Provident Bancorp stock plunges as it estimates Q3 loss sparked by crypto (NASDAQ:PVBC)

Provident Bancorp (NASDAQ:PVBC) stock slid 19% in Wednesday morning trading after the company delayed its quarterly earnings filing and estimated a Q3 loss of $27.5M related to loans to a cryptocurrency miner. Stephens analyst Matt Breese downgraded his rating on the stock to Equal-Weight from Overweight.

PVBC suffered an estimated loss of $1.63 per share, a 12% reduction in tangible book value and an almost $50M increase in non-performing assets, the analyst wrote in a note to clients.

After the close on Tuesday, Provident Bancorp delayed its 10-Q filing and provided the loss estimate. Note that in mid-October, the Provident Bancorp (PVBC) said it was expecting to report a Q3 loss due to a write-down of collateral of repossessed from a crypto mining company. “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,” PVBC said in an SEC filing.

After the company forgave a $27.4M loan, its digital asset mining loan portfolio totaled $76.5M at Sept. 30, 2022, a majority of which it expects to be impaired and placed on non-accrual status with significant related specific reserves.

“While our initial assessment of the October news was that TBV would be down ~3%-6%, the increase in reserve and NPAs per the more recent call report suggests a wider degree of credit disruption than anticipated, with additional details in the most recent delayed 10-Q announcement,” Breese said.

Provident Bancorp (PVBC) in its statement, said volatility in bitcoin (BTC-USD) prices and increasing energy costs called into question the financial stability of its crypto-mining clients as well as the mining rigs they used for collateral.

The analyst’s Neutral rating aligns with the SA Quant rating of Hold.