Benzinga - Massachusetts-based BankProv announced it would no longer offer loans collateralized with crypto mining machines.
What Happened: In a Tuesday filing with the SEC, the bank's holding company, Provident Bank, stated the bank's portfolio of digital-asset loans had declined by 50% in the fourth quarter due to the sale of impaired loans and the repayment of a line of credit.
BankProv held $41.2 million in digital-asset-related loans at the end of December, with $26.7 million of that being collateralized by crypto-mining machines.
The bank said, "The amount will continue to decline as the Bank is no longer originating this type of loan."
The crypto mining industry boomed in 2021, using mining machines as collateral to secure loans, often using the funds to purchase more machines.
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Why it Matters: However, this model began to unravel as the cryptocurrency bear market took hold and mining machine prices plummeted by 85% in 2022, according to data from Luxor Technologies analyzed by CoinDesk.
This led to margin calls and collateral seizures as borrowers were unable to service their debt.
Through 2022, BankProv wrote off $47.9 million in net charge-offs, primarily from loans collateralized by mining rigs.
The bank also announced it repossessed mining machines in September in exchange for forgiving $27.4 million of debt for undisclosed parties.
As of the end of December, BankProv had a total of $1.42 billion in net loans.
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