Ponce Financial Group, Inc. Reports Second Quarter 2024 Results

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

YORK, July 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 second quarter of 2024.

Second Quarter 2024 Highlights (Compared to Prior Periods):

Net income available to common stockholders was $3.1 million, or $0.14 per diluted share for the three months ended June 30, 2024, as compared to net income available to common stockholders of $2.4 million, or $0.11 per diluted share for the three months ended March 31, 2024 and net loss to common stockholders of ($0.1) million, or $0.00 per diluted share for the three months ended June 30, 2023. Net income for the three months ended June 30, 2024, which excludes $0.1 million in dividends on preferred shares, was $3.2 million. The Company began paying dividends on its preferred stock during the quarter ended June 30, 2024, as required by the terms thereof.

Included in the $3.1 million of net income available to common stockholders for the second quarter of 2024 results is $38.8 million in interest and dividend income, $2.3 million in non-interest income and $0.4 million in benefit for credit losses, offset by $20.9 million in interest expense, $16.1 million in non-interest expense and $0.1 million in payments and accrued dividends on preferred shares.

Net interest income of $17.9 million for the second quarter of 2024 decreased $0.9 million, or 4.88%, from the prior quarter and increased $1.6 million, or 9.96%, from the same quarter last year. As discussed in our prior earnings release, the first quarter of 2024 included a $1.0 million recovery of interest from a previously non-performing loan, which increased net interest income in that period as compared to the current period.

Net interest margin was 2.62% for the second quarter of 2024, versus 2.71% for the prior quarter and versus 2.65% for the same quarter last year. A significant driver of the reduction in net interest margin is the aforementioned recovery.

Six Months 2024 Highlights (Compared to 2023):

Net income available to common stockholders was $5.5 million, or $0.25 per diluted share for the six months ended June 30, 2024, as compared to net income available to common stockholders of $0.2 million, or $0.01 per diluted share for the six months ended June 30, 2023. Net income for the six months ended June 30, 2024, which excludes $0.1 million in dividends on preferred shares, was $5.6 million.

Net interest income for the six months ended June 30, 2024 was $36.7 million, an increase of $5.2 million, or 16.49%, compared to $31.5 million for the six months ended June 30, 2023.

Non-interest income for the six months ended June 30, 2024 was $4.0 million, an increase of $0.7 million, or 19.75%, from $3.3 million for the six months ended June 30, 2023.

Non-interest expense for the six months ended June 30, 2024 was $33.1 million, a decrease of $0.4 million, or 1.06%, compared to $33.5 million for the six months ended June 30, 2023.

Cash and equivalents were $103.2 million as of June 30, 2024, a decrease of $36.0 million, or 25.88%, from December 31, 2023.

Securities totaled $555.2 million as of June 30, 2024, a decrease of $26.4 million, or 4.54%, from December 31, 2023 primarily due to regular principal payments.

Net loans receivable were $2.02 billion as of June 30, 2024, an increase of $126.3 million, or 6.66%, from December 31, 2023.

Deposits were $1.61 billion as of June 30, 2024, an increase of $98.5 million, or 6.53%, 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 both in terms of improving our economic performance as well as serving our communities. We have exceeded our qualified lending targets under ECIP and qualified for a 0.50% preferred dividend rate. Book value per share continues to grow and is now $11.45 (up $0.51 vs last year) and total equity per common share stands at $20.90. 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 22.47%, 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 $679.9 million, approximately 1.7 times of our uninsured deposits of $401.7 million. We remain committed to the communities we serve and our status as a Minority Depository Institution (“MDI”)/Community Development Financial Institution ("CDFI"), and we 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 “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

June 30,

March 31,

December 31,

September 30,

June 30,

Performance Ratios (Annualized):

2024

2023

Return on average assets (1)

0.45

0.33

0.08

0.39

(0.01

Return on average equity (1)

2.59

1.97

0.42

2.11

(0.07

Net interest rate spread (1) (2)

1.72

1.82

1.74

1.68

1.75

Net interest margin (1) (3)

2.62

2.71

2.66

2.58

2.65

Non-interest expense to average assets (1)

2.28

2.35

2.66

2.58

2.65

Efficiency ratio (4)

80.09

82.56

96.83

78.11

96.15

Average interest-earning assets to average interest- bearing liabilities

129.73

129.69

133.50

134.49

137.67

Average equity to average assets

17.41

17.00

18.25

18.32

19.21

At or for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Capital Ratios (Annualized):

2024

2023

Total capital to risk-weighted assets (Bank only)

22.47

22.79

23.30

25.10

26.30

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

21.24

21.54

22.05

23.85

25.05

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

21.24

21.54

22.05

23.85

25.05

Tier 1 capital to average assets (Bank only)

16.70

16.26

17.49

17.51

17.95

At or for the Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

Asset Quality Ratios (Annualized):

2024

2023

Allowance for loan losses as a percentage of total loans

1.18

1.23

1.36

1.51

1.64

Allowance for loan losses as a percentage of nonperforming loans

130.28

140.90

152.99

169.49

167.06

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

(0.10

(0.25

(0.24

(0.34

(0.41

Non-performing loans as a percentage of total gross loans

0.89

0.87

0.89

0.98

Non-performing loans as a percentage of total assets

0.65

0.62

0.63

Total non-performing assets as a percentage of total assets

0.65

0.62

0.63

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

0.82

0.79

0.81

0.82

0.83

Annualized where appropriate.

Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.

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

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

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 June 30, 2024 was $3.2 million compared to net income of $2.4 million for the three months ended March 31, 2024 and net loss of $0.1 million for the three months ended June 30, 2023.

The increase of net income for the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was attributed mainly to a decrease in non-interest expense, an increase in non-interest income, a decrease in provision for income taxes and an increase in benefit for credit losses, partially offset by a decrease in net interest income.

The increase of net income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was largely due to increases in net interest income, an increase to benefit for credit losses, a decrease in non-interest expense and an increase in non-interest income, partially offset by an increase in provision for income taxes.

Net income for the six months ended June 30, 2024 was $5.6 million compared to a net income of $0.2 million for the six months ended June 30, 2023. The increase in net income was attributable to increases in net interest income, benefit for credit losses and non-interest income and a decrease in non-interest expense, partially offset by an increase in provision for income taxes.

Net Interest Income and Net Margin

Net interest income for the three months ended June 30, 2024, decreased $0.9 million, or 4.88%, to $17.9 million compared to $18.8 million for the three months ended March 31, 2024 and increased $1.6 million, or 9.96%, compared to $16.3 million for the three months ended June 30, 2023. As discussed in our prior earnings release, the first quarter of 2024 included a $1.0 million recovery of interest from a previously non-performing loan, which increased net interest income in that period as compared to the current period.

Net interest income for the six months ended June 30, 2024, increased $5.2 million, or 16.49%, to $36.7 million, compared to $31.5 million for the six months ended June 30, 2023.

For the six months ended June 30, 2024, benefit for credit losses amounted to $0.6 million consisting of a benefit for credit losses on loans in the amount of $0.4 million and a release in the provision for credit losses on held-to-maturity securities in the amount of $0.2 million. The $0.4 million benefit for credit losses on loans for the six months ended June 30, 2024 resulted from a benefit of $1.5 million related to micro loans offset by a provision of $1.1 million related to non-micro loans.

Net interest margin was 2.62% for the three months ended June 30, 2024 compared to 2.71% for the prior quarter, a decrease of 9bps and 2.65% for the same period last year, a decrease of 3bps.

Net interest margin was 2.67% for the six months ended June 30, 2024 compared to 2.71% for the six months ended June 30, 2023, a decrease of 4bps.

Non-interest Income

Non-interest income for the three months ended June 30, 2024, was $2.3 million, an increase of $0.6 million, or 32.28%, compared to $1.7 million the three months ended March 31, 2024 and an increase of $0.8 million, or 51.34%, compared to $1.5 million the three months ended June 30, 2023.

The $0.6 million increase in non-interest income for the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was largely attributable to an increase of $0.5 million in other non-interest income related to the mark to market adjustments on a private equity fund and $0.1 million in late and prepayment charges.

The $0.8 million increase in non-interest income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was largely attributable to increases of $0.5 million in other non-interest income related to the mark to market adjustments on a private equity fund, $0.2 million in income on sale of mortgage loans and $0.1 million in late and prepayment charges.

Non-interest income for the six months ended June 30, 2024, was $4.0 million, an increase of $0.7 million, or 19.75%, compared to $3.3 million for the six months ended June 30, 2023. The increase was largely attributable to increases of $0.6 million in other non-interest income and $0.4 million in income on sale of mortgage loans, partially offset by a decrease of $0.3 million in late and prepayment charges.

Non-interest Expense

Non-interest expense for the three months ended June 30, 2024, was $16.1 million, a decrease of $0.8 million, or 4.74%, compared to $17.0 million for the three months ended March 31, 2024 and a decrease of $0.9 million, or 5.51%, compared to $17.1 million for the three months ended June 30, 2023.

The $0.8 million decrease from the three months ended March 31, 2024 was mainly attributable to decreases of $0.7 million in provision for contingencies, $0.4 million in professional fees, $0.1 million in compensation and benefits, $0.1 million in occupancy and equipment and $0.1 million in data processing, partially offset by an increase of $0.6 million in other operating expense.

The $0.9 million decrease from the three months ended June 30, 2023 was mainly attributable to decreases of $1.0 million in provision for contingencies, $0.5 million in professional fees, $0.3 million in office supplies, telephone and postage, $0.2 million in occupancy and equipment, $0.2 million in data processing expenses and $0.1 million in marketing and promotional expenses, partially offset by increases of $0.4 million in other operating expense, $0.3 million in direct loan expenses and $0.3 million in compensation and benefits and a decrease of $0.3 million in Grain recoveries.

Non-interest expense for the six months ended June 30, 2024, was $33.1 million, a decrease of $0.4 million, or 1.06%, compared to $33.5 million for the six months ended June 30, 2023. The $0.4 million decrease from the six months ended June 30, 2023 was mainly attributable to decreases of $1.8 million in provision for contingencies, $0.4 million in office supplies, telephone and postage, $0.3 million in professional fees, $0.3 million in data processing expenses, $0.2 million in marketing and promotional expenses and $0.1 million in occupancy and equipment, partially offset by a decrease of $1.1 million in Grain recoveries, and increases of $0.7 million in compensation and benefits and $0.6 million in direct loan expenses.

Balance Sheet Summary

Total assets increased $91.3 million, or 3.32%, to $2.84 billion as of June 30, 2024 from $2.75 billion as of December 31, 2023. The increase in total assets is largely attributable to increases of $126.3 million in net loans receivable, $27.8 million in mortgage loans held for sale and $4.6 million in Federal Home Loan Bank of New York stock, partially offset by decreases of $36.0 million in cash and cash equivalents, $19.6 million in held-to-maturity securities, $6.8 million in available-for-sale securities, $3.2 million in other assets, $1.2 million in deferred tax assets and $0.6 million in accrued interest receivable.

Total liabilities increased $85.0 million, or 3.76%, to $2.34 billion as of June 30, 2024 from $2.26 billion as of December 31, 2023. The increase in total liabilities was largely attributable to an increase of $98.5 million in deposits, partially offset by decreases of $5.1 million in accrued interest payable, $4.0 million in borrowings, $3.5 million in other liabilities and $0.8 million in operating lease liabilities.

Total stockholders’ equity increased $6.3 million, or 1.27%, to $497.7 million as of June 30, 2024, from $491.4 million as of December 31, 2023. This increase in stockholders’ equity was largely attributable to $5.5 million in net income available to common stockholders, $1.0 million impact to additional paid in capital as a result of share-based compensation and $0.6 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; 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,

2024

2023

ASSETS

Cash and due from banks:

Cash

23,128

29,972

28,930

26,046

31,162

Interest-bearing deposits

80,038

104,752

110,260

90,966

212,627

Total cash and cash equivalents

103,166

134,724

139,190

117,012

243,789

Available-for-sale securities, at fair value

113,125

116,044

119,902

116,753

123,720

Held-to-maturity securities, at amortized cost

442,113

452,955

461,748

471,065

481,952

Placement with banks

249

996

Mortgage loans held for sale, at fair value

37,764

7,860

9,980

14,103

10,070

Loans receivable, net

2,022,173

1,981,428

1,895,886

1,787,607

1,695,047

Accrued interest receivable

17,441

18,063

18,010

16,624

16,054

Premises and equipment, net

16,976

17,396

16,053

16,453

16,856

Right of use assets

30,349

31,021

31,272

32,110

32,435

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

23,972

23,892

19,377

18,870

19,195

Deferred tax assets

13,172

13,919

14,332

15,984

15,924

Other assets

21,507

21,151

24,723

16,286

15,919

Total assets

2,842,007

2,818,702

2,750,722

2,623,863

2,671,957

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Deposits

1,606,097

1,585,784

1,507,620

1,401,132

1,442,013

Operating lease liabilities

31,861

32,486

32,684

33,459

33,716

Accrued interest payable

6,820

4,218

11,965

8,385

4,704

Advance payments by borrowers for taxes and insurance

10,838

13,245

10,778

13,743

12,402

Borrowings

680,421

684,421

675,100

682,100

Other liabilities

8,313

8,866

11,859

6,986

6,540

Total liabilities

2,344,350

2,325,020

2,259,327

2,138,805

2,181,475

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

(9,519

)

(9,702

)

(9,747

)

(10,975

)

(5,202

)

Additional paid-in-capital

207,934

207,584

207,106

207,626

207,287

Retained earnings

102,951

99,834

97,420

96,902

94,312

Accumulated other comprehensive loss

(16,557

)

(16,590

)

(15,649

)

(20,468

)

(17,597

)

Unearned compensation ─ ESOP

(12,401

)

(12,693

)

(12,984

)

(13,276

)

(13,567

)

Total stockholders' equity

497,657

493,682

491,395

485,058

490,482

Total liabilities and stockholders' equity

2,842,007

2,818,702

2,750,722

2,623,863

2,671,957

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,

2024

2023

Interest and dividend income:

Interest on loans receivable

31,281

30,664

27,814

25,276

23,015

Interest on deposits due from banks

1,542

2,911

990

1,969

1,817

Interest and dividend on securities and FHLBNY stock

5,969

6,091

6,146

6,261

6,223

Total interest and dividend income

38,792

39,666

34,950

33,506

31,055

Interest expense:

Interest on certificates of deposit

6,358

6,380

5,103

4,362

3,881

Interest on other deposits

7,389

6,540

5,706

5,639

4,413

Interest on borrowings

7,141

7,923

6,944

6,963

6,479

Total interest expense

20,888

20,843

17,753

16,964

14,773

Net interest income

17,904

18,823

17,197

16,542

16,282

(Benefit) provision for credit losses

(374

)

(180

)

(375

)

535

987

Net interest income after (benefit) provision for credit losses

18,278

19,003

17,572

16,007

15,295

Non-interest income:

Service charges and fees

492

473

498

516

481

Brokerage commissions

Late and prepayment charges

426

359

365

899

372

Income on sale of mortgage loans

274

302

244

173

Grant income

—

438

3,718

—

Other

1,057

565

(273

)

304

522

Total non-interest income

2,258

1,707

1,285

5,627

1,492

Non-interest expense:

Compensation and benefits

7,724

7,844

8,262

7,566

7,425

Occupancy and equipment

3,564

3,667

3,686

3,588

3,724

Data processing expenses

1,013

1,127

1,101

1,582

1,208

Direct loan expenses

633

732

497

369

345

(Benefit) provision for contingencies

(493

)

164

418

391

517

Insurance and surety bond premiums

263

253

250

255

248

Office supplies, telephone and postage

233

249

294

301

489

Professional fees

1,369

1,723

2,040

1,693

1,904

Grain recoveries

(65

)

(53

)

(152

)

(69

)

(346

)

Marketing and promotional expenses

145

100

146

248

303

Directors fees and regulatory assessment

176

179

173

169

160

Other operating expenses

1,585

965

1,182

1,223

1,112

Total non-interest expense

16,147

16,950

17,897

17,316

17,089

Income (loss) before income taxes

4,389

3,760

960

4,318

(302

)

Provision (benefit) for income taxes

1,197

1,346

442

1,728

(215

)

Net income (loss)

3,192

2,414

518

2,590

(87

)

Dividends on preferred shares

—

Net income (loss) available to common stockholders

3,117

2,414

518

2,590

(87

)

Earnings per common share:

Basic

0.14

0.11

0.02

0.12

(0.00

)

Diluted

0.14

0.11

0.02

0.12

(0.00

)

Weighted average common shares outstanding:

Basic

22,409,803

22,353,492

22,224,945

22,272,076

23,208,168

Diluted

22,419,309

22,366,728

22,406,102

22,349,217

23,208,168

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

For the Six Months Ended June 30,

2024

2023

Variance $

Variance %

Interest and dividend income:

Interest on loans receivable

61,945

42,715

19,230

45.02

Interest on deposits due from banks

4,453

2,014

2,439

121.10

Interest and dividend on securities and FHLBNY stock

12,060

12,682

(622

)

(4.90

Total interest and dividend income

78,458

57,411

21,047

36.66

Interest expense:

Interest on certificates of deposit

12,738

7,106

5,632

79.26

Interest on other deposits

13,929

7,225

6,704

92.79

Interest on borrowings

15,064

11,553

3,511

30.39

Total interest expense

41,731

25,884

15,847

61.22

Net interest income

36,727

31,527

5,200

16.49

(Benefit) provision for credit losses

(554

)

813

(1,367

)

(168.14

Net interest income after benefit for credit losses

37,281

30,714

6,567

21.38

Non-interest income:

Service charges and fees

965

972

)

(0.72

Brokerage commissions

(33

)

(66.00

Late and prepayment charges

785

1,101

(316

)

(28.70

Income on sale of mortgage loans

576

181

395

218.23

Other

1,622

1,007

615

61.07

Total non-interest income

3,965

3,311

654

19.75

Non-interest expense:

Compensation and benefits

15,568

14,871

697

4.69

Occupancy and equipment

7,231

7,294

(63

)

(0.86

Data processing expenses

2,140

2,400

(260

)

(10.83

Direct loan expenses

1,365

757

608

80.32

(Benefit) provision for contingencies

(329

)

1,502

(1,831

)

(121.90

Insurance and surety bond premiums

516

513

0.58

Office supplies, telephone and postage

482

888

(406

)

(45.72

Professional fees

3,092

3,359

(267

)

(7.95

Grain recoveries

(118

)

(1,260

)

1,142

(90.63

Marketing and promotional expenses

245

431

(186

)

(43.16

Directors fees and regulatory assessment

355

315

12.70

Other operating expenses

2,550

2,380

170

7.14

Total non-interest expense

33,097

33,450

(353

)

(1.06

Income before income taxes

8,149

575

7,574

1,317.22

Provision for income taxes

2,543

331

2,212

668.28

Net income

5,606

244

5,362

2,197.54

Dividends on preferred shares

—

Net income available to common stockholders

5,531

244

5,287

2,166.80

Earnings per common share:

Basic

0.25

0.01

0.24

2,254.79

Diluted

0.25

0.01

0.24

2,256.11

Weighted average common shares outstanding:

Basic

22,381,647

23,250,357

(868,710

)

(3.74

Diluted

22,393,018

23,275,201

(882,183

)

(3.79

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,

2024

2023

Performance Ratios:

Return on average assets (1)

0.45

0.33

0.08

0.39

(0.01

Return on average equity (1)

2.59

1.97

0.42

2.11

(0.07

Net interest rate spread (1) (2)

1.72

1.82

1.74

1.68

1.75

Net interest margin (1) (3)

2.62

2.71

2.66

2.58

2.65

Non-interest expense to average assets (1)

2.28

2.35

2.66

2.58

2.65

Efficiency ratio (4)

80.09

82.56

96.83

78.11

96.15

Average interest-earning assets to average interest- bearing liabilities

129.73

129.69

133.50

134.49

137.67

Average equity to average assets

17.41

17.00

18.25

18.32

19.21

Capital Ratios:

Total capital to risk-weighted assets (Bank only)

22.47

22.79

23.30

25.10

26.30

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

21.24

21.54

22.05

23.85

25.05

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

21.24

21.54

22.05

23.85

25.05

Tier 1 capital to average assets (Bank only)

16.70

16.26

17.49

17.51

17.95

Asset Quality Ratios:

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

1.18

1.23

1.36

1.51

1.64

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

130.28

140.90

152.99

169.49

167.06

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

(0.10

(0.25

(0.24

(0.34

(0.41

Non-performing loans as a percentage of total gross loans

0.89

0.87

0.89

0.98

Non-performing loans as a percentage of total assets

0.65

0.62

0.63

Total non-performing assets as a percentage of total assets

0.65

0.62

0.63

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

0.82

0.79

0.81

0.82

0.83

Other:

Number of offices

Number of full-time equivalent employees

227

233

237

243

244

Annualized where appropriate.

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.

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

Efficiency ratio represents noninterest expense divided by the sum of net interest income and non-interest income.

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.

Ponce Financial Group, Inc. and Subsidiaries

Securities Portfolio

June 30, 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

2,992

—

(196

)

2,796

2,990

—

(206

)

2,784

Corporate Bonds

25,773

—

(1,859

)

23,914

25,790

—

(2,122

)

23,668

Mortgage-Backed Securities:

Collateralized Mortgage Obligations(1)

36,886

—

(6,280

)

30,606

39,375

—

(6,227

)

33,148

FHLMC Certificates

9,611

—

(1,523

)

8,088

10,163

—

(1,482

)

8,681

FNMA Certificates

58,797

—

(11,174

)

47,623

61,359

—

(9,842

)

51,517

GNMA Certificates

—

)

104

—

104

Total available-for-sale securities

134,158

—

(21,033

)

113,125

139,781

—

(19,879

)

119,902

Held-to-Maturity Securities:

U.S. Agency Bonds

25,000

—

(253

)

24,747

25,000

—

(181

)

24,819

Corporate Bonds

82,500

—

(2,230

)

80,270

82,500

—

(2,691

)

79,809

Mortgage-Backed Securities:

Collateralized Mortgage Obligations(1)

200,684

—

(8,533

)

192,151

212,093

104

(5,170

)

207,027

FHLMC Certificates

3,664

—

(274

)

3,390

3,897

—

(244

)

3,653

FNMA Certificates

112,925

—

(5,565

)

107,360

118,944

—

(4,088

)

114,856

SBA Certificates

17,558

169

—

17,727

19,712

166

—

19,878

Allowance for Credit Losses

(218

)

—

(398

)

—

Total held-to-maturity securities

442,113

169

(16,855

)

425,645

461,748

270

(12,374

)

450,042

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

For the

Months Ended

Year Ended

June 30, 2024

December 31, 2023

Allowance for credit losses on securities at beginning of the period

398

—

CECL adoption

—

662

Benefit for credit losses

(180

)

(264

)

Allowance for credit losses on securities at end of the period

218

398

Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

As of

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2023

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Mortgage loans:

1-4 family residential

Investor Owned

337,292

16.49

339,331

16.92

343,689

17.89

347,082

19.13

351,754

20.43

Owner-Occupied

147,485

7.21

150,842

7.52

152,311

7.93

151,866

8.37

154,116

8.94

Multifamily residential

545,323

26.66

545,825

27.22

550,559

28.65

553,694

30.52

550,033

31.94

Nonresidential properties

337,583

16.51

327,350

16.32

342,343

17.81

321,472

17.71

317,416

18.43

Construction and land

641,879

31.39

608,665

30.35

503,925

26.22

411,383

22.67

315,843

18.34

Total mortgage loans

2,009,562

98.26

1,972,013

98.33

1,892,827

98.50

1,785,497

98.40

1,689,162

98.08

Non-mortgage loans:

Business loans

30,222

1.48

26,664

1.33

19,779

1.03

18,416

1.02

21,041

1.22

Consumer loans (1)

5,305

0.26

6,741

0.34

8,966

0.47

10,416

0.58

11,958

0.70

Total non-mortgage loans

35,527

1.74

33,405

1.67

28,745

1.50

28,832

1.60

32,999

1.92

Total loans, gross

2,045,089

100.00

2,005,418

100.00

1,921,572

100.00

1,814,329

100.00

1,722,161

100.00

Net deferred loan origination costs

1,145

674

468

692

1,059

Allowance for credit losses on loans

(24,061

)

(24,664

)

(26,154

)

(27,414

)

(28,173

)

Loans, net

2,022,173

1,981,428

1,895,886

1,787,607

1,695,047

As of June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023 and June 30, 2023, consumer loans include $4.3 million, $5.7 million, $8.0 million, $9.3 million and $11.2 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, 2024

(in thousands)

Receivable from Grain

Microloans originated - put back to Grain (inception-to-June 30, 2024)

23,986

Write-downs, net of recoveries (inception-to-date as of June 30, 2024)

(15,341

)

Cash receipts from Grain (inception-to-June 30, 2024)

(6,819

)

Grant/reserve

(1,826

)

Net receivable as of June 30, 2024

—

Microloan receivables from Grain Borrowers

Grain originated loans receivable as of June 30, 2024

4,277

Allowance for credit losses on loans as of June 30, 2024(1)

(3,623

)

Microloans, net of allowance for credit losses on loans as of June 30, 2024

654

Investments

Investment in Grain

1,000

Investment in Grain write-off in Q3 2022

(1,000

)

Investment in Grain as of June 30, 2024

—

Total exposure related to Grain as of June 30, 2024(2)

654

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

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

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2023

(Dollars in thousands)

Allowance for credit losses on loans at beginning of the period

24,664

26,154

27,414

28,173

28,975

(Benefit) provision for credit losses on loans

(120

)

(255

)

(126

)

750

934

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

(747

)

(1,302

)

(1,135

)

(1,592

)

(1,931

)

Total charge-offs

(747

)

(1,354

)

(1,198

)

(1,592

)

(1,931

)

Recoveries:

Mortgage loans:

1-4 family residences

Investor owned

—

Owner occupied

—

Multifamily residences

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

257

118

195

Total recoveries

264

119

195

Net (charge-offs) recoveries

(483

)

(1,235

)

(1,134

)

(1,509

)

(1,736

)

Allowance for credit losses on loans at end of the period

24,061

24,664

26,154

27,414

28,173

Ponce Financial Group, Inc. and Subsidiaries

Deposits

As of

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2023

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Demand(1)

178,125

11.09

191,541

12.07

185,151

12.28

214,326

15.30

225,106

15.61

Interest-bearing deposits:

NOW/IOLA accounts(1)

81,178

5.05

73,202

4.62

77,909

5.17

74,055

5.29

64,193

4.45

Money market accounts(2)

502,255

31.27

482,344

30.42

432,735

28.70

370,500

26.44

387,970

26.91

Reciprocal deposits

109,945

6.85

97,718

6.16

96,860

6.42

82,670

5.90

100,919

7.00

Savings accounts

109,694

6.83

112,713

7.11

114,139

7.57

117,870

8.41

119,635

8.30

Total NOW, money market, reciprocal and savings accounts

803,072

50.00

765,977

48.31

721,643

47.86

645,095

46.04

672,717

46.66

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

156,224

9.73

146,296

9.23

132,153

8.77

122,353

8.73

120,043

8.32

Brokered certificates of deposit(3)

94,614

5.89

94,689

5.97

98,729

6.55

98,729

7.05

98,729

6.85

Listing service deposits(3)

9,361

0.58

12,688

0.80

14,433

0.96

15,180

1.08

20,258

1.40

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

364,701

22.71

374,593

23.62

355,511

23.58

305,449

21.80

305,160

21.16

Total certificates of deposit

624,900

38.91

628,266

39.62

600,826

39.86

541,711

38.66

544,190

37.73

Total interest-bearing deposits

1,427,972

88.91

1,394,243

87.93

1,322,469

87.72

1,186,806

84.70

1,216,907

84.39

Total deposits

1,606,097

100.00

1,585,784

100.00

1,507,620

100.00

1,401,132

100.00

1,442,013

100.00

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

As of June 30, 2023, $150.6 million of Raisin deposits were reclassified from money market accounts to certificates of deposits. $36.4 million were reclassified to Certificates of deposits of $250K or more and $114.2 million were reclassified to certificates of deposit less than $250K.

As of June 30, 2024, March 31, 2024, December 31, 2023, September 30, 2023 and June 30, 2023, there were $1.5 million, $1.5 million, $0.3 million, $0.3 million and $3.3 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,

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

4.69

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

4.20

684,421

4.10

Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

As of Three Months Ended

June 30,

March 31,

December 31,

September 30,

June 30,

2024

2023

(Dollars in thousands)

Non-accrual loans:

Mortgage loans:

1-4 family residential

Investor owned

436

399

793

396

296

Owner occupied

1,423

1,426

1,682

1,685

2,363

Multifamily residential

5,754

4,098

2,979

1,444

1,435

Nonresidential properties

828

441

—

Construction and land

8,907

10,277

10,759

11,721

Non-mortgage loans:

Business

396

146

165

209

—

Consumer

—

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

17,744

16,787

16,378

15,455

15,815

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

Mortgage loans:

1-4 family residential

Investor owned

277

270

209

Owner occupied

448

447

449

840

Multifamily residential

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

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

725

717

719

1,049

Total non-accrual loans(2)

18,469

17,504

17,095

16,174

16,864

Accruing modifications to borrowers experiencing financial difficulty (1):

Mortgage loans:

1-4 family residential

Investor owned

1,830

1,850

2,112

2,131

2,161

Owner occupied

2,171

2,288

2,313

2,335

2,353

Multifamily residential

—

Nonresidential properties

707

748

757

765

783

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

Total accruing modifications to borrowers experiencing financial difficulty(1)

4,708

4,886

5,182

5,231

5,297

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

23,177

22,390

22,277

21,405

22,161

Total non-performing loans to total gross loans

0.89

0.87

0.89

0.98

Total non-performing assets to total assets

0.65

0.62

0.63

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

0.82

0.79

0.81

0.82

0.83

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.

Includes nonperforming mortgage loans held for sale.

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

For the Three Months Ended June 30,

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)

2,040,149

31,281

6.17

1,683,117

23,015

5.48

Securities(3)

562,560

5,486

3.92

614,598

5,731

3.74

Other(4)(5)

141,368

2,025

5.76

164,509

2,309

5.63

Total interest-earning assets

2,744,077

38,792

5.69

2,462,224

31,055

5.06

Non-interest-earning assets(5)

105,774

121,169

Total assets

2,849,851

2,583,393

Interest-bearing liabilities:

NOW/IOLA(6) (7)

72,932

151

0.83

66,314

305

1.84

Money market(7) (8)

599,209

7,209

4.84

408,329

4,077

4.00

Savings

111,859

0.10

122,802

0.09

Certificates of deposit(8)

635,850

6,358

4.02

524,445

3,881

2.97

Total deposits

1,419,850

13,745

3.89

1,121,890

8,292

2.96

Advance payments by borrowers

14,948

0.05

16,967

0.05

Borrowings

680,421

7,141

4.22

649,652

6,479

4.00

Total interest-bearing liabilities

2,115,219

20,888

3.97

1,788,509

14,773

3.31

Non-interest-bearing liabilities:

Non-interest-bearing demand(6)

188,920

—

255,673

—

Other non-interest-bearing liabilities

49,437

—

42,906

—

Total non-interest-bearing liabilities

238,357

—

298,579

—

Total liabilities

2,353,576

20,888

2,087,088

14,773

Total equity

496,275

496,305

Total liabilities and total equity

2,849,851

3.97

2,583,393

3.31

Net interest income

17,904

16,282

Net interest rate spread(9)

1.72

1.75

Net interest-earning assets(10)

628,858

673,715

Net interest margin(11)

2.62

2.65

Average interest-earning assets to interest-bearing liabilities

129.73

137.67

Annualized where appropriate.

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

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

Includes FHLBNY demand account, FHLBNY stock dividends and FRBNY demand deposits.

FRBNY demand deposits for prior period have been reclassified for consistency.

Includes reclassification of $44.0 million average outstanding balances from non-interest bearing demand to NOW/IOLA for the three months ended June 30, 2023.

Includes $0.3 million of interest expense reclassified from money market to NOW/IOLA for the three months ended June 30, 2023.

Includes reclassification of $130.7 million average outstanding balances and $1.5 million of interest expenses from money market to certificates of deposit for the three months ended June 30, 2023.

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.

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

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,

2024

2023

Average

Outstanding

Average

Outstanding

Average

Balance

Interest

Yield/Rate(1)

Balance

Interest

Yield/Rate

(Dollars in thousands)

Interest-earning assets:

Loans(2)

2,009,706

61,945

6.20

1,627,939

42,715

5.29

Securities(3)

569,397

11,105

3.92

622,822

11,806

3.82

Other(4)(5)

189,899

5,408

5.73

106,812

2,890

5.46

Total interest-earning assets

2,769,002

78,458

5.70

2,357,573

57,411

4.91

Non-interest-earning assets(5)

106,172

122,083

Total assets

2,875,174

2,479,656

Interest-bearing liabilities:

NOW/IOLA(6) (7)

77,891

369

0.95

69,024

993

2.90

Money market(7) (8)

571,886

13,501

4.75

361,557

6,168

3.44

Savings

112,680

0.10

125,823

0.09

Certificates of deposit(8)

632,689

12,738

4.05

520,420

7,106

2.75

Total deposits

1,395,146

26,663

3.84

1,076,824

14,326

2.68

Advance payments by borrowers

13,917

0.06

14,954

0.07

Borrowings

725,745

15,064

4.17

587,026

11,553

3.97

Total interest-bearing liabilities

2,134,808

41,731

3.93

1,678,804

25,884

3.11

Non-interest-bearing liabilities:

Non-interest-bearing demand(6)

193,891

—

261,988

—

Other non-interest-bearing liabilities

51,749

—

42,451

—

Total non-interest-bearing liabilities

245,640

—

304,439

—

Total liabilities

2,380,448

41,731

1,983,243

25,884

Total equity

494,726

496,413

Total liabilities and total equity

2,875,174

3.93

2,479,656

3.11

Net interest income

36,727

31,527

Net interest rate spread(9)

1.77

1.80

Net interest-earning assets(10)

634,194

678,769

Net interest margin(11)

2.67

2.71

Average interest-earning assets to

interest-bearing liabilities

129.71

140.43

Annualized where appropriate.

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

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

Includes FHLBNY demand account, FHLBNY stock dividends and FRBNY demand deposits.

FRBNY demand deposits for prior period have been reclassified for consistency.

Includes reclassification of $46.2 million average outstanding balances from non-interest bearing demand to NOW/IOLA for the six months ended June 30, 2023.

Includes $1.0 million of interest expense reclassified from money market to NOW/IOLA for the six months ended June 30, 2023.

Includes reclassification of $132.8 million average outstanding balances and $2.8 million of interest expenses from money market to certificates of deposit for the six months ended June 30, 2023.

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.

Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.

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,

2024

2023

Other Data

Common shares issued

24,886,711

Less treasury shares

1,074,979

1,096,214

1,101,191

1,233,111

617,924

Common shares outstanding at end of period

23,811,732

23,790,497

23,785,520

23,653,600

24,268,787

Book value per common share

11.45

11.29

11.20

10.99

10.94

Tangible book value per common share

11.45

11.29

11.20

10.99

10.94

Contact:

Sergio Vaccaro

Sergio.vaccaro@poncebank.net

718-931-9000

Source: Ponce Financial Group, Inc.

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