Provident Bancorp, Inc. Reports Earnings of the September 30, 2016 Quarter

AMESBURY, Mass., Oct. 20, 2016

David P. Mansfield, Chief Executive Officer, said, "This earnings report reflects our continued focus on being an innovative commercial bank leader.  We are committed to strengthening the economic development of the regions we serve, by working closely with our small-to medium sized business customers and delivering superior customized solutions, products and services to meet their banking needs; and by establishing and supporting valuable partnerships with economic drivers in our markets."

Net interest income before provision for loan losses increased by $832,000, or 14.1%, compared to the third quarter of 2015 and increased by $2.2 million, or 13.0%, compared to the nine months ending September 30, 2015. The growth in net interest income this quarter over the prior year's third quarter is primarily the result of an increase in our average interest earning assets of $54.8 million or 8.2% and an increase in net interest margin of 19 basis points to 3.72% for the three months ended September 30, 2016. The growth in net interest income for the nine months ended September 30, 2016 compared to the nine months ended in the same period 2015 is primarily the result of an increase in average interest earning assets of $65.4 million or 10.2% and an increase of the net interest margin of 9 basis points to 3.64% for the nine months ended September 30, 2016.

Provision for loan losses of $163,000 were booked for the third quarter of 2016 compared to $174,000 for the same period 2015. For the nine months ended September 30, 2016 $484,000 of provisions were recognized compared to $645,000 for the nine months ended September 30, 2015. The provisions were primarily due to an increase in our loan portfolio as we apply historical loss ratios to newly originated loans, which, absent other factors, results in an increase in the allowance for loan losses as the loan portfolio increases. The allowance for loan losses as a percentage of total loans was 1.40% as of September 30, 2016 compared to 1.46% as of September 30, 2015. The allowance for loan losses as a percent of non-performing loans was 590.56% as of September 30, 2016 compared to 249.97% as of September 30, 2015. Non-performing assets were $1.4 million or 0.18% to total assets as of September 30, 2016 compared to $3.1 million or 0.44% to total asset for the same period 2015.

Non-interest income increased $203,000, or 17.5% to $1.4 million for the three months ended September 30, 2016. For the nine months ended September 30, 2016, non-interest income increased $422,000, or 14.8%, to $3.3 million. The primary reasons for the increases in both periods presented are due to the increased gains on sales of securities and income from our bank owned life insurance policies (BOLI). Additional purchases of BOLI were made during the second half of 2015.

Non-interest expense decreased $1.7 million, or 24.1% to $5.2 million for the three months ended September 30, 2016. For the nine months ended September 30, 2016, non-interest expense decreased $1.0 million or 6.2% to $15.2 million. The primary reason for the decrease is the $2.2 million funding of the Bank's charitable foundation in the third quarter of 2015.  The decrease was partially offset by increases in salary expense and professional fees. Increases in salary and employee benefits were $203,000 or 6.7% for the three months ended September 30, 2016 and $819,000 or 9.4% for the nine months ended September 30, 2016. Increases in professional fees were $81,000 or 37.3% for the three months ended September 30, 2016 and $214,000 or 32.3% for the nine months ended September 30, 2016.

As of September 30, 2016 total assets have increased $24.8 million, or 3.34% to $768.2 million compared to $743.4 million at December 31, 2015. The primary reason for the increase is due to net loans with an increase of $34.4 million or 6.2%. The increase in loans is offset by a net decrease in investments of $10.1 million or 8.1%. On May 31, 2016 the Company transferred all of its held-to-maturity securities to available-for-sale. The cost basis transferred was $44.2 million with an unrealized net gain of $2.2 million. The reason for the transfer was for liquidity management. Deposits were $610.3 million as of September 30, 2016 representing an increase of $33.1 million or 5.7% compared to December 31, 2015. Borrowings decreased $16.0 million or 27.8% to $41.5 million as of September 30, 2016.