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: Northeast Community Bancorp, White Plains, NY (NECB)

It's time Management at Northeast Community Bancorp stop hoarding the company's shares.

Since my August 2012 review, NECB has managed to accrue some value and bank operations have improved upon Jose Collazo's ascendance in leadership.

Still, Management has failed to feed the bank's shareholders a square meal now for over 11 years, even though they could easily double NECB's value just by converting the rest of the stock to full public ownership.

As I explain below, even if they don't, NECB is too cheap to ignore.

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

Prospective Buyers	Dime Community Bancshares, Brooklyn, NY (DCOM) PCSB Financial Corp, Yorktown Heights, NY (PCSB) Webster Financial Corp, Waterbury, CT (WBS)
Financial Snapshot †as of 09/30/2017 (estimates based on Call Report)	Total assets: $759M† Tangible book value per share:    $9.25† NPAs to assets: 0.67%† Price to book: 108% Market cap: $122M Dividend yield: 1.2% Trailing 12-month ROA: 0.9%† Trailing 12-month ROE: 5.8%†
Mostly Scoundrels †One Luminary	Kenneth Martinek, Chairman and CEO Kenneth H. Thomas, Director Diane B. Cavanaugh, Director Jose Collazo, President and COO†
The Skinny	Given where recent conversions trade in the market, the NECB value proposition is better than ever. Were NECB to fully convert at book value, minority shareholders would obtain $18.83 per share. NECB is trading at about half that value today,  right where it converted in 2006. Even if the bank opts not to fully convert, Northeast Community shareholders can be glad to have stayed at the table. The dinner may be late, but it won't be too shabby compared to what's available in the neighborhood. For example, consider another similarly-sized New York Mutual Holding Company that recently effected a partial conversion like NECB's — PDL Community Bancorp (PDLB). PDLB has a $275M market cap and assets about the same as NECB's at $813M, but were PDL to sell the rest of its shares at book value, its minority shareholders would obtain only $16.20 a share. PDLB is trading at 92% of that value today. Meanwhile, NECB is trading at half PDLB's market cap, while earning twice the money as PDLB.
Sources	Northeast Community Bank website 2017 Proxy Statement 2016 Annual Report SNL Financial Confidential interviews with shareholders and analysts Kenneth H. Thomas business Diane B. Cavanaugh business

Northeast Community Bancorp, White Plains, NY (NECB)

The Case of a Gluttonous Bank en route to Morbid Obesity

Is there any hope Northeast Community Bancorp will check its overindulgence before it's too late? 

After reviewing the state of affairs at NECB, I have to agree with what the market is saying: the bank's directors have dissipated half of its value since it came public in 2006, and their expansion plans are only taking it down.

To watch how they gorge themselves at the expense of shareholders is just plain revolting. The two Kennies in charge ought to be ashamed of themselves, cut their salaries, dispose of their far-flung branches, take the rest of the bank's shares public, buy back what stock they can, sell to the highest bidder, and spare us their ugliness.

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Disclosure: As of this posting, I do not own shares of NECB but may subsequently purchase them.

Prospective Buyers	Customers Bancorp, Wyomissing, PA (privately held) - Recently purchased CMS Bancorp (CMSB) of White Plains and has expressed intentions to continue growing in New York Hudson Valley Holding, Younkers, NY (HVB) - Five times bigger than NECB with overlapping branches  Peoples United Financial, Bridgeport, CT (PBCT) - An acquisitive bank with overlapping branches
Financial Snapshot (as of 06/30/2012)	Total assets: $453M Tangible book value per share: $8.33 NPAs to assets: 5% Price to book: 61% Market cap: $65.6M Dividend yield: 2.3% Trailing 12-month return on assets: 0.27% Trailing 12-month return on equity: 1.22%
Scoundrels	Kenneth Martinek, Chairman, President, and CEO Kenneth H. Thomas, Director and "Consultant" Salvatore Randazzo, CFO and Executive VP Jose Collazo, COO, CIO, and Executive VP
Red Flags	NECB isn't earning anything close to a reasonable return Decent banks make 10% on equity or can at least articulate a plan for getting there The most NECB ever made was about 0.8% ($6M on $240M in assets) in the three years prior to going public (2003-2005) In contrast, Lake Shore Bancorp (LSBK), a bank of almost identical asset size, is nearly five times more profitable NECB's stock is trading at half where it was when it came public, while rival LSBK is still trading where it came public NECB's expansion plan is delusional The more NECB has grown over the past decade, the less it has earned After more than doubling its assets, NECB netted a mere $1.5M, 0.01% return — a spectacular 79% drop in performance from before going public in 2006 NECB is grossly overcompensating its executives The executive team of Northeast Community Bancorp earns more in personal compensation than the bank earns as a corporation  NECB's CEO pays himself $340K per year — more than three times the national average of $110K estimated by Career Builder Kenneth Martinek's compensation is 40% higher then that paid to Daniel P. Reininga, CEO of way-better-performing Lake Shore Bancorp (LSBK) NECB is putting self-dealing above insider ownership Bank Director Kenneth Thomas has been receiving compensation from NECB for 34 years! NECB has paid Thomas over $500K in the past five years alone, presumably for expansion consulting services that clearly haven't served the bank or its shareholders The self-proclaimed bank analyst has at least $2.5M to toss around in bids after failed bank branches, but doesn't believe enough in his own bank after all these years to own more than $50K worth of stock Last week this whiny sore loser loose cannon of a Director lost a bid to purchase a bank branch in Doral, FL and filed a lawsuit against the winning bidder
Sources	Northeast Community Bank website 2011 Annual Report 2012 Annual Meeting and Proxy Statement June 30, 2012 10-Q Kenneth Thomas's website Article in South Florida Business Journal Career Builder Salary calculator Confidential interviews with shareholders