Ponce Financial Group, Inc. Reports Third Quarter 2024 Results

Ponce Bank Oct 30, 2024 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 2024.

Third Quarter 2024 Highlights (Compared to Prior Periods):

Net income available to common stockholders was $2.2 million, or $0.10 per diluted share for the three months ended September 30, 2024, as compared to net income available to common stockholders of $3.1 million, or $0.14 per diluted share for the three months ended June 30, 2024 and net income available to common stockholders of $2.6 million, or $0.12 per diluted share for the three months ended September 30, 2023. Total net income for the three months ended September 30, 2024 was $2.4 million. The Company paid dividends of $0.3 million on its preferred stock during the quarter ended September 30, 2024.

Included in the $2.2 million of net income available to common stockholders for the third quarter of 2024 results is $41.3 million in interest and dividend income and $1.2 million in non-interest income, offset by $22.3 million in interest expense, $16.3 million in non-interest expense, $0.8 million in provision for credit losses, $0.6 million in provision for income taxes and $0.3 million in dividends on preferred shares.

Net interest income of $19.0 million for the third quarter of 2024 increased $1.1 million, or 6.25%, from the prior quarter and increased $2.5 million, or 15.00%, from the same quarter last year.

Net interest margin was 2.65% for the third quarter of 2024, versus 2.62% for the prior quarter and versus 2.58% for the same quarter last year.

Nine Months 2024 Highlights (Compared to 2023):

Net income available to common stockholders was $7.7 million, or $0.34 per diluted share for the nine months ended September 30, 2024, as compared to net income available to common stockholders of $2.8 million, or $0.12 per diluted share for the nine months ended September 30, 2023. Total net income for the nine months ended September 30, 2024, prior to the payment of $0.4 million in dividends on preferred shares, was $8.0 million.

Net interest income for the nine months ended September 30, 2024 was $55.8 million, an increase of $7.7 million, or 15.98%, compared to $48.1 million for the nine months ended September 30, 2023.

Non-interest income for the nine months ended September 30, 2024 was $5.1 million, a decrease of $3.8 million, or 42.76%, from $8.9 million for the nine months ended September 30, 2023. The decrease was primarily driven by a $3.7 million in grants that were received in the prior year.

Non-interest expense for the nine months ended September 30, 2024 was $49.4 million, a decrease of $1.4 million, or 2.67%, compared to $50.8 million for the nine months ended September 30, 2023.

Cash and equivalents were $155.8 million as of September 30, 2024, an increase of $16.6 million, or 11.94%, from $139.2 million as of December 31, 2023.

Securities totaled $514.7 million as of September 30, 2024, a decrease of $66.9 million, or 11.50%, from $581.7 million as of December 31, 2023 primarily due to regular principal payments, maturity of one available-for-sale security in the amount of $4.0 million and call of one held-to-maturity security in the amount of $25.0 million.

Net loans receivable were $2.18 billion as of September 30, 2024, an increase of $284.4 million, or 15.00%, from $1.90 billion as of December 31, 2023.

Deposits were $1.87 billion as of September 30, 2024, an increase of $362.7 million, or 24.06%, from $1.51 billion as of December 31, 2023.

President and Chief Executive Officer’s Comments

Carlos P. Naudon, Ponce Financial Group’s President and CEO, stated, “We continue to make progress quarter over quarter both in terms of our economic performance as well as serving our communities. Book value per share continues to grow and is now $11.74 (up $0.75 vs last year) and total equity per common share stands at $21.18. Our levels of liquidity and capital remain strong. Our net interest income grew quarter over quarter, and we’re well positioned for a decline in interest rates. We reduced our borrowings during the quarter, paying off the entirety of our Bank Term Funding Program Loan, while lowering the overall cost and extending our maturities. 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, “During the quarter, the US Treasury Department issued proposed guidelines under which it may sell their ECIP investment back to the issuers or related non-profit affiliates. We believe the adoption of the proposed regulations would be greatly beneficial to Ponce Financial Group, although there can be no assurance that the proposed regulations will be adopted, or that that will be adopted in their current form. Most of our loan growth of $157.6 million this quarter is explained by our desire to ensure qualification under the proposed regulations, if adopted. Deposits also grew significantly during the quarter including $35.0 million from the Banking Development District program of New York.”

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):

2024

2023

Return on average assets (1)

0.33

0.45

0.33

0.08

0.39

Return on average equity (1)

1.93

2.59

1.97

0.42

2.11

Net interest rate spread (1) (2)

1.77

1.72

1.82

1.74

1.68

Net interest margin (1) (3)

2.65

2.62

2.71

2.66

2.58

Non-interest expense to average assets (1)

2.19

2.28

2.35

2.66

2.58

Efficiency ratio (4)

80.87

80.09

82.56

96.83

78.11

Average interest-earning assets to average interest- bearing liabilities

128.35

129.73

129.69

133.50

134.49

Average equity to average assets

16.97

17.41

17.00

18.25

18.32

At or for the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Capital Ratios (Annualized):

2024

2023

Total capital to risk-weighted assets (Bank only)

21.61

22.47

22.79

23.30

25.10

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

20.45

21.24

21.54

22.05

23.85

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

20.45

21.24

21.54

22.05

23.85

Tier 1 capital to average assets (Bank only)

16.19

16.70

16.26

17.49

17.51

At or for the Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

Asset Quality Ratios (Annualized):

2024

2023

Allowance for loan losses as a percentage of total loans

1.09

1.18

1.23

1.36

1.51

Allowance for loan losses as a percentage of nonperforming loans

139.52

130.28

140.90

152.99

169.49

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

(0.17

(0.10

(0.25

(0.24

(0.34

Non-performing loans as a percentage of total gross loans

0.78

0.89

0.87

0.89

Non-performing loans as a percentage of total assets

0.57

0.65

0.62

Total non-performing assets as a percentage of total assets

0.57

0.65

0.62

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

0.73

0.82

0.79

0.81

0.82

(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 cost of interest-bearing liabilities.

(3)

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

(4)

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

(5)

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

Summary of Results of Operations

Net income for the three months ended September 30, 2024 was $2.4 million compared to net income of $3.2 million for the three months ended June 30, 2024 and net income of $2.6 million for the three months ended September 30, 2023.

The decrease of net income for the three months ended September 30, 2024 compared to the three months ended June 30, 2024 was attributed mainly to an increase of $1.2 million in provision for credit losses, a decrease of $1.1 million in non-interest income, an increase of $0.2 million in non-interest expense, partially offset by an increase of $1.1 million in net interest income and a decrease of $0.6 million in provision for income taxes .

The decrease of net income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was largely due to a decrease of $4.5 million in non-interest income as a result of a $3.7 million grant reported in the third quarter of 2023 and an increase of $0.3 million in provision for credit losses, partially offset by an increase of $2.5 million in net interest income and decreases of $1.1 million in provision for income taxes and $ 1.0 million in non-interest expense.

Net income for the nine months ended September 30, 2024 was $8.0 million compared to a net income of $2.8 million for the nine months ended September 30, 2023. The increase of $5.2 million in net income was attributable to an increase of $7.7 million in net interest income, a decrease of $1.3 million in non-interest expense and a decrease of $1.1 million in provision for credit losses, partially offset by a decrease of $3.8 million in non-interest income and an increase of $1.1 million in provision for income taxes.

Net Interest Income and Net Margin

Net interest income for the three months ended September 30, 2024, increased $1.1 million, or 6.25%, to $19.0 million compared to $17.9 million for the three months ended June 30, 2024 and increased $2.5 million, or 15.00%, compared to $16.5 million for the three months ended September 30, 2023.

Net interest income for the nine months ended September 30, 2024, increased $7.7 million, or 15.98%, to $55.8 million, compared to $48.1 million for the nine months ended September 30, 2023. The increase of $7.7 million of net interest income was attributable to an increase of $28.8 million in total interest and dividend income, offset by an increase of $21.1 million in total interest expense.

For the nine months ended September 30, 2024, provision for credit losses amounted to $0.2 million consisting of a provision for credit losses on loans in the amount of $0.4 million and a benefit for credit losses on held-to-maturity securities in the amount of $0.2 million. The $0.4 million provision for credit losses on loans for the nine months ended September 30, 2024 resulted from a benefit of $2.1 million related to microloans offset by a provision of $2.5 million related to non-microloans.

Net interest margin was 2.65% for the three months ended September 30, 2024 compared to 2.62% for the prior quarter, an increase of 3bps and 2.58% for the same period last year, an increase of 7bps.

Net interest margin was 2.66% for the nine months ended September 30, 2024 compared to 2.65% for the nine months ended September 30, 2023, an increase of 1bp.

Non-interest Income

Non-interest income for the three months ended September 30, 2024, was $1.2 million, a decrease of $1.1 million, or 49.03%, compared to $2.3 million the three months ended June 30, 2024 and a decrease of $4.5 million, or 79.55%, compared to $5.6 million the three months ended September 30, 2023.

The $1.1 million decrease in non-interest income for the three months ended September 30, 2024 compared to the three months ended June 30, 2024 was largely attributable to decreases of $0.7 million in other non-interest income related to the mark to market adjustments on a private equity fund investment and $0.3 million in late and prepayment charges.

The $4.5 million decrease in non-interest income for the three months ended September 30, 2024 compared to the three months ended September 30, 2023 was largely attributable to $3.7 million in grants received in the third quarter of 2023 and a decrease of $0.8 million in late and prepayment charges.

Non-interest income for the nine months ended September 30, 2024, was $5.1 million, a decrease of $3.8 million, or 42.76%, compared to $8.9 million for the nine months ended September 30, 2023. The decrease was largely attributable to $3.7 million related to grants received in the third quarter of 2023 and a decrease of $1.1 million in late and prepayment charges, partially, offset by increases of $0.6 million in other non-interest income and $0.4 million in income on sale of mortgage loans.

Non-interest Expense

Non-interest expense for the three months ended September 30, 2024, was $16.3 million, an increase of $0.2 million, or 1.03%, compared to $16.1 million for the three months ended June 30, 2024 and a decrease of $1.0 million, or 5.79%, compared to $17.3 million for the three months ended September 30, 2023.

The $0.2 million increase from the three months ended September 30, 2024 compared to the three months ended June 30, 2024 was mainly attributable to a decrease of $0.2 million in benefit for contingencies and an increase of $0.2 million in occupancy and equipment, partially offset by a decrease of $0.3 million in other operating expense.

The $1.0 million decrease from the three months ended September 30, 2023 compared to the three months ended September 30, 2023 was mainly attributable to decreases of $0.6 million in provision for contingencies, $0.5 million in data processing expenses and $0.3 million in professional fees, partially offset by increases of $0.2 million in direct loan expenses, $0.2 million in occupancy and equipment and $0.1 million in compensation and benefits.

Non-interest expense for the nine months ended September 30, 2024, was $49.4 million, a decrease of $1.4 million, or 2.67%, compared to $50.8 million for the nine months ended September 30, 2023. The $1.4 million decrease from the nine months ended September 30, 2023 was mainly attributable to decreases of $2.5 million in provision for contingencies, $0.7 million in data processing expenses, $0.6 million in professional fees and $0.5 million in office supplies, telephone and postage, partially offset by a decrease of $1.2 million in microloans recoveries and increases of $0.8 million in compensation and benefits and $0.8 million in direct loan expenses.

Balance Sheet Summary

Total assets increased $265.2 million, or 9.64%, to $3.02 billion as of September 30, 2024 from $2.75 billion as of December 31, 2023. The increase in total assets is largely attributable to increases of $284.4 million in net loans receivable, $26.7 million in other assets, $16.6 million in cash and cash equivalents, $9.1 million in Federal Home Loan Bank of New York stock and $0.8 million in net premises and equipment, partially offset by decreases of $58.0 million in held-to-maturity securities, $8.9 million in available-for-sale securities, $2.5 million in deferred tax assets, $1.5 million in right of use assets, $1.1 million in accrued interest receivable and $0.4 million in mortgage loans held for sale.

Total liabilities increased $252.1 million, or 11.16%, to $2.51 billion as of September 30, 2024 from $2.26 billion as of December 31, 2023. The increase in total liabilities was largely attributable to an increase of $362.7 million in deposits, $3.0 million in advance payments by borrowers for taxes and insurance and $0.8 million in other liabilities, partially offset by decreases of $104.0 million in borrowings, $9.0 million in accrued interest payable and $1.4 million in operating lease liabilities.

Total stockholders’ equity increased $13.2 million, or 2.69%, to $504.6 million as of September 30, 2024, from $491.4 million as of December 31, 2023. This increase in stockholders’ equity was largely attributable to $8.0 million in net income, $3.0 million in other comprehensive income, $1.6 million impact to additional paid in capital as a result of share-based compensation and $1.0 million from release of ESOP shares, offset by $0.4 million in preferred stock dividend for shares issued pursuant to the ECIP.

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

September 30,

June 30,

March 31,

December 31,

September 30,

2024

2023

ASSETS

Cash and due from banks:

Cash

32,061

23,128

29,972

28,930

26,046

Interest-bearing deposits

123,751

80,038

104,752

110,260

90,966

Total cash and cash equivalents

155,812

103,166

134,724

139,190

117,012

Available-for-sale securities, at fair value

111,005

113,125

116,044

119,902

116,753

Held-to-maturity securities, at amortized cost

403,736

442,113

452,955

461,748

471,065

Placement with banks

249

996

Mortgage loans held for sale, at fair value

9,566

37,764

7,860

9,980

14,103

Loans receivable, net

2,180,331

2,022,173

1,981,428

1,895,886

1,787,607

Accrued interest receivable

16,890

17,441

18,063

18,010

16,624

Premises and equipment, net

16,843

16,976

17,396

16,053

16,453

Right of use assets

29,785

30,349

31,021

31,272

32,110

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

28,515

23,972

23,892

19,377

18,870

Deferred tax assets

11,845

13,172

13,919

14,332

15,984

Other assets

51,392

21,507

21,151

24,723

16,286

Total assets

3,015,969

2,842,007

2,818,702

2,750,722

2,623,863

LIABILITIES AND STOCKHOLDERS' EQUITY

Liabilities:

Deposits

1,870,323

1,606,097

1,585,784

1,507,620

1,401,132

Operating lease liabilities

31,343

31,861

32,486

32,684

33,459

Accrued interest payable

2,918

6,820

4,218

11,965

8,385

Advance payments by borrowers for taxes and insurance

13,733

10,838

13,245

10,778

13,743

Borrowings

580,421

680,421

684,421

675,100

Other liabilities

12,642

8,313

8,866

11,859

6,986

Total liabilities

2,511,380

2,344,350

2,325,020

2,259,327

2,138,805

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

(9,445

)

(9,519

)

(9,702

)

(9,747

)

(10,975

)

Additional paid-in-capital

208,478

207,934

207,584

207,106

207,626

Retained earnings

105,103

102,951

99,834

97,420

96,902

Accumulated other comprehensive loss

(12,686

)

(16,557

)

(16,590

)

(15,649

)

(20,468

)

Unearned compensation ─ ESOP

(12,110

)

(12,401

)

(12,693

)

(12,984

)

(13,276

)

Total stockholders' equity

504,589

497,657

493,682

491,395

485,058

Total liabilities and stockholders' equity

3,015,969

2,842,007

2,818,702

2,750,722

2,623,863

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,

2024

2023

Interest and dividend income:

Interest on loans receivable

32,945

31,281

30,664

27,814

25,276

Interest on deposits due from banks

2,430

1,542

2,911

990

1,969

Interest and dividend on securities and FHLBNY stock

5,918

5,969

6,091

6,146

6,261

Total interest and dividend income

41,293

38,792

39,666

34,950

33,506

Interest expense:

Interest on certificates of deposit

6,926

6,358

6,380

5,103

4,362

Interest on other deposits

8,519

7,389

6,540

5,706

5,639

Interest on borrowings

6,825

7,141

7,923

6,944

6,963

Total interest expense

22,270

20,888

20,843

17,753

16,964

Net interest income

19,023

17,904

18,823

17,197

16,542

Provision (benefit) for credit losses

789

(374

)

(180

)

(375

)

535

Net interest income after provision (benefit) for credit losses

18,234

18,278

19,003

17,572

16,007

Non-interest income:

Service charges and fees

508

492

473

498

516

Brokerage commissions

—

Late and prepayment charges

426

359

365

899

Income on sale of mortgage loans

218

274

302

244

173

Grant income

—

438

3,718

Other

348

1,057

565

(273

)

304

Total non-interest income

1,151

2,258

1,707

1,285

5,627

Non-interest expense:

Compensation and benefits

7,674

7,724

7,844

8,262

7,566

Occupancy and equipment

3,786

3,564

3,667

3,686

3,588

Data processing expenses

1,099

1,013

1,127

1,101

1,582

Direct loan expenses

573

633

732

497

369

(Benefit) provision for contingencies

(252

)

(493

)

164

418

391

Insurance and surety bond premiums

292

263

253

250

255

Office supplies, telephone and postage

222

233

249

294

301

Professional fees

1,351

1,369

1,723

2,040

1,693

Microloans recoveries

(54

)

(65

)

(53

)

(152

)

(69

)

Marketing and promotional expenses

180

145

100

146

248

Directors fees and regulatory assessment

178

176

179

173

169

Other operating expenses

1,265

1,585

965

1,182

1,223

Total non-interest expense

16,314

16,147

16,950

17,897

17,316

Income before income taxes

3,071

4,389

3,760

960

4,318

Provision for income taxes

638

1,197

1,346

442

1,728

Net income

2,433

3,192

2,414

518

2,590

Dividends on preferred shares

281

—

Net income available to common stockholders

2,152

3,117

2,414

518

2,590

Earnings per common share:

Basic

0.10

0.14

0.11

0.02

0.12

Diluted

0.10

0.14

0.11

0.02

0.12

Weighted average common shares outstanding:

Basic

22,446,009

22,409,803

22,353,492

22,224,945

22,272,076

Diluted

22,612,028

22,419,309

22,366,728

22,406,102

22,349,217

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

For the Nine Months Ended September 30,

2024

2023

Variance $

Variance %

Interest and dividend income:

Interest on loans receivable

94,890

67,991

26,899

39.56

Interest on deposits due from banks

6,883

3,983

2,900

72.81

Interest and dividend on securities and FHLBNY stock

17,978

18,943

(965

)

(5.09

Total interest and dividend income

119,751

90,917

28,834

31.71

Interest expense:

Interest on certificates of deposit

19,664

11,468

8,196

71.47

Interest on other deposits

22,448

12,864

9,584

74.50

Interest on borrowings

21,889

18,516

3,373

18.22

Total interest expense

64,001

42,848

21,153

49.37

Net interest income

55,750

48,069

7,681

15.98

Provision for credit losses

235

1,348

(1,113

)

(82.57

Net interest income after provision for credit losses

55,515

46,721

8,794

18.82

Non-interest income:

Service charges and fees

1,473

1,488

(15

)

(1.01

Brokerage commissions

(50

)

(74.63

Late and prepayment charges

862

2,000

(1,138

)

(56.90

Income on sale of mortgage loans

794

354

440

124.29

Grant income

—

3,718

(3,718

)

(100.00

Other

1,970

1,311

659

50.27

Total non-interest income

5,116

8,938

(3,822

)

(42.76

Non-interest expense:

Compensation and benefits

23,242

22,437

805

3.59

Occupancy and equipment

11,017

10,882

135

1.24

Data processing expenses

3,239

3,982

(743

)

(18.66

Direct loan expenses

1,938

1,126

812

72.11

(Benefit) provision for contingencies

(581

)

1,893

(2,474

)

(130.69

Insurance and surety bond premiums

808

768

5.21

Office supplies, telephone and postage

704

1,189

(485

)

(40.79

Professional fees

4,443

5,052

(609

)

(12.05

Microloans recoveries

(172

)

(1,329

)

1,157

(87.06

Marketing and promotional expenses

425

679

(254

)

(37.41

Directors fees and regulatory assessment

533

484

10.12

Other operating expenses

3,815

3,603

212

5.88

Total non-interest expense

49,411

50,766

(1,355

)

(2.67

Income before income taxes

11,220

4,893

6,327

129.31

Provision for income taxes

3,181

2,059

1,122

54.49

Net income

8,039

2,834

5,205

183.66

Dividends on preferred shares

356

—

356

100.00

Net income available to common stockholders

7,683

2,834

4,849

171.10

Earnings per common share:

Basic

0.34

0.12

0.22

177.36

Diluted

0.34

0.12

0.22

177.10

Weighted average common shares outstanding:

Basic

22,403,258

22,920,680

(517,422

)

(2.26

Diluted

22,466,178

22,962,956

(496,778

)

(2.16

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,

2024

2023

Performance Ratios:

Return on average assets (1)

0.33

0.45

0.33

0.08

0.39

Return on average equity (1)

1.93

2.59

1.97

0.42

2.11

Net interest rate spread (1) (2)

1.77

1.72

1.82

1.74

1.68

Net interest margin (1) (3)

2.65

2.62

2.71

2.66

2.58

Non-interest expense to average assets (1)

2.19

2.28

2.35

2.66

2.58

Efficiency ratio (4)

80.87

80.09

82.56

96.83

78.11

Average interest-earning assets to average interest- bearing liabilities

128.35

129.73

129.69

133.50

134.49

Average equity to average assets

16.97

17.41

17.00

18.25

18.32

Capital Ratios:

Total capital to risk-weighted assets (Bank only)

21.61

22.47

22.79

23.30

25.10

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

20.45

21.24

21.54

22.05

23.85

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

20.45

21.24

21.54

22.05

23.85

Tier 1 capital to average assets (Bank only)

16.19

16.70

16.26

17.49

17.51

Asset Quality Ratios:

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

1.09

1.18

1.23

1.36

1.51

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

139.52

130.28

140.90

152.99

169.49

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

(0.17

(0.10

(0.25

(0.24

(0.34

Non-performing loans as a percentage of total gross loans

0.78

0.89

0.87

0.89

Non-performing loans as a percentage of total assets

0.57

0.65

0.62

Total non-performing assets as a percentage of total assets

0.57

0.65

0.62

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

0.73

0.82

0.79

0.81

0.82

Other:

Number of offices

Number of full-time equivalent employees

228

227

233

237

243

(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 non-interest income.

(5)

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

Ponce Financial Group, Inc. and Subsidiaries

Securities Portfolio

September 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

2,993

—

(124

)

2,869

2,990

—

(206

)

2,784

Corporate Bonds

21,766

—

(1,438

)

20,328

25,790

—

(2,122

)

23,668

Mortgage-Backed Securities:

Collateralized Mortgage Obligations (1)

35,620

—

(4,976

)

30,644

39,375

—

(6,227

)

33,148

FHLMC Certificates

9,310

—

(1,119

)

8,191

10,163

—

(1,482

)

8,681

FNMA Certificates

57,345

—

(8,463

)

48,882

61,359

—

(9,842

)

51,517

GNMA Certificates

—

104

—

104

Total available-for-sale securities

127,125

—

(16,120

)

111,005

139,781

—

(19,879

)

119,902

Held-to-Maturity Securities:

U.S. Agency Bonds

25,000

—

(49

)

24,951

25,000

—

(181

)

24,819

Corporate Bonds

57,500

—

(618

)

56,882

82,500

—

(2,691

)

79,809

Mortgage-Backed Securities:

Collateralized Mortgage Obligations (1)

193,440

454

(2,946

)

190,948

212,093

104

(5,170

)

207,027

FHLMC Certificates

3,441

—

(169

)

3,272

3,897

—

(244

)

3,653

FNMA Certificates

108,577

(1,967

)

106,632

118,944

—

(4,088

)

114,856

SBA Certificates

15,985

153

—

16,138

19,712

166

—

19,878

Allowance for Credit Losses

(207

)

—

(398

)

—

Total held-to-maturity securities

403,736

629

(5,749

)

398,823

461,748

270

(12,374

)

450,042

(1)

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

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

For the Nine

For the

Months Ended

Year Ended

September 30, 2024

December 31, 2023

Allowance for credit losses on securities at beginning of the period

398

—

CECL adoption

—

662

Benefit for credit losses

(191

)

(264

)

Allowance for credit losses on securities at end of the period

207

398

Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

As of

September 30,

June 30,

March 31,

December 31,

September 30,

2024

2023

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Mortgage loans:

1-4 family residential

Investor Owned

332,380

15.09

337,292

16.49

339,331

16.92

343,689

17.89

347,082

19.13

Owner-Occupied

145,065

6.59

147,485

7.21

150,842

7.52

152,311

7.93

151,866

8.37

Multifamily residential

678,029

30.78

545,323

26.66

545,825

27.22

550,559

28.65

553,694

30.52

Nonresidential properties

383,277

17.40

337,583

16.51

327,350

16.32

342,343

17.81

321,472

17.71

Construction and land

631,461

28.67

641,879

31.39

608,665

30.35

503,925

26.22

411,383

22.67

Total mortgage loans

2,170,212

98.53

2,009,562

98.26

1,972,013

98.33

1,892,827

98.50

1,785,497

98.40

Non-mortgage loans:

Business loans

28,499

1.29

30,222

1.48

26,664

1.33

19,779

1.03

18,416

1.02

Consumer loans (1)

4,021

0.18

5,305

0.26

6,741

0.34

8,966

0.47

10,416

0.58

Total non-mortgage loans

32,520

1.47

35,527

1.74

33,405

1.67

28,745

1.50

28,832

1.60

Total loans, gross

2,202,732

100.00

2,045,089

100.00

2,005,418

100.00

1,921,572

100.00

1,814,329

100.00

Net deferred loan origination costs

1,565

1,145

674

468

692

Allowance for credit losses on loans

(23,966

)

(24,061

)

(24,664

)

(26,154

)

(27,414

)

Loans, net

2,180,331

2,022,173

1,981,428

1,895,886

1,787,607

(1)

As of September 30, 2024, June 30,2024, March 31, 2024, December 31, 2023, and September 30, 2023, consumer loans include $3.0 million, $4.3 million, $5.7 million, $8.0 million, and $9.3 million, respectively, of microloans originated by the Bank.

Ponce Financial Group, Inc. and Subsidiaries

Microloans Exposure (previously originated by the Bank under its arrangement with Grain)

Total Microloans Exposure as of September 30, 2024

(in thousands)

Microloans Receivable from Grain

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

23,932

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

(15,287

)

Cash receipts (inception-to-September 30, 2024)

(6,819

)

Grant/reserve

(1,826

)

Net receivable as of September 30, 2024

—

Microloans Receivables from Borrowers

Microloans receivable as of September 30, 2024

3,033

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

(2,570

)

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

463

Investments

Investment in Grain

1,000

Investment write-off in Q3 2022

(1,000

)

Net investment as of September 30, 2024

—

Total exposure related to microloans as of September 30, 2024 (2)

463

(1)

Excludes $1.5 million of security deposits by microloans originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions.

(2)

Total remaining exposure to microloan borrowers. These loans are now serviced by the Bank.

On November 1, 2023, Ponce Financial Group, Inc. and Grain Technologies, Inc. ("Grain") signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining microloans. 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 microloans.

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,

2024

2023

(Dollars in thousands)

Allowance for credit losses on loans at beginning of the period

24,061

24,664

26,154

27,414

28,173

Provision (benefit) for credit losses on loans

801

(120

)

(255

)

(126

)

750

Charge-offs:

Mortgage loans:

1-4 family residences

Investor owned

—

Owner occupied

—

Multifamily residences

—

Nonresidential properties

)

—

Construction and land

—

Non-mortgage loans:

Business

(450

)

—

(52

)

(63

)

—

Consumer

(634

)

(747

)

(1,302

)

(1,135

)

(1,592

)

Total charge-offs

(1,091

)

(747

)

(1,354

)

(1,198

)

(1,592

)

Recoveries:

Non-mortgage loans:

Business

—

Consumer

194

257

118

Total recoveries

195

264

119

Net (charge-offs) recoveries

(896

)

(483

)

(1,235

)

(1,134

)

(1,509

)

Allowance for credit losses on loans at end of the period

23,966

24,061

24,664

26,154

27,414

Ponce Financial Group, Inc. and Subsidiaries

Deposits

As of

September 30,

June 30,

March 31,

December 31,

September 30,

2024

2023

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

Amount

Percent

(Dollars in thousands)

Demand (1)

182,737

9.78

178,125

11.09

191,541

12.07

185,151

12.28

214,326

15.30

Interest-bearing deposits:

NOW/IOLA accounts (1)

71,445

3.82

81,178

5.05

73,202

4.62

77,909

5.17

74,055

5.29

Money market accounts

660,168

35.30

502,255

31.27

482,344

30.42

432,735

28.70

370,500

26.44

Reciprocal deposits

94,145

5.03

109,945

6.85

97,718

6.16

96,860

6.42

82,670

5.90

Savings accounts

108,941

5.82

109,694

6.83

112,713

7.11

114,139

7.57

117,870

8.41

Total NOW, money market, reciprocal and savings accounts

934,699

49.97

803,072

50.00

765,977

48.31

721,643

47.86

645,095

46.04

Certificates of deposit of $250K or more

174,053

9.31

156,224

9.73

146,296

9.23

132,153

8.77

122,353

8.73

Brokered certificates of deposit (2)

94,531

5.05

94,614

5.89

94,689

5.97

98,729

6.55

98,729

7.05

Listing service deposits (2)

7,376

0.39

9,361

0.58

12,688

0.80

14,433

0.96

15,180

1.08

All other certificates of deposit less than $250K

476,927

25.50

364,701

22.71

374,593

23.62

355,511

23.58

305,449

21.80

Total certificates of deposit

752,887

40.25

624,900

38.91

628,266

39.62

600,826

39.86

541,711

38.66

Total interest-bearing deposits

1,687,586

90.22

1,427,972

88.91

1,394,243

87.93

1,322,469

87.72

1,186,806

84.70

Total deposits

1,870,323

100.00

1,606,097

100.00

1,585,784

100.00

1,507,620

100.00

1,401,132

100.00

(1)

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

(2)

As of December 31, 2023, and September 30, 2023, there were $0.3 million and $0.3 million, respectively, in individual listing service deposits amounting to $250,000 or more. As of September 30, 2024, there were no 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,

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

59,321

4.00

363,321

4.55

2025

50,000

4.41

50,000

4.41

2026

200,000

4.25

—

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

580,421

3.86

684,421

4.10

Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

As of Three Months Ended

September 30,

June 30,

March 31,

December 31,

September 30,

2024

2023

(Dollars in thousands)

Non-accrual loans:

Mortgage loans:

1-4 family residential

Investor owned

436

399

793

396

Owner occupied

1,423

1,426

1,682

1,685

Multifamily residential

4,685

5,754

4,098

2,979

1,444

Nonresidential properties

824

828

441

—

Construction and land

8,907

10,277

10,759

11,721

Non-mortgage loans:

Business

180

396

146

165

209

Consumer

—

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

16,455

17,744

16,787

16,378

15,455

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

Mortgage loans:

1-4 family residential

Investor owned

278

277

270

Owner occupied

444

448

447

449

Multifamily residential

—

Nonresidential properties

—

Construction and land

—

Non-mortgage loans:

Business

—

Consumer

—

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

722

725

717

719

Total non-accrual loans (2)

17,177

18,469

17,504

17,095

16,174

Accruing modifications to borrowers experiencing financial difficulty (1):

Mortgage loans:

1-4 family residential

Investor owned

1,821

1,830

1,850

2,112

2,131

Owner occupied

2,116

2,171

2,288

2,313

2,335

Multifamily residential

—

Nonresidential properties

672

707

748

757

765

Construction and land

—

Non-mortgage loans:

Business

222

—

Consumer

—

Total accruing modifications to borrowers experiencing financial difficulty (1)

4,831

4,708

4,886

5,182

5,231

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

22,008

23,177

22,390

22,277

21,405

Total non-performing loans to total gross loans

0.78

0.89

0.87

0.89

Total non-performing assets to total assets

0.57

0.65

0.62

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

0.73

0.82

0.79

0.81

0.82

(1)

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

(2)

Includes nonperforming mortgage loans held for sale.

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

For the Three Months Ended September 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)

2,096,592

32,945

6.25

1,777,585

25,276

5.64

Securities (3)

548,708

5,324

3.86

599,573

5,821

3.85

Other (4)

210,057

3,024

5.73

169,570

2,409

5.64

Total interest-earning assets

2,855,357

41,293

5.75

2,546,728

33,506

5.22

Non-interest-earning assets

107,153

111,771

Total assets

2,962,510

2,658,499

Interest-bearing liabilities:

NOW/IOLA (5) (6)

74,690

174

0.93

69,935

141

0.80

Money market (6)

711,385

8,318

4.65

485,042

5,468

4.47

Savings

109,571

0.09

118,095

0.10

Certificates of deposit

655,562

6,926

4.20

527,302

4,362

3.28

Total deposits

1,551,208

15,443

3.96

1,200,374

10,000

3.31

Advance payments by borrowers

13,151

0.06

14,537

0.03

Borrowings

660,312

6,825

4.11

678,676

6,963

4.07

Total interest-bearing liabilities

2,224,671

22,270

3.98

1,893,587

16,964

3.55

Non-interest-bearing liabilities:

Non-interest-bearing demand (5)

185,543

—

231,299

—

Other non-interest-bearing liabilities

49,702

—

46,643

—

Total non-interest-bearing liabilities

235,245

—

277,942

—

Total liabilities

2,459,916

22,270

2,171,529

16,964

Total equity

502,594

486,970

Total liabilities and total equity

2,962,510

3.98

2,658,499

3.55

Net interest income

19,023

16,542

Net interest rate spread (7)

1.77

1.67

Net interest-earning assets (8)

630,686

653,141

Net interest margin (9)

2.65

2.58

Average interest-earning assets to interest-bearing liabilities

128.35

134.49

(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 FRBNY demand deposits.

(5)

Includes reclassification of $47.1 million average outstanding balances from non-interest bearing demand to NOW/IOLA for the three months ended September 30, 2023.

(6)

Includes $0.1 million of interest expense reclassified from money market to NOW/IOLA for the three months ended September 30, 2023.

(7)

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.

(8)

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

(9)

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,

2024

2023

Average

Outstanding

Average

Outstanding

Average

Balance

Interest

Yield/Rate (1)

Balance

Interest

Yield/Rate

(Dollars in thousands)

Interest-earning assets:

Loans (2)

2,038,879

94,890

6.22

1,678,369

67,991

5.42

Securities (3)

562,451

16,429

3.90

614,987

17,627

3.83

Other (4)

196,668

8,432

5.73

127,961

5,299

5.54

Total interest-earning assets

2,797,998

119,751

5.72

2,421,317

90,917

5.02

Non-interest-earning assets

106,500

118,609

Total assets

2,904,498

2,539,926

Interest-bearing liabilities:

NOW/IOLA (5) (6)

76,817

543

0.94

69,331

1,133

2.18

Money market (6)

618,725

21,819

4.71

403,171

11,637

3.86

Savings

111,636

0.10

123,218

0.10

Certificates of deposit

640,369

19,664

4.10

522,740

11,468

2.93

Total deposits

1,447,547

42,106

3.89

1,118,460

24,326

2.91

Advance payments by borrowers

13,660

0.06

14,814

0.05

Borrowings

703,775

21,889

4.15

617,912

18,516

4.01

Total interest-bearing liabilities

2,164,982

64,001

3.95

1,751,186

42,848

3.27

Non-interest-bearing liabilities:

Non-interest-bearing demand (5)

191,087

—

251,645

—

Other non-interest-bearing liabilities

51,061

—

43,864

—

Total non-interest-bearing liabilities

242,148

—

295,509

—

Total liabilities

2,407,130

64,001

2,046,695

42,848

Total equity

497,368

493,231

Total liabilities and total equity

2,904,498

3.95

2,539,926

3.27

Net interest income

55,750

48,069

Net interest rate spread (7)

1.77

1.74

Net interest-earning assets (8)

633,016

670,131

Net interest margin (9)

2.66

2.65

Average interest-earning assets to

interest-bearing liabilities

129.24

138.27

(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 FRBNY demand deposits.

(5)

Includes reclassification of $46.5 million average outstanding balances from non-interest bearing demand to NOW/IOLA for the nine months ended September 30, 2023.

(6)

Includes $1.1 million of interest expense reclassified from money market to NOW/IOLA for the nine months ended September 30, 2023.

(7)

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.

(8)

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

(9)

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,

2024

2023

Other Data

Common shares issued

24,886,711

Less treasury shares

1,067,248

1,074,979

1,096,214

1,101,191

1,233,111

Common shares outstanding at end of period

23,819,463

23,811,732

23,790,497

23,785,520

23,653,600

Book value per common share

11.74

11.45

11.29

11.20

10.99

Tangible book value per common share

11.74

11.45

11.29

11.20

10.99

Contact:

Sergio Vaccaro

sergio.vaccaro@poncebank.net

718-931-9000

Source: Ponce Financial Group, Inc.

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