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PDL Community Bancorp Announces 2019 Second Quarter Results

NEW YORK, Aug. 02, 2019 (GLOBE NEWSWIRE) -- PDL Community Bancorp (the “Company”) (PDLB), the holding company for Ponce Bank (the “Bank”), reported net income of $950,000, or $0.05 per basic and diluted share, for the second quarter of 2019, compared to $668,000, or $0.04 per basic and diluted share, for the prior quarter and net income of $699,000, or $0.04 per basic and diluted share, for the second quarter of 2018. For each of the six months ended June 30, 2019 and 2018, net income was $1.6 million, or $0.09 per basic and diluted share.

Carlos P. Naudon, President and CEO remarked that, “although the rise in interest rates and the growth of the construction and land portfolio has helped in maintaining the yield we receive on our earning assets, the rates we pay on interest-bearing liabilities has increased more rapidly due to increased competition for deposits in our market place combined with an increase in the costs of alternative funding sources to support our growth.” He also remarked that “in order to alleviate the use of alternative funding sources, we deployed a core deposit and customer acquisition strategic initiative at the beginning of 2019. As of the end of the quarter, we have opened 1,732 new accounts with a corresponding aggregate balance of $34.7 million in core deposits.”

Net Income

The increase in net income from the prior quarter reflects a $32,000, or 0.3%, increase in interest and dividend income, a $149,000 decrease in provision for loan losses, and a $384,000, or 4.2%, decrease in noninterest expense, offset by a $67,000, or 8.9%, decrease in noninterest income, a $150,000, or 5.1%, increase in interest expense and $66,000, or 21.5%, increase in provision for income tax.

The increase in net income from the same quarter last year reflects a $1.0 million, or 9.1%, increase in interest and dividend income, a $337,000 decrease in provision for loan losses, and a $162,000, or 30.9%, increase in noninterest income, offset by an $820,000, or 36.4%, increase in interest expense, a $252,000, or 3.0%, increase in noninterest expense and a $207,000, or 124.7%, increase in provision for income tax.

Net income for the six months ended June 30, 2019 and 2018 was $1.6 million. For the six months ended June 30, 2019, net income reflects an increase of $2.7 million, or 12.2%, in interest and dividend income, a $282,000, or 65.4%, decrease in provision for loan losses, a $30,000, or 2.1%, increase in noninterest income, offset by a $1.7 million, or 39.9%, increase in interest expense, a $1.1 million, or 6.5%, increase in noninterest expense and $246,000, or 56.7%, increase in provision for income tax.

 Net Interest Margin

The net interest margin decreased by 11 basis points to 3.75% for the three months ended June 30, 2019 from 3.86% for the three months ended March 31, 2019, while the net interest rate spread decreased by 12 basis points to 3.34% from 3.46% for the same periods. Average interest-earning assets increased by $6.0 million, or 0.6%, to $999.4 million for the three months ended June 30, 2019 from $993.4 million for the three months ended March 31, 2019. The average yield on interest-earning assets decreased by 8 basis points to 4.98% from 5.06% for the same periods. Average interest-bearing liabilities increased by $8.6 million, or 1.2%, to $750.3 million for the three months ended June 30, 2019 from $741.7 million for the three months ended March 31, 2019. The average rate on interest-bearing liabilities increased by 4 basis points to 1.64% from 1.60% for the same periods. 

The net interest margin decreased by 21 basis points to 3.75% for the three months ended June 30, 2019 from 3.96% for the three months ended June 30, 2018, while the net interest rate spread decreased by 30 basis points to 3.34% from 3.64% for the same periods. Average interest-earning assets increased by $74.6 million, or 8.1%, to $999.4 million for the three months ended June 30, 2019 from $924.9 million for the three months ended June 30, 2018. The average yield on interest-earning assets increased by 4 basis points to 4.98% from 4.94% for the same periods. Average interest-bearing liabilities increased by $54.3 million, or 7.8%, to $750.3 million for the three months ended June 30, 2019 from $696.0 million for the three months ended June 30, 2018. The average rate on interest-bearing liabilities increased by 34 basis points to 1.64% from 1.30% for the same periods.

Noninterest Income

Noninterest income decreased to $686,000 for the three months ended June 30, 2019, down $67,000, or 8.9%, from $753,000 for the three months ended March 31, 2019. The decreased was attributable to decreases of $85,000, or 78.0%, in brokerage commissions and $103,000, or 37.5%, in other noninterest income, offset by an increase of $123,000, or 88.5%, in late fees and prepayment charges related to mortgage loans.

Noninterest income increased to $686,000 for the three months ended June 30, 2019, up $162,000, or 30.9%, from $524,000 for the three months ended June 30, 2018. The increase was mainly attributable to an increase of $210,000, or 403.9%, in late fees and prepayment charges related to mortgage loans.

Noninterest Expense

Noninterest expense was $8.7 million for the quarter ended June 30, 2019, down $384,000, or 4.2%, from $9.1 million for the quarter ended March 31, 2019. The decrease was mainly attributable to a decrease in compensation and benefits expense of $538,000 as a result of lower group life and health insurance expense related to claims, nonrecurring first quarter 2019 bonus payments resulting in lower payroll tax expense in the second quarter, lower brokerage commissions and a net decrease of compensation associated with organizational changes relating to branch and back office personnel; occupancy expense of $179,000 as a result of seasonal trends and prior quarter project completion expenses; and office supplies, telephone and postage expenses of $46,000. The decrease in noninterest expense was partially offset by increases in data processing expenses of $78,000; professional fees of $223,000; marketing and promotional expenses of $21,000 and other operating expenses of $52,000.

Noninterest expense increased $252,000, or 3.0%, to $8.7 million for the quarter ended June 30, 2019 from $8.5 million for the quarter ended June 30, 2018. The increase was largely due to increases in professional fees of $204,000 as a result of increased expenses associated with business and media development combined with increased expenses associated with the annual stockholders meeting and public reporting; data processing expenses of $131,000 as a result of system enhancements and implementation charges related to software upgrades and additional products being used; other operating expenses of $72,000 as a result of loss on loans sold; and direct loan expenses of $30,000. The increase in noninterest expense was partially offset by decreases in compensation and benefits expense of $87,000 and office supplies, telephone and postage expenses of $81,000.

Asset Quality

Nonperforming assets increased to $10.1 million, or 0.96% of total assets, at June 30, 2019, from $8.0 million, or 0.77% of total assets, at March 31, 2019 and $6.7 million, or 0.69% of total assets, at June 30, 2018. The increase from March 31, 2019 is mainly attributable to an increase in nonaccrual, nonresidential loans of $2.8 million.

There was no provision for loan losses for the quarter ended June 30, 2019, compared to $149,000 for the quarter ended March 31, 2019 and $337,000 for the quarter ended June 30, 2018. The allowance for loan losses was $12.5 million, or 1.32% of total loans, at June 30, 2019, compared to $12.4 million, or 1.33% of total loans, at March 31, 2019 and $11.8 million, or 1.36% of total loans, at June 30, 2018. Net recoveries totaled $11,000 for the quarter ended June 30, 2019, compared to net charge-offs totaling $359,000 for the quarter ended March 31, 2019 and net recoveries totaling $5,000 for the quarter ended June 30, 2018.           

Balance Sheet

Total assets decreased $3.8 million, or 0.4%, to $1,056.1 million at June 30, 2019 from $1,059.9 million at December 31, 2018. Net loans increased $15.7 million, or 1.7%, to $934.2 million at June 30, 2019 from $918.5 million at December 31, 2018. The increase in net loans was primarily due to increases of $13.4 million, or 15.3%, in construction and land loans and $6.5 million, or 2.8%, in multifamily residential loans, offset by a decrease of $4.3 million, or 27.6%, in business loans.

Steven A. Tsavaris, Executive Chairman remarked that, “while we remain optimistic about our loan production for the second half of 2019, we are experiencing tough competition for nonresidential property loans from both small and large banks, as well as from nonbank lenders." He also remarked that "we are willing to walk away from competing for certain loans as a result of what other lenders are willing to offer on rate and terms, including duration."

Total deposits decreased $7.4 million, or 0.9%, to $802.4 million at June 30, 2019 from $809.8 million at December 31, 2018. The decrease in deposits was mainly attributable to a decrease of $45.0 million, or 10.6 %, in certificates of deposit offset by an increase of $42.1 million, or 36.3%, in money market accounts.

Total stockholders’ equity was $165.2 million at June 30, 2019, compared to $169.2 million at December 31, 2018. The Company and the Bank exceeded all regulatory capital requirements to be deemed well-capitalized at June 30, 2019. The Bank’s total capital to risk-weighted assets ratio was 19.54%, the tier 1 capital to risk-weighted assets ratio and the common equity tier 1 capital ratio were both 18.29%, and the tier 1 capital to total assets ratio was 13.64% at June 30, 2019, compared to 19.39%, 18.14%, and 13.66%, respectively at December 31, 2018.  

On March 22, 2019, the Board of Directors adopted a share repurchase program effective March 25, 2019. Under the repurchase program, the Company may repurchase up to 923,151 shares of its common stock, or approximately 5% of the outstanding shares, which will be used to fund the grants of restricted stock units and stock options made under the Company’s 2018 Long-Term Incentive Plan. Repurchased shares will be held by the Company as Treasury shares until used to fund the restricted stock units and option grants. The repurchase program may be suspended or terminated at any time without prior notice, and it will expire on September 24, 2019. During the quarter ended June 30, 2019, the Company repurchased 463,112 shares of the Company’s common stock. As of June 30, 2019, 446,173 shares could still be repurchased under the repurchase program.

About PDL Community Bancorp

PDL Community Bancorp is the holding company for Ponce Bank. The Bank’s business primarily consists of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in mortgage loans, consisting of one-to-four family residences (investor-owned and owner-occupied), multifamily residences, nonresidential properties and construction and land, and, to a lesser extent, in business and consumer loans. The Bank also invests in securities, which have historically consisted of U.S. Government and federal agency securities and securities issued by government-sponsored or government-owned enterprises, as well as, mortgage-backed securities and Federal Home Loan Bank stock. The Bank offers a variety of deposit accounts, including demand, savings, money market and certificates of deposit. 

Forward Looking Statements

Certain statements herein constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by words such as “believes,” “will,” “would,” “expects,” “project,” “may,” “could,” “developments,” “strategic,” “launching,” “opportunities,” “anticipates,” “estimates,” “intends,” “plans,” “targets” and similar expressions. These statements are based upon the current beliefs and expectations of the Company’s management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to, adverse conditions in the capital and debt markets and the impact of such conditions on the Company’s business activities; changes in interest rates; competitive pressures from other financial institutions; the effects of general economic conditions on a national basis or in the local markets in which the Company operates, including changes that adversely affect borrowers’ ability to service and repay the Company’s loans; changes in the value of securities in the Company’s investment portfolio; changes in loan default and charge-off rates; fluctuations in real estate values; the adequacy of loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; changes in government regulation; changes in accounting standards and practices; the risk that intangibles recorded in the Company’s financial statements will become impaired; demand for loans in the Company’s market area; the Company’s ability to attract and maintain deposits; risks related to the implementation of acquisitions, dispositions, and restructurings; the risk that the Company may not be successful in the implementation of its business strategy; changes in assumptions used in making such forward-looking statements and the risk factors described in the prospectus and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission (the “SEC”), which are available at the SEC’s website, www.sec.gov. Should one or more of these risks materialize or should underlying beliefs or assumptions prove incorrect, PDL Community Bancorp’s actual results could differ materially from those discussed. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. The Company disclaims any obligation to publicly update or revise any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as may be required by applicable law or regulation.



PDL Community Bancorp and Subsidiaries
Consolidated Balance Sheets
(Dollars in thousands, except for share data)

    As of  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2019     2019     2018     2018     2018  
ASSETS                                        
Cash and due from banks:                                        
Cash   $ 6,003     $ 5,690     $ 45,225     $ 5,494     $ 7,088  
Interest-bearing deposits in banks     47,007       35,877       24,553       16,895       42,094  
Total cash and cash equivalents     53,010       41,567       69,778       22,389       49,182  
Available-for-sale securities, at fair value     22,154       22,166       27,144       24,177       28,144  
Loans receivable, net     934,236       925,099       918,509       893,884       850,426  
Accrued interest receivable     3,773       3,735       3,795       3,609       3,350  
Premises and equipment, net     32,205       31,777       31,135       29,293       28,366  
Other real estate owned     58                          
Federal Home Loan Bank of New York stock (FHLBNY), at cost     4,609       2,915       2,915       2,621       2,617  
Deferred tax assets     3,913       3,852       3,811       4,118       3,805  
Other assets     2,158       2,485       2,814       2,620       2,923  
Total assets   $ 1,056,116     $ 1,033,596     $ 1,059,901     $ 982,711     $ 968,813  
LIABILITIES AND STOCKHOLDERS' EQUITY                                        
Liabilities:                                        
Deposits   $ 802,408     $ 806,781     $ 809,758     $ 764,792     $ 753,255  
Accrued interest payable     88       75       63       75       141  
Advance payments by borrowers for taxes and insurance     6,059       8,099       6,037       7,219       5,491  
Advances from the Federal Home Loan Bank of New York and others     79,404       44,404       69,404       37,775       37,775  
Other liabilities     2,954       3,975       5,467       5,706       5,573  
Total liabilities     890,913       863,334       890,729       815,567       802,235  
Commitments and contingencies                                        
Stockholders' Equity:                                        
Preferred stock, $0.01 par value; 10,000,000 shares authorized, none issued                              
Common stock, $0.01 par value; 50,000,000  shares authorized; 18,463,028 shares issued and 17,986,050 shares outstanding as of  June 30, 2019 and 18,463,028 shares issued and outstanding as of December 31,2018     185       185       185       185       185  
Treasury stock, at cost; 476,978 shares at June 30, 2019 and no shares as of December 31, 2018     (6,798 )     (193 )                  
Additional paid-in-capital     85,357       84,976       84,581       84,557       84,488  
Retained earnings     100,431       99,481       98,813       96,896       96,495  
Accumulated other comprehensive loss     (7,941 )     (8,035 )     (8,135 )     (8,101 )     (8,076 )
Unearned compensation - ESOP; 603,125 shares as of June 30, 2019 and 627,251 shares  as of December 31, 2018     (6,031 )     (6,152 )     (6,272 )     (6,393 )     (6,514 )
Total stockholders' equity     165,203       170,262       169,172       167,144       166,578  
Total liabilities and stockholders' equity   $ 1,056,116     $ 1,033,596     $ 1,059,901     $ 982,711     $ 968,813  
                                         



PDL Community Bancorp and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share data)

     For the Quarters Ended  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2019     2019     2018     2018     2018  
Interest and dividend income:                                        
Interest on loans receivable   $ 12,060     $ 12,095     $ 12,026     $ 11,483     $ 11,053  
Interest and dividend on available-for-sale securities and FHLBNY stock     354       287       300       254       330  
Total interest and dividend income     12,414       12,382       12,326       11,737       11,383  
Interest expense:                                        
Interest on certificates of deposit     1,904       1,956       2,078       1,942       1,847  
Interest on other deposits     821       631       320       272       199  
Interest on borrowings     345       333       321       276       204  
Total interest expense     3,070       2,920       2,719       2,490       2,250  
Net interest income     9,344       9,462       9,607       9,247       9,133  
Provision for loan losses           149       215       602       337  
Net interest income after provision for loan losses     9,344       9,313       9,392       8,645       8,796  
Noninterest income:                                        
Service charges and fees     228       230       217       191       214  
Brokerage commissions     24       109       108       286       42  
Late and prepayment charges     262       139       278       65       52  
Other     172       275       212       172       216  
Total noninterest income     686       753       815       714       524  
Noninterest expense:                                        
Compensation and benefits     4,476       5,014       4,371       4,547       4,563  
Occupancy and equipment     1,732       1,911       1,879       1,585       1,717  
Data processing expenses     431       353       357       342       300  
Direct loan expenses     182       156       217       265       152  
Insurance and surety bond premiums     83       83       94       87       99  
Office supplies, telephone and postage     271       317       349       308       352  
FDIC deposit insurance assessment     66       68       70       68       66  
Professional fees     733       510       1,025       978       529  
Marketing and promotional expenses     47       26       68       40       55  
Directors fees     73       83       69       69       70  
Regulatory dues     47       56       60       63       58  
Other operating expenses     566       514       515       417       494  
Total noninterest expense     8,707       9,091       9,074       8,769       8,455  
Income before income taxes     1,323       975       1,133       590       865  
Provision for income taxes     373       307       498       188       166  
Net income   $ 950     $ 668     $ 635     $ 402     $ 699  
Earnings per share:                                        
Basic   $ 0.05     $ 0.04     $ 0.04     $ 0.02     $ 0.04  
Diluted   $ 0.05     $ 0.04     $ 0.04     $ 0.02     $ 0.04  
                                         



PDL Community Bancorp and Subsidiaries
Consolidated Statements of Income
(Dollars in thousands, except per share data)

     For the Six Months Ended June 30,  
    2019     2018     Variance $     Variance %  
Interest and dividend income:                                
Interest on loans receivable   $ 24,155     $ 21,439     $ 2,716       12.67 %
Interest and dividend on available-for-sale securities and FHLBNY stock     641       654       (13 )     (1.99 %)
Total interest and dividend income     24,796       22,093       2,703       12.23 %
Interest expense:                                
Interest on certificates of deposit     3,860       3,597       263       7.31 %
Interest on other deposits     1,452       383       1,069       279.11 %
Interest on borrowings     678       303       375       123.76 %
Total interest expense     5,990       4,283       1,707       39.86 %
Net interest income     18,806       17,810       996       5.59 %
Provision for loan losses     149       431       (282 )     (65.43 %)
Net interest income after provision for loan losses     18,657       17,379       1,278       7.35 %
Noninterest income:                                
Service charges and fees     458       437       21       4.81 %
Brokerage commissions     133       138       (5 )     (3.62 %)
Late and prepayment charges     401       263       138       52.47 %
Other     447       571       (124 )     (21.72 %)
Total noninterest income     1,439       1,409       30       2.13 %
Noninterest expense:                                
Compensation and benefits     9,490       8,918       572       6.41 %
Occupancy and equipment     3,643       3,208       435       13.56 %
Data processing expenses     784       708       76       10.73 %
Direct loan expenses     338       307       31       10.10 %
Insurance and surety bond premiums     166       188       (22 )     (11.70 %)
Office supplies, telephone and postage     588       652       (64 )     (9.82 %)
FDIC deposit insurance assessment     134       134             0.00 %
Professional fees     1,243       1,151       92       7.99 %
Marketing and promotional expenses     73       107       (34 )     (31.78 %)
Directors fees     156       139       17       12.23 %
Regulatory dues     103       115       (12 )     (10.43 %)
Other operating expenses     1,080       1,087       (7 )     (0.64 %)
Total noninterest expense     17,798       16,714       1,084       6.49 %
Income before income taxes     2,298       2,074       224       10.80 %
Provision for income taxes     680       434       246       56.68 %
Net income   $ 1,618     $ 1,640     $ (22 )     (1.34 %)
Earnings per share:                                
Basic   $ 0.09     $ 0.09     N/A     N/A  
Diluted   $ 0.09     $ 0.09     N/A     N/A  
                                 



PDL Community Bancorp and Subsidiaries
Key Metrics

    At or for the Quarters Ended  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2019     2019     2018     2018     2018  
Performance Ratios:                                        
Return on average assets     0.37 %     0.26 %     0.25 %     0.16 %     0.29 %
Return on average equity     2.26 %     1.59 %     1.49 %     0.95 %     1.68 %
Net interest rate spread (1)     3.34 %     3.46 %     3.52 %     3.49 %     3.64 %
Net interest margin (2)     3.75 %     3.86 %     3.90 %     3.86 %     3.96 %
Noninterest expense to average assets     3.38 %     3.59 %     3.57 %     3.54 %     3.54 %
Efficiency ratio (3)     86.81 %     89.00 %     87.07 %     88.03 %     87.55 %
Average interest-earning assets to average interest- bearing liabilities     133.20 %     133.93 %     134.30 %     135.09 %     132.89 %
Average equity to average assets     16.27 %     16.58 %     16.69 %     17.06 %     17.45 %
Capital Ratios:                                        
Total capital to risk weighted assets (bank only)     19.54 %     19.32 %     19.39 %     19.60 %     20.07 %
Tier 1 capital to risk weighted assets (bank only)     18.29 %     18.06 %     18.14 %     18.35 %     18.81 %
Common equity Tier 1 capital to risk-weighted assets (bank only)     18.29 %     18.06 %     18.14 %     18.35 %     18.81 %
Tier 1 capital to average assets (bank only)     13.64 %     13.56 %     13.66 %     13.78 %     14.03 %
Asset Quality Ratios:                                        
Allowance for loan losses as a percentage of total loans     1.32 %     1.33 %     1.36 %     1.37 %     1.36 %
Allowance for loan losses as a percentage of nonperforming loans     123.50 %     155.87 %     186.77 %     (186.74 %)     176.63 %
Net (charge-offs) recoveries to average outstanding loans during the year     0.00 %     (0.16 %)     0.03 %     0.00 %     0.00 %
Non-performing loans as a percentage of total loans     1.08 %     0.86 %     0.73 %     0.73 %     0.77 %
Non-performing loans as a percentage of total assets     0.96 %     0.77 %     0.64 %     0.67 %     0.69 %
Total non-performing assets as a percentage of total assets     0.96 %     0.77 %     0.64 %     0.67 %     0.69 %
Total non-performing assets, accruing loans past due 90 days or more,  and accruing troubled debt restructured loans as a percentage of total assets     1.82 %     1.74 %     1.63 %     1.79 %     1.87 %
Other:                                        
Number of offices   14     14     14     14     14  
Number of full-time equivalent employees   183     185     181     175     194  
                                         

(1)      Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(2)      Net interest margin represents net interest income divided by average total interest-earning assets.
(3)      Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

Key metrics calculated on income statement items were annualized where appropriate.



PDL Community Bancorp and Subsidiaries
Loan Portfolio

...
    For the Quarters Ended  
    June 30,     March 31,     December 31,     September 30,     June 30,  
    2019     2019     2018     2018     2018  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
       
    (Dollars in thousands)  
Mortgage loans:                                                                                
1-4 family residential                                                                                
Investor Owned   $ 302,428       32.00 %