Ponce Financial Group, Inc. Reports Second Quarter 2023 Results


NEW YORK, July 28, 2023 (GLOBE NEWSWIRE) -- 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):

  • Net loss of ($0.1) million, or $0.00 per diluted share for the three months ended June 30, 2023, as compared to net income of $0.3 million, or $0.01 per diluted share for the three months ended March 31, 2023 and net income of $0.8 million, or $0.03 per diluted share for the three months ended June 30, 2022.
  • Included in the ($0.1) million of net loss for the second quarter of 2023 results is $31.1 million in interest and dividend income and $1.5 million in non-interest income, offset by a $17.1 million in non-interest expense and $14.8 million in interest expense.
  • Net interest income of $16.3 million for the second quarter of 2023 increased $1.0 million, or 6.80%, from the prior quarter and $0.8 million, or 5.13%, from the same quarter last year.
  • Net interest margin was 2.65% for the second quarter of 2023, decreased from 2.75% for the prior quarter and from 3.92% for the same quarter last year.
  • Cash and equivalents were $243.8 million as of June 30, 2023, an increase of $189.4 million, or 348.47%, from December 31, 2022, as we decided to keep ample sources of liquidity at hand while taking advantage of the positive spread between our interest bearing overnight deposits at the Fed and borrowing costs under the Bank Term Funding Program ("BTFP").
  • Securities totaled $605.7 million as of June 30, 2023, a decrease of $34.7 million, or 5.59%, from December 31, 2022 primarily due to a call on one of the securities amounting to $10.0 million and regular principal payments.
  • Net loans receivable were $1.70 billion as of June 30, 2023, an increase of $201.9 million, or 13.52%, from December 31, 2022.
  • Deposits were $1.44 billion as of June 30, 2023, an increase of $189.6 million, or 15.14%, from December 31, 2022.

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."

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%
                     

(1) Annualized where appropriate.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
(4) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

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.

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 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.

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 
                    

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

Ponce Financial Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share data)

 Three Months Ended 
 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 
                    

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

Ponce Financial Group, Inc. and Subsidiaries
Consolidated Statements of Operations
(Dollars in thousands, except per share data)

  For the Six Months Ended June 30, 
  2023  2022  Variance $  Variance % 
Interest and dividend income:            
Interest on loans receivable $42,715  $34,257  $8,458   24.69%
Interest on deposits due from banks  2,014   168   1,846   1,098.81%
Interest and dividend on securities and FHLBNY stock  12,682   1,760   10,922   620.57%
Total interest and dividend income  57,411   36,185   21,226   58.66%
Interest expense:            
Interest on certificates of deposit  4,252   1,480   2,772   187.30%
Interest on other deposits  10,079   805   9,274   1,152.05%
Interest on borrowings  11,553   1,074   10,479   975.70%
Total interest expense  25,884   3,359   22,525   670.59%
Net interest income  31,527   32,826   (1,299)  (3.96%)
Provision for credit losses  813   2,075   (1,262)  (60.82%)
Net interest income after provision for credit losses  30,714   30,751   (37)  (0.12%)
Non-interest income:            
Service charges and fees  972   885   87   9.83%
Brokerage commissions  50   552   (502)  (90.94%)
Late and prepayment charges  1,101   251   850   338.65%
Income on sale of mortgage loans  181   618   (437)  (70.71%)
Loan origination     1,321   (1,321)  (100.00%)
Other  1,007   778   229   29.43%
Total non-interest income  3,311   4,405   (1,094)  (24.84%)
Non-interest expense:            
Compensation and benefits  14,871   14,036   835   5.95%
Occupancy and equipment  7,294   6,429   865   13.45%
Data processing expenses  2,400   1,671   729   43.63%
Direct loan expenses  757   1,379   (622)  (45.11%)
Provision for contingencies  1,502   47   1,455   3,095.74%
Insurance and surety bond premiums  513   303   210   69.31%
Office supplies, telephone and postage  888   811   77   9.49%
Professional fees  3,359   3,082   277   8.99%
Contribution to the Ponce De Leon Foundation     4,995   (4,995)  (100.00%)
Grain (recoveries) and write-off  (1,260)  9,574   (10,834)  (113.16%)
Marketing and promotional expenses  431   123   308   250.41%
Directors fees and regulatory assessment  315   321   (6)  (1.87%)
Other operating expenses  2,380   1,870   510   27.27%
Total non-interest expense  33,450   44,641   (11,191)  (25.07%)
Income (loss) before income taxes  575   (9,485)  10,060   (106.06%)
Provision (benefit) for income taxes  331   (3,436)  3,767   (109.63%)
Net income (loss) $244  $(6,049) $6,293   (104.03%)
Earnings (loss) per common share:            
Basic $0.01  $(0.27) $0.28   (103.86%)
Diluted $0.01  $(0.27) $0.28   (103.85%)
Weighted average common shares outstanding:            
Basic  23,250,357   22,243,776   1,006,581   4.53%
Diluted  23,275,201   22,243,776   1,031,425   4.64%
                 

Ponce Financial Group, Inc. and Subsidiaries
Key Metrics

 At or for the Three Months Ended 
 June 30,  March 31,  December 31,  September 30,  June 30, 
 2023  2023  2022  2022  2022 
Performance Ratios:              
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%
Capital Ratios:              
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%
Asset Quality Ratios:              
Allowance for credit losses on loans as a percentage of total loans 1.64%  1.77%  2.27%  1.77%  1.31%
Allowance for credit losses on loans 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%
Other:              
Number of offices 19   19   19   19   19 
Number of full-time equivalent employees 244   251   253   257   253 
               

(1) Annualized where appropriate.
(2) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(3) Net interest margin represents net interest income divided by average total interest-earning assets.
(4) Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.

Ponce Financial Group, Inc. and Subsidiaries
Securities Portfolio

  June 30, 2023  December 31, 2022 
     Gross  Gross        Gross  Gross    
  Amortized  Unrealized  Unrealized     Amortized  Unrealized  Unrealized    
  Cost  Gains  Losses  Fair Value  Cost  Gains  Losses  Fair Value 
  (in thousands)  (in thousands) 
Available-for-Sale Securities:                        
U.S. Government Bonds $2,988  $  $(279) $2,709  $2,985  $  $(296) $2,689 
Corporate Bonds  25,807      (2,784)  23,023   25,824      (2,465)  23,359 
Mortgage-Backed Securities:                        
Collateralized Mortgage Obligations (1)  42,128      (6,724)  35,404   44,503      (6,726)  37,777 
FHLMC Certificates  10,742      (1,636)  9,106   11,310      (1,676)  9,634 
FNMA Certificates  64,298      (10,931)  53,367   67,199      (11,271)  55,928 
GNMA Certificates  114      (3)  111   122      (4)  118 
Total available-for-sale securities $146,077  $  $(22,357) $123,720  $151,943  $  $(22,438) $129,505 
                         
Held-to-Maturity Securities:                        
U.S. Agency Bonds $25,000  $  $(455) $24,545  $35,000  $  $(380) $34,620 
Corporate Bonds  82,500   25   (2,978)  79,547   82,500   57   (3,819)  78,738 
Mortgage-Backed Securities:                        
Collateralized Mortgage Obligations (1)  224,312      (7,312)  217,000   235,479   192   (5,558)  230,113 
FHLMC Certificates  3,948      (291)  3,657   4,120      (268)  3,852 
FNMA Certificates  125,943      (5,828)  120,115   131,918      (5,227)  126,691 
SBA Certificates  21,111   79      21,190   21,803   34      21,837 
Allowance for Credit Losses  (862)                     
Total held-to-maturity securities $481,952  $104  $(16,864) $466,054  $510,820  $283  $(15,252) $495,851 
                                 

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

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

  For the Six Months Ended June 30, 
  2023  2022 
Beginning balance $  $ 
CECL adoption  662    
Provision for credit losses  200    
Allowance for credit losses on securities $862  $ 
         

Ponce Financial Group, Inc. and Subsidiaries
Loan Portfolio

  As of 
  June 30,  March 31,  December 31,  September 30,  June 30, 
  2023  2023  2022  2022  2022 
  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent 
  (Dollars in thousands) 
Mortgage loans:                              
1-4 family residential                              
Investor Owned $351,754   20.43% $354,559   21.60% $343,968   22.54% $336,667   23.79% $321,671   24.02%
Owner-Occupied  154,116   8.94%  149,481   9.10%  134,878   8.84%  112,749   7.97%  100,048   7.47%
Multifamily residential  550,033   31.94%  553,430   33.71%  494,667   32.42%  421,917   29.81%  396,470   29.60%
Nonresidential properties  317,416   18.43%  314,560   19.17%  308,043   20.19%  282,642   19.97%  279,877   20.90%
Construction and land  315,843   18.34%  235,157   14.33%  185,018   12.13%  197,437   13.95%  165,425   12.35%
Total mortgage loans  1,689,162   98.08%  1,607,187   97.91%  1,466,574   96.12%  1,351,412   95.49%  1,263,491   94.34%
Non-mortgage loans:                              
Business loans (1)  21,041   1.22%  19,890   1.21%  39,965   2.62%  41,398   2.92%  45,720   3.41%
Consumer loans (2)  11,958   0.70%  14,227   0.88%  19,129   1.26%  22,563   1.59%  30,198   2.25%
Total non-mortgage loans  32,999   1.92%  34,117   2.09%  59,094   3.88%  63,961   4.51%  75,918   5.66%
Total loans, gross  1,722,161   100.00%  1,641,304   100.00%  1,525,668   100.00%  1,415,373   100.00%  1,339,409   100.00%
Net deferred loan origination costs  1,059      2,099      2,051      2,288      2,446    
Allowance for credit losses on loans  (28,173)     (28,975)     (34,592)     (25,108)     (17,535)   
Loans, net $1,695,047     $1,614,428     $1,493,127     $1,392,553     $1,324,320    
                                    

(1) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, business loans include $3.2 million, $3.6 million, $20.0 million, $24.7 million and $30.8 million, respectively, of PPP loans.
(2) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022 and June 30, 2022, consumer loans include $11.2 million, $13.4 million, $18.2 million, $21.5 million and $28.3 million, respectively, of loans originated by the Bank pursuant to its arrangement with Grain.

Ponce Financial Group, Inc. and Subsidiaries
Grain Loan Exposure

Grain Technologies, Inc. ("Grain") Total Exposure as of June 30, 2023 
(in thousands) 
Receivable from Grain   
Microloans originated - put back to Grain (inception-to-June 30, 2023) $24,324 
Write-downs, net of recoveries (inception-to-date as of June 30, 2023)  (15,679)
Cash receipts from Grain (inception-to-June 30, 2023)  (6,819)
Grant/reserve  (1,826)
Net receivable as of June 30, 2023 $ 
Microloan receivables from Grain Borrowers   
Grain originated loans receivable as of June 30, 2023 $11,213 
Allowance for credit losses on loans as of June 30, 2023 (1)  (9,786)
Microloans, net of allowance for credit losses on loans as of June 30, 2023 $1,427 
Investments   
Investment in Grain $1,000 
Investment in Grain write-off in Q3 2022  (1,000)
Investment in Grain as of June 30, 2023   
Total exposure to Grain as of June 30, 2023 $1,427 
     

(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 $1.3 million of security deposits by Grain originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions.

Ponce Financial Group, Inc. and Subsidiaries
Allowance for Credit Losses on Loans

 For the Three Months Ended 
 June 30,  March 31,  December 31,  September 30,  June 30, 
 2023  2023  2022  2022  2022 
 (Dollars in thousands) 
Allowance for credit losses on loans at beginning of the period$28,975  $34,592  $25,108  $17,535  $16,893 
Provision (benefit) for credit losses on loans 934   (321)  12,641   9,330   817 
Adoption of CECL    (3,090)         
Charge-offs:              
Mortgage loans:              
1-4 family residences              
Investor owned              
Owner occupied              
Multifamily residences              
Nonresidential properties              
Construction and land              
Non-mortgage loans:              
Business              
Consumer (1,931)  (2,569)  (3,659)  (1,799)  (450)
Total charge-offs (1,931)  (2,569)  (3,659)  (1,799)  (450)
Recoveries:              
Mortgage loans:              
1-4 family residences              
Investor owned             156 
Owner occupied          39    
Multifamily residences              
Nonresidential properties              
Construction and land              
Non-mortgage loans:              
Business          1   91 
Consumer 195   363   502   2   28 
Total recoveries 195   363   502   42   275 
Net (charge-offs) recoveries (1,736)  (2,206)  (3,157)  (1,757)  (175)
Allowance for credit losses on loans at end of the period$28,173  $28,975  $34,592  $25,108  $17,535 
                    

Ponce Financial Group, Inc. and Subsidiaries
Deposits

  As of 
  June 30,  March 31,  December 31,  September 30,  June 30, 
  2023  2023  2022  2022  2022 
  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent  Amount  Percent 
  (Dollars in thousands) 
Demand $266,545   18.48% $282,741   21.15% $289,149   23.08% $288,654   21.37% $284,462   24.77%
Interest-bearing deposits:                              
NOW/IOLA accounts  22,754   1.57%  21,735   1.63%  24,349   1.94%  28,799   2.13%  28,597   2.49%
Money market accounts  538,520   37.35%  408,404   30.55%  317,815   25.38%  360,293   26.66%  181,156   15.77%
Reciprocal deposits  100,919   7.00%  109,649   8.20%  114,049   9.11%  162,858   12.05%  151,264   13.17%
Savings accounts  119,635   8.30%  127,731   9.55%  130,432   10.41%  140,055   10.37%  139,244   12.12%
Total NOW, money market, reciprocal and savings accounts  781,828   54.22%  667,519   49.93%  586,645   46.84%  692,005   51.21%  500,261   43.55%
Certificates of deposit of $250K or more  83,646   5.80%  76,893   5.75%  70,113   5.60%  61,900   4.58%  65,157   5.67%
Brokered certificates of deposit (1)  98,729   6.85%  98,754   7.39%  98,754   7.89%  98,760   7.31%  62,650   5.45%
Listing service deposits (1)  20,258   1.40%  28,417   2.13%  35,813   2.86%  40,964   3.03%  48,953   4.26%
All other certificates of deposit less than $250K  191,007   13.25%  182,553   13.65%  171,938   13.73%  168,906   12.50%  187,245   16.30%
Total certificates of deposit  393,640   27.30%  386,617   28.92%  376,618   30.08%  370,530   27.42%  364,005   31.68%
Total interest-bearing deposits  1,175,468   81.52%  1,054,136   78.85%  963,263   76.92%  1,062,535   78.63%  864,266   75.23%
Total deposits $1,442,013   100.00% $1,336,877   100.00% $1,252,412   100.00% $1,351,189   100.00% $1,148,728   100.00%
                                         

(1) As of June 30, 2023, March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022, there were $3.3 million, $9.5 million, $13.6 million, $13.8 million, and $18.5 million, respectively, in individual listing service deposits amounting to $250,000 or more. All brokered certificates of deposit individually amounted to less than $250,000.

Ponce Financial Group, Inc. and Subsidiaries
Borrowings

 June 30,  December 31, 
 2023  2022 
 Scheduled
Maturity
  Redeemable
at Call Date
  Weighted
Average
Rate
  Scheduled
Maturity
  Redeemable
at Call Date
  Weighted
Average
Rate
 
 (Dollars in thousands) 
Overnight line of credit advance$  $   % $6,000  $6,000   4.6%
                  
Term advances ending:                 
2023$7,000  $7,000   2.12  $178,375  $178,375   4.32 
2024 354,000   354,000   4.53   50,000   50,000   4.75 
2025 50,000   50,000   4.41   50,000   50,000   4.41 
2026                 
2027 212,000   212,000   3.44   183,000   183,000   3.25 
Thereafter 59,100   59,100   3.43   50,000   50,000   3.35 
 $682,100  $682,100   4.06% $517,375  $517,375   3.90%
                        

Ponce Financial Group, Inc. and Subsidiaries
Nonperforming Assets

 As of Three Months Ended 
 June 30,  March 31,  December 31,  September 30,  June 30, 
 2023  2023  2022  2022  2022 
 (Dollars in thousands) 
Non-accrual loans:              
Mortgage loans:              
1-4 family residential              
Investor owned$296  $2,836  $2,844  $5,902  $3,460 
Owner occupied 2,363   2,245   961   971   1,140 
Multifamily residential 1,435             
Nonresidential properties          778   1,162 
Construction and land 11,721   11,906   7,567   10,660   10,817 
Non-mortgage loans:              
Business    40      359    
Consumer              
Total non-accrual loans (not including non-accruing troubled debt restructured loans)$15,815  $17,027  $11,372  $18,670  $16,579 
               
Non-accruing troubled debt restructured loans:              
Mortgage loans:              
1-4 family residential              
Investor owned$209  $213  $217  $221  $224 
Owner occupied 840   2,020   2,027   2,215   1,746 
Multifamily residential              
Nonresidential properties    91   93   95   96 
Construction and land              
Non-mortgage loans:              
Business              
Consumer              
Total non-accruing troubled debt restructured loans 1,049   2,324   2,337   2,531   2,066 
Total non-accrual loans$16,864  $19,351  $13,709  $21,201  $18,645 
               
Accruing troubled debt restructured loans:              
Mortgage loans:              
1-4 family residential              
Investor owned$2,161  $2,185  $2,207  $2,228  $2,246 
Owner occupied 2,353   1,310   1,328   1,254   2,019 
Multifamily residential              
Nonresidential properties 783   701   708   715   725 
Construction and land              
Non-mortgage loans:              
Business              
Consumer              
Total accruing troubled debt restructured loans$5,297  $4,196  $4,243  $4,197  $4,990 
Total non-performing assets and accruing troubled debt restructured loans$22,161  $23,547  $17,952  $25,398  $23,635 
Total non-performing loans to total gross loans 0.98%  1.18%  0.90%  1.50%  1.39%
Total non-performing assets to total assets 0.63%  0.76%  0.59%  0.97%  0.90%
Total non-performing assets and accruing troubled debt restructured loans to total assets 0.83%  0.93%  0.78%  1.16%  1.14%
                    

Ponce Financial Group, Inc. and Subsidiaries
Average Balance Sheets

 For the Three Months Ended June 30,
 2023 2022
 Average       Average      
 Outstanding     Average Outstanding     Average
 Balance  Interest  Yield/Rate (1) Balance  Interest  Yield/Rate (1)
 (Dollars in thousands)
Interest-earning assets:               
Loans (2)$1,683,117  $23,015  5.48% $1,318,400  $16,057  4.89%
Securities (3) 614,598   5,731  3.74%  155,939   908  2.34%
Other (4) (5) 164,509   2,309  5.63%  109,755   202  0.74%
Total interest-earning assets 2,462,224   31,055  5.06%  1,584,094   17,167  4.35%
Non-interest-earning assets (5) 121,169        145,308      
Total assets$2,583,393       $1,729,402      
Interest-bearing liabilities:               
NOW/IOLA$22,280  $8  0.14% $32,321  $14  0.17%
Money market 539,020   5,874  4.37%  338,984   474  0.56%
Savings 122,802   29  0.09%  136,755   31  0.09%
Certificates of deposit 393,754   2,381  2.43%  387,129   677  0.70%
Total deposits 1,077,856   8,292  3.09%  895,189   1,196  0.54%
Advance payments by borrowers 16,967   2  0.05%  12,359   2  0.06%
Borrowings 649,652   6,479  4.00%  89,965   481  2.14%
Total interest-bearing liabilities 1,744,475   14,773  3.40%  997,513   1,679  0.68%
Non-interest-bearing liabilities:               
Non-interest-bearing demand 299,707        359,181      
Other non-interest-bearing liabilities 42,906        67,220      
Total non-interest-bearing liabilities 342,613        426,401      
Total liabilities 2,087,088   14,773     1,423,914   1,679   
Total equity 496,305        305,488      
Total liabilities and total equity$2,583,393     3.40% $1,729,402     0.68%
Net interest income   $16,282       $15,488   
Net interest rate spread (6)      1.66%       3.67%
Net interest-earning assets (7)$717,749       $586,581      
Net interest margin (8)      2.65%       3.92%
Average interest-earning assets to interest-bearing liabilities      141.14%       158.80%
                  

(1) Annualized where appropriate.
(2) Loans include loans and mortgage loans held for sale, at fair value.
(3) Securities include available-for-sale securities and held-to-maturity securities.
(4) Includes FHLBNY demand account, FHLBNY stock dividends and FRB demand deposits.
(5) FRB demand deposits for prior period have been reclassified for consistency.
(6) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(7) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(8) Net interest margin represents net interest income divided by average total interest-earning assets.

Ponce Financial Group, Inc. and Subsidiaries
Average Balance Sheets

 For the Six Months Ended June 30, 
 2023  2022 
 Average        Average       
 Outstanding     Average  Outstanding     Average 
 Balance  Interest  Yield/Rate (1)  Balance  Interest  Yield/Rate 
 (Dollars in thousands) 
Interest-earning assets:                 
Loans (2)$1,627,939  $42,715   5.29% $1,321,897  $34,257   5.23%
Securities (3) 622,822   11,806   3.82%  147,066   1,625   2.23%
Other (4) (5) 106,812   2,890   5.46%  108,094   303   0.57%
Total interest-earning assets 2,357,573   57,411   4.91%  1,577,057   36,185   4.63%
Non-interest-earning assets (5) 122,083         151,047       
Total assets$2,479,656        $1,728,104       
Interest-bearing liabilities:                 
NOW/IOLA$22,804  $17   0.15% $32,700  $30   0.19%
Money market 494,385   9,998   4.08%  329,448   709   0.43%
Savings 125,823   59   0.09%  136,084   63   0.09%
Certificates of deposit 387,592   4,252   2.21%  403,028   1,480   0.74%
Total deposits 1,030,604   14,326   2.80%  901,260   2,282   0.51%
Advance payments by borrowers 14,954   5   0.07%  11,091   3   0.05%
Borrowings 587,026   11,553   3.97%  102,258   1,074   2.12%
Total interest-bearing liabilities 1,632,584   25,884   3.20%  1,014,609   3,359   0.67%
Non-interest-bearing liabilities:                 
Non-interest-bearing demand 308,208         365,771       
Other non-interest-bearing liabilities 42,451         57,446       
Total non-interest-bearing liabilities 350,659         423,217       
Total liabilities 1,983,243   25,884      1,437,826   3,359    
Total equity 496,413         290,278       
Total liabilities and total equity$2,479,656      3.20% $1,728,104      0.67%
Net interest income   $31,527        $32,826    
Net interest rate spread (6)       1.71%        3.96%
Net interest-earning assets (7)$724,989        $562,448       
Net interest margin (8)       2.70%        4.20%
Average interest-earning assets to interest-bearing liabilities       144.41%        155.43%
                    

(1) Annualized where appropriate.
(2) Loans include loans and mortgage loans held for sale, at fair value.
(3) Securities include available-for-sale securities and held-to-maturity securities.
(4) Includes FHLBNY demand account, FHLBNY stock dividends and FRB demand deposit.
(5) FRB demand deposits for prior period have been reclassified for consistency.
(6) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities.
(7) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(8) Net interest margin represents net interest income divided by average total interest-earning assets.

Ponce Financial Group, Inc. and Subsidiaries
Other Data

 As of 
 June 30,  March 31,  December 31,  September 30,  June 30, 
 2023  2023  2022  2022  2022 
Other Data              
Common shares issued 24,886,711   24,865,476   24,861,329   24,728,460   24,724,274 
Less treasury shares 617,924   1,976   1,976       
Common shares outstanding at end of period 24,268,787   24,863,500   24,859,353   24,728,460   24,724,274 
               
Book value per common share$10.94  $10.90  $10.77  $11.15  $11.85 
Tangible book value per common share$10.94  $10.90  $10.77  $11.15  $11.85 
                    

Contact:
Frank Perez
frank.perez@poncebank.net
718-931-9000