Ponce Financial Group, Inc. Reports Second Quarter 2023 Results

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

Second Quarter 2023 Highlights (Compared to Prior Periods):

• Net loss of ($0.1) million, or $0.00 per diluted share for the three months ended June 30, 2023, as compared to net income of $0.3 million, or $0.01 per diluted share for the three months ended March 31, 2023 and net income of $0.8 million, or $0.03 per diluted share for the three months ended June 30, 2022.
• Included in the ($0.1) million of net loss for the second quarter of 2023 results is $31.1 million in interest and dividend income and $1.5 million in non-interest income, offset by a $17.1 million in non-interest expense and $14.8 million in interest expense.
• Net interest income of $16.3 million for the second quarter of 2023 increased $1.0 million, or 6.80%, from the prior quarter and $0.8 million, or 5.13%, from the same quarter last year.
• Net interest margin was 2.65% for the second quarter of 2023, decreased from 2.75% for the prior quarter and from 3.92% for the same quarter last year.
• Cash and equivalents were $243.8 million as of June 30, 2023, an increase of $189.4 million, or 348.47%, from December 31, 2022, as we decided to keep ample sources of liquidity at hand while taking advantage of the positive spread between our interest bearing overnight deposits at the Fed and borrowing costs under the Bank Term Funding Program ("BTFP").
• Securities totaled $605.7 million as of June 30, 2023, a decrease of $34.7 million, or 5.59%, from December 31, 2022 primarily due to a call on one of the securities amounting to $10.0 million and regular principal payments.
• Net loans receivable were $1.70 billion as of June 30, 2023, an increase of $201.9 million, or 13.52%, from December 31, 2022.
• Deposits were $1.44 billion as of June 30, 2023, an increase of $189.6 million, or 15.14%, from December 31, 2022.

President and Chief Executive Officer's Comments

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

"We continue to show strong levels of capital and liquidity. On the capital front, our total capital ratio at Ponce Bank stands at 26.30%, well in excess of regulatory requirements. In terms of liquidity, our liquid assets plus borrowing capacity at the Federal Home Loan Bank of New York ("FHLBNY") stand at $817 million, more than two and a half times of our uninsured deposits of $325 million."

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

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

Executive Chairman's Comment

Steven A. Tsavaris, Ponce Financial Group's Executive Chairman added "While the increase in rates will continue to put pressure on growth, we were able to organically grow our loans and deposits during the quarter. The US economy continues to show resiliency and credit conditions remain strong. Our credit metrics improved during the quarter with nonperforming loans ratios declining quarter over quarter and year over year."

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

		At or for the Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
Performance Ratios (Annualized):		2023				2023				2022				2022				2022
Return on average assets (1)			(0.01	%)			0.06	%			(1.62	%)			(2.80	%)			0.17	%
Return on average equity (1)			(0.07	%)			0.27	%			(7.28	%)			(11.25	%)			1.01	%
Net interest rate spread (1) (2)			1.66	%			1.78	%			2.13	%			3.08	%			3.67	%
Net interest margin (1) (3)			2.65	%			2.75	%			2.97	%			3.59	%			3.92	%
Non-interest expense to average assets (1)			2.65	%			2.79	%			2.78	%			4.83	%			3.73	%
Efficiency ratio (4)			96.15	%			95.88	%			94.95	%			132.46	%			93.77	%
Average interest-earning assets to average interest- bearing liabilities			141.14	%			148.20	%			152.30	%			162.67	%			158.80	%
Average equity to average assets			19.21	%			20.91	%			22.32	%			24.90	%			17.32	%

		At or for the Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
Capital Ratios (Annualized):		2023				2023				2022				2022				2022
Total capital to risk weighted assets (Bank only)			26.30	%			27.54	%			30.53	%			33.39	%			36.00	%
Tier 1 capital to risk weighted assets (Bank only)			25.05	%			26.28	%			29.26	%			32.13	%			34.75	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)			25.05	%			26.28	%			29.26	%			32.13	%			34.75	%
Tier 1 capital to average assets (Bank only)			17.95	%			19.51	%			20.47	%			22.91	%			28.79	%

		At or for the Three Months Ended
		June 30,				March 31,				December 31,				September 30,				June 30,
Asset Quality Ratios (Annualized):		2023				2023				2022				2022				2022
Allowance for loan losses as a percentage of total loans			1.64	%			1.77	%			2.27	%			1.77	%			1.31	%
Allowance for loan losses as a percentage of nonperforming loans			167.06	%			149.73	%			252.33	%			118.43	%			94.05	%
Net (charge-offs) recoveries to average outstanding loans (1)			(0.41	%)			(0.57	%)			(0.85	%)			(0.52	%)			(0.05	%)
Non-performing loans as a percentage of total gross loans			0.98	%			1.18	%			0.90	%			1.50	%			1.39	%
Non-performing loans as a percentage of total assets			0.63	%			0.76	%			0.59	%			0.97	%			0.90	%
Total non-performing assets as a percentage of total assets			0.63	%			0.76	%			0.59	%			0.97	%			0.90	%
Total non-performing assets and accruing troubled debt restructured loans as a percentage of total assets			0.83	%			0.93	%			0.78	%			1.16	%			1.14	%

(1) Annualized where appropriate.

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

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

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

Summary of Results of Operations

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

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

Net Interest Income and Net Margin

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

Net interest margin was 2.65% for the three months ended June 30, 2023 compared to 2.75% for the prior quarter, a decrease of 10bps and 3.92% for the same period last year, a decrease of 127bps. The decrease in net interest margin was a result of an increase in the cost of funds driven by higher interest rates.

Non-interest Income

Non-interest income for the three months ended June 30, 2023, was $1.5 million, a decrease of $0.3 million, or 17.98%, compared to the three months ended March 31, 2023 and a decrease of $0.7 million, or 31.53%, compared to the three months ended June 30, 2022.

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

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

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

Non-interest Expense

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

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

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

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

Balance Sheet Summary

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

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

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

About Ponce Financial Group, Inc.

Ponce Financial Group, Inc. is the holding company for Ponce Bank. Ponce Bank is a Minority Depository Institution, a Community Development Financial Institution, and a certified Small Business Administration lender. Ponce Bank's business primarily consists of taking deposits from the general public and to a lesser extent alternative funding sources and investing those funds, together with funds generated from operations and borrowings, in mortgage loans, consisting of 1-4 family residences (investor-owned and owner-occupied), multifamily residences, nonresidential properties, construction and land, and, to a lesser extent, in business and consumer loans. Ponce Bank also invests in securities, which consist of U.S. Government and federal agency securities and securities issued by government-sponsored or government-owned enterprises, as well as, mortgage-backed securities, corporate bonds and obligations, and Federal Home Loan Bank stock.

Forward Looking Statements

Certain statements herein constitute forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Exchange Act and are intended to be covered by the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. Such statements may be identified by words such as "believes," "will," "would," "expects," "project," "may," "could," "developments," "strategic," "launching," "opportunities," "anticipates," "estimates," "intends," "plans," "targets" and similar expressions. These statements are based upon the current beliefs and expectations of management and are subject to significant risks and uncertainties. Actual results may differ materially from those set forth in the forward-looking statements as a result of numerous factors. Factors that could cause such differences to exist include, but are not limited to, adverse conditions in the capital and debt markets and the impact of such conditions on business activities; changes in interest rates; competitive pressures from other financial institutions; the effects of general economic conditions on a national basis or in the local markets in which Ponce Bank operates, including changes that adversely affect borrowers' ability to service and repay Ponce Bank's loans; anticipated losses with respect to the Company's investment in Grain; changes in the value of securities in the investment portfolio; changes in loan default and charge-off rates; fluctuations in real estate values; the adequacy of loan loss reserves; decreases in deposit levels necessitating increased borrowing to fund loans and investments; operational risks including, but not limited to, cybersecurity, fraud and natural disasters; changes in government regulation; changes in accounting standards and practices; the risk that intangibles recorded in the financial statements will become impaired; demand for loans in Ponce Bank's market area; Ponce Bank's ability to attract and maintain deposits; risks related to the implementation of acquisitions, dispositions, and restructurings; the risk that Ponce Financial Group, Inc. may not be successful in the implementation of its business strategy; changes in assumptions used in making such forward-looking statements and the risk factors described in Ponce Financial Group, Inc.'s Annual Report on Form 10-K and Quarterly Reports on Form 10-Q as filed with the Securities and Exchange Commission (the "SEC"), which are available at the SEC's website, www.sec.gov. Readers are cautioned not to place undue reliance on these forward-looking statements, which speak only as of the date of this release. Ponce Financial Group, Inc. disclaims any obligation to publicly update or revise any forward-looking statements to reflect changes in underlying assumptions or factors, new information, future events or other changes, except as may be required by applicable law or regulation.

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(Dollars in thousands, except for share data)

	As of
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
ASSETS
Cash and due from banks:
Cash	$	31,162			$	26,951			$	31,977			$	34,007			$	24,934
Interest-bearing deposits		212,627				157,736				22,383				28,514				249,872
Total cash and cash equivalents		243,789				184,687				54,360				62,521				274,806
Available-for-sale securities, at fair value		123,720				128,320				129,505				131,977				140,044
Held-to-maturity securities, at amortized cost (1)		481,952				491,649				510,820				494,297				211,517
Placement with banks		996				1,245				1,494				2,490				2,490
Mortgage loans held for sale, at fair value		10,070				2,987				1,979				3,357				9,234
Loans receivable, net		1,695,047				1,614,428				1,493,127				1,392,553				1,324,320
Accrued interest receivable		16,054				15,435				15,049				14,063				13,255
Premises and equipment, net		16,856				17,215				17,446				17,759				18,945
Right of use assets		32,435				33,147				33,423				34,121				34,416
Federal Home Loan Bank of New York stock (FHLBNY), at cost		19,195				19,209				24,661				14,272				16,429
Deferred tax assets		15,924				15,413				16,137				13,822				9,658
Other assets		15,919				15,799				13,988				11,170				21,585
Total assets	$	2,671,957			$	2,539,534			$	2,311,989			$	2,192,402			$	2,076,699
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	1,442,013			$	1,336,877			$	1,252,412			$	1,351,189			$	1,148,728
Operating lease liabilities		33,716				34,308				34,532				35,081				35,217
Accrued interest payable		4,704				1,767				1,390				854				158
Advance payments by borrowers for taxes and insurance		12,402				14,902				9,724				10,589				8,668
Borrowings		682,100				648,375				517,375				286,375				334,375
Other liabilities		6,540				7,264				3,856				7,631				31,471
Total liabilities		2,181,475				2,043,493				1,819,289				1,691,719				1,558,617
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized		225,000				225,000				225,000				225,000				225,000
Common stock, $0.01 par value; 200,000,000 shares authorized		249				249				249				247				247
Treasury stock, at cost		(5,202	)			(2	)			(2	)			—				—
Additional paid-in-capital		207,287				206,883				206,508				206,092				205,669
Retained earnings		94,312				94,399				92,955				102,169				116,907
Accumulated other comprehensive loss		(17,597	)			(16,629	)			(17,860	)			(18,420	)			(15,032	)
Unearned compensation ─ ESOP		(13,567	)			(13,859	)			(14,150	)			(14,405	)			(14,709	)
Total stockholders' equity		490,482				496,041				492,700				500,683				518,082
Total liabilities and stockholders' equity	$	2,671,957			$	2,539,534			$	2,311,989			$	2,192,402			$	2,076,699

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

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

	Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
Interest and dividend income:
Interest on loans receivable	$	23,015			$	19,700			$	18,550			$	17,058			$	16,057
Interest on deposits due from banks		1,817				197				199				346				132
Interest and dividend on securities and FHLBNY stock		6,223				6,459				6,184				4,230				978
Total interest and dividend income		31,055				26,356				24,933				21,634				17,167
Interest expense:
Interest on certificates of deposit		2,381				1,871				1,310				687				677
Interest on other deposits		5,913				4,166				4,125				1,543				521
Interest on borrowings		6,479				5,074				3,332				1,793				481
Total interest expense		14,773				11,111				8,767				4,023				1,679
Net interest income		16,282				15,245				16,166				17,611				15,488
Provision (benefit) for credit losses		987				(174	)			12,641				9,330				817
Net interest income after provision (benefit) for credit losses		15,295				15,419				3,525				8,281				14,671
Non-interest income:
Service charges and fees		481				491				481				464				445
Brokerage commissions		35				15				180				288				214
Late and prepayment charges		372				729				263				109				193
Income on sale of mortgage loans		82				99				7				116				200
Loan origination (1)		—				—				(557	)			522				696
(Loss) gain on sale of premises and equipment		—				—				—				(436	)			—
Other		522				485				63				514				431
Total non-interest income		1,492				1,819				437				1,577				2,179
Non-interest expense:
Compensation and benefits		7,425				7,446				6,501				7,377				6,911
Occupancy and equipment		3,724				3,570				3,928				3,611				3,237
Data processing expenses		1,208				1,192				1,114				994				824
Direct loan expenses		345				412				454				654				505
Provision for contingencies		517				985				(440	)			519				30
Insurance and surety bond premiums		248				265				270				297				156
Office supplies, telephone and postage		489				399				375				369				406
Professional fees		1,904				1,455				1,571				1,251				1,748
Grain (recoveries) and write-off		(346	)			(914	)			(515	)			8,881				1,500
Marketing and promotional expenses		303				128				256				214				52
Directors fees and regulatory assessment		160				155				196				188				167
Other operating expenses		1,112				1,268				2,055				1,061				1,031
Total non-interest expense		17,089				16,361				15,765				25,416				16,567
(Loss) income before income taxes		(302	)			877				(11,803	)			(15,558	)			283
Provision (benefit) for income taxes		(215	)			546				(2,589	)			(820	)			(488	)
Net (loss) income	$	(87	)		$	331			$	(9,214	)		$	(14,738	)		$	771
Earnings (loss) per common share:
Basic	$	(0.00	)		$	0.01			$	(0.40	)		$	(0.64	)		$	0.03
Diluted	$	(0.00	)		$	0.01			$	(0.40	)		$	(0.64	)		$	0.03
Weighted average common shares outstanding:
Basic		23,208,168				23,293,013				23,168,097				23,094,859				23,056,559
Diluted		23,208,168				23,324,532				23,168,097				23,094,859				23,128,911

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

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

		For the Six Months Ended June 30,
		2023				2022				Variance $				Variance %
Interest and dividend income:
Interest on loans receivable		$	42,715			$	34,257			$	8,458				24.69	%
Interest on deposits due from banks			2,014				168				1,846				1,098.81	%
Interest and dividend on securities and FHLBNY stock			12,682				1,760				10,922				620.57	%
Total interest and dividend income			57,411				36,185				21,226				58.66	%
Interest expense:
Interest on certificates of deposit			4,252				1,480				2,772				187.30	%
Interest on other deposits			10,079				805				9,274				1,152.05	%
Interest on borrowings			11,553				1,074				10,479				975.70	%
Total interest expense			25,884				3,359				22,525				670.59	%
Net interest income			31,527				32,826				(1,299	)			(3.96	%)
Provision for credit losses			813				2,075				(1,262	)			(60.82	%)
Net interest income after provision for credit losses			30,714				30,751				(37	)			(0.12	%)
Non-interest income:
Service charges and fees			972				885				87				9.83	%
Brokerage commissions			50				552				(502	)			(90.94	%)
Late and prepayment charges			1,101				251				850				338.65	%
Income on sale of mortgage loans			181				618				(437	)			(70.71	%)
Loan origination			—				1,321				(1,321	)			(100.00	%)
Other			1,007				778				229				29.43	%
Total non-interest income			3,311				4,405				(1,094	)			(24.84	%)
Non-interest expense:
Compensation and benefits			14,871				14,036				835				5.95	%
Occupancy and equipment			7,294				6,429				865				13.45	%
Data processing expenses			2,400				1,671				729				43.63	%
Direct loan expenses			757				1,379				(622	)			(45.11	%)
Provision for contingencies			1,502				47				1,455				3,095.74	%
Insurance and surety bond premiums			513				303				210				69.31	%
Office supplies, telephone and postage			888				811				77				9.49	%
Professional fees			3,359				3,082				277				8.99	%
Contribution to the Ponce De Leon Foundation			—				4,995				(4,995	)			(100.00	%)
Grain (recoveries) and write-off			(1,260	)			9,574				(10,834	)			(113.16	%)
Marketing and promotional expenses			431				123				308				250.41	%
Directors fees and regulatory assessment			315				321				(6	)			(1.87	%)
Other operating expenses			2,380				1,870				510				27.27	%
Total non-interest expense			33,450				44,641				(11,191	)			(25.07	%)
Income (loss) before income taxes			575				(9,485	)			10,060				(106.06	%)
Provision (benefit) for income taxes			331				(3,436	)			3,767				(109.63	%)
Net income (loss)		$	244			$	(6,049	)		$	6,293				(104.03	%)
Earnings (loss) per common share:
Basic		$	0.01			$	(0.27	)		$	0.28				(103.86	%)
Diluted		$	0.01			$	(0.27	)		$	0.28				(103.85	%)
Weighted average common shares outstanding:
Basic			23,250,357				22,243,776				1,006,581				4.53	%
Diluted			23,275,201				22,243,776				1,031,425				4.64	%

Ponce Financial Group, Inc. and Subsidiaries

Key Metrics

	At or for the Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
Performance Ratios:
Return on average assets (1)		(0.01	%)			0.06	%			(1.62	%)			(2.80	%)			0.17	%
Return on average equity (1)		(0.07	%)			0.27	%			(7.28	%)			(11.25	%)			1.01	%
Net interest rate spread (1) (2)		1.66	%			1.78	%			2.13	%			3.08	%			3.67	%
Net interest margin (1) (3)		2.65	%			2.75	%			2.97	%			3.59	%			3.92	%
Non-interest expense to average assets (1)		2.65	%			2.79	%			2.78	%			4.83	%			3.73	%
Efficiency ratio (4)		96.15	%			95.88	%			94.95	%			132.46	%			93.77	%
Average interest-earning assets to average interest- bearing liabilities		141.14	%			148.20	%			152.30	%			162.67	%			158.80	%
Average equity to average assets		19.21	%			20.91	%			22.32	%			24.90	%			17.32	%
Capital Ratios:
Total capital to risk weighted assets (Bank only)		26.30	%			27.54	%			30.53	%			33.39	%			36.00	%
Tier 1 capital to risk weighted assets (Bank only)		25.05	%			26.28	%			29.26	%			32.13	%			34.75	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)		25.05	%			26.28	%			29.26	%			32.13	%			34.75	%
Tier 1 capital to average assets (Bank only)		17.95	%			19.51	%			20.47	%			22.91	%			28.79	%
Asset Quality Ratios:
Allowance for credit losses on loans as a percentage of total loans		1.64	%			1.77	%			2.27	%			1.77	%			1.31	%
Allowance for credit losses on loans as a percentage of nonperforming loans		167.06	%			149.73	%			252.33	%			118.43	%			94.05	%
Net (charge-offs) recoveries to average outstanding loans (1)		(0.41	%)			(0.57	%)			(0.85	%)			(0.52	%)			(0.05	%)
Non-performing loans as a percentage of total gross loans		0.98	%			1.18	%			0.90	%			1.50	%			1.39	%
Non-performing loans as a percentage of total assets		0.63	%			0.76	%			0.59	%			0.97	%			0.90	%
Total non-performing assets as a percentage of total assets		0.63	%			0.76	%			0.59	%			0.97	%			0.90	%
Total non-performing assets and accruing troubled debt restructured loans as a percentage of total assets		0.83	%			0.93	%			0.78	%			1.16	%			1.14	%
Other:
Number of offices		19				19				19				19				19
Number of full-time equivalent employees		244				251				253				257				253

(1) Annualized where appropriate.

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

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

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

Ponce Financial Group, Inc. and Subsidiaries

Securities Portfolio

		June 30, 2023																December 31, 2022
						Gross				Gross												Gross				Gross
		Amortized				Unrealized				Unrealized								Amortized				Unrealized				Unrealized
		Cost				Gains				Losses				Fair Value				Cost				Gains				Losses				Fair Value
		(in thousands)																(in thousands)
Available-for-Sale Securities:
U.S. Government Bonds		$	2,988			$	—			$	(279	)		$	2,709			$	2,985			$	—			$	(296	)		$	2,689
Corporate Bonds			25,807				—				(2,784	)			23,023				25,824				—				(2,465	)			23,359
Mortgage-Backed Securities:
Collateralized Mortgage Obligations (1)			42,128				—				(6,724	)			35,404				44,503				—				(6,726	)			37,777
FHLMC Certificates			10,742				—				(1,636	)			9,106				11,310				—				(1,676	)			9,634
FNMA Certificates			64,298				—				(10,931	)			53,367				67,199				—				(11,271	)			55,928
GNMA Certificates			114				—				(3	)			111				122				—				(4	)			118
Total available-for-sale securities		$	146,077			$	—			$	(22,357	)		$	123,720			$	151,943			$	—			$	(22,438	)		$	129,505
Held-to-Maturity Securities:
U.S. Agency Bonds		$	25,000			$	—			$	(455	)		$	24,545			$	35,000			$	—			$	(380	)		$	34,620
Corporate Bonds			82,500				25				(2,978	)			79,547				82,500				57				(3,819	)			78,738
Mortgage-Backed Securities:
Collateralized Mortgage Obligations (1)			224,312				—				(7,312	)			217,000				235,479				192				(5,558	)			230,113
FHLMC Certificates			3,948				—				(291	)			3,657				4,120				—				(268	)			3,852
FNMA Certificates			125,943				—				(5,828	)			120,115				131,918				—				(5,227	)			126,691
SBA Certificates			21,111				79				—				21,190				21,803				34				—				21,837
Allowance for Credit Losses			(862	)			—				—				—				—				—				—				—
Total held-to-maturity securities		$	481,952			$	104			$	(16,864	)		$	466,054			$	510,820			$	283			$	(15,252	)		$	495,851

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

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

		For the Six Months Ended June 30,
		2023				2022
Beginning balance		$	—			$	—
CECL adoption			662				—
Provision for credit losses			200				—
Allowance for credit losses on securities		$	862			$	—

Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

		As of
		June 30,								March 31,								December 31,								September 30,								June 30,
		2023								2023								2022								2022								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Mortgage loans:
1-4 family residential
Investor Owned		$	351,754				20.43	%		$	354,559				21.60	%		$	343,968				22.54	%		$	336,667				23.79	%		$	321,671				24.02	%
Owner-Occupied			154,116				8.94	%			149,481				9.10	%			134,878				8.84	%			112,749				7.97	%			100,048				7.47	%
Multifamily residential			550,033				31.94	%			553,430				33.71	%			494,667				32.42	%			421,917				29.81	%			396,470				29.60	%
Nonresidential properties			317,416				18.43	%			314,560				19.17	%			308,043				20.19	%			282,642				19.97	%			279,877				20.90	%
Construction and land			315,843				18.34	%			235,157				14.33	%			185,018				12.13	%			197,437				13.95	%			165,425				12.35	%
Total mortgage loans			1,689,162				98.08	%			1,607,187				97.91	%			1,466,574				96.12	%			1,351,412				95.49	%			1,263,491				94.34	%
Non-mortgage loans:
Business loans (1)			21,041				1.22	%			19,890				1.21	%			39,965				2.62	%			41,398				2.92	%			45,720				3.41	%
Consumer loans (2)			11,958				0.70	%			14,227				0.88	%			19,129				1.26	%			22,563				1.59	%			30,198				2.25	%
Total non-mortgage loans			32,999				1.92	%			34,117				2.09	%			59,094				3.88	%			63,961				4.51	%			75,918				5.66	%
Total loans, gross			1,722,161				100.00	%			1,641,304				100.00	%			1,525,668				100.00	%			1,415,373				100.00	%			1,339,409				100.00	%
Net deferred loan origination costs			1,059								2,099								2,051								2,288								2,446
Allowance for credit losses on loans			(28,173	)							(28,975	)							(34,592	)							(25,108	)							(17,535	)
Loans, net		$	1,695,047							$	1,614,428							$	1,493,127							$	1,392,553							$	1,324,320

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

(2) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, consumer loans include $11.2 million, $13.4 million, $18.2 million, $21.5 million and $28.3 million, respectively, of loans originated by the Bank pursuant to its arrangement with Grain.

Ponce Financial Group, Inc. and Subsidiaries

Grain Loan Exposure

Grain Technologies, Inc. ("Grain") Total Exposure as of June 30, 2023
(in thousands)
Receivable from Grain
Microloans originated - put back to Grain (inception-to-June 30, 2023)		$	24,324
Write-downs, net of recoveries (inception-to-date as of June 30, 2023)			(15,679	)
Cash receipts from Grain (inception-to-June 30, 2023)			(6,819	)
Grant/reserve			(1,826	)
Net receivable as of June 30, 2023		$	—
Microloan receivables from Grain Borrowers
Grain originated loans receivable as of June 30, 2023		$	11,213
Allowance for credit losses on loans as of June 30, 2023 (1)			(9,786	)
Microloans, net of allowance for credit losses on loans as of June 30, 2023		$	1,427
Investments
Investment in Grain		$	1,000
Investment in Grain write-off in Q3 2022			(1,000	)
Investment in Grain as of June 30, 2023			—
Total exposure to Grain as of June 30, 2023		$	1,427

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

Ponce Financial Group, Inc. and Subsidiaries

Allowance for Credit Losses on Loans

	For the Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
	(Dollars in thousands)
Allowance for credit losses on loans at beginning of the period	$	28,975			$	34,592			$	25,108			$	17,535			$	16,893
Provision (benefit) for credit losses on loans		934				(321	)			12,641				9,330				817
Adoption of CECL		—				(3,090	)			—				—				—
Charge-offs:
Mortgage loans:
1-4 family residences
Investor owned		—				—				—				—				—
Owner occupied		—				—				—				—				—
Multifamily residences		—				—				—				—				—
Nonresidential properties		—				—				—				—				—
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		(1,931	)			(2,569	)			(3,659	)			(1,799	)			(450	)
Total charge-offs		(1,931	)			(2,569	)			(3,659	)			(1,799	)			(450	)
Recoveries:
Mortgage loans:
1-4 family residences
Investor owned		—				—				—				—				156
Owner occupied		—				—				—				39				—
Multifamily residences		—				—				—				—				—
Nonresidential properties		—				—				—				—				—
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				1				91
Consumer		195				363				502				2				28
Total recoveries		195				363				502				42				275
Net (charge-offs) recoveries		(1,736	)			(2,206	)			(3,157	)			(1,757	)			(175	)
Allowance for credit losses on loans at end of the period	$	28,173			$	28,975			$	34,592			$	25,108			$	17,535

Ponce Financial Group, Inc. and Subsidiaries

Deposits

		As of
		June 30,								March 31,								December 31,								September 30,								June 30,
		2023								2023								2022								2022								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Demand		$	266,545				18.48	%		$	282,741				21.15	%		$	289,149				23.08	%		$	288,654				21.37	%		$	284,462				24.77	%
Interest-bearing deposits:
NOW/IOLA accounts			22,754				1.57	%			21,735				1.63	%			24,349				1.94	%			28,799				2.13	%			28,597				2.49	%
Money market accounts			538,520				37.35	%			408,404				30.55	%			317,815				25.38	%			360,293				26.66	%			181,156				15.77	%
Reciprocal deposits			100,919				7.00	%			109,649				8.20	%			114,049				9.11	%			162,858				12.05	%			151,264				13.17	%
Savings accounts			119,635				8.30	%			127,731				9.55	%			130,432				10.41	%			140,055				10.37	%			139,244				12.12	%
Total NOW, money market, reciprocal and savings accounts			781,828				54.22	%			667,519				49.93	%			586,645				46.84	%			692,005				51.21	%			500,261				43.55	%
Certificates of deposit of $250K or more			83,646				5.80	%			76,893				5.75	%			70,113				5.60	%			61,900				4.58	%			65,157				5.67	%
Brokered certificates of deposit (1)			98,729				6.85	%			98,754				7.39	%			98,754				7.89	%			98,760				7.31	%			62,650				5.45	%
Listing service deposits (1)			20,258				1.40	%			28,417				2.13	%			35,813				2.86	%			40,964				3.03	%			48,953				4.26	%
All other certificates of deposit less than $250K			191,007				13.25	%			182,553				13.65	%			171,938				13.73	%			168,906				12.50	%			187,245				16.30	%
Total certificates of deposit			393,640				27.30	%			386,617				28.92	%			376,618				30.08	%			370,530				27.42	%			364,005				31.68	%
Total interest-bearing deposits			1,175,468				81.52	%			1,054,136				78.85	%			963,263				76.92	%			1,062,535				78.63	%			864,266				75.23	%
Total deposits		$	1,442,013				100.00	%		$	1,336,877				100.00	%		$	1,252,412				100.00	%		$	1,351,189				100.00	%		$	1,148,728				100.00	%

(1) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, there were $3.3 million, $9.5 million, $13.6 million, $13.8 million, and $18.5 million, respectively, in individual listing service deposits amounting to $250,000 or more. All brokered certificates of deposit individually amounted to less than $250,000.

Ponce Financial Group, Inc. and Subsidiaries

Borrowings

	June 30,												December 31,
	2023												2022
	Scheduled Maturity				Redeemable at Call Date				Weighted Average Rate				Scheduled Maturity				Redeemable at Call Date				Weighted Average Rate
	(Dollars in thousands)
Overnight line of credit advance	$	—			$	—				—	%		$	6,000			$	6,000				4.6	%
Term advances ending:
2023	$	7,000			$	7,000				2.12			$	178,375			$	178,375				4.32
2024		354,000				354,000				4.53				50,000				50,000				4.75
2025		50,000				50,000				4.41				50,000				50,000				4.41
2026		—				—				—				—				—				—
2027		212,000				212,000				3.44				183,000				183,000				3.25
Thereafter		59,100				59,100				3.43				50,000				50,000				3.35
	$	682,100			$	682,100				4.06	%		$	517,375			$	517,375				3.90	%

Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

	As of Three Months Ended
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
	(Dollars in thousands)
Non-accrual loans:
Mortgage loans:
1-4 family residential
Investor owned	$	296			$	2,836			$	2,844			$	5,902			$	3,460
Owner occupied		2,363				2,245				961				971				1,140
Multifamily residential		1,435				—				—				—				—
Nonresidential properties		—				—				—				778				1,162
Construction and land		11,721				11,906				7,567				10,660				10,817
Non-mortgage loans:
Business		—				40				—				359				—
Consumer		—				—				—				—				—
Total non-accrual loans (not including non-accruing troubled debt restructured loans)	$	15,815			$	17,027			$	11,372			$	18,670			$	16,579
Non-accruing troubled debt restructured loans:
Mortgage loans:
1-4 family residential
Investor owned	$	209			$	213			$	217			$	221			$	224
Owner occupied		840				2,020				2,027				2,215				1,746
Multifamily residential		—				—				—				—				—
Nonresidential properties		—				91				93				95				96
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total non-accruing troubled debt restructured loans		1,049				2,324				2,337				2,531				2,066
Total non-accrual loans	$	16,864			$	19,351			$	13,709			$	21,201			$	18,645
Accruing troubled debt restructured loans:
Mortgage loans:
1-4 family residential
Investor owned	$	2,161			$	2,185			$	2,207			$	2,228			$	2,246
Owner occupied		2,353				1,310				1,328				1,254				2,019
Multifamily residential		—				—				—				—				—
Nonresidential properties		783				701				708				715				725
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total accruing troubled debt restructured loans	$	5,297			$	4,196			$	4,243			$	4,197			$	4,990
Total non-performing assets and accruing troubled debt restructured loans	$	22,161			$	23,547			$	17,952			$	25,398			$	23,635
Total non-performing loans to total gross loans		0.98	%			1.18	%			0.90	%			1.50	%			1.39	%
Total non-performing assets to total assets		0.63	%			0.76	%			0.59	%			0.97	%			0.90	%
Total non-performing assets and accruing troubled debt restructured loans to total assets		0.83	%			0.93	%			0.78	%			1.16	%			1.14	%

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

	For the Three Months Ended June 30,
	2023											2022
	Average											Average
	Outstanding								Average			Outstanding								Average
	Balance				Interest				Yield/Rate (1)			Balance				Interest				Yield/Rate (1)
	(Dollars in thousands)
Interest-earning assets:
Loans (2)	$	1,683,117			$	23,015			5.48	%		$	1,318,400			$	16,057			4.89	%
Securities (3)		614,598				5,731			3.74	%			155,939				908			2.34	%
Other (4) (5)		164,509				2,309			5.63	%			109,755				202			0.74	%
Total interest-earning assets		2,462,224				31,055			5.06	%			1,584,094				17,167			4.35	%
Non-interest-earning assets (5)		121,169											145,308
Total assets	$	2,583,393										$	1,729,402
Interest-bearing liabilities:
NOW/IOLA	$	22,280			$	8			0.14	%		$	32,321			$	14			0.17	%
Money market		539,020				5,874			4.37	%			338,984				474			0.56	%
Savings		122,802				29			0.09	%			136,755				31			0.09	%
Certificates of deposit		393,754				2,381			2.43	%			387,129				677			0.70	%
Total deposits		1,077,856				8,292			3.09	%			895,189				1,196			0.54	%
Advance payments by borrowers		16,967				2			0.05	%			12,359				2			0.06	%
Borrowings		649,652				6,479			4.00	%			89,965				481			2.14	%
Total interest-bearing liabilities		1,744,475				14,773			3.40	%			997,513				1,679			0.68	%
Non-interest-bearing liabilities:
Non-interest-bearing demand		299,707				—							359,181				—
Other non-interest-bearing liabilities		42,906				—							67,220				—
Total non-interest-bearing liabilities		342,613				—							426,401				—
Total liabilities		2,087,088				14,773							1,423,914				1,679
Total equity		496,305											305,488
Total liabilities and total equity	$	2,583,393							3.40	%		$	1,729,402							0.68	%
Net interest income					$	16,282										$	15,488
Net interest rate spread (6)									1.66	%										3.67	%
Net interest-earning assets (7)	$	717,749										$	586,581
Net interest margin (8)									2.65	%										3.92	%
Average interest-earning assets to interest-bearing liabilities									141.14	%										158.80	%

(1) Annualized where appropriate.

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

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

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

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

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

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

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

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

	For the Six Months Ended June 30,
	2023												2022
	Average												Average
	Outstanding								Average				Outstanding								Average
	Balance				Interest				Yield/Rate (1)				Balance				Interest				Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans (2)	$	1,627,939			$	42,715				5.29	%		$	1,321,897			$	34,257				5.23	%
Securities (3)		622,822				11,806				3.82	%			147,066				1,625				2.23	%
Other (4) (5)		106,812				2,890				5.46	%			108,094				303				0.57	%
Total interest-earning assets		2,357,573				57,411				4.91	%			1,577,057				36,185				4.63	%
Non-interest-earning assets (5)		122,083												151,047
Total assets	$	2,479,656											$	1,728,104
Interest-bearing liabilities:
NOW/IOLA	$	22,804			$	17				0.15	%		$	32,700			$	30				0.19	%
Money market		494,385				9,998				4.08	%			329,448				709				0.43	%
Savings		125,823				59				0.09	%			136,084				63				0.09	%
Certificates of deposit		387,592				4,252				2.21	%			403,028				1,480				0.74	%
Total deposits		1,030,604				14,326				2.80	%			901,260				2,282				0.51	%
Advance payments by borrowers		14,954				5				0.07	%			11,091				3				0.05	%
Borrowings		587,026				11,553				3.97	%			102,258				1,074				2.12	%
Total interest-bearing liabilities		1,632,584				25,884				3.20	%			1,014,609				3,359				0.67	%
Non-interest-bearing liabilities:
Non-interest-bearing demand		308,208				—								365,771				—
Other non-interest-bearing liabilities		42,451				—								57,446				—
Total non-interest-bearing liabilities		350,659				—								423,217				—
Total liabilities		1,983,243				25,884								1,437,826				3,359
Total equity		496,413												290,278
Total liabilities and total equity	$	2,479,656								3.20	%		$	1,728,104								0.67	%
Net interest income					$	31,527											$	32,826
Net interest rate spread (6)										1.71	%											3.96	%
Net interest-earning assets (7)	$	724,989											$	562,448
Net interest margin (8)										2.70	%											4.20	%
Average interest-earning assets to interest-bearing liabilities										144.41	%											155.43	%

(1) Annualized where appropriate.

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

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

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

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

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

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

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

Ponce Financial Group, Inc. and Subsidiaries

Other Data

	As of
	June 30,				March 31,				December 31,				September 30,				June 30,
	2023				2023				2022				2022				2022
Other Data
Common shares issued		24,886,711				24,865,476				24,861,329				24,728,460				24,724,274
Less treasury shares		617,924				1,976				1,976				—				—
Common shares outstanding at end of period		24,268,787				24,863,500				24,859,353				24,728,460				24,724,274
Book value per common share	$	10.94			$	10.90			$	10.77			$	11.15			$	11.85
Tangible book value per common share	$	10.94			$	10.90			$	10.77			$	11.15			$	11.85

Contact:

Frank Perez

[email protected]

718-931-9000