Ponce Financial Group, Inc. Reports First Quarter 2024 Results

Ponce Bank Apr 30, 2024 12:00:00 AM

YORK, April 30, 2024 (GLOBE NEWSWIRE) -- Ponce Financial Group, Inc., (the “Company”) (NASDAQ: PDLB), the holding company for Ponce Bank (the “Bank”), today announced results for the first quarter of 2024.

First Quarter 2024 Highlights (Compared to Prior Periods):

Net income of $2.4 million, or $0.11 per diluted share for the three months ended March 31, 2024, as compared to net income of $0.5 million, or $0.02 per diluted share for the three months ended December 31, 2023 and net income of $0.3 million, or $0.01 per diluted share for the three months ended March 31, 2023.

Included in the $2.4 million of net income for the first quarter of 2024 results is $39.7 million in interest and dividend income, $1.7 million in non-interest income and $0.2 million in benefit for credit losses, offset by $20.8 million in interest expense and $17.0 million in non-interest expense.

Net interest income of $18.8 million for the first quarter of 2024 increased $1.6 million, or 9.46%, from the prior quarter and increased $3.6 million, or 23.47%, from the same quarter last year.

Net interest margin was 2.71% for the first quarter of 2024, increased from 2.66% for the prior quarter and decreased from 2.75% for the same quarter last year.

Non-interest income for the three months ended March 31, 2024 was $1.7 million, increased $0.4 million, or 32.84%, from $1.3 million for the three months ended December 31, 2023 and decreased $0.1 million, or 6.16%, from $1.8 million for the three months ended March 31, 2023.

Non-interest expense for the three months ended March 31, 2024 was $17.0 million, decreased $0.9 million, or 5.29%, compared to $17.9 million for the three months ended December 31, 2023 and increased $0.6 million, or 3.60% compared to $16.4 million for the three months ended March 31, 2023.

Cash and equivalents were $134.7 million as of March 31, 2024, decreased $4.5 million, or 3.21%, from December 31, 2023.

Securities totaled $569.0 million as of March 31, 2024, decreased $12.7 million, or 2.18%, from December 31, 2023 primarily due to regular principal payments.

Net loans receivable were $1.98 billion as of March 31, 2024, increased $85.5 million, or 4.51%, from December 31, 2023.

Deposits were $1.59 billion as of March 31, 2024, increased $78.2 million, or 5.18%, from December 31, 2023.

President and Chief Executive Officer’s Comments

Carlos P. Naudon, Ponce Financial Group’s President and CEO, stated “Despite the challenging operating environment, we continue to make progress: net interest income grew for the fourth quarter in a row, and net interest margin grew for the second quarter in a row. Book value per share is now $11.29 (up $0.39 vs last year) and total equity per share stands at $20.75. We’re also making progress on the expense side and have reduced headcount by 7% year over year. We continue to show strong levels of capital and liquidity. On the capital front, our total capital ratio at Ponce Bank stands at 23.33%, well in excess of regulatory requirements. In terms of liquidity, our liquid assets plus borrowing capacity at the Federal Home Loan Bank of New York ("FHLBNY") stands at $724.1 million, approximately 1.7 times of our uninsured deposits of $416.9 million. We remain committed to the communities we serve, our Minority Depository Institution (“MDI”)/Community Development Financial Institutions ("CDFI") status and continuing to invest in our people and in technology to improve our efficiency."

Executive Chairman’s Comment

Steven A. Tsavaris, Ponce Financial Group’s Executive Chairman added “We continue to grow both loans and deposits while maintaining credit quality. While we see resiliency in our client base, our prudent approach might result in lower growth in the coming quarters as we prioritize sound underwriting practices and balance sheet management over loan growth.”

Selected performance metrics are as follows (refer to “Key Metrics” for additional information):

At or for the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Performance Ratios (Annualized):

2024

2023

Return on average assets (1)

0.33

0.08

0.39

(0.01

0.06

Return on average equity (1)

1.97

0.42

2.11

(0.07

0.27

Net interest rate spread (1) (2)

1.82

1.74

1.68

1.75

1.88

Net interest margin (1) (3)

2.71

2.66

2.58

2.65

2.75

Non-interest expense to average assets (1)

2.35

2.66

2.58

2.65

2.79

Efficiency ratio (4)

82.56

96.83

78.11

96.15

95.88

Average interest-earning assets to average interest- bearing liabilities

129.69

133.50

134.49

137.67

143.62

Average equity to average assets

17.00

18.25

18.32

19.21

20.91

At or for the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Capital Ratios (Annualized):

2024

2023

Total capital to risk-weighted assets (Bank only)

22.79

23.30

25.10

26.30

27.54

Tier 1 capital to risk-weighted assets (Bank only)

21.54

22.05

23.85

25.05

26.28

Common equity Tier 1 capital to risk-weighted assets (Bank only)

21.54

22.05

23.85

25.05

26.28

Tier 1 capital to average assets (Bank only)

16.26

17.49

17.51

17.95

19.51

At or for the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

Asset Quality Ratios (Annualized):

2024

2023

Allowance for loan losses as a percentage of total loans

1.23

1.36

1.51

1.64

1.77

Allowance for loan losses as a percentage of nonperforming loans

140.90

152.99

169.49

167.06

149.73

Net (charge-offs) recoveries to average outstanding loans (1)

(0.25

(0.24

(0.34

(0.41

(0.57

Non-performing loans as a percentage of total gross loans

0.87

0.89

0.98

1.18

Non-performing loans as a percentage of total assets

0.62

0.63

0.76

Total non-performing assets as a percentage of total assets

0.62

0.63

0.76

Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (5)

0.79

0.81

0.82

0.83

0.93

(1) Annualized where appropriate.

(2) 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.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

(4) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

(5) Balances include both modifications to borrowers experiencing financial difficulty, in accordance with ASU 2022-02 adopted on January 1, 2023, and previously existing troubled debt restructurings.

Summary of Results of Operations

Net income for the three months ended March 31, 2024 was $2.4 million compared to net income of $0.5 million for the three months ended December 31, 2023 and net income of $0.3 million for the three months ended March 31, 2023.

The increase of net income for the three months ended March 31, 2024 compared to the three months ended December 31, 2023 was attributed mainly to an increase in net interest income, a decrease in non-interest expense and an increase in non-interest income, partially offset by an increase in provision for income taxes and a decrease in benefit for credit losses.

The increase of net income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was largely due to increases in net interest income, partially offset by increases in provision for income taxes and non-interest expense and a decrease in non-interest income.

Net Interest Income and Net Margin

Net interest income for the three months ended March 31, 2024, increased $1.6 million, or 9.46%, to $18.8 million compared to $17.2 million for the three months ended December 31, 2023 and increased $3.6 million, or 23.47%, compared to $15.2 million for the three months ended March 31, 2023. Included in this increase was a recovery of $1.0 million in interest income from a construction loan that was previously nonperforming.

For the three months ended March 31, 2024, benefit for credit losses amounted to $0.2 million consists of a benefit for credit losses on loans in the amount of $0.3 million and a provision on credit losses on held-to-maturity securities in the amount of $0.1 million. The $0.3 million benefit for credit losses on loans for the three months ended March 31, 2024 resulted from a benefit of $0.8 million related to micro loans originated by Grain and a provision of $0.5 million related to non-micro loans.

Net interest margin was 2.71% for the three months ended March 31, 2024 compared to 2.66% for the prior quarter, an increase of 5bps and 2.75% for the same period last year, a decrease of 4bps. The decrease in net interest margin for the three months ended March 31, 2024 when compared to the same period last year was a result of an increase in the cost of funds driven by higher interest rates.

Non-interest Income

Non-interest income for the three months ended March 31, 2024, was $1.7 million, an increase of $0.4 million, or 32.84%, compared to the three months ended December 31, 2023 and a decrease of $0.1 million, or 6.16%, compared to the three months ended March 31, 2023.

The $0.4 million increase in non-interest income for the three months ended March 31, 2024 compared to the three months ended December 31, 2023 was largely attributable to an increase of $0.8 million in other non-interest income partially offset by a grant of $0.4 million received in the fourth quarter of 2023 from the U.S. Treasury. No grants were received in the first quarter of 2024.

The $0.1 million decrease in non-interest income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was largely attributable to a decrease of $0.4 million in late and prepayment charges, partially offset by increases of $0.2 million in income on sale of mortgage loans and $0.1 million in other non-interest income.

Non-interest Expense

Non-interest expense for the three months ended March 31, 2024, was $17.0 million, a decrease of $0.9 million, or 5.29%, compared to $17.9 million for the three months ended December 31, 2023 and an increase of $0.6 million, or 3.60%, compared to $16.4 million for the three months ended March 31, 2023.

The $0.9 million decrease from the three months ended December 31, 2023 was mainly attributable to decreases of $0.4 million in compensation and benefits, $0.3 million in provision for contingencies, $0.3 million in professional fees and $0.2 million in other operating expense, partially offset by an increase of $0.3 million in direct loan expense.

The $0.6 million increase from the three months ended March 31, 2023 was mainly attributable to a decrease of $0.9 million in Grain recoveries, increases of $0.4 million in compensation and benefits, $0.3 million in direct loan expenses and $0.3 million in professional fees, partially offset by decreases of $0.8 million in provision for contingencies, $0.3 million in other operating expense and $0.2 million in office supplies, telephone and postage.

Balance Sheet Summary

Total assets increased $68.0 million, or 2.47%, to $2.82 billion as of March 31, 2024 from $2.75 billion as of December 31, 2023. The increase in total assets is largely attributable to increases of $85.5 million in net loans receivable, $4.5 million in Federal Home Loan Bank of New York stock and $1.3 million in premises and equipment, partially offset by decreases of $8.8 million in held-to-maturity securities, $4.5 million in cash and cash equivalents, $3.9 million in available-for-sale securities. $3.6 million in other assets and $2.1 million in mortgage loans held for sale.

Total liabilities increased $65.7 million, or 2.91%, to $2.33 billion as of March 31, 2024 from $2.26 billion as of December 31, 2023. The increase in total liabilities was largely attributable to increases of $78.2 million in deposits and $2.5 million in advance payments by borrowers for taxes and insurance, partially offset by decreases of $7.7 million in accrued interest payable, $4.0 million in borrowings and $3.0 million in other liabilities.

Total stockholders’ equity increased $2.3 million, or 0.47%, to $493.7 million as of March 31, 2024, from $491.4 million as of December 31, 2023. This increase in stockholders’ equity was largely attributable to $2.4 million in net income, $0.5 million impact to additional paid in capital as a result of share-based compensation and $0.3 million from release of ESOP shares, offset by $0.9 million in other comprehensive loss.

About Ponce Financial Group, Inc.

Ponce Financial Group, Inc. is the holding company for Ponce Bank. Ponce Bank is a Minority Depository Institution, a Community Development Financial Institution, and a certified Small Business Administration lender. Ponce Bank’s business primarily consists of taking deposits from the general public and to a lesser extent alternative funding sources and investing those funds, 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, construction and land, and, to a lesser extent, in business and consumer loans. Ponce Bank also invests in securities, which consist of U.S. Government and federal agency securities and securities issued by government-sponsored or government-owned enterprises, as well as, mortgage-backed securities, corporate bonds and obligations, and Federal Home Loan Bank stock.

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 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 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 Ponce Bank operates, including changes that adversely affect borrowers’ ability to service and repay Ponce Bank’s loans; anticipated losses with respect to the Company's investment in Grain; changes in the value of securities in the 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 financial statements will become impaired; demand for loans in Ponce Bank’s market area; Ponce Bank’s ability to attract and maintain deposits; risks related to the implementation of acquisitions, dispositions, and restructurings; the risk that Ponce Financial Group, Inc. 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 Ponce Financial Group, Inc.’s Annual Report on Form 10-K 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. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Ponce Financial Group, Inc. 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.

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(Dollars in thousands, except for share data)

As of

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

ASSETS

Cash and due from banks:

Cash

29,972

28,930

26,046

31,162

26,951

Interest-bearing deposits

104,752

110,260

90,966

212,627

157,736

Total cash and cash equivalents

134,724

139,190

117,012

243,789

184,687

Available-for-sale securities, at fair value

116,044

119,902

116,753

123,720

128,320

Held-to-maturity securities, at amortized cost

452,955

461,748

471,065

481,952

491,649

Placement with banks

249

996

1,245

Mortgage loans held for sale, at fair value

7,860

9,980

14,103

10,070

2,987

Loans receivable, net

1,981,428

1,895,886

1,787,607

1,695,047

1,614,428

Accrued interest receivable

18,063

18,010

16,624

16,054

15,435

Premises and equipment, net

17,396

16,053

16,453

16,856

17,215

Right of use assets

31,021

31,272

32,110

32,435

33,147

Federal Home Loan Bank of New York stock (FHLBNY), at cost

23,892

19,377

18,870

19,195

19,209

Deferred tax assets

13,919

14,332

15,984

15,924

15,413

Other assets

21,151

24,723

16,286

15,919

15,799

Total assets

2,818,702

2,750,722

2,623,863

2,671,957

2,539,534

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Deposits

1,585,784

1,507,620

1,401,132

1,442,013

1,336,877

Operating lease liabilities

32,486

32,684

33,459

33,716

34,308

Accrued interest payable

4,218

11,965

8,385

4,704

1,767

Advance payments by borrowers for taxes and insurance

13,245

10,778

13,743

12,402

14,902

Borrowings

680,421

684,421

675,100

682,100

648,375

Other liabilities

8,866

11,859

6,986

6,540

7,264

Total liabilities

2,325,020

2,259,327

2,138,805

2,181,475

2,043,493

Commitments and contingencies

Stockholders' Equity:

Preferred stock, $0.01 par value; 100,000,000 shares authorized

225,000

Common stock, $0.01 par value; 200,000,000 shares authorized

249

Treasury stock, at cost

(9,702

)

(9,747

)

(10,975

)

(5,202

)

Additional paid-in-capital

207,584

207,106

207,626

207,287

206,883

Retained earnings

99,834

97,420

96,902

94,312

94,399

Accumulated other comprehensive loss

(16,590

)

(15,649

)

(20,468

)

(17,597

)

(16,629

)

Unearned compensation ─ ESOP

(12,693

)

(12,984

)

(13,276

)

(13,567

)

(13,859

)

Total stockholders' equity

493,682

491,395

485,058

490,482

496,041

Total liabilities and stockholders' equity

2,818,702

2,750,722

2,623,863

2,671,957

2,539,534

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

Interest and dividend income:

Interest on loans receivable

30,664

27,814

25,276

23,015

19,700

Interest on deposits due from banks

2,911

990

1,969

1,817

197

Interest and dividend on securities and FHLBNY stock

6,091

6,146

6,261

6,223

6,459

Total interest and dividend income

39,666

34,950

33,506

31,055

26,356

Interest expense:

Interest on certificates of deposit

6,380

5,103

4,362

3,881

3,225

Interest on other deposits

6,540

5,706

5,639

4,413

2,812

Interest on borrowings

7,923

6,944

6,963

6,479

5,074

Total interest expense

20,843

17,753

16,964

14,773

11,111

Net interest income

18,823

17,197

16,542

16,282

15,245

(Benefit) provision for credit losses

(180

)

(375

)

535

987

(174

)

Net interest income after (benefit) provision for credit losses

19,003

17,572

16,007

15,295

15,419

Non-interest income:

Service charges and fees

473

498

516

481

491

Brokerage commissions

Late and prepayment charges

359

365

899

372

729

Income on sale of mortgage loans

302

244

173

Grant income

—

438

3,718

—

Other

565

(273

)

304

522

485

Total non-interest income

1,707

1,285

5,627

1,492

1,819

Non-interest expense:

Compensation and benefits

7,844

8,262

7,566

7,425

7,446

Occupancy and equipment

3,667

3,686

3,588

3,724

3,570

Data processing expenses

1,127

1,101

1,582

1,208

1,192

Direct loan expenses

732

497

369

345

412

Provision for contingencies

164

418

391

517

985

Insurance and surety bond premiums

253

250

255

248

265

Office supplies, telephone and postage

249

294

301

489

399

Professional fees

1,723

2,040

1,693

1,904

1,455

Grain recoveries

(53

)

(152

)

(69

)

(346

)

(914

)

Marketing and promotional expenses

100

146

248

303

128

Directors fees and regulatory assessment

179

173

169

160

155

Other operating expenses

965

1,182

1,223

1,112

1,268

Total non-interest expense

16,950

17,897

17,316

17,089

16,361

Income (loss) before income taxes

3,760

960

4,318

(302

)

877

Provision (benefit) for income taxes

1,346

442

1,728

(215

)

546

Net income (loss)

2,414

518

2,590

(87

)

331

Earnings per common share:

Basic

0.11

0.02

0.12

(0.00

)

0.01

Diluted

0.11

0.02

0.12

(0.00

)

0.01

Weighted average common shares outstanding:

Basic

22,353,492

22,224,945

22,272,076

23,208,168

23,293,013

Diluted

22,366,728

22,406,102

22,349,217

23,208,168

23,324,532

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

For the Three Months Ended March 31,

2024

2023

Variance $

Variance

Interest and dividend income:

Interest on loans receivable

30,664

19,700

10,964

55.65

Interest on deposits due from banks

2,911

197

2,714

1,377.66

Interest and dividend on securities and FHLBNY stock

6,091

6,459

(368

)

(5.70

Total interest and dividend income

39,666

26,356

13,310

50.50

Interest expense:

Interest on certificates of deposit

6,380

3,225

3,155

97.83

Interest on other deposits

6,540

2,812

3,728

132.57

Interest on borrowings

7,923

5,074

2,849

56.15

Total interest expense

20,843

11,111

9,732

87.59

Net interest income

18,823

15,245

3,578

23.47

Benefit for credit losses

(180

)

(174

)

3.45

Net interest income after benefit for credit losses

19,003

15,419

3,584

23.24

Non-interest income:

Service charges and fees

473

491

(18

)

(3.67

Brokerage commissions

)

(46.67

Late and prepayment charges

359

729

(370

)

(50.75

Income on sale of mortgage loans

302

203

205.05

Other

565

485

16.49

Total non-interest income

1,707

1,819

(112

)

(6.16

Non-interest expense:

Compensation and benefits

7,844

7,446

398

5.35

Occupancy and equipment

3,667

3,570

2.72

Data processing expenses

1,127

1,192

(65

)

(5.45

Direct loan expenses

732

412

320

77.67

Provision for contingencies

164

985

(821

)

(83.35

Insurance and surety bond premiums

253

265

(12

)

(4.53

Office supplies, telephone and postage

249

399

(150

)

(37.59

Professional fees

1,723

1,455

268

18.42

Grain recoveries

(53

)

(914

)

861

(94.20

Marketing and promotional expenses

100

128

(28

)

(21.88

Directors fees and regulatory assessment

179

155

15.48

Other operating expenses

965

1,268

(303

)

(23.90

Total non-interest expense

16,950

16,361

589

3.60

Income before income taxes

3,760

877

2,883

328.73

Provision for income taxes

1,346

546

800

146.52

Net income

2,414

331

2,083

629.31

Earnings per common share:

Basic

0.11

0.01

0.09

659.96

Diluted

0.11

0.01

0.09

660.54

Weighted average common shares outstanding:

Basic

22,353,492

23,293,013

(939,521

)

(4.03

Diluted

22,366,728

23,324,532

(957,804

)

(4.11

Ponce Financial Group, Inc. and Subsidiaries

Key Metrics

At or for the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

Performance Ratios:

Return on average assets (1)

0.33

0.08

0.39

(0.01

0.06

Return on average equity (1)

1.97

0.42

2.11

(0.07

0.27

Net interest rate spread (1) (2)

1.82

1.74

1.68

1.75

1.88

Net interest margin (1) (3)

2.71

2.66

2.58

2.65

2.75

Non-interest expense to average assets (1)

2.35

2.66

2.58

2.65

2.79

Efficiency ratio (4)

82.56

96.83

78.11

96.15

95.88

Average interest-earning assets to average interest- bearing liabilities

129.69

133.50

134.49

137.67

143.62

Average equity to average assets

17.00

18.25

18.32

19.21

20.91

Capital Ratios:

Total capital to risk-weighted assets (Bank only)

22.79

23.30

25.10

26.30

27.54

Tier 1 capital to risk-weighted assets (Bank only)

21.54

22.05

23.85

25.05

26.28

Common equity Tier 1 capital to risk-weighted assets (Bank only)

21.54

22.05

23.85

25.05

26.28

Tier 1 capital to average assets (Bank only)

16.26

17.49

17.51

17.95

19.51

Asset Quality Ratios:

Allowance for credit losses on loans as a percentage of total loans

1.23

1.36

1.51

1.64

1.77

Allowance for credit losses on loans as a percentage of nonperforming loans

140.90

152.99

169.49

167.06

149.73

Net (charge-offs) recoveries to average outstanding loans (1)

(0.25

(0.24

(0.34

(0.41

(0.57

Non-performing loans as a percentage of total gross loans

0.87

0.89

0.98

1.18

Non-performing loans as a percentage of total assets

0.62

0.63

0.76

Total non-performing assets as a percentage of total assets

0.62

0.63

0.76

Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (5)

0.79

0.81

0.82

0.83

0.93

Other:

Number of offices

Number of full-time equivalent employees

233

237

243

244

251

(1) Annualized where appropriate.

(2) 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.

(3) Net interest margin represents net interest income divided by average total interest-earning assets.

(4) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

Ponce Financial Group, Inc. and Subsidiaries

Securities Portfolio

March 31, 2024

December 31, 2023

Gross

Amortized

Unrealized

Amortized

Unrealized

Cost

Gains

Losses

Fair Value

Cost

Gains

Losses

Fair Value

(in thousands)

Available-for-Sale Securities:

U.S. Government Bonds

2,991

—

(211

)

2,780

2,990

—

(206

)

2,784

Corporate Bonds

25,782

—

(2,262

)

23,520

25,790

—

(2,122

)

23,668

Mortgage-Backed Securities:

Collateralized Mortgage Obligations (1)

38,183

—

(6,229

)

31,954

39,375

—

(6,227

)

33,148

FHLMC Certificates

9,903

—

(1,424

)

8,479

10,163

—

(1,482

)

8,681

FNMA Certificates

60,158

—

(10,948

)

49,210

61,359

—

(9,842

)

51,517

GNMA Certificates

102

—

)

101

104

—

104

Total available-for-sale securities

137,119

—

(21,075

)

116,044

139,781

—

(19,879

)

119,902

Held-to-Maturity Securities:

U.S. Agency Bonds

25,000

—

(289

)

24,711

25,000

—

(181

)

24,819

Corporate Bonds

82,500

—

(2,211

)

80,289

82,500

—

(2,691

)

79,809

Mortgage-Backed Securities:

Collateralized Mortgage Obligations (1)

207,079

—

(7,468

)

199,611

212,093

104

(5,170

)

207,027

FHLMC Certificates

3,819

—

(253

)

3,566

3,897

—

(244

)

3,653

FNMA Certificates

116,085

—

(5,263

)

110,822

118,944

—

(4,088

)

114,856

SBA Certificates

18,945

169

—

19,114

19,712

166

—

19,878

Allowance for Credit Losses

(473

)

—

(398

)

—

Total held-to-maturity securities

452,955

169

(15,484

)

438,113

461,748

270

(12,374

)

450,042

(1) Comprised of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Ginnie Mae (“GNMA”) issued securities.

The following table presents the activity in the allowance for credit losses for held-to-maturity securities.

For the Three

For the

Months Ended

Year Ended

March 31, 2024

December 31, 2023

Allowance for credit losses on securities at beginning of the period

398

—

CECL adoption

—

662

Provision for credit losses

(264

)

Allowance for credit losses on securities at end of the period

473

398

Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

As of

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Mortgage loans:

1-4 family residential

Investor Owned

339,331

16.92

343,689

17.89

347,082

19.13

351,754

20.43

354,559

21.60

Owner-Occupied

150,842

7.52

152,311

7.93

151,866

8.37

154,116

8.94

149,481

9.10

Multifamily residential

545,825

27.22

550,559

28.65

553,694

30.52

550,033

31.94

553,430

33.71

Nonresidential properties

327,350

16.32

342,343

17.81

321,472

17.71

317,416

18.43

314,560

19.17

Construction and land

608,665

30.35

503,925

26.22

411,383

22.67

315,843

18.34

235,157

14.33

Total mortgage loans

1,972,013

98.33

1,892,827

98.50

1,785,497

98.40

1,689,162

98.08

1,607,187

97.91

Non-mortgage loans:

Business loans

26,664

1.33

19,779

1.03

18,416

1.02

21,041

1.22

19,890

1.21

Consumer loans (1)

6,741

0.34

8,966

0.47

10,416

0.58

11,958

0.70

14,227

0.88

Total non-mortgage loans

33,405

1.67

28,745

1.50

28,832

1.60

32,999

1.92

34,117

2.09

Total loans, gross

2,005,418

100.00

1,921,572

100.00

1,814,329

100.00

1,722,161

100.00

1,641,304

100.00

Net deferred loan origination costs

674

468

692

1,059

2,099

Allowance for credit losses on loans

(24,664

)

(26,154

)

(27,414

)

(28,173

)

(28,975

)

Loans, net

1,981,428

1,895,886

1,787,607

1,695,047

1,614,428

(1) As of March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, consumer loans include $5.7 million, $8.0 million, $9.3 million, $11.2 million and $13.4 million, respectively, of loans originated by the Bank pursuant to its arrangement with Grain.

Ponce Financial Group, Inc. and Subsidiaries

Grain Loan Exposure

Grain Technologies, Inc. ("Grain") Total Exposure as of March 31, 2024

(in thousands)

Receivable from Grain

Microloans originated - put back to Grain (inception-to-March 31, 2024)

24,051

Write-downs, net of recoveries (inception-to-date as of March 31, 2024)

(15,406

)

Cash receipts from Grain (inception-to-March 31, 2024)

(6,819

)

Grant/reserve

(1,826

)

Net receivable as of March 31, 2024

—

Microloan receivables from Grain Borrowers

Grain originated loans receivable as of March 31, 2024

5,731

Allowance for credit losses on loans as of March 31, 2024 (1)

(4,868

)

Microloans, net of allowance for credit losses on loans as of March 31, 2024

863

Investments

Investment in Grain

1,000

Investment in Grain write-off in Q3 2022

(1,000

)

Investment in Grain as of March 31, 2024

—

Total exposure related to Grain as of March 31, 2024 (2)

863

(1) Excludes $1.6 million of security deposits by Grain originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions.

(2) Total remaining exposure to Grain borrowers. These loans are now serviced by the Bank.

On November 1, 2023, Ponce Financial Group, Inc. and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining Grain loans. In order to facilitate the transfer of the servicing responsibilities to the Bank, Grain granted the Bank a perpetual right and license to use the Grain software, including the source code to service the remaining loans.

Ponce Financial Group, Inc. and Subsidiaries

Allowance for Credit Losses on Loans

For the Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

(Dollars in thousands)

Allowance for credit losses on loans at beginning of the period

26,154

27,414

28,173

28,975

34,592

(Benefit) provision for credit losses on loans

(255

)

(126

)

750

934

(321

)

Adoption of CECL

—

(3,090

)

Charge-offs:

Mortgage loans:

1-4 family residences

Investor owned

—

Owner occupied

—

Multifamily residences

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

(52

)

(63

)

—

Consumer

(1,302

)

(1,135

)

(1,592

)

(1,931

)

(2,569

)

Total charge-offs

(1,354

)

(1,198

)

(1,592

)

(1,931

)

(2,569

)

Recoveries:

Mortgage loans:

1-4 family residences

Investor owned

—

Owner occupied

—

Multifamily residences

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

118

195

363

Total recoveries

119

195

363

Net (charge-offs) recoveries

(1,235

)

(1,134

)

(1,509

)

(1,736

)

(2,206

)

Allowance for credit losses on loans at end of the period

24,664

26,154

27,414

28,173

28,975

Ponce Financial Group, Inc. and Subsidiaries

Deposits

As of

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Demand (1)

191,541

12.07

185,151

12.28

214,326

15.30

225,106

15.61

236,120

17.67

Interest-bearing deposits:

NOW/IOLA accounts (1)

73,202

4.62

77,909

5.17

74,055

5.29

64,193

4.45

68,356

5.11

Money market accounts (2)

482,344

30.42

432,735

28.70

370,500

26.44

387,970

26.91

293,140

21.93

Reciprocal deposits

97,718

6.16

96,860

6.42

82,670

5.90

100,919

7.00

109,649

8.20

Savings accounts

112,713

7.11

114,139

7.57

117,870

8.41

119,635

8.30

127,731

9.55

Total NOW, money market, reciprocal and savings accounts

765,977

48.31

721,643

47.86

645,095

46.04

672,717

46.66

598,876

44.79

Certificates of deposit of $250K or more (2)

146,296

9.23

132,153

8.77

122,353

8.73

120,043

8.32

113,955

8.52

Brokered certificates of deposit (3)

94,689

5.97

98,729

6.55

98,729

7.05

98,729

6.85

98,754

7.39

Listing service deposits (3)

12,688

0.80

14,433

0.96

15,180

1.08

20,258

1.40

28,417

2.13

All other certificates of deposit less than $250K (2)

374,593

23.62

355,511

23.58

305,449

21.80

305,160

21.16

260,755

19.50

Total certificates of deposit

628,266

39.62

600,826

39.86

541,711

38.66

544,190

37.73

501,881

37.54

Total interest-bearing deposits

1,394,243

87.93

1,322,469

87.72

1,186,806

84.70

1,216,907

84.39

1,100,757

82.33

Total deposits

1,585,784

100.00

1,507,620

100.00

1,401,132

100.00

1,442,013

100.00

1,336,877

100.00

(1) As of December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, $58.2 million, $51.5 million, $41.4 million and $46.6 million, respectively, were reclassified from demand to NOW/IOLA accounts.

(2) As of June 30, 2023 and March 31, 2023, $150.6 million and $115.3 million, respectively, of SaveBetter deposits were reclassified from money market accounts to certificates of deposits. $36.4 million and $37.1 million, respectively, were reclassified to Certificates of deposits of $250K or more and $114.2 million and $78.2 million, respectively, were reclassified to certificates of deposit less than $250K.

(3) As of March 31, 2024, December 31, 2023, September 30, 2023, June 30, 2023 and March 31, 2023, there were $1.5 million, $0.3 million, $0.3 million, $3.3 million and $9.5 million, respectively, in individual listing service deposits amounting to $250,000 or more. All brokered certificates of deposit individually amounted to less than $250,000.

Ponce Financial Group, Inc. and Subsidiaries

Borrowings

March 31,

December 31,

2024

2023

Scheduled

Maturity

Redeemable

at Call Date

Weighted

Average

Rate

Scheduled

Maturity

Redeemable

at Call Date

Weighted

Average

Rate

(Dollars in thousands)

Term advances ending:

2024

109,321

5.15

363,321

4.55

2025

250,000

4.69

50,000

4.41

2026

50,000

4.83

—

2027

212,000

3.44

212,000

3.44

2028

9,100

3.84

9,100

3.84

Thereafter

50,000

3.35

50,000

3.35

680,421

4.28

684,421

4.10

Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

As of Three Months Ended

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

(Dollars in thousands)

Non-accrual loans:

Mortgage loans:

1-4 family residential

Investor owned

399

793

396

296

2,836

Owner occupied

1,426

1,682

1,685

2,363

2,245

Multifamily residential

4,098

2,979

1,444

1,435

—

Nonresidential properties

441

—

Construction and land

10,277

10,759

11,721

11,906

Non-mortgage loans:

Business

146

165

209

—

Consumer

—

Total non-accrual loans (not including non-accruing modifications to borrowers experiencing financial difficulty) (1)

16,787

16,378

15,455

15,815

17,027

Non-accruing modifications to borrowers experiencing financial difficulty (1):

Mortgage loans:

1-4 family residential

Investor owned

270

209

213

Owner occupied

447

449

840

2,020

Multifamily residential

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

Total non-accruing modifications to borrowers experiencing financial difficulty (1)

717

719

1,049

2,324

Total non-accrual loans (2)

17,504

17,095

16,174

16,864

19,351

Accruing modifications to borrowers experiencing financial difficulty (1):

Mortgage loans:

1-4 family residential

Investor owned

1,850

2,112

2,131

2,161

2,185

Owner occupied

2,288

2,313

2,335

2,353

1,310

Multifamily residential

—

Nonresidential properties

748

757

765

783

701

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

Total accruing modifications to borrowers experiencing financial difficulty (1)

4,886

5,182

5,231

5,297

4,196

Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty (1)

22,390

22,277

21,405

22,161

23,547

Total non-performing loans to total gross loans

0.87

0.89

0.98

1.18

Total non-performing assets to total assets

0.62

0.63

0.76

Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (1)

0.79

0.81

0.82

0.83

0.93

(1) Balances include both modifications to borrowers experiencing financial difficulty, in accordance with ASU 2022-02 adopted on January 1, 2023, and previously existing troubled debt restructurings.

(2) Includes nonperforming mortgage loans held for sale.

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

For the Three Months Ended March 31,

2024

2023

Average

Outstanding

Average

Outstanding

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

(Dollars in thousands)

Interest-earning assets:

Loans (2)

1,979,263

30,664

6.23

1,572,148

19,700

5.08

Securities (3)

576,235

5,619

3.92

631,138

6,075

3.90

Other (4) (5)

238,432

3,383

5.71

48,473

581

4.86

Total interest-earning assets

2,793,930

39,666

5.71

2,251,759

26,356

4.75

Non-interest-earning assets (5)

106,566

123,007

Total assets

2,900,496

2,374,766

Interest-bearing liabilities:

NOW/IOLA (6) (7)

82,849

218

1.06

71,765

688

3.89

Money market (7) (8)

544,563

6,292

4.65

314,241

2,091

2.70

Savings

113,501

0.10

128,876

0.09

Certificates of deposit (8)

629,528

6,380

4.08

516,327

3,225

2.53

Total deposits

1,370,441

12,918

3.79

1,031,209

6,034

2.37

Advance payments by borrowers

12,886

0.06

12,919

0.09

Borrowings

771,070

7,923

4.13

523,705

5,074

3.93

Total interest-bearing liabilities

2,154,397

20,843

3.89

1,567,833

11,111

2.87

Non-interest-bearing liabilities:

Non-interest-bearing demand (6)

198,862

—

268,372

—

Other non-interest-bearing liabilities

54,061

—

42,038

—

Total non-interest-bearing liabilities

252,923

—

310,410

—

Total liabilities

2,407,320

20,843

1,878,243

11,111

Total equity

493,176

496,523

Total liabilities and total equity

2,900,496

3.89

2,374,766

2.87

Net interest income

18,823

15,245

Net interest rate spread (9)

1.82

1.88

Net interest-earning assets (10)

639,533

683,926

Net interest margin (11)

2.71

2.75

Average interest-earning assets to interest-bearing liabilities

129.69

143.62

(1) Annualized where appropriate.

(2) Loans include loans and mortgage loans held for sale, at fair value.

(3) Securities include available-for-sale securities and held-to-maturity securities.

(4) Includes FHLBNY demand account, FHLBNY stock dividends and FRB demand deposits.

(5) FRB demand deposits for prior period have been reclassified for consistency.

(6) Includes reclassification of $48.4 million average outstanding balances from non-interest bearing demand to NOW/IOLA for the three months ended March 31, 2023.

(7) Include $0.7 million of interest expense reclassified from money market to NOW/IOLA for the three months ended March 31, 2023.

(8) Includes reclassification of $135.0 million average outstanding balances and $1.4 million of interest expenses from money market to certificates of deposit for the three months ended March 31, 2023.

(9) 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.

(10) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

(11) Net interest margin represents net interest income divided by average total interest-earning assets.

Ponce Financial Group, Inc. and Subsidiaries

Other Data

As of

March 31,

December 31,

September 30,

June 30,

March 31,

2024

2023

Other Data

Common shares issued

24,886,711

24,865,476

Less treasury shares

1,096,214

1,101,191

1,233,111

617,924

1,976

Common shares outstanding at end of period

23,790,497

23,785,520

23,653,600

24,268,787

24,863,500

Book value per common share

11.29

11.20

10.99

10.94

10.90

Tangible book value per common share

11.29

11.20

10.99

10.94

10.90

Contact:

Frank Perez

frank.perez@poncebank.net

718-931-9000

Source: Ponce Financial Group, Inc.

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