Provident Bancorp(PVBC) - 2022 Q1 - Quarterly Report

Part I. Financial Information This section presents the company's interim consolidated financial statements and management's discussion of financial condition and results of operations Item 1. Financial Statements This section presents the unaudited interim consolidated financial statements, showing total assets of $1.79 billion and net income of $5.5 million for the quarter Consolidated Balance Sheets Total assets increased to $1.79 billion driven by higher cash and deposits, with net loans stable at $1.44 billion Consolidated Balance Sheet Highlights (in thousands) | Account | March 31, 2022 (unaudited) | December 31, 2021 | | :--- | :--- | :--- | | Assets | | | | Cash and cash equivalents | $216,076 | $153,115 | | Loans, net | $1,437,429 | $1,433,803 | | Total assets | $1,792,010 | $1,729,283 | | Liabilities & Equity | | | | Total deposits | $1,522,269 | $1,459,895 | | Total liabilities | $1,555,465 | $1,495,501 | | Total shareholders' equity | $236,545 | $233,782 | | Total liabilities and shareholders' equity | $1,792,010 | $1,729,283 | Consolidated Statements of Income Net income for Q1 2022 increased 28.6% to $5.5 million, driven by higher net interest income and lower loan loss provision Consolidated Income Statement Highlights (in thousands, except per share data) | Metric | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net interest and dividend income | $17,925 | $14,908 | | Provision for loan losses | $83 | $753 | | Noninterest income | $1,320 | $1,018 | | Noninterest expense | $11,411 | $9,213 | | Net income | $5,525 | $4,297 | | Diluted EPS | $0.32 | $0.24 | Consolidated Statements of Comprehensive Income Comprehensive income for Q1 2022 was $4.3 million, offset by a $1.3 million other comprehensive loss from unrealized debt security losses Comprehensive Income (in thousands) | Item | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net income | $5,525 | $4,297 | | Total other comprehensive loss | $(1,274) | $(185) | | Comprehensive income | $4,251 | $4,112 | Consolidated Statements of Changes in Shareholders' Equity Shareholders' equity increased to $236.5 million, driven by net income, partially offset by dividends and stock repurchases - Key activities affecting shareholders' equity in Q1 2022 included net income of $5.5 million, dividend declarations of $0.04 per share totaling $673,000, and the repurchase of 95,229 shares of common stock for $1.5 million[14] Consolidated Statements of Cash Flows Cash and cash equivalents increased by $63.0 million in Q1 2022, primarily from financing activities and deposit growth Net Cash Flow Summary (in thousands) | Activity | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $2,307 | $5,779 | | Net cash provided by investing activities | $596 | $2,195 | | Net cash provided by financing activities | $60,058 | $41,080 | | Net increase in cash and cash equivalents | $62,961 | $49,054 | Notes to Consolidated Financial Statements Notes detail accounting policies, loan portfolio composition, allowance for loan losses, and the Bank's 'well capitalized' regulatory status - The company specializes in technology-first banking for niche markets, including digital assets, renewable energy, fin-tech, and search fund lending[24] Loan Portfolio Composition (in thousands) | Loan Type | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Commercial real estate | $429,842 | $432,275 | | Commercial | $753,276 | $726,241 | | Mortgage warehouse | $223,593 | $253,764 | | Other | $52,899 | $45,131 | | Total Loans | $1,459,610 | $1,457,411 | - Total non-accrual loans decreased to $1.9 million at March 31, 2022, from $2.9 million at December 31, 2021[41] Bank Regulatory Capital Ratios | Ratio | March 31, 2022 | Requirement for 'Well Capitalized' | | :--- | :--- | :--- | | Total Capital (to Risk Weighted Assets) | 14.75% | > 10.0% | | Tier 1 Capital (to Risk Weighted Assets) | 13.50% | > 8.0% | | Common Equity Tier 1 Capital | 13.50% | > 6.5% | | Tier 1 Capital (to Average Assets) | 12.10% | > 5.0% | Management's Discussion and Analysis of Financial Condition and Results of Operation Management discusses Q1 2022 financial results, highlighting a 28.6% net income increase, 3.6% asset growth, and expanded net interest margin Balance Sheet Analysis Total assets grew 3.6% to $1.79 billion, driven by increased cash and deposits, particularly from digital asset and BaaS customers - Digital asset deposit balances increased by $79.7 million (80.0%) to $179.4 million at March 31, 2022[113] - Banking as a Service (BaaS) deposit balances increased by $34.4 million (57.5%) to $94.3 million at March 31, 2022[113][114] - Shareholders' equity increased by $2.8 million to $236.5 million, driven by net income, partially offset by stock repurchases of $1.5 million and dividends of $673,000[115] Asset Quality Asset quality improved with non-performing assets decreasing to $1.9 million, and the allowance for loan losses at 1.32% of total loans Non-Performing Assets (in thousands) | Metric | March 31, 2022 | December 31, 2021 | | :--- | :--- | :--- | | Total non-accrual loans | $1,881 | $2,892 | | Total non-performing assets | $1,881 | $2,892 | | Total non-performing assets to total assets | 0.10% | 0.17% | Allowance for Loan Losses Ratios | Ratio | March 31, 2022 | March 31, 2021 | | :--- | :--- | :--- | | Allowance to non-performing loans | 1,025.84% | 255.29% | | Allowance to total loans outstanding | 1.32% | 1.43% | Results of Operations Net income increased 28.6% to $5.5 million, driven by higher net interest income and noninterest income, despite increased noninterest expenses - Net interest income increased by $3.0 million (20.2%) YoY, driven by a 10.8% increase in average interest-earning assets and a 35 basis point expansion in net interest margin to 4.43%[126] - Interest expense decreased 46.5% YoY due to a lower cost of interest-bearing deposits (0.23% vs 0.43%) and a strategic reduction in average interest-bearing deposit balances[125] - Noninterest income increased 29.7% YoY, largely due to a 53.3% increase in customer service fees on deposit accounts, driven by services for Bitcoin ATM operators and growth in digital asset and BaaS customer accounts[128] - Noninterest expense increased 23.9% YoY, primarily due to higher staffing costs to support new technologies, a 1,214.7% increase in insurance expense related to digital asset strategies, and a $395,000 write-down of an SBA receivable[129] Management of Market Risk The company manages interest rate risk using NII and EVE models, showing asset sensitivity with NII projected to increase 9.20% in a +200 basis point rate shock Net Interest Income Sensitivity Analysis (at March 31, 2022) | Change in Interest Rates (Basis Points) | Estimated Change in NII Over Next 12 Months | | :--- | :--- | | +200 | +9.20% | | -100 | -8.90% | Economic Value of Equity (EVE) Sensitivity Analysis (at March 31, 2022) | Change in Interest Rates (Basis Points) | Estimated Change in EVE | | :--- | :--- | | +200 | +2.50% | | +100 | +2.00% | | -100 | -2.90% | Liquidity and Capital Resources The company maintains strong liquidity with $216.1 million in cash and significant borrowing capacity, exceeding all regulatory capital requirements - At March 31, 2022, the company had total cash and cash equivalents of $216.1 million[144] - Available borrowing capacity includes $118.4 million from the FHLB and a $267.9 million line of credit with the Federal Reserve Bank of Boston[145] Item 3. Quantitative and Qualitative Disclosures about Market Risk This section refers to Item 2 for quantitative and qualitative disclosures regarding market risk - Information regarding market risk is provided in Item 2 of this report[152] Item 4. Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal controls over financial reporting - Management concluded that the Company's disclosure controls and procedures were effective as of March 31, 2022[153] - No material changes were made to internal controls over financial reporting during the quarter ended March 31, 2022[154] Part II. Other Information This section provides other required disclosures, including legal proceedings, risk factors, and equity security sales Item 1. Legal Proceedings The company reports no material legal proceedings - Not applicable[155] Item 1A. Risk Factors This item is not applicable as the company is a smaller reporting company - Not applicable to a smaller reporting company[156] Item 2. Unregistered Sales of Equity Securities and Use of Proceeds The company repurchased 95,431 shares at an average price of $15.94 in Q1 2022, with 339,726 shares remaining for repurchase Issuer Purchases of Equity Securities (Q1 2022) | Period | Total Shares Purchased | Average Price Paid per Share | Shares Purchased as Part of Program | | :--- | :--- | :--- | :--- | | Jan 2022 | 202 | $18.87 | — | | Feb 2022 | 7,888 | $16.17 | 7,888 | | Mar 2022 | 87,341 | $15.91 | 87,341 | | Total | 95,431 | $15.94 | 95,229 | Item 6. Exhibits This section lists exhibits filed with Form 10-Q, including corporate governance documents and Sarbanes-Oxley certifications - Exhibits filed include corporate governance documents, Sarbanes-Oxley certifications (302 and 906), and iXBRL data files[164]