Provident Bancorp in Amesbury, Massachusetts, is grappling with a sizable cryptocurrency hit that it expects will result in a third-quarter loss.
The $1.8 billion-asset bank this week delayed its latest earnings filing but estimated a third-quarter loss of $27.5 million related to loans to a cryptocurrency miner. That would compare with net income of $5.1 million reported for the third quarter of 2021.
Provident cautioned in a regulatory filing Tuesday the official loss could exceed its estimates. It cited the highly publicized meltdown of the cryptocurrency mining industry in recent months.
The “volatility in Bitcoin and rising energy costs called into question the financial stability of the company’s borrowers who hold digital asset mining loans,” Provident said. “The collectability of all principal and interest related to these loans, as well as the value of the cryptocurrency mining rigs that serve as the underlying collateral,” are questionable, it said in the filing.
The company said its expected loss is linked to a partial writedown on cryptocurrency mining rigs that were repossessed in exchange for the forgiveness of a $27.4 million loan. Excluding that loan, Provident said its digital-asset mining loan portfolio totaled $76.5 million at the close of the third quarter.
The company has reviewed that portfolio and estimated “a majority to be impaired.” It placed the impaired loans on nonaccrual status and said it set aside “significant related specific reserves” for possible losses.