Ponce Financial Group, Inc. Reports First Quarter 2023 Results

Rhea-AI Summary

Ponce Financial Group (NASDAQ: PDLB) reported a net income of $0.3 million, or $0.01 per diluted share, for Q1 2023, a notable recovery from net losses of $9.2 million in Q4 2022 and $6.8 million in Q1 2022. The increase was largely driven by an improved provision recovery related to Grain Technology. Net interest income fell to $15.2 million, down 5.7% from the previous quarter and 12.1% year-over-year, primarily due to rising funding costs. The net interest margin decreased to 2.75%, while total deposits increased by 6.74% to $1.34 billion. Cash and equivalents surged 239.75% to $184.7 million. The company’s total assets rose 9.84% to $2.54 billion. Ponce Financial also highlighted its commitment to investing in technology and community support, being awarded a $3.7 million grant from the U.S. Treasury.

Positive

• Net income of $0.3 million for Q1 2023, a turnaround from losses in prior quarters.
• Total assets increased by 9.84% to $2.54 billion.
• Deposits rose by 6.74% to $1.34 billion.
• Cash and equivalents increased by 239.75% to $184.7 million.
• Improved provision recovery from Grain Technology contributed positively to earnings.
• Awarded a $3.7 million grant from the U.S. Treasury, enhancing community support.

Negative

• Net interest income decreased by 5.7% from Q4 2022 and 12.1% year-over-year.
• Net interest margin fell to 2.75%, down from 2.98% in the prior quarter.
• Non-interest expenses increased by 3.78% from Q4 2022.

NEW YORK, April 26, 2023 (GLOBE NEWSWIRE) -- Ponce Financial Group, Inc., (the “Company”) (NASDAQ: PDLB), the holding company for Ponce Bank (the “Bank”), today announced results for the first quarter of 2023.

First Quarter 2023 Highlights (Compared to Prior Periods):

• Net income of $0.3 million or $0.01 per diluted share, for the three months ended March 31, 2023, as compared to net loss of ($9.2) million, or ($0.40) per diluted share for the three months ended December 31, 2022 and net loss of ($6.8) million, or ($0.31) per diluted share for the three months ended March 31, 2022.
• Included in the $0.3 million of net income for the first quarter of 2023 results is $15.2 million in net interest income and $1.8 million in non-interest income, offset by a $16.4 million in non-interest expense.
• Net interest income of $15.2 million for the first quarter of 2023 decreased $0.9 million, or 5.70%, from the prior quarter and $2.1 million, or 12.07%, from the same quarter last year, largely due to an increase in funding costs driven by the significant increase in interest rates during the quarter.
• Net interest margin was 2.75% for the first quarter of 2023, a decrease from 2.98% for the prior quarter and from 4.68% for the same quarter last year.
• Cash and equivalents were $184.7 million as of March 31, 2023, an increase of $130.3 million, or 239.75%, from December 31,2022 as we were able to take advantage of borrowing rates below what we collect on our interest bearing overnight deposit with banks.
• Securities totaled $620.0 million as of March 31, 2023, a decrease of $20.4 million, or 3.18%, from December 31, 2022 due to a call on one of the securities and changes in principal.
• Net loans receivable were $1.61 billion as of March 31, 2023, an increase of $121.3 million, or 8.12%, from December 31, 2022.
• Deposits were $1.34 billion as of March 31, 2023, an increase of $84.5 million, or 6.74%, from December 31, 2022.

President and Chief Executive Officer’s Comments

Carlos P. Naudon, Ponce Financial Group’s President and CEO, stated, “Although the U.S. economy continues to show strength, we saw plenty of volatility as well as a continuation of rate increases during the quarter. Despite that backdrop we were able to grow our loan and deposit base while keeping plenty of liquidity available – our liquid assets (cash and equivalents plus unpledged securities) stand at $573 million, almost double the level of our uninsured deposits of approximately $317 million. Our capital levels continue to be industry leading and multiples of regulatory requirements. We were also able to regain profitability and grow our book value per share. During the quarter we implemented Current Expected Credit Losses ("CECL") which slightly reduced our allowance for credit losses but increased our reserve for contingent exposures (which are booked as operating expenses). On the quarterly provision, we booked a net recovery as the $1.5 million charge due to loan increases and the $0.1 million related to the investment portfolio, offset by recoveries on the micro consumer loan portfolio of $1.8 million as the portfolio paid off significantly during the quarter. We also booked $0.9 million in recoveries related to the micro consumer loan receivable given our cash collections during the quarter.

“While we continue to prepare for different scenarios and it’s reasonable to expect further volatility, we remain committed to invest in our people and in technology to make us more efficient. Our commitment is also to the communities we serve and to our MDI/CDFI status – as an example, we announced on April 17, 2023 that we were awarded a grant of $3.7 million from the U.S. Treasury as part of the CDFI Equitable Recovery Program.”

Executive Chairman’s Comment

Steven A. Tsavaris, Ponce Financial Group’s Executive Chairman added, “Despite a challenging environment, we were able to organically add over $140 million to our real estate loan portfolio across most categories during the quarter while reducing our exposure related to consumer micro loans. We achieved this growth, without sacrificing quality - we will never choose loan growth over safe and sound underwriting practices. Our prudence has served us well over the years and it will continue to do so for years to come.”

Selected performance metrics are as follows (refer to “Key Metrics” for additional information):

		At or for the Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
Performance Ratios (Annualized):		2023				2022				2022				2022				2022
Return on average assets (1)			0.06	%			(1.62	%)			(2.80	%)			0.17	%			(1.55	%)
Return on average equity (1)			0.27	%			(7.28	%)			(11.25	%)			1.01	%			(10.06	%)
Net interest rate spread (1) (2)			1.79	%			2.14	%			3.12	%			3.86	%			4.48	%
Net interest margin (1) (3)			2.75	%			2.98	%			3.62	%			4.10	%			4.68	%
Non-interest expense to average assets (1)			2.79	%			2.78	%			4.83	%			3.73	%			6.39	%
Efficiency ratio (4)			95.88	%			94.95	%			132.46	%			93.77	%			143.50	%
Average interest-earning assets to average interest- bearing liabilities			147.75	%			151.73	%			161.30	%			151.98	%			145.54	%
Average equity to average assets			20.91	%			22.32	%			24.90	%			17.32	%			15.76	%

		At or for the Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
Capital Ratios (Annualized):		2023				2022				2022				2022				2022
Total capital to risk weighted assets (Bank only)			27.54	%			30.53	%			33.39	%			36.00	%			23.27	%
Tier 1 capital to risk weighted assets (Bank only)			26.28	%			29.26	%			32.13	%			34.75	%			22.02	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)			26.28	%			29.26	%			32.13	%			34.75	%			22.02	%
Tier 1 capital to average assets (Bank only)			19.51	%			20.47	%			22.91	%			28.79	%			14.88	%

		At or for the Three Months Ended
		March 31,				December 31,				September 30,				June 30,				March 31,
Asset Quality Ratios (Annualized):		2023				2022				2022				2022				2022
Allowance for loan losses as a percentage of total loans			1.77	%			2.27	%			1.77	%			1.31	%			1.28	%
Allowance for loan losses as a percentage of nonperforming loans			149.73	%			252.33	%			118.43	%			94.05	%			106.84	%
Net (charge-offs) recoveries to average outstanding loans (1)			(0.57	%)			(0.85	%)			(0.52	%)			(0.05	%)			(0.22	%)
Non-performing loans as a percentage of total gross loans			1.18	%			0.90	%			1.50	%			1.39	%			1.20	%
Non-performing loans as a percentage of total assets			0.76	%			0.59	%			0.97	%			0.90	%			0.97	%
Total non-performing assets as a percentage of total assets			0.76	%			0.59	%			0.97	%			0.90	%			0.97	%
Total non-performing assets and accruing troubled debt restructured loans as a percentage of total assets			0.93	%			0.78	%			1.16	%			1.14	%			1.30	%

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 income for the three months ended March 31, 2023, was $0.3 million compared to a net loss of ($9.2) million for the three months ended December 31, 2022 and net loss of ($6.8) million for the three months ended March 31, 2022. The increase of net income for the three months ended March 31, 2023 compared to the three months ended December 31, 2022 was attributed mainly to Grain Technology, Inc. ("Grain")’s net provision recovery this quarter versus a large Grain-related provision charge the prior quarter. The increase of net income for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was largely due to charges related to Grain and a contribution to the Ponce De Leon Foundation in the first quarter of 2022.

Net Interest Income and Net Margin

Net interest income for the three months ended March 31, 2023, was $15.2 million compared to $16.2 million for the three months ended December 31, 2022 and $17.3 million for the three months end March 31, 2022. This decrease is largely explained by increases in interest expenses due to higher interest rates, offset by increases in interest and dividend income.

Net interest margin was 2.75% for the three months ended March 31, 2023 compared to 2.98% for the prior quarter, a decrease of 23bps and 4.68% for the same period last year, a decrease of 193bps. 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 March 31, 2023, was $1.8 million, an increase of $1.4 million, or 316.25%, compared to the three months ended December 31, 2022 and a decrease of $0.4 million, or 18.28%, compared to the three months ended March 31, 2022.

The $1.4 million increase in non-interest income for the three months ended March 31, 2023 compared to the three months ended December 31, 2022 was impacted by the reversal of loan origination income that had been taken upfront (as opposed to deferred) last quarter and increases in late and prepayment charges and other non-interest income this quarter.

The $0.4 million decrease in non-interest income for the three months ended March 31, 2023 compared to the three months ended March 31, 2022 was attributable to decreases of $0.6 million in loan origination fees, $0.3 million in income on sale of mortgage loans and $0.3 million in brokerage commission, partially offset by increases of $0.7 million in late and prepayment charges and $0.1 million in other non-interest income.

Non-interest Expense

Non-interest expense for the three months ended March 31, 2023, was $16.4 million, an increase of $0.6 million, or 3.78%, compared to the three months ended December 31, 2022 and a decrease of $11.7 million, or 41.72%, compared to the three months ended March 31, 2022.

The $0.6 million increase from the three months ended December 31, 2022 was mainly attributable to increases of $1.4 million in provision for contingencies (mostly due to CECL implementation) and $0.9 million in compensation and benefits expense, offset by decreases of $0.8 million in other expenses, $0.4 million in Grain recoveries and $0.4 million in occupancy and equipment.

The $11.7 million decrease from the three months ended March 31, 2022 was attributable to a $9.0 million decrease in Grain write-off and write-down, as well as a $5.0 million contribution to the Ponce De Leon Foundation last year, partially offset by a higher provision for contingencies of $1.0 million (due to higher volumes and CECL implementation).

Balance Sheet Summary

Total assets increased $227.5 million, or 9.84%, to $2.54 billion as of March 31, 2023 from $2.31 billion as of December 31, 2022. The increase in total assets is largely attributable to increases of $130.3 million in cash and cash equivalents, $121.3 million in net loans receivable (inclusive of a $16.5 million net decrease in PPP loans) and $1.8 million in other assets, offset by decreases of $19.2 million in held-to-maturity securities and $5.5 million in Federal Home Loan Bank of New York stock.

Total liabilities increased $224.2 million, or 12.32%, to $2.04 billion as of March 31, 2023 from $1.82 billion as of December 31, 2022. The increase in total liabilities was largely attributable to increases of $131.0 million in borrowings and $84.5 million in deposits.

Total stockholders’ equity increased $3.3 million, or 0.68%, to $496.0 million as of March 31, 2023, from $492.7 million as of December 31, 2022. This increase in stockholders’ equity was largely attributable to $1.2 million in other comprehensive income related to improved valuation of securities, $1.1 million as a result of implementation of CECL, $0.4 million in share-based compensation, $0.3 million in net income and $0.3 million in ESOP.

About Ponce Financial Group, Inc.

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, is the holding company for Ponce Bank. Ponce Bank is a Minority Depository Institution, a Community Development Financial Institution, and a certified Small Business Administration lender. 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
	March 31,				December 31,				September 30,				June 30,				March 31,
	2023				2022				2022				2022				2022
ASSETS
Cash and due from banks:
Cash	$	83,670			$	34,074			$	37,235			$	53,544			$	32,168
Interest-bearing deposits in banks		101,017				20,286				25,286				221,262				37,127
Total cash and cash equivalents		184,687				54,360				62,521				274,806				69,295
Available-for-sale securities, at fair value		128,320				129,505				131,977				140,044				154,799
Held-to-maturity securities, at amortized cost (1)		491,649				510,820				494,297				211,517				927
Placement with banks		1,245				1,494				2,490				2,490				2,490
Mortgage loans held for sale, at fair value		2,987				1,979				3,357				9,234				7,972
Loans receivable, net		1,614,428				1,493,127				1,392,553				1,324,320				1,300,446
Accrued interest receivable		15,435				15,049				14,063				13,255				12,799
Premises and equipment, net		17,215				17,446				17,759				18,945				19,279
Right of use assets		33,147				33,423				34,121				34,416				35,179
Federal Home Loan Bank of New York stock (FHLBNY), at cost		19,209				24,661				14,272				16,429				5,420
Deferred tax assets		15,413				16,137				13,822				9,658				7,440
Other assets		15,799				13,988				11,170				21,585				13,730
Total assets	$	2,539,534			$	2,311,989			$	2,192,402			$	2,076,699			$	1,629,776
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits	$	1,336,877			$	1,252,412			$	1,351,189			$	1,148,728			$	1,181,165
Operating lease liabilities		34,308				34,532				35,081				35,217				35,821
Accrued interest payable		1,767				1,390				854				158				223
Advance payments by borrowers for taxes and insurance		14,902				9,724				10,589				8,668				10,161
Borrowings		648,375				517,375				286,375				334,375				93,375
Warehouse lines of credit		—				—				—				—				753
Other liabilities		7,264				3,856				7,631				31,471				8,699
Total liabilities		2,043,493				1,819,289				1,691,719				1,558,617				1,330,197
Commitments and contingencies
Stockholders' Equity:
Preferred stock, $0.01 par value; 100,000,000 shares authorized		225,000				225,000				225,000				225,000				—
Common stock, $0.01 par value; 200,000,000 shares authorized		249				249				247				247				247
Treasury stock, at cost		(2	)			(2	)			—				—				—
Additional paid-in-capital		206,883				206,508				206,092				205,669				205,243
Retained earnings		94,399				92,955				102,169				116,907				116,136
Accumulated other comprehensive loss		(16,629	)			(17,860	)			(18,420	)			(15,032	)			(7,035	)
Unearned compensation ─ ESOP		(13,859	)			(14,150	)			(14,405	)			(14,709	)			(15,012	)
Total stockholders' equity		496,041				492,700				500,683				518,082				299,579
Total liabilities and stockholders' equity	$	2,539,534			$	2,311,989			$	2,192,402			$	2,076,699			$	1,629,776

(1) Included for the quarterly period ended March 31, 2023 was $0.8 million 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
	March 31,				December 31,				September 30,				June 30,				March 31,
	2023				2022				2022				2022				2022
Interest and dividend income:
Interest on loans receivable	$	19,700			$	18,550			$	17,058			$	16,057			$	18,200
Interest on deposits due from banks		197				199				346				132				36
Interest and dividend on securities and FHLBNY stock		6,459				6,184				4,230				978				782
Total interest and dividend income		26,356				24,933				21,634				17,167				19,018
Interest expense:
Interest on certificates of deposit		1,871				1,310				687				677				803
Interest on other deposits		4,166				4,125				1,543				521				284
Interest on borrowings		5,074				3,332				1,793				481				593
Total interest expense		11,111				8,767				4,023				1,679				1,680
Net interest income		15,245				16,166				17,611				15,488				17,338
(Benefit) provision for credit losses		(174	)			12,641				9,330				817				1,258
Net interest income after (benefit) provision for credit losses		15,419				3,525				8,281				14,671				16,080
Non-interest income:
Service charges and fees		491				481				464				445				440
Brokerage commissions		15				180				288				214				338
Late and prepayment charges		729				263				109				193				58
Income on sale of mortgage loans		99				7				116				200				418
Loan origination (1)		—				(557	)			522				696				625
(Loss) gain on sale of premises and equipment		—				—				(436	)			—				—
Other		485				63				514				431				347
Total non-interest income		1,819				437				1,577				2,179				2,226
Non-interest expense:
Compensation and benefits		7,446				6,501				7,377				6,911				7,125
Occupancy and equipment		3,570				3,928				3,611				3,237				3,192
Data processing expenses		1,192				1,114				994				824				847
Direct loan expenses		412				454				654				505				874
Provision for contingencies		985				(440	)			519				30				17
Insurance and surety bond premiums		265				270				297				156				147
Office supplies, telephone and postage		399				375				369				406				405
Professional fees		1,455				1,571				1,251				1,748				1,334
Contribution to the Ponce De Leon Foundation		—				—				—				—				4,995
Grain (recoveries) and write-off		(914	)			(515	)			8,881				1,500				8,074
Marketing and promotional expenses		128				256				214				52				71
Directors fees and regulatory assessment		155				196				188				167				154
Other operating expenses		1,268				2,055				1,061				1,031				839
Total non-interest expense		16,361				15,765				25,416				16,567				28,074
Income (loss) before income taxes		877				(11,803	)			(15,558	)			283				(9,768	)
Provision (benefit) for income taxes		546				(2,589	)			(820	)			(488	)			(2,948	)
Net income (loss)	$	331			$	(9,214	)		$	(14,738	)		$	771			$	(6,820	)
Earnings (loss) per common share:
Basic	$	0.01			$	(0.40	)		$	(0.64	)		$	0.03			$	(0.31	)
Diluted	$	0.01			$	(0.40	)		$	(0.64	)		$	0.03			$	(0.31	)
Weighted average common shares outstanding:
Basic		23,293,013				23,168,097				23,094,859				23,056,559				21,721,113
Diluted		23,324,532				23,168,097				23,094,859				23,128,911				21,721,113

(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 Three Months Ended March 31,
		2023				2022				Variance $				Variance %
Interest and dividend income:
Interest on loans receivable		$	19,700			$	18,200			$	1,500				8.24	%
Interest on deposits due from banks			197				36				161				447.22	%
Interest and dividend on securities and FHLBNY stock			6,459				782				5,677				725.96	%
Total interest and dividend income			26,356				19,018				7,338				38.58	%
Interest expense:
Interest on certificates of deposit			1,871				803				1,068				133.00	%
Interest on other deposits			4,166				284				3,882				1,366.90	%
Interest on borrowings			5,074				593				4,481				755.65	%
Total interest expense			11,111				1,680				9,431				561.37	%
Net interest income			15,245				17,338				(2,093	)			(12.07	%)
(Benefit) provision for credit losses			(174	)			1,258				(1,432	)			(113.83	%)
Net interest income after (benefit) provision for credit losses			15,419				16,080				(661	)			(4.11	%)
Non-interest income:
Service charges and fees			491				440				51				11.59	%
Brokerage commissions			15				338				(323	)			(95.56	%)
Late and prepayment charges			729				58				671				1,156.90	%
Income on sale of mortgage loans			99				418				(319	)			(76.32	%)
Loan origination			—				625				(625	)			(100.00	%)
Other			485				347				138				39.77	%
Total non-interest income			1,819				2,226				(407	)			(18.28	%)
Non-interest expense:
Compensation and benefits			7,446				7,125				321				4.51	%
Occupancy and equipment			3,570				3,192				378				11.84	%
Data processing expenses			1,192				847				345				40.73	%
Direct loan expenses			412				874				(462	)			(52.86	%)
Provision for contingencies			985				17				968				5,694.12	%
Insurance and surety bond premiums			265				147				118				80.27	%
Office supplies, telephone and postage			399				405				(6	)			(1.48	%)
Professional fees			1,455				1,334				121				9.07	%
Contribution to the Ponce De Leon Foundation			—				4,995				(4,995	)			(100.00	%)
Grain (recoveries) and write-off			(914	)			8,074				(8,988	)			(111.32	%)
Marketing and promotional expenses			128				71				57				80.28	%
Directors fees and regulatory assessment			155				154				1				0.65	%
Other operating expenses			1,268				839				429				51.13	%
Total non-interest expense			16,361				28,074				(11,713	)			(41.72	%)
Income (loss) before income taxes			877				(9,768	)			10,645				(108.98	%)
Provision (benefit) for income taxes			546				(2,948	)			3,494				(118.52	%)
Net income (loss)		$	331			$	(6,820	)		$	7,151				(104.85	%)
Earnings (loss) per common share:
Basic		$	0.01			$	(0.31	)		$	0.33				(104.53	%)
Diluted		$	0.01			$	(0.31	)		$	0.33				(104.52	%)
Weighted average common shares outstanding:
Basic			23,293,013				21,721,113				1,571,900				7.24	%
Diluted			23,324,532				21,721,113				1,603,419				7.38	%

Ponce Financial Group, Inc. and Subsidiaries
Key Metrics

	At or for the Three Months Ended
	March 31,				December 31,				September 30,				June 30,				March 31,
	2023				2022				2022				2022				2022
Performance Ratios:
Return on average assets (1)		0.06	%			(1.62	%)			(2.80	%)			0.17	%			(1.55	%)
Return on average equity (1)		0.27	%			(7.28	%)			(11.25	%)			1.01	%			(10.06	%)
Net interest rate spread (1) (2)		1.79	%			2.14	%			3.12	%			3.86	%			4.48	%
Net interest margin (1) (3)		2.75	%			2.98	%			3.62	%			4.10	%			4.68	%
Non-interest expense to average assets (1)		2.79	%			2.78	%			4.83	%			3.73	%			6.39	%
Efficiency ratio (4)		95.88	%			94.95	%			132.46	%			93.77	%			143.50	%
Average interest-earning assets to average interest- bearing liabilities		147.75	%			151.73	%			161.30	%			151.98	%			145.54	%
Average equity to average assets		20.91	%			22.32	%			24.90	%			17.32	%			15.76	%
Capital Ratios:
Total capital to risk weighted assets (Bank only)		27.54	%			30.53	%			33.39	%			36.00	%			23.27	%
Tier 1 capital to risk weighted assets (Bank only)		26.28	%			29.26	%			32.13	%			34.75	%			22.02	%
Common equity Tier 1 capital to risk-weighted assets (Bank only)		26.28	%			29.26	%			32.13	%			34.75	%			22.02	%
Tier 1 capital to average assets (Bank only)		19.51	%			20.47	%			22.91	%			28.79	%			14.88	%
Asset Quality Ratios:
Allowance for credit losses on loans as a percentage of total loans		1.77	%			2.27	%			1.77	%			1.31	%			1.28	%
Allowance for credit losses on loans as a percentage of nonperforming loans		149.73	%			252.33	%			118.43	%			94.05	%			106.84	%
Net (charge-offs) recoveries to average outstanding loans (1)		(0.57	%)			(0.85	%)			(0.52	%)			(0.05	%)			(0.22	%)
Non-performing loans as a percentage of total gross loans		1.18	%			0.90	%			1.50	%			1.39	%			1.20	%
Non-performing loans as a percentage of total assets		0.76	%			0.59	%			0.97	%			0.90	%			0.97	%
Total non-performing assets as a percentage of total assets		0.76	%			0.59	%			0.97	%			0.90	%			0.97	%
Total non-performing assets and accruing troubled debt restructured loans as a percentage of total assets		0.93	%			0.78	%			1.16	%			1.14	%			1.30	%
Other:
Number of offices		19				19				19				19				19
Number of full-time equivalent employees		251				253				257				253				223

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

		March 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		$	2,987			$	—			$	(241	)		$	2,746			$	2,985			$	—			$	(296	)		$	2,689
Corporate Bonds			25,816				—				(2,639	)			23,177				25,824				—				(2,465	)			23,359
Mortgage-Backed Securities:
Collateralized Mortgage Obligations (1)			43,421				—				(6,030	)			37,391				44,503				—				(6,726	)			37,777
FHLMC Certificates			11,036				—				(1,490	)			9,546				11,310				—				(1,676	)			9,634
FNMA Certificates			65,819				—				(10,474	)			55,345				67,199				—				(11,271	)			55,928
GNMA Certificates			117				—				(2	)			115				122				—				(4	)			118
Total available-for-sale securities		$	149,196			$	—			$	(20,876	)		$	128,320			$	151,943			$	—			$	(22,438	)		$	129,505
Held-to-Maturity Securities:
U.S. Agency Bonds		$	25,000			$	—			$	(206	)		$	24,794			$	35,000			$	—			$	(380	)		$	34,620
Corporate Bonds			82,500				—				(4,158	)			78,342				82,500				57				(3,819	)			78,738
Mortgage-Backed Securities:
Collateralized Mortgage Obligations (1)			230,531				853				(2,457	)			228,927				235,479				192				(5,558	)			230,113
FHLMC Certificates			4,008				—				(245	)			3,763				4,120				—				(268	)			3,852
FNMA Certificates			128,968				—				(3,695	)			125,273				131,918				—				(5,227	)			126,691
SBA Certificates			21,451				71				—				21,522				21,803				34				—				21,837
Total held-to-maturity securities (2)		$	492,458			$	924			$	(10,761	)		$	482,621			$	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.
2. Excludes $0.8 million related to allowance for credit losses on securities.

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

		For the Three Months Ended March 31,
		2023				2022
Beginning balance		$	—			$	—
CECL adoption			662				—
Provision for credit losses			147				—
Allowance for credit losses on securities		$	809			$	—

Ponce Financial Group, Inc. and Subsidiaries
Loan Portfolio

		As of
		March 31,								December 31,								September 30,								June 30,								March 31,
		2023								2022								2022								2022								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Mortgage loans:
1-4 family residential
Investor Owned		$	354,559				21.60	%		$	343,968				22.54	%		$	336,667				23.79	%		$	321,671				24.02	%		$	323,442				24.59	%
Owner-Occupied			149,481				9.10	%			134,878				8.84	%			112,749				7.97	%			100,048				7.47	%			95,234				7.24	%
Multifamily residential			553,430				33.71	%			494,667				32.42	%			421,917				29.81	%			396,470				29.60	%			368,133				27.98	%
Nonresidential properties			314,560				19.17	%			308,043				20.19	%			282,642				19.97	%			279,877				20.90	%			251,893				19.14	%
Construction and land			235,157				14.33	%			185,018				12.13	%			197,437				13.95	%			165,425				12.35	%			144,881				11.01	%
Total mortgage loans			1,607,187				97.91	%			1,466,574				96.12	%			1,351,412				95.49	%			1,263,491				94.34	%			1,183,583				89.96	%
Non-mortgage loans:
Business loans (1)			19,890				1.21	%			39,965				2.62	%			41,398				2.92	%			45,720				3.41	%			100,253				7.62	%
Consumer loans (2)			14,227				0.88	%			19,129				1.26	%			22,563				1.59	%			30,198				2.25	%			31,899				2.42	%
Total non-mortgage loans			34,117				2.09	%			59,094				3.88	%			63,961				4.51	%			75,918				5.66	%			132,152				10.04	%
Total loans, gross			1,641,304				100.00	%			1,525,668				100.00	%			1,415,373				100.00	%			1,339,409				100.00	%			1,315,735				100.00	%
Net deferred loan origination costs			2,099								2,051								2,288								2,446								1,604
Allowance for credit losses on loans			(28,975	)							(34,592	)							(25,108	)							(17,535	)							(16,893	)
Loans, net		$	1,614,428							$	1,493,127							$	1,392,553							$	1,324,320							$	1,300,446

1. As of March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, business loans include $3.6 million, $20.0 million, $24.7 million, $30.8 million and $86.0 million, respectively, of PPP loans.
2. As of March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, consumer loans include $13.4 million, $18.2 million, $21.5 million, $28.3 million and $31.0 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 March 31, 2023
(in thousands)
Receivable from Grain
Microloans originated - put back to Grain (inception-to-March 31, 2023)		$	25,057
Write-downs, net of recoveries (inception-to-date as of March 31, 2023)			(16,541	)
Cash receipts from Grain (inception-to-March 31, 2023)			(6,690	)
Grant/reserve			(1,826	)
Net receivable as of March 31, 2023		$	—
Microloan receivables from Grain Borrowers
Grain originated loans receivable as of March 31, 2023		$	13,365
Allowance for credit losses on loans as of March 31, 2023 (1)			(11,597	)
Microloans, net of allowance for credit losses on loans as of March 31, 2023		$	1,768
Investments
Investment in Grain		$	1,000
Investment in Grain write-off in Q3 2022			(1,000	)
Investment in Grain as of March 31, 2023			—
Total exposure to Grain as of March 31, 2023		$	1,768

(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 $1.2 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
	March 31,				December 31,				September 30,				June 30,				March 31,
	2023				2022				2022				2022				2022
	(Dollars in thousands)
Allowance for credit losses on loans at beginning of the period	$	34,592			$	25,108			$	17,535			$	16,893			$	16,352
(Benefit) provision for credit losses on loans		(321	)			12,641				9,330				817				1,258
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		(2,569	)			(3,659	)			(1,799	)			(450	)			(751	)
Total charge-offs		(2,569	)			(3,659	)			(1,799	)			(450	)			(751	)
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				2
Consumer		363				502				2				28				32
Total recoveries		363				502				42				275				34
Net (charge-offs) recoveries		(2,206	)			(3,157	)			(1,757	)			(175	)			(717	)
Allowance for credit losses on loans at end of the period	$	28,975			$	34,592			$	25,108			$	17,535			$	16,893

Ponce Financial Group, Inc. and Subsidiaries
Deposits

		As of
		March 31,								December 31,								September 30,								June 30,								March 31,
		2023								2022								2022								2022								2022
		Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent				Amount				Percent
		(Dollars in thousands)
Demand		$	282,741				21.15	%		$	289,149				23.08	%		$	288,654				21.37	%		$	284,462				24.77	%		$	281,132				23.81	%
Interest-bearing deposits:
NOW/IOLA accounts			21,735				1.63	%			24,349				1.94	%			28,799				2.13	%			28,597				2.49	%			33,010				2.79	%
Money market accounts			408,404				30.55	%			317,815				25.38	%			360,293				26.66	%			181,156				15.77	%			169,847				14.38	%
Reciprocal deposits			109,649				8.20	%			114,049				9.11	%			162,858				12.05	%			151,264				13.17	%			160,510				13.59	%
Savings accounts			127,731				9.55	%			130,432				10.41	%			140,055				10.37	%			139,244				12.12	%			133,966				11.34	%
Total NOW, money market, reciprocal and savings accounts			667,519				49.93	%			586,645				46.84	%			692,005				51.21	%			500,261				43.55	%			497,333				42.10	%
Certificates of deposit of $250K or more			76,893				5.75	%			70,113				5.60	%			61,900				4.58	%			65,157				5.67	%			75,130				6.36	%
Brokered certificates of deposit (1)			98,754				7.39	%			98,754				7.89	%			98,760				7.31	%			62,650				5.45	%			79,282				6.71	%
Listing service deposits (1)			28,417				2.13	%			35,813				2.86	%			40,964				3.03	%			48,953				4.26	%			53,876				4.56	%
All other certificates of deposit less than $250K			182,553				13.65	%			171,938				13.73	%			168,906				12.50	%			187,245				16.30	%			194,412				16.46	%
Total certificates of deposit			386,617				28.92	%			376,618				30.08	%			370,530				27.42	%			364,005				31.68	%			402,700				34.09	%
Total interest-bearing deposits			1,054,136				78.85	%			963,263				76.92	%			1,062,535				78.63	%			864,266				75.23	%			900,033				76.19	%
Total deposits		$	1,336,877				100.00	%		$	1,252,412				100.00	%		$	1,351,189				100.00	%		$	1,148,728				100.00	%		$	1,181,165				100.00	%

(1) As of March 31, 2023, December 31, 2022, September 30, 2022, June 30, 2022 and March 31, 2022, there were $9.5 million, $13.6 million, $13.8 million, $18.5 million, and $19.0 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

	March 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				4.6	%
Term advances ending:
2023	$	24,775			$	24,775				2.81			$	178,375			$	178,375				4.32
2024		302,500				302,500				4.51				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	%
	$	648,375			$	648,375				3.99	%		$	517,375			$	517,375				3.90	%

Ponce Financial Group, Inc. and Subsidiaries
Nonperforming Assets

	As of Three Months Ended
	March 31,				December 31,				September 30,				June 30,				March 31,
	2023				2022				2022				2022				2022
	(Dollars in thousands)
Non-accrual loans:
Mortgage loans:
1-4 family residential
Investor owned	$	2,836			$	2,844			$	5,902			$	3,460			$	3,596
Owner occupied		2,245				961				971				1,140				962
Multifamily residential		—				—				—				—				—
Nonresidential properties		—				—				778				1,162				1,166
Construction and land		11,906				7,567				10,660				10,817				7,567
Non-mortgage loans:
Business		40				—				359				—				—
Consumer		—				—				—				—				—
Total non-accrual loans (not including non-accruing troubled debt restructured loans)	$	17,027			$	11,372			$	18,670			$	16,579			$	13,291
Non-accruing troubled debt restructured loans:
Mortgage loans:
1-4 family residential
Investor owned	$	213			$	217			$	221			$	224			$	230
Owner occupied		2,020				2,027				2,215				1,746				2,192
Multifamily residential		—				—				—				—				—
Nonresidential properties		91				93				95				96				98
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total non-accruing troubled debt restructured loans		2,324				2,337				2,531				2,066				2,520
Total non-accrual loans	$	19,351			$	13,709			$	21,201			$	18,645			$	15,811
Accruing troubled debt restructured loans:
Mortgage loans:
1-4 family residential
Investor owned	$	2,185			$	2,207			$	2,228			$	2,246			$	2,269
Owner occupied		1,310				1,328				1,254				2,019				2,313
Multifamily residential		—				—				—				—				—
Nonresidential properties		701				708				715				725				726
Construction and land		—				—				—				—				—
Non-mortgage loans:
Business		—				—				—				—				—
Consumer		—				—				—				—				—
Total accruing troubled debt restructured loans	$	4,196			$	4,243			$	4,197			$	4,990			$	5,308
Total non-performing assets and accruing troubled debt restructured loans	$	23,547			$	17,952			$	25,398			$	23,635			$	21,119
Total non-performing loans to total gross loans		1.18	%			0.90	%			1.50	%			1.39	%			1.20	%
Total non-performing assets to total assets		0.76	%			0.59	%			0.97	%			0.90	%			0.97	%
Total non-performing assets and accruing troubled debt restructured loans to total assets		0.93	%			0.78	%			1.16	%			1.14	%			1.30	%

Ponce Financial Group, Inc. and Subsidiaries
Average Balance Sheets

	For the Three Months Ended March 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)	$	1,572,148			$	19,700			5.08	%		$	1,325,433			$	18,200			5.57	%
Securities (3)		631,138				6,075			3.90	%			138,095				717			2.11	%
Other (4)		41,643				581			5.66	%			38,253				101			1.07	%
Total interest-earning assets		2,244,929				26,356			4.76	%			1,501,781				19,018			5.14	%
Non-interest-earning assets		129,837											225,006
Total assets	$	2,374,766										$	1,726,787
Interest-bearing liabilities:
NOW/IOLA	$	23,334			$	9			0.16	%		$	33,083			$	16			0.20	%
Money market		449,206				4,124			3.72	%			319,806				235			0.30	%
Savings		128,876				30			0.09	%			135,404				32			0.10	%
Certificates of deposit		381,362				1,871			1.99	%			419,104				803			0.78	%
Total deposits		982,778				6,034			2.49	%			907,397				1,086			0.49	%
Advance payments by borrowers		12,919				3			0.09	%			9,808				1			0.04	%
Borrowings		523,705				5,074			3.93	%			114,688				593			2.10	%
Total interest-bearing liabilities		1,519,402				11,111			2.97	%			1,031,893				1,680			0.66	%
Non-interest-bearing liabilities:
Non-interest-bearing demand		316,803				—							372,433				—
Other non-interest-bearing liabilities		42,038				—							47,562				—
Total non-interest-bearing liabilities		358,841				—							419,995				—
Total liabilities		1,878,243				11,111							1,451,888				1,680
Total equity		496,523											274,899
Total liabilities and total equity	$	2,374,766							2.97	%		$	1,726,787							0.66	%
Net interest income					$	15,245										$	17,338
Net interest rate spread (5)									1.79	%										4.48	%
Net interest-earning assets (6)	$	725,527										$	469,888
Net interest margin (7)									2.75	%										4.68	%
Average interest-earning assets to interest-bearing liabilities									147.75	%										145.54	%

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 and FHLBNY stock dividends.
5. 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.
6. Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
7. Net interest margin represents net interest income divided by average total interest-earning assets.

        

Ponce Financial Group, Inc. and Subsidiaries
Other Data

	As of
	March 31,				December 31,				September 30,				June 30,				March 31,
	2023				2022				2022				2022				2022
Other Data
Common shares issued		24,865,476				24,861,329				24,728,460				24,724,274				24,724,274
Less treasury shares		1,976				1,976				—				—				—
Common shares outstanding at end of period		24,863,500				24,859,353				24,728,460				24,724,274				24,724,274
Book value per common share	$	10.90			$	10.77			$	11.15			$	11.85			$	12.12
Tangible book value per common share	$	10.90			$	10.77			$	11.15			$	11.85			$	12.12

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

 

FAQ

What financial results did Ponce Financial Group (PDLB) report for Q1 2023?

Ponce Financial Group reported a net income of $0.3 million for Q1 2023, a significant recovery from losses in the previous quarters.

How much did PDLB's total assets increase by in Q1 2023?

Total assets increased by 9.84% to $2.54 billion as of March 31, 2023.

What were the changes in Ponce Financial Group's deposits and net loans in Q1 2023?

Deposits rose by 6.74% to $1.34 billion, while net loans receivable increased by 8.12% to $1.61 billion.

Did Ponce Financial Group experience an increase in net interest income for Q1 2023?

No, net interest income decreased by 5.7% compared to Q4 2022.

What grant did Ponce Financial Group receive in April 2023?

The company was awarded a $3.7 million grant from the U.S. Treasury as part of the CDFI Equitable Recovery Program.