NINGI Research is short Provident Bancorp, Inc. (NASDAQ: PVBC), because, after recent revelations regarding losses due to crypto-backed loans, we think the bank is riddled with nepotism. In our opinion, the CEO failed at risk management and leadership due to seemingly personal relationships. The board of directors failed at its supervisory duties, and the public’s trust in the bank deteriorated. We expect further revelations and regulatory actions in the coming weeks.
In our opinion,
- Loans granted to crypto companies were highly leveraged and collateralized by fast-depreciating assets or solely by cryptocurrencies,
- The director responsible for the crypto lending business seems to be an immediate family member of the bank’s chief executive officer,
- The chief executive officer’s judgment is impaired by this relationship and this led and will lead to more losses,
- The board of directors failed at its supervisory duties, and contrary to statements, most of the bank’s board members are not independent,
- The audit chairwoman was granted residential mortgage loans and the compensation chairwoman was contracted for the design of the bank’s new headquarter,
- In the last two years, the CEO received almost $4 million in compensation.
- Bank employees lost a significant amount of their retirement savings in the bank’s 401k because, beginning in 2021, the bank chose to invest in its own stock,
- Trust in this institute, the management team, and the board of directors has been completely lost, and the share price will reflect this in the near future as well.