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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): January 30, 2024

 

 

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 January 30, 2024, Ponce Financial Group, Inc., the holding company for Ponce Bank (the "Bank"), issued a press release announcing its financial results with respect to its fourth quarter ended December 31, 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 January 30, 2024
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:	January 30, 2024	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 Fourth Quarter 2023 Results

 

NEW YORK, January 30, 2024 - Ponce Financial Group, Inc., (the “Company”) (NASDAQ: PDLB), the holding company for Ponce Bank (the “Bank”), today announced results for the fourth quarter of 2023.

Fourth Quarter 2023 Highlights (Compared to Prior Periods):

 

Full Year 2023 Highlights (Compared to 2022):

 

President and Chief Executive Officer’s Comments

Carlos P. Naudon, Ponce Financial Group’s President and CEO, stated “We were pleased to see continued improvement during the quarter: Net interest income grew for the third quarter in a row and, despite the challenging operating environment, net interest income was also up quarter over quarter. Book value per share was $11.20 at year-end, up $0.21 quarter over quarter and up $0.43 versus last year. Total equity per share now stands at $20.66. Additionally, in order to better manage our interest risk, during the fourth quarter, we entered into two pay fixed, receiver SOFR swaps, one with notional amount of $150 million for 2 years and one with notional amount of $100 million for 3 years.

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We continue to show strong levels of capital and liquidity. On the capital front, our total capital ratio at Ponce Bank stands at 23.30%, 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") stands at $778.8 million, two times of our uninsured deposits of $389.4 million.

We remain committed to the communities we serve, our Minority Depository Institution (“MDI”)/Community Development Financial Institutions ("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 “We were able to grow both loans and deposits by over $100 million this quarter. We continue to see resiliency of our client base, but we’ll prioritize sound underwriting practices 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
		December 31,				September 30,				June 30,				March 31,				December 31,
Performance Ratios (Annualized):		2023				2023				2023				2023				2022
Return on average assets (1)			0.08	%			0.39	%			(0.01	%)			0.06	%			(1.62	%)
Return on average equity (1)			0.42	%			2.11	%			(0.07	%)			0.27	%			(7.28	%)
Net interest rate spread (1) (2)			1.63	%			1.58	%			1.66	%			1.78	%			2.13	%
Net interest margin (1) (3)			2.66	%			2.58	%			2.65	%			2.75	%			2.97	%
Non-interest expense to average assets (1)			2.66	%			2.58	%			2.65	%			2.79	%			2.78	%
Efficiency ratio (4)			96.83	%			78.11	%			96.15	%			95.88	%			94.95	%
Average interest-earning assets to average interest- bearing liabilities			137.49	%			137.92	%			141.14	%			148.20	%			152.30	%
Average equity to average assets			18.25	%			18.32	%			19.21	%			20.91	%			22.32	%

 

		At or for the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
Capital Ratios (Annualized):		2023				2023				2023				2023				2022
Total capital to risk weighted assets (Bank only)			23.30	%			25.10	%			26.30	%			27.54	%			30.53	%
Tier 1 capital to risk weighted assets (Bank only)			22.05	%			23.85	%			25.05	%			26.28	%			29.26	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)			22.05	%			23.85	%			25.05	%			26.28	%			29.26	%
Tier 1 capital to average assets (Bank only)			17.49	%			17.51	%			17.95	%			19.51	%			20.47	%

 

 

		At or for the Three Months Ended
		December 31,				September 30,				June 30,				March 31,				December 31,
Asset Quality Ratios (Annualized):		2023				2023				2023				2023				2022
Allowance for loan losses as a percentage of total loans			1.36	%			1.51	%			1.64	%			1.77	%			2.27	%
Allowance for loan losses as a percentage of nonperforming loans			152.99	%			169.49	%			167.06	%			149.73	%			252.33	%
Net (charge-offs) recoveries to average outstanding loans (1)			(0.24	%)			(0.34	%)			(0.41	%)			(0.57	%)			(0.85	%)
Non-performing loans as a percentage of total gross loans			0.89	%			0.89	%			0.98	%			1.18	%			0.90	%
Non-performing loans as a percentage of total assets			0.62	%			0.62	%			0.63	%			0.76	%			0.59	%
Total non-performing assets as a percentage of total assets			0.62	%			0.62	%			0.63	%			0.76	%			0.59	%
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (5)			0.81	%			0.82	%			0.83	%			0.93	%			0.78	%

 

 

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Summary of Results of Operations

 

Net income for the three months ended December 31, 2023 was $0.5 million compared to net income of $2.6 million for the three months ended September 30, 2023 and a net loss of ($9.2) million for the three months ended December 31, 2022. The decrease of net income for the three months ended December 31, 2023 compared to the three months ended September 30, 2023 was attributed mainly to a decrease in non-interest income and an increase in non-interest expense, partially offset by a decrease in provision for income taxes and, increases in a benefit for credit losses and net interest income. The increase of net income for the three months ended December 31, 2023 compared to the three months ended December 31, 2022 was largely due to increases in benefit for credit losses, net interest income and non-interest income, partially offset by increases in provision for income taxes and non-interest expense.

 

Net income for the year ended December 31, 2023 was $3.4 million compared to a net loss of ($30.0) million for the year ended December 31, 2022. The increase in net income was attributable to an increase in benefit for credit losses and a decrease in 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 Interest Income and Net Margin

 

Net interest income for the three months ended December 31, 2023, increased $0.7 million, or 3.96%, to $17.2 million compared to $16.5 million for the three months ended September 30, 2023 and increased $1.0 million, or 6.38%, compared to $16.2 million for the three months ended December 31, 2022.

Net interest margin was 2.66% for the three months ended December 31, 2023 compared to 2.58% for the prior quarter, an increase of 8bps and 2.97% for the same period last year, a decrease of 31bps. The decrease in net interest margin for the three months ended December 31, 2023 when compared to the same period last year 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 December 31, 2023, was $1.3 million, a decrease of $4.3 million, or 77.16%, compared to the three months ended September 30, 2023 and an increase of $0.8 million, or 194.05%, compared to the three months ended December 31, 2022.

The $4.3 million decrease in non-interest income for the three months ended December 31, 2023 compared to the three months ended September 30, 2023 was largely attributable to a grant of $3.7 million received in the third quarter of 2023 from the U.S. Treasury, partially offset by a smaller grant of $0.4 million received in the fourth quarter of 2023 from the U.S. Treasury. The decrease in non-interest income was also impacted by decreases of $0.6 million in other non-interest income and $0.5 million in late and prepayment charges.

Non-interest income for the year ended December 31, 2023, was $10.2 million, an increase of $3.8 million, or 59.26%, compared to $6.4 million for the year ended December 31, 2022. The $3.8 million increase from the year ended December 31, 2022 was attributable to two grants totaled $4.2 million received from the U.S. Treasury and an increase of $1.7 million in late and prepayment charges, partially offset by decreases of $1.3 million in loan origination and $0.9 million in brokerage commission.

 

Non-interest Expense

 

Non-interest expense for the three months ended December 31, 2023, was $17.9 million, an increase of $0.6 million, or 3.36%, compared to $17.3 million for the three months ended September 30, 2023 and an increase of $2.1 million, or 13.52%, compared to $15.8 million for the three months ended December 31, 2022.

 

The $2.1 million increase from the three months ended December 31, 2022 was mainly attributable to increases of $1.8 million in compensation and benefits, $0.9 million in provision for contingencies and $0.5 million in professional fees, partially offset by a decrease of $0.9 million in other operating expense.

 

Non-interest expense for the year ended December 31, 2023 was $68.7 million, a decrease of $17.2 million, or 19.99%, compared to $85.8 million for the year ended December 31, 2022. The $17.2 million decrease of non-interest expense from the year ended December 31, 2022 was attributable to $17.9 million Grain consumer microloan write-off during 2022 compared with $1.5 million of Grain consumer microloan recoveries recognized during the current period. The decrease in non-interest expense was also impacted by

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a $5.0 million contribution to the Ponce De Leon Foundation during 2022, partially offset by increases of $2.8 million in compensation and benefits, $2.2 million in provision for contingencies, $1.3 million in data processing expenses and $1.2 million in professional fees.

 

Balance Sheet Summary

 

Total assets increased $438.7 million, or 18.98%, to $2.75 billion as of December 31, 2023 from $2.31 billion as of December 31, 2022. The increase in total assets is largely attributable to increases of $402.8 million in net loans receivable, $84.8 million in cash and cash equivalents, $10.7 million in other assets and $8.0 million in mortgage loans held for sale, partially offset by decreases of $49.1 million in held-to-maturity securities, $9.6 million in available-for-sale securities and $5.3 million in Federal Home Loan Bank of New York stock.

 

Total liabilities increased $440.0 million, or 24.19%, to $2.26 billion as of December 31, 2023 from $1.82 billion as of December 31, 2022. The increase in total liabilities was largely attributable to increases of $255.2 million in deposits, $167.0 million in borrowings, $10.6 million in accrued interest payable and $8.0 million in other liabilities.

Total stockholders’ equity decreased $1.3 million, or 0.26%, to $491.4 million as of December 31, 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 during 2023 and $2.2 million in other comprehensive loss, offset by $3.4 million in net income, $1.9 million impact to additional paid in capital as a result of share-based compensation, $1.1 million as a result of implementation of CECL and $1.1 million from release of ESOP shares.

 

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
	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
ASSETS
Cash and due from banks:
Cash	$	28,930			$	26,046			$	31,162			$	26,951			$	31,977
Interest-bearing deposits		110,260				90,966				212,627				157,736				22,383
Total cash and cash equivalents		139,190				117,012				243,789				184,687				54,360
Available-for-sale securities, at fair value		119,902				116,753				123,720				128,320				129,505
Held-to-maturity securities, at amortized cost (1)		461,748				471,065				481,952				491,649				510,820
Placement with banks		249				996				996				1,245				1,494
Mortgage loans held for sale, at fair value		9,980				14,103				10,070				2,987				1,979
Loans receivable, net		1,895,886				1,787,607				1,695,047				1,614,428				1,493,127
Accrued interest receivable		18,010				16,624				16,054				15,435				15,049
Premises and equipment, net		16,053				16,453				16,856				17,215				17,446
Right of use assets		31,272				32,110				32,435				33,147				33,423
Federal Home Loan Bank of New York stock (FHLBNY), at cost		19,377				18,870				19,195				19,209				24,661
Deferred tax assets		14,332				15,984				15,924				15,413				16,137
Other assets		24,723				16,286				15,919				15,799				13,988
Total assets	$	2,750,722			$	2,623,863			$	2,671,957			$	2,539,534			$	2,311,989
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	1,507,620			$	1,401,132			$	1,442,013			$	1,336,877			$	1,252,412
Operating lease liabilities		32,684				33,459				33,716				34,308				34,532
Accrued interest payable		11,965				8,385				4,704				1,767				1,390
Advance payments by borrowers for taxes and insurance		10,778				13,743				12,402				14,902				9,724
Borrowings		684,421				675,100				682,100				648,375				517,375
Other liabilities		11,859				6,986				6,540				7,264				3,856
Total liabilities		2,259,327				2,138,805				2,181,475				2,043,493				1,819,289
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				249
Treasury stock, at cost		(9,747	)			(10,975	)			(5,202	)			(2	)			(2	)
Additional paid-in-capital		207,106				207,626				207,287				206,883				206,508
Retained earnings		97,420				96,902				94,312				94,399				92,955
Accumulated other comprehensive loss		(15,649	)			(20,468	)			(17,597	)			(16,629	)			(17,860	)
Unearned compensation ─ ESOP		(12,984	)			(13,276	)			(13,567	)			(13,859	)			(14,150	)
Total stockholders' equity		491,395				485,058				490,482				496,041				492,700
Total liabilities and stockholders' equity	$	2,750,722			$	2,623,863			$	2,671,957			$	2,539,534			$	2,311,989

 

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

 

	Three Months Ended
	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
Interest and dividend income:
Interest on loans receivable	$	27,814			$	25,276			$	23,015			$	19,700			$	18,550
Interest on deposits due from banks		990				1,969				1,817				197				199
Interest and dividend on securities and FHLBNY stock		6,146				6,261				6,223				6,459				6,184
Total interest and dividend income		34,950				33,506				31,055				26,356				24,933
Interest expense:
Interest on certificates of deposit		5,103				4,362				3,881				3,225				1,786
Interest on other deposits		5,706				5,639				4,413				2,812				3,649
Interest on borrowings		6,944				6,963				6,479				5,074				3,332
Total interest expense		17,753				16,964				14,773				11,111				8,767
Net interest income		17,197				16,542				16,282				15,245				16,166
(Benefit) provision for credit losses		(375	)			535				987				(174	)			12,641
Net interest income after provision (benefit) for credit losses		17,572				16,007				15,295				15,419				3,525
Non-interest income:
Service charges and fees		498				516				481				491				481
Brokerage commissions		13				17				35				15				180
Late and prepayment charges		365				899				372				729				263
Income on sale of mortgage loans		244				173				82				99				7
Loan origination (1)		—				—				—				—				(557	)
Grant income		438				3,718				—				—				—
Other		(273	)			304				522				485				63
Total non-interest income		1,285				5,627				1,492				1,819				437
Non-interest expense:
Compensation and benefits		8,262				7,566				7,425				7,446				6,501
Occupancy and equipment		3,686				3,588				3,724				3,570				3,928
Data processing expenses		1,101				1,582				1,208				1,192				1,114
Direct loan expenses		497				369				345				412				454
Provision for contingencies		418				391				517				985				(440	)
Insurance and surety bond premiums		250				255				248				265				270
Office supplies, telephone and postage		294				301				489				399				375
Professional fees		2,040				1,693				1,904				1,455				1,571
Grain (recoveries) and write-off		(152	)			(69	)			(346	)			(914	)			(515	)
Marketing and promotional expenses		146				248				303				128				256
Directors fees and regulatory assessment		173				169				160				155				196
Other operating expenses		1,182				1,223				1,112				1,268				2,055
Total non-interest expense		17,897				17,316				17,089				16,361				15,765
Income (loss) before income taxes		960				4,318				(302	)			877				(11,803	)
Provision (benefit) for income taxes		442				1,728				(215	)			546				(2,589	)
Net income (loss)	$	518			$	2,590			$	(87	)		$	331			$	(9,214	)
Earnings (loss) per common share:
Basic	$	0.02			$	0.12			$	(0.00	)		$	0.01			$	(0.40	)
Diluted	$	0.02			$	0.12			$	(0.00	)		$	0.01			$	(0.40	)
Weighted average common shares outstanding:
Basic		22,224,945				22,272,076				23,208,168				23,293,013				23,168,097
Diluted		22,406,102				22,349,217				23,208,168				23,324,532				23,168,097

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Operations

(Dollars in thousands, except per share data)

 

		For the Years Ended December 31,
		2023				2022				Variance $				Variance %
Interest and dividend income:
Interest on loans receivable		$	95,805			$	69,865			$	25,940				37.13	%
Interest on deposits due from banks			4,973				713				4,260				597.48	%
Interest and dividend on securities and FHLBNY stock			25,089				12,174				12,915				106.09	%
Total interest and dividend income			125,867				82,752				43,115				52.10	%
Interest expense:
Interest on certificates of deposit			16,571				4,148				12,423				299.49	%
Interest on other deposits			18,570				5,802				12,768				220.06	%
Interest on borrowings			25,460				6,199				19,261				310.71	%
Total interest expense			60,601				16,149				44,452				275.26	%
Net interest income			65,266				66,603				(1,337	)			(2.01	%)
Provision for credit losses			973				24,046				(23,073	)			(95.95	%)
Net interest income after provision for credit losses			64,293				42,557				21,736				51.08	%
Non-interest income:
Service charges and fees			1,986				1,830				156				8.52	%
Brokerage commissions			80				1,020				(940	)			(92.16	%)
Late and prepayment charges			2,365				623				1,742				279.61	%
Income on sale of mortgage loans			598				741				(143	)			(19.30	%)
Loan origination			—				1,286				(1,286	)			(100.00	%)
Grant income			4,156				—				4,156				—	%
Loss on sale of premises and equipment			—				(436	)			436				(100.00	%)
Other			1,038				1,355				(317	)			(23.39	%)
Total non-interest income			10,223				6,419				3,804				59.26	%
Non-interest expense:
Compensation and benefits			30,699				27,914				2,785				9.98	%
Occupancy and equipment			14,568				13,968				600				4.30	%
Data processing expenses			5,083				3,779				1,304				34.51	%
Direct loan expenses			1,623				2,487				(864	)			(34.74	%)
Provision for contingencies			2,311				126				2,185				1,734.13	%
Insurance and surety bond premiums			1,018				870				148				17.01	%
Office supplies, telephone and postage			1,483				1,555				(72	)			(4.63	%)
Professional fees			7,092				5,904				1,188				20.12	%
Contribution to the Ponce De Leon Foundation			—				4,995				(4,995	)			(100.00	%)
Grain (recoveries) and write-off			(1,481	)			17,940				(19,421	)			(108.26	%)
Marketing and promotional expenses			825				593				232				39.12	%
Directors fees and regulatory assessment			657				705				(48	)			(6.81	%)
Other operating expenses			4,785				4,986				(201	)			(4.03	%)
Total non-interest expense			68,663				85,822				(17,159	)			(19.99	%)
Income (loss) before income taxes			5,853				(36,846	)			42,699				(115.89	%)
Provision (benefit) for income taxes			2,501				(6,845	)			9,346				(136.54	%)
Net income (loss)		$	3,352			$	(30,001	)		$	33,353				(111.17	%)
Earnings (loss) per common share:
Basic		$	0.15			$	(1.32	)		$	1.47				(111.15	%)
Diluted		$	0.15			$	(1.32	)		$	1.47				(111.11	%)
Weighted average common shares outstanding:
Basic			22,745,317				22,690,943				54,374				0.24	%
Diluted			22,822,313				22,690,943				131,370				0.58	%

 

 

7

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Ponce Financial Group, Inc. and Subsidiaries

Key Metrics

	At or for the Three Months Ended
	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
Performance Ratios:
Return on average assets (1)		0.08	%			0.39	%			(0.01	%)			0.06	%			(1.62	%)
Return on average equity (1)		0.42	%			2.11	%			(0.07	%)			0.27	%			(7.28	%)
Net interest rate spread (1) (2)		1.63	%			1.58	%			1.66	%			1.78	%			2.13	%
Net interest margin (1) (3)		2.66	%			2.58	%			2.65	%			2.75	%			2.97	%
Non-interest expense to average assets (1)		2.66	%			2.58	%			2.65	%			2.79	%			2.78	%
Efficiency ratio (4)		96.83	%			78.11	%			96.15	%			95.88	%			94.95	%
Average interest-earning assets to average interest- bearing liabilities		137.49	%			137.92	%			141.14	%			148.20	%			152.30	%
Average equity to average assets		18.25	%			18.32	%			19.21	%			20.91	%			22.32	%
Capital Ratios:
Total capital to risk weighted assets (Bank only)		23.30	%			25.10	%			26.30	%			27.54	%			30.53	%
Tier 1 capital to risk weighted assets (Bank only)		22.05	%			23.85	%			25.05	%			26.28	%			29.26	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)		22.05	%			23.85	%			25.05	%			26.28	%			29.26	%
Tier 1 capital to average assets (Bank only)		17.49	%			17.51	%			17.95	%			19.51	%			20.47	%
Asset Quality Ratios:
Allowance for credit losses on loans as a percentage of total loans		1.36	%			1.51	%			1.64	%			1.77	%			2.27	%
Allowance for credit losses on loans as a percentage of nonperforming loans		152.99	%			169.49	%			167.06	%			149.73	%			252.33	%
Net (charge-offs) recoveries to average outstanding loans (1)		(0.24	%)			(0.34	%)			(0.41	%)			(0.57	%)			(0.85	%)
Non-performing loans as a percentage of total gross loans		0.89	%			0.89	%			0.98	%			1.18	%			0.90	%
Non-performing loans as a percentage of total assets		0.62	%			0.62	%			0.63	%			0.76	%			0.59	%
Total non-performing assets as a percentage of total assets		0.62	%			0.62	%			0.63	%			0.76	%			0.59	%
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (5)		0.81	%			0.82	%			0.83	%			0.93	%			0.78	%
Other:
Number of offices		18				19				19				19				19
Number of full-time equivalent employees		237				243				244				251				253

 

 

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Securities Portfolio

 

		December 31, 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		$	2,990			$	—			$	(206	)		$	2,784			$	2,985			$	—			$	(296	)		$	2,689
Corporate Bonds			25,790				—				(2,122	)			23,668				25,824				—				(2,465	)			23,359
Mortgage-Backed Securities:
Collateralized Mortgage Obligations (1)			39,375				—				(6,227	)			33,148				44,503				—				(6,726	)			37,777
FHLMC Certificates			10,163				—				(1,482	)			8,681				11,310				—				(1,676	)			9,634
FNMA Certificates			61,359				—				(9,842	)			51,517				67,199				—				(11,271	)			55,928
GNMA Certificates			104				—				—				104				122				—				(4	)			118
Total available-for-sale securities		$	139,781			$	—			$	(19,879	)		$	119,902			$	151,943			$	—			$	(22,438	)		$	129,505
Held-to-Maturity Securities:
U.S. Agency Bonds		$	25,000			$	—			$	(181	)		$	24,819			$	35,000			$	—			$	(380	)		$	34,620
Corporate Bonds			82,500				—				(2,691	)			79,809				82,500				57				(3,819	)			78,738
Mortgage-Backed Securities:
Collateralized Mortgage Obligations (1)			212,093				104				(5,170	)			207,027				235,479				192				(5,558	)			230,113
FHLMC Certificates			3,897				—				(244	)			3,653				4,120				—				(268	)			3,852
FNMA Certificates			118,944				—				(4,088	)			114,856				131,918				—				(5,227	)			126,691
SBA Certificates			19,712				166				—				19,878				21,803				34				—				21,837
Allowance for Credit Losses			(398	)			—				—				—				—				—				—				—
Total held-to-maturity securities		$	461,748			$	270			$	(12,374	)		$	450,042			$	510,820			$	283			$	(15,252	)		$	495,851

 

 

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

 

		December 31,
		2023				2022
Beginning balance		$	—			$	—
CECL adoption			662				—
Provision for credit losses			(264	)			—
Allowance for credit losses on securities		$	398			$	—

 

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Loan Portfolio

 

		As of
		December 31,								September 30,								June 30,								March 31,								December 31,
		2023								2023								2023								2023								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Mortgage loans:
1-4 family residential
Investor Owned		$	343,689				17.89	%		$	347,082				19.13	%		$	351,754				20.43	%		$	354,559				21.60	%		$	343,968				22.54	%
Owner-Occupied			152,311				7.93	%			151,866				8.37	%			154,116				8.94	%			149,481				9.10	%			134,878				8.84	%
Multifamily residential			550,559				28.65	%			553,694				30.52	%			550,033				31.94	%			553,430				33.71	%			494,667				32.42	%
Nonresidential properties			342,343				17.81	%			321,472				17.71	%			317,416				18.43	%			314,560				19.17	%			308,043				20.19	%
Construction and land			503,925				26.22	%			411,383				22.67	%			315,843				18.34	%			235,157				14.33	%			185,018				12.13	%
Total mortgage loans			1,892,827				98.50	%			1,785,497				98.40	%			1,689,162				98.08	%			1,607,187				97.91	%			1,466,574				96.12	%
Non-mortgage loans:
Business loans (1)			19,779				1.03	%			18,416				1.02	%			21,041				1.22	%			19,890				1.21	%			39,965				2.62	%
Consumer loans (2)			8,966				0.47	%			10,416				0.58	%			11,958				0.70	%			14,227				0.88	%			19,129				1.26	%
Total non-mortgage loans			28,745				1.50	%			28,832				1.60	%			32,999				1.92	%			34,117				2.09	%			59,094				3.88	%
Total loans, gross			1,921,572				100.00	%			1,814,329				100.00	%			1,722,161				100.00	%			1,641,304				100.00	%			1,525,668				100.00	%
Net deferred loan origination costs			468								692								1,059								2,099								2,051
Allowance for credit losses on loans			(26,154	)							(27,414	)							(28,173	)							(28,975	)							(34,592	)
Loans, net		$	1,895,886							$	1,787,607							$	1,695,047							$	1,614,428							$	1,493,127

 

 

 

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Grain Loan Exposure

 

Grain Technologies, Inc. ("Grain") Total Exposure as of December 31, 2023
(in thousands)
Receivable from Grain
Microloans originated - put back to Grain (inception-to-December 31, 2023)		$	24,104
Write-downs, net of recoveries (inception-to-date as of December 31, 2023)			(15,459	)
Cash receipts from Grain (inception-to-December 31, 2023)			(6,819	)
Grant/reserve			(1,826	)
Net receivable as of December 31, 2023		$	—
Microloan receivables from Grain Borrowers
Grain originated loans receivable as of December 31, 2023		$	7,985
Allowance for credit losses on loans as of December 31, 2023 (1)			(7,026	)
Microloans, net of allowance for credit losses on loans as of December 31, 2023		$	959
Investments
Investment in Grain		$	1,000
Investment in Grain write-off in Q3 2022			(1,000	)
Investment in Grain as of December 31, 2023			—
Total exposure related to Grain as of December 31, 2023 (2)		$	959

 

(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.

(2) Total remaining exposure to Grain borrowers. These loans are now serviced by the Bank.

 

On November 1, 2023, Ponce Financial Group, Inc. and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining Grain loans. In order to facilitate the transfer of the servicing responsibilities to the Bank, Grain granted the Bank a perpetual right and license to use the Grain software, including the source code to service the remaining loans.

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Ponce Financial Group, Inc. and Subsidiaries

Allowance for Credit Losses on Loans

 

	For the Three Months Ended
	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
	(Dollars in thousands)
Allowance for credit losses on loans at beginning of the period	$	27,414			$	28,173			$	28,975			$	34,592			$	25,108
Provision (benefit) for credit losses on loans		(126	)			750				934				(321	)			12,641
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		(63	)			—				—				—				—
Consumer		(1,135	)			(1,592	)			(1,931	)			(2,569	)			(3,659	)
Total charge-offs		(1,198	)			(1,592	)			(1,931	)			(2,569	)			(3,659	)
Recoveries:
Mortgage loans:
1-4 family residences
Investor owned		—				—				—				—				—
Owner occupied		—				—				—				—				—
Multifamily residences		—				—				—				—				—
Nonresidential properties		—				—				—				—				—
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				3				—				—				—
Consumer		64				80				195				363				502
Total recoveries		64				83				195				363				502
Net (charge-offs) recoveries		(1,134	)			(1,509	)			(1,736	)			(2,206	)			(3,157	)
Allowance for credit losses on loans at end of the period	$	26,154			$	27,414			$	28,173			$	28,975			$	34,592

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Deposits

 

		As of
		December 31,								September 30,								June 30,								March 31,								December 31,
		2023								2023								2023								2023								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Demand		$	243,384				16.14	%		$	265,862				18.98	%		$	266,545				18.48	%		$	282,741				21.15	%		$	289,149				23.08	%
Interest-bearing deposits:
NOW/IOLA accounts			19,676				1.31	%			22,519				1.61	%			22,754				1.57	%			21,735				1.63	%			24,349				1.94	%
Money market accounts (1)			432,735				28.70	%			370,500				26.44	%			387,970				26.91	%			293,140				21.93	%			236,143				18.86	%
Reciprocal deposits			96,860				6.42	%			82,670				5.90	%			100,919				7.00	%			109,649				8.20	%			114,049				9.11	%
Savings accounts			114,139				7.57	%			117,870				8.41	%			119,635				8.30	%			127,731				9.55	%			130,432				10.41	%
Total NOW, money market, reciprocal and savings accounts			663,410				44.00	%			593,559				42.36	%			631,278				43.78	%			552,255				41.31	%			504,973				40.32	%
Certificates of deposit of $250K or more (1)			132,153				8.77	%			122,353				8.73	%			120,043				8.32	%			113,955				8.52	%			106,336				8.49	%
Brokered certificates of deposit (2)			98,729				6.55	%			98,729				7.05	%			98,729				6.85	%			98,754				7.39	%			98,754				7.89	%
Listing service deposits (2)			14,433				0.96	%			15,180				1.08	%			20,258				1.40	%			28,417				2.13	%			35,813				2.86	%
All other certificates of deposit less than $250K (1)			355,511				23.58	%			305,449				21.80	%			305,160				21.17	%			260,755				19.50	%			217,387				17.36	%
Total certificates of deposit			600,826				39.86	%			541,711				38.66	%			544,190				37.74	%			501,881				37.54	%			458,290				36.60	%
Total interest-bearing deposits			1,264,236				83.86	%			1,135,270				81.02	%			1,175,468				81.52	%			1,054,136				78.85	%			963,263				76.92	%
Total deposits		$	1,507,620				100.00	%		$	1,401,132				100.00	%		$	1,442,013				100.00	%		$	1,336,877				100.00	%		$	1,252,412				100.00	%

 

 

13

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Ponce Financial Group, Inc. and Subsidiaries

Borrowings

 

	December 31,												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		363,321				363,321				4.55				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
2028		9,100				9,100				3.84				—				—				—
Thereafter		50,000				50,000				3.35				50,000				50,000				3.35
	$	684,421			$	684,421				4.10	%		$	517,375			$	517,375				3.90	%

 

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Ponce Financial Group, Inc. and Subsidiaries

Nonperforming Assets

 

	As of Three Months Ended
	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
	(Dollars in thousands)
Non-accrual loans:
Mortgage loans:
1-4 family residential
Investor owned	$	793			$	396			$	296			$	2,836			$	2,844
Owner occupied		1,682				1,685				2,363				2,245				961
Multifamily residential		2,979				1,444				1,435				—				—
Nonresidential properties		—				—				—				—				—
Construction and land		10,759				11,721				11,721				11,906				7,567
Non-mortgage loans:
Business		19				209				—				40				—
Consumer		146				—				—				—				—
Total non-accrual loans (not including non-accruing modifications to borrowers experiencing financial difficulty) (1)	$	16,378			$	15,455			$	15,815			$	17,027			$	11,372
Non-accruing modifications to borrowers experiencing financial difficulty (1):
Mortgage loans:
1-4 family residential
Investor owned	$	270			$	270			$	209			$	213			$	217
Owner occupied		447				449				840				2,020				2,027
Multifamily residential		—				—				—				—				—
Nonresidential properties		—				—				—				91				93
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total non-accruing modifications to borrowers experiencing financial difficulty (1)		717				719				1,049				2,324				2,337
Total non-accrual loans	$	17,095			$	16,174			$	16,864			$	19,351			$	13,709
Accruing modifications to borrowers experiencing financial difficulty (1):
Mortgage loans:
1-4 family residential
Investor owned	$	2,112			$	2,131			$	2,161			$	2,185			$	2,207
Owner occupied		2,313				2,335				2,353				1,310				1,328
Multifamily residential		—				—				—				—				—
Nonresidential properties		757				765				783				701				708
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total accruing modifications to borrowers experiencing financial difficulty (1)	$	5,182			$	5,231			$	5,297			$	4,196			$	4,243
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty (1)	$	22,277			$	21,405			$	22,161			$	23,547			$	17,952
Total non-performing loans to total gross loans		0.89	%			0.89	%			0.98	%			1.18	%			0.90	%
Total non-performing assets to total assets		0.62	%			0.62	%			0.63	%			0.76	%			0.59	%
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (1)		0.81	%			0.82	%			0.83	%			0.93	%			0.78	%

 

 

(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 the period in 2022, the balances only include troubled debt restructurings.

15

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Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

 

	For the Three Months Ended December 31,
	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)	$	1,884,301			$	27,814			5.86%		$	1,478,308			$	18,550			4.98%
Securities (3)		582,563				5,715			3.89%			636,457				5,931			3.70%
Other (4) (5)		96,070				1,421			5.87%			47,069				452			3.81%
Total interest-earning assets		2,562,934				34,950			5.41%			2,161,834				24,933			4.58%
Non-interest-earning assets (5)		107,305										87,861
Total assets	$	2,670,239									$	2,249,695
Interest-bearing liabilities:
NOW/IOLA	$	20,210			$	8			0.16%		$	25,349			$	22			0.34%
Money market (6)		474,306				5,668			4.74%			437,813				3,619			3.28%
Savings		116,600				28			0.10%			139,115				8			0.02%
Certificates of deposit (6)		559,713				5,103			3.62%			434,368				1,786			1.63%
Total deposits		1,170,829				10,807			3.66%			1,036,645				5,435			2.08%
Advance payments by borrowers		15,033				2			0.05%			12,942				—			— %
Borrowings		678,235				6,944			4.06%			369,832				3,332			3.57%
Total interest-bearing liabilities		1,864,097				17,753			3.78%			1,419,419				8,767			2.45%
Non-interest-bearing liabilities:
Non-interest-bearing demand		267,150				—						325,616				—
Other non-interest-bearing liabilities		51,764				—						2,424				—
Total non-interest-bearing liabilities		318,914				—						328,040				—
Total liabilities		2,183,011				17,753						1,747,459				8,767
Total equity		487,228										502,236
Total liabilities and total equity	$	2,670,239							3.78%		$	2,249,695							2.45%
Net interest income					$	17,197									$	16,166
Net interest rate spread (7)									1.63%										2.13%
Net interest-earning assets (8)	$	698,837									$	742,415
Net interest margin (9)									2.66%										2.97%
Average interest-earning assets to interest-bearing liabilities									137.49%										152.30%

 

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Average Balance Sheets

 

	For the Years Ended December 31,
	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)	$	1,730,275			$	95,805				5.54	%		$	1,375,723			$	69,865				5.08	%
Securities (3)		606,815				23,342				3.85	%			357,446				11,709				3.28	%
Other (4) (5)		119,923				6,720				5.60	%			84,133				1,178				1.40	%
Total interest-earning assets		2,457,013				125,867				5.12	%			1,817,302				82,752				4.55	%
Non-interest-earning assets (5)		115,760												124,351
Total assets	$	2,572,773											$	1,941,653
Interest-bearing liabilities:
NOW/IOLA	$	22,168			$	33				0.15	%		$	30,151			$	65				0.22	%
Money market (6)		424,160				18,413				4.34	%			367,838				5,604				1.52	%
Savings		121,550				116				0.10	%			138,137				128				0.09	%
Certificates of deposit (6)		528,999				16,571				3.13	%			407,739				4,148				1.02	%
Total deposits		1,096,877				35,133				3.20	%			943,865				9,945				1.05	%
Advance payments by borrowers		14,869				8				0.05	%			11,514				5				0.04	%
Borrowings		633,116				25,460				4.02	%			206,969				6,199				3.00	%
Total interest-bearing liabilities		1,744,862				60,601				3.47	%			1,162,348				16,149				1.39	%
Non-interest-bearing liabilities:
Non-interest-bearing demand		290,335				—								344,505				—
Other non-interest-bearing liabilities		45,858				—								33,225				—
Total non-interest-bearing liabilities		336,193				—								377,730				—
Total liabilities		2,081,055				60,601								1,540,078				16,149
Total equity		491,718												401,575
Total liabilities and total equity	$	2,572,773								3.47	%		$	1,941,653								1.39	%
Net interest income					$	65,266											$	66,603
Net interest rate spread (7)										1.65	%											3.16	%
Net interest-earning assets (8)	$	712,151											$	654,954
Net interest margin (9)										2.66	%											3.66	%
Average interest-earning assets to
interest-bearing liabilities										140.81	%											156.35	%

 

 

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Ponce Financial Group, Inc. and Subsidiaries

Other Data

 

	As of
	December 31,				September 30,				June 30,				March 31,				December 31,
	2023				2023				2023				2023				2022
Other Data
Common shares issued		24,886,711				24,886,711				24,886,711				24,865,476				24,861,329
Less treasury shares		1,101,191				1,233,111				617,924				1,976				1,976
Common shares outstanding at end of period		23,785,520				23,653,600				24,268,787				24,863,500				24,859,353
Book value per common share	$	11.20			$	10.99			$	10.94			$	10.90			$	10.77
Tangible book value per common share	$	11.20			$	10.99			$	10.94			$	10.90			$	10.77

 

 

 

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