SEC Filing | Ponce Bank

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10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended June 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-41255

Ponce Financial Group, Inc.

(Exact Name of Registrant as Specified in its Charter)


Maryland	87-1893965
(State or other jurisdiction of incorporation or organization)	(I.R.S. 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

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 (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

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. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of August 3, 2023, the registrant had 23,653,600 shares of common stock, $0.01 par value per share, outstanding.


Auditor Firm Id: 339	Auditor Name: Mazars USA LLP	Auditor Location: New York, New York, USA

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION	1
Item 1.	Consolidated Financial Statements	1
	Consolidated Statements of Financial Condition (Unaudited)	1
	Consolidated Statements of Operations (Unaudited)	2
	Consolidated Statements of Comprehensive (Loss) Income (Unaudited)	3
	Consolidated Statements of Stockholders’ Equity (Unaudited)	4
	Consolidated Statements of Cash Flows (Unaudited)	5
	Notes to Consolidated Financial Statements (Unaudited)	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	45
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	67
Item 4.	Controls and Procedures	67
PART II.	OTHER INFORMATION	68
Item 1.	Legal Proceedings	68
Item 1A.	Risk Factors	68
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	68
Item 3.	Defaults Upon Senior Securities	68
Item 4.	Mine Safety Disclosures	68
Item 5.	Other Information	68
Item 6.	Exhibits	69
Signatures		70

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Financial Condition (Unaudited)

June 30, 2023 and December 31, 2022

(Dollars in thousands, except share data)


	June 30,			December 31,
	2023			2022
	(unaudited)
ASSETS
Cash and due from banks:
Cash	$	31,162		$	31,977
Interest-bearing deposits		212,627			22,383
Total cash and cash equivalents		243,789			54,360
Available-for-sale securities, at fair value (Note 3)		123,720			129,505
Held-to-maturity securities, net of allowance for credit losses of $862 at June 30, 2023 and $0 at December 31, 2022; at amortized cost (fair value 2023 $466,054; 2022 $495,851) (Note 3)		481,952			510,820
Placements with banks		996			1,494
Mortgage loans held for sale, at fair value		10,070			1,979
Loans receivable, net of allowance for credit losses - 2023 $28,173; 2022 $34,592 (Note 4)		1,695,047			1,493,127
Accrued interest receivable		16,054			15,049
Premises and equipment, net (Note 5)		16,856			17,446
Right of use assets (Note 6)		32,435			33,423
Federal Home Loan Bank of New York (FHLBNY) stock, at cost		19,195			24,661
Deferred tax assets (Note 9)		15,924			16,137
Other assets		15,919			13,988
Total assets	$	2,671,957		$	2,311,989
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits (Note 7)	$	1,442,013		$	1,252,412
Operating lease liabilities		33,716			34,532
Accrued interest payable		4,704			1,390
Advance payments by borrowers for taxes and insurance		12,402			9,724
Borrowings (Note 8)		682,100			517,375
Other liabilities		6,540			3,856
Total liabilities		2,181,475			1,819,289
Commitments and contingencies (Note 12)
Stockholders' Equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized, 225,000 shares issued and outstanding as of June 30, 2023 and as of December 31, 2022.		225,000			225,000
Common stock, $0.01 par value; 200,000,000 shares authorized; 24,886,711 shares issued and 24,268,787 shares outstanding as of June 30, 2023 and 24,861,329 shares issued and 24,859,353 shares outstanding as of December 31, 2022		249			249
Treasury stock, at cost; 617,924 shares as of June 30, 2023 and 1,976 shares as of December 31, 2022 (Note 10)		(5,202	)		(2	)
Additional paid-in-capital		207,287			206,508
Retained earnings		94,312			92,955
Accumulated other comprehensive loss (Note 15)		(17,597	)		(17,860	)
Unearned compensation ─ ESOP; 1,502,603 shares as of June 30, 2023 and 1,569,475 shares as of December 31, 2022 (Note 10)		(13,567	)		(14,150	)
Total stockholders' equity		490,482			492,700
Total liabilities and stockholders' equity	$	2,671,957		$	2,311,989

The accompanying notes are an integral part of the consolidated financial statements (unaudited).

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations (Unaudited)

Three and Six Months Ended June 30, 2023 and 2022

(Dollars in thousands, except share data)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Interest and dividend income:
Interest on loans receivable	$	23,015		$	16,057		$	42,715		$	34,257
Interest on deposits due from banks		1,817			132			2,014			168
Interest and dividend on securities and FHLBNY stock		6,223			978			12,682			1,760
Total interest and dividend income		31,055			17,167			57,411			36,185
Interest expense:
Interest on certificates of deposit		2,381			677			4,252			1,480
Interest on other deposits		5,913			521			10,079			805
Interest on borrowings		6,479			481			11,553			1,074
Total interest expense		14,773			1,679			25,884			3,359
Net interest income		16,282			15,488			31,527			32,826
Provision for credit losses (Note 3) (Note 4)		987			817			813			2,075
Net interest income after provision for credit losses		15,295			14,671			30,714			30,751
Non-interest income:
Service charges and fees		481			445			972			885
Brokerage commissions		35			214			50			552
Late and prepayment charges		372			193			1,101			251
Income on sale of mortgage loans		82			200			181			618
Loan origination		—			696			—			1,321
Other		522			431			1,007			778
Total non-interest income		1,492			2,179			3,311			4,405
Non-interest expense:
Compensation and benefits		7,425			6,911			14,871			14,036
Occupancy and equipment		3,724			3,237			7,294			6,429
Data processing expenses		1,208			824			2,400			1,671
Direct loan expenses		345			505			757			1,379
Provision for contingencies		517			30			1,502			47
Insurance and surety bond premiums		248			156			513			303
Office supplies, telephone and postage		489			406			888			811
Professional fees		1,904			1,748			3,359			3,082
Contribution to the Ponce De Leon Foundation (Note 2)		—			—			—			4,995
Grain (recoveries) write-off (Note 4)		(346	)		1,500			(1,260	)		9,574
Marketing and promotional expenses		303			52			431			123
Directors' fees and regulatory assessment		160			167			315			321
Other operating expenses		1,112			1,031			2,380			1,870
Total non-interest expense		17,089			16,567			33,450			44,641
(Loss) income before income taxes		(302	)		283			575			(9,485	)
(Benefit) provision for income taxes (Note 9)		(215	)		(488	)		331			(3,436	)
Net (loss) income	$	(87	)	$	771		$	244		$	(6,049	)
(Loss) earnings per common share (Note 10):
Basic	$	(0.00	)	$	0.03		$	0.01		$	(0.27	)
Diluted	$	(0.00	)	$	0.03		$	0.01		$	(0.27	)
Weighted average common shares outstanding (Note 10):
Basic		23,208,168			23,056,559			23,250,357			22,243,776
Diluted		23,208,168			23,128,911			23,275,201			22,243,776

The accompanying notes are an integral part of the consolidated financial statements (unaudited).

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

Three and Six Months Ended June 30, 2023 and 2022

(In thousands)


	For the Three Months Ended June 30,						For the Six Months Ended June 30,
	2023			2022			2023			2022
Net (loss) income	$	(87	)	$	771		$	244		$	(6,049	)
Net change in unrealized gain (losses) on securities:
Unrealized gain (losses)		(1,284	)		(10,191	)		280			(17,299	)
Income (tax) benefit effect		316			2,194			(17	)		3,723
Total other comprehensive (loss) income, net of tax		(968	)		(7,997	)		263			(13,576	)
Total comprehensive (loss) income	$	(1,055	)	$	(7,226	)	$	507		$	(19,625	)

The accompanying notes are an integral part of the consolidated financial statements (unaudited).

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (Unaudited)

Six Months Ended June 30, 2023 and 2022

(Dollars in thousands, except share data)

Accumulated

Unallocated

Treasury

Additional

Other

Common

Preferred Stock

Common Stock

Stock,

Paid-in

Retained

Comprehensive

Stock

Shares

Amount

Shares

Amount

At Cost

Capital

Earnings

Income (Loss)

of ESOP

Total

Balance, December 31, 2022

225,000

225,000

24,859,353

249