false000187407100018740712023-07-282023-07-28

 

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): July 28, 2023

 

 

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, New York				10462
(Address of Principal Executive Offices)				(Zip Code)

 

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

 

(Former Name or Former Address, if Changed Since Last Report)

 

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:

☐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 Global Market

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 2.02 Results of Operations and Financial Condition.

On July 28, 2023, Ponce Financial Group, Inc., the holding company for Ponce Bank (the "Bank"), issued a press release announcing its financial results with respect to its second quarter ended June 30, 2023. 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 9.01 Financial Statements and Exhibits.

(d)Exhibits.

Exhibit Number		Description
99.1		Press release dated July 28, 2023
104		Cover Page Interactive Data File (embedded within the Inline XBRL)

 

 

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SIGNATURE

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:	July 28, 2023	By:	/s/ Carlos P. Naudon
			Carlos P. Naudon President and Chief Executive Officer

 

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Exhibit 99.1

Ponce Financial Group, Inc. Reports Second Quarter 2023 Results

 

NEW YORK, July 28, 2023 - 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):

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."

 

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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	%

 

 

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.

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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

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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.

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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

 

 

 

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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

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations<