BankProv Stops Offering Loans Collateralized With Crypto Mining Machines
Crypto-friendly BankProv has stopped offering loans collateralized with crypto mining machines and said its portfolio of digital-asset loans fell 50% in the fourth quarter as some impaired loans were sold on and a line of credit was repaid.
The Massachusetts-based bank held $41.2 million in digital asset-related loans at the end of December. Of that, $26.7 million is collateralized with crypto mining machines, and the amount "will continue to decline as the Bank is no longer originating this type of loan," holding company Provident Bank (PVBC) said in a Tuesday filing with the U.S. Securities and Exchange Commission.
The crypto mining industry started borrowing heavily in 2021 using mining machines as collateral, and often using the funds to buy more such machines. That model started breaking down along with the bear market in cryptocurrencies. Mining machine prices fell by about 85% in 2022, according to data from services firm Luxor Technologies analyzed by CoinDesk, leading to margin calls and collateral seizures when borrowers couldn't service the debt.
Through 2022, BankProv wrote off $47.9 million in net charge-offs, primarily from loans collateralized by mining rigs. It said it repossessed mining machines in September in exchange for forgiving $27.4 million of debt for undisclosed parties.
BankProv had $1.42 billion of net loans in total at the end of December.