<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, 1996 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, outstanding at July 31, 1996 is 26,345,695.
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>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
<TABLE>
PROVIDENT BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Dollars in Thousands)
<CAPTION>
June 30, December 31,
1996 1995
ASSETS (Unaudited)
<S> <C> <C>
Cash and Noninterest Bearing Deposits $165,019 $213,594
Investment Securities Available for Sale
(amortized cost - $1,123,477 and $955,994) 1,121,010 959,904
Loans and Leases (Net of Unearned Income):
Commercial Lending:
Commercial and Financial 2,243,307 2,250,542
Mortgage 465,936 448,906
Construction 222,024 266,354
Lease Financing 139,263 128,686
Consumer Lending:
Instalment 980,493 1,000,940
Residential 494,647 466,422
Lease Financing 450,337 334,226
Total Loans and Leases 4,996,007 4,896,076
Reserve for Loan and Lease Losses (61,169) (60,235)
Net Loans and Leases 4,934,838 4,835,841
Premises and Equipment 92,798 90,976
Other Assets 114,799 105,036
$6,428,464 $6,205,351
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities:
Deposits:
Noninterest Bearing $455,229 $523,631
Interest Bearing 3,793,380 3,654,920
Total Deposits 4,248,609 4,178,551
Short-Term Debt 819,523 637,240
Long-Term Debt 765,721 820,083
Accrued Interest and Other Liabilities 136,270 136,940
Total Liabilities 5,970,123 5,772,814
Shareholders' Equity:
Preferred Stock, 5,000,000 Shares Authorized,
Series D, 70,272 Issued 7,000 7,000
Common Stock, No Par Value, $.44 Stated Value, 90,000,000
Shares Authorized, 26,344,395 and 26,316,617 Issued 11,715 11,703
Capital Surplus 137,883 137,313
Retained Earnings 297,346 265,017
Reserve for Retirement of Capital Securities 6,000 9,000
Treasury Stock, - Shares and 1,689 Shares - (38)
Unrealized Gains (Losses) on Marketable Securities
(net of deferred income tax) (1,603) 2,542
Total Shareholders' Equity 458,341 432,537
$6,428,464 $6,205,351
</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,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest Income:
Interest and Fees on Loans and Leases $109,778 $101,298 $220,178 $197,191
Interest on Investment Securities:
Taxable 17,227 12,671 32,244 21,976
Exempt From Federal Income Taxes 155 100 258 195
17,382 12,771 32,502 22,171
Interest on Federal Funds Sold and
Reverse Repurchase Agreements 452 75 730 746
Total Interest Income 127,612 114,144 253,410 220,108
Interest Expense:
Interest on Deposits:
Savings and Demand Deposits 5,127 7,012 10,389 14,067
Time Deposits 42,030 41,797 83,690 82,188
Total Interest on Deposits 47,157 48,809 94,079 96,255
Interest on Short-Term Debt 9,735 9,704 18,716 15,496
Interest on Long-Term Debt 12,071 6,567 24,502 13,177
Total Interest Expense 68,963 65,080 137,297 124,928
Net Interest Income 58,649 49,064 116,113 95,180
Provision for Loan and Lease Losses 13,750 3,000 23,750 5,000
Net Interest Income After Provision
for Loan and Lease Losses 44,899 46,064 92,363 90,180
Noninterest Income:
Service Charges on Deposit Accounts 5,317 3,911 10,182 7,682
Other Service Charges and Fees 7,373 7,100 16,600 10,885
Gain on Sales of Loans and Leases 1,149 630 2,123 2,432
Security Gains 96 - 96 -
Other 8,640 1,205 12,382 2,642
Total Noninterest Income 22,575 12,846 41,383 23,641
Noninterest Expense:
Compensation:
Salaries 14,767 13,600 30,409 26,888
Benefits 2,596 2,288 5,404 4,738
Profit Sharing 935 864 1,911 1,670
Occupancy 2,454 2,198 4,827 4,345
Equipment Expense 2,805 2,298 5,164 4,601
Deposit Insurance 887 2,177 1,774 4,354
Professional Fees 2,183 1,566 4,009 2,937
Other 9,979 8,872 19,380 16,672
Total Noninterest Expense 36,606 33,863 72,878 66,205
Earnings Before Income Taxes 30,868 25,047 60,868 47,616
Applicable Income Taxes 10,618 8,572 20,943 16,141
Net Earnings $20,250 $16,475 $39,925 $31,475
Net Earnings Per Common Share:
Primary $.74 $.67 $1.46 $1.27
Fully Diluted .73 .60 1.44 1.15
Average Primary Shares 27,127 23,758 27,093 23,780
Average Fully Diluted Shares 27,792 27,263 27,783 27,274
</TABLE>
<PAGE>
<TABLE>
PROVIDENT BANCORP, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in Thousands)
<CAPTION>
Six Months Ended June 30,
1996 1995
<S> <C> <C>
Operating Activities:
Net Earnings $39,925 $31,475
Adjustments to Reconcile Net Earnings to
Net Cash Provided by Operating Activities:
Provision for Loan and Lease Losses 23,750 5,000
Provision for Depreciation and Amortization 7,947 5,763
Amortization of Investment Security Discounts (3,406) (336)
Amortization of Unearned Income (17,474) (10,260)
Net (Increase) Decrease in Trading Securities (216) 100
Proceeds from Sale of Loans Held for Sale 93,083 40,828
Origination of Loans Held for Sale (91,965) (39,470)
Realized Gains on Loans Held for Sale (1,118) (557)
Realized Gains on Sale of Loans and Leases (1,005) (1,875)
Realized Investment Security Gains (96) -
(Increase) Decrease in Interest Receivable (3,687) 1,557
Increase in Accounts Receivable and Other Assets (3,155) (27,496)
Increase (Decrease) in Interest Payable (3,019) 5,476
Increase in Accounts Payable and Other Liabilities 4,581 6,957
Other (234) 313
Net Cash Provided By Operating Activities 43,911 17,475
Investing Activities:
Investment Securities Available for Sale:
Proceeds from Sales 79,398 427
Proceeds from Maturities and Prepayments 357,494 82,036
Purchases (536,827) (66,519)
Investment Securities Held to Maturity:
Proceeds from Maturities and Prepayments - 5,264
Purchases - (227,334)
Net Increase in Loans and Leases (172,934) (186,355)
Proceeds from Sale of Other Real Estate 5,316 1,997
Purchases of Premises and Equipment (12,945) (16,889)
Proceeds from Sales of Premises and Equipment 131 1,299
Net Cash Used In Investing Activities (280,367) (406,074)
Financing Activities:
Net Decrease in Demand and Savings Deposits (114,841) (93,573)
Net Increase in Certificates of Deposit 184,899 6,676
Net Increase in Short-Term Debt 182,283 155,690
Principal Payments on Long-Term Debt (54,716) (23,494)
Proceeds From Issuance of Long-Term Debt 248 100,000
Cash Dividends Paid (10,617) (8,948)
Proceeds from Sale of Common and Treasury Stock 625 2,717
Repurchase of Common Stock - (6,109)
Net Cash Provided By Financing Activities 187,881 132,959
Decrease in Cash and Cash Equivalents (48,575) (255,640)
Cash and Cash Equivalents at Beginning of Period 213,594 424,575
Cash and Cash Equivalents at End of Period $165,019 $168,935
Supplemental Disclosures of Cash Flow Information:
Cash Paid for:
Interest $140,316 $119,452
Income Taxes 5,000 9,000
Non-Cash Activity:
Additions to Other Real Estate in Settlement
of Loans and Leases 8,080 495
Reclassification of Operating Leases to (from) Lease Financing 3,439 (4,225)
Securitization of Residential Loans 64,025 -
</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 1995 annual report on Form 10-K filed
with the Securities and Exchange Commission.
All data relating to Provident Bancorp's common stock and per share
information has been adjusted for a 3-for-2 common stock split
effective May 24, 1996.
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 Statement of Financial Accounting Standards ("SFAS")
No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of" on January 1, 1996. This
statement requires that long-lived assets be segregated into two
categories, those to be held and used and those to be disposed of.
Long-lived assets to be held and used are reviewed for impairment
whenever circumstances indicate that the carrying value may not be
recoverable. An impairment loss is recorded when the sum of the
expected future cash flows is less than the carrying amount of the
assets. In this situation, an impairment loss is recorded in the
amount of the difference between the carrying amount and the fair
value of the asset. Assets to be disposed of that are subject to the
reporting requirements of Accounting Principles Board ("APB") Opinion
No. 30, "Reporting the Results of Operations -- Reporting the Effects
of Disposal of a Segment of a Business, and Extraordinary, Unusual and
Infrequently Occurring Events and Transactions" are to be measured at
the lower of carrying amount or net realizable value. Long-lived
assets to be disposed of that are not subject to APB Opinion No. 30
<PAGE>
requirements are to be accounted for at the lower of carrying amount
or fair value less cost to sell.
SFAS No. 122, "Accounting for Mortgage Servicing Rights" was also
adopted by Bancorp on January 1, 1996. Under this statement, when
mortgage loans are originated or purchased by an institution and
subsequently sold or securitized with servicing retained, the cost of
the loan shall be allocated between the loan (without servicing) and
the fair value of the servicing. Prior to this statement, no costs of
the loan were allocated to the servicing. Additionally, the statement
specifies how mortgage servicing rights and excess servicing rights
should be evaluated for impairment.
The adoption of SFAS No. 121 and SFAS No. 122 had no material impact
on Bancorp's consolidated financial position or results of operations.
SFAS No. 123, "Accounting for Stock-Based Compensation" was issued in
October, 1995. The statement encourages, but does not require,
adoption of a fair value-based accounting method for stock-based
employee compensation plans. Bancorp elected to continue its
accounting in accordance with APB Opinion No. 25, "Accounting for
Stock Issued to Employees", whereby no compensation expense is
recognized for the granting of stock options. Pro forma disclosures of
what net earnings and earnings per share would have been had the new
fair value method been used will be presented in Bancorp's 1996 annual
report on Form 10-K.
Stock Options
Pursuant to Bancorp's 1988 Stock Option Plan and 1992 Outside
Director's Stock Option Plan, options to purchase 554,950 shares of
Bancorp common stock were granted during the first six months of 1996.
The options have exercise prices ranging from $31.75 to $35.86.
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,
1996, these off-balance sheet instruments consisted of standby letters
of credit of $107.0 million, commitments to extend credit of $1.7
billion and interest rate swaps with a notional amount of $2.2
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 1996 were $20.3
million compared to $16.5 million for the second quarter of 1995. Net
interest income increased by $9.6 million, or 20%, over the comparable
<PAGE>
period in 1995. Interest income increased by $13.5 million, or 12%,
which more than offset the $3.9 million, or 6%, increase in interest
expense. The provision for loan and lease losses increased $10.8
million, or 358%, to cover the growth of total loans and leases and
expected net charge-offs during 1996. Noninterest income increased
$9.7 million, or 76%, primarily due to increases in service charges on
deposits and other income. Noninterest expense increased $2.7 million,
or 8%, primarily as a result of increases in compensation expense,
professional services and other expense which more than offset a
decrease in deposit insurance.
Bancorp's net earnings for the first six months of 1996 were $39.9
million compared to $31.5 million for the first six months of 1995.
Net interest income increased by $20.9 million, or 22%, over the
comparable period in 1995. Interest income increased by $33.3 million,
or 15%, which more than offset the $12.4 million, or 10%, increase in
interest expense. The provision for loan and lease losses increased
$18.8 million, or 375%, to cover an increase in the balance of total
loans and leases and expected net charge-offs during 1996. Noninterest
income increased $17.7 million, or 75%, primarily due to the increase
in other service charges and fees and other income. Noninterest
expense increased $6.7 million, or 10%, primarily due to increases in
compensation expense, professional services and other expense which
more than offset a decrease in deposit insurance.
The following ratios compare returns on average assets and average
equity for the first six months of 1996 and for the year 1995.
<TABLE>
<CAPTION>
Six Months Ended Year Ended
June 30, 1996 December 31, 1995
<S> <C> <C>
Net Earnings to Average Assets(1) 1.28% 1.29%
Net Earnings to Average Shareholders' Equity(1) 18.02% 18.37%
<FN>
(1)Net earnings for the six months ended June 30, 1996 have been annualized.
</TABLE>
The ratio of noninterest expense to tax equivalent revenue
("efficiency ratio") was 46.2% for the first six months of 1996
compared to 56.9% for the first six months of 1995. Tax equivalent
revenue includes tax equivalent net interest income and noninterest
income but excludes non-recurring gains and security gains or losses.
The improvement in the efficiency ratio was due primarily to increased
noninterest income which grew at a proportionately greater rate than
noninterest expense.
Nonperforming assets as of June 30, 1996 decreased $19.6 million
compared to December 31, 1995, but increased $2.2 million compared to
June 30, 1995. The ratio of nonperforming loans to total loans and
leases was .39% at June 30, 1996, compared to .86% at December 31,
1995 and .55% at June 30, 1995. The ratio of nonperforming assets to
total loans, leases and other real estate owned was .57% at June 30,
1996, compared to .98% at December 31, 1995 and .59% at June 30, 1995.
<PAGE>
Net Interest Income
See Table 1 for net interest income on a tax equivalent basis and
Table 2 for consolidated average balances, average rates and net
interest margin.
Net interest income on a tax equivalent basis increased approximately
$20.9 million for the first six months of 1996 over the comparable
period in 1995. This increase resulted from a $11.8 million increase
due to changes in volume and a $9.1 million increase 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 3.97% for the first six
months of 1996 as compared to 3.81% for the comparable period in 1995.
The improvement in the net interest margin during this period reflects
the decrease in the average rate paid on interest bearing liabilities
of 30 basis points, more than offsetting the decrease in the average
rate received on interest earning assets of 13 basis points. The
decrease in Bancorp's overall rate on interest bearing liabilities was
due to the decline in the rate paid on deposits and long-term debt,
which more than offset an increase in higher cost liabilities. The
decrease in the average rate earned on interest earning assets was due
to a lower average rate earned on commercial and financial loans which
was partially offset by an increase in higher yield assets. Bancorp's
interest bearing liabilities have reacted more quickly to changing
interest rates in the environment than its interest earning assets,
causing the net interest margin to increase. Interest rate swaps
increased the net interest margin by 21 basis points during the first
six months of 1996. During the first six months of 1995, interest rate
swaps decreased the net interest margin by 20 basis points.
In preparing the net interest margin tables, nonaccrual loan balances
are included in the average balances for loans and leases. Loan and
lease fees are included in loan and lease revenue as follows: second
quarter 1996 - $3.8 million, second quarter 1995 - $4.1 million, year-
to-date 1996 - $8.8 million, and year-to-date 1995 - $8.7 million.
Provision for Loan and Lease Losses
For the first six months of 1996 and 1995, the provision for loan and
lease losses was $23.8 million and $5.0 million, respectively. The
increase in the provision was the result of two factors. Total loans
and leases have increased by $601.2 million, or 14%, over the last
twelve months. Additionally, a higher level of charge-offs and lower
level of recoveries are expected during 1996 compared to 1995.
<PAGE>
Noninterest Income
Second Quarter 1996 Compared to Second Quarter 1995
Noninterest income increased $9.7 million during the second quarter of
1996 compared to the same quarter in 1995. Service charges on deposit
accounts increased primarily due to increased fee rates on corporate
deposit accounts, nonsufficient funds and ATM usage. Service charges
and fees include $2.1 million of gains and fees related to commercial
lending during the second quarter of 1996 and a $2.7 million gain from
the sale of mortgage loan servicing rights during the same time period
in 1995. Gain on sales of loans and leases increased primarily due to
gains recorded on the sale of consumer leases. Other income increased
primarily as a result of the receipt of additional consideration
related to a restructured loan.
Six Months Ended June 30, 1996 Compared to Six Months Ended June 30,
1995
Noninterest income increased $17.7 million during the first six months
of 1996 compared to the same period in 1995. Service charges on
deposit accounts, other service charges and fees and other income
increased primarily for the same reasons given in the quarterly
comparison.
Noninterest Expense
Second Quarter 1996 Compared to Second Quarter 1995
Noninterest expense increased $2.7 million during the second quarter
of 1996 when compared to 1995. Compensation expense, primarily in the
areas of commercial and consumer lending, securities brokerage, and
customer service, increased as a result of merit and promotion
increases, increases in incentives and increased personnel. Equipment
expense increased primarily due to the depreciation of expanded
telebanking and computer equipment. The decline in deposit insurance
expense was due to the lowering of the FDIC insurance rate.
Professional fees increased primarily due to management consulting and
residential loan subservicing expenses. Increases in franchise taxes,
loan origination expense and credit card processing were the primary
reasons for the increase in other expense.
Six Months Ended June 30, 1995 Compared to Six Months Ended June 30,
1995
Noninterest expense increased $6.7 million during the first half of
1996 when compared to 1995. Areas of significant change were in
compensation expense, deposit insurance, professional fees, and other
expense. The explanation of these changes are the same as those given
in the quarterly comparison.
<PAGE>
Financial Condition
Investment Securities
Investment securities increased $161.1 million during 1996. During
1996, Bancorp purchased $175.0 million in securitized credit card
portfolios. In addition, Bancorp securitized approximately $64
million of its own residential mortgage loans which resulted in this
balance being transferred from residential loans to investment
securities.
Loans and Leases
Total loans and leases increased $99.9 million during 1996. The
increase was primarily due to growth in consumer lease financing.
The following table shows the composition of the commercial and
financial loan category by industry type at June 30, 1996 (dollars in
millions):
<TABLE>
<CAPTION>
Amount on
Type Amount % Nonaccrual
<S> <C> <C> <C>
Construction $77.1 3 $1.3
Manufacturing 453.6 20 4.2
Transportation/Utilities 138.9 6 3.5
Wholesale Trade 214.8 10 1.1
Retail Trade 246.9 11 .2
Finance & Insurance 104.7 5 .5
Real Estate Operators/Investment 285.4 13 .7
Service Industries 368.9 16 1.1
Automobile Dealers 106.3 5 -
Other(1) 246.7 11 1.7
Total $2,243.3 100 $14.3
<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, 1996 is shown in the following
table (dollars in millions):
<TABLE>
<CAPTION>
Amount on
Type Amount % Nonaccrual
<S> <C> <C> <C>
Apartments $95.1 14 $-
Office/Warehouse 145.2 21 .3
Residential Development 95.9 14 .1
Shopping/Retail 136.8 20 -
Land 40.9 6 -
Industrial Plants 16.7 2 -
Hotel/Motel 48.4 7 -
Health Facilities 4.5 1 -
Auto Sales and Service 23.6 3 -
Churches 12.1 2 -
Mobile Home Parks 10.7 2 -
Other Commercial Properties 58.1 8 -
Total $688.0 100 $.4
</TABLE>
<PAGE>
Bancorp maintains a reserve to absorb potential losses in its loan and
lease portfolio. Management's determination of the adequacy of the
reserve is based on reviews of specific loans and leases, credit loss
experience, general economic conditions and other pertinent factors.
Loans and leases deemed uncollectible are charged off and deducted
from the reserve and recoveries on loans and leases 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 and lease 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 and lease portfolio
and an increase in the provision for loan and lease losses.
The following table shows the progression of the reserve for loan and
lease losses (dollars in thousands):
<TABLE>
<CAPTION>
1996 1995
<S> <C> <C>
Balance at January 1 $60,235 $51,979
Provision for Loan and Lease Losses 23,750 5,000
Loans and Leases Charged Off (24,807) (6,483)
Recoveries 1,991 3,779
Balance at June 30 $61,169 $54,275
</TABLE>
Net charge-offs totaled $22.8 million during the first six months of
1996 compared to $2.7 million for the same time period in 1995. Net
charge-offs for commercial lending were $14.2 million which was
comprised principally of commercial and financial loans. Net charge-
offs for consumer lending were $8.6 million which consisted primarily
of instalment loans. Management expects the trend in net charge-offs
to decline in the second half of 1996. As a percentage of total loans
and leases outstanding, the reserve was 1.22% at June 30, 1996
compared to 1.23% at December 31, 1995 and June 30, 1995.
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 decreased $19.6 million during the
first six months of 1996. Nonaccrual loans decreased $18.6 million
during the first six months of 1996. Significant activity within
nonaccrual loans includes the addition of a loan for $5.2 million, the
charge-off of five loans totaling $11.1 million, the transfer of two
loans to other real estate totaling $6.6 million and the repayment of
one loan for $5.2 million. Renegotiated loans decreased $4.2 million
primarily due to the sale of one loan. Other real estate increased
$3.3 million. Significant activity within other real estate includes
the transfer in of two nonaccrual loans totaling $6.6 million, as
noted above, and the sale of one property for $3.8 million. At June
30, 1996, nonperforming assets as a percentage of total loans, leases
and other real estate is .57% which compares favorably to Bancorp's
most recent five-year average of .94%.
<PAGE>
Deposits
Noninterest bearing deposits decreased $68.4 million, or 13%, from
December 31, 1995 to June 30, 1996. The decrease was primarily in
commercial deposits.
Short-Term Debt
Short-term debt increased $182.3 million, or 29%, to $819.5 million
during the first half of 1996. The increase was due to the purchase of
overnight federal funds.
Capital Resources and Adequacy
During the first six months of 1996, shareholders' equity increased
$25.8 million, or 6%, to $458.3 million. Dividends of $10.4 million on
common stock and $259,000 on preferred stock were paid in the first
six months of 1996. Unrealized gains on marketable securities, net of
deferred income taxes, decreased $4.1 million during the first six
months of 1996.
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, 1996 December 31, 1995
<S> <C> <C>
Average Shareholders' Equity to Average Assets 7.11% 7.02%
Preferred Dividend Payout to Net Earnings 0.65 3.39
Common Dividend Payout to Net Earnings 25.94 22.78
Tier 1 Leverage Ratio 7.11 7.13
Tier 1 Capital to Risk-Weighted Assets 7.73 7.52
Total Risk-Based Capital To Risk-Weighted Assets 11.79 11.77
</TABLE>
Bancorp's quarterly dividend on its common stock increased from $.18
per share to $.21 per share effective with the dividend paid in the
second quarter of 1996. This higher dividend rate should cause the
common and preferred dividend payout ratios to increase in the future.
Capital expenditures planned by Bancorp for building improvements and
furniture and equipment in 1996 are currently estimated to be
approximately $16 million. Included in this amount are projected
capital expenditures for improvements of data processing capabilities
and improvement of the branch banking network, with emphasis being
placed on enhancing the branches located in local supermarkets and
placement of additional ATMs. Bancorp also intends to expand and
improve its telephone banking operations. Through June 30, 1996,
approximately $7.0 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.
<PAGE>
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. Bancorp has a
number of sources to provide for liquidity needs. First, liquidity
needs can be met by the liquid assets on its balance sheet such as
cash and deposits with other banks. Another source is the generation
of new deposits. Bancorp may borrow both short-term and long-term
funds. Bancorp has an additional $137.5 million available for
borrowing under a medium-term bank note program. Additional sources of
liquidity include the sale of investment securities and the sale of
commercial and consumer loans and leases.
The major source of liquidity for Bancorp on a parent-only basis ("the
Parent") is dividends paid to it by its subsidiaries. Pursuant to
Federal Reserve and state banking regulations, the maximum amount
available for dividend distribution to the Parent at June 30, 1996 by
its banking subsidiaries was approximately $114.5 million. The Parent
has not received dividends from its subsidiaries during the first six
months of 1996.
At June 30, 1996, the Parent had $132.4 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 $175 million have been obtained by the Parent to support its
commercial paper borrowings. Also, the Parent has $30 million in
general purpose lines of credit. These lines had not been used at June
30, 1996. The Parent had approximately $126.8 million in cash and
interest earning deposits at June 30, 1996.
<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
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Total Interest Income $127,612 $114,144 $253,410 $220,108
Taxable Equivalent Adjustment 142 127 257 249
Taxable Equivalent Interest Income 127,754 114,271 253,667 220,357
Total Interest Expense 68,963 65,080 137,297 124,928
Net Interest Income 58,791 49,191 116,370 95,429
Provision for Loan and Lease Losses 13,750 3,000 23,750 5,000
Taxable Equivalent Net Interest Income After
Provision for Loan and Lease Losses 45,041 46,191 92,620 90,429
Noninterest Income 22,575 12,846 41,383 23,641
Noninterest Expense 36,606 33,863 72,878 66,205
Taxable Equivalent Earnings Before Income Taxes 31,010 25,174 61,125 47,865
Applicable Income Taxes 10,618 8,572 20,943 16,141
Taxable Equivalent Adjustment 142 127 257 249
Net Earnings $20,250 $16,475 $39,925 $31,475
Net Earnings Applicable to Common Stock $20,112 $15,894 $39,666 $30,314
</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, 1996 June 30, 1995 June 30, 1996 June 30, 1995
Average Avg Average Avg Average Avg Average Avg
Balance Rate Balance Rate Balance Rate Balance Rate
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Assets:
Loans and Leases (Net of Unearned Income):
Commercial Lending:
Commercial and Financial $2,249 9.11% $1,995 10.12% $2,237 9.35% $1,952 10.09%
Mortgage 452 9.37 425 9.14 447 9.15 424 9.17
Construction 231 8.92 200 9.59 247 9.01 191 9.56
Lease Financing 128 8.00 95 7.71 126 7.65 99 7.68
Consumer Lending:
Instalment 991 9.27 925 9.09 997 9.30 926 8.79
Residential 465 8.63 497 7.82 470 8.33 500 7.99
Lease Financing 421 7.53 228 7.14 390 7.50 213 7.03
Total Loans and Leases 4,937 8.95 4,365 9.31 4,914 9.02 4,305 9.25
Reserve for Loan and Lease Losses (66) (56) (65) (55)
Net Loans and Leases 4,871 9.07 4,309 9.43 4,849 9.14 4,250 9.37
Investment Securities:
Taxable 1,060 6.54 851 5.97 998 6.50 770 5.76
Tax-Exempt 16 6.17 10 5.99 13 6.09 10 5.93
Total Investment Securities 1,076 6.53 861 5.97 1,011 6.49 780 5.76
Federal Funds Sold and Reverse
Repurchase Agreements 35 5.18 5 6.22 28 5.18 26 5.73
Total Earning Assets 5,982 8.59 5,175 8.85 5,888 8.66 5,056 8.79
Cash and Noninterest Bearing Deposits 157 146 148 146
Other Assets 196 159 193 148
Total Assets $6,335 $5,480 $6,229 $5,350
Liabilities and Shareholders' Equity:
Deposits:
Demand Deposits $253 1.94 $258 2.23 $253 1.94 $260 2.23
Savings Deposits 588 2.68 657 3.41 594 2.69 664 3.40
Time Deposits 2,928 5.77 2,689 6.23 2,872 5.86 2,690 6.16
Total Deposits 3,769 5.03 3,604 5.43 3,719 5.09 3,614 5.37
Short-Term Debt:
Federal Funds Purchased and
Repurchase Agreements 596 5.23 499 6.07 558 5.28 391 5.95
Commercial Paper 145 5.45 140 6.13 148 5.47 131 6.02
Short-Term Notes Payable 1 6.46 1 5.21 1 6.68 1 5.46
Total Short-Term Debt 742 5.27 640 6.08 707 5.32 523 5.97
Long-Term Debt 812 5.98 390 6.75 816 6.04 383 6.95
Total Interest Bearing Liabilities 5,323 5.21 4,634 5.63 5,242 5.27 4,520 5.57
Noninterest Bearing Deposits 413 381 405 375
Other Liabilities 148 86 139 83
Shareholders' Equity 451 379 443 372
Total Liabilities and Shareholders' Equity $6,335 $5,480 $6,229 $5,350
Net Interest Spread 3.38% 3.22% 3.39% 3.22%
Net Interest Margin 3.95% 3.81% 3.97% 3.81%
</TABLE>
<PAGE>
<TABLE>
Provident Bancorp, Inc. and Subsidiaries
Consolidated Quarterly Nonperforming Assets
(unaudited)
(Dollars In Thousands)
Table 3.
<CAPTION>
Quarter Ended
June Mar. Dec. Sept. June
1996 1996 1995 1995 1995
<S> <C> <C> <C> <C> <C>
Nonaccrual Loans: (1)
Commercial Lending:
Commercial and Financial $14,283 $26,749 $26,190 $12,231 $14,655
Mortgage 300 1,162 6,716 1,521 2,465
Construction 71 78 78 78 78
Lease Financing 2,720 2,664 2,605 - -
Consumer Lending:
Instalment - - 230 30 -
Residential 1,489 1,296 1,678 1,367 1,388
Lease Financing - - - - -
Total Nonaccrual Loans 18,863 31,949 37,497 15,227 18,586
Renegotiated Loans (2) 551 558 4,753 4,886 5,721
Total Nonperforming Loans 19,414 32,507 42,250 20,113 24,307
Other Real Estate and Equipment Owned:
Commercial 7,341 7,460 3,714 - -
Closed bank branches - - 189 189 189
Residential 897 989 468 292 265
Multifamily - 588 594 601 607
Land 661 663 663 734 724
Total 8,899 9,700 5,628 1,816 1,785
Total Nonperforming Assets $28,313 $42,207 $47,878 $21,929 $26,092
Loans 90 Days Past Due Still Accruing $25,426 $31,178 $26,578 $6,309 $4,717
Total Loans and Leases 4,996,007 4,890,021 4,896,076 4,646,366 4,394,802
Reserve for Loan and Lease Losses 61,169 60,966 60,235 55,830 54,275
Total Assets 6,428,464 6,243,786 6,205,351 5,955,257 5,607,455
Reserve for Loan and Lease Losses as a Percent of:
Nonperforming Loans 315.08% 187.55% 142.57% 277.58% 223.29%
Nonperforming Assets 216.05% 144.45% 125.81% 254.59% 208.01%
Total Loans and Leases 1.22% 1.25% 1.23% 1.20% 1.23%
Nonperforming Loans as a % of Total
Loans and Leases .39% .66% .86% .43% .55%
Nonperforming Assets as a Percent of:
Total Loans, Leases and Other Real Estate .57% .86% .98% .47% .59%
Total Assets .44% .68% .77% .37% .47%
<FN>
(1) Bancorp generally stops accruing interest on loans and leases 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.
</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 16, 1996.
Proxies were solicited pursuant to Regulation 14 under the Securities
Exchange Act of 1934 and the following matters were voted upon and
approved by the shareholders as indicated below. All votes have been
adjusted for the 3-for-2 common stock split effective May 24, 1996.
Election of the following directors:
(a) Jack M. Cook, 23,205,416 votes for, 3,228 votes against and
178,313 abstentions.
(b) Allen L. Davis, 23,202,095 votes for, 3,228 votes against and
181,634 abstentions.
(c) Thomas D. Grote, Jr., 23,205,716 votes for, 3,228 votes against
and 178,013 abstentions.
(d) Philip R. Myers, 23,205,716 votes for, 3,228 votes against and
178,013 abstentions.
(e) Joseph A. Pedoto, 23,205,084 votes for, 3,228 votes against and
178,644 abstentions.
(f) Sidney A. Peerless, 23,205,084 votes for, 3,228 votes against and
178,644 abstentions.
(g) Joseph A. Steger, 23,201,702 votes for, 3,228 votes against and
182,027 abstentions.
Amendment and restatement of the 1988 Stock Option Plan:
22,415,856 votes for, 751,769 votes against, and 219,332
abstentions.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit filed:
Exhibit 27 - Financial Data Schedule
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 12, 1996 \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, 1996 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-31-1996
<PERIOD-END> JUN-30-1996
<CASH> 165,019
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 1,121,010
<INVESTMENTS-CARRYING> 0
<INVESTMENTS-MARKET> 0
<LOANS> 4,996,007
<ALLOWANCE> 61,169
<TOTAL-ASSETS> 6,428,464
<DEPOSITS> 4,248,609
<SHORT-TERM> 819,523
<LIABILITIES-OTHER> 136,270
<LONG-TERM> 765,721
0
7,000
<COMMON> 11,715
<OTHER-SE> 439,626
<TOTAL-LIABILITIES-AND-EQUITY> 6,428,464
<INTEREST-LOAN> 220,178
<INTEREST-INVEST> 32,502
<INTEREST-OTHER> 730
<INTEREST-TOTAL> 253,410
<INTEREST-DEPOSIT> 94,079
<INTEREST-EXPENSE> 137,297
<INTEREST-INCOME-NET> 116,113
<LOAN-LOSSES> 23,750
<SECURITIES-GAINS> 96
<EXPENSE-OTHER> 72,878
<INCOME-PRETAX> 60,868
<INCOME-PRE-EXTRAORDINARY> 39,925
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 39,925
<EPS-PRIMARY> 1.46<F1>
<EPS-DILUTED> 1.44<F1>
<YIELD-ACTUAL> 3.97
<LOANS-NON> 18,863
<LOANS-PAST> 25,426
<LOANS-TROUBLED> 551
<LOANS-PROBLEM> 36,402
<ALLOWANCE-OPEN> 60,235
<CHARGE-OFFS> 24,807
<RECOVERIES> 1,991
<ALLOWANCE-CLOSE> 61,169
<ALLOWANCE-DOMESTIC> 61,169
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
<FN>
<F1>Earnings per share has been adjusted for a 3 for 2 stock split which was
effective May 24, 1996. Prior financial data schedules have not been restated
for this recapitalization.
</FN>
</TABLE>
