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

UPDATE: Brunswick Bancorp, Brunswick, NJ (BRBW)

Four hundred and fifty five days after my April 2017 Review of Brunswick Bancorp, head scoundrel Roman Gumina met his Maker.

In death there is hope! If Roman's successor Uncle Frank Junior can right side the bank's expenses, it's entirely plausible we could see a resurrection of BRBW share price to $14. Were Uncle Frankie to sell the bank, Brunswick stock could conceivably garner the same.

Question is, how much of Roman Gumina's greed is embodied in the bank's operational design and family management DNA? In his wake, is BRBW a bargain buy or a pile of dead money?

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Disclosure: As of this posting, I own shares of BRBW and may subsequently either dispose of them or purchase more.

Prospective Buyers	Still true today: The $95M of deposits in Brunswick's Livingston Ave branch headquarters might be appealing to area institutions, but I doubt any buyer would be interested in the 4 out of 7 other branches struggling to manage less than $9M each. Amboy Bancorp, Old Bridge, NJ (private) Magyar Bancorp, New Brunswick, NJ (MGYR) Provident Financial Services, Iselin, NJ (PFS)
Financial Snapshot †as of 06/30/2018	Total assets: $187M† Tangible book value per share:      $12.50† NPAs to assets: 4.6%† Price to book: 70% Market cap: $26.5M Dividend yield: 0% Trailing 12-month ROA: 0.3%† Trailing 12-month ROE: 1.7%†
Scoundrels	Frank Gumina, Jr, Interim Chairman Nicholas A. Frungillo, Jr, President and CEO Frank J. Gumina III, Esq, Vice President, Bank Counsel
Red Flag	My concerns about Brunswick Bank & Trust are essentially unchanged since my April 2017 review. The bank's expenses are way out of line with industry norms or anything justifiable (see table below). Roman Gumina owned at least 10 unrelated entities, and money is still flowing from the bank to some of them. More than half the bank's branches are too small to be profitable, and should be closed. NPA's are 4x current industry average. Here's what I'd love to see Management do (and, what fiscal responsibility requires): Cut Occupancy and Other Expenses in half! That alone should add $450K to pre-tax earnings and produce triple last quarter’s earnings. Cut the asking price of REO low enough to sell it, then put the proceeds into earning assets. That could add another $160K to the pre-tax income. Don't spend the late Gumina’s $310,000/year salary on anyone or anything new. That's cash straight to the bottom line. Do these three things, and watch earnings rise six-fold! How Brunswick Bank's expenses compare to peers'. 1 not including rent charged for Bank use of Gumina properties 2 a Timyan Bank Alert favorite in NJ 3 in the two quarters prior to close of merger with SB One Bancorp (SBBX)
Sources	Brunswick Bank & Trust website Roman Gumina Obituary June 2018 Call Report SNL Financial Confidential interviews with shareholders and analysts

Brunswick Bancorp, New Brunswick, NJ (BRBW)

A Case of Appeal to Family Interest

There's no indication that the scoundrels at Brunswick Bancorp care about their shareholders, but maybe we can appeal to their greed.

Given that Chairman and CEO Roman Gumina owns 27%, his mother 5.5%, and other Guminas 4.2% or more, the family has two great options for making out good without further shareholder shake down:

1. Were the Guminas to sell the bank outright, they would increase the value of their own holdings by $10M. Outside investors would score a similar amount.
   
2. Alternatively, the Gumina family could use a quarter of the bank's excess capital to buy stock back from those of us who want out, make Brunswick Bank & Trust even more of a family operation, and still increase the value of their holdings by $10M.

In any event, if you don't own BRBW, consider yourself lucky! Even at 58% of book value, the stock only "looks" cheap.

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Disclosure: As of this posting, I own shares of BRBW and may subsequently either dispose of them or purchase more.

Prospective Buyers	The $88M in deposits in Brunswick's Livingston Ave branch might be appealing to area institutions, but I doubt any buyer would be interested in the 5 out of 6 other branches struggling to manage less than $10M each. Amboy Bancorp, Old Bridge, NJ (private) Magyar Bancorp, New Brunswick, NJ (MGYR) Provident Financial Services, Iselin, NJ (PFS)
Financial Snapshot †as of 12/31/2016	Total assets: $180M† Tangible book value per share: $12.14† NPAs to assets: 6.5%† Price to book: 59% Market cap: $21.7M Dividend yield: 0% Trailing 12-month return on assets: 0.38%† Trailing 12-month return on equity: 1.85%†
Scoundrels	Roman Gumina, Chairman and CEO Nicholas A. Frungillo, Jr., President Louis Foulke, CFO, Secretary and Treasurer
Red Flags	Ask around and you'll hear all sorts of unsettling rumors about the Gumina family — real gangster stuff, complete with death threats and people suddenly going "dark" after daring to voice their concerns. In the interest of self-preservation, I'll step around all that here. Performance at Brunswick Bank & Trust hasn't improved in decades. In 1989, under the-now-deceased Carmen Gumina's watch, the bank earned $1.1M. It hasn't come close since. NPAs were 10% as recently as Year End 2012, and are still high at 6.5%. Meanwhile, current Chairman and CEO Roman Gumina has been "rewarding" himself pretty handsomely: Over the past seven years, Brunswick Bancorp has suffered a cumulative loss of $501K while Roman skimmed off $2,266,000. In 2010, the bank lost $1.2M and NPAs reached 12%, but that didn't stop Roman from taking a $96K bonus on top of his $310K base pay. Even as the bank started reporting income — net of $283K, $406K, and $677K in 2014, 2015, and 2016, respectively — Roman's $310K a year salary is beyond what you'd call "commensurate with performance."  In spite of his high compensation and the bank's screaming need for stronger management, Gumina doesn't appear to consider his responsibilities or pay grade worthy of full-time attention. 10 Other Entities in which Roman Gumina Owns a Controlling Interest  Aaron Road Associates Cardal Associates Cranbury Station LLC Applegarth Associates Carmine Investments Brunswick Management LLC Englishtown Realty LLC Mullica Hill Management Mantec Associates Franklinville Plaza Management Associates LLC
Sources	Brunswick Bank & Trust website Richard Boywitt vs Brunswick Bancorp lawsuit SNL Financial Confidential interviews with shareholders and analysts