Ponce Financial Group, Inc. Announces 2022 Second Quarter Results

Jul 29th, 2022 18:12 EST

NEW YORK, July 29, 2022 (GLOBE NEWSWIRE) — Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp (the “Company”) (NASDAQ: PDLB), the holding company for Ponce Bank (the “Bank”), reported net income of $771,000, or $0.03 per basic and diluted share, for the second quarter of 2022, compared to a net loss of ($6.8 million), or ($0.31) per basic and diluted share, for the prior quarter and net income of $5.9 million, or $0.35 per basic and diluted share, for the second quarter of 2021.

Second Quarter Highlights

  • Completed a private placement of $225.0 million of Senior Non-Cumulative Perpetual Preferred Stock, Series A, to the U.S. Department of Treasury pursuant to the Emergency Capital Investment Program.
  • Net interest income of $15.5 million for the second quarter of 2022 decreased $1.9 million, or 10.67%, from the prior quarter due to a reduction in PPP fee amortization. Net interest income for the second quarter of 2022 increased $1.8 million, or 12.79%, from the same quarter last year.
  • Income before taxes was $283,000 for the second quarter of 2022 as compared to a loss before taxes of ($9.8 million) for the prior quarter and income before taxes of $7.8 million for the same quarter last year. Included in the second quarter of 2022 is $1.5 million in additional write-offs of the receivable due from Grain Technologies, Inc. (“Grain”) for microloan originations put back to Grain. Included in the first quarter of 2022 is a $6.3 million write-off and $1.7 million in additional reserves for the receivable due from Grain for microloan originations put back to Grain.
  • Average cost of interest-bearing deposits was 0.54% for the second quarter of 2022, an increase from 0.49% for the prior quarter and a decrease from 0.67% for the same quarter last year.
  • Net interest margin was 4.10% for the second quarter of 2022, a decrease from 4.68% for the prior quarter and an increase from 3.84% for the same quarter last year.
  • Net interest rate spread was 3.86% for the second quarter of 2022, a decrease from 4.48% for the prior quarter and an increase from 3.60% for the same quarter last year.
  • Efficiency ratio was 93.77% for the second quarter of 2022 compared to 143.50% for the prior quarter and 61.80% for the same quarter last year.
  • Non-performing loans of $18.6 million as of June 30, 2022 increased $9.6 million year-over-year and were 1.39% of total gross loans receivable at June 30, 2022. The increase was largely attributable to a completed $6.6 million condominium construction loan which is now in the selling phase and has sales under contracts.
  • Net loans receivable were $1.32 billion at June 30, 2022, an increase of $19.2 million, or 1.47%, from December 31, 2021. The increase of $19.2 million was attributable to a $125.2 million increase in non-PPP loans partially offset by a $106.0 million decrease in PPP loans.
  • Securities increased $210.6 million in held-to-maturity securities and by $26.7 million in available-for-sale securities from December 31, 2021. The increase in the securities portfolio is designed to increase interest income and enhance the diversification in interest-earning assets.
  • Deposits were $1.15 billion at June 30, 2022, a decrease of $56.0 million, or 4.65%, from December 31, 2021.
  • An Environmental, Social and Governance Committee was established; it is comprised of the Executive Management Team and is currently in the process of developing a materiality assessment in order to determine what issues, practices, and policies are most important to key stakeholders.

President and Chief Executive Officer’s Comments

Carlos P. Naudon, President and CEO, stated that “we have raised additional equity capital of $328.8 million since December 31, 2021, giving us an unprecedented $518.1 million in stockholder’s equity with which to carry out our mission and add value to our stakeholders, which now includes the United States Treasury, as the holder of our preferred stock. We have begun the process of leveraging that capital, increasing our cash and securities portfolio to a combined $626.4 million from $268.2 million last year, positioning us for additional growing sources of interest income, a new strategic priority. We continue to assess the performance of our microloan portfolio and its strategic impact on our mission as an MDI and CDFI. We are balancing our need to acquire and retain talent necessary to grow our Company with our financial performance.”

Executive Chairman’s Comments

Steven A. Tsavaris, Executive Chairman, noted that “we continue to focus on growing our loan portfolio, net of PPP loans. We increased our net loans receivable by $19.2 million, or 1.47%, since December 31, 2021. Most telling, the reported growth masks the $125.2 million increase in non-PPP loans due to the concurrent $106.0 million reduction in PPP loans. The portfolio of mortgage loans has grown 17.1% year-over-year and 11.1% since December 31, 2021. Our loan growth reflects the resilience of rent stabilized housing, and its construction, in our communities, as well as the attractiveness of our non-qualified mortgages to business customers. We continue to be humbled by the retention of relationships after PPP loan forgivenesses.”

Summary of Results of Operations

Net income for the three months ended June 30, 2022 was $771,000, compared to ($6.8 million) of net loss for the three months ended March 31, 2022 and $5.9 million of net income for the three months ended June 30, 2021.

The $771,000 net income for the three months ended June 30, 2022, was a $7.6 million increase compared to the prior quarter. This increase was attributable to a decrease of $11.5 million in non-interest expense, offset by decreases of $2.5 million of benefit for income taxes and $1.9 million of net interest income. The $11.5 million decrease in non-interest expense reflects the lower write-down of Grain receivable and the nonrecurring contribution to the Ponce De Leon Foundation during the three months ended March 31, 2022.

The $771,000 net income for the three months ended June 30, 2022, was a $5.2 million reduction compared to the same quarter last year. This reduction was due to an increase of $2.9 million in non-interest expense, a decrease of $6.2 million in non-interest income and an increase of $231,000 in provision for loan losses, partially offset by an increase of $1.8 million in net interest income and a decrease of $2.4 million in provision for income taxes quarter over quarter.

The ($6.0 million) net loss for the six months ended June 30, 2022 is a $14.4 million decrease compared to the same period last year. This variance was largely due to an increase of $18.1 million in non-interest expense explained by the one-off expenses mentioned above as well as by an increase in compensation and benefits. Non-interest income was down by $7.8 million given the gain on sale of real property booked last year of $4.8 million coupled with a reduction in income on the sale of mortgage loans. Net interest income after provision for loan losses was up by $5.4 million on higher volumes.

Net interest income for the three months ended June 30, 2022 was $15.5 million, a decrease of $1.9 million, or 10.67%, compared to the three months ended March 31, 2022 and an increase of $1.8 million, or 12.79%, compared to the three months ended June 30, 2021. The decrease of $1.9 million in net interest income for the three months ended June 30, 2022 compared to the three months ended March 31, 2022 was due to a reduction in PPP fee amortization. The increase of $1.8 million in net interest income for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was due to higher average interest-earning assets of $81.6 million and higher net interest margin of 26bps.

Net interest income for the six months ended June 30, 2022 was $32.8 million, an increase of $6.2 million, or 23.29%, compared to the six months ended June 30, 2021. This increase was due to increases in average interest-earning assets of $137.3 million and net interest margin of 48bps.

Non-interest income of $2.2 million for both the three months ended June 30, 2022 and the three months ended March 31, 2022, decreased $6.2 million from $8.3 million for the three months ended June 30, 2021. Excluding the $4.2 million gain, net of expense, from sale of real properties during the three months ended June 30, 2021, non-interest income decreased $2.0 million from $4.2 million for the three months ended June 30, 2021 compared to $2.2 million for the three months ended June 30, 2022, largely due to decreases in income on mortgage loan sales and originations, reflecting both a slowdown in the secondary mortgage markets for refinances as well as the retention in portfolio of originated non-qualified mortgage loans.

The $2.2 million of non-interest income for both the three months ended June 30, 2022 and the three months ended March 31, 2022 was impacted by increases of $519,000 in other non-interest income and $135,000 in late and prepayment charges, offset by decreases of $364,000 in loan origination fees, $218,000 in income on sale of mortgage loans and $124,000 in brokerage commissions, quarter over quarter.

The decrease of $6.2 million in non-interest income for the three months ended June 30, 2022 compared to the three months ended June 30, 2021 was due to the absence of the one-time $4.2 million in gain, net of expenses, from the sale of real properties recognized during the three months ended June 30, 2021, combined with decreases of $1.1 million in income on sale of mortgage loans, $874,000 in loan origination fees, $216,000 in brokerage commissions and $105,000 in late and prepayment charges, offset by increases of $218,000 in other non-interest income and $79,000 in service charges and fees.

Non-interest income decreased $7.8 million to $4.4 million for the six months ended June 30, 2022 from $12.2 million for the six months ended June 30, 2021. The decrease of $7.8 million was due to a one-time $4.8 million gain, net of expenses, from the sale of real properties recognized during the six months ended June 30, 2021, combined with decreases of $2.2 million in income on sale of mortgage loans, $952,000 in loan origination fees, $291,000 in late and prepayment charges and $101,000 in brokerage commissions, offset by increases of $342,000 in other non-interest income and $190,000 in service charges and fees.

Non-interest expense decreased $11.5 million, or 40.98%, to $16.6 million for the three months ended June 30, 2022 from $28.1 million for the three months ended March 31, 2022 and increased $2.9 million, or 21.46%, from $13.6 million for the three months ended June 30, 2021.

The decrease of $11.5 million in non-interest expense for the three months ended June 30, 2022, compared to the three months ended March 31, 2022, was attributable to an aggregate $8.1 million write-off and write-down related to the receivable due from Grain for microloans originated by Grain and put back to Grain due to fraud in the first quarter of 2022 compared to an additional $1.5 million write-off and write-down in the second quarter of 2022, and a $5.0 million contribution to the Ponce De Leon Foundation in connection with the second-step conversion and reorganization during the first quarter of 2022. Other decreases in non-interest expense included $369,000 in direct loan expenses and $214,000 in compensation and benefits, offset by increases of $414,000 in professional fees and $205,000 in other operating expenses.

The increase of $2.9 million in non-interest expense for the three months ended June 30, 2022, compared to the three months ended June 30, 2021 is a result of increases of $2.7 million in compensation and benefits, $1.5 million in write-off and write-down in the second quarter of 2022 related to the receivable due from Grain for microloans originated by Grain and put back to Grain due to fraud, $399,000 in occupancy and equipment, $103,000 in other operating expenses and $91,000 in data processing expenses, offset by decreases of $1.2 million in professional fees and $646,000 in direct loan expenses. The $2.7 million increase of compensation and benefits related to nonrecurring expense amortization related to PPP loans and new hires.

Non-interest expense increased $18.1 million to $44.6 million for the six months ended June 30, 2022 from $26.6 million for the six months ended June 30, 2021. The increase in non-interest expense for the six months ended June 30, 2022 compared to the six months ended June 30, 2021 was attributable to an aggregate $9.6 million write-off and write down related to the receivable due from Grain for microloans originated by Grain and put back to Grain due to fraud, a $5.0 million contribution to the Ponce De Leon Foundation in connection with the second-step conversion and reorganization during the first quarter of 2022. Other increases in non-interest expense included $4.1 million in compensation and benefits, $957,000 in occupancy and equipment reflecting rental expenses on facilities that were sold and leased back and $344,000 in data processing expenses, offset by decreases of $1.1 million in professional fees and $781,000 in direct loan expenses. The $4.1 million increase of compensation and benefits related to nonrecurring expense amortization related to PPP loans and new hires.

Summary of Balance Sheet

Total assets increased $388.8 million, or 23.51%, to $2.04 billion at June 30, 2022 from $1.65 billion at December 31, 2021. The increase in total assets is attributable to increases of $210.6 million in held-to-maturity securities and $120.9 million in cash and cash equivalents. Other increases in total assets are $26.7 million in available-for-sale securities, $19.2 million in net loans receivable (inclusive of $106.0 million net decrease in PPP loans), $10.4 million in FHLBNY stock, $5.8 million in deferred tax assets, $1.5 million in other assets and $893,000 in accrued interest receivable. The increase in total assets was reduced by decreases of $6.6 million in mortgage loans held for sale, at fair value and $672,000, net, in premises and equipment.

Total liabilities increased $59.9 million, or 4.09%, to $1.52 billion at June 30, 2022 from $1.46 billion at December 31, 2021. The increase in total liabilities was mainly attributable to increases of $228.1 million in advances from FHLBNY and $24.0 million in other liabilities offset by decreases of $122.0 million in second-step liabilities held at December 31, 2021 pending the closing of the conversion and reorganization on January 27, 2022, $56.0 million in deposits and $15.1 million in warehouse lines of credit.

Total stockholders’ equity increased $328.8 million, or 173.75%, to $518.1 million at June 30, 2022 from $189.3 million at December 31, 2021. This increase in stockholders’ equity was mainly attributable to the $225.0 million issuance of preferred stock to the U.S. Treasury pursuant to its Emergency Capital Investment Program, $118.0 million as a result of the sale of common stock in the second-step mutual conversion and reorganization, $4.0 million equity contribution to the Ponce De Leon Foundation, $756,000 in share-based compensation and $690,000 in Employee Stock Ownership Plan shares committed to be released offset by $13.6 million in accumulated other comprehensive loss and $6.0 million in net loss.

Pursuant to the conversion and reorganization, PDL Community Bancorp treasury stock was extinguished on January 27, 2022. Ponce Financial Group, Inc. currently has no treasury stock.

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 and 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; the anticipated impact of the COVID-19 pandemic and Ponce Bank’s attempts at mitigation; 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., as the successor by merger with PDL Community Bancorp, and SubsidiariesConsolidated Statements of Financial Condition(Dollars in thousands, except for share data)

  As of  
  June 30,     March 31,     December 31,     September 30,     June 30,  
  2022     2022     2021     2021     2021  
ASSETS                                      
Cash and due from banks:                                      
Cash $ 53,544     $ 32,168     $ 98,954     $ 29,365     $ 32,541  
Interest-bearing deposits in banks   221,262       37,127       54,940       33,673       33,551  
Total cash and cash equivalents   274,806       69,295       153,894       63,038       66,092  
Available-for-sale securities, at fair value   140,044       154,799       113,346       104,358       48,536  
Held-to-maturity securities, at amortized cost   211,517       927       934       1,437       1,720  
Placement with banks   2,490       2,490       2,490       2,490       2,739  
Mortgage loans held for sale, at fair value   9,234       7,972       15,836       13,930       15,308  
Loans receivable, net   1,324,320       1,300,446       1,305,078       1,302,238       1,343,578  
Accrued interest receivable   13,255       12,799       12,362       13,360       13,134  
Premises and equipment, net   18,945       19,279       19,617       34,081       34,057  
Federal Home Loan Bank of New York stock (FHLBNY), at cost   16,429       5,420       6,001       6,001       6,156  
Deferred tax assets   9,658       7,440       3,820       4,826       5,493  
Other assets   21,585       13,730       20,132       14,793       10,837  
Total assets $ 2,042,283     $ 1,594,597     $ 1,653,510     $ 1,560,552     $ 1,547,650  
LIABILITIES AND STOCKHOLDERS’ EQUITY                                      
Liabilities:                                      
Deposits $ 1,148,728     $ 1,181,165     $ 1,204,716     $ 1,249,261     $ 1,236,161  
Accrued interest payable   158       223       228       238       55  
Advance payments by borrowers for taxes and insurance   8,668       10,161       7,657       9,118       7,682  
Advances from the FHLBNY and others   334,375       93,375       106,255       106,255       109,255  
Warehouse lines of credit         753       15,090       11,261       13,084  
Mortgage loan fundings payable                     1,136       743  
Second-step liabilities               122,000              
Other liabilities   32,272       9,341       8,308       9,396       8,780  
Total liabilities   1,524,201       1,295,018       1,464,254       1,386,665       1,375,760  
Commitments and contingencies                                      
Stockholders’ Equity:                                      
Preferred stock, $0.01 par value; 100,000,000 shares authorized   225,000                          
Common stock, $0.01 par value; 200,000,000 shares authorized   247       247       185       185       185  
Treasury stock, at cost               (13,687 )     (15,069 )     (15,069 )
Additional paid-in-capital   205,669       205,243       85,601       86,360       85,956  
Retained earnings   116,907       116,136       122,956       107,977       105,925  
Accumulated other comprehensive loss   (15,032 )     (7,035 )     (1,456 )     (621 )     (41 )
Unearned compensation ─ ESOP   (14,709 )     (15,012 )     (4,343 )     (4,945 )     (5,066 )
Total stockholders’ equity   518,082       299,579       189,256       173,887       171,890  
Total liabilities and stockholders’ equity $ 2,042,283     $ 1,594,597     $ 1,653,510     $ 1,560,552     $ 1,547,650  

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and SubsidiariesConsolidated Statements of Operations(Dollars in thousands, except per share data)

  Three Months Ended  
  June 30,     March 31,     December 31,     September 30,     June 30,  
  2022     2022     2021     2021     2021  
Interest and dividend income:                                      
Interest on loans receivable $ 16,057     $ 18,200     $ 18,013     $ 16,991     $ 15,603  
Interest on deposits due from banks   132       36       7       9       2  
Interest and dividend on securities and FHLBNY stock   978       782       632       425       239  
Total interest and dividend income   17,167       19,018       18,652       17,425       15,844  
Interest expense:                                      
Interest on certificates of deposit   677       803       907       1,010       1,108  
Interest on other deposits   521       284       309       354       382  
Interest on borrowings   481       593       654       621       622  
Total interest expense   1,679       1,680       1,870       1,985       2,112  
Net interest income   15,488       17,338       16,782       15,440       13,732  
Provision for loan losses   817       1,258       873       572       586  
Net interest income after provision for loan losses   14,671       16,080       15,909       14,868       13,146  
Non-interest income:                                      
Service charges and fees   445       440       468       494       366  
Brokerage commissions   214       338       401       270       430  
Late and prepayment charges   193       58       336       329       298  
Income on sale of mortgage loans   200       418       1,294       1,175       1,288  
Loan origination   97       461       886       625       971  
Gain on sale of real property               15,431             4,176  
Other   1,030       511       353       341       812  
Total non-interest income   2,179       2,226       19,169       3,234       8,341  
Non-interest expense:                                      
Compensation and benefits   6,911       7,125       6,959       6,427       4,212  
Occupancy and equipment   3,237       3,192       3,007       2,849       2,838  
Data processing expenses   824       847       771       917       733  
Direct loan expenses   505       874       1,032       696       1,151  
Insurance and surety bond premiums   156       147       149       147       143  
Office supplies, telephone and postage   406       405       552       626       467  
Professional fees   1,748       1,334       1,700       1,765       2,902  
Contribution to the Ponce De Leon Foundation         4,995                    
Grain write-off and write-down   1,500       8,074                    
Marketing and promotional expenses   52       71       69       51       48  
Directors fees   96       71       80       67       69  
Regulatory dues   71       83       69       74       120  
Other operating expenses   1,061       856       1,466       1,113       958  
Total non-interest expense   16,567       28,074       15,854       14,732       13,641  
Income (loss) before income taxes   283       (9,768 )     19,224       3,370       7,846  
(Benefit) provision for income taxes   (488 )     (2,948 )     4,245       1,318       1,914  
Net income (loss) $ 771     $ (6,820 )   $ 14,979     $ 2,052     $ 5,932  
Earnings (loss) per common share:                                      
Basic $ 0.03     $ (0.31 )   $ 0.90     $ 0.12     $ 0.35  
Diluted $ 0.03     $ (0.31 )   $ 0.89     $ 0.12     $ 0.35  
Weighted average common shares outstanding:                                      
Basic   23,056,559       21,721,113       16,864,929       16,823,731       16,737,037  
Diluted   23,128,911       21,721,113       16,924,785       16,914,833       16,773,606  

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and SubsidiariesConsolidated Statements of Operations(Dollars in thousands, except per share data)

    For the Six Months Ended June 30,  
    2022     2021     Variance $     Variance %  
Interest and dividend income:                                
Interest on loans receivable   $ 34,257     $ 30,528     $ 3,729       12.22 %
Interest on deposits due from banks     168       4       164     *  
Interest and dividend on securities and FHLBNY stock     1,760       489       1,271       259.92 %
Total interest and dividend income     36,185       31,021       5,164       16.65 %
Interest expense:                                
Interest on certificates of deposit     1,480       2,327       (847 )     (36.40 %)
Interest on other deposits     805       764       41       5.37 %
Interest on borrowings     1,074       1,306       (232 )     (17.76 %)
Total interest expense     3,359       4,397       (1,038 )     (23.61 %)
Net interest income     32,826       26,624       6,202       23.29 %
Provision for loan losses     2,075       1,272       803       63.13 %
Net interest income after provision for loan losses     30,751       25,352       5,399       21.30 %
Non-interest income:                                
Service charges and fees     885       695       190       27.34 %
Brokerage commissions     552       653       (101 )     (15.47 %)
Late and prepayment charges     251       542       (291 )     (53.69 %)
Income on sale of mortgage loans     618       2,796       (2,178 )     (77.90 %)
Loan origination     558       1,510       (952 )     (63.05 %)
Gain on sale of real property           4,839       (4,839 )     (100.00 %)
Other     1,541       1,199       342       28.52 %
Total non-interest income     4,405       12,234       (7,829 )     (63.99 %)
Non-interest expense:                                
Compensation and benefits     14,036       9,876       4,160       42.12 %
Occupancy and equipment     6,429       5,472       957       17.49 %
Data processing expenses     1,671       1,327       344       25.92 %
Direct loan expenses     1,379       2,160       (781 )     (36.16 %)
Insurance and surety bond premiums     303       289       14       4.84 %
Office supplies, telephone and postage     811       876       (65 )     (7.42 %)
Professional fees     3,082       4,164       (1,082 )     (25.98 %)
Contribution to the Ponce De Leon Foundation     4,995             4,995       %
Grain write-off and write-down     9,574             9,574       %
Marketing and promotional expenses     123       86       37       43.02 %
Directors fees     167       138       29       21.01 %
Regulatory dues     154       180       (26 )     (14.44 %)
Other operating expenses     1,917       1,988       (71 )     (3.57 %)
Total non-interest expense     44,641       26,556       18,085       68.10 %
(Loss) income before income taxes     (9,485 )     11,030       (20,515 )     (185.99 %)
(Benefit) provision for income taxes     (3,436 )     2,646       (6,082 )     (229.86 %)
Net (loss) income   $ (6,049 )   $ 8,384     $ (14,433 )     (172.15 %)
(Loss) earnings per common share:                                
Basic   $ (0.27 )   $ 0.50     N/A     N/A  
Diluted   $ (0.27 )   $ 0.50     N/A     N/A  
Weighted average common shares outstanding:                                
Basic     22,243,776       16,643,138     N/A     N/A  
Diluted     22,243,776       16,661,423     N/A     N/A  

* Represents more than 500%

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and SubsidiariesKey Metrics

  At or for the Three Months Ended  
  June 30,     March 31,     December 31,     September 30,     June 30,  
  2022     2022     2021     2021     2021  
Performance Ratios:                                      
Return on average assets (1)   0.18 %     (1.60 %)     3.69 %     0.52 %     1.59 %
Return on average equity (1)   1.01 %     (10.06 %)     31.46 %     4.59 %     13.95 %
Net interest rate spread (1) (2)   3.86 %     4.48 %     4.32 %     3.92 %     3.60 %
Net interest margin (1) (3)   4.10 %     4.68 %     4.51 %     4.13 %     3.84 %
Non-interest expense to average assets (1)   3.84 %     6.59 %     3.90 %     3.72 %     3.65 %
Efficiency ratio (4)   93.77 %     143.50 %     44.10 %     78.89 %     61.80 %
Average interest-earning assets to average interest- bearing liabilities   151.98 %     145.54 %     138.10 %     138.89 %     140.13 %
Average equity to average assets   17.66 %     15.92 %     11.71 %     11.27 %     11.37 %
Capital Ratios:                                      
Total capital to risk weighted assets (Bank only)   36.00 %     23.27 %     17.23 %     16.15 %     16.08 %
Tier 1 capital to risk weighted assets (Bank only)   34.75 %     22.02 %     15.98 %     14.90 %     14.83 %
Common equity Tier 1 capital to risk-weighted assets (Bank only)   34.75 %     22.02 %     15.98 %     14.90 %     14.83 %
Tier 1 capital to average assets (Bank only)   28.79 %     14.88 %     10.95 %     9.98 %     10.22 %
Asset Quality Ratios:                                      
Allowance for loan losses as a percentage of total loans   1.31 %     1.28 %     1.24 %     1.21 %     1.16 %
Allowance for loan losses as a percentage of nonperforming loans   94.05 %     106.84 %     142.90 %     157.17 %     175.63 %
Net (charge-offs) recoveries to average outstanding loans (1)   (0.05 %)     (0.22 %)     (0.18 %)     (0.13 %)     (0.07 %)
Non-performing loans as a percentage of total gross loans   1.39 %     1.20 %     0.87 %     0.77 %     0.66 %
Non-performing loans as a percentage of total assets   0.91 %     0.99 %     0.69 %     0.65 %     0.58 %
Total non-performing assets as a percentage of total assets   0.91 %     0.99 %     0.69 %     0.65 %     0.58 %
Total non-performing assets, accruing loans past due 90 days or more, and accruing troubled debt restructured loans as a percentage of total assets   1.16 %     1.32 %     1.07 %     1.05 %     1.01 %
Other:                                      
Number of offices 18     18     19     19     19  
Number of full-time equivalent employees 253     223     217     230     231  
                                       

(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., as the successor by merger with PDL Community Bancorp, and SubsidiariesSecurities Portfolio

    June 30, 2022  
            Gross     Gross          
    Amortized     Unrealized     Unrealized          
    Cost     Gains     Losses     Fair Value  
    (in thousands)  
Available-for-Sale Securities:                                
U.S. Government Bonds   $ 2,983     $     $ (264 )   $ 2,719  
Corporate Bonds     25,841       2       (1,812 )     24,031  
Mortgage-Backed Securities:                                
Collateralized Mortgage Obligations (1)     47,252             (5,322 )     41,930  
FHLMC Certificates     11,965             (1,513 )     10,452  
FNMA Certificates     70,771               (10,003 )     60,768  
GNMA Certificates     144                   144  
Total available-for-sale securities   $ 158,956     $ 2     $ (18,914 )   $ 140,044  
                               
Held-to-Maturity Securities:                                
Corporate Bonds   $ 79,000     $ 7     $     $ 79,007  
Mortgage-Backed Securities:                                
Collateralized Mortgage Obligations (1)     62,422             (3 )     62,419  
FHLMC Certificates     842             (128 )     714  
FNMA Certificates     69,253             (41 )     69,212  
Total held-to-maturity securities   $ 211,517     $ 7     $ (172 )   $ 211,352  

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

    December 31, 2021  
            Gross     Gross          
    Amortized     Unrealized     Unrealized          
    Cost     Gains     Losses     Fair Value  
    (in thousands)  
Available-for-Sale Securities:                                
U.S. Government Bonds   $ 2,981     $     $ (47 )   $ 2,934  
Corporate Bonds     21,243       144       (203 )     21,184  
Mortgage-Backed Securities:                                
Collateralized Mortgage Obligations (1)     18,845             (497 )     18,348  
FNMA Certificates     71,930             (1,231 )     70,699  
GNMA Certificates     175       6             181  
Total available-for-sale securities   $ 115,174     $ 150     $ (1,978 )   $ 113,346  
                               
Held-to-Maturity Securities:                                
FHLMC Certificates   $ 934     $     $ (20 )   $ 914  
Total held-to-maturity securities   $ 934     $     $ (20 )   $ 914  

(1) Comprised of FHLMC, FNMA and GNMA issued securities.

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and SubsidiariesLoan Portfolio

    As of  
    June 30,   March 31,   December 31,   September 30,   June 30,  
    2022   2022   2021   2021   2021  
    Amount     Percent   Amount     Percent   Amount     Percent   Amount     Percent   Amount     Percent  
    (Dollars in thousands)  
Mortgage loans:                                                              
1-4 family residential                                                              
Investor Owned   $ 321,671     24.02 % $ 323,442     24.59 % $ 317,304     24.01 % $ 319,346     24.14 % $ 325,409     23.83 %
Owner-Occupied     100,048     7.47 %   95,234     7.24 %   96,947     7.33 %   97,493     7.37 %   98,839     7.24 %
Multifamily residential     396,470     29.60 %   368,133     27.98 %   348,300     26.34 %   317,575     24.01 %   318,579     23.33 %
Nonresidential properties     279,877     20.90 %   251,893     19.14 %   239,691     18.13 %   211,075     15.96 %   211,181     15.46 %
Construction and land     165,425     12.35 %   144,881     11.01 %   134,651     10.19 %   133,130     10.07 %   125,265     9.17 %
Total mortgage loans     1,263,491     94.34 %   1,183,583     89.96 %   1,136,893     86.00 %   1,078,619     81.55 %   1,079,273     79.02 %
Non-mortgage loans:                                                              
Business loans (1)     45,720     3.41 %   100,253     7.62 %   150,512     11.38 %   207,859     15.72 %   253,935     18.59 %
Consumer loans (2)     30,198     2.25 %   31,899     2.42 %   34,693     2.62 %   36,095     2.73 %   32,576     2.39 %
Total non-mortgage loans     75,918     5.66 %   132,152     10.04 %   185,205     14.00 %   243,954     18.45 %   286,511     20.98 %
Total loans, gross     1,339,409     100.00 %   1,315,735     100.00 %   1,322,098     100.00 %   1,322,573     100.00 %   1,365,784     100.00 %
                                                               
Net deferred loan origination costs     2,446           1,604           (668 )         (4,327 )         (6,331 )      
Allowance for losses on loans     (17,535 )         (16,893 )         (16,352 )         (16,008 )         (15,875 )      
                                                               
Loans, net   $ 1,324,320         $ 1,300,446         $ 1,305,078         $ 1,302,238         $ 1,343,578        

(1)   As of June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021, and June 30, 2021, business loans include $30.8 million, $86.0 million, $136.8 million, $195.9 million and $241.5 million, respectively, of PPP loans.(2)  As of June 30, 2022, March 31, 2022, December 31, 2021, September 30, 2021 and June 30, 2021, consumer loans include $28.3 million, $31.0 million, $33.9 million, $35.5 million and $32.0 million, respectively, of loans originated by the Bank pursuant to its arrangement with Grain.

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and SubsidiariesGrain Loan Exposure

Grain Technologies, Inc. (“Grain”) Total Exposure as of June 30, 2022  
(Dollars in thousands)  
         
Receivable from Grain        
Microloans originated – put back to Grain (inception-to-June 30, 2022)   $ 20,449  
Write-downs (year to date as of June 30, 2022)     (9,574 )
Cash receipts from Grain (inception-to-June 30, 2022)     (6,047 )
Grant/reserve     (1,826 )
Net receivable as of June 30, 2022   $ 3,002  
         
Microloan receivables        
Grain originated loans receivable as of June 30, 2022   $ 28,296  
Allowance for loan losses as of June 30, 2022     (1,399 )
Microloans, net of allowance for loan losses as of June 30, 2022   $ 26,897  
         
Investments        
Investment in Grain as of June 30, 2022   $ 1,000  
         
Total exposure to Grain   $ 30,899  

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and SubsidiariesAllowance for Loan Losses

  For the Three Months Ended  
  June 30,     March 31,     December 31,     September 30,     June 30,  
  2022     2022     2021     2021     2021  
  (Dollars in thousands)  
Allowance for loan losses at beginning of the period $ 16,893     $ 16,352     $ 16,008     $ 15,875     $ 15,508  
Provision for loan losses   817       1,258       873       572       586  
Charge-offs:                                      
Mortgage loans:                                      
1-4 family residences                                      
Investor owned                            
Owner occupied                            
Multifamily residences               (38 )            
Nonresidential properties                            
Construction and land                            
Non-mortgage loans:                                      
Business                            
Consumer   (450 )     (751 )     (560 )     (510 )     (222 )
Total charge-offs   (450 )     (751 )     (598 )     (510 )     (222 )
Recoveries:                                      
Mortgage loans:                                      
1-4 family residences                                      
Investor owned   156             8              
Owner occupied               45              
Multifamily residences                            
Nonresidential properties                            
Construction and land                            
Non-mortgage loans:                                      
Business   91       2       15       69        
Consumer   28       32       1       2       3  
Total recoveries   275       34       69       71       3  
Net (charge-offs) recoveries   (175 )     (717 )     (529 )     (439 )     (219 )
Allowance for loan losses at end of the period $ 17,535     $ 16,893     $ 16,352     $ 16,008     $ 15,875  

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and SubsidiariesDeposits

    As of  
    June 30,   March 31,   December 31,   September 30,   June 30,  
    2022   2022   2021   2021   2021  
    Amount     Percent   Amount     Percent   Amount     Percent   Amount     Percent   Amount     Percent  
    (Dollars in thousands)  
Demand   $ 284,462     24.77 % $ 281,132     23.81 % $ 274,956     22.83 % $ 297,777     23.85 % $ 320,404     25.91 %
Interest-bearing deposits:                                                              
NOW/IOLA accounts     28,597     2.49 %   33,010     2.79 %   35,280     2.93 %   28,025     2.24 %   28,996     2.35 %
Money market accounts     181,156     15.77 %   169,847     14.38 %   186,893     15.51 %   199,758     15.99 %   172,925     13.99 %
Reciprocal deposits     151,264     13.17 %   160,510     13.59 %   143,221     11.89 %   147,226     11.79 %   151,443     12.25 %
Savings accounts     139,244     12.12 %   133,966     11.34 %   134,887     11.20 %   142,851     11.43 %   130,430     10.55 %
Total NOW, money market, reciprocal and savings accounts     500,261     43.55 %   497,333     42.10 %   500,281     41.53 %   517,860     41.45 %   483,794     39.14 %
Certificates of deposit of $250K or more     65,157     5.67 %   75,130     6.36 %   78,454     6.51 %   70,996     5.68 %   74,941     6.06 %
Brokered certificates of deposit (1)     62,650     5.45 %   79,282     6.71 %   79,320     6.58 %   83,505     6.68 %   83,506     6.76 %
Listing service deposits (1)     48,953     4.26 %   53,876     4.56 %   66,411     5.51 %   66,340     5.31 %   66,518     5.38 %
All other certificates of deposit less than $250K     187,245     16.30 %   194,412     16.46 %   205,294     17.04 %   212,783     17.03 %   206,998     16.75 %
Total certificates of deposit     364,005     31.68 %   402,700     34.09 %   429,479     35.64 %   433,624     34.70 %   431,963     34.95 %
Total interest-bearing deposits     864,266     75.23 %   900,033     76.19 %   929,760     77.17 %   951,484     76.15 %   915,757     74.09 %
Total deposits   $ 1,148,728     100.00 % $ 1,181,165     100.00 % $ 1,204,716     100.00 % $ 1,249,261     100.00 % $ 1,236,161     100.00 %

(1)  As of June 30, 2022, March 31, 2022, December 31, 2021, and September 30, 2021, June 30, 2021, there were $18.5 million, $19.0 million, $29.0 million, $28.9 million and $28.9 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., as the successor by merger with PDL Community Bancorp, and Subsidiaries Nonperforming Assets

  As of Three Months Ended  
  June 30,     March 31,     December 31,     September 30,     June 30,  
  2022     2022     2021     2021     2021  
  (Dollars in thousands)  
Non-accrual loans:                                      
Mortgage loans:                                      
1-4 family residential                                      
Investor owned $ 3,460     $ 3,596     $ 3,349     $ 1,669     $ 1,983  
Owner occupied   1,140       962       1,284       1,090       1,593  
Multifamily residential               1,200       2,577       955  
Nonresidential properties   1,162       1,166       2,163       1,388       1,408  
Construction and land   10,817       7,567       917       922        
Non-mortgage loans:                                      
Business                            
Consumer                            
Total non-accrual loans (not including non-accruing troubled debt restructured loans) $ 16,579     $ 13,291     $ 8,913     $ 7,646     $ 5,939  
                                       
Non-accruing troubled debt restructured loans:                                      
Mortgage loans:                                      
1-4 family residential                                      
Investor owned $ 224     $ 230     $ 234     $ 238     $ 242  
Owner occupied   1,746       2,192       2,196       2,200       2,199  
Multifamily residential                            
Nonresidential properties   96       98       100       101       659  
Construction and land                            
Non-mortgage loans:                                      
Business                            
Consumer                            
Total non-accruing troubled debt restructured loans   2,066       2,520       2,530       2,539       3,100  
Total non-accrual loans $ 18,645     $ 15,811     $ 11,443     $ 10,185     $ 9,039  
                                       
Accruing troubled debt restructured loans:                                      
Mortgage loans:                                      
1-4 family residential                                      
Investor owned $ 2,246     $ 2,269     $ 3,089     $ 3,121     $ 3,347  
Owner occupied   2,019       2,313       2,374       2,396       2,431  
Multifamily residential                            
Nonresidential properties   725       726       732       738       755  
Construction and land                            
Non-mortgage loans:                                      
Business                            
Consumer                            
Total accruing troubled debt restructured loans $ 4,990     $ 5,308     $ 6,195     $ 6,255     $ 6,533  
Total non-performing assets and accruing troubled debt restructured loans $ 23,635     $ 21,119     $ 17,638     $ 16,440     $ 15,572  
Total non-performing loans to total gross loans   1.39 %     1.20 %     0.87 %     0.77 %     0.66 %
Total non-performing assets to total assets   0.91 %     0.99 %     0.69 %     0.65 %     0.58 %
Total non-performing assets and accruing troubled debt restructured loans to total assets   1.16 %     1.32 %     1.07 %     1.05 %     1.01 %

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp, and Subsidiaries Average Balance Sheets

  For the Three Months Ended June 30,  
  2022     2021  
  Average                   Average                
  Outstanding             Average     Outstanding             Average  
  Balance     Interest     Yield/Rate (1)     Balance     Interest     Yield/Rate (1)  
  (Dollars in thousands)  
Interest-earning assets:                                          
Loans (2) $ 1,318,400     $ 16,057     4.89%     $ 1,332,808     $ 15,603     4.70%  
Securities (3)   155,939       908     2.34%       41,218       170     1.65%  
Other (4)   41,708       202     1.94%       60,439       71     0.47%  
Total interest-earning assets   1,516,047       17,167     4.54%       1,434,465       15,844     4.43%  
Non-interest-earning assets   213,355                     66,240                
Total assets $ 1,729,402                   $ 1,500,705                
Interest-bearing liabilities:                                          
NOW/IOLA $ 32,321     $ 14     0.17%     $ 30,370     $ 32     0.42%  
Money market   338,984       474     0.56%       300,326       311     0.42%  
Savings   136,755       31     0.09%       131,397       38     0.12%  
Certificates of deposit   387,129       677     0.70%       431,324       1,108     1.03%  
Total deposits   895,189       1,196     0.54%       893,417       1,489     0.67%  
Advance payments by borrowers   12,359       2     0.06%       11,086       1     0.04%  
Borrowings   89,965       481     2.14%       119,162       622     2.09%  
Total interest-bearing liabilities   997,513       1,679     0.68%       1,023,665       2,112     0.83%  
Non-interest-bearing liabilities:                                          
Non-interest-bearing demand   359,181                   293,626              
Other non-interest-bearing liabilities   67,220                   12,848              
Total non-interest-bearing liabilities   426,401                   306,474              
Total liabilities   1,423,914       1,679             1,330,139       2,112        
Total equity   305,488                     170,566                
Total liabilities and total equity $ 1,729,402             0.68%     $ 1,500,705             0.83%  
Net interest income         $ 15,488                   $ 13,732        
Net interest rate spread (5)                 3.86%                     3.60%  
Net interest-earning assets (6) $ 518,534                   $ 410,800                
Net interest margin (7)                 4.10%                     3.84%  
Average interest-earning assets to interest-bearing liabilities                 151.98%                     140.13%  
                                           

(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., as the successor by merger with PDL Community Bancorp, and Subsidiaries Average Balance Sheets

  For the Six Months Ended June 30,  
  2022     2021  
  Average                   Average                
  Outstanding             Average     Outstanding             Average  
  Balance     Interest     Yield/Rate (1)     Balance     Interest     Yield/Rate  
  (Dollars in thousands)  
Interest-earning assets:                                          
Loans (2) $ 1,321,897     $ 34,257     5.23%     $ 1,286,226     $ 30,528     4.79%  
Securities (3)   147,066       1,625     2.23%       31,919       346     2.19%  
Other (4)   39,990       303     1.53%       53,548       147     0.55%  
Total interest-earning assets   1,508,953       36,185     4.84%       1,371,693       31,021     4.56%  
Non-interest-earning assets   219,151                     65,102                
Total assets $ 1,728,104                   $ 1,436,795                
Interest-bearing liabilities:                                          
NOW/IOLA $ 32,700     $ 30     0.19%     $ 31,720     $ 70     0.45%  
Money market   329,448       709     0.43%       288,779       615     0.43%  
Savings   136,084       63     0.09%       129,191       77     0.12%  
Certificates of deposit   403,028       1,480     0.74%       418,722       2,327     1.12%  
Total deposits   901,260       2,282     0.51%       868,412       3,089     0.72%  
Advance payments by borrowers   11,091       3     0.05%       9,999       2     0.04%  
Borrowings   102,258       1,074     2.12%       124,429       1,306     2.12%  
Total interest-bearing liabilities   1,014,609       3,359     0.67%       1,002,840       4,397     0.88%  
Non-interest-bearing liabilities:                                          
Non-interest-bearing demand   365,771                   254,588              
Other non-interest-bearing liabilities   57,446                   13,297              
Total non-interest-bearing liabilities   423,217                   267,885              
Total liabilities   1,437,826       3,359             1,270,725       4,397        
Total equity   290,278                     166,070                
Total liabilities and total equity $ 1,728,104             0.67%     $ 1,436,795             0.88%  
Net interest income         $ 32,826                   $ 26,624        
Net interest rate spread (5)                 4.17%                     3.68%  
Net interest-earning assets (6) $ 494,344                   $ 368,853                
Net interest margin (7)                 4.39%                     3.91%  
Average interest-earning assets to                                          
interest-bearing liabilities                 148.72%                     136.78%  
                                           

(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., as the successor by merger with PDL Community Bancorp, and SubsidiariesOther Data

  As of  
  June 30,     March 31,     December 31,     September 30,     June 30,  
  2022     2022     2021     2021     2021  
Other Data                                      
Common shares issued   24,724,274       24,724,274       18,463,028       18,463,028       18,463,028  
Less treasury shares               1,037,041       1,132,086       1,135,086  
Common shares outstanding at end of period   24,724,274       24,724,274       17,425,987       17,330,942       17,327,942  
                                       
Book value per common share $ 11.85     $ 12.12     $ 10.86     $ 10.03     $ 9.92  
Tangible book value per common share $ 11.85     $ 12.12     $ 10.86     $ 10.03     $ 9.92  

Contact:Sergio Vaccaro[email protected]718-931-9000

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