Ponce Financial Group, Inc. Reports Second Quarter 2023 Results

Ponce Bank Jul 28, 2023 12:00:00 AM

YORK, July 28, 2023 (GLOBE NEWSWIRE) -- Ponce Financial Group, Inc., (the “Company”) (NASDAQ: PDLB), the holding company for Ponce Bank (the “Bank”), today announced results for the second quarter of 2023.

Second Quarter 2023 Highlights (Compared to Prior Periods):

Net loss of ($0.1) million, or $0.00 per diluted share for the three months ended June 30, 2023, as compared to net income of $0.3 million, or $0.01 per diluted share for the three months ended March 31, 2023 and net income of $0.8 million, or $0.03 per diluted share for the three months ended June 30, 2022.

Included in the ($0.1) million of net loss for the second quarter of 2023 results is $31.1 million in interest and dividend income and $1.5 million in non-interest income, offset by a $17.1 million in non-interest expense and $14.8 million in interest expense.

Net interest income of $16.3 million for the second quarter of 2023 increased $1.0 million, or 6.80%, from the prior quarter and $0.8 million, or 5.13%, from the same quarter last year.

Net interest margin was 2.65% for the second quarter of 2023, decreased from 2.75% for the prior quarter and from 3.92% for the same quarter last year.

Cash and equivalents were $243.8 million as of June 30, 2023, an increase of $189.4 million, or 348.47%, from December 31, 2022, as we decided to keep ample sources of liquidity at hand while taking advantage of the positive spread between our interest bearing overnight deposits at the Fed and borrowing costs under the Bank Term Funding Program ("BTFP").

Securities totaled $605.7 million as of June 30, 2023, a decrease of $34.7 million, or 5.59%, from December 31, 2022 primarily due to a call on one of the securities amounting to $10.0 million and regular principal payments.

Net loans receivable were $1.70 billion as of June 30, 2023, an increase of $201.9 million, or 13.52%, from December 31, 2022.

Deposits were $1.44 billion as of June 30, 2023, an increase of $189.6 million, or 15.14%, from December 31, 2022.

President and Chief Executive Officer’s Comments

Carlos P. Naudon, Ponce Financial Group’s President and CEO, stated “Despite the challenges we face, we’re thrilled to have started our share buy-back program during the second quarter of 2023. As of June 30, 2023, we have purchased 615,948 shares at an average price of $8.44 per share, well below our book value of $10.94 per common share. Our book value per common share also increased by $0.04 per share during the quarter. We also saw our stock added to the Russell 3000 index which increases the exposure and liquidity of our stock."

"We continue to show strong levels of capital and liquidity. On the capital front, our total capital ratio at Ponce Bank stands at 26.30%, 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") stand at $817 million, more than two and a half times of our uninsured deposits of $325 million."

"As previously announced, we were awarded a grant of $3.7 million from the U.S. Treasury as part of the Community Development Financial Institution (“CDFI”) Equitable Recovery Program which we expect to receive during the third quarter of 2023."

"We remain committed to the communities we serve, our Minority Depository Institution (“MDI”)/CDFI status and to continue 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 “While the increase in rates will continue to put pressure on growth, we were able to organically grow our loans and deposits during the quarter. The US economy continues to show resiliency and credit conditions remain strong. Our credit metrics improved during the quarter with nonperforming loans ratios declining quarter over quarter and year over year."

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

At or for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Performance Ratios (Annualized):

2023

2022

Return on average assets (1)

(0.01

0.06

(1.62

(2.80

0.17

Return on average equity (1)

(0.07

0.27

(7.28

(11.25

1.01

Net interest rate spread (1) (2)

1.66

1.78

2.13

3.08

3.67

Net interest margin (1) (3)

2.65

2.75

2.97

3.59

3.92

Non-interest expense to average assets (1)

2.65

2.79

2.78

4.83

3.73

Efficiency ratio (4)

96.15

95.88

94.95

132.46

93.77

Average interest-earning assets to average interest- bearing liabilities

141.14

148.20

152.30

162.67

158.80

Average equity to average assets

19.21

20.91

22.32

24.90

17.32

At or for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Capital Ratios (Annualized):

2023

2022

Total capital to risk weighted assets (Bank only)

26.30

27.54

30.53

33.39

36.00

Tier 1 capital to risk weighted assets (Bank only)

25.05

26.28

29.26

32.13

34.75

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

25.05

26.28

29.26

32.13

34.75

Tier 1 capital to average assets (Bank only)

17.95

19.51

20.47

22.91

28.79

At or for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Asset Quality Ratios (Annualized):

2023

2022

Allowance for loan losses as a percentage of total loans

1.64

1.77

2.27

1.77

1.31

Allowance for loan losses as a percentage of nonperforming loans

167.06

149.73

252.33

118.43

94.05

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

(0.41

(0.57

(0.85

(0.52

(0.05

Non-performing loans as a percentage of total gross loans

0.98

1.18

0.90

1.50

1.39

Non-performing loans as a percentage of total assets

0.63

0.76

0.59

0.97

0.90

Total non-performing assets as a percentage of total assets

0.63

0.76

0.59

0.97

0.90

Total non-performing assets and accruing troubled debt restructured loans as a percentage of total assets

0.83

0.93

0.78

1.16

1.14

(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.

Summary of Results of Operations

Net loss for the three months ended June 30, 2023 was ($0.1) million compared to net income of $0.3 million for the three months ended March 31, 2023 and net income of $0.8 million for the three months ended June 30, 2022. The decrease of net income for the three months ended June 30, 2023 compared to the three months ended March 31, 2023 was attributed mainly to increases in provision for credit loss and non-interest expense and a decrease in non-interest income, partially offset by an increase in net interest income. The decrease of net income for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was largely due to a decrease in non-interest income and an increase in non-interest expense, partially offset by an increase net interest income.

Net income for the six months ended June 30, 2023 was $0.2 million compared to a net loss of ($6.0) million for the six months ended June 30, 2022. The increase in net income was attributable to decreases in non-interest expense and provision for credit losses, partially offset by decreases in net interest income and non-interest income.

Net Interest Income and Net Margin

Net interest income for the three months ended June 30, 2023, was $16.3 million compared to $15.2 million for the three months ended March 31, 2023 and $15.5 million for the three months end June 30, 2022. This increase is largely explained by an increase in interest and dividend income, offset by an increase in interest expenses due to higher interest rates. Included in net interest income are the effects of our borrowings under the Bank Term Funding Program (BTFP). Our average borrowing cost under the program is 4.45% while our deposit at the Fed account yields 5.15% as of June 30, 2023. The BTFP has a maturity of one year and allows for prepayment with no penalty.

Net interest margin was 2.65% for the three months ended June 30, 2023 compared to 2.75% for the prior quarter, a decrease of 10bps and 3.92% for the same period last year, a decrease of 127bps. The decrease in net interest margin 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 June 30, 2023, was $1.5 million, a decrease of $0.3 million, or 17.98%, compared to the three months ended March 31, 2023 and a decrease of $0.7 million, or 31.53%, compared to the three months ended June 30, 2022.

The $0.3 million decrease in non-interest income for the three months ended June 30, 2023 compared to the three months ended March 31, 2023 was related to a prepayment fee reported in the prior quarter.

The $0.7 million decrease in non-interest income for the three months ended June 30, 2023 compared to the three months ended June 30, 2022 was attributable to decreases of $0.7 million in loan origination fees, $0.2 million in brokerage commission and $0.1 million in income on sale of mortgage loans, partially offset by increases of $0.2 million in late and prepayment charges and $0.1 million in other non-interest income.

Non-interest income for the six months ended June 30, 2023, was $3.3 million, a decrease of $1.1 million, or 24.84%, compared to the six months ended June 30, 2022. The $1.1 million decrease from the six months ended June 30, 2022 was attributable to decreases of $1.3 million in loan origination, $0.5 million in brokerage commission and $0.4 million in income on sale of mortgage loans, partially offset by increases of $0.9 million in late and prepayment charges, $0.2 million in other non-interest income and $0.1 million in service charges and fees.

Non-interest Expense

Non-interest expense for the three months ended June 30, 2023, was $17.1 million, an increase of $0.7 million, or 4.45%, compared to the three months ended March 31, 2023 and an increase of $0.5 million, or 3.15%, compared to the three months ended June 30, 2022.

The $0.7 million increase from the three months ended March 31, 2023 was mainly attributable to a decrease of $0.6 million in consumer microloan recoveries, increases of $0.4 million in professional fees, $0.2 million in marketing and promotional expenses and $0.2 million in occupancy and equipment, offset by a decrease of $0.5 million in provision for contingencies.

The $0.5 million increase from the three months ended June 30, 2022 was attributable to increases of $0.5 million in compensation and benefits, $0.5 million in occupancy and equipment, $0.5 million in provision for contingencies, $0.4 million in data processing expenses, $0.3 million marketing and promotional expenses and $0.2 million in professional fees, offset by a $1.5 million charge in the prior year period and a $0.4 million recovery in the current year period related to Grain.

Non-interest expense for the six months ended June 30, 2023, was $33.5 million, a decrease of $11.2 million, or 25.07%, compared to the six months ended June 30, 2022. The $11.2 million decrease of non-interest expense from the six months ended June 30, 2022 was attributable to a $9.6 million consumer microloan write-off during the corresponding period last year, compared with $1.3 million of consumer microloan recoveries during the six months ending June 30, 2023 and a $5.0 million contribution to the Ponce De Leon Foundation during the six months ended June 30, 2022.

Balance Sheet Summary

Total assets increased $360.0 million, or 15.57%, to $2.67 billion as of June 30, 2023 from $2.31 billion as of December 31, 2022. The increase in total assets is largely attributable to increases of $201.9 million in net loans receivable, $189.4 million in cash and cash equivalents, $8.1 million in mortgage loans held for sale and $1.9 million in other assets, offset by decreases of $28.9 million in held-to-maturity securities, $5.8 million in available-for-sale securities, and $5.5 million in Federal Home Loan Bank of New York stock.

Total liabilities increased $362.2 million, or 19.91%, to $2.18 billion as of June 30, 2023 from $1.82 billion as of December 31, 2022. The increase in total liabilities was largely attributable to increases of $189.6 million in deposits and $164.7 million in borrowings.

Total stockholders’ equity decreased $2.2 million, or 0.45%, to $490.5 million as of June 30, 2023, from $492.7 million as of December 31, 2022. This decrease in stockholders’ equity was largely attributable to $5.2 million in share repurchases, partially offset by increases in equity of $1.1 million as a result of implementation of CECL, $0.8 million in share-based compensation, $0.6 million in ESOP, $0.3 million in other comprehensive income related to improved valuation of securities and $0.2 million in net income.

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

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

ASSETS

Cash and due from banks:

Cash

31,162

26,951

31,977

34,007

24,934

Interest-bearing deposits

212,627

157,736

22,383

28,514

249,872

Total cash and cash equivalents

243,789

184,687

54,360

62,521

274,806

Available-for-sale securities, at fair value

123,720

128,320

129,505

131,977

140,044

Held-to-maturity securities, at amortized cost (1)

481,952

491,649

510,820

494,297

211,517

Placement with banks

996

1,245

1,494

2,490

Mortgage loans held for sale, at fair value

10,070

2,987

1,979

3,357

9,234

Loans receivable, net

1,695,047

1,614,428

1,493,127

1,392,553

1,324,320

Accrued interest receivable

16,054

15,435

15,049

14,063

13,255

Premises and equipment, net

16,856

17,215

17,446

17,759

18,945

Right of use assets

32,435

33,147

33,423

34,121

34,416

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

19,195

19,209

24,661

14,272

16,429

Deferred tax assets

15,924

15,413

16,137

13,822

9,658

Other assets

15,919

15,799

13,988

11,170

21,585

Total assets

2,671,957

2,539,534

2,311,989

2,192,402

2,076,699

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Deposits

1,442,013

1,336,877

1,252,412

1,351,189

1,148,728

Operating lease liabilities

33,716

34,308

34,532

35,081

35,217

Accrued interest payable

4,704

1,767

1,390

854

158

Advance payments by borrowers for taxes and insurance

12,402

14,902

9,724

10,589

8,668

Borrowings

682,100

648,375

517,375

286,375

334,375

Other liabilities

6,540

7,264

3,856

7,631

31,471

Total liabilities

2,181,475

2,043,493

1,819,289

1,691,719

1,558,617

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

247

Treasury stock, at cost

(5,202

)

—

Additional paid-in-capital

207,287

206,883

206,508

206,092

205,669

Retained earnings

94,312

94,399

92,955

102,169

116,907

Accumulated other comprehensive loss

(17,597

)

(16,629

)

(17,860

)

(18,420

)

(15,032

)

Unearned compensation ─ ESOP

(13,567

)

(13,859

)

(14,150

)

(14,405

)

(14,709

)

Total stockholders' equity

490,482

496,041

492,700

500,683

518,082

Total liabilities and stockholders' equity

2,671,957

2,539,534

2,311,989

2,192,402

2,076,699

(1) Included for the quarterly period ended June 30, 2023 and March 31, 2023 was $0.9 million and $0.8 million, respectively, related to the allowance for credit loss on held-to-maturity securities.

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

Interest and dividend income:

Interest on loans receivable

23,015

19,700

18,550

17,058

16,057

Interest on deposits due from banks

1,817

197

199

346

132

Interest and dividend on securities and FHLBNY stock

6,223

6,459

6,184

4,230

978

Total interest and dividend income

31,055

26,356

24,933

21,634

17,167

Interest expense:

Interest on certificates of deposit

2,381

1,871

1,310

687

677

Interest on other deposits

5,913

4,166

4,125

1,543

521

Interest on borrowings

6,479

5,074

3,332

1,793

481

Total interest expense

14,773

11,111

8,767

4,023

1,679

Net interest income

16,282

15,245

16,166

17,611

15,488

Provision (benefit) for credit losses

987

(174

)

12,641

9,330

817

Net interest income after provision (benefit) for credit losses

15,295

15,419

3,525

8,281

14,671

Non-interest income:

Service charges and fees

481

491

481

464

445

Brokerage commissions

180

288

214

Late and prepayment charges

372

729

263

109

193

Income on sale of mortgage loans

116

200

Loan origination (1)

—

(557

)

522

696

(Loss) gain on sale of premises and equipment

—

(436

)

—

Other

522

485

514

431

Total non-interest income

1,492

1,819

437

1,577

2,179

Non-interest expense:

Compensation and benefits

7,425

7,446

6,501

7,377

6,911

Occupancy and equipment

3,724

3,570

3,928

3,611

3,237

Data processing expenses

1,208

1,192

1,114

994

824

Direct loan expenses

345

412

454

654

505

Provision for contingencies

517

985

(440

)

519

Insurance and surety bond premiums

248

265

270

297

156

Office supplies, telephone and postage

489

399

375

369

406

Professional fees

1,904

1,455

1,571

1,251

1,748

Grain (recoveries) and write-off

(346

)

(914

)

(515

)

8,881

1,500

Marketing and promotional expenses

303

128

256

214

Directors fees and regulatory assessment

160

155

196

188

167

Other operating expenses

1,112

1,268

2,055

1,061

1,031

Total non-interest expense

17,089

16,361

15,765

25,416

16,567

(Loss) income before income taxes

(302

)

877

(11,803

)

(15,558

)

283

Provision (benefit) for income taxes

(215

)

546

(2,589

)

(820

)

(488

)

Net (loss) income

(87

)

331

(9,214

)

(14,738

)

771

Earnings (loss) per common share:

Basic

(0.00

)

0.01

(0.40

)

(0.64

)

0.03

Diluted

(0.00

)

0.01

(0.40

)

(0.64

)

0.03

Weighted average common shares outstanding:

Basic

23,208,168

23,293,013

23,168,097

23,094,859

23,056,559

Diluted

23,208,168

23,324,532

23,168,097

23,094,859

23,128,911

(1) Amounts for the quarterly period ended December 31, 2022 include the reversal of $0.8 million of loan origination income that had been taken upfront in prior quarters of 2022 (as opposed to deferred over the life of ‎the loan)‎.

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

For the Six Months Ended June 30,

2023

2022

Variance $

Variance %

Interest and dividend income:

Interest on loans receivable

42,715

34,257

8,458

24.69

Interest on deposits due from banks

2,014

168

1,846

1,098.81

Interest and dividend on securities and FHLBNY stock

12,682

1,760

10,922

620.57

Total interest and dividend income

57,411

36,185

21,226

58.66

Interest expense:

Interest on certificates of deposit

4,252

1,480

2,772

187.30

Interest on other deposits

10,079

805

9,274

1,152.05

Interest on borrowings

11,553

1,074

10,479

975.70

Total interest expense

25,884

3,359

22,525

670.59

Net interest income

31,527

32,826

(1,299

)

(3.96

Provision for credit losses

813

2,075

(1,262

)

(60.82

Net interest income after provision for credit losses

30,714

30,751

(37

)

(0.12

Non-interest income:

Service charges and fees

972

885

9.83

Brokerage commissions

552

(502

)

(90.94

Late and prepayment charges

1,101

251

850

338.65

Income on sale of mortgage loans

181

618

(437

)

(70.71

Loan origination

—

1,321

(1,321

)

(100.00

Other

1,007

778

229

29.43

Total non-interest income

3,311

4,405

(1,094

)

(24.84

Non-interest expense:

Compensation and benefits

14,871

14,036

835

5.95

Occupancy and equipment

7,294

6,429

865

13.45

Data processing expenses

2,400

1,671

729

43.63

Direct loan expenses

757

1,379

(622

)

(45.11

Provision for contingencies

1,502

1,455

3,095.74

Insurance and surety bond premiums

513

303

210

69.31

Office supplies, telephone and postage

888

811

9.49

Professional fees

3,359

3,082

277

8.99

Contribution to the Ponce De Leon Foundation

—

4,995

(4,995

)

(100.00

Grain (recoveries) and write-off

(1,260

)

9,574

(10,834

)

(113.16

Marketing and promotional expenses

431

123

308

250.41

Directors fees and regulatory assessment

315

321

)

(1.87

Other operating expenses

2,380

1,870

510

27.27

Total non-interest expense

33,450

44,641

(11,191

)

(25.07

Income (loss) before income taxes

575

(9,485

)

10,060

(106.06

Provision (benefit) for income taxes

331

(3,436

)

3,767

(109.63

Net income (loss)

244

(6,049

)

6,293

(104.03

Earnings (loss) per common share:

Basic

0.01

(0.27

)

0.28

(103.86

Diluted

0.01

(0.27

)

0.28

(103.85

Weighted average common shares outstanding:

Basic

23,250,357

22,243,776

1,006,581

4.53

Diluted

23,275,201

22,243,776

1,031,425

4.64

Ponce Financial Group, Inc. and Subsidiaries

Key Metrics

At or for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

Performance Ratios:

Return on average assets (1)

(0.01

0.06

(1.62

(2.80

0.17

Return on average equity (1)

(0.07

0.27

(7.28

(11.25

1.01

Net interest rate spread (1) (2)

1.66

1.78

2.13

3.08

3.67

Net interest margin (1) (3)

2.65

2.75

2.97

3.59

3.92

Non-interest expense to average assets (1)

2.65

2.79

2.78

4.83

3.73

Efficiency ratio (4)

96.15

95.88

94.95

132.46

93.77

Average interest-earning assets to average interest- bearing liabilities

141.14

148.20

152.30

162.67

158.80

Average equity to average assets

19.21

20.91

22.32

24.90

17.32

Capital Ratios:

Total capital to risk weighted assets (Bank only)

26.30

27.54

30.53

33.39

36.00

Tier 1 capital to risk weighted assets (Bank only)

25.05

26.28

29.26

32.13

34.75

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

25.05

26.28

29.26

32.13

34.75

Tier 1 capital to average assets (Bank only)

17.95

19.51

20.47

22.91

28.79

Asset Quality Ratios:

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

1.64

1.77

2.27

1.77

1.31

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

167.06

149.73

252.33

118.43

94.05

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

(0.41

(0.57

(0.85

(0.52

(0.05

Non-performing loans as a percentage of total gross loans

0.98

1.18

0.90

1.50

1.39

Non-performing loans as a percentage of total assets

0.63

0.76

0.59

0.97

0.90

Total non-performing assets as a percentage of total assets

0.63

0.76

0.59

0.97

0.90

Total non-performing assets and accruing troubled debt restructured loans as a percentage of total assets

0.83

0.93

0.78

1.16

1.14

Other:

Number of offices

Number of full-time equivalent employees

244

251

253

257

253

(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

June 30, 2023

December 31, 2022

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

2,988

—

(279

)

2,709

2,985

—

(296

)

2,689

Corporate Bonds

25,807

—

(2,784

)

23,023

25,824

—

(2,465

)

23,359

Mortgage-Backed Securities:

Collateralized Mortgage Obligations (1)

42,128

—

(6,724

)

35,404

44,503

—

(6,726

)

37,777

FHLMC Certificates

10,742

—

(1,636

)

9,106

11,310

—

(1,676

)

9,634

FNMA Certificates

64,298

—

(10,931

)

53,367

67,199

—

(11,271

)

55,928

GNMA Certificates

114

—

)

111

122

—

)

118

Total available-for-sale securities

146,077

—

(22,357

)

123,720

151,943

—

(22,438

)

129,505

Held-to-Maturity Securities:

U.S. Agency Bonds

25,000

—

(455

)

24,545

35,000

—

(380

)

34,620

Corporate Bonds

82,500

(2,978

)

79,547

82,500

(3,819

)

78,738

Mortgage-Backed Securities:

Collateralized Mortgage Obligations (1)

224,312

—

(7,312

)

217,000

235,479

192

(5,558

)

230,113

FHLMC Certificates

3,948

—

(291

)

3,657

4,120

—

(268

)

3,852

FNMA Certificates

125,943

—

(5,828

)

120,115

131,918

—

(5,227

)

126,691

SBA Certificates

21,111

—

21,190

21,803

—

21,837

Allowance for Credit Losses

(862

)

—

Total held-to-maturity securities

481,952

104

(16,864

)

466,054

510,820

283

(15,252

)

495,851

(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 Six Months Ended June 30,

2023

2022

Beginning balance

—

CECL adoption

662

—

Provision for credit losses

200

—

Allowance for credit losses on securities

862

—

Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

As of

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Mortgage loans:

1-4 family residential

Investor Owned

351,754

20.43

354,559

21.60

343,968

22.54

336,667

23.79

321,671

24.02

Owner-Occupied

154,116

8.94

149,481

9.10

134,878

8.84

112,749

7.97

100,048

7.47

Multifamily residential

550,033

31.94

553,430

33.71

494,667

32.42

421,917

29.81

396,470

29.60

Nonresidential properties

317,416

18.43

314,560

19.17

308,043

20.19

282,642

19.97

279,877

20.90

Construction and land

315,843

18.34

235,157

14.33

185,018

12.13

197,437

13.95

165,425

12.35

Total mortgage loans

1,689,162

98.08

1,607,187

97.91

1,466,574

96.12

1,351,412

95.49

1,263,491

94.34

Non-mortgage loans:

Business loans (1)

21,041

1.22

19,890

1.21

39,965

2.62

41,398

2.92

45,720

3.41

Consumer loans (2)

11,958

0.70

14,227

0.88

19,129

1.26

22,563

1.59

30,198

2.25

Total non-mortgage loans

32,999

1.92

34,117

2.09

59,094

3.88

63,961

4.51

75,918

5.66

Total loans, gross

1,722,161

100.00

1,641,304

100.00

1,525,668

100.00

1,415,373

100.00

1,339,409

100.00

Net deferred loan origination costs

1,059

2,099

2,051

2,288

2,446

Allowance for credit losses on loans

(28,173

)

(28,975

)

(34,592

)

(25,108

)

(17,535

)

Loans, net

1,695,047

1,614,428

1,493,127

1,392,553

1,324,320

(1) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, business loans include $3.2 million, $3.6 million, $20.0 million, $24.7 million and $30.8 million, respectively, of PPP loans.

(2) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, consumer loans include $11.2 million, $13.4 million, $18.2 million, $21.5 million and $28.3 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 June 30, 2023

(in thousands)

Receivable from Grain

Microloans originated - put back to Grain (inception-to-June 30, 2023)

24,324

Write-downs, net of recoveries (inception-to-date as of June 30, 2023)

(15,679

)

Cash receipts from Grain (inception-to-June 30, 2023)

(6,819

)

Grant/reserve

(1,826

)

Net receivable as of June 30, 2023

—

Microloan receivables from Grain Borrowers

Grain originated loans receivable as of June 30, 2023

11,213

Allowance for credit losses on loans as of June 30, 2023 (1)

(9,786

)

Microloans, net of allowance for credit losses on loans as of June 30, 2023

1,427

Investments

Investment in Grain

1,000

Investment in Grain write-off in Q3 2022

(1,000

)

Investment in Grain as of June 30, 2023

—

Total exposure to Grain as of June 30, 2023

1,427

(1) Includes $0.3 million for allowance for unused commitments on the $2.4 million of unused commitments available to Grain originated borrowers reported in other liabilities in the accompanying Consolidated Statements of Financial Conditions. Excludes $1.3 million of security deposits by Grain originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions.

Ponce Financial Group, Inc. and Subsidiaries

Allowance for Credit Losses on Loans

For the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

(Dollars in thousands)

Allowance for credit losses on loans at beginning of the period

28,975

34,592

25,108

17,535

16,893

Provision (benefit) for credit losses on loans

934

(321

)

12,641

9,330

817

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

—

Consumer

(1,931

)

(2,569

)

(3,659

)

(1,799

)

(450

)

Total charge-offs

(1,931

)

(2,569

)

(3,659

)

(1,799

)

(450

)

Recoveries:

Mortgage loans:

1-4 family residences

Investor owned

—

156

Owner occupied

—

Multifamily residences

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

195

363

502

Total recoveries

195

363

502

275

Net (charge-offs) recoveries

(1,736

)

(2,206

)

(3,157

)

(1,757

)

(175

)

Allowance for credit losses on loans at end of the period

28,173

28,975

34,592

25,108

17,535

Ponce Financial Group, Inc. and Subsidiaries

Deposits

As of

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Demand

266,545

18.48

282,741

21.15

289,149

23.08

288,654

21.37

284,462

24.77

Interest-bearing deposits:

NOW/IOLA accounts

22,754

1.57

21,735

1.63

24,349

1.94

28,799

2.13

28,597

2.49

Money market accounts

538,520

37.35

408,404

30.55

317,815

25.38

360,293

26.66

181,156

15.77

Reciprocal deposits

100,919

7.00

109,649

8.20

114,049

9.11

162,858

12.05

151,264

13.17

Savings accounts

119,635

8.30

127,731

9.55

130,432

10.41

140,055

10.37

139,244

12.12

Total NOW, money market, reciprocal and savings accounts

781,828

54.22

667,519

49.93

586,645

46.84

692,005

51.21

500,261

43.55

Certificates of deposit of $250K or more

83,646

5.80

76,893

5.75

70,113

5.60

61,900

4.58

65,157

5.67

Brokered certificates of deposit (1)

98,729

6.85

98,754

7.39

98,754

7.89

98,760

7.31

62,650

5.45

Listing service deposits (1)

20,258

1.40

28,417

2.13

35,813

2.86

40,964

3.03

48,953

4.26

All other certificates of deposit less than $250K

191,007

13.25

182,553

13.65

171,938

13.73

168,906

12.50

187,245

16.30

Total certificates of deposit

393,640

27.30

386,617

28.92

376,618

30.08

370,530

27.42

364,005

31.68

Total interest-bearing deposits

1,175,468

81.52

1,054,136

78.85

963,263

76.92

1,062,535

78.63

864,266

75.23

Total deposits

1,442,013

100.00

1,336,877

100.00

1,252,412

100.00

1,351,189

100.00

1,148,728

100.00

(1) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, there were $3.3 million, $9.5 million, $13.6 million, $13.8 million, and $18.5 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

June 30,

December 31,

2023

2022

Scheduled

Maturity

Redeemable

at Call Date

Weighted

Average

Rate

Scheduled

Maturity

Redeemable

at Call Date

Weighted

Average

Rate

(Dollars in thousands)

Overnight line of credit advance

—

6,000

4.6

Term advances ending:

2023

7,000

2.12

178,375

4.32

2024

354,000

4.53

50,000

4.75

2025

50,000

4.41

50,000

4.41

2026

—

2027

212,000

3.44

183,000

3.25

Thereafter

59,100

3.43

50,000

3.35

682,100

4.06

517,375

3.90

Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

As of Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

(Dollars in thousands)

Non-accrual loans:

Mortgage loans:

1-4 family residential

Investor owned

296

2,836

2,844

5,902

3,460

Owner occupied

2,363

2,245

961

971

1,140

Multifamily residential

1,435

—

Nonresidential properties

—

778

1,162

Construction and land

11,721

11,906

7,567

10,660

10,817

Non-mortgage loans:

Business

—

359

—

Consumer

—

Total non-accrual loans (not including non-accruing troubled debt restructured loans)

15,815

17,027

11,372

18,670

16,579

Non-accruing troubled debt restructured loans:

Mortgage loans:

1-4 family residential

Investor owned

209

213

217

221

224

Owner occupied

840

2,020

2,027

2,215

1,746

Multifamily residential

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

Total non-accruing troubled debt restructured loans

1,049

2,324

2,337

2,531

2,066

Total non-accrual loans

16,864

19,351

13,709

21,201

18,645

Accruing troubled debt restructured loans:

Mortgage loans:

1-4 family residential

Investor owned

2,161

2,185

2,207

2,228

2,246

Owner occupied

2,353

1,310

1,328

1,254

2,019

Multifamily residential

—

Nonresidential properties

783

701

708

715

725

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

Total accruing troubled debt restructured loans

5,297

4,196

4,243

4,197

4,990

Total non-performing assets and accruing troubled debt restructured loans

22,161

23,547

17,952

25,398

23,635

Total non-performing loans to total gross loans

0.98

1.18

0.90

1.50

1.39

Total non-performing assets to total assets

0.63

0.76

0.59

0.97

0.90

Total non-performing assets and accruing troubled debt restructured loans to total assets

0.83

0.93

0.78

1.16

1.14

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

For the Three Months Ended June 30,

2023

2022

Average

Outstanding

Average

Outstanding

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate (1)

(Dollars in thousands)

Interest-earning assets:

Loans (2)

1,683,117

23,015

5.48

1,318,400

16,057

4.89

Securities (3)

614,598

5,731

3.74

155,939

908

2.34

Other (4) (5)

164,509

2,309

5.63

109,755

202

0.74

Total interest-earning assets

2,462,224

31,055

5.06

1,584,094

17,167

4.35

Non-interest-earning assets (5)

121,169

145,308

Total assets

2,583,393

1,729,402

Interest-bearing liabilities:

NOW/IOLA

22,280

0.14

32,321

0.17

Money market

539,020

5,874

4.37

338,984

474

0.56

Savings

122,802

0.09

136,755

0.09

Certificates of deposit

393,754

2,381

2.43

387,129

677

0.70

Total deposits

1,077,856

8,292

3.09

895,189

1,196

0.54

Advance payments by borrowers

16,967

0.05

12,359

0.06

Borrowings

649,652

6,479

4.00

89,965

481

2.14

Total interest-bearing liabilities

1,744,475

14,773

3.40

997,513

1,679

0.68

Non-interest-bearing liabilities:

Non-interest-bearing demand

299,707

—

359,181

—

Other non-interest-bearing liabilities

42,906

—

67,220

—

Total non-interest-bearing liabilities

342,613

—

426,401

—

Total liabilities

2,087,088

14,773

1,423,914

1,679

Total equity

496,305

305,488

Total liabilities and total equity

2,583,393

3.40

1,729,402

0.68

Net interest income

16,282

15,488

Net interest rate spread (6)

1.66

3.67

Net interest-earning assets (7)

717,749

586,581

Net interest margin (8)

2.65

3.92

Average interest-earning assets to interest-bearing liabilities

141.14

158.80

(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) 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.

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

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

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

For the Six Months Ended June 30,

2023

2022

Average

Outstanding

Average

Outstanding

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate

(Dollars in thousands)

Interest-earning assets:

Loans (2)

1,627,939

42,715

5.29

1,321,897

34,257

5.23

Securities (3)

622,822

11,806

3.82

147,066

1,625

2.23

Other (4) (5)

106,812

2,890

5.46

108,094

303

0.57

Total interest-earning assets

2,357,573

57,411

4.91

1,577,057

36,185

4.63

Non-interest-earning assets (5)

122,083

151,047

Total assets

2,479,656

1,728,104

Interest-bearing liabilities:

NOW/IOLA

22,804

0.15

32,700

0.19

Money market

494,385

9,998

4.08

329,448

709

0.43

Savings

125,823

0.09

136,084

0.09

Certificates of deposit

387,592

4,252

2.21

403,028

1,480

0.74

Total deposits

1,030,604

14,326

2.80

901,260

2,282

0.51

Advance payments by borrowers

14,954

0.07

11,091

0.05

Borrowings

587,026

11,553

3.97

102,258

1,074

2.12

Total interest-bearing liabilities

1,632,584

25,884

3.20

1,014,609

3,359

0.67

Non-interest-bearing liabilities:

Non-interest-bearing demand

308,208

—

365,771

—

Other non-interest-bearing liabilities

42,451

—

57,446

—

Total non-interest-bearing liabilities

350,659

—

423,217

—

Total liabilities

1,983,243

25,884

1,437,826

3,359

Total equity

496,413

290,278

Total liabilities and total equity

2,479,656

3.20

1,728,104

0.67

Net interest income

31,527

32,826

Net interest rate spread (6)

1.71

3.96

Net interest-earning assets (7)

724,989

562,448

Net interest margin (8)

2.70

4.20

Average interest-earning assets to interest-bearing liabilities

144.41

155.43

(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 deposit.

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

(6) 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.

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

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

Ponce Financial Group, Inc. and Subsidiaries

Other Data

As of

June 30,

March 31,

December 31,

September 30,

June 30,

2023

2022

Other Data

Common shares issued

24,886,711

24,865,476

24,861,329

24,728,460

24,724,274

Less treasury shares

617,924

1,976

—

Common shares outstanding at end of period

24,268,787

24,863,500

24,859,353

24,728,460

24,724,274

Book value per common share

10.94

10.90

10.77

11.15

11.85

Tangible book value per common share

10.94

10.90

10.77

11.15

11.85

Contact:

Frank Perez

frank.perez@poncebank.net

718-931-9000

Source: Ponce Financial Group, Inc.

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