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PDL Community Bancorp Announces 2019 Third Quarter Results

PDL Community Bancorp Announces 2019 Third Quarter Results

NEW YORK, Oct. 30, 2019 (GLOBE NEWSWIRE) -- PDL Community Bancorp (the “Company”) (PDLB), the holding company for Ponce Bank (the “Bank”), reported net income of $709,000, or $0.04 per basic and diluted share, for the third quarter of 2019, compared to $950,000, or $0.05 per basic and diluted share, for the prior quarter and net income of $402,000, or $0.02 per basic and diluted share, for the third quarter of 2018. For the nine months ended September 30, 2019 and 2018, net income was $2.3 million and $2.0 million, or $0.13 and $0.11 per basic and diluted share, respectively.

Carlos P. Naudon, President and CEO remarked that, “the year-to-date results are evidence that management remains focused on executing on its core business while investing in capturing growth opportunities and executing strategic initiatives. The increase in net interest income from the prior year reflects the balancing of loan growth and asset quality, the increase in occupancy and equipment expense evidences the continued branch transformation initiative, and the shares repurchased this year have added value to shareholders.”

Net Income

The $241,000 decrease in net income from the prior quarter reflects a $627,000, or 7.2%, increase in noninterest expense, a $118,000, or 3.8%, increase in interest expense, a $107,000, or 15.6%, decrease in noninterest income and a $14,000 increase in provision for loan losses, offset by a $539,000, or 4.3%, increase in interest and dividend income and a $86,000, or 23.1%, decrease in provision for income taxes.

The $307,000 increase in net income from the same quarter last year reflects a $1.2 million, or 10.4%, increase in interest and dividend income and a $588,000 decrease in provision for loan losses, offset by a $698,000, or 28.0%, increase in interest expense, a $565,000, or 6.4%, increase in noninterest expense, a $135,000, or 18.9%, decrease in noninterest income and a $99,000, or 52.7%, increase in provision for income taxes.

Net income for the nine months ended September 30, 2019 and 2018 was $2.3 million and $2.0 million, respectively. For the nine months ended September 30, 2019, net income reflects an increase of $3.9 million, or 11.6%, in interest and dividend income and a $871,000, or 84.2%, decrease in provision for loan losses, offset by a $2.4 million, or 35.5%, increase in interest expense, a $1.6 million, or 6.5%, increase in noninterest expense, a $344,000, or 55.2%, increase in provision for income taxes and a $104,000, or 4.9%, decrease in noninterest income.

Net Interest Margin

The net interest margin increased by 8 basis points to 3.83% for the three months ended September 30, 2019 from 3.75% for the three months ended June 30, 2019, while the net interest rate spread increased by 10 basis points to 3.44% from 3.34% for the same periods. Average interest-earning assets increased by $11.4 million, or 1.1%, to $1,010.9 million for the three months ended September 30, 2019 from $999.4 million for the three months ended June 30, 2019. The average yield on interest-earning assets increased by 10 basis points to 5.08% from 4.98%, for the same periods. Average interest-bearing liabilities increased by $19.1 million, or 2.5%, to $769.4 million for the three months ended September 30, 2019 from $750.3 million for the three months ended June 30, 2019. The average rate on interest-bearing liabilities was unchanged at 1.64% for both periods. 

The net interest margin decreased by 3 basis points to 3.83% for the three months ended September 30, 2019 from 3.86% for the three months ended September 30, 2018, while the net interest rate spread decreased by 5 basis points to 3.44% from 3.49% for the same periods. Average interest-earning assets increased by $59.7 million, or 6.3%, to $1,010.9 million for the three months ended September 30, 2019 from $951.2 million for the three months ended September 30, 2018. The average yield on interest-earning assets increased by 18 basis points to 5.08% from 4.90% for the same periods. Average interest-bearing liabilities increased by $65.3 million, or 9.3%, to $769.4 million for the three months ended September 30, 2019 from $704.1 million for the three months ended September 30, 2018. The average rate on interest-bearing liabilities increased by 24 basis points to 1.64% from 1.40% for the same periods.

Noninterest Income

Noninterest income decreased to $579,000 for the three months ended September 30, 2019, down $107,000, or 15.6%, from $686,000 for the three months ended June 30, 2019. The decrease was attributable to decreases of $112,000, or 42.7%, in late and prepayment charges related to mortgage loans and $26,000, or 15.1%, in other noninterest income offset by increases of $19,000, or 8.3%, in service charges and fees and $12,000, or 50.0%, in brokerage commissions.

Noninterest income decreased to $579,000 for the three months ended September 30, 2019, down $135,000, or 18.9%, from $714,000 for the three months ended September 30, 2018. The decrease was mainly attributable to decreases of $250,000, or 87.4%, in brokerage commissions and $26,000, or 15.1%, in other noninterest income offset by increases of $85,000, or 130.8%, in late and prepayment charges related to mortgage loans and $56,000, or 29.3%, in service charges and fees.

Noninterest Expense

Noninterest expense was $9.3 million for the three months ended September 30, 2019, up $627,000, or 7.2%, from $8.7 million for the three months ended June 30, 2019. The increase was mainly attributable to increases in professional fees of $223,000; occupancy and equipment of $211,000 as a result of prior quarter project completion expenses; compensation and benefits expense of $191,000 as a result of expenses related to new hires annual merit increase; insurance and surety bond premiums of $63,000; regulatory dues of $23,000 and office supplies, telephone and postage expenses of $10,000. The increase in noninterest expense was partially offset by decreases in other operating expenses of $57,000 mainly due to a credit from the Federal Deposit Insurance Corporation in the amount of $205,000 related to our FDIC deposit insurance assessment; and data processing expenses of $33,000.

Noninterest expense increased $565,000, or 6.4%, to $9.3 million for the three months ended September 30, 2019 from $8.8 million for the three months ended September 30, 2018. The increase was mainly attributable to increases in occupancy and equipment of $358,000 as a result of rebranding and branch renovation initiatives; compensation and benefits expense of $120,000 as a result of expenses related to restricted stock and stock options; other operating expenses of $90,000 as a result of increase in recruiting fees of $107,000 offset by a credit from the Federal Deposit Insurance Corporation in the amount of $205,000 related to our FDIC deposit insurance assessment; insurance and surety bond premiums of $59,000; and data processing expenses of $56,000 as a result of system enhancements and implementation charges related to software upgrades and additional products. The increase in noninterest expense was partially offset by decreases in direct loan expenses of $82,000; office supplies, telephone and postage expenses of $27,000 and professional fees of $22,000.

Asset Quality

Nonperforming assets increased to $10.3 million, or 0.94% of total assets, at September 30, 2019, from $10.1 million, or 0.96% of total assets, at June 30, 2019 and $6.6 million, or 0.67% of total assets, at September 30, 2018. The increase from June 30, 2019 is mainly attributable to an increase in nonaccrual, 1-4 family residential loans of $522,000.

There was a $14,000 provision for loan losses for the quarter ended September 30, 2019, compared to $0 for the quarter ended June 30, 2019 and $602,000 for the quarter ended September 30, 2018. The allowance for loan losses was $12.2 million, or 1.27% of total loans, at September 30, 2019, compared to $12.5 million, or 1.32% of total loans, at June 30, 2019 and $12.4 million, or 1.37% of total loans, at September 30, 2018. Net charge-offs totaled $372,000 for the quarter ended September 30, 2019, compared to net recoveries totaling $11,000 for the quarter ended June 30, 2019 and $13,000 for the quarter ended September 30, 2018.        

Balance Sheet

Total assets increased $40.1 million, or 3.8%, to $1,100.0 million at September 30, 2019 from $1,059.9 million at December 31, 2018. Net loans increased $30.0 million, or 3.3%, to $948.5 million at September 30, 2019 from $918.5 million at December 31, 2018. The increase in net loans was primarily due to increases of $18.6 million, or 21.2%, in construction and land loans, $3.9 million, or 1.0%, in 1-4 family residential and $12.1 million, or 5.2%, in multifamily residential loans, offset by a decrease of $4.7 million, or 29.7%, in business loans.

Steven A. Tsavaris, Executive Chairman remarked that, “while management remains optimistic about the loan production for the remainder of 2019, we are experiencing tough competition for refinancings accelerated by the decreasing interest rate environment." He also remarked that "loan originations remain close to the same levels as the previous year, but payoffs have increased as interest rates have declined."

Total deposits decreased $51.9 million, or 6.4%, to $757.8 million at September 30, 2019 from $809.8 million at December 31, 2018. The decrease in deposits was mainly attributable to decreases of $55.4 million, or 13.1 %, in certificates of deposit and $11.7 million, or 10.1% in demand deposits offset by an increase of $15.2 million, or 5.7%, in savings, NOW and money market accounts.

Total stockholders’ equity was $160.6 million at September 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 September 30, 2019. The Bank’s total capital to risk-weighted assets ratio was 19.29%, the tier 1 capital to risk-weighted assets ratio and the common equity tier 1 capital ratio were both 18.03%, and the tier 1 capital to total assets ratio was 13.62% at September 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 through September 24, 2019. Under the repurchase program, the Company could have repurchased up to 923,151 shares of its common stock, or approximately 5% of the outstanding shares, which are to be used primarily to fund the grants of restricted stock units and stock options made under the Company’s 2018 Long-Term Incentive Plan. Repurchased shares are held by the Company as Treasury shares until used to fund the restricted stock units and option grants. A total of 886,325 shares were repurchased under the program before it expired on September 24, 2019. During the quarter ended September 30, 2019, the Company repurchased 409,347 shares of the Company’s common stock.

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 1-4 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  
  September 30,     June 30,     March 31,     December 31,     September 30,  
  2019     2019     2019     2018     2018  
ASSETS                                      
Cash and due from banks:                                      
Cash $ 6,425     $ 6,003     $ 5,690     $ 45,225     $ 5,494  
Interest-bearing deposits in banks   40,965       47,007       35,877       24,553       16,895  
Total cash and cash equivalents   47,390       53,010       41,567       69,778       22,389  
Available-for-sale securities, at fair value   51,966       22,154       22,166       27,144       24,177  
Loans receivable, net   948,548       934,236       925,099       918,509       893,884  
Accrued interest receivable   3,893       3,773       3,735       3,795       3,609  
Premises and equipment, net   32,805       32,205       31,777       31,135       29,293  
Other real estate owned         58                    
Federal Home Loan Bank of New York stock (FHLBNY), at cost   8,659       4,609       2,915       2,915       2,621  
Deferred tax assets   3,925       3,913       3,852       3,811       4,118  
Other assets   2,802       2,158       2,485       2,814       2,620  
Total assets $ 1,099,988     $ 1,056,116     $ 1,033,596     $ 1,059,901     $ 982,711  
LIABILITIES AND STOCKHOLDERS' EQUITY                                      
Liabilities:                                      
Deposits $ 757,845     $ 802,408     $ 806,781     $ 809,758     $ 764,792  
Accrued interest payable   81       88       75       63       75  
Advance payments by borrowers for taxes and insurance   7,780       6,059       8,099       6,037       7,219  
Advances from the Federal Home Loan Bank of New York and others   169,404       79,404       44,404       69,404       37,775  
Other liabilities   4,324       2,954       3,975       5,467       5,706  
Total liabilities   939,434       890,913       863,334       890,729       815,567  
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 17,576,703 shares outstanding as of  September 30, 2019 and 18,463,028 shares issued and outstanding as of December 31,2018   185       185       185       185       185  
Treasury stock, at cost; 886,325 shares at September 30, 2019 and no shares as of December 31, 2018   (12,663 )     (6,798 )     (193 )            
Additional paid-in-capital   85,750       85,357       84,976       84,581       84,557  
Retained earnings   101,140       100,431       99,481       98,813       96,896  
Accumulated other comprehensive loss   (7,947 )     (7,941 )     (8,035 )     (8,135 )     (8,101 )
Unearned compensation - ESOP; 591,062 shares as of September 30, 2019 and 627,251 shares  as of December 31, 2018   (5,911 )     (6,031 )     (6,152 )     (6,272 )     (6,393 )
Total stockholders' equity   160,554       165,203       170,262       169,172       167,144  
Total liabilities and stockholders' equity $ 1,099,988     $ 1,056,116     $ 1,033,596     $ 1,059,901     $ 982,711  


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

  For the Quarters Ended  
  September 30,     June 30,     March 31,     December 31,     September 30,  
  2019     2019     2019     2018     2018  
Interest and dividend income:                                      
Interest on loans receivable $ 12,663     $ 12,060     $ 12,095     $ 12,026     $ 11,483  
Interest on deposits due from banks   117       278       149       170       141  
Interest and dividend on available-for-sale securities and FHLBNY stock   173       76       138       130       113  
Total interest and dividend income   12,953       12,414       12,382       12,326       11,737  
Interest expense:                                      
Interest on certificates of deposit   1,896       1,904       1,956       2,078       1,942  
Interest on other deposits   759       821       631       320       272  
Interest on borrowings   533       345       333       321       276  
Total interest expense   3,188       3,070       2,920       2,719       2,490  
Net interest income   9,765       9,344       9,462       9,607       9,247  
Provision for loan losses   14             149       215       602  
Net interest income after provision for loan losses   9,751       9,344       9,313       9,392       8,645  
Noninterest income:                                      
Service charges and fees   247       228       230       217       191  
Brokerage commissions   36       24       109       108       286  
Late and prepayment charges   150       262       139       278       65  
Other   146       172       275       212       172  
Total noninterest income   579       686       753       815       714  
Noninterest expense:                                      
Compensation and benefits   4,667       4,476       5,014       4,371       4,547  
Occupancy and equipment   1,943       1,732       1,911       1,879       1,585  
Data processing expenses   398       431       353       357       342  
Direct loan expenses   183       182       156       217       265  
Insurance and surety bond premiums   146       83       83       94       87  
Office supplies, telephone and postage   281       271       317       349       308  
Professional fees   956       733       510       1,025       978  
Marketing and promotional expenses   46       47       26       68       40  
Directors fees   69       73       83       69       69  
Regulatory dues   70       47       56       60       63  
Other operating expenses   575       632       582       585       485  
Total noninterest expense   9,334       8,707       9,091       9,074       8,769  
Income before income taxes   996       1,323       975       1,133       590  
Provision for income taxes   287       373       307       498       188  
Net income $ 709     $ 950     $ 668     $ 635     $ 402  
Earnings per share:                                      
Basic $ 0.04     $ 0.05     $ 0.04     $ 0.04     $ 0.02  
Diluted $ 0.04     $ 0.05     $ 0.04     $ 0.04     $ 0.02  


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

  For the Nine Months Ended September 30,  
  2019     2018     Variance $     Variance %  
Interest and dividend income:                              
Interest on loans receivable $ 36,818     $ 32,922     $ 3,896       11.83 %
Interest on deposits due from banks   498       510       (12 )     (2.35 %)
Interest and dividend on available-for-sale securities and FHLBNY stock   433       399       34       8.52 %
Total interest and dividend income   37,749       33,831       3,918       11.58 %
Interest expense:                              
Interest on certificates of deposit   5,756       5,539       217       3.92 %
Interest on other deposits   2,211       655       1,556       237.56 %
Interest on borrowings   1,211       578       633       109.52 %
Total interest expense   9,178       6,772       2,406       35.53 %
Net interest income   28,571       27,059       1,512       5.59 %
Provision for loan losses   163       1,034       (871 )     (84.24 %)
Net interest income after provision for loan losses   28,408       26,025       2,383       9.16 %
Noninterest income:                              
Service charges and fees   705       627       78       12.44 %
Brokerage commissions   169       424       (255 )     (60.14 %)
Late and prepayment charges   551       327       224       68.50 %
Other   593       744       (151 )     (20.30 %)
Total noninterest income   2,018       2,122       (104 )     (4.90 %)
Noninterest expense:                              
Compensation and benefits   14,157       13,466       691       5.13 %
Occupancy and equipment   5,586       4,794       792       16.52 %
Data processing expenses   1,182       1,050       132       12.57 %
Direct loan expenses   521       572       (51 )     (8.92 %)
Insurance and surety bond premiums   312       275       37       13.45 %
Office supplies, telephone and postage   869       960       (91 )     (9.48 %)
Professional fees   2,199       2,130       69       3.24 %
Marketing and promotional expenses   119       147       (28 )     (19.05 %)
Directors fees   225       207       18       8.70 %
Regulatory dues   173       177       (4 )     (2.26 %)
Other operating expenses   1,789       1,705       84       4.93 %
Total noninterest expense   27,132       25,483       1,649       6.47 %
Income before income taxes   3,294       2,664       630       23.65 %
Provision for income taxes   967       623       344       55.22 %
Net income $ 2,327     $ 2,041     $ 286       14.01 %
Earnings per share:                              
Basic $ 0.13     $ 0.11     N/A     N/A  
Diluted $ 0.13     $ 0.11     N/A     N/A  


PDL Community Bancorp and Subsidiaries
Key Metrics

  At or for the Quarters Ended  
  September 30,     June 30,     March 31,     December 31,     September 30,  
  2019     2019     2019     2018     2018  
Performance Ratios:                                      
Return on average assets   0.27 %     0.37 %     0.26 %     0.25 %     0.16 %
Return on average equity   1.71 %     2.26 %     1.59 %     1.49 %     0.95 %
Net interest rate spread (1)   3.44 %     3.34 %     3.46 %     3.52 %     3.49 %
Net interest margin (2)   3.83 %     3.75 %     3.86 %     3.90 %     3.86 %
Noninterest expense to average assets   3.54 %     3.38 %     3.59 %     3.57 %     3.54 %
Efficiency ratio (3)   90.24 %     86.81 %     89.00 %     87.07 %     88.03 %
Average interest-earning assets to average interest- bearing liabilities   131.38 %     133.20 %     133.93 %     134.30 %     135.09 %
Average equity to average assets   15.71 %     16.27 %     16.58 %     16.69 %     17.06 %
Capital Ratios:                                      
Total capital to risk weighted assets (bank only)   19.29 %     19.54 %     19.32 %     19.39 %     19.60 %
Tier 1 capital to risk weighted assets (bank only)   18.03 %     18.29 %     18.06 %     18.14 %     18.35 %
Common equity Tier 1 capital to risk-weighted assets (bank only)   18.03 %     18.29 %     18.06 %     18.14 %     18.35 %
Tier 1 capital to average assets (bank only)   13.62 %     13.64 %     13.56 %     13.66 %     13.78 %
Asset Quality Ratios:                                      
Allowance for loan losses as a percentage of total loans   1.27 %     1.32 %     1.33 %     1.36 %     1.37 %
Allowance for loan losses as a percentage of nonperforming loans   117.72 %     123.50 %     155.87 %     186.77 %     (186.74 %)
Net (charge-offs) recoveries to average outstanding loans   (0.15 %)     0.00 %     (0.16 %)     0.03 %     0.00 %
Non-performing loans as a percentage of total loans   1.09 %     1.08 %     0.86 %     0.73 %     0.73 %
Non-performing loans as a percentage of total assets   0.94 %     0.96 %     0.77 %     0.64 %     0.67 %
Total non-performing assets as a percentage of total assets   0.94 %     0.96 %     0.77 %     0.64 %     0.67 %
Total non-performing assets, accruing loans past due 90 days or more,  and accruing troubled debt restructured loans as a percentage of total assets   1.73 %     1.82 %     1.74 %     1.63 %     1.79 %
Other:                                      
Number of offices 14     14     14     14     14  
Number of full-time equivalent employees 187     183     185     181     175  

(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

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  For the Quarters Ended  
  September 30,     June 30,     March 31,     December 31,     September 30,  
  2019     2019     2019     2018     2018  
  Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
  (Dollars in thousands)  
Mortgage loans:                                                                    
1-4 family residential