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PDL Community Bancorp Announces Results for the Year Ended December 31, 2018

NEW YORK, March 20, 2019 (GLOBE NEWSWIRE) -- PDL Community Bancorp (the “Company”) (PDLB), the holding company for Ponce Bank (the “Bank”), reported net income of $2.7 million for the year ended December 31, 2018 compared to a net loss of $4.4 million for the year ended December 31, 2017. The Company was formed on September 29, 2017 in conjunction with the reorganization of Ponce De Leon Federal Bank, Ponce Bank’s predecessor, into a two-tier mutual holding company structure with the Company as the mid-tier stock form holding company. Accordingly, the Company’s financial results for periods prior to September 30, 2017 are solely those of Ponce Bank. The Company’s results of operations for 2017 include a one-time pre-tax contribution by the Company of 609,279 shares of common stock, valued at $6.1 million, and $200,000 in cash, to establish The Ponce De Leon Foundation (the “Foundation”).

The Company reported net income of $635,000 for the quarter ended December 31, 2018 compared to a net loss of $2.9 million for the same period in 2017. Basic and diluted earnings per share for the three months ended December 31, 2018 were both $0.04.

Carlos P. Naudon, President and CEO, remarked that “we are deriving significant benefits from continuing to focus on organic growth while investing in enhancing our customers’ experiences.” Executive Chairman Steven A. Tsavaris noted that “our investments leading up to becoming a public company have contributed to a reduction in the growth of the costs of being a public company.”

Net Interest Income

Net interest income was $36.7 million for the year ended December 31, 2018, up $4.5 million, or 13.9%, from $32.2 million for the year ended December 31, 2017. The increase in net interest income for the year ended December 31, 2018 compared to the year ended December 31, 2017 reflects a $7.2 million, or 18.4%, increase in total interest and dividend income offset by an increase of $2.7 million, or 39.9%, in total interest expense. The increase in interest and dividend income is primarily due to growth in the investor-owned one-to-four family, multifamily, nonresidential, and construction and land loans that provided an increase in average outstanding loans of $131.5 million, or 17.9%, for the year ended December 31, 2018 compared to the same period in 2017. The net interest rate spread and net interest margin was 3.57% and 3.92%, respectively, for the year ended December 31, 2018 compared to 3.76% and 4.02%, respectively, for the same period in 2017. The average yield on loans decreased to 5.18% for the year ended December 31, 2018 from 5.19% for the same period in 2017. The increase in interest expense is due to an increase in average interest-bearing liabilities of $81.5 million, or 13.3%, for the year ended December 31, 2018 compared to the same period in 2017. The cost of interest-bearing liabilities increased to 1.36% for the year ended December 31, 2018 from 1.11% for the same period in 2017.

Net interest income was $9.6 million for the quarter ended December 31, 2018, up $1.1 million, or 13.3%, from $8.5 million for the quarter ended December 31, 2017. The increase in net interest income for the quarter ended December 31, 2018 compared to the same period in 2017 reflects a $2.0 million, or 19.4%, increase in total interest and dividend income offset by an increase of $869,000, or 47.0%, in total interest expense. The increase in interest and dividend income is primarily due to growth in the investor-owned one-to-four family, multifamily, nonresidential, and construction and land loans, that provided an increase in average outstanding loans of $108.7 million, or 13.5%, for the quarter ended December 31, 2018 compared to the same period in 2017. The net interest rate spread and net interest margin was 3.52% and 3.90%, respectively, for the quarter ended December 31, 2018 compared to 3.58% and 3.88%, respectively, for the same period in 2017. The average yield on loans increased to 5.21% for the quarter ended December 31, 2018 from 4.96% for the same period in 2017. The increase in interest expense is due to an increase in average interest-bearing liabilities of $90.0 million, or 14.1%, for the quarter ended December 31, 2018 compared to the same period in 2017. The cost of interest-bearing liabilities increased to 1.48% for the quarter ended December 31, 2018 from 1.15% for the same period in 2017.

Noninterest Income

Noninterest income was $2.9 million for the year ended December 31, 2018, down $166,000, or 5.4%, from $3.1 million for the same period in 2017. The decrease is mainly attributed to a decrease in late fees and prepayment charges related to mortgage loans of $204,000, a decrease in service charges and brokerage commission of $78,000, offset by an increase in other fees of $116,000.

Noninterest income was $815,000 for the quarter ended December 31, 2018, up $121,000, or 17.4%, from $694,000 for the same period in 2017. The increase is mainly attributed to an increase in late fees and prepayment charges related to mortgage loans of $71,000 and other fees of $43,000.

Noninterest Expense

Noninterest expense was $34.6 million for the year ended December 31, 2018, down $2.0 million, or 5.5%, from $36.6 million for the same period in 2017. The decrease is mainly attributed to the absence of a one-time pre-tax contribution by the Company in 2017 of 609,279 shares of common stock, valued at $6.1 million, and $200,000 in cash, in connection with the establishment of the Foundation. This decrease was partially offset by increases in professional fees of $2.1 million, compensation and benefits of $830,000, occupancy expense of $848,000, and office supplies, telephone and postage of $206,000.

Noninterest expense was $9.1 million for the quarter ended December 31, 2018, up $338,000, or 3.9%, from $8.8 million for the same period in 2017. The increase is mainly attributed to increases in professional fees of $603,000 and occupancy expenses of $291,000, which was offset by a decrease in compensation and benefits of $733,000.

Asset Quality

Nonperforming assets decreased to $6.8 million, or 0.64% of total assets at December 31, 2018 from $11.4 million, or 1.23%, of total assets at December 31, 2017. The decrease is mainly attributable to a decrease in nonaccruals of $4.6 million which includes a decrease of $2.2 million in owner-occupied one-to-four family residences.

Provision for loan losses was $215,000 for the quarter ended December 31, 2018, compared to $1.2 million for the same period in 2017. Provision for loan losses was $1.2 million for the year ended December 31, 2018, compared to $1.7 million for the same period in 2017. The allowance for loan losses was $12.7 million, or 1.36%, of total loans at December 31, 2018, compared to $11.1 million, or 1.37%, of total loans at December 31, 2017. Net recoveries totaled $78,000 for the quarter ended December 31, 2018, compared to  net charge-offs of $1.3 million for the same period in 2017.  Net recoveries totaled $339,000 for the year ended December 31, 2018, or 0.04%, of average loans outstanding, compared to net charge offs of $850,000 for the year ended December 31, 2017, or 0.12%, of average loans outstanding.

Balance Sheet

Total assets increased $134.4 million, or 14.5%, to $1.1 billion at December 31, 2018 from $925.5 million at December 31, 2017. Net loans increased $119.8 million, or 15.0%, to $918.5 million at December 31, 2018 from $798.7 million at December 31, 2017. The increase in loans was primarily attributed to an increase of $126.1 million in mortgage loans in the investor-owned one-to-four family residential, multifamily, nonresidential, and construction and land and $2.8 million increase in business loans. The increase was offset by a decrease of $8.1 million in owner-occupied one-to-four family residential loans.

Total deposits increased $95.8 million, or 13.4%, to $809.8 million at December 31, 2018 from $714.0 million at December 31, 2017. The increase in deposits was primarily attributed to increases in certificates of deposits of $14.0 million, in demand deposits of $12.9 million, and in money market deposits of $69.7 million.

Total stockholders’ equity was $169.2 million at December 31, 2018 compared to $164.8 million at December 31, 2017. The Company and the Bank exceeded all regulatory capital requirements to be deemed well-capitalized at December 31, 2018. The Bank’s total capital to risk-weighted asset ratio was 19.39%, the tier 1 capital to risk-weighted assets ratio and the common equity tier 1 capital ratio were both 18.14%, the tier 1 capital to total assets ratio was 13.66% at December 31, 2018 compared to 20.73%, 19.48%, and 14.67% at December 31, 2017, respectively.

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 -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)

      
  December 31,     September 30,     June 30,     March 31,     December 31,  
  2018     2018     2018     2018     2017  
ASSETS                                      
Cash and due from banks:                                      
Cash $ 45,225     $ 5,494     $ 7,088     $ 6,570     $ 24,746  
Interest-bearing deposits in banks   24,553       16,895       42,094       52,409       34,978  
Total cash and cash equivalents   69,778       22,389       49,182       58,979       59,724  
Available-for-sale securities, at fair value   27,144       24,177       28,144       28,422       28,897  
Loans receivable, net of allowance for loan losses   918,509       893,884       850,426       823,014       798,703  
Accrued interest receivable   3,795       3,609       3,350       3,202       3,335  
Premises and equipment, net   31,135       29,293       28,366       27,684       27,172  
Federal Home Loan Bank Stock (FHLB), at cost   2,915       2,621       2,617       1,673       1,511  
Deferred tax assets   3,811       4,118       3,805       3,801       3,909  
Other assets   2,814       2,620       2,923       2,848       2,271  
Total assets $ 1,059,901     $ 982,711     $ 968,813     $ 949,623     $ 925,522  
LIABILITIES AND STOCKHOLDERS' EQUITY                                      
Liabilities:                                      
Deposits $ 809,758     $ 764,792     $ 753,255     $ 752,267     $ 713,985  
Accrued interest payable   63       75       141       61       42  
Advance payments by borrowers for taxes and insurance   6,037       7,219       5,491       6,999       5,025  
Advances and borrowings   69,404       37,775       37,775       20,000       36,400  
Other liabilities   5,467       5,706       5,573       4,582       5,285  
Total liabilities   890,729       815,567       802,235       783,909       760,737  
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 outstanding at December 31, 2018   185       185       185       185       185  
Additional paid-in-capital   84,581       84,557       84,488       84,419       84,351  
Retained earnings   98,813       96,896       96,495       95,796       94,855  
Accumulated other comprehensive loss   (8,135 )     (8,101 )     (8,076 )     (8,052 )     (7,851 )
Unearned Employee Stock Ownership Plan (ESOP) shares   (6,272 )     (6,393 )     (6,514 )     (6,634 )     (6,755 )
                                       
Total stockholders' equity   169,172       167,144       166,578       165,714       164,785  
Total liabilities and stockholders' equity $ 1,059,901     $ 982,711     $ 968,813     $ 949,623     $ 925,522  
                                       

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

     For the Quarters Ended  
    December 31,     September 30,     June 30,     March 31,     December 31,  
    2018     2018     2018     2018     2017  
Interest and dividend income:                                        
Interest on loans receivable   $ 12,026     $ 11,483     $ 11,053     $ 10,386     $ 10,106  
Interest and dividends on investment securities and FHLB stock     300       254       330       324       221  
Total interest and dividend income     12,326       11,737       11,383       10,710       10,327  
Interest expense:                                        
Interest on certificates of deposit     2,078       1,942       1,847       1,750       1,599  
Interest on other deposits     320       272       199       185       168  
Interest on borrowings     321       276       204       98       83  
Total interest expense     2,719       2,490       2,250       2,033       1,850  
Net interest income     9,607       9,247       9,133       8,677       8,477  
Provision for loan losses     215       602       337       94       1,219  
Net interest income after provision for loan losses     9,392       8,645       8,796       8,583       7,258  
Noninterest income:                                        
Service charges and fees     217       191       214       223       224  
Brokerage commissions     108       286       42       96       94  
Late and prepayment charges     278       65       52       211       207  
Other     212       172       216       355       169  
Total noninterest income     815       714       524       885       694  
Noninterest expense:                                        
Compensation and benefits     4,371       4,547       4,563       4,458       5,104  
Occupancy expense     1,879       1,585       1,717       1,491       1,588  
Data processing expenses     357       342       300       408       293  
Direct loan expenses     217       265       152       155       171  
Insurance and surety bond premiums     94       87       99       89       64  
Office supplies, telephone and postage     349       308       352       300       317  
FDIC deposit insurance assessment     70       68       66       68       4  
Charitable foundation contributions                              
Professional fees     1,025       978       529       623       422  
Directors fees     69       69       70       69       71  
Marketing and promotional expenses     68       40       55       52       79  
Regulatory dues     60       63       58       56       18  
Other operating expenses     515       417       494       490       605  
Total noninterest expense     9,074       8,769       8,455       8,259       8,736  
Income (loss) before income taxes     1,133       590       865       1,209       (784 )
Provision for income taxes     498       188       166       268       2,081  
                                         
Net income (loss)   $ 635     $ 402     $ 699     $ 941     $ (2,865 )
Earnings per share:                                        
Basic   $ 0.04     $ 0.02     $ 0.04     $ 0.05     $ (0.16 )
Diluted   $ 0.04     $ 0.02     $ 0.04     $ 0.05     $ (0.16 )
                                         

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

     For the Years Ended December 31,  
    2018     2017     Variance $     Variance %  
Interest and dividend income:                                
Interest on loans receivable   $ 44,948     $ 38,172     $ 6,776       17.75 %
Interest and dividends on investment securities and FHLB stock     1,208       817       391       47.86 %
Total interest and dividend income     46,156       38,989       7,167       18.38 %
Interest expense:                                
Interest on certificates of deposit     7,617       5,917       1,700       28.73 %
Interest on other deposits     974       656       318       48.48 %
Interest on borrowings     899       210       689       328.10 %
Total interest expense     9,490       6,783       2,707       39.91 %
Net interest income     36,666       32,206       4,460       13.85 %
Provision for loan losses (recovery)     1,249       1,716       (467 )     (27.21 %)
Net interest income after provision for loan losses     35,417       30,490       4,927       16.16 %
Noninterest income:                                
Service charges and fees     845       909       (64 )     (7.04 %)
Brokerage commissions     533       547       (14 )     (2.56 %)
Late and prepayment charges     606       810       (204 )     (25.19 %)
Other     954       838       116       13.84 %
Total noninterest income     2,938       3,104       (166 )     (5.35 %)
Noninterest expense:                                
Compensation and benefits     17,939       17,109       830       4.85 %
Occupancy expense     6,673       5,825       848       14.56 %
Data processing expenses     1,408       1,470       (62 )     (4.22 %)
Direct loan expenses     788       739       49       6.63 %
Insurance and surety bond premiums     369       269       100       37.17 %
Office supplies, telephone and postage     1,309       1,103       206       18.68 %
FDIC deposit insurance assessment     272       250       22       8.80 %
Charitable foundation contributions           6,293       (6,293 )     100.00 %
Professional fees     3,154       1,060       2,094       197.55 %
Directors fees     277       289       (12 )     (4.15 %)
Marketing and promotional expenses     215       308       (93 )     (30.19 %)
Regulatory dues     238       262       (24 )     (9.16 %)
Other operating expenses     1,915       1,580       335       21.20 %
Total noninterest expense     34,557       36,557       (2,000 )     (5.47 %)
Income (loss) before income taxes     3,798       (2,963 )     6,761       (228.18 %)
Provision for income taxes     1,121       1,424       (303 )     (21.28 %)
Net income (loss)   $ 2,677     $ (4,387 )   $ 7,064       (161.02 %)
Earnings per share:                                
Basic   $ 0.15     $ (0.16 )   N/A     N/A  
Diluted   $ 0.15     $ (0.16 )   N/A     N/A  
                                 

PDL Community Bancorp and Subsidiaries
Key Metrics

    At or For the Years Ended December 31,  
    2018     2017     2016     2015     2014  
Performance Ratios:                                        
Return on average assets     0.28 %     (0.51 %)     0.20 %     0.35 %     0.35 %
Return on average equity     1.60 %     (3.52 %)     1.53 %     2.76 %     2.80 %
Net interest rate spread (1)     3.57 %     3.76 %     3.82 %     3.96 %     4.26 %
Net interest margin (2)     3.92 %     4.02 %     4.02 %     4.14 %     4.42 %
Noninterest expense to average assets     3.56 %     4.28 %     3.84 %     3.67 %     3.59 %
Efficiency ratio (3)     87.26 %     103.53 %     92.15 %     86.23 %     79.34 %
Average interest-earning assets to average interest- bearing liabilities     134.52 %     130.35 %     123.84 %     121.66 %     119.27 %
Average equity to average assets     17.26 %     14.58 %     12.81 %     12.78 %     12.58 %
Capital Ratios:                                        
Total capital to risk weighted assets (bank only)     19.39 %     20.73 %     19.21 %     20.72 %     20.32 %
Tier 1 capital to risk weighted assets (bank only)     18.14 %     19.48 %     17.96 %     19.46 %     19.06 %
Common equity Tier 1 capital to risk-weighted assets (bank only)     18.14 %     19.48 %     17.96 %     19.46 %   N/A  
Tier 1 capital to average assets (bank only)     13.66 %     14.67 %     13.32 %     13.67 %     13.46 %
Asset Quality Ratios:                                        
Allowance for loan losses as a percentage of total loans     1.36 %     1.37 %     1.57 %     1.64 %     1.71 %
Allowance for loan losses as a percentage of nonperforming loans     186.77 %     97.05 %     132.15 %     99.78 %     58.79 %
Net (charge-offs) recoveries to average outstanding loans during the year     0.04 %     (0.12 %)     0.13 %     (0.06 %)     (0.30 %)
Non-performing loans as a percentage of total loans     0.73 %     1.41 %     1.19 %     1.65 %     2.91 %
Non-performing loans as a percentage of total assets     0.64 %     1.23 %     1.04 %     1.35 %     2.28 %
Total non-performing assets as a percentage of total assets     0.64 %     1.23 %     1.04 %     1.36 %     2.30 %
Total non-performing assets, accruing loans past due 90 days or more,  and accruing troubled debt restructured loans as a percentage of total assets     1.63 %     2.72 %     3.50 %     4.19 %     5.33 %
Other:                                        
Number of offices   14     14     14     14     14  
Number of full-time equivalent employees   181     177     174     175     164  
                                         

(1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of average 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.

PDL Community Bancorp and Subsidiaries
Loan Portfolio

...
    At December 31,  
    2018     2017     2016     2015     2014  
    Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent     Amount     Percent  
    (Dollars in thousands)  
Mortgage loans:                                                                                
1-4 family residential                                                                                
Investor Owned   $ 303,197       32.61 %   $ 287,158       35.51 %   $ 227,409       34.90 %   $ 203,239       35.25 %   $ 190,726       34.54 %
Owner-Occupied     92,788       9.98 %     100,854       12.47 %     97,631       14.98 %     106,053       18.39 %     105,222       19.05 %
Multifamily residential     232,509       25.01 %     188,550       23.31 %     158,200       24.28 %     122,836       21.30 %     110,978       20.10 %
Nonresidential properties     196,917       21.18 %     151,193       18.70 %     121,500       18.64 %     106,462       18.46 %     111,806       20.24 %
Construction and land     87,572       9.42 %     67,240       8.31 %     30,340       4.66 %     22,883       3.97 %     18,707       3.39 %
Total mortgage loans     912,983       98.20 %     794,995       98.30 %     635,080       97.46 %     561,473       97.37 %     537,439       97.32 %
Nonmortgage loans: