Provident Bancorp, Inc. (PVBC): 5 FORCES Analysis [Nov-2025 Updated]

You're looking at a regional bank caught in a classic squeeze, and the recent $211.8 million merger with NB Bancorp in late 2025 tells you everything you need to know about the pressure cooker that is New England banking right now. Honestly, even with that scale boost, the core challenges remain fierce: funding suppliers, like depositors, hold real power in this rate environment, evidenced by the bank's total deposits slipping 2.0% in Q3 2025 as customers easily switch for better yields. When your net income for that quarter lands at just $2.7 million, you know the competitive rivalry and the threat of substitutes are biting hard, despite high regulatory barriers for new entrants. So, before you decide on your next move, let's break down exactly where the power lies across all five of Michael Porter's forces for this institution.

Provident Bancorp, Inc. (PVBC) - Porter's Five Forces: Bargaining power of suppliers

When you look at Provident Bancorp, Inc.'s funding structure, the bargaining power of its suppliers-primarily depositors and wholesale lenders-is a major lever in the current rate environment. Honestly, in a rising rate scenario, depositors definitely gain leverage because they can shop around for better yields, putting direct pressure on your cost of funds.

Provident Bancorp, Inc. made a clear strategic move to counter this supplier power in the first quarter of 2025. They intentionally reduced higher-cost funding sources. You saw deposits fall by $124.4 million, which was a 9.5% drop quarter-over-quarter, specifically because the bank was scaling back on those more expensive brokered/listing and specialty deposits. That's management actively managing supplier power by shedding the most expensive relationships.

Still, even with that reduction, the cost of your core funding remains a critical metric. For the first quarter of 2025, the average cost of interest-bearing deposits for Provident Bancorp, Inc. stood at 3.25%. That number tells you where the market is pricing your primary funding source, even after your mix-shift actions. To give you some perspective on how that cost compares to recent periods, look at this breakdown:

The fact that the NIM still edged up to 3.65% in Q1 2025, despite the rate backdrop, shows the benefit of that cost reduction, even if the absolute cost of 3.25% is still meaningful. If onboarding takes 14+ days, churn risk rises.

Beyond depositors, wholesale funding, like advances from the Federal Home Loan Bank (FHLB), is a necessary, powerful supplier. When you intentionally shrink deposits, you often have to lean on these facilities to bridge liquidity gaps. In Q1 2025, Provident Bancorp, Inc. actually increased borrowings by $83.0 million quarter-over-quarter to cover that liquidity need at quarter-end. This reliance confirms the FHLB and similar wholesale sources hold significant power; they are the backstop, and their pricing dictates your contingency funding cost.

Here are the key supplier-related financial movements you should track:

• Deposits fell $124.4 million (-9.5%) QoQ in Q1 2025.
• Overnight borrowings increased by $83.0 million QoQ in Q1 2025.
• The cost of interest-bearing deposits was 3.25% in Q1 2025.
• The cost of borrowed funds in Q1 2025 was 3.76% (compared to 3.64% in Q4 2024).

Finance: draft 13-week cash view by Friday.

Provident Bancorp, Inc. (PVBC) - Porter's Five Forces: Bargaining power of customers

The bargaining power of customers for Provident Bancorp, Inc. is notably elevated, driven by the competitive nature of the banking sector and the specific characteristics of its client base, particularly borrowers and depositors.

Borrowers and depositors have many choices from regional and national banks. This broad market access means customers can easily switch banks for better loan rates or deposit yields. To illustrate the pressure this puts on Provident Bancorp, Inc., consider the recent movement in its funding base:

• The bank's total deposits decreased by $25.6 million in Q3 2025.
• This represented a 2.0% contraction from the previous quarter.
• Conversely, in the preceding quarter (Q2 2025), deposits had grown by $73.5 million QoQ, showing the volatility in deposit retention.

The ease of switching is a constant threat, forcing Provident Bancorp, Inc. to remain competitive on pricing for both sides of its balance sheet. For example, in Q3 2025, the interest expense on deposits was $7.9 million, an 8.5% increase from Q2 2025, despite the overall deposit balance falling, suggesting a higher cost to retain the remaining balances or a shift in mix.

Commercial Real Estate (CRE) borrowers have high power due to large loan sizes. When a client has a significant loan relationship, their ability to negotiate terms or threaten to move that large asset balance to a competitor increases their leverage substantially. Provident Bancorp, Inc.'s strategic focus on this segment makes it particularly sensitive to this dynamic. As of September 30, 2025, the CRE portfolio was a dominant part of the loan book:

The CRE portfolio alone accounted for nearly 47.0% of total loans at the end of Q3 2025. This concentration means that the retention and satisfaction of a few large CRE clients can disproportionately impact Provident Bancorp, Inc.'s asset side. The bank is actively growing this area, having seen it increase from 42.16% of total loans at December 31, 2024, to 46.98% by September 30, 2025. This growth, while strategic, simultaneously increases the concentration risk and the bargaining power held by those large CRE clients.

Furthermore, the bank's efforts to manage its funding sources show an awareness of this customer power. Provident Bancorp, Inc. proactively managed its liabilities, reducing borrowings by $27.0 million, or 78.4%, from the previous quarter. This suggests a desire to rely less on potentially more volatile or rate-sensitive wholesale funding, but the pressure from depositors to maintain competitive yields remains a key factor in managing the cost of funds, which saw the cost of interest-bearing deposits increase by 17 basis points in Q3 2025.

Provident Bancorp, Inc. (PVBC) - Porter's Five Forces: Competitive rivalry

You're looking at the competitive rivalry in the New England banking space, and honestly, it's a tough fight. The market across Massachusetts (MA) and New Hampshire (NH) remains fragmented, meaning there are many players vying for the same customer deposits and loan business. This intense competition is the primary driver behind the recent strategic moves, like the merger Provident Bancorp, Inc. finalized with NB Bancorp, Inc. (Needham Bank). The general industry wisdom, as noted by analysts, is that many regional banks simply need more scale to survive the next generation of banking, especially when trying to compete with Wall Street giants.

To give you a clear picture of where Provident Bancorp, Inc. stood just before the final integration, here are some key figures from their third quarter of 2025, which ended September 30, 2025:

That net income of $2.7 million for Q3 2025 shows a modest return in what is clearly a tough, competitive market. Still, you have to note the significant year-over-year improvement; the nine months ending September 30, 2025, saw net income reach $7.7 million, a strong rebound from just $2.4 million in the first nine months of 2024. This performance reflects the strategic efforts to manage costs and credit benefits while navigating the environment. The merger, which received all regulatory approvals by October 20, 2025, and was expected to close around November 14 or 15, 2025, was the direct action taken to combat this rivalry by gaining necessary scale.

The combination with NB Bancorp, Inc. immediately changes the competitive dynamic for the resulting entity. Here's what that scale looks like:

• Total assets projected around $7.1 billion at close.
• Total deposits expected to be $5.9 billion.
• The combined bank is projected to be the sixth largest Massachusetts-based bank in the Boston MSA by deposit market share.
• The combined footprint includes 18 branches across MA and Southern New Hampshire.

Direct competition from larger, well-capitalized institutions is definitely a factor you must account for. When Provident Bancorp, Inc. was operating alone, it was a smaller player facing established regional and national banks that can invest far more heavily in technology-like building those fancy mobile apps that customers expect today. The merger was designed to put the combined entity in a better position to fight that battle, aiming for an estimated 19% accretion to NB Bancorp, Inc.'s earnings per share in 2026. Finance: draft 13-week cash view by Friday.

Provident Bancorp, Inc. (PVBC) - Porter's Five Forces: Threat of substitutes

You're looking at the competitive landscape for Provident Bancorp, Inc. (PVBC) right as the company is completing its merger with NB Bancorp, Inc. on November 14, 2025. This context is vital because, as of late 2025, Provident Bancorp, Inc. is effectively ceasing to exist as a separate entity. Still, the forces that shaped its business-especially substitutes-remain highly relevant for the successor institution.

FinTech firms and digital-only banks continue to chip away at traditional banking services, often by offering specialized, low-cost alternatives. For instance, in the critical area of payment services, competition from nonbanks without a physical presence in the market rose to 28% according to the 2025 CSBS Annual Survey of Community Banks, an increase of 7 percentage points from the prior survey. This pressure is driving adoption; 92% of financial institutions plan to embed fintech into their digital banking experiences over the next two years.

Provident Bancorp, Inc. itself has been actively managing its exposure to certain lending segments that face intense substitution pressure or higher risk profiles. As of the third quarter of 2025, the company reported a net loan decrease of $42.5 million, or 3.3%, from the prior quarter, driven specifically by reductions in mortgage warehouse loans and enterprise value loans. This strategic reduction signals a response to the competitive environment where non-bank lenders are strong substitutes in these commercial and warehouse lending spaces.

When looking at credit unions versus banks, the competitive dynamic is nuanced. While trade groups often cite credit unions as a threat, the 2025 CSBS survey suggests community banks see large banks and peer institutions as their primary competitors, with credit unions not being called out as a distinct competitive category in the data. However, credit unions are still active players, with 45% prioritizing legacy system updates, showing a commitment to their technology base.

The core differentiator for Provident Bancorp, Inc., and any traditional bank, remains the safety net of deposit insurance. The Bank explicitly stated that it ensures 100% of its deposits are insured through a combination of coverage provided by the Federal Deposit Insurance Corporation (FDIC) and the Depositors Insurance Fund (DIF). The strength of this backing is quantified by the Deposit Insurance Fund (DIF) reserve ratio, which increased to 1.40% in Q3 2025, comfortably above the statutory minimum of 1.35%. The standard FDIC coverage limit remains $250,000 per account owner/ownership category at each insured bank. To manage large balances, the use of reciprocal deposit networks is significant; deposits totaling $422 billion were held in these networks at the end of the first quarter of 2025.

Here is a snapshot of the deposit insurance and competitive data points:

The reliance on technology to combat substitution is clear across the industry. The push for digital experience enhancement is a top priority, with 52% of institutions citing it as a leading focus. Furthermore, the industry trend shows that banks are actively looking to fintech partners for assistance in specific areas:

• Small and medium-sized business (SMB) services
• Treasury management solutions
• Embedding payments fintech

The commitment to this hybrid model-maintaining physical presence while accelerating digital-is an attempt to differentiate from purely digital substitutes, despite the underlying expense of that strategy.

Provident Bancorp, Inc. (PVBC) - Porter's Five Forces: Threat of new entrants

The threat of new entrants for Provident Bancorp, Inc. is generally considered low to moderate, primarily due to the significant structural hurdles inherent in the commercial banking sector. You know that starting a full-service bank from scratch is not like launching a typical tech startup; the barriers are steep and heavily regulated.

High regulatory and capital requirements create a significant barrier to entry for full-service banks. Regulators like the Federal Deposit Insurance Corporation (FDIC), the Federal Reserve, and the Office of the Comptroller of the Currency (OCC) enforce strict prudential standards to ensure safety and soundness. These requirements are often modeled on Basel Committee agreements. For instance, a key hurdle is the leverage ratio, which requires Tier 1 capital to be at least 4% of total assets, irrespective of asset riskiness, for adequately capitalized banks. Furthermore, for large banks, the total Common Equity Tier 1 (CET1) capital ratio requirement is composed of a minimum of 4.5% plus a Stress Capital Buffer (SCB) of at least 2.5%. A final rule, set to take effect on April 1, 2026, caps the enhanced supplementary leverage ratio (eSLR) at 1% for depository institution subsidiaries, meaning the overall leverage requirement for those entities will not exceed 4%. These mandates require substantial upfront capital commitments that deter most potential competitors.

To illustrate Provident Bancorp, Inc.'s current standing against these capital demands, consider its recent balance sheet strength:

PVBC was well-capitalized with a shareholders' equity to total assets ratio of 15.1% in Q1 2025. This ratio, reported at 15.1% as of March 31, 2025, shows that Provident Bancorp, Inc. maintains a capital position significantly stronger than the baseline regulatory requirements, giving it a buffer against unexpected losses and making it a more stable incumbent against new, potentially less capitalized entrants.

However, the landscape is shifting because new entrants are finding ways around the traditional chartering process. Specialized Banking-as-a-Service (BaaS) and FinTech partnerships allow new entrants to access the market indirectly. These models let technology companies offer banking products by licensing a regulated bank's charter, bypassing the need to secure their own expensive charter. Provident Bancorp, Inc. itself is active in this space, using in-house APIs and partnerships with firms like Treasury Prime and Modern Treasury to expand its reach. BankProv also announced a partnership with Fintel Connect to expand its affiliate program, showing a commitment to technology-first solutions. This ecosystem means a new, agile FinTech can enter the customer-facing market quickly, even if the underlying regulated infrastructure is provided by an existing bank.

The final factor balancing this threat is brand equity versus operational agility. New entrants avoid legacy costs, but lack the trust of the BankProv brand, which has a 200-year history. BankProv, operating as a subsidiary of Provident Bancorp, Inc., was founded in 1828. This deep history, coupled with the fact that it insures 100% of its deposits through the FDIC and the Depositors Insurance Fund (DIF), builds a level of trust that a brand-new, often virtual, entrant cannot immediately replicate. New entrants, while unburdened by the operational costs of physical branches or older systems, must spend considerable time and capital building the same level of customer confidence.

Here are the key dynamics shaping the threat:

• High capital requirements act as a significant deterrent.
• BaaS models allow FinTechs to enter the distribution layer.
• Provident Bancorp, Inc. has established partnerships like Treasury Prime.
• BankProv's founding in 1828 provides a trust advantage.
• New entrants benefit from avoiding legacy IT and real estate costs.

Finance: draft a sensitivity analysis on the impact of a 5% increase in new BaaS-backed competitors on PVBC's non-interest income by next Tuesday.