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Table of Contents

 

 

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

 

☒

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the quarterly period ended September 30, 2023

OR

 

☐

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the transition period from to

Commission File Number: 001-41255

 

Ponce Financial Group, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Maryland

87-1893965

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

2244 Westchester Avenue

Bronx, NY

10462

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (718) 931-9000

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common stock, par value $0.01 per share

 

PDLB

 

The NASDAQ Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

☐

Accelerated filer

☐

 

 

 

 

Non-accelerated filer

☒

Smaller reporting company

☒

 

 

 

 

 

 

 

Emerging growth company

 

☐

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of November 8, 2023, the registrant had 23,653,600 shares of common stock, $0.01 par value per share, outstanding.

Auditor Firm Id: 339

Auditor Name: Mazars USA LLP

Auditor Location: New York, New York, USA

 

 

 

Table of Contents

 

Table of Contents

 

 

 

Page

PART I.

 

FINANCIAL INFORMATION

 

1

Item 1.

 

Consolidated Financial Statements

 

1

 

Consolidated Statements of Financial Condition (Unaudited)

 

1

 

Consolidated Statements of Operations (Unaudited)

 

2

 

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

 

3

 

 

Consolidated Statements of Stockholders’ Equity (Unaudited)

 

4

 

Consolidated Statements of Cash Flows (Unaudited)

 

5

 

Notes to Consolidated Financial Statements (Unaudited)

 

6

Item 2.

 

Management’s Discussion and Analysis of Financial Condition and Results of Operations

 

46

Item 3.

 

Quantitative and Qualitative Disclosures About Market Risk

 

70

Item 4.

 

Controls and Procedures

 

70

PART II.

 

OTHER INFORMATION

 

71

Item 1.

 

Legal Proceedings

 

71

Item 1A.

 

Risk Factors

 

71

Item 2.

 

Unregistered Sales of Equity Securities and Use of Proceeds

 

71

Item 3.

 

Defaults Upon Senior Securities

 

71

Item 4.

 

Mine Safety Disclosures

 

71

Item 5.

 

Other Information

 

71

Item 6.

 

Exhibits

 

72

Signatures

 

73

 

 

 

i

Table of Contents

 

PART I—FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements.

Ponce Financial Group, Inc. and Subsidiaries

 

Consolidated Statements of Financial Condition (Unaudited)

September 30, 2023 and December 31, 2022

(Dollars in thousands, except share data)

 

 

 

September 30,

 

 

December 31,

 

 

 

2023

 

 

2022

 

 

 

(unaudited)

 

 

 

 

ASSETS

 

 

 

 

 

 

Cash and due from banks:

 

 

 

 

 

 

Cash (1)

 

$

26,046

 

 

$

31,977

 

Interest-bearing deposits (1)

 

 

90,966

 

 

 

22,383

 

Total cash and cash equivalents

 

 

117,012

 

 

 

54,360

 

Available-for-sale securities, at fair value (Note 3)

 

 

116,753

 

 

 

129,505

 

Held-to-maturity securities, net of allowance for credit losses of $647 at September 30, 2023 and $0 at December 31, 2022; at amortized cost (fair value 2023 $444,864; 2022 $495,851) (Note 3)

 

 

471,065

 

 

 

510,820

 

Placements with banks

 

 

996

 

 

 

1,494

 

Mortgage loans held for sale, at fair value (Note 4)

 

 

14,103

 

 

 

1,979

 

Loans receivable, net of allowance for credit losses of $27,414 at September 30, 2023 and $34,592 at December 31, 2022 (Note 5)

 

 

1,787,607

 

 

 

1,493,127

 

Accrued interest receivable

 

 

16,624

 

 

 

15,049

 

Premises and equipment, net (Note 6)

 

 

16,453

 

 

 

17,446

 

Right of use assets (Note 7)

 

 

32,110

 

 

 

33,423

 

Federal Home Loan Bank of New York (FHLBNY) stock, at cost

 

 

18,870

 

 

 

24,661

 

Deferred tax assets (Note 10)

 

 

15,984

 

 

 

16,137

 

Other assets

 

 

16,286

 

 

 

13,988

 

Total assets

 

$

2,623,863

 

 

$

2,311,989

 

LIABILITIES AND STOCKHOLDERS' EQUITY

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

Deposits (Note 8)

 

$

1,401,132

 

 

$

1,252,412

 

Operating lease liabilities

 

 

33,459

 

 

 

34,532

 

Accrued interest payable

 

 

8,385

 

 

 

1,390

 

Advance payments by borrowers for taxes and insurance

 

 

13,743

 

 

 

9,724

 

Borrowings (Note 9)

 

 

675,100

 

 

 

517,375

 

Other liabilities

 

 

6,986

 

 

 

3,856

 

Total liabilities

 

 

2,138,805

 

 

 

1,819,289

 

Commitments and contingencies (Note 13)

 

 

 

 

 

 

Stockholders' Equity:

 

 

 

 

 

 

Preferred stock, $0.01 par value; 100,000,000 shares authorized, 225,000 shares issued and outstanding
     as of September 30, 2023 and as of December 31, 2022.

 

 

225,000

 

 

 

225,000

 

Common stock, $0.01 par value; 200,000,000 shares authorized; 24,886,711 shares issued and 23,653,600 shares outstanding as of September 30, 2023 and 24,861,329 shares issued and 24,859,353 shares outstanding as of December 31, 2022

 

 

249

 

 

 

249

 

Treasury stock, at cost; 1,233,111 shares as of September 30, 2023 and 1,976 shares as of December 31, 2022 (Note 11)

 

 

(10,975

)

 

 

(2

)

Additional paid-in-capital

 

 

207,626

 

 

 

206,508

 

Retained earnings

 

 

96,902

 

 

 

92,955

 

Accumulated other comprehensive loss (Note 16)

 

 

(20,468

)

 

 

(17,860

)

Unearned compensation ─ ESOP; 1,469,167 shares as of September 30, 2023 and 1,569,475
   shares as of December 31, 2022 (Note 11)

 

 

(13,276

)

 

 

(14,150

)

Total stockholders' equity

 

 

485,058

 

 

 

492,700

 

Total liabilities and stockholders' equity

 

$

2,623,863

 

 

$

2,311,989

 

 

(1)
As of December 31, 2022, $2.1 million of Federal Reserve Bank ("FRB") cash were reclassified from Cash to Interest-bearing deposits.

 

The accompanying notes are an integral part of the consolidated financial statements (unaudited).

1

Table of Contents

 

Ponce Financial Group, Inc. and Subsidiaries

 

Consolidated Statements of Operations (Unaudited)

Three and Nine Months Ended September 30, 2023 and 2022

(Dollars in thousands, except share data)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

Interest on loans receivable

 

$

25,276

 

 

$

17,058

 

 

$

67,991

 

 

$

51,315

 

Interest on deposits due from banks

 

 

1,969

 

 

 

346

 

 

 

3,983

 

 

 

514

 

Interest and dividend on securities and FHLBNY stock

 

 

6,261

 

 

 

4,230

 

 

 

18,943

 

 

 

5,990

 

Total interest and dividend income

 

 

33,506

 

 

 

21,634

 

 

 

90,917

 

 

 

57,819

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Interest on certificates of deposit (1)

 

 

4,362

 

 

 

855

 

 

 

11,468

 

 

 

2,361

 

Interest on other deposits (1)

 

 

5,639

 

 

 

1,375

 

 

 

12,864

 

 

 

2,154

 

Interest on borrowings

 

 

6,963

 

 

 

1,793

 

 

 

18,516

 

 

 

2,867

 

Total interest expense

 

 

16,964

 

 

 

4,023

 

 

 

42,848

 

 

 

7,382

 

Net interest income

 

 

16,542

 

 

 

17,611

 

 

 

48,069

 

 

 

50,437

 

Provision for credit losses (Note 3) (Note 5)

 

 

535

 

 

 

9,330

 

 

 

1,348

 

 

 

11,405

 

Net interest income after provision for credit losses

 

 

16,007

 

 

 

8,281

 

 

 

46,721

 

 

 

39,032

 

Non-interest income:

 

 

 

 

 

 

 

 

 

 

 

 

Service charges and fees

 

 

516

 

 

 

464

 

 

 

1,488

 

 

 

1,349

 

Brokerage commissions

 

 

17

 

 

 

288

 

 

 

67

 

 

 

840

 

Late and prepayment charges

 

 

899

 

 

 

109

 

 

 

2,000

 

 

 

360

 

Income on sale of mortgage loans

 

 

173

 

 

 

116

 

 

 

354

 

 

 

734

 

Loan origination

 

 

—

 

 

 

522

 

 

 

—

 

 

 

1,843

 

Grant income

 

 

3,718

 

 

 

—

 

 

 

3,718

 

 

 

—

 

Loss on sale of premises and equipment

 

 

—

 

 

 

(436

)

 

 

—

 

 

 

(436

)

Other

 

 

304

 

 

 

514

 

 

 

1,311

 

 

 

1,292

 

Total non-interest income

 

 

5,627

 

 

 

1,577

 

 

 

8,938

 

 

 

5,982

 

Non-interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

Compensation and benefits

 

 

7,566

 

 

 

7,377

 

 

 

22,437

 

 

 

21,413

 

Occupancy and equipment

 

 

3,588

 

 

 

3,611

 

 

 

10,882

 

 

 

10,040

 

Data processing expenses

 

 

1,582

 

 

 

994

 

 

 

3,982

 

 

 

2,665

 

Direct loan expenses

 

 

369

 

 

 

654

 

 

 

1,126

 

 

 

2,033

 

Provision for contingencies

 

 

391

 

 

 

519

 

 

 

1,893

 

 

 

566

 

Insurance and surety bond premiums

 

 

255

 

 

 

297

 

 

 

768

 

 

 

600

 

Office supplies, telephone and postage

 

 

301

 

 

 

369

 

 

 

1,189

 

 

 

1,180

 

Professional fees

 

 

1,693

 

 

 

1,251

 

 

 

5,052

 

 

 

4,333

 

Contribution to the Ponce De Leon Foundation (Note 2)

 

 

—

 

 

 

—

 

 

 

—

 

 

 

4,995

 

Grain (recoveries) write-off (Note 5)

 

 

(69

)

 

 

8,881

 

 

 

(1,329

)

 

 

18,455

 

Marketing and promotional expenses

 

 

248

 

 

 

214

 

 

 

679

 

 

 

337

 

Directors' fees and regulatory assessment

 

 

169

 

 

 

188

 

 

 

484

 

 

 

509

 

Other operating expenses

 

 

1,223

 

 

 

1,061

 

 

 

3,603

 

 

 

2,931

 

Total non-interest expense

 

 

17,316

 

 

 

25,416

 

 

 

50,766

 

 

 

70,057

 

Income (loss) before income taxes

 

 

4,318

 

 

 

(15,558

)

 

 

4,893

 

 

 

(25,043

)

Provision (benefit) for income taxes (Note 10)

 

 

1,728

 

 

 

(820

)

 

 

2,059

 

 

 

(4,256

)

Net income (loss)

 

$

2,590

 

 

$

(14,738

)

 

$

2,834

 

 

$

(20,787

)

Earnings (loss) per common share (Note 12):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

$

0.12

 

 

$

(0.64

)

 

$

0.12

 

 

$

(0.92

)

Diluted

 

$

0.12

 

 

$

(0.64

)

 

$

0.12

 

 

$

(0.92

)

Weighted average common shares outstanding (Note 12):

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

 

22,272,076

 

 

 

23,094,859

 

 

 

22,920,680

 

 

 

22,524,477

 

Diluted

 

 

22,349,217

 

 

 

23,094,859

 

 

 

22,962,956

 

 

 

22,524,477

 

 

(1)
For the three and nine months ended September 30, 2022, $0.2 million of interest expense were reclassified from Interest on other deposits to Interest on certificates of deposits.

The accompanying notes are an integral part of the consolidated financial statements (unaudited).

2

Table of Contents

 

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Comprehensive (Loss) Income (Unaudited)

Three and Nine Months Ended September 30, 2023 and 2022

(In thousands)

 

 

 

For the Three Months Ended September 30,

 

 

For the Nine Months Ended September 30,

 

 

 

2023

 

 

2022

 

 

2023

 

 

2022

 

Net income (loss)

 

$

2,590

 

 

$

(14,738

)

 

$

2,834

 

 

$

(20,787

)

Net change in unrealized losses on securities:

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized losses

 

 

(3,644

)

 

 

(4,194

)

 

 

(3,364

)

 

 

(21,493

)

Income (tax) benefit effect

 

 

773

 

 

 

806

 

 

 

756

 

 

 

4,529

 

Total other comprehensive loss, net of tax

 

 

(2,871

)

 

 

(3,388

)

 

 

(2,608

)

 

 

(16,964

)

Total comprehensive (loss) income

 

$

(281

)

 

$

(18,126

)

 

$

226

 

 

$

(37,751

)

 

The accompanying notes are an integral part of the consolidated financial statements (unaudited).

 

3

Table of Contents

 

Ponce Financial Group, Inc. and Subsidiaries

Consolidated Statements of Stockholders’ Equity (Unaudited)

Nine Months Ended September 30, 2023 and 2022

(Dollars in thousands, except share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

Unallocated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Treasury

 

 

Additional

 

 

 

 

 

Other

 

 

Common

 

 

 

 

 

 

Preferred Stock

 

 

Common Stock

 

 

Stock,

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Stock

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Shares

 

 

Amount

 

 

At Cost

 

 

Capital

 

 

Earnings

 

 

Income (Loss)

 

 

of ESOP

 

 

Total

 

Balance, December 31, 2022

 

 

225,000

 

 

$

225,000

 

 

 

24,859,353

 

 

$

249

 

 

$

(2

)

 

$

206,508

 

 

$

92,955

 

 

$

(17,860

)

 

$

(14,150

)

 

$

492,700

 

Net income

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

331

 

 

 

—

 

 

 

—

 

 

 

331

 

Other comprehensive income, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,231

 

 

 

—

 

 

 

1,231

 

Impact of CECL adoption, net of tax

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

1,113

 

 

 

—

 

 

 

—

 

 

 

1,113

 

Release of restricted stock units

 

 

—

 

 

 

—

 

 

 

4,147

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

 

 

—

 

ESOP shares committed to be released (33,436 shares)

 

 

—