Ponce Financial Group, Inc. Reports Third Quarter 2023 Results

NEW YORK, Oct. 30, 2023 (GLOBE NEWSWIRE) -- Ponce Financial Group, Inc., (the "Company") (NASDAQ:PDLB), the holding company for Ponce Bank (the "Bank"), today announced results for the third quarter of 2023.

Third Quarter 2023 Highlights (Compared to Prior Periods):

• Net income of $2.6 million, or $0.12 per diluted share for the three months ended September 30, 2023, as compared to net loss of ($0.1) million, or $0.00 per diluted share for the three months ended June 30, 2023 and net loss of ($14.7) million, or ($0.64) per diluted share for the three months ended September 30, 2022.
• Included in the $2.6 million of net income for the third quarter of 2023 results is $33.5 million in interest and dividend income and $5.6 million in non-interest income, offset by a $17.3 million in non-interest expense and $17.0 million in interest expense.
• Net interest income of $16.5 million for the third quarter of 2023 increased $0.3 million, or 1.60%, from the prior quarter and decreased $1.1 million, or 6.07%, from the same quarter last year.
• Net interest margin was 2.58% for the third quarter of 2023, decreased from 2.65% for the prior quarter and from 3.59% for the same quarter last year.
• Cash and equivalents were $117.0 million as of September 30, 2023, an increase of $62.7 million, or 115.25%, from December 31, 2022, as we decided to keep ample sources of liquidity at hand while taking advantage of the positive spread between our interest bearing overnight deposits at the Fed and borrowing costs under the Bank Term Funding Program ("BTFP").
• Securities totaled $587.8 million as of September 30, 2023, a decrease of $52.5 million, or 8.20%, from December 31, 2022 primarily due to a call on one of the securities amounting to $10.0 million, maturities on two securities amounting to $3.0 million and regular principal payments.
• Net loans receivable were $1.79 billion as of September 30, 2023, an increase of $294.5 million, or 19.72%, from December 31, 2022.
• Deposits were $1.40 billion as of September 30, 2023, an increase of $148.7 million, or 11.87%, from December 31, 2022.

President and Chief Executive Officer's Comments

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

We continue to show strong levels of capital and liquidity. On the capital front, our total capital ratio at Ponce Bank stands at 25.10% well in excess of regulatory requirements. In terms of liquidity, our liquid assets plus borrowing capacity at the Federal Home Loan Bank of New York ("FHLBNY") stand at $695.0 million, more than two times of our uninsured deposits of $334.0 million.

  

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

Executive Chairman's Comment

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

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

		At or for the Three Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
Performance Ratios (Annualized):		2023				2023				2023				2022				2022
Return on average assets (1)			0.39	%			(0.01	%)			0.06	%			(1.62	%)			(2.80	%)
Return on average equity (1)			2.11	%			(0.07	%)			0.27	%			(7.28	%)			(11.25	%)
Net interest rate spread (1) (2)			1.58	%			1.66	%			1.78	%			2.13	%			3.08	%
Net interest margin (1) (3)			2.58	%			2.65	%			2.75	%			2.97	%			3.59	%
Non-interest expense to average assets (1)			2.58	%			2.65	%			2.79	%			2.78	%			4.83	%
Efficiency ratio (4)			78.11	%			96.15	%			95.88	%			94.95	%			132.46	%
Average interest-earning assets to average interest- bearing liabilities			137.92	%			141.14	%			148.20	%			152.30	%			162.67	%
Average equity to average assets			18.32	%			19.21	%			20.91	%			22.32	%			24.90	%

		At or for the Three Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
Capital Ratios (Annualized):		2023				2023				2023				2022				2022
Total capital to risk weighted assets (Bank only)			25.10	%			26.30	%			27.54	%			30.53	%			33.39	%
Tier 1 capital to risk weighted assets (Bank only)			23.85	%			25.05	%			26.28	%			29.26	%			32.13	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)			23.85	%			25.05	%			26.28	%			29.26	%			32.13	%
Tier 1 capital to average assets (Bank only)			17.51	%			17.95	%			19.51	%			20.47	%			22.91	%

		At or for the Three Months Ended
		September 30,				June 30,				March 31,				December 31,				September 30,
Asset Quality Ratios (Annualized):		2023				2023				2023				2022				2022
Allowance for loan losses as a percentage of total loans			1.51	%			1.64	%			1.77	%			2.27	%			1.77	%
Allowance for loan losses as a percentage of nonperforming loans			169.49	%			167.06	%			149.73	%			252.33	%			118.43	%
Net (charge-offs) recoveries to average outstanding loans (1)			(0.34	%)			(0.41	%)			(0.57	%)			(0.85	%)			(0.52	%)
Non-performing loans as a percentage of total gross loans			0.89	%			0.98	%			1.18	%			0.90	%			1.50	%
Non-performing loans as a percentage of total assets			0.62	%			0.63	%			0.76	%			0.59	%			0.97	%
Total non-performing assets as a percentage of total assets			0.62	%			0.63	%			0.76	%			0.59	%			0.97	%
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets(5)			0.82	%			0.83	%			0.93	%			0.78	%			1.16	%

(1) Annualized where appropriate.

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

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

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

(5) For periods in 2023, balances include both modifications to borrowers experiencing financial difficulty, in accordance with ASU 2022-02 adopted on January 1, 2023, and previously existing troubled debt restructurings. For periods in 2022, the balances only include troubled debt restructurings.



Summary of Results of Operations

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

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

Net Interest Income and Net Margin

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

Net interest margin was 2.58% for the three months ended September 30, 2023 compared to 2.65% for the prior quarter, a decrease of 7bps and 3.59% for the same period last year, a decrease of 101bps. The decrease in net interest margin was a result of an increase in the cost of funds driven by higher interest rates.

Non-interest Income

Non-interest income for the three months ended September 30, 2023, was $5.6 million, an increase of $4.1 million, or 277.14%, compared to the three months ended June 30, 2023 and an increase of $4.1 million, or 256.82%, compared to the three months ended September 30, 2022.

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

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

Non-interest Expense

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

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

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

Balance Sheet Summary

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

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

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

About Ponce Financial Group, Inc.

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

Forward Looking Statements

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

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Financial Condition

(Dollars in thousands, except for share data)

	As of
	September 30,				June 30,				March 31,				December 31,				September 30,
	2023				2023				2023				2022				2022
ASSETS
Cash and due from banks:
Cash	$	26,046			$	31,162			$	26,951			$	31,977			$	34,007
Interest-bearing deposits		90,966				212,627				157,736				22,383				28,514
Total cash and cash equivalents		117,012				243,789				184,687				54,360				62,521
Available-for-sale securities, at fair value		116,753				123,720				128,320				129,505				131,977
Held-to-maturity securities, at amortized cost(1)		471,065				481,952				491,649				510,820				494,297
Placement with banks		996				996				1,245				1,494				2,490
Mortgage loans held for sale, at fair value		14,103				10,070				2,987				1,979				3,357
Loans receivable, net		1,787,607				1,695,047				1,614,428				1,493,127				1,392,553
Accrued interest receivable		16,624				16,054				15,435				15,049				14,063
Premises and equipment, net		16,453				16,856				17,215				17,446				17,759
Right of use assets		32,110				32,435				33,147				33,423				34,121
Federal Home Loan Bank of New York stock (FHLBNY), at cost		18,870				19,195				19,209				24,661				14,272
Deferred tax assets		15,984				15,924				15,413				16,137				13,822
Other assets		16,286				15,919				15,799				13,988				11,170
Total assets	$	2,623,863			$	2,671,957			$	2,539,534			$	2,311,989			$	2,192,402
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	1,401,132			$	1,442,013			$	1,336,877			$	1,252,412			$	1,351,189
Operating lease liabilities		33,459				33,716				34,308				34,532				35,081
Accrued interest payable		8,385				4,704				1,767				1,390				854
Advance payments by borrowers for taxes and insurance		13,743				12,402				14,902				9,724				10,589
Borrowings		675,100				682,100				648,375				517,375				286,375
Other liabilities		6,986				6,540				7,264				3,856				7,631
Total liabilities		2,138,805				2,181,475				2,043,493				1,819,289				1,691,719
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized		225,000				225,000				225,000				225,000				225,000
Common stock, $0.01 par value; 200,000,000 shares authorized		249				249				249				249				247
Treasury stock, at cost		(10,975	)			(5,202	)			(2	)			(2	)			—
Additional paid-in-capital		207,626				207,287				206,883				206,508				206,092
Retained earnings		96,902				94,312				94,399				92,955				102,169
Accumulated other comprehensive loss		(20,468	)			(17,597	)			(16,629	)			(17,860	)			(18,420	)
Unearned compensation ─ ESOP		(13,276	)			(13,567	)			(13,859	)			(14,150	)			(14,405	)
Total stockholders' equity		485,058				490,482				496,041				492,700				500,683
Total liabilities and stockholders' equity	$	2,623,863			$	2,671,957			$	2,539,534			$	2,311,989			$	2,192,402

(1) Included for the quarterly period ended September 30, 2023, June 30, 2023 and March 31, 2023 were $0.6 million, $0.9 million and $0.8 million, respectively, related to the allowance for credit loss on held-to-maturity securities.

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

	Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
	2023				2023				2023				2022				2022
Interest and dividend income:
Interest on loans receivable	$	25,276			$	23,015			$	19,700			$	18,550			$	17,058
Interest on deposits due from banks		1,969				1,817				197				199				346
Interest and dividend on securities and FHLBNY stock		6,261				6,223				6,459				6,184				4,230
Total interest and dividend income		33,506				31,055				26,356				24,933				21,634
Interest expense:
Interest on certificates of deposit		4,362				3,881				3,225				1,786				855
Interest on other deposits		5,639				4,413				2,812				3,649				1,375
Interest on borrowings		6,963				6,479				5,074				3,332				1,793
Total interest expense		16,964				14,773				11,111				8,767				4,023
Net interest income		16,542				16,282				15,245				16,166				17,611
Provision (benefit) for credit losses		535				987				(174	)			12,641				9,330
Net interest income after provision (benefit) for credit losses		16,007				15,295				15,419				3,525				8,281
Non-interest income:
Service charges and fees		516				481				491				481				464
Brokerage commissions		17				35				15				180				288
Late and prepayment charges		899				372				729				263				109
Income on sale of mortgage loans		173				82				99				7				116
Loan origination(1)		—				—				—				(557	)			522
Grant income		3,718				—				—				—				—
(Loss) gain on sale of premises and equipment		—				—				—				—				(436	)
Other		304				522				485				63				514
Total non-interest income		5,627				1,492				1,819				437				1,577
Non-interest expense:
Compensation and benefits		7,566				7,425				7,446				6,501				7,377
Occupancy and equipment		3,588				3,724				3,570				3,928				3,611
Data processing expenses		1,582				1,208				1,192				1,114				994
Direct loan expenses		369				345				412				454				654
Provision for contingencies		391				517				985				(440	)			519
Insurance and surety bond premiums		255				248				265				270				297
Office supplies, telephone and postage		301				489				399				375				369
Professional fees		1,693				1,904				1,455				1,571				1,251
Grain (recoveries) and write-off		(69	)			(346	)			(914	)			(515	)			8,881
Marketing and promotional expenses		248				303				128				256				214
Directors fees and regulatory assessment		169				160				155				196				188
Other operating expenses		1,223				1,112				1,268				2,055				1,061
Total non-interest expense		17,316				17,089				16,361				15,765				25,416
Income (loss) before income taxes		4,318				(302	)			877				(11,803	)			(15,558	)
Provision (benefit) for income taxes		1,728				(215	)			546				(2,589	)			(820	)
Net income (loss)	$	2,590			$	(87	)		$	331			$	(9,214	)		$	(14,738	)
Earnings (loss) per common share:
Basic	$	0.12			$	(0.00	)		$	0.01			$	(0.40	)		$	(0.64	)
Diluted	$	0.12			$	(0.00	)		$	0.01			$	(0.40	)		$	(0.64	)
Weighted average common shares outstanding:
Basic		22,272,076				23,208,168				23,293,013				23,168,097				23,094,859
Diluted		22,349,217				23,208,168				23,324,532				23,168,097				23,094,859

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



Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

		For the Nine Months Ended September 30,
		2023				2022				Variance $				Variance %
Interest and dividend income:
Interest on loans receivable		$	67,991			$	51,315			$	16,676				32.50	%
Interest on deposits due from banks			3,983				514				3,469				674.90	%
Interest and dividend on securities and FHLBNY stock			18,943				5,990				12,953				216.24	%
Total interest and dividend income			90,917				57,819				33,098				57.24	%
Interest expense:
Interest on certificates of deposit			11,468				2,361				9,107				385.73	%
Interest on other deposits			12,864				2,154				10,710				497.21	%
Interest on borrowings			18,516				2,867				15,649				545.83	%
Total interest expense			42,848				7,382				35,466				480.44	%
Net interest income			48,069				50,437				(2,368	)			(4.69	%)
Provision for credit losses			1,348				11,405				(10,057	)			(88.18	%)
Net interest income after provision for credit losses			46,721				39,032				7,689				19.70	%
Non-interest income:
Service charges and fees			1,488				1,349				139				10.30	%
Brokerage commissions			67				840				(773	)			(92.02	%)
Late and prepayment charges			2,000				360				1,640				455.56	%
Income on sale of mortgage loans			354				734				(380	)			(51.77	%)
Loan origination			—				1,843				(1,843	)			(100.00	%)
Grant income			3,718				—				3,718				—	%
(Loss) gain on sale of premises and equipment			—				(436	)			436				(100.00	%)
Other			1,311				1,292				19				1.47	%
Total non-interest income			8,938				5,982				2,956				49.41	%
Non-interest expense:
Compensation and benefits			22,437				21,413				1,024				4.78	%
Occupancy and equipment			10,882				10,040				842				8.39	%
Data processing expenses			3,982				2,665				1,317				49.42	%
Direct loan expenses			1,126				2,033				(907	)			(44.61	%)
Provision for contingencies			1,893				566				1,327				234.45	%
Insurance and surety bond premiums			768				600				168				28.00	%
Office supplies, telephone and postage			1,189				1,180				9				0.76	%
Professional fees			5,052				4,333				719				16.59	%
Contribution to the Ponce De Leon Foundation			—				4,995				(4,995	)			(100.00	%)
Grain (recoveries) and write-off			(1,329	)			18,455				(19,784	)			(107.20	%)
Marketing and promotional expenses			679				337				342				101.48	%
Directors fees and regulatory assessment			484				509				(25	)			(4.91	%)
Other operating expenses			3,603				2,931				672				22.93	%
Total non-interest expense			50,766				70,057				(19,291	)			(27.54	%)
Income (loss) before income taxes			4,893				(25,043	)			29,936				(119.54	%)
Provision (benefit) for income taxes			2,059				(4,256	)			6,315				(148.38	%)
Net income (loss)		$	2,834			$	(20,787	)		$	23,621				(113.63	%)
Earnings (loss) per common share:
Basic		$	0.12			$	(0.92	)		$	1.05				(113.40	%)
Diluted		$	0.12			$	(0.92	)		$	1.05				(113.37	%)
Weighted average common shares outstanding:
Basic			22,920,680				22,524,477				396,203				1.76	%
Diluted			22,962,956				22,524,477				438,479				1.95	%

Ponce Financial Group, Inc. and Subsidiaries

Key Metrics

	At or for the Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
	2023				2023				2023				2022				2022
Performance Ratios:
Return on average assets (1)		0.39	%			(0.01	%)			0.06	%			(1.62	%)			(2.80	%)
Return on average equity (1)		2.11	%			(0.07	%)			0.27	%			(7.28	%)			(11.25	%)
Net interest rate spread (1) (2)		1.58	%			1.66	%			1.78	%			2.13	%			3.08	%
Net interest margin (1) (3)		2.58	%			2.65	%			2.75	%			2.97	%			3.59	%
Non-interest expense to average assets (1)		2.58	%			2.65	%			2.79	%			2.78	%			4.83	%
Efficiency ratio (4)		78.11	%			96.15	%			95.88	%			94.95	%			132.46	%
Average interest-earning assets to average interest- bearing liabilities		137.92	%			141.14	%			148.20	%			152.30	%			162.67	%
Average equity to average assets		18.32	%			19.21	%			20.91	%			22.32	%			24.90	%
Capital Ratios:
Total capital to risk weighted assets (Bank only)		25.10	%			26.30	%			27.54	%			30.53	%			33.39	%
Tier 1 capital to risk weighted assets (Bank only)		23.85	%			25.05	%			26.28	%			29.26	%			32.13	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)		23.85	%			25.05	%			26.28	%			29.26	%			32.13	%
Tier 1 capital to average assets (Bank only)		17.51	%			17.95	%			19.51	%			20.47	%			22.91	%
Asset Quality Ratios:
Allowance for credit losses on loans as a percentage of total loans		1.51	%			1.64	%			1.77	%			2.27	%			1.77	%
Allowance for credit losses on loans as a percentage of nonperforming loans		169.49	%			167.06	%			149.73	%			252.33	%			118.43	%
Net (charge-offs) recoveries to average outstanding loans (1)		(0.34	%)			(0.41	%)			(0.57	%)			(0.85	%)			(0.52	%)
Non-performing loans as a percentage of total gross loans		0.89	%			0.98	%			1.18	%			0.90	%			1.50	%
Non-performing loans as a percentage of total assets		0.62	%			0.63	%			0.76	%			0.59	%			0.97	%
Total non-performing assets as a percentage of total assets		0.62	%			0.63	%			0.76	%			0.59	%			0.97	%
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets(5)		0.82	%			0.83	%			0.93	%			0.78	%			1.16	%
Other:
Number of offices		19				19				19				19				19
Number of full-time equivalent employees		243				244				251				253				257

(1) Annualized where appropriate.

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

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

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

(5) For periods in 2023, balances include both modifications to borrowers experiencing financial difficulty, in accordance with ASU 2022-02 adopted on January 1, 2023, and previously existing troubled debt restructurings. For periods in 2022, the balances only include troubled debt restructurings.

Ponce Financial Group, Inc. and Subsidiaries 

Securities Portfolio

		September 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		$	2,989			$	—			$	(276	)		$	2,713			$	2,985			$	—			$	(296	)		$	2,689
Corporate Bonds			25,799				—				(2,609	)			23,190				25,824				—				(2,465	)			23,359
Mortgage-Backed Securities:
Collateralized Mortgage Obligations(1)			40,646				—				(7,657	)			32,989				44,503				—				(6,726	)			37,777
FHLMC Certificates			10,441				—				(1,904	)			8,537				11,310				—				(1,676	)			9,634
FNMA Certificates			62,771				—				(13,552	)			49,219				67,199				—				(11,271	)			55,928
GNMA Certificates			108				—				(3	)			105				122				—				(4	)			118
Total available-for-sale securities		$	142,754			$	—			$	(26,001	)		$	116,753			$	151,943			$	—			$	(22,438	)		$	129,505
Held-to-Maturity Securities:
U.S. Agency Bonds		$	25,000			$	—			$	(504	)		$	24,496			$	35,000			$	—			$	(380	)		$	34,620
Corporate Bonds			82,500				—				(5,117	)			77,383				82,500				57				(3,819	)			78,738
Mortgage-Backed Securities:
Collateralized Mortgage Obligations(1)			217,632				—				(12,198	)			205,434				235,479				192				(5,558	)			230,113
FHLMC Certificates			3,923				—				(358	)			3,565				4,120				—				(268	)			3,852
FNMA Certificates			121,940				—				(8,818	)			113,122				131,918				—				(5,227	)			126,691
SBA Certificates			20,717				147				—				20,864				21,803				34				—				21,837
Allowance for Credit Losses			(647	)			—				—				—				—				—				—				—
Total held-to-maturity securities		$	471,065			$	147			$	(26,995	)		$	444,864			$	510,820			$	283			$	(15,252	)		$	495,851

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



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

		September 30,				December 31,
		2023				2022
Beginning balance		$	—			$	—
CECL adoption			662				—
Provision for credit losses			(15	)			—
Allowance for credit losses on securities		$	647			$	—

Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

		As of
		September 30,								June 30,								March 31,								December 31,								September 30,
		2023								2023								2023								2022								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Mortgage loans:
1-4 family residential
Investor Owned		$	347,082				19.13	%		$	351,754				20.43	%		$	354,559				21.60	%		$	343,968				22.54	%		$	336,667				23.79	%
Owner-Occupied			151,866				8.37	%			154,116				8.94	%			149,481				9.10	%			134,878				8.84	%			112,749				7.97	%
Multifamily residential			553,694				30.52	%			550,033				31.94	%			553,430				33.71	%			494,667				32.42	%			421,917				29.81	%
Nonresidential properties			321,472				17.71	%			317,416				18.43	%			314,560				19.17	%			308,043				20.19	%			282,642				19.97	%
Construction and land			411,383				22.67	%			315,843				18.34	%			235,157				14.33	%			185,018				12.13	%			197,437				13.95	%
Total mortgage loans			1,785,497				98.40	%			1,689,162				98.08	%			1,607,187				97.91	%			1,466,574				96.12	%			1,351,412				95.49	%
Non-mortgage loans:
Business loans (1)			18,416				1.02	%			21,041				1.22	%			19,890				1.21	%			39,965				2.62	%			41,398				2.92	%
Consumer loans (2)			10,416				0.58	%			11,958				0.70	%			14,227				0.88	%			19,129				1.26	%			22,563				1.59	%
Total non-mortgage loans			28,832				1.60	%			32,999				1.92	%			34,117				2.09	%			59,094				3.88	%			63,961				4.51	%
Total loans, gross			1,814,329				100.00	%			1,722,161				100.00	%			1,641,304				100.00	%			1,525,668				100.00	%			1,415,373				100.00	%
Net deferred loan origination costs			692								1,059								2,099								2,051								2,288
Allowance for credit losses on loans			(27,414	)							(28,173	)							(28,975	)							(34,592	)							(25,108	)
Loans, net		$	1,787,607							$	1,695,047							$	1,614,428							$	1,493,127							$	1,392,553

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

(2)   As of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, consumer loans include $9.3 million, $11.2 million, $13.4 million, $18.2 million and $21.5 million, respectively, of loans originated by the Bank pursuant to its arrangement with Grain.

Ponce Financial Group, Inc. and Subsidiaries

Grain Loan Exposure

Grain Technologies, Inc. ("Grain") Total Exposure as of September 30, 2023
(in thousands)
Receivable from Grain
Microloans originated - put back to Grain (inception-to-September 30, 2023)		$	24,255
Write-downs, net of recoveries (inception-to-date as of September 30, 2023)			(15,610	)
Cash receipts from Grain (inception-to-September 30, 2023)			(6,819	)
Grant/reserve			(1,826	)
Net receivable as of September 30, 2023		$	—
Microloan receivables from Grain Borrowers
Grain originated loans receivable as of September 30, 2023		$	9,318
Allowance for credit losses on loans as of September 30, 2023(1)			(8,163	)
Microloans, net of allowance for credit losses on loans as of September 30, 2023		$	1,155
Investments
Investment in Grain		$	1,000
Investment in Grain write-off in Q3 2022			(1,000	)
Investment in Grain as of September 30, 2023			—
Total exposure to Grain as of September 30, 2023		$	1,155

(1) Includes $0.3 million for allowance for unused commitments on the $2.4 million of unused commitments available to Grain originated borrowers reported in other liabilities in the accompanying Consolidated Statements of Financial Conditions. Excludes $1.6 million of security deposits by Grain originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions.

Ponce Financial Group, Inc. and Subsidiaries

Allowance for Credit Losses on Loans

	For the Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
	2023				2023				2022				2022				2022
	(Dollars in thousands)
Allowance for credit losses on loans at beginning of the period	$	28,173			$	28,975			$	34,592			$	25,108			$	17,535
Provision (benefit) for credit losses on loans		750				934				(321	)			12,641				9,330
Adoption of CECL		—				—				(3,090	)			—				—
Charge-offs:
Mortgage loans:
1-4 family residences
Investor owned		—				—				—				—				—
Owner occupied		—				—				—				—				—
Multifamily residences		—				—				—				—				—
Nonresidential properties		—				—				—				—				—
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		(1,592	)			(1,931	)			(2,569	)			(3,659	)			(1,799	)
Total charge-offs		(1,592	)			(1,931	)			(2,569	)			(3,659	)			(1,799	)
Recoveries:
Mortgage loans:
1-4 family residences
Investor owned		—				—				—				—				—
Owner occupied		—				—				—				—				39
Multifamily residences		—				—				—				—				—
Nonresidential properties		—				—				—				—				—
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		3				—				—				—				1
Consumer		80				195				363				502				2
Total recoveries		83				195				363				502				42
Net (charge-offs) recoveries		(1,509	)			(1,736	)			(2,206	)			(3,157	)			(1,757	)
Allowance for credit losses on loans at end of the period	$	27,414			$	28,173			$	28,975			$	34,592			$	25,108

Ponce Financial Group, Inc. and Subsidiaries

Deposits

		As of
		September 30,								June 30,								March 31,								December 31,								September 30,
		2023								2023								2023								2022								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Demand		$	265,862				18.98	%		$	266,545				18.48	%		$	282,741				21.15	%		$	289,149				23.08	%		$	288,654				21.37	%
Interest-bearing deposits:
NOW/IOLA accounts			22,519				1.61	%			22,754				1.57	%			21,735				1.63	%			24,349				1.94	%			28,799				2.13	%
Money market accounts			370,500				26.44	%			387,970				26.91	%			293,140				21.93	%			236,143				18.86	%			257,409				19.05	%
Reciprocal deposits			82,670				5.90	%			100,919				7.00	%			109,649				8.20	%			114,049				9.11	%			162,858				12.05	%
Savings accounts			117,870				8.41	%			119,635				8.30	%			127,731				9.55	%			130,432				10.41	%			140,055				10.37	%
Total NOW, money market, reciprocal and savings accounts			593,559				42.36	%			631,278				43.78	%			552,255				41.31	%			504,973				40.32	%			589,121				43.60	%
Certificates of deposit of $250K or more			122,353				8.73	%			120,043				8.32	%			113,955				8.52	%			106,336				8.49	%			114,016				8.43	%
Brokered certificates of deposit(1)			98,729				7.05	%			98,729				6.85	%			98,754				7.39	%			98,754				7.89	%			98,760				7.31	%
Listing service deposits(1)			15,180				1.08	%			20,258				1.40	%			28,417				2.13	%			35,813				2.86	%			40,964				3.03	%
All other certificates of deposit less than $250K			305,449				21.80	%			305,160				21.17	%			260,755				19.50	%			217,387				17.36	%			219,674				16.26	%
Total certificates of deposit			541,711				38.66	%			544,190				37.74	%			501,881				37.54	%			458,290				36.60	%			473,414				35.03	%
Total interest-bearing deposits			1,135,270				81.02	%			1,175,468				81.52	%			1,054,136				78.85	%			963,263				76.92	%			1,062,535				78.63	%
Total deposits		$	1,401,132				100.00	%		$	1,442,013				100.00	%		$	1,336,877				100.00	%		$	1,252,412				100.00	%		$	1,351,189				100.00	%

(1)   As of September 30, 2023, June 30, 2023, March 31, 2023, December 31, 2022 and September 30, 2022, there were $0.3 million, $3.3 million, $9.5 million, $13.6 million and $13.8 million, respectively, in individual listing service deposits amounting to $250,000 or more. All brokered certificates of deposit individually amounted to less than $250,000.

Ponce Financial Group, Inc. and Subsidiaries

Borrowings

	September 30,												December 31,
	2023												2022
	Scheduled Maturity				Redeemable at Call Date				Weighted Average Rate				Scheduled Maturity				Redeemable at Call Date				Weighted Average Rate
	(Dollars in thousands)
Overnight line of credit advance	$	—			$	—				—	%		$	6,000			$	6,000				4.61	%
Term advances ending:
2023	$	—			$	—				—			$	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
	$	675,100			$	675,100				4.08	%		$	517,375			$	517,375				3.90	%

Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

	As of Three Months Ended
	September 30,				June 30,				March 31,				December 31,				September 30,
	2023				2023				2023				2022				2022
	(Dollars in thousands)
Non-accrual loans:
Mortgage loans:
1-4 family residential
Investor owned	$	396			$	296			$	2,836			$	2,844			$	5,902
Owner occupied		1,685				2,363				2,245				961				971
Multifamily residential		1,444				1,435				—				—				—
Nonresidential properties		—				—				—				—				778
Construction and land		11,721				11,721				11,906				7,567				10,660
Non-mortgage loans:
Business		209				—				40				—				359
Consumer		—				—				—				—				—
Total non-accrual loans (not including non-accruing modifications to borrowers experiencing financial difficulty)(1)	$	15,455			$	15,815			$	17,027			$	11,372			$	18,670
Non-accruing modifications to borrowers experiencing financial difficulty(1):
Mortgage loans:
1-4 family residential
Investor owned	$	270			$	209			$	213			$	217			$	221
Owner occupied		449				840				2,020				2,027				2,215
Multifamily residential		—				—				—				—				—
Nonresidential properties		—				—				91				93				95
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total non-accruing modifications to borrowers experiencing financial difficulty(1)		719				1,049				2,324				2,337				2,531
Total non-accrual loans	$	16,174			$	16,864			$	19,351			$	13,709			$	21,201
Accruing modifications to borrowers experiencing financial difficulty (1):
Mortgage loans:
1-4 family residential
Investor owned	$	2,131			$	2,161			$	2,185			$	2,207			$	2,228
Owner occupied		2,335				2,353				1,310				1,328				1,254
Multifamily residential		—				—				—				—				—
Nonresidential properties		765				783				701				708				715
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total accruing modifications to borrowers experiencing financial difficulty(1)	$	5,231			$	5,297			$	4,196			$	4,243			$	4,197
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty(1)	$	21,405			$	22,161			$	23,547			$	17,952			$	25,398
Total non-performing loans to total gross loans		0.89	%			0.98	%			1.18	%			0.90	%			1.50	%
Total non-performing assets to total assets		0.62	%			0.63	%			0.76	%			0.59	%			0.97	%
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets(1)		0.82	%			0.83	%			0.93	%			0.78	%			1.16	%

(1) For periods in 2023, balances include both modifications to borrowers experiencing financial difficulty, in accordance with ASU 2022-02 adopted on January 1, 2023, and previously existing troubled debt restructurings. For periods in 2022, the balances only include troubled debt restructurings.

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

	For the Three Months Ended September 30,
	2023											2022
	Average											Average
	Outstanding								Average			Outstanding								Average
	Balance				Interest				Yield/Rate(1)			Balance				Interest				Yield/Rate(1)
	(Dollars in thousands)
Interest-earning assets:
Loans(2)	$	1,777,585			$	25,276			5.64	%		$	1,379,029			$	17,058			4.91	%
Securities(3)		599,573				5,821			3.85	%			492,337				4,153			3.35	%
Other(4)(5)		169,570				2,409			5.64	%			74,055				423			2.27	%
Total interest-earning assets		2,546,728				33,506			5.22	%			1,945,421				21,634			4.41	%
Non-interest-earning assets(5)		111,771											108,329
Total assets	$	2,658,499										$	2,053,750
Interest-bearing liabilities:
NOW/IOLA	$	22,876			$	8			0.14	%		$	29,939			$	13			0.17	%
Money market		485,042				5,601			4.58	%			381,606				1,303			1.35	%
Savings		118,095				29			0.10	%			141,200				57			0.16	%
Certificates of deposit		527,302				4,362			3.28	%			382,163				855			0.89	%
Total deposits		1,153,315				10,000			3.44	%			934,908				2,228			0.95	%
Advance payments by borrowers		14,537				1			0.03	%			10,918				2			0.07	%
Borrowings		678,676				6,963			4.07	%			250,112				1,793			2.84	%
Total interest-bearing liabilities		1,846,528				16,964			3.64	%			1,195,938				4,023			1.33	%
Non-interest-bearing liabilities:
Non-interest-bearing demand		278,358				—							321,556				—
Other non-interest-bearing liabilities		46,643				—							16,377				—
Total non-interest-bearing liabilities		325,001				—							337,933				—
Total liabilities		2,171,529				16,964							1,533,871				4,023
Total equity		486,970											519,879
Total liabilities and total equity	$	2,658,499							3.64	%		$	2,053,750							1.33	%
Net interest income					$	16,542										$	17,611
Net interest rate spread(6)									1.58	%										3.08	%
Net interest-earning assets(7)	$	700,200										$	749,483
Net interest margin(8)									2.58	%										3.59	%
Average interest-earning assets to interest-bearing liabilities									137.92	%										162.67	%

(1)   Annualized where appropriate.

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

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

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

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

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

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

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

Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

	For the Nine Months Ended September 30,
	2023											2022
	Average											Average
	Outstanding								Average			Outstanding								Average
	Balance				Interest				Yield/Rate(1)			Balance				Interest				Yield/Rate
	(Dollars in thousands)
Interest-earning assets:
Loans(2)	$	1,678,369			$	67,991			5.42	%		$	1,341,151			$	51,315			5.12	%
Securities(3)		614,987				17,627			3.83	%			263,421				5,778			2.93	%
Other(4)(5)		127,961				5,299			5.54	%			96,623				726			1.00	%
Total interest-earning assets		2,421,317				90,917			5.02	%			1,701,195				57,819			4.54	%
Non-interest-earning assets(5)		118,609											136,650
Total assets	$	2,539,926										$	1,837,845
Interest-bearing liabilities:
NOW/IOLA	$	22,828			$	25			0.15	%		$	31,769			$	43			0.18	%
Money market		403,171				12,745			4.23	%			344,361				1,986			0.77	%
Savings		123,218				88			0.10	%			137,808				120			0.12	%
Certificates of deposit		522,740				11,468			2.93	%			398,661				2,361			0.79	%
Total deposits		1,071,957				24,326			3.03	%			912,599				4,510			0.66	%
Advance payments by borrowers		14,814				6			0.05	%			11,033				5			0.06	%
Borrowings		617,912				18,516			4.01	%			152,084				2,867			2.52	%
Total interest-bearing liabilities		1,704,683				42,848			3.36	%			1,075,716				7,382			0.92	%
Non-interest-bearing liabilities:
Non-interest-bearing demand		298,148				—							350,871				—
Other non-interest-bearing liabilities		43,864				—							43,606				—
Total non-interest-bearing liabilities		342,012				—							394,477				—
Total liabilities		2,046,695				42,848							1,470,193				7,382
Total equity		493,231											367,652
Total liabilities and total equity	$	2,539,926							3.36	%		$	1,837,845							0.92	%
Net interest income					$	48,069										$	50,437
Net interest rate spread(6)									1.66	%										3.62	%
Net interest-earning assets(7)	$	716,634										$	625,479
Net interest margin(8)									2.65	%										3.96	%
Average interest-earning assets to
interest-bearing liabilities									142.04	%										158.15	%

(1) Annualized where appropriate.

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

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

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

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

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

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

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

Ponce Financial Group, Inc. and Subsidiaries

Other Data

	As of
	September 30,				June 30,				March 31,				December 31,				September 30,
	2023				2023				2023				2022				2022
Other Data
Common shares issued		24,886,711				24,886,711				24,865,476				24,861,329				24,728,460
Less treasury shares		1,233,111				617,924				1,976				1,976				—
Common shares outstanding at end of period		23,653,600				24,268,787				24,863,500				24,859,353				24,728,460
Book value per common share	$	10.99			$	10.94			$	10.90			$	10.77			$	11.15
Tangible book value per common share	$	10.99			$	10.94			$	10.90			$	10.77			$	11.15

Contact:

Frank Perez

[email protected]

718-981-9000