Provident Bancorp in Amesbury, Massachusetts, beset by a cryptocurrency hit that resulted in a steep third-quarter loss, said it had righted the ship and returned to profitability late in 2022.
The $1.6 billion-asset parent of BankProv said in its earnings release in late January that it swung from a net loss of $35.3 million for the third quarter to net income of $2.7 million for the fourth quarter.
The recovery was notable because the company had grappled with soured loans to a cryptocurrency miner. It cited a partial writedown on crypto 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.
Provident is among several banks that expanded into the crypto arena only to see it melt down in 2022. The company said in its fourth-quarter earnings report that its digital-asset portfolio dwindled by nearly 50% from the prior quarter, to $41.2 million. It credited the sale of impaired loans.
“During the fourth quarter, we took decisive action to reduce our exposure to loans secured by cryptocurrency mining rigs,” Carol Houle, interim co-president and co-CEO, said in the earnings release. “Not only are we no longer originating these types of loans, we have also reduced that portfolio to nearly half what it was” at the close of the third quarter.
“The remaining sectors of our loan portfolio continue to perform in accordance with our historical experience, and it is in large part due to our long-term strategy of portfolio diversification that we have been able to weather recent volatility and losses,” Houle added.
The company said its fourth-quarter loans backed by crypto mining rigs, specifically, decreased by more than 40% from the prior quarter, to $26.7 million. It expects the portfolio to continue shrinking in 2023.
These types of loans made up the bulk of Provident’s $46 million of net charge-offs in the fourth quarter.
The loan losses weighed down full-year results. Provident reported a $21.5 million loss for all of 2022. A year earlier, it reported net income of $16.1 million.
Provident had earlier made public its crypto woes and said in November that it had reviewed its crypto portfolio and estimated “a majority” to be impaired. It placed the impaired loans on nonaccrual status.
In December, then-CEO Dave Mansfield resigned. He had led the bank since 2013.
Houle, who is Provident’s chief financial officer, stepped in as temporary co-CEO, sharing the role with the company’s former chairman, Joe Reilly. Provident said it is searching for a permanent chief executive.