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Provident Bancorp, Inc. /MD/ (PVBC)·Q3 2024 Earnings Summary

Executive Summary

  • PVBC returned to profitability with net income of $0.716M ($0.04 diluted EPS), improving from a Q2 loss of $3.308M ($-0.20) but down from $2.466M ($0.15) in Q3’23; net interest margin expanded sequentially to 3.38% and interest rate spread to 2.19% .
  • Deposit mix improved: retail deposits +$59.5M QoQ (+8.1%) while listing service and brokered deposits declined, helping modestly lower deposit costs; management expects further cost-of-funds tailwinds following the late-September Fed rate cut .
  • Credit costs moderated: provision fell to $1.693M from $6.458M in Q2, but non-accrual loans rose to $37.2M (2.25% of assets) driven by a single $16.2M construction & land development relationship; individually analyzed reserves on an enterprise value loan reached $8.8M .
  • No formal quantitative guidance was provided; management emphasized strategic execution: strengthening retail deposits, reducing high-cost third-party funding, and shifting the loan mix toward traditional CRE/commercial while running off enterprise value and digital asset exposure .

What Went Well and What Went Wrong

What Went Well

  • Net interest margin and spread improved sequentially to 3.38% and 2.19% as funding mix shifted and deposit costs eased modestly; net interest and dividend income rose to $12.409M (+3.8% QoQ) .
  • Retail deposit growth: retail deposits increased by $59.5M (+8.1% QoQ), enabling runoff of listing service deposits (-$23.4M) and brokered deposits (-$20.1M) and positioning for lower cost of funds post-Fed cut in late September .
  • Strategic repositioning: continued exit from higher-risk portfolios—enterprise value loans down $46.0M QoQ and digital asset portfolio fully closed earlier in 2024—while CRE and mortgage warehouse grew; CEO: “strengthen our retail deposit base… run off high-cost third-party deposits… optimize the benefit from the late-September interest rate reduction” .

What Went Wrong

  • Asset quality deterioration: non-accrual loans jumped to $37.2M (2.25% of assets) due to a $16.2M construction & land development relationship placed on non-accrual in Q3 .
  • Elevated credit concentration risk: an enterprise value relationship required additional $1.7M reserve, bringing individually analyzed reserves to $8.8M; though provision moderated, this continues to weigh on earnings quality .
  • Borrowing costs: interest expense on borrowings surged to $0.952M (+205% QoQ) as average borrowings and borrowing rates increased; total interest-bearing liability cost rose to 3.92% (+3bps QoQ; +51bps YoY) .

Financial Results

MetricQ3 2023Q2 2024Q3 2024
Net Income ($USD Millions)$2.466 $(3.308) $0.716
Diluted EPS ($USD)$0.15 $(0.20) $0.04
Total Interest & Dividend Income ($USD Millions)$23.228 $21.872 $22.429
Total Interest Expense ($USD Millions)$9.340 $9.919 $10.020
Net Interest & Dividend Income ($USD Millions)$13.888 $11.953 $12.409
Noninterest Income ($USD Millions)$1.765 $1.523 $1.708
Net Interest Margin %3.44% 3.27% 3.38%
Interest Rate Spread %2.35% 2.10% 2.19%
ROAA % (annualized)0.57% (0.85%) 0.18%
ROAE % (annualized)4.55% (5.80%) 1.27%

Sequential trend within 2024:

MetricQ1 2024Q2 2024Q3 2024
Net Income ($USD Millions)$4.981 $(3.308) $0.716
Diluted EPS ($USD)$0.30 $(0.20) $0.04
Net Interest & Dividend Income ($USD Millions)$12.486 $11.953 $12.409
Noninterest Income ($USD Millions)$1.356 $1.523 $1.708
Provision for Credit Losses ($USD Millions)$(5.581) benefit $6.458 expense $1.693 expense
Net Interest Margin %3.38% 3.27% 3.38%

Loan and deposit mix KPIs:

KPIDec 31, 2023Jun 30, 2024Sep 30, 2024
Net Loans ($USD Millions)$1,321.158 $1,349.355 $1,386.669
CRE Loans ($USD Millions)$468.928 $510.395 $549.029
Construction & Land Dev. ($USD Millions)$77.851 $57.145 $41.401
Mortgage Warehouse ($USD Millions)$166.567 $256.516 $292.866
Commercial Loans ($USD Millions)$176.124 $144.700 $170.514
Enterprise Value ($USD Millions)$433.633 $394.177 $348.171
Total Deposits ($USD Millions)$1,331.222 $1,264.655 $1,288.495
Retail Deposits ($USD Millions)$—$731.0 +$59.5 QoQ to drive total ↑
Listing Services Deposits ($USD Millions)$—$—$(23.4) QoQ
Brokered Deposits ($USD Millions)$—$185.1 $(20.1) QoQ

Asset quality:

KPIDec 31, 2023Jun 30, 2024Sep 30, 2024
Non-accrual Loans ($USD Millions)$16.517 $21.316 $37.161
NPLs / Total Loans %1.23% 1.56% 2.64%
NPLs / Total Assets %0.99% 1.29% 2.25%
ACL on Loans ($USD Millions)$21.571 $20.341 $21.923
ACL / Total Loans %1.61% 1.49% 1.56%
Net Charge-offs (Quarter) ($USD Millions)—$2.1 $0.084

Guidance Changes

No formal quantitative guidance was provided in Q3 materials.

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Revenue/EPSFY/Q4Not providedNot providedMaintained (no guidance)
NIM/SpreadFY/Q4Not providedManagement expects cost-of-funds benefits post Fed cut; no numeric targetsCommentary only
OpExFY/Q4Not providedContinued cost discipline; workforce reduction >5% executed in Q3Commentary only
CreditFY/Q4Not providedMonitoring enterprise value and construction credits; exploring workout/exit optionsCommentary only

Earnings Call Themes & Trends

No Q3 2024 earnings call transcript was available in the document catalog; themes reflect management press releases.

TopicPrevious Mentions (Q2 & Q1 2024)Current Period (Q3 2024)Trend
Deposit strategy & cost of fundsQ2: Marketing to grow retail deposits; facing competitive deposit costs . Q1: Community re-engagement and local market focus .Retail deposits +$59.5M QoQ; runoff of listing/brokered; CEO expects Fed cut to reduce cost of funds .Improving mix; potential cost relief ahead.
Loan mix shift (EV/digital asset → traditional)Q2: EV reserves +$7.1M; digital asset portfolio closed; CRE/warehouse growth . Q1: EV/digital asset exposure reduced; strategic plan execution .EV loans down $46.0M QoQ; CRE +$38.6M; warehouse +$36.4M; digital asset remains closed .Continuing de-risking and traditional growth.
Asset qualityQ2: Non-accruals + to $21.3M; EV relationship modified; charge-offs $2.1M .Non-accruals $37.2M due to $16.2M construction loan; provision $1.693M; EV reserves $8.8M .Deterioration on one relationship; provisions moderated.
NIM and spreadQ2: NIM 3.27%; spread 2.10% . Q1: NIM 3.38%; spread 2.28% .NIM back to 3.38%; spread 2.19% .Stabilizing/improving sequentially.
OpEx disciplineQ2: Salaries and fees down; efficiency 86.03% . Q1: Expense reduction initiatives .Workforce reduction >5%; professional services cut; noninterest expense $11.576M .Structural cost actions underway.

Management Commentary

  • “We are excited that our exhaustive efforts to strengthen our retail deposit base are yielding positive results… enabling us to run off high-cost third-party deposits, strengthen our liquidity position and optimize the benefit from the late-September interest rate reduction… result in meaningful reductions in our cost of funds.” — CEO Joseph Reilly .
  • On asset quality: “The Bank has evaluated the construction and land development loan relationship placed on non-accrual… due to the high collateral value of the project, [we are] exploring options to work out or exit this relationship as efficiently as possible.” .
  • On cost discipline: “We have… redirected our focus to traditional community banking… completed an evaluation to reduce our professional services… and carried out a workforce reduction of over five percent…” .

Q&A Highlights

No Q3 2024 earnings call transcript was available; there were no published analyst Q&A or clarifications in our document set for the period [ListDocuments 0 results].

Estimates Context

S&P Global consensus EPS and revenue estimates for Q3 2024 were unavailable due to data-access limitations at the time of request; therefore, formal beat/miss vs Wall Street consensus cannot be determined. Values retrieved from S&P Global.*

Key Takeaways for Investors

  • Sequential recovery: PVBC returned to profitability with NIM/spread improvement and rising net interest income; watch for continued margin support as deposit mix shifts and recent rate cut rolls through funding costs .
  • De-risking continues: EV portfolio exposure is shrinking and digital asset lending has been fully exited; traditional CRE and mortgage warehouse growth is reshaping the balance sheet .
  • Credit watch: Non-accrual increase was concentrated in one construction relationship; provision moderated but individually analyzed EV reserves remain elevated—monitor resolution pathways and collateral outcomes .
  • Cost actions: Structural expense cuts (workforce >5%, reduced professional services) should support efficiency; further OpEx normalization could enhance earnings resilience .
  • Funding mix: Retail deposit growth and reductions in listing/brokered deposits position PVBC to lower cost of funds; sustained deposit franchise strength is a key medium-term driver .
  • Trading lens: Near-term stock catalysts include evidence of deposit cost relief and credit resolution progress; risks center on further non-accrual migration or additional EV-related reserve needs .
  • Medium-term thesis: A more traditional community bank profile with improving margin and controlled OpEx could support normalized ROA/ROE if asset quality stabilizes and mortgage warehouse growth remains disciplined .