Ponce Financial Group, Inc. Reports Second Quarter 2023 Results

Source: Nasdaq GlobeNewswire / 28 Jul 2023 16:21:18 America/New_York

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

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

Ponce Financial Group, Inc. Reports Second Quarter 2023 Results

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