for the quarter ended December 31, 2024, a decrease of $542,000, or 5.4%, from the quarter ended September 30, 2024, and a decrease of $523,000, or 5.2%, from the quarter ended December 31, 2023. Interest expense on deposits was $8.7 million for the quarter ended December 31, 2024, a decrease of $405,000, or 4.5%, from the quarter ended September 30, 2024, and a decrease of $1.2 million, or 12.5%, from the quarter ended December 31, 2023. The decrease in interest expense on deposits from the prior quarter was primarily driven bya30-basis pointdecrease in the cost of interest-bearing deposits to 3.53%. The decrease in interest expense on deposits from the prior year quarter was primarily driven by a decrease in the average balance of interest-bearing deposits of $103.5 million, or 9.5%, and a 12-basis point decrease in the average cost of interest-bearing deposits. The Bank has been successful in replacing its high-cost deposits from wholesale markets with lower-cost core deposits generated from its retail base, as reflected by thedecrease in interest expense on deposits during the fourth quarter of 2024 despite an increase in the average balance of interest-bearing deposits over the same period. Interest expense on borrowings totaled $815,000 for the quarter ended December 31, 2024, a decrease of $137,000, or 14.4%, from the prior quarter, and anincrease of $719,000, or 749.0%, over the prior year quarter. The decrease in interest expense on borrowings from the prior quarter was driven by a $7.1 million, or 9.3%, decrease in the average balance of borrowings and a 28-basis point reduction in the cost of borrowings. The increase in interest expense on borrowings from the prior year quarter was primarily due to a $53.5million, or 340.3%, increase in the average balance of borrowings used to fund increases in the mortgage warehouse portfolio, and a 227-basis point increase in the cost of borrowings.The Company's total cost of interest-bearing liabilitieswas 3.61% for the quarter ended December 31, 2024, which is a decrease of 31 basis points, from 3.92%, for the quarter ended September 30, 2024, and a decrease of twobasis points from 3.63% for the quarter ended December 31, 2023.
Total interest expense increased $6.8 million, or 21.3%, to $39.0 millionfor theyear ended December 31, 2024, compared to $32.1million for theyear ended December 31, 2023.Interest expense on deposits was $36.7 million for theyear ended December 31, 2024, an increase of $6.1 million, or 19.9%, from theyear ended December 31, 2023. This increase was driven byan increase in the average cost ofinterest-bearing deposits of 62 basis points, to 3.73%. For theyear ended December 31, 2024, interest expense on borrowings increased $751,000, or 48.9%, due toan increase in the average balance of borrowings of $8.3 million, or 20.5% and an increase in the cost of borrowings of 89 basis points, to 4.69%. The Company's total cost of interest-bearing liabilities was 3.78% for theyear ended December 31, 2024,which is an increase of 65 basis points, from 3.13%for theyear ended December 31, 2023.
Mr. Reilly noted,”The improvement in our net interest margin in the fourth quarter of 2024 was realized bygenerating significant core deposit growth from our retail banking operation, while simultaneouslyreducingfunding costs as the Federal Reserve Bank began to ease rates in late 2024.”
The Company recognized a $1.6millioncredit loss benefitfor the quarter ended December 31, 2024, compared to a $1.7 million provision for credit losses for the quarter ended September 30, 2024, and a $1.2 million credit loss benefit recognized for the quarter ended December 31, 2023. The credit loss benefit for thequarter ended December 31, 2024was primarily driven by an $880,000 recovery related to a previously charged-off enterprise value loan,reductions in the general allowance dueto updated loss rates resulting from the annual refresh of our current expected credit loss model, and changes in the loan portfolio mix. The benefit for the quarter waspartially offset by an additional$1.3million reserve on a $17.6 million enterprise value relationship, which, as ofDecember 31, 2024, carried a total reserve of $10.1 million. For theyear ended December 31, 2024, the Company recognized a $1.0 millionprovision for credit losses, compared to a $678,000 benefit fortheyear ended December 31, 2023.
Net recoveries totaled $867,000 for the quarter ended December 31, 2024, compared to net charge-offs of $84,000for the quarter ended September 30, 2024, and net charge-offs of $1.2 million for the quarter ended December 31, 2023. For theyear ended December 31, 2024, net charge-offs totaled $1.4million, compared to $4.8 million for theyear ended December 31, 2023. Charge-offs for theyear ended December 31, 2024were primarily related to the settlement and partial charge-off of thelast remaining loan in the digital asset portfolio, partially offset by an $880,000 recovery on a previously charged-offenterprise value loan.
Non-accrual loans were $20.9 million, or 1.31% of total assets, as of December 31, 2024, compared to $37.2 million, or 2.25% of total assets, as ofSeptember 30, 2024 and $16.5 million, or 0.99% of total assets, as of December 31, 2023. The decrease in non-accrual loans as of December 31, 2024was primarily due to the successful workout of a $16.2 million construction loan, which included a partial payoff of the loan and the financing of the remaining$12.7 million with a short-term commercial real estate loan to a new borrower. The increase in non-accrual loans fromDecember 31, 2023, was primarily related to the addition of two enterprise value loans, partially offset by the settlement and partial charge-offof the Bank's last remaining digital asset loan relationship during 2024.
Mr. Reilly noted, “I am pleased to announce the successful workout of the $16.2 million construction loan relationship placed on non-accrual status in the third quarter of 2024. This required a noteworthy effort by our credit and workout teams to complete this with a timely, favorable outcome for the Bank. We remain focused on maintaining strong credit management practices, with a continued commitment to improving asset quality.”
Noninterest income was $1.3million for the quarter ended December 31, 2024, compared to $1.7million for the quarter ended September 30, 2024, and $1.6million for the quarter ended December 31, 2023. For theyear ended December 31, 2024, noninterest income decreased $1.2million, or 16.3%, to$5.9 million, from $7.1 million for theyear ended December 31, 2023.The decrease in noninterest income over the prior year was primarily due to decreases in fees generated by business lines that have been deemphasized bythe Bank.
Noninterest expense was $10.1 million for the quarterended December 31, 2024, compared to $11.6 million for the quarter endedSeptember 30, 2024, and$12.5millionfor the quarter ended December 31, 2023. The decrease in noninterest expense from the prior quarter of $1.5 million, or 12.6%, was primarily due to decreases in salaries and employee benefits of $304,000, or 4.2%,professional fees of $215,000, or 26.9%, and a $750,000 management fee accrual that was reversed in conjunction with the execution of a loan modification in the fourth quarter of 2024. The decrease in noninterest expense from the prior year quarter of $2.3million, or 18.8%, was primarily due toa decrease in professional fees of $902,000, or 60.7%, and the$750,000 fee accrual reversal included in other expense.The decreases noted in all periods presented largely reflect the impact of the Bank successfully lowering its risk appetite and realizing the associatedreduction in the level of resources required to run traditional banking operations.
Noninterest expense was $46.0 million for theyear ended December 31, 2024, a decrease of $5.1 million, or 10.0%, from $51.1 million for the year ended December 31, 2023primarily due to decreases insalaries and employee benefits of $1.6million, or 5.1%;professional fees of $1.2 million, or 24.0%;insurance expensesof $594,000, or 32.9%; and other expenses of $1.6 million, or 47.6%.
Mr. Reilly noted, “The reduction in our noninterest expenses is illustrative of the efforts we have made to align our operations with our current strategy and risk appetite. We have experienced meaningful reductions in professional services, including legal, audit and consulting costs, as well as a reduction in salaries and employee benefits. Our focus remains on driving efficiencies to reduce operating costs, and we are eager to maintain the positive momentum in 2025.”
The Company recorded anincome tax provision of $1.5 millionfor the quarter ended December 31, 2024,compared to$132,000 for the quarter ended September 30, 2024, and$1.1 million for the quarter ended December 31, 2023. Fortheyear ended December 31, 2024, the Company recorded a provision for income tax of $2.1million, reflecting an effective tax rate of 22.5%, compared to $3.8 million, or an effective tax rate of 25.9%, for theyear ended December 31, 2023.
Total assets were $1.59 billion at December 31, 2024, a decrease of $55.0million, or 3.3%, from $1.65 billion at September 30, 2024, and a decrease of$77.1million, or 4.6%, from $1.67 billion atDecember 31, 2023. Cash and cash equivalents totaled $169.1million atDecember 31, 2024, an increase of$30.5million, or 22.0%, fromSeptember 30, 2024, primarily due to adecrease innetloans and an increase in total deposits, partially offset bya decrease in borrowings.Cash and cash equivalents decreased$51.2 million, or 23.2%, fromDecember 31, 2023, primarily due to decreases in deposits and borrowings, partially offset by a decrease in net loans. Net loans were $1.31billion at December 31, 2024, a decrease of $81.2million, or 5.9%, from September 30, 2024 and $15.7 million, or 1.2%, fromDecember 31, 2023. The decrease in net loans over the prior quarter was primarily due to decreases in enterprise value loans of $38.4million, or 11.0%, mortgage warehouse loans of$33.7million, or 11.5%,and construction and landdevelopment loansof $13.3 million, or 32.1%, partially offset by an increasein commercial real estate loans of $10.3 million, or 1.9%. These changes reflect the continued effort to reduce our exposure in the enterprise value portfolio and the$16.2 million construction loan workout that resulted in the financing of a new $12.7 million commercial real estate loan during the quarter ended December 31, 2024. The decrease in net loans fromDecember 31, 2023 was primarily due to decreases in enterprise value loans of $123.8 million, or 28.6%, construction and land development loans of $49.8 million, or 63.9%, and the$12.3 million decreaseresulting from the closure of the digital asset loan portfolio, partially offset by increases in mortgage warehouseloans of $92.6 million, or 55.6%, and commercial real estateloans of$90.4 million, or 19.3%. These changes reflect $47.4million in construction and land development loans that converted to permanent commercial real estate loans during 2024,the reclassification of approximately $33.8 million in loans from the enterprise value to the commercial portfolio,and the strategic shift in our loan portfolio mixillustrating our strategy to reduce credit risk.The allowance for credit losses on loans was $21.1million, or 1.59% of total loans, as of December 31, 2024, compared to $21.9 million, or 1.56% of total loans, as of September 30, 2024, and $21.6million, or 1.61% of total loans, as of December 31, 2023. The decrease in the allowance for credit losses fromSeptember 30, 2024of $836,000, or 3.8%, wasprimarily driven byreductions in the general allowance due to updated loss rates resulting from the annual refresh of our current expected credit loss model, and changesin the loan portfolio mix. These reductions werepartially offset by an additional$1.3million reserve on a $17.6 million enterprise value relationshipwhich, as of December 31, 2024, carried a total reserve of $10.1 million. The decrease in the allowance for credit losses from December 31, 2023was $484,000, or 2.2%.
Total deposits were $1.31 billion at December 31, 2024, an increase of $20.5 million, or 1.6%, from $1.29billion at September 30, 2024, and a decrease of $22.3 million, or 1.7%, from $1.33billion atDecember 31, 2023. The increase in deposits from September 30, 2024was primarily driven by an increase in retail deposits of$22.2 million, or 2.8%, and a $17.2 million, or 16.1%, increase in specialty deposits,partially offset bya decrease in brokered deposits of$14.8 million or, 9.0%, anda decrease in deposits obtained through listing services of $12.6 million, or 21.0%.The decrease in deposits fromDecember 31, 2023was primarily driven by a decrease in deposits obtained through listing services of $89.2 million, or 65.2%, and a decrease in brokered deposits of $45.3 million, or 23.2%, partially offset by an increase in retail deposits of $74.7 million, or 10.1%.Total borrowings were $44.6 million at December 31, 2024, a decreaseof $80.0million, or 64.2%,from September 30, 2024, and a decrease of $60.1 million, or 57.4%, fromDecember 31, 2023, reflecting our improved liquidity position and decreased needfor short-term funding.
As of December 31, 2024, shareholders' equity totaled $231.1 million, an increase of $4.9million, or 2.2%, fromSeptember 30, 2024, and an increase of $9.2million, or 4.1%, from December 31, 2023. The increases includethe Company's net income, which totaled $4.9million and $7.3million for the three and twelve monthsended December 31, 2024, respectively. Shareholders' equity to total assets was 14.5% at December 31, 2024, compared to 13.7% atSeptember 30, 2024, and 13.3% atDecember 31, 2023. Book value per share was $12.99at December 31, 2024, an increase from $12.76at September 30, 2024, and $12.55 atDecember 31, 2023. Market value per share increased to $11.40at December 31, 2024, an increase of 5.7% from $10.79 at September 30, 2024, and an increase of 13.2% from $10.07 atDecember 31, 2023. As of December 31, 2024, the Bank was categorized as well capitalized under the Federal Deposit Insurance Corporation regulatory framework for prompt corrective action.
Mr. Reilly concluded,”The fourth quarter marked a significant milestone in the progress of our strategic objectives and I am excited to see our efforts gaining momentum and delivering positive results. As always, I am incredibly proud of the dedication and hard work of our employees, who remain committed to both our institution and the communities we serve.”
About Provident Bancorp, Inc.
Provident Bancorp, Inc. (NASDAQ:PVBC) is the holding company for BankProv, a full-service commercial bank headquartered in Massachusetts. With retail branches in the Seacoast Region of Northeastern Massachusetts and New Hampshire, as well as commercial banking offices in the Manchester/Concord market in Central New Hampshire, BankProv delivers a unique combination of traditional banking services and innovative financial solutions to its markets. Founded in Amesbury, Massachusetts in 1828, BankProv holds the honor of being the 10th oldest bank in the nation. The Bank 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, visit bankprov.com.
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 on which they are given). These factors include: general economic conditions; interest rates; inflation;levels of unemployment; legislative, regulatory and accounting changes; monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the Federal Reserve Bank; deposit flows; our ability to access cost-effective funding; changes in liquidity, including the size and composition of our deposit portfolio and the percentage of uninsured deposits in the portfolio; changes in consumer spending, borrowing and savings habits; competition; the imposition of tariffs or other domestic or international governmental policies impacting the value of the products of our borrowers;a potential government shutdown;our ability to successfully shift the balance sheet to that of a traditional community bank; real estate values in the market area; loan demand; the adequacy of our level and methodology for calculating our allowance for credit losses; changes in the quality of our loan and securities portfolios; the ability of our borrowers to repay their loans; an unexpected adverse financial, regulatory or bankruptcy event experienced by our cryptocurrency, digital asset or financial technology (“fintech”) customers; our ability to retain key employees; failures or breaches of our IT systems, including cyberattacks; the failure to maintain current technologies; the ability of the Company or the Bank to effectively manage its growth; global and national war and terrorism; the impact of the COVID-19 pandemic or any other pandemic on our operations and financial results and those of our customers; 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 that 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.
Investor contact: Joseph Reilly President and Chief Executive Officer Provident Bancorp, Inc. jreilly@bankprov.com
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