Amesbury-based BankProv saw deposits increase 9 percent during the first quarter, with much of that increase tied to its banking-as-a-service products and considered volatile by the bank.

BankProv had total deposits of $1.4 billion at the end of the first quarter, up $124.3 million, or 9.7 percent, from the end of 2022, when deposits totaled $1.28 billion.

The bank said in its first quarter earnings statement released this week that its specialty deposits, which include deposits from banking-as-a-service and digital asset customers, increased by $117 million. This increase helped the bank’s total specialty deposits more than double in the first quarter, from $102.8 million as of Dec. 31 to $219.8 million as of March 31.

The specialty deposits tied to BankProv’s BaaS customers increased by $116.4 million during the first quarter to $161.7 million, with $31 million of these deposits involving customers with a business model focused on digital assets.

The bank said it considers $91.9 million of the BaaS deposits to be volatile and is holding that amount as cash. The bank’s cash and cash equivalents increased by $163.5 million, or 202.8 percent, in the first quarter.

The bank has another $58.1 million in non-BaaS specialty deposits for digital asset customers as of March 31, up $621,000 from Dec. 31.

Last year, a lending product for digital asset mining led to a $35 million loss at BankProv during the third quarter. The bank has seen positive earnings for the past two quarters.

The bank’s parent company, Provident Bancorp Inc., had first quarter net income of $2.1 million, or $0.13 per diluted share, compared to $2.7 million, or $0.16 per diluted share, in the fourth quarter and $5.5 million, or $0.32 per diluted share, in the first quarter of 2022.

“Heading into the first quarter our primary objective was the development and implementation of a renewed strategic direction,” Carol Houle – BankProv’s co-president, co-CEO, and chief financial officer – said in the earnings statement. “We are pleased that our financial results met our expectations and are proud of the hard work and dedication of our employees in their efforts to achieve our objectives.”

BankProv said it continues to wind down the digital asset lending portfolio, which decreased by 33.8 percent from $40.8 million at the end of 2022 to $27 million as of March 31. The bank said the decrease resulted primarily from paydowns on outstanding lines of credit and the payoff of a $4.8 million loan secured by cryptocurrency mining rigs.

Net loans decreased $92.7 million, or 6.5 percent, during the first quarter to $1.32 billion. In addition to reductions in the digital asset mining portfolio, BankProv saw decreases in mortgage warehouse loans of $64.1 million, or 30.1 percent, and a decline in commercial loans of $22.6 million, or 10.4 percent, which the bank said was primarily related to payoffs in its traditional loan portfolio.

Total assets increased $65.8 million, or 4 percent, during the quarter to $1.7 billion as of March 31. The bank attributed the increase to cash and cash equivalents. The bank noted that the increase was partially offset by decreases in net loans and other repossessed assets, which declined by $6.1 million following the sale of cryptocurrency mining rigs that BankProv had repossessed from digital asset loan customers in 2022.

The bank said it was “well insulated” from the effects of the March bank failures.

“The high-profile failures of a few large financial institutions had widespread impacts during the first quarter of 2023,” Joe Reilly, the bank’s co-CEO and co-president, said in the statement. “The importance of liquidity, diversification, and deposit insurance was thrust into the spotlight and in response, we took decisive action to reaffirm our secure position in each of these areas and to reassure our customers of the safety of their deposits. We are happy that our institution was able to weather much of the negative fallout and are extremely thankful for the continued support of our customers and communities.”