Provident Bancorp in Amesbury, Mass., is signaling that it will report a net loss for the third quarter that reflects its dealings with the cryptocurrency mining industry.
The $1.8 billion-asset parent of BankProv disclosed in a regulatory filing that it expects to report a loss of about $27.5 million in the quarter. The anticipated loss is tied to the company’s loan-loss provision.
“The company is still evaluating the actual level of losses due to the recent decline in the cryptocurrency mining industry, and such losses may exceed this estimate,” the filing said.
Bitcoin volatility and rising energy costs “called into question the financial stability of the company’s borrowers who hold digital asset mining loans, 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,” Provident added.
Provident disclosed in October that it had repossessed crypto mining rigs in exchange for forgiving a $27.4 million loan relationship. The company disclosed in the latest filing that the arrangement will lead to a partial writedown and triggered a detailed review of similarly collateralized loans.
Following the review, Provident determined that “a majority” of its remaining $76.5 million of loan exposure to digital asset mining borrowers is likely “impaired” and will be “placed on nonaccrual status with significant related specific reserves.”