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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

 

FORM 8-K

 

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report: (Date of earliest event reported): May 9, 2022

 

Ponce Financial Group, Inc.

(Exact name of Registrant as Specified in Its Charter)

 

 

Maryland	001-41255	87-1893965
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)
2244 Westchester Avenue Bronx, NY		10462
(Address of Principal Executive Offices)		(Zip Code)

Registrant’s Telephone Number, Including Area Code: (718) 931-9000

 

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions (see General Instructions A.2. below):

☐	Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐	Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐	Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐	Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class		Trading Symbol(s)		Name of each exchange on which registered
Common stock, par value $0.01 per share		PDLB		The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§ 230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§ 240.12b-2 of this chapter).

Emerging growth company ☒

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

 

  

 

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Item 2.02Results of Operations and Financial Condition

On May 9, 2022, Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp (the “Company”), the holding company for Ponce Bank, issued a press release announcing its financial results with respect to its first quarter ended March 31, 2022. The Company’s press release is included as Exhibit 99.1 to this report.

The information set forth in this Item 2.02 and in the attached Exhibit 99.1 is deemed to be “furnished” and shall not be deemed to be “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), or otherwise subject to the liabilities of that Section.

Item 9.01Financial Statements and Exhibits.

(d) Exhibits.

 

Exhibit Number		Description
99.1		Press release dated May 9, 2022
104		Cover Page Interactive Data File (embedded within the Inline XBRL)

 

 

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

 

		Ponce Financial Group, Inc.
Date:  May 9, 2022		By:	/s/ Carlos P. Naudon
			Carlos P. Naudon
			President Chief Executive Officer

 

 

Exhibit 99.1

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, Announces 2022 First Quarter Results

New York (May 9, 2022): Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp (the “Company”) (NASDAQ: PDLB), the holding company for Ponce Bank (the “Bank”), reported a net loss of ($6.8 million), or ($0.31) per basic and diluted share, for the first quarter of 2022, compared to net income of $15.0 million, or $0.90 per basic and $0.89 per diluted share, for the prior quarter and net income of $2.5 million, or $0.15 per basic and diluted share, for the first quarter of 2021.

First Quarter Highlights

President and Chief Executive Officer’s Comments

Carlos P. Naudon, President and CEO, stated that “the reported net loss of $6.8 million for the first quarter of 2022, the beginning of our life as a fully publicly traded company, reflects $13.1 million in one-time pre-tax events; a $5.0 million contribution to the Ponce De Leon Foundation as part of our conversion and reorganization and an aggregate of $8.1 million write-off and write-down of the receivable due from Grain for microloans originated by Grain and put back to Grain due to fraud. Although we are confident that Grain will grow from a pre-profit startup to a solid company, the write-off and write-down reflect the current economic conditions and regulatory requirements, notwithstanding Grain’s success in raising capital and its targeting low and low-to-moderate income communities and underserved people. Additionally, we maintain an allowance for loan losses which at March 31, 2022 amounted to $1.5 million, or 4.8%, specifically for the $31.0 million microloans portfolio. We continue to view our microloan portfolio as important to our mission and are pleased that, as an MDI and CDFI, we have been able to provide over 54,000 new customers a reasonably priced alternative to otherwise high-cost, predatory lending options. We are also encouraged that our net interest income after provision for loan losses continues to improve quarter-over-quarter since the first quarter of 2021 and that, excluding the noted one-time events, our operating expenses remain consistent with our growth. From April 1, 2021 to March 31, 2022, we grew the Company by 11.2% while our capital increased by 85.8%, positioning us well for the challenges of tomorrow.”

Executive Chairman’s Comments

Steven A. Tsavaris, Executive Chairman, noted that “we are pleased that we have been able to offset the effects on our loan portfolio due to reductions in PPP loans as they are forgiven by increasing the origination of our traditional loans, augmented by increased lending in non-qualified mortgages – a clear benefit of our being a CDFI and MDI. We look forward to the closing of our announced ECIP capital funding from the U.S. Treasury.”

 

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Results of Operations Summary

Net loss for the three months ended March 31, 2022 was ($6.8 million), compared to $15.0 million of net income for the three months ended December 31, 2021 and $2.5 million of net income for the three months ended March 31, 2021.

The ($6.8 million) net loss for the three months ended March 31, 2022 compared to $15.0 million of net income for the three months ended December 31, 2021 was attributable to a decrease of $16.9 million in non-interest income quarter to quarter and an increase of $12.2 million in non-interest expense quarter to quarter. The $12.2 million increase in non-interest expense was the result of the write-off and write-down related to Grain of $8.1 million and a contribution to the Ponce De Leon Foundation of $5.0 million, and an increase of $385,000 in provision for loan losses, offset by $3.0 million in benefit for income taxes, rather than a $4.2 million provision for income taxes quarter to quarter.

The ($6.8 million) net loss for the three months ended March 31, 2022 compared to $2.5 million of net income for the three months ended March 31, 2021 was due to an increase of $15.2 million in non-interest expense, a decrease of $1.7 million in non-interest income and an increase of $572,000 in provision for loan losses. The net loss was offset by increases of $4.4 million in net interest income and a $3.0 million benefit for income taxes, rather than a $732,000 provision for income taxes quarter to quarter.

Net interest income for the three months ended March 31, 2022 was $17.3 million, an increase of $556,000, or 3.3%, compared to the three months ended December 31, 2021 and an increase of $4.4 million, or 34.5%, compared to the three months ended March 31, 2021. The increase of $556,000 in net interest income for the three months ended March 31, 2022 compared to the three months ended December 31, 2021 was attributable to an increase of $366,000 in interest and dividend income and a decrease of $190,000 in interest expense. The increase of $4.4 million in net interest income for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was attributable to an increase of $3.8 million in interest and dividend income and a decrease of $605,000 in interest expense.

Net interest margin was 4.68% for the three months ended March 31, 2022, an increase of 17 basis points from 4.51% for the three months ended December 31, 2021 and an increase of 68 basis points from 4.00% for the three months ended March 31, 2021. 

Net interest rate spread increased by 16 basis points to 4.48% for the three months ended March 31, 2022 from 4.32% for the three months ended December 31, 2021 and increased by 72 basis points from 3.76% for the three months ended March 31, 2021. The increase in the net interest rate spread for the three months ended March 31, 2022 compared to the three months ended December 31, 2021 was primarily due to an increase in the average yield on interest-earning assets of 13 basis points to 5.14% for the three months ended March 31, 2022 from 5.01% for the three months ended December 31, 2021, and a decrease in the average rate on interest-bearing liabilities of 3 basis points to 0.66% for the three months ended March 31, 2022 from 0.69% for the three months ended December 31, 2021. The increase in the net interest rate spread for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was primarily due to an increase in the average yield on interest-earning assets of 44 basis points to 5.14% for the three months ended March 31, 2022 from 4.70% for the three months ended March 31, 2021 and a decrease in the average rates on interest-bearing liabilities of 28 basis points to 0.66% for the three months ended March 31, 2022 from 0.94% for the three months ended March 31, 2021.

Non-interest income decreased $16.9 million to $2.2 million for the three months ended March 31, 2022 from $19.2 million for the three months ended December 31, 2021 and decreased $1.7 million from $3.9 million for the three months ended March 31, 2021. Excluding the $15.4 million gain, net of expense, from sale of real properties during the three months ended December 31, 2021, non-interest income decreased $1.5 million to $2.2 million for the three months ended March 31, 2022 compared to $3.7 million for the three months ended December 31, 2021.

The decrease of $16.9 million in non-interest income for the three months ended March 31, 2022 compared to the three months ended December 31, 2021 was due to the absence of the one-time $15.4 million in gain, net of expenses, from the sale of real properties recognized in the fourth quarter of 2021, and decreases of $876,000 in income on sale of mortgage loans, $425,000 in loan origination fees, $278,000 in late and prepayment charges, $63,000 in brokerage commissions and $28,000 in service charges and fees, offset by an increase of $158,000 in other non-interest income.

The decrease of $1.7 million in non-interest income for the three months ended March 31, 2022 compared to the three months ended March 31, 2021 was due to decreases of $1.1 million in income on sale of mortgage loans, $663,000, net of expenses, from the sale of real properties recognized in the first quarter of 2021, $186,000 in late and prepayment charges and $78,000 in loan origination fees, offset by increases of $124,000 in other non-interest income, $115,000 in brokerage commissions and $111,000 in service charges and fees.

Non-interest expense increased $12.2 million, or 77.1%, to $28.1 million for the three months ended March 31, 2022 from $15.9 million for the three months ended December 31, 2021 and increased $15.2 million, or 117.4%, from $12.9 million for the three months ended March 31, 2021.

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The increase of $12.2 million in non-interest expense for the three months ended March 31, 2022, compared to the three months ended December 31, 2021, was attributable to an aggregate $8.1 million write-off and write down related to the receivable due from Grain for microloans originated by Grain and put back to Grain due to fraud, $5.0 million contribution to the Ponce De Leon Foundation in connection with the second-step conversion and reorganization, and increases of $185,000 in occupancy and equipment, $166,000 in compensation and benefits and $76,000 in data processing expenses, offset by decreases of $610,000 in other operating expenses, $366,000 in professional fees, $158,000 in direct loan expenses and $147,000 in office supplies, telephone and postage.

The increase of $15.2 million in non-interest expense for the three months ended March 31, 2022, compared to the three months ended March 31, 2021 was attributable to an aggregate $8.1 million in write-off and write-down related to the receivable due from Grain for microloans originated by Grain and put back to Grain due to fraud, $5.0 million in contribution to the Ponce De Leon Foundation in connection with the second-step conversion and reorganization, and increases of $1.5 million in compensation and benefits, $558,000 in occupancy and equipment, $253,000 in data processing expenses, $72,000 in professional fees and $33,000 in marketing and promotional expense, offset by decreases of $174,000 in other operating expenses and $135,000 in direct loan expenses.

Balance Sheet Summary

Total assets decreased $58.9 million, or 3.6%, to $1.59 billion at March 31, 2022 from $1.65 billion at December 31, 2021. The decrease in total assets is attributable to decreases of $84.6 million in cash and cash equivalents, $7.9 million in mortgage loans held for sale, at fair value, $6.4 million in other assets, $4.6 million in net loans receivable (inclusive of $50.8 million net decrease in PPP loans), $581,000 in FHLBNY stock and $338,000, net, in premises and equipment. The decrease in total assets was reduced by increases of $41.5 million in available-for-sale securities, $3.6 million in deferred tax assets and $437,000 in accrued interest receivable.

Total liabilities decreased $169.2 million, or 11.6%, to $1.30 billion at March 31, 2022 from $1.46 billion at December 31, 2021. The decrease in total liabilities was mainly attributable to decreases of $122.0 million in second-step liabilities held pending the closing of the conversion and reorganization on January 27, 2022, $23.6 million in deposits, $14.3 million in warehouse lines of credit and $12.9 million in advances from FHLBNY, offset by increases of  $2.5 million in advance payments by borrowers for taxes and insurance and $1.0 million in other liabilities.

Total stockholders’ equity increased $110.3 million, or 58.3%, to $299.6 million at March 31, 2022 from $189.3 million at December 31, 2021. This increase in stockholders’ equity was mainly attributable to $118.0 million as a result of the sale of equity in the second-step conversion and reorganization, $4.0 million contribution to the Ponce De Leon Foundation, $366,000 in Employee Stock Ownership Plan shares committed to be released and $351,000 in share-based compensation offset by $6.8 million in net loss and $5.6 million in other comprehensive loss.

Pursuant to the conversion and reorganization, PDL Community Bancorp treasury stock was extinguished on January 27, 2022. Ponce Financial Group, Inc. currently has no treasury stock.

About Ponce Financial Group, Inc.

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, 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. The Bank’s business primarily consists of taking deposits from the general public and to a lesser extent alternative funding sources and investing those deposits, 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 and construction and land, and, to a lesser extent, in business and consumer loans. The 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.

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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; the anticipated impact of the COVID-19 pandemic and Ponce Bank’s attempts at mitigation; 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.

  

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Consolidated Statements of Financial Condition

(Dollars in thousands, except for share data)

 

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

 

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

 

 

* Represents more than 500%

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Key Metrics

 

 

 

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Loan Portfolio

 

 

 

 

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Allowance for Loan Losses

 

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Deposits

 

 

 

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Nonperforming Assets

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Average Balance Sheets

 

 

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Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries

Other Data

 

 

 

 

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