Ponce Financial Group, Inc. Reports Third Quarter 2023 Results

Ponce Bank Oct 30, 2023 12:00:00 AM

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

Third Quarter 2023 Highlights (Compared to Prior Periods):

Net income of $2.6 million, or $0.12 per diluted share for the three months ended September 30, 2023, as compared to net loss of ($0.1) million, or $0.00 per diluted share for the three months ended June 30, 2023 and net loss of ($14.7) million, or ($0.64) per diluted share for the three months ended September 30, 2022.

Included in the $2.6 million of net income for the third quarter of 2023 results is $33.5 million in interest and dividend income and $5.6 million in non-interest income, offset by a $17.3 million in non-interest expense and $17.0 million in interest expense.

Net interest income of $16.5 million for the third quarter of 2023 increased $0.3 million, or 1.60%, from the prior quarter and decreased $1.1 million, or 6.07%, from the same quarter last year.

Net interest margin was 2.58% for the third quarter of 2023, decreased from 2.65% for the prior quarter and from 3.59% for the same quarter last year.

Cash and equivalents were $117.0 million as of September 30, 2023, an increase of $62.7 million, or 115.25%, 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 $587.8 million as of September 30, 2023, a decrease of $52.5 million, or 8.20%, from December 31, 2022 primarily due to a call on one of the securities amounting to $10.0 million, maturities on two securities amounting to $3.0 million and regular principal payments.

Net loans receivable were $1.79 billion as of September 30, 2023, an increase of $294.5 million, or 19.72%, from December 31, 2022.

Deposits were $1.40 billion as of September 30, 2023, an increase of $148.7 million, or 11.87%, from December 31, 2022.

President and Chief Executive Officer’s Comments

Carlos P. Naudon, Ponce Financial Group’s President and CEO, stated “During the quarter, we completed our share buyback program at a cost of $8.91 per share, almost a 20% discount to our book value at September 30, 2023. Despite the headwinds caused by the increase in interest rates, which impacts our AOCI and drives down our net interest margin, we were able to increase book value per share by 5 cents quarter over quarter as well as grow our net interest income for the second quarter in a row. As previously announced, in addition to the $3.7 million grant received this quarter, we have been informed that we will receive an additional grant of approximately $0.5 million from the Community Development Financial Institutions ("CDFI") fund in the fourth quarter of 2023.

We continue to show strong levels of capital and liquidity. On the capital front, our total capital ratio at Ponce Bank stands at 25.10% 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 $695.0 million, more than two times of our uninsured deposits of $334.0 million.

We remain committed to the communities we serve, our Minority Depository Institution (“MDI”)/CDFI status and continuing to invest in our people and in technology to improve our efficiency".

Executive Chairman’s Comment

Steven A. Tsavaris, Ponce Financial Group’s Executive Chairman added “While the increase in rates continues to put pressure on our operations, we still see resiliency on our client base, strong credit conditions and loan demand. While our credit metrics continue to improve, we will be prudent on our underwriting and balance sheet management even at the expense of loan growth.”

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

At or for the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Performance Ratios (Annualized):

2023

2022

Return on average assets (1)

0.39

(0.01

0.06

(1.62

(2.80

Return on average equity (1)

2.11

(0.07

0.27

(7.28

(11.25

Net interest rate spread (1) (2)

1.58

1.66

1.78

2.13

3.08

Net interest margin (1) (3)

2.58

2.65

2.75

2.97

3.59

Non-interest expense to average assets (1)

2.58

2.65

2.79

2.78

4.83

Efficiency ratio (4)

78.11

96.15

95.88

94.95

132.46

Average interest-earning assets to average interest- bearing liabilities

137.92

141.14

148.20

152.30

162.67

Average equity to average assets

18.32

19.21

20.91

22.32

24.90

At or for the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Capital Ratios (Annualized):

2023

2022

Total capital to risk weighted assets (Bank only)

25.10

26.30

27.54

30.53

33.39

Tier 1 capital to risk weighted assets (Bank only)

23.85

25.05

26.28

29.26

32.13

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

23.85

25.05

26.28

29.26

32.13

Tier 1 capital to average assets (Bank only)

17.51

17.95

19.51

20.47

22.91

At or for the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Asset Quality Ratios (Annualized):

2023

2022

Allowance for loan losses as a percentage of total loans

1.51

1.64

1.77

2.27

1.77

Allowance for loan losses as a percentage of nonperforming loans

169.49

167.06

149.73

252.33

118.43

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

(0.34

(0.41

(0.57

(0.85

(0.52

Non-performing loans as a percentage of total gross loans

0.89

0.98

1.18

0.90

1.50

Non-performing loans as a percentage of total assets

0.62

0.63

0.76

0.59

0.97

Total non-performing assets as a percentage of total assets

0.62

0.63

0.76

0.59

0.97

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

0.82

0.83

0.93

0.78

1.16

(1) Annualized where appropriate.

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

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

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

(5) For periods in 2023, 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. For periods in 2022, the balances only include troubled debt restructurings.

Summary of Results of Operations

Net income for the three months ended September 30, 2023 was $2.6 million compared to net loss of ($0.1) million for the three months ended June 30, 2023 and net loss of ($14.7) million for the three months ended September 30, 2022. The increase of net income for the three months ended September 30, 2023 compared to the three months ended June 30, 2023 was attributed mainly to increases in non-interest income and net interest income and a decrease in provision for credit loss, partially offset by increases provision for income taxes and non-interest expense. The increase of net income for the three months ended September 30, 2023 compared to the three months ended September 30, 2022 was largely due to decreases in provision for credit loss and non-interest expense and an increase in non-interest income, partially offset by an increase in provision for income taxes and a decrease in net interest income.

Net income for the nine months ended September 30, 2023 was $2.8 million compared to a net loss of ($20.8) million for the nine months ended September 30, 2022. The increase in net income was attributable to decreases in non-interest expense and provision for credit losses and an increase in non-interest income, partially offset by an increase in provision for income taxes and a decrease in net interest income.

Net Interest Income and Net Margin

Net interest income for the three months ended September 30, 2023, increased $0.3 million, or 1.60%, to $16.5 million compared to $16.3 million for the three months ended June 30, 2023 and decreased $1.1 million, or 6.07%, compared to $17.6 million for the three months end September 30, 2022.

Net interest margin was 2.58% for the three months ended September 30, 2023 compared to 2.65% for the prior quarter, a decrease of 7bps and 3.59% for the same period last year, a decrease of 101bps. 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 September 30, 2023, was $5.6 million, an increase of $4.1 million, or 277.14%, compared to the three months ended June 30, 2023 and an increase of $4.1 million, or 256.82%, compared to the three months ended September 30, 2022.

The $4.1 million increase in non-interest income for the three months ended September 30, 2023 compared to the three months ended June 30, 2023 and the three months ended September 30, 2022 was largely attributable to a grant of $3.7 million received in the third quarter of 2023 from the U.S. Treasury as part of the CDFI Equitable Recovery Program and a $0.5 million assignment fee that was recognized in the third quarter of 2023.

Non-interest income for the nine months ended September 30, 2023, was $8.9 million, an increase of $3.0 million, or 49.41%, compared to $6.0 million for the nine months ended September 30, 2022. The $3.0 million increase from the nine months ended September 30, 2022 was attributable to a grant of $3.7 million received from the U.S. Treasury and an increase of $1.6 million in late and prepayment charges, partially offset by a decrease of $1.8 million in loan origination.

Non-interest Expense

Non-interest expense for the three months ended September 30, 2023, was $17.3 million, an increase of $0.2 million, or 1.33%, compared to $17.1 million for the three months ended June 30, 2023 and a decrease of $8.1 million, or 31.87%, compared to $25.4 million for the three months ended September 30, 2022.

The $8.1 million decrease from the three months ended September 30, 2022 was mainly attributable to $8.9 million of Grain consumer microloans write-offs during the third quarter of 2022 and a decrease of $0.3 million in direct loan expense, partially offset by increases of $0.6 million in data processing expenses and $0.4 million in professional fees.

Non-interest expense for the nine months ended September 30, 2023, was $50.8 million, a decrease of $19.3 million, or 27.54%, compared to the nine months ended September 30, 2022. The $19.3 million decrease of non-interest expense from the nine months ended September 30, 2022 was attributable to $18.5 million of Grain consumer microloan write-off during the corresponding period last year compared with $1.3 million of Grain consumer microloan recoveries recognized during the current period. The decrease in non-interest expense was also impacted by a $5.0 million contribution to the Ponce De Leon Foundation during the corresponding period last year, partially offset by increases of $1.3 million in provision for contingencies, $1.3 million in data processing expenses, $1.0 million in compensation and benefits and $0.7 million in professional fees.

Balance Sheet Summary

Total assets increased $311.9 million, or 13.49%, to $2.62 billion as of September 30, 2023 from $2.31 billion as of December 31, 2022. The increase in total assets is largely attributable to increases of $294.5 million in net loans receivable, $62.7 million in cash and cash equivalents, $12.1 million in mortgage loans held for sale and $2.5 million in other assets, offset by decreases of $39.8 million in held-to-maturity securities, $12.8 million in available-for-sale securities, and $5.8 million in Federal Home Loan Bank of New York stock.

Total liabilities increased $319.5 million, or 17.56%, to $2.14 billion as of September 30, 2023 from $1.82 billion as of December 31, 2022. The increase in total liabilities was largely attributable to increases of $157.7 million in borrowings and $148.7 million in deposits.

Total stockholders’ equity decreased $7.6 million, or 1.55%, to $485.1 million as of September 30, 2023, from $492.7 million as of December 31, 2022. This decrease in stockholders’ equity was largely attributable to $11.0 million in share repurchases and an increase of $2.6 million in other comprehensive loss, partially offset by increases of $2.8 million in net income, $1.2 million in share-based compensation, $1.1 million as a result of implementation of CECL and $0.8 million in ESOP.

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

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

ASSETS

Cash and due from banks:

Cash

26,046

31,162

26,951

31,977

34,007

Interest-bearing deposits

90,966

212,627

157,736

22,383

28,514

Total cash and cash equivalents

117,012

243,789

184,687

54,360

62,521

Available-for-sale securities, at fair value

116,753

123,720

128,320

129,505

131,977

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

471,065

481,952

491,649

510,820

494,297

Placement with banks

996

1,245

1,494

2,490

Mortgage loans held for sale, at fair value

14,103

10,070

2,987

1,979

3,357

Loans receivable, net

1,787,607

1,695,047

1,614,428

1,493,127

1,392,553

Accrued interest receivable

16,624

16,054

15,435

15,049

14,063

Premises and equipment, net

16,453

16,856

17,215

17,446

17,759

Right of use assets

32,110

32,435

33,147

33,423

34,121

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

18,870

19,195

19,209

24,661

14,272

Deferred tax assets

15,984

15,924

15,413

16,137

13,822

Other assets

16,286

15,919

15,799

13,988

11,170

Total assets

2,623,863

2,671,957

2,539,534

2,311,989

2,192,402

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Deposits

1,401,132

1,442,013

1,336,877

1,252,412

1,351,189

Operating lease liabilities

33,459

33,716

34,308

34,532

35,081

Accrued interest payable

8,385

4,704

1,767

1,390

854

Advance payments by borrowers for taxes and insurance

13,743

12,402

14,902

9,724

10,589

Borrowings

675,100

682,100

648,375

517,375

286,375

Other liabilities

6,986

6,540

7,264

3,856

7,631

Total liabilities

2,138,805

2,181,475

2,043,493

1,819,289

1,691,719

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

(10,975

)

(5,202

)

—

Additional paid-in-capital

207,626

207,287

206,883

206,508

206,092

Retained earnings

96,902

94,312

94,399

92,955

102,169

Accumulated other comprehensive loss

(20,468

)

(17,597

)

(16,629

)

(17,860

)

(18,420

)

Unearned compensation ─ ESOP

(13,276

)

(13,567

)

(13,859

)

(14,150

)

(14,405

)

Total stockholders' equity

485,058

490,482

496,041

492,700

500,683

Total liabilities and stockholders' equity

2,623,863

2,671,957

2,539,534

2,311,989

2,192,402

(1) Included for the quarterly period ended September 30, 2023, June 30, 2023 and March 31, 2023 were $0.6 million, $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

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

Interest and dividend income:

Interest on loans receivable

25,276

23,015

19,700

18,550

17,058

Interest on deposits due from banks

1,969

1,817

197

199

346

Interest and dividend on securities and FHLBNY stock

6,261

6,223

6,459

6,184

4,230

Total interest and dividend income

33,506

31,055

26,356

24,933

21,634

Interest expense:

Interest on certificates of deposit

4,362

3,881

3,225

1,786

855

Interest on other deposits

5,639

4,413

2,812

3,649

1,375

Interest on borrowings

6,963

6,479

5,074

3,332

1,793

Total interest expense

16,964

14,773

11,111

8,767

4,023

Net interest income

16,542

16,282

15,245

16,166

17,611

Provision (benefit) for credit losses

535

987

(174

)

12,641

9,330

Net interest income after provision (benefit) for credit losses

16,007

15,295

15,419

3,525

8,281

Non-interest income:

Service charges and fees

516

481

491

481

464

Brokerage commissions

180

288

Late and prepayment charges

899

372

729

263

109

Income on sale of mortgage loans

173

116

Loan origination(1)

—

(557

)

522

Grant income

3,718

—

(Loss) gain on sale of premises and equipment

—

(436

)

Other

304

522

485

514

Total non-interest income

5,627

1,492

1,819

437

1,577

Non-interest expense:

Compensation and benefits

7,566

7,425

7,446

6,501

7,377

Occupancy and equipment

3,588

3,724

3,570

3,928

3,611

Data processing expenses

1,582

1,208

1,192

1,114

994

Direct loan expenses

369

345

412

454

654

Provision for contingencies

391

517

985

(440

)

519

Insurance and surety bond premiums

255

248

265

270

297

Office supplies, telephone and postage

301

489

399

375

369

Professional fees

1,693

1,904

1,455

1,571

1,251

Grain (recoveries) and write-off

(69

)

(346

)

(914

)

(515

)

8,881

Marketing and promotional expenses

248

303

128

256

214

Directors fees and regulatory assessment

169

160

155

196

188

Other operating expenses

1,223

1,112

1,268

2,055

1,061

Total non-interest expense

17,316

17,089

16,361

15,765

25,416

Income (loss) before income taxes

4,318

(302

)

877

(11,803

)

(15,558

)

Provision (benefit) for income taxes

1,728

(215

)

546

(2,589

)

(820

)

Net income (loss)

2,590

(87

)

331

(9,214

)

(14,738

)

Earnings (loss) per common share:

Basic

0.12

(0.00

)

0.01

(0.40

)

(0.64

)

Diluted

0.12

(0.00

)

0.01

(0.40

)

(0.64

)

Weighted average common shares outstanding:

Basic

22,272,076

23,208,168

23,293,013

23,168,097

23,094,859

Diluted

22,349,217

23,208,168

23,324,532

23,168,097

23,094,859

(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 Nine Months Ended September 30,

2023

2022

Variance $

Variance %

Interest and dividend income:

Interest on loans receivable

67,991

51,315

16,676

32.50

Interest on deposits due from banks

3,983

514

3,469

674.90

Interest and dividend on securities and FHLBNY stock

18,943

5,990

12,953

216.24

Total interest and dividend income

90,917

57,819

33,098

57.24

Interest expense:

Interest on certificates of deposit

11,468

2,361

9,107

385.73

Interest on other deposits

12,864

2,154

10,710

497.21

Interest on borrowings

18,516

2,867

15,649

545.83

Total interest expense

42,848

7,382

35,466

480.44

Net interest income

48,069

50,437

(2,368

)

(4.69

Provision for credit losses

1,348

11,405

(10,057

)

(88.18

Net interest income after provision for credit losses

46,721

39,032

7,689

19.70

Non-interest income:

Service charges and fees

1,488

1,349

139

10.30

Brokerage commissions

840

(773

)

(92.02

Late and prepayment charges

2,000

360

1,640

455.56

Income on sale of mortgage loans

354

734

(380

)

(51.77

Loan origination

—

1,843

(1,843

)

(100.00

Grant income

3,718

—

3,718

—

(Loss) gain on sale of premises and equipment

—

(436

)

436

(100.00

Other

1,311

1,292

1.47

Total non-interest income

8,938

5,982

2,956

49.41

Non-interest expense:

Compensation and benefits

22,437

21,413

1,024

4.78

Occupancy and equipment

10,882

10,040

842

8.39

Data processing expenses

3,982

2,665

1,317

49.42

Direct loan expenses

1,126

2,033

(907

)

(44.61

Provision for contingencies

1,893

566

1,327

234.45

Insurance and surety bond premiums

768

600

168

28.00

Office supplies, telephone and postage

1,189

1,180

0.76

Professional fees

5,052

4,333

719

16.59

Contribution to the Ponce De Leon Foundation

—

4,995

(4,995

)

(100.00

Grain (recoveries) and write-off

(1,329

)

18,455

(19,784

)

(107.20

Marketing and promotional expenses

679

337

342

101.48

Directors fees and regulatory assessment

484

509

(25

)

(4.91

Other operating expenses

3,603

2,931

672

22.93

Total non-interest expense

50,766

70,057

(19,291

)

(27.54

Income (loss) before income taxes

4,893

(25,043

)

29,936

(119.54

Provision (benefit) for income taxes

2,059

(4,256

)

6,315

(148.38

Net income (loss)

2,834

(20,787

)

23,621

(113.63

Earnings (loss) per common share:

Basic

0.12

(0.92

)

1.05

(113.40

Diluted

0.12

(0.92

)

1.05

(113.37

Weighted average common shares outstanding:

Basic

22,920,680

22,524,477

396,203

1.76

Diluted

22,962,956

22,524,477

438,479

1.95

Ponce Financial Group, Inc. and Subsidiaries

Key Metrics

At or for the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

Performance Ratios:

Return on average assets (1)

0.39

(0.01

0.06

(1.62

(2.80

Return on average equity (1)

2.11

(0.07

0.27

(7.28

(11.25

Net interest rate spread (1) (2)

1.58

1.66

1.78

2.13

3.08

Net interest margin (1) (3)

2.58

2.65

2.75

2.97

3.59

Non-interest expense to average assets (1)

2.58

2.65

2.79

2.78

4.83

Efficiency ratio (4)

78.11

96.15

95.88

94.95

132.46

Average interest-earning assets to average interest- bearing liabilities

137.92

141.14

148.20

152.30

162.67

Average equity to average assets

18.32

19.21

20.91

22.32

24.90

Capital Ratios:

Total capital to risk weighted assets (Bank only)

25.10

26.30

27.54

30.53

33.39

Tier 1 capital to risk weighted assets (Bank only)

23.85

25.05

26.28

29.26

32.13

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

23.85

25.05

26.28

29.26

32.13

Tier 1 capital to average assets (Bank only)

17.51

17.95

19.51

20.47

22.91

Asset Quality Ratios:

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

1.51

1.64

1.77

2.27

1.77

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

169.49

167.06

149.73

252.33

118.43

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

(0.34

(0.41

(0.57

(0.85

(0.52

Non-performing loans as a percentage of total gross loans

0.89

0.98

1.18

0.90

1.50

Non-performing loans as a percentage of total assets

0.62

0.63

0.76

0.59

0.97

Total non-performing assets as a percentage of total assets

0.62

0.63

0.76

0.59

0.97

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

0.82

0.83

0.93

0.78

1.16

Other:

Number of offices

Number of full-time equivalent employees

243

244

251

253

257

(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

September 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

2,989

—

(276

)

2,713

2,985

—

(296

)

2,689

Corporate Bonds

25,799

—

(2,609

)

23,190

25,824

—

(2,465

)

23,359

Mortgage-Backed Securities:

Collateralized Mortgage Obligations(1)

40,646

—

(7,657

)

32,989

44,503

—

(6,726

)

37,777

FHLMC Certificates

10,441

—

(1,904

)

8,537

11,310

—

(1,676

)

9,634

FNMA Certificates

62,771

—

(13,552

)

49,219

67,199

—

(11,271

)

55,928

GNMA Certificates

108

—

)

105

122

—

)

118

Total available-for-sale securities

142,754

—

(26,001

)

116,753

151,943

—

(22,438

)

129,505

Held-to-Maturity Securities:

U.S. Agency Bonds

25,000

—

(504

)

24,496

35,000

—

(380

)

34,620

Corporate Bonds

82,500

—

(5,117

)

77,383

82,500

(3,819

)

78,738

Mortgage-Backed Securities:

Collateralized Mortgage Obligations(1)

217,632

—

(12,198

)

205,434

235,479

192

(5,558

)

230,113

FHLMC Certificates

3,923

—

(358

)

3,565

4,120

—

(268

)

3,852

FNMA Certificates

121,940

—

(8,818

)

113,122

131,918

—

(5,227

)

126,691

SBA Certificates

20,717

147

—

20,864

21,803

—

21,837

Allowance for Credit Losses

(647

)

—

Total held-to-maturity securities

471,065

147

(26,995

)

444,864

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.

September 30,

December 31,

2023

2022

Beginning balance

—

CECL adoption

662

—

Provision for credit losses

(15

)

—

Allowance for credit losses on securities

647

—

Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

As of

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Mortgage loans:

1-4 family residential

Investor Owned

347,082

19.13

351,754

20.43

354,559

21.60

343,968

22.54

336,667

23.79

Owner-Occupied

151,866

8.37

154,116

8.94

149,481

9.10

134,878

8.84

112,749

7.97

Multifamily residential

553,694

30.52

550,033

31.94

553,430

33.71

494,667

32.42

421,917

29.81

Nonresidential properties

321,472

17.71

317,416

18.43

314,560

19.17

308,043

20.19

282,642

19.97

Construction and land

411,383

22.67

315,843

18.34

235,157

14.33

185,018

12.13

197,437

13.95

Total mortgage loans

1,785,497

98.40

1,689,162

98.08

1,607,187

97.91

1,466,574

96.12

1,351,412

95.49

Non-mortgage loans:

Business loans (1)

18,416

1.02

21,041

1.22

19,890

1.21

39,965

2.62

41,398

2.92

Consumer loans (2)

10,416

0.58

11,958

0.70

14,227

0.88

19,129

1.26

22,563

1.59

Total non-mortgage loans

28,832

1.60

32,999

1.92

34,117

2.09

59,094

3.88

63,961

4.51

Total loans, gross

1,814,329

100.00

1,722,161

100.00

1,641,304

100.00

1,525,668

100.00

1,415,373

100.00

Net deferred loan origination costs

692

1,059

2,099

2,051

2,288

Allowance for credit losses on loans

(27,414

)

(28,173

)

(28,975

)

(34,592

)

(25,108

)

Loans, net

1,787,607

1,695,047

1,614,428

1,493,127

1,392,553

(1) As of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, business loans include $1.1 million, $3.2 million, $3.6 million, $20.0 million and $24.7 million, respectively, of PPP loans.

(2) As of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, consumer loans include $9.3 million, $11.2 million, $13.4 million, $18.2 million and $21.5 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 September 30, 2023

(in thousands)

Receivable from Grain

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

24,255

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

(15,610

)

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

(6,819

)

Grant/reserve

(1,826

)

Net receivable as of September 30, 2023

—

Microloan receivables from Grain Borrowers

Grain originated loans receivable as of September 30, 2023

9,318

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

(8,163

)

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

1,155

Investments

Investment in Grain

1,000

Investment in Grain write-off in Q3 2022

(1,000

)

Investment in Grain as of September 30, 2023

—

Total exposure to Grain as of September 30, 2023

1,155

(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 $1.6 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

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

(Dollars in thousands)

Allowance for credit losses on loans at beginning of the period

28,173

28,975

34,592

25,108

17,535

Provision (benefit) for credit losses on loans

750

934

(321

)

12,641

9,330

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

(1,592

)

(1,931

)

(2,569

)

(3,659

)

(1,799

)

Total charge-offs

(1,592

)

(1,931

)

(2,569

)

(3,659

)

(1,799

)

Recoveries:

Mortgage loans:

1-4 family residences

Investor owned

—

Owner occupied

—

Multifamily residences

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

195

363

502

Total recoveries

195

363

502

Net (charge-offs) recoveries

(1,509

)

(1,736

)

(2,206

)

(3,157

)

(1,757

)

Allowance for credit losses on loans at end of the period

27,414

28,173

28,975

34,592

25,108

Ponce Financial Group, Inc. and Subsidiaries

Deposits

As of

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Demand

265,862

18.98

266,545

18.48

282,741

21.15

289,149

23.08

288,654

21.37

Interest-bearing deposits:

NOW/IOLA accounts

22,519

1.61

22,754

1.57

21,735

1.63

24,349

1.94

28,799

2.13

Money market accounts

370,500

26.44

387,970

26.91

293,140

21.93

236,143

18.86

257,409

19.05

Reciprocal deposits

82,670

5.90

100,919

7.00

109,649

8.20

114,049

9.11

162,858

12.05

Savings accounts

117,870

8.41

119,635

8.30

127,731

9.55

130,432

10.41

140,055

10.37

Total NOW, money market, reciprocal and savings accounts

593,559

42.36

631,278

43.78

552,255

41.31

504,973

40.32

589,121

43.60

Certificates of deposit of $250K or more

122,353

8.73

120,043

8.32

113,955

8.52

106,336

8.49

114,016

8.43

Brokered certificates of deposit(1)

98,729

7.05

98,729

6.85

98,754

7.39

98,754

7.89

98,760

7.31

Listing service deposits(1)

15,180

1.08

20,258

1.40

28,417

2.13

35,813

2.86

40,964

3.03

All other certificates of deposit less than $250K

305,449

21.80

305,160

21.17

260,755

19.50

217,387

17.36

219,674

16.26

Total certificates of deposit

541,711

38.66

544,190

37.74

501,881

37.54

458,290

36.60

473,414

35.03

Total interest-bearing deposits

1,135,270

81.02

1,175,468

81.52

1,054,136

78.85

963,263

76.92

1,062,535

78.63

Total deposits

1,401,132

100.00

1,442,013

100.00

1,336,877

100.00

1,252,412

100.00

1,351,189

100.00

(1) As of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, there were $0.3 million, $3.3 million, $9.5 million, $13.6 million and $13.8 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

September 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

4.61

Term advances ending:

2023

—

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

675,100

4.08

517,375

3.90

Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

As of Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

(Dollars in thousands)

Non-accrual loans:

Mortgage loans:

1-4 family residential

Investor owned

396

296

2,836

2,844

5,902

Owner occupied

1,685

2,363

2,245

961

971

Multifamily residential

1,444

1,435

—

Nonresidential properties

—

778

Construction and land

11,721

11,906

7,567

10,660

Non-mortgage loans:

Business

209

—

359

Consumer

—

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

15,455

15,815

17,027

11,372

18,670

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

Mortgage loans:

1-4 family residential

Investor owned

270

209

213

217

221

Owner occupied

449

840

2,020

2,027

2,215

Multifamily residential

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

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

719

1,049

2,324

2,337

2,531

Total non-accrual loans

16,174

16,864

19,351

13,709

21,201

Accruing modifications to borrowers experiencing financial difficulty (1):

Mortgage loans:

1-4 family residential

Investor owned

2,131

2,161

2,185

2,207

2,228

Owner occupied

2,335

2,353

1,310

1,328

1,254

Multifamily residential

—

Nonresidential properties

765

783

701

708

715

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

Total accruing modifications to borrowers experiencing financial difficulty(1)

5,231

5,297

4,196

4,243

4,197

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

21,405

22,161

23,547

17,952

25,398

Total non-performing loans to total gross loans

0.89

0.98

1.18

0.90

1.50

Total non-performing assets to total assets

0.62

0.63

0.76

0.59

0.97

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

0.82

0.83

0.93

0.78

1.16

(1) For periods in 2023, 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. For periods in 2022, the balances only include troubled debt restructurings.

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

For the Three Months Ended September 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)

1,777,585

25,276

5.64

1,379,029

17,058

4.91

Securities(3)

599,573

5,821

3.85

492,337

4,153

3.35

Other(4)(5)

169,570

2,409

5.64

74,055

423

2.27

Total interest-earning assets

2,546,728

33,506

5.22

1,945,421

21,634

4.41

Non-interest-earning assets(5)

111,771

108,329

Total assets

2,658,499

2,053,750

Interest-bearing liabilities:

NOW/IOLA

22,876

0.14

29,939

0.17

Money market

485,042

5,601

4.58

381,606

1,303

1.35

Savings

118,095

0.10

141,200

0.16

Certificates of deposit

527,302

4,362

3.28

382,163

855

0.89

Total deposits

1,153,315

10,000

3.44

934,908

2,228

0.95

Advance payments by borrowers

14,537

0.03

10,918

0.07

Borrowings

678,676

6,963

4.07

250,112

1,793

2.84

Total interest-bearing liabilities

1,846,528

16,964

3.64

1,195,938

4,023

1.33

Non-interest-bearing liabilities:

Non-interest-bearing demand

278,358

—

321,556

—

Other non-interest-bearing liabilities

46,643

—

16,377

—

Total non-interest-bearing liabilities

325,001

—

337,933

—

Total liabilities

2,171,529

16,964

1,533,871

4,023

Total equity

486,970

519,879

Total liabilities and total equity

2,658,499

3.64

2,053,750

1.33

Net interest income

16,542

17,611

Net interest rate spread(6)

1.58

3.08

Net interest-earning assets(7)

700,200

749,483

Net interest margin(8)

2.58

3.59

Average interest-earning assets to interest-bearing liabilities

137.92

162.67

(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 Nine Months Ended September 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)

1,678,369

67,991

5.42

1,341,151

51,315

5.12

Securities(3)

614,987

17,627

3.83

263,421

5,778

2.93

Other(4)(5)

127,961

5,299

5.54

96,623

726

1.00

Total interest-earning assets

2,421,317

90,917

5.02

1,701,195

57,819

4.54

Non-interest-earning assets(5)

118,609

136,650

Total assets

2,539,926

1,837,845

Interest-bearing liabilities:

NOW/IOLA

22,828

0.15

31,769

0.18

Money market

403,171

12,745

4.23

344,361

1,986

0.77

Savings

123,218

0.10

137,808

120

0.12

Certificates of deposit

522,740

11,468

2.93

398,661

2,361

0.79

Total deposits

1,071,957

24,326

3.03

912,599

4,510

0.66

Advance payments by borrowers

14,814

0.05

11,033

0.06

Borrowings

617,912

18,516

4.01

152,084

2,867

2.52

Total interest-bearing liabilities

1,704,683

42,848

3.36

1,075,716

7,382

0.92

Non-interest-bearing liabilities:

Non-interest-bearing demand

298,148

—

350,871

—

Other non-interest-bearing liabilities

43,864

—

43,606

—

Total non-interest-bearing liabilities

342,012

—

394,477

—

Total liabilities

2,046,695

42,848

1,470,193

7,382

Total equity

493,231

367,652

Total liabilities and total equity

2,539,926

3.36

1,837,845

0.92

Net interest income

48,069

50,437

Net interest rate spread(6)

1.66

3.62

Net interest-earning assets(7)

716,634

625,479

Net interest margin(8)

2.65

3.96

Average interest-earning assets to

interest-bearing liabilities

142.04

158.15

(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

September 30,

June 30,

March 31,

December 31,

September 30,

2023

2022

Other Data

Common shares issued

24,886,711

24,865,476

24,861,329

24,728,460

Less treasury shares

1,233,111

617,924

1,976

—

Common shares outstanding at end of period

23,653,600

24,268,787

24,863,500

24,859,353

24,728,460

Book value per common share

10.99

10.94

10.90

10.77

11.15

Tangible book value per common share

10.99

10.94

10.90

10.77

11.15

Contact:

Frank Perez

frank.perez@poncebank.net

718-981-9000

Source: Ponce Financial Group, Inc.

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