<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
Quarterly Report Pursuant to Section 13 or 15 (d) of
the Securities Exchange Act of 1934
For the Quarterly Period Ended Commission File
June 30, 1995 No. 1-8019
P R O V I D E N T B A N C O R P , I N C .
Incorporated under IRS Employer I.D.
the Laws of Ohio No. 31-0982792
One East Fourth Street, Cincinnati, Ohio 45202
Phone: 513-579-2000
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the registrant was required to file such reports),
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No ______
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date: Common
stock, without par value, at July 31, 1995 is 15,566,443
Please address all correspondence to:
John R. Farrenkopf
Vice President and Chief Financial Officer
Provident Bancorp, Inc.
One East Fourth Street
Cincinnati, Ohio 45202
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
PROVIDENT BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
June 30, December 31,
ASSETS 1995 1994
<S> <C> <C>
Cash and Noninterest Bearing Deposits $156,960 $172,025
Federal Funds Sold and Reverse Repurchase Agreements 11,975 252,550
Investment Securities:
Held to Maturity (market value - $254,697 and $31,699) 253,783 31,699
Available for Sale (amortized cost - $663,708 and $679,310) 657,523 654,221
Loans (Net of Unearned Income):
Commercial Lending:
Commercial and Financial 1,992,067 1,878,351
Commercial Mortgage 421,793 420,222
Commercial Construction 203,902 172,190
Equipment Lease Financing 98,999 109,743
Consumer Lending:
Instalment 934,129 930,545
Residential 500,225 507,734
Lease Financing 243,687 185,753
Total Loans 4,394,802 4,204,538
Reserve for Possible Loan Losses (54,275) (51,979)
Net Loans 4,340,527 4,152,559
Premises and Equipment 78,395 64,210
Other Assets 108,292 84,227
$5,607,455 $5,411,491
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest Bearing $427,840 $452,458
Interest Bearing 3,553,912 3,616,191
Total Deposits 3,981,752 4,068,649
Short-Term Debt 677,397 521,707
Long-Term Debt 459,985 383,433
Accrued Interest and Other Liabilities 97,400 78,351
Total Liabilities 5,216,534 5,052,140
Shareholders' Equity:
Preferred Stock, 5,000,000 Shares Authorized, Series B,
371,418 Issued 37,000 37,000
Common Stock, No Par Value, $.67 Stated Value, 60,000,000
Shares Authorized, 15,653,599 and 15,639,849 Issued 10,436 10,427
Capital Surplus 107,767 107,264
Retained Earnings 235,505 210,355
Reserve for Retirement of Capital Securities 8,000 10,667
Treasury Stock, 121,222 and 4,487 Shares (3,844) (134)
Unrealized Losses on Marketable Securities
(net of deferred income tax) (3,943) (16,228)
Total Shareholders' Equity 390,921 359,351
$5,607,455 $5,411,491
</TABLE>
<PAGE>
<TABLE>
PROVIDENT BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(In Thousands, Except Per Share Amounts)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans:
Taxable $101,163 $73,466 $196,924 $139,753
Exempt From Federal Income Taxes 135 147 267 305
101,298 73,613 197,191 140,058
Interest on Investment Securities:
Taxable 12,671 8,084 21,976 16,979
Exempt From Federal Income Taxes 100 2 195 4
12,771 8,086 22,171 16,983
Interest on Federal Funds Sold and
Reverse Repurchase Agreements 75 183 746 467
Total Interest Income 114,144 81,882 220,108 157,508
Interest Expense:
Interest on Deposits:
Savings and Demand Deposits 7,012 6,244 14,067 12,362
Time Deposits 41,797 21,175 82,188 39,400
Total Interest on Deposits 48,809 27,419 96,255 51,762
Interest on Short-Term Debt 9,704 3,844 15,496 7,823
Interest on Long-Term Debt 6,567 5,277 13,177 9,439
Total Interest Expense 65,080 36,540 124,928 69,024
Net Interest Income 49,064 45,342 95,180 88,484
Provision for Possible Loan Losses 3,000 3,000 5,000 6,000
Net Interest Income After Provision
for Possible Loan Losses 46,064 42,342 90,180 82,484
Other Income:
Service Charges on Deposit Accounts 3,911 3,678 7,682 7,304
Other Service Charges and Fees 7,100 3,688 10,885 7,111
Gain on Sales of Loans 630 (77) 2,432 691
Security Gains - - - -
Other 1,205 870 2,642 2,489
Total Other Income 12,846 8,159 23,641 17,595
Other Expense:
Compensation:
Salaries 13,600 12,117 26,888 24,300
Benefits 2,288 2,258 4,738 4,530
Profit Sharing 864 784 1,670 1,529
Occupancy 2,198 1,927 4,345 3,878
Equipment Expense 2,298 1,943 4,601 3,824
Deposit Insurance 2,177 1,767 4,354 3,533
Other 10,438 8,023 19,609 15,987
Total Other Expense 33,863 28,819 66,205 57,581
Earnings Before Income Taxes 25,047 21,682 47,616 42,498
Applicable Income Taxes 8,572 7,356 16,141 14,469
Net Earnings $16,475 $14,326 $31,475 $28,029
Net Earnings Per Common Share:
Primary $.99 $.85 $1.89 $1.65
Fully Diluted .90 .78 1.72 1.52
Average Primary Shares 16,011 16,062 16,018 16,051
Average Fully Diluted Shares 18,356 18,409 18,351 18,385
</TABLE>
<PAGE>
<TABLE>
PROVIDENT BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Six Months Ended June 30,
1995 1994
<S> <C> <C>
Operating Activities:
Net Earnings $31,475 $28,029
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Provision for Possible Loan Losses 5,000 6,000
Provision for Depreciation and Amortization 5,763 4,642
Amortization of Investment Security Premiums (Discounts) (336) 483
Amortization of Unearned Income (10,260) (4,177)
Net Decrease in Trading Securities 100 74
Proceeds from Sale of Loans Held for Sale 40,828 69,229
Origination of Loans Held for Sale (39,470) (7,825)
Realized Gains on Loans Held for Sale (557) (660)
Realized Gains on Sale of Loans (1,875) (31)
Realized Investment Security Gains - -
(Increase) Decrease in Interest Receivable 1,557 (2,679)
Increase in Accounts Receivable and Other Assets (27,496) (14,856)
Increase in Interest Payable 5,476 6,858
Decrease in Accounts Payable and Other Liabilities (1,597) (44)
Other 8,447 1,502
Net Cash Provided By Operating Activities 17,055 86,545
Investing Activities:
Investment Securities Available for Sale:
Proceeds from Sales 427 -
Proceeds from Maturities and Prepayments 82,036 105,382
Purchases (66,519) (67,819)
Investment Securities Held to Maturity:
Proceeds from Sales - -
Proceeds from Maturities and Prepayments 5,264 765
Purchases (227,334) (12,198)
Net Increase in Loans and Leases (185,935) (373,644)
Proceeds from Sale of Other Real Estate 1,997 3,086
Purchases of Premises and Equipment (16,889) (5,990)
Proceeds from Sales of Premises and Equipment 1,299 2,261
Net Cash Used In Investing Activities (405,654) (348,157)
Financing Activities:
Net Decrease in Demand and Savings Deposits (93,573) (112,823)
Net Increase in Certificates of Deposit 6,676 441,042
Net Increase (Decrease) in Short-Term Debt 155,690 (82,746)
Principal Payments on Long-Term Debt (23,494) (107,529)
Proceeds From Issuance of Long-Term Debt 100,000 210,482
Cash Dividends Paid (8,948) (8,357)
Proceeds from Sale of Common Stock 2,717 289
Repurchase of Common Stock (6,109) -
Net Cash Provided By Financing Activities 132,959 340,358
Increase (Decrease) in Cash and Cash Equivalents (255,640) 78,746
Cash and Cash Equivalents at Beginning of Period 424,575 539,394
Cash and Cash Equivalents at End of Period $168,935 $618,140
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest $119,452 $62,146
Income Taxes 9,000 16,400
Non-Cash Activity:
Additions to Other Real Estate in Settlement of Loans 495 1,160
Transfer of Premises and Equipment to Other Real Estate - 101
</TABLE>
<PAGE>
PROVIDENT BANCORP, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited consolidated
financial statements contain all adjustments (consisting of only
normal recurring accruals) necessary for fair presentation. The
results of operations for interim periods are not necessarily
indicative of the results to be expected for the full year.
The financial statements presented herein should be read in
conjunction with the financial statements and notes thereto included
in Provident Bancorp, Inc.'s 1994 annual report on Form 10-K filed
with the Securities and Exchange Commission.
Basis of Presentation
The consolidated financial statements include the accounts of
Provident Bancorp, Inc. and its subsidiaries ("Bancorp"), all of which
are wholly owned. All significant intercompany balances and
transactions have been eliminated. Certain reclassifications have
been made to conform to the current year presentation.
The accompanying financial statements have been prepared in accordance
with the instructions to Form 10-Q and therefore do not include all
information and footnotes necessary to be in conformity with generally
accepted accounting principles.
Bancorp adopted Financial Accounting Standards Board("FASB") Statement
No. 114, "Accounting by Creditors for Impairment of a Loan", on
January 1, 1995. This statement requires a creditor to measure the
value of an impaired loan, as defined in the statement, based on the
present value of expected future cash flows discounted at the loan's
effective interest rate or, if more practical, at the loan's
observable market price or the fair value of the collateral, if the
loan is collateral dependent. Generally, interest income on impaired
loans is computed on the outstanding principal balance. Impaired loans
are generally placed on nonaccrual status when the payment of
principal and/or interest is past due 90 days or more. FASB Statement
No. 114 is not applicable to Bancorp's instalment loans, residential
loans, leases and debt securities. The adoption of FASB Statement No.
114 had no material impact on Bancorp's financial condition or results
of operations.
Stock Options
Pursuant to Bancorp's 1988 Stock Option Plan and 1992 Outside
Director's Stock Option Plan, options to purchase 165,000 shares of
Bancorp common stock were granted during the first six months of 1995.
The options have exercise prices ranging from $29.69 to $34.25.
<PAGE>
Off-Balance Sheet Financial Agreements
In the normal course of business, Bancorp uses various financial
instruments with off-balance sheet risk to manage its interest rate
risk and to meet the financing needs of its customers. At June 30,
1995, these off-balance sheet instruments consisted of standby letters
of credit of $93 million, commitments to extend credit of $1.3 billion
and interest rate swaps with a notional amount of $1.4 billion.
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
Results of Operations
Summary
Bancorp's net earnings for the second quarter of 1995 were $16.5
million compared to $14.3 million for the second quarter of 1994. Net
interest income increased by $3.7 million, or 8%, over the comparable
period in 1994. Interest income increased by $32.3 million, or 39%,
which more than offset the $28.5 million, or 78%, increase in interest
expense. Other income increased $4.7 million, or 57%, primarily due
to a gain from the sale of mortgage loan servicing rights. Other
expense increased $5.0 million, or 18%, primarily due to increases in
salaries and benefits and other expense.
Bancorp's net earnings for the first six months of 1995 were $31.5
million compared to $28.0 million for the first six months of 1994.
Net interest income increased by $6.7 million, or 8%, over the
comparable period in 1994. Interest income increased by $62.6
million, or 40%, which more than offset the $55.9 million, or 81%,
increase in interest expense. Other income increased $6.0 million, or
34%, primarily due to the increase in gain on sales of loans and a
gain from the sale of mortgage loan servicing rights. Other expense
increased $8.6 million, or 15%, primarily due to increases in salaries
and benefits and other expense.
The following ratios compare returns on average assets and average
equity for the first six months of 1995 and for the year 1994.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
<S> <C> <C>
Net Earnings to Average Assets(1) 1.18% 1.24%
Net Earnings to Average Shareholders' Equity(1) 16.91% 16.64%
<FN>
(1)Net earnings for the six months ended June 30, 1995 have been annualized.
</TABLE>
The ratio of operating expense to tax equivalent revenue ("efficiency
ratio") was 56.9% for the first six months of 1995 compared to 54.2%
for the first six months of 1994. Tax equivalent revenue includes tax
equivalent net interest income and other income but excludes non-
<PAGE>
recurring gains and security gains or losses. The primary reason for
the increase in the efficiency ratio was operating expense increasing
at a proportionately faster rate than tax equivalent net interest
income.
Asset quality remained strong during the second quarter of 1995. The
ratio of nonperforming loans to total loans was .55% at June 30, 1995,
compared to .17% at December 31, 1994 and .48% at June 30, 1994. The
ratio of nonperforming assets to total loans and other real estate
owned was .59% at June 30, 1995, compared to .25% at December 31, 1994
and .65% at June 30, 1994.
Net Interest Income
See Table 1 for net interest income on a tax equivalent basis and
Table 2 for consolidated average balances, rates earned/paid and net
interest margin.
Net interest income on a tax equivalent basis increased approximately
$6.8 million for the first six months of 1995 over the comparable
period in 1994. This increase resulted from a $11.5 million increase
due to changes in volume more than offsetting the $4.7 million
decrease which was caused by changes in rates. Volume changes are
caused by changes in the average balances of interest earning assets
and interest bearing liabilities. The net interest margin was 3.81%
for the first six months of 1995 as compared to 4.26% for the
comparable period in 1994. The decrease in the net interest margin
during this period reflects the increase in the average rate paid on
interest bearing liabilities, which increased 181 basis points, more
than offsetting the increase of 121 basis points in the average rate
earned on interest earning assets. An increase in time deposits
combined with an increase in the rate paid on time deposits were the
primary reasons for the increase in Bancorp's interest expense and
overall cost of interest bearing liabilities. An increase in the
amount of commercial and financial loans combined with repricing of
commercial and financial loans were the primary reasons for the
increase in interest income and the average rate earned on interest
earning assets. Beginning in the first quarter of 1994, market
interest rates began to increase and continued to increase through the
first quarter of 1995. During the second quarter of 1995, interest
rates started to decline. As interest rates increased, interest
bearing liabilities reacted more quickly than interest earning assets,
causing the net interest margin to decrease. The increase in interest
rates that began in 1994 was the primary reason that interest rate
swaps decreased the net interest margin by 20 basis points during the
first half of 1995. During the first half of 1994, interest rate swaps
increased the net interest margin by 29 basis points.
In preparing the net interest margin tables, nonaccrual loan balances
are included in the average balances for loans. Loan fees are
included in loan revenue as follows: second quarter 1995 - $4.1
million, second quarter 1994 - $3.9 million, year-to-date 1995 - $8.7
million and year-to-date 1994 - $7.4 million.
<PAGE>
Provision for Possible Loan Losses
For the first half of 1995 and 1994, the provision for possible loan
losses was $5 million and $6 million, respectively. As loan growth has
slowed, the provision for possible loan losses has decreased.
Other Income
Second Quarter 1995 Compared to Second Quarter 1994
Other income increased $4.7 million during the second quarter of 1995,
primarily due to the increase in gain on sale of loans and the gain
from the sale of mortgage loan servicing rights. Other service
charges and fees increased primarily due to the gain from the sale of
mortgage loan servicing rights and an increase in credit card fee
income. The increase in the gain on sale of loans was primarily due
to a decrease in interest rates in the residential mortgage markets.
An increase in operating lease income was the primary reason for the
increase in other.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30,
1994
Other income increased $6 million during the first six months of 1995,
primarily for the same reasons given in the quarterly comparison. The
sale of an equipment lease was the primary reason for the increase in
gain on sale of loans.
Other Expense
Second Quarter 1995 Compared to Second Quarter 1994
Other expense increased $5 million during the second quarter of 1995
when compared to 1994. Salaries increased as a result of merit and
promotion increases, increases in incentives and increased expenses in
the retail banking area. Occupancy expense increased primarily due to
an increase in the amount of space rented. The increase in equipment
expense was primarily due to increased depreciation expense relating
to the bank's data processing operations. The increase in the deposit
base was the reason for the increase in deposit insurance expense.
Increases in marketing expense and data processing expense were the
primary reasons for the increase in other.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30,
1994
Other expense increased $8.6 million during the first half of 1995
when compared to 1994. Salaries increased as a result of merit and
promotion increases, increases in incentives and increased expenses in
the retail banking and commercial lending areas. Occupancy expense,
equipment expense and deposit insurance expense increased primarily
for the same reasons given in the quarterly comparison. Increases in
stationery and supplies expense and data processing expense were the
primary reasons for the increase in other.
<PAGE>
Financial Condition
Investment Securities and Short-Term Investments
Investment securities increased $225.4 million, or 33%, during 1995 as
more funds were invested in investment securities due to slower loan
growth during the first half of 1995. Federal funds sold and reverse
repurchase agreements decreased $240.6 million, or 95%, during 1995 as
funds were shifted to asset categories with higher yields.
Loans
The sale of equipment financed under an equipment lease financing was
the primary reason for the decrease in equipment lease financing.
Consumer lease financing increased $57.9 million, or 31%, as
automobile leasing continued to grow. As competition has intensified,
management has decided to limit instalment loan growth. If growth in
the economy continues to slow in 1995, Bancorp will more than likely
experience slower loan growth in 1995 than in 1994.
The following table shows the composition of the commercial and
financial loan category by industry type at June 30, 1995 (dollars in
millions):
<TABLE>
<CAPTION>
Amount on
Type Amount % Nonaccrual
<S> <C> <C> <C>
Construction $98.0 5 $.4
Manufacturing 405.5 20 3.4
Transportation/Utilities 111.4 6 5.8
Wholesale Trade 220.3 11 .8
Retail Trade 218.2 11 .2
Finance & Insurance 107.1 5 .3
Real Estate Operators/Investment 251.9 13 1.4
Service Industries 271.4 14 1.1
Automobile Dealers 107.7 5 -
Other(1) 200.6 10 1.3
Total $1,992.1 100 $14.7
<FN>
(1)Includes various kinds of loans, such as small business loans and loans with
balances under $100,000.
</TABLE>
The composition of the commercial mortgage and construction loan
categories by property type at June 30, 1995 is shown in the following
table (dollars in millions):
<PAGE>
<TABLE>
<CAPTION>
Amount on
Type Amount % Nonaccrual
<S> <C> <C> <C>
Apartments $87.4 14 $.2
Office/Warehouse 135.2 22 .6
Residential Development 88.7 14 .1
Shopping/Retail 152.2 24 1.0
Land 21.5 3 -
Industrial Plants 17.5 3 -
Hotel/Motel 25.0 4 -
Health Facilities 5.3 1 -
Auto Sales and Service 19.2 3 -
Churches 12.7 2 -
Mobile Home Parks 10.9 2 -
Other Commercial Properties 50.1 8 .6
Total $625.7 100 $2.5
</TABLE>
At June 30, 1995, approximately $136.4 million, or 3.1%, of Bancorp's
total loan portfolio was classified as highly leveraged loans. This
is an increase of $18.6 million since December 31, 1994. In general,
Bancorp does not originate highly leveraged loans but participates in
loans originated by larger banks. All of the highly leveraged loans
are current at this time except for one loan with a balance of $2
million that is on nonaccrual status. Placing this loan on nonaccrual
reduced interest income in the first half of 1995 by approximately
$181,000. These loans were considered by management in the
determination of the adequacy of the reserve for possible loan losses.
Bancorp also has commitments to lend up to an additional $44.7 million
at market rates under this type of transaction to present borrowers.
Bancorp maintains a reserve for possible loan losses to absorb
potential losses in its loan portfolio. Management's determination of
the adequacy of the reserve is based on reviews of specific loans,
loan loss experience, general economic conditions and other pertinent
factors. Loans deemed uncollectible are charged off and deducted from
the reserve and recoveries on loans previously charged off are added
to the reserve. Management considers the present reserve to be
appropriate and adequate to cover potential losses inherent in the
loan portfolio based on the current economic environment. However,
future economic changes cannot be predicted. Deterioration in general
economic conditions could result in an increase in the risk
characteristics of the loan portfolio and an increase in the provision
for possible loan losses.
The following table shows the progression of the reserve for possible
loan losses (dollars in thousands):
<TABLE>
<CAPTION>
1995 1994
<S> <C> <C>
Balance at January 1 $51,979 $40,542
Provision for Possible Loan Losses 5,000 6,000
Loans Charged Off (6,483) (4,366)
Recoveries 3,779 2,150
Balance at June 30 $54,275 $44,326
</TABLE>
<PAGE>
The primary reason for the increase in loan charge-offs in 1995 was
the charge-off of one commercial loan during the second quarter of
1995. The primary reason for the increase in recoveries in 1995 was
the partial recovery of a commercial loan charge-off that occurred in
1991. As a percentage of total loans outstanding, the reserve was
1.23% at June 30, 1995, 1.24% at December 31, 1994 and 1.20% at June
30, 1994.
Table 3 shows a comparison of the major components of nonperforming
assets over the past five quarters along with various asset quality
ratios. Nonperforming assets have increased $15.5 million during
1995. Nonaccrual loans have increased approximately $12.3 million
during the first six months of 1995, primarily due to two commercial
and financial loans being put on nonaccrual status during the first
quarter. Renegotiated loans increased due to one commercial and
financial loan being renegotiated during the second quarter of 1995.
The decrease in other real estate owned was due primarily to the sale
of commercial and multifamily properties. Nonperforming assets as a
percentage of loans and total assets at June 30, 1995 are at a level
that is more consistent with historical averages.
Deposits
Although interest bearing deposits as of June 30, 1995 decreased $62.3
million, or 1.72%, when compared to December 31, 1994, the average
interest bearing deposit balance for the first half of 1995 increased
$564.8 million, or 19%, over the average interest bearing deposit
balance for the year 1994. The increase in the average balance is
primarily due to an increase in brokered deposits.
Short-Term Debt
Short-term debt increased $155.7 million, or 30%, during the first
half of 1995, primarily due to an increase in federal funds purchased
of $162.8 million. The average short-term debt balance for the first
half of 1995 increased $76.8 million, or 17%, over the average balance
for the year 1994 primarily due to an increase in average federal
funds purchased of $46.1 million.
Long-Term Debt
During the first six months of 1995, long-term debt increased $76.6
million, or 20%, to a balance of $460.0 million. In June 1995, The
Provident Bank borrowed an additional $100 million from the Federal
Home Loan Bank at a variable rate based on the one-month LIBOR rate
and a maturity date of June 9, 2000. In addition, principal payments
on existing debt were made totaling $23.5 million during the first
half of 1995.
Capital Resources and Adequacy
During the first six months of 1995, shareholders' equity increased
$31.6 million, or 9%, to $390.9 million. Dividends of $7.8 million on
common stock and $1.2 million on preferred stock were paid in the
<PAGE>
first six months of 1995. Treasury stock increased to $3.8 million at
June 30, 1995 as Bancorp purchased 192,222 shares and sold 75,487
shares of its common stock during the first six months of 1995. In
December, 1994, Bancorp announced that it would purchase up to 200,000
shares to be used for various company benefit plans and for other
corporate purposes. In May, 1995, Bancorp announced that it would
purchase up to an additional 200,000 shares. Unrealized losses on
marketable securities, net of deferred income taxes, decreased $12.3
million during the first six months of 1995 as a result of an
improvement in market conditions.
The following table of ratios is important to the analysis of the
adequacy of capital resources.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1995 December 31, 1994
<S> <C> <C>
Average Shareholders' Equity to Average Assets 6.96% 7.43%
Preferred Dividend Payout to Net Earnings 3.69(1) 5.15
Common Dividend Payout to Net Earnings 24.74(1) 25.47
Tier 1 Leverage Ratio 7.06 7.21
Tier 1 Capital to Risk-Weighted Assets 7.71 7.86
Total Risk-Based Capital To Risk-Weighted Assets 12.34 12.85
<FN>
(1)Net earnings and dividend payouts for the six months ended June 30, 1995 have been annualized.
</TABLE>
In July, 1995, Bancorp announced that the quarterly dividend on its
common stock would increase from $.25 per share to $.275 per share
effective with the dividend paid in the third quarter of 1995. This
dividend rate increase should cause the common dividend payout ratio
to increase in the future.
In the fourth quarter of 1994, Bancorp proceeded with the optional
redemption of its Series B preferred stock. Pursuant to the terms of
the Series B preferred stock, on the redemption date, the Series B
preferred shares were not redeemed but ceased to accrue dividends at
the preferred stock rate of $8.00 per share. Dividends are now paid as
if the Series B preferred stock had been converted to Bancorp common
stock.
Capital expenditures planned by Bancorp for building improvements and
furniture and equipment in 1995 are currently estimated to be
approximately $14 million. Included in this amount are projected
capital expenditures for improvements of the branch banking network
and improvements in data processing capabilities for The Provident
Bank's data processing subsidiary. Through June 30, 1995,
approximately $5.8 million of these expenditures have been made.
Management believes that currently available funds and funds provided
by normal operations will be sufficient to meet capital requirements.
Liquidity
Adequate liquidity is necessary to meet the borrowing needs and
deposit withdrawal requirements of customers as well as to satisfy
liabilities, fund operations and support asset growth. Cash flows
generated by new deposits, loan payments and maturities of loans are
<PAGE>
sources of liquidity. Other sources include federal funds, investment
securities and access to borrowed funds in the money markets.
Net liquid assets at June 30, 1995 were as follows (dollars in
millions):
<TABLE>
<S> <C>
Cash and deposits due from banks $157.0
Federal funds sold net(1) (536.3)
Investment securities due with one year 662.2
Loans due within one year 1,505.1
Net liquid assets $1,788.0
<FN>
(1)Federal funds sold and reverse repurchase agreements less federal funds
purchased and repurchase agreements.
</TABLE>
Total deposits decreased $86.9 million from the amount reported at
December 31, 1994. Approximately $23.5 million of long-term debt was
repaid during the first six months of 1995; during the remainder of
1995, approximately $2.6 million of long-term debt is due to be repaid
based upon scheduled principal payments.
The major source of liquidity for Bancorp on a parent-only basis is
dividends paid to it by its subsidiaries. Pursuant to Federal Reserve
and state banking regulations, the maximum amount available for
dividend distribution to Bancorp at June 30, 1995 by its banking
subsidiaries was approximately $70.5 million. Bancorp has not
received dividends from its subsidiaries during the first six months
of 1995.
At June 30, 1995, the parent had $127.6 million of short-term
commercial paper outstanding. A portion of commercial paper proceeds
was used to fund short-term loans. Contractual lines of credit
totaling $130 million have been obtained by Bancorp to support its
commercial paper borrowings. These lines had not been used at June 30,
1995. The parent had approximately $18.7 million in cash and interest
earning deposits and $83.5 million in short-term repurchase agreements
at June 30, 1995.
Management believes that the repayment of Bancorp's debt can be made
using funds generated by Bancorp and received as dividends from
subsidiaries both in the short-term as well as in the long-term.
<PAGE>
<TABLE>
Provident Bancorp, Inc. and Subsidiaries
Condensed Consolidated Statements Of Earnings
(unaudited)
(In Thousands)
Table 1.
<CAPTION>
Quarter Ended Six Months Ended
June June June June
1995 1994 1995 1994
<S> <C> <C> <C> <C>
Total Interest Income $114,144 $81,882 $220,108 $157,508
Taxable Equivalent Adjustment 127 80 249 166
Taxable Equivalent Interest Income 114,271 81,962 220,357 157,674
Total Interest Expense 65,080 36,540 124,928 69,024
Net Interest Income 49,191 45,422 95,429 88,650
Provision for Possible Loan Losses 3,000 3,000 5,000 6,000
Taxable Equivalent Net Interest Income After
Provision for Possible Loan Losses 46,191 42,422 90,429 82,650
Noninterest Income 12,846 8,159 23,641 17,595
Noninterest Expense 33,863 28,819 66,205 57,581
Taxable Equivalent Earnings Before Income Taxes 25,174 21,762 47,865 42,664
Applicable Income Taxes 8,572 7,356 16,141 14,469
Taxable Equivalent Adjustment 127 80 249 166
Net Earnings $16,475 $14,326 $31,475 $28,029
Net Earnings Applicable to Common Stock $15,894 $13,583 $30,314 $26,543
</TABLE>
<PAGE>
<TABLE>
Provident Bancorp, Inc. and Subsidiaries
Consolidated Average Balances, Rates and Yields
On a Fully Taxable Equivalent Basis
(unaudited)
(Dollars In Millions)
Table 2.
<CAPTION>
Quarter Ended Six Months Ended
June 30,1995 June 30,1994 June 30,1995 June 30,1994
Rate Rate Rate Rate
Earned/ Earned/ Earned/ Earned/
Balance Paid Balance Paid Balance Paid Balance Paid
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans (Net of Unearned Income):
Commercial Lending:
Commercial and Financial $1,995 10.12% $1,589 8.55% $1,952 10.09% $1,553 8.08%
Commercial Mortgage 425 9.14 396 8.62 424 9.17 395 8.72
Commercial Construction 200 9.59 156 7.98 191 9.56 149 7.60
Equipment Lease Financing 95 7.71 81 7.75 99 7.68 88 7.96
Consumer Lending:
Instalment 925 9.09 843 7.73 926 8.79 816 7.76
Residential 497 7.82 506 7.83 500 7.99 502 7.99
Lease Financing 228 7.14 19 11.01 213 7.03 10 11.25
Total Loans 4,365 9.31 3,590 8.23 4,305 9.25 3,513 8.05
Reserve for Possible Loan Losses (56) (45) (55) (44)
Net Loans 4,309 9.43 3,545 8.34 4,250 9.37 3,469 8.15
Investment Securities:
Taxable 851 5.97 693 4.68 770 5.76 702 4.87
Tax Exempt 10 5.99 - 8.72 10 5.93 - 8.52
Total Investment Securities 861 5.97 693 4.68 780 5.76 702 4.87
Federal Funds Sold and Reverse
Repurchase Agreements 5 6.22 15 4.82 26 5.73 25 3.79
Total Earning Assets 5,175 8.85 4,253 7.73 5,056 8.79 4,196 7.58
Cash and Noninterest Bearing Deposits 146 144 146 142
Other Assets 159 108 148 107
Total Assets $5,480 $4,505 $5,350 $4,445
Liabilities and Shareholders' Equity:
Deposits:
Demand Deposits $258 2.23 $266 2.16 $260 2.23 $270 2.16
Savings Deposits 657 3.41 780 2.48 664 3.40 789 2.42
Time Deposits 2,689 6.23 1,862 4.56 2,690 6.16 1,776 4.47
Total Deposits 3,604 5.43 2,908 3.78 3,614 5.37 2,835 3.68
Short-Term Debt:
Federal Funds Purchased and
Repurchase Agreements 499 6.07 282 3.72 391 5.95 333 3.42
Commercial Paper 140 6.13 115 4.25 131 6.02 110 3.97
Short-Term Notes Payable 1 5.21 1 2.68 1 5.46 1 3.11
Total Short-Term Debt 640 6.08 398 3.87 523 5.97 444 3.55
Long-Term Debt 390 6.75 451 4.70 383 6.95 421 4.52
Total Interest Bearing Liabilities 4,634 5.63 3,757 3.90 4,520 5.57 3,700 3.76
Noninterest Bearing Deposits 381 343 375 339
Other Liabilities 86 63 83 65
Shareholders Equity 379 342 372 341
Total Liabilities and Shareholders' Equity $5,480 $4,505 $5,350 $4,445
Net Interest Spread 3.22% 3.83% 3.22% 3.82%
Net Interest Margin 3.81% 4.28% 3.81% 4.26%
</TABLE>
<PAGE>
<TABLE>
Provident Bancorp, Inc. and Subsidiaries
Consolidated Quarterly Nonperforming Assets
(unaudited)
(Dollars In Thousands)
Table 3.
<CAPTION>
Quarter Ended
June March Dec. Sept. June
1995 1995 1994 1994 1994
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans: (1)
Commercial Lending:
Commercial and Financial $14,655 $13,173 $2,973 $2,431 $12,276
Commercial Mortgage 2,465 1,868 1,869 2,233 2,569
Commercial Construction 78 78 78 201 521
Equipment Lease Financing - - - - -
Consumer Lending:
Instalment - - - 31 1
Residential 1,388 1,327 1,396 1,182 1,443
Lease Financing - - - - -
Total Nonaccrual Loans 18,586 16,446 6,316 6,078 16,810
Renegotiated Loans (2) 5,721 896 961 978 988
Total Nonperforming Loans 24,307 17,342 7,277 7,056 17,798
Other Real Estate and Equipment Owned:
Commercial - 84 714 2,117 1,786
Closed bank branches 189 189 311 274 279
Residential 265 271 350 455 947
Multifamily 607 740 1,094 1,101 1,185
Land 724 857 857 2,148 2,163
Total 1,785 2,141 3,326 6,095 6,360
Total Nonperforming Assets $26,092 $19,483 $10,603 $13,151 $24,158
Loans 90 Days Past Due Still Accruing (3) $4,717 $4,858 $4,673 $4,420 $3,963
Total Loans 4,394,802 4,285,665 4,204,538 3,960,845 3,700,374
Reserve for Possible Loan Losses 54,275 53,987 51,979 45,112 44,326
Total Assets 5,607,455 5,298,327 5,411,491 5,140,380 5,055,433
Reserve for Possible Loan Losses as a Percent of:
Nonperforming Loans 223.29% 311.31% 714.29% 639.34% 249.05%
Nonperforming Assets 208.01% 277.10% 490.23% 343.03% 183.48%
Total Loans 1.23% 1.26% 1.24% 1.14% 1.20%
Nonperforming Loans as a % of Total Loans .55% .40% .17% .18% .48%
Nonperforming Assets as a Percent of:
Total Loans and Other Real Estate .59% .45% .25% .33% .65%
Total Assets .47% .37% .20% .26% .48%
<FN>
(1) Bancorp generally stops accruing interest on loans when the payment of principal and/or
interest is past due 90 days or more.
(2) Loans renegotiated to provide a reduction or deferral of interest or principal because of a
deterioration in the financial position of the borrower.
(3) Loans in this category represent primarily consumer loans contractually past due 90 days or
more as to interest or principal payments.
</TABLE>
<PAGE>
PART II. - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Registrant's annual meeting of shareholders was held on May 18, 1995.
Proxies were solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934 and the following matter was voted upon and
approved by the shareholders as indicated below:
Election of the following directors:
(a) Jack M. Cook, 14,134,508 votes for, 3,751 votes against and
105,395 abstentions.
(b) Allen L. Davis, 14,133,398 votes for, 3,751 votes against and
106,505 abstentions.
(c) Thomas D. Grote, Jr., 14,134,230 votes for, 3,751 votes against
and 105,673 abstentions.
(d) S. Paul Mathews, 14,132,153 votes for, 3,751 votes against and
107,750 abstentions.
(e) Philip R. Myers, 14,134,375 votes for, 3,751 votes against and
105,528 abstentions.
(f) Joseph A. Pedoto, 14,134,396 votes for, 3,751 votes against and
105,507 abstentions.
(g) Sidney A. Peerless, 14,132,252 votes for, 3,751 votes against and
107,651 abstentions.
(h) Joseph A. Steger, 14,131,886 votes for, 3,751 votes against and
108,017 abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit filed: Exhibit 27 - Financial Data Schedule
For submission in electronic filing only.
All other items required in Part II of this form have been omitted
since they are not applicable or not required.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf
by the undersigned, thereunto duly authorized.
Provident Bancorp, Inc.
Registrant
Date: August 9, 1995 \s\ John R. Farrenkopf
John R. Farrenkopf
Vice President and
Chief Financial Officer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
This schedule contains summary financial information extracted from
Provident Bancorp, Inc.'s 10-Q for June 30, 1995 and is qualified in its
entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<CASH> 156,960
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 11,975
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 657,523
<INVESTMENTS-CARRYING> 253,783
<INVESTMENTS-MARKET> 254,697
<LOANS> 4,394,802
<ALLOWANCE> 54,275
<TOTAL-ASSETS> 5,607,455
<DEPOSITS> 3,981,752
<SHORT-TERM> 677,397
<LIABILITIES-OTHER> 97,400
<LONG-TERM> 459,985
<COMMON> 10,436
0
37,000
<OTHER-SE> 343,485
<TOTAL-LIABILITIES-AND-EQUITY> 5,607,455
<INTEREST-LOAN> 197,191
<INTEREST-INVEST> 22,171
<INTEREST-OTHER> 746
<INTEREST-TOTAL> 220,108
<INTEREST-DEPOSIT> 96,255
<INTEREST-EXPENSE> 124,928
<INTEREST-INCOME-NET> 95,180
<LOAN-LOSSES> 5,000
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 66,205
<INCOME-PRETAX> 47,616
<INCOME-PRE-EXTRAORDINARY> 31,475
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 31,475
<EPS-PRIMARY> 1.89
<EPS-DILUTED> 1.72
<YIELD-ACTUAL> 3.81
<LOANS-NON> 18,586
<LOANS-PAST> 4,717
<LOANS-TROUBLED> 5,721
<LOANS-PROBLEM> 43,702
<ALLOWANCE-OPEN> 51,979
<CHARGE-OFFS> 6,483
<RECOVERIES> 3,779
<ALLOWANCE-CLOSE> 54,275
<ALLOWANCE-DOMESTIC> 54,275
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
