Ponce Financial Group, Bronx, NY (PDLB)

A New York Case of Self-Serving Bank Conversion

Ponce Financial Group stands out amongst its peers in the northeastern US, but not in a good way.

Despite receiving $225M of preferred funding (i.e., no interest for two years) in June 2022 from the U.S. Emergency Capital Investment Program (ECIP),  PDLB remains unprofitable. Meanwhile, Management's deployment of capital has been as unusual as it is self-serving.

PDLB is a walking invitation for shareholders who meet the SEC Rule §240.14a-8 criteria to submit proposals recommending that Management put Ponce Bank up for sale first chance it can (i.e., January 2025). 

Per Ponce Financial's April 2023 Proxy, the deadline to submit a shareholder proposal is December 29, 2023.

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Disclosure: As of this posting, I don't own any shares of PDLB.

Prospective Buyers	Any of these area banks should be able to cut costs and better utilize Ponce Bank's assets by acquiring Ponce near book value: Apple Bank, New York, NY (private) Dime Community Bank, Bronx, NY (DCOM) Emigrant Savings, New York, NY (private)
Financial Snapshot †as of 09/30/2023	Total assets: $2.62B† Tangible book value per share:    $10.99† NPAs to assets: 0.6%† Price to book: 84% Market cap: $220M Dividend yield: 0% Trailing 12-month ROA: 0%† Trailing 12-month ROE: 0%†
Scoundrels	Steven A. Tsavaris, Chairman Carlos P. Naudon, President and CEO Sergio Vaccaro, CFO
Red Flags	It's easy to see how Ponce Bank has lost $37M since its January 2022 second step stock offering. It's less easy to understand Management's unusual capital investments and self-serving compensation strategies. Just months after raising $122M in the stock offering, Ponce reported an $8M quarterly loss due to a fraudulent microlending program called Grain. Not to be deterred, Ponce then partnered with unproven fintech startups SaveBetter LLC and LendingFront Technologies.  Last October, Ponce spent $3M to purchase an interest in Latin American (!) payment processor Bamboo Payment In spite of their poor performance and creative capital destruction, Tsvaris and Naudon paid themselves $4.9M over the past two years.  PDLB WMPN MGYR NECB Assets $2.6B $830M $907M $1.7B Stock +/– – 10% + 25% - 2% + 70% Earnings* -$27.1M +$7.2M +$14.2M +$58.9M * Since PDLB's January 2022 conversion
Sources	Ponce Bank website 2022 Form 10-K Q4 2022 Quarterly Report May 2022 S&P Global Article SEC Rule §14a-8 Denver Law Review of SEC Rule §14a-8 U.S. Emergency Capital Investment Program (ECIP) Confidential interviews with shareholders and analysts