Ponce Financial Group, Inc. Reports Fourth Quarter 2024 Results

Fourth Quarter 2024 Highlights (Compared to Prior Periods):

• Net income available to common stockholders was $2.7 million, or $0.12 per diluted share for the three months ended December 31, 2024, as compared to net income available to common stockholders of $2.2 million, or $0.10 per diluted share for the three months ended September 30, 2024 and net income available to common stockholders of $0.5 million, or $0.02 per diluted share for the three months ended December 31, 2023. Total net income for the three months ended December 31, 2024 was $2.9 million. The Company paid dividends of $0.3 million on its preferred stock during the three months ended December 31, 2024.
• Included in the $2.7 million of net income available to common stockholders for the fourth quarter of 2024 results is $42.9 million in interest and dividend income and $2.1 million in non-interest income, offset by $22.2 million in interest expense, $17.3 million in non-interest expense, $1.5 million in provision for income taxes. $1.1 million in provision for credit losses and $0.3 million in dividends on preferred shares.
• Net interest income of $20.7 million for the fourth quarter of 2024 increased $1.7 million, or 8.97%, from the prior quarter and increased $3.5 million, or 20.54%, from the same quarter last year.
• Net interest margin was 2.80% for the fourth quarter of 2024, versus 2.65% for the prior quarter and 2.66% for the same quarter last year.

Full Year 2024 Highlights (Compared to 2023):

• Net income available to common stockholders was $10.3 million, or $0.46 per diluted share for the year ended December 31, 2024, compared to net income available to common stockholders of $3.4 million, or $0.15 per diluted share for the year ended December 31, 2023. Total net income for the year ended December 31, 2024, prior to the payment of $0.6 million in dividends on preferred shares, was $11.0 million.
• Net interest income for the year ended December 31, 2024 was $76.5 million, an increase of $11.2 million, or 17.18%, compared to $65.3 million for the year ended December 31, 2023.
• Non-interest income for the year ended December 31, 2024 was $7.2 million, a decrease of $3.0 million, or 29.44%, from $10.2 million for the year ended December 31, 2023. The decrease was primarily driven by $4.2 million in grants that were received in the prior year.
• Non-interest expense for the year ended December 31, 2024 was $66.7 million, a decrease of $2.0 million, or 2.90%, compared to $68.7 million for the year ended December 31, 2023.
• Cash and equivalents were $139.8 million as of December 31, 2024, an increase of $0.6 million, or 0.47%, from $139.2 million as of December 31, 2023.
• Securities totaled $472.9 million as of December 31, 2024, a decrease of $108.7 million, or 18.70%, from $581.7 million as of December 31, 2023 primarily due to regular principal payments, the maturity of one available-for-sale security in the amount of $4.0 million and one held-to-maturity security in the amount of $25.0 million and the call of one held-to-maturity security in the amount of $25.0 million.
• Net loans receivable were $2.29 billion as of December 31, 2024, an increase of $390.7 million, or 20.61%, from $1.90 billion as of December 31, 2023.
• Deposits were $1.88 billion as of December 31, 2024, an increase of $377.2 million, or 25.02%, from $1.51 billion as of December 31, 2023.

President and Chief Executive Officer's Comments

Carlos P. Naudon, Ponce Financial Group, Inc.'s President and CEO, stated,“We are pleased with the progress we have made in 2024. We executed an agreement with the U.S. Treasury that gives us the option, upon achievement of certain conditions, to buy back the ECIP preferred shares we previously issued at favorable prices, we launched our PonceDirect digital bank and gained significant traction with SBA loans. Our levels of liquidity and capital remain strong, while our loans grew by 20.61% and deposits by 25.02%. We have seen consistent profitability over the past several quarters as we continue to see increases both in net interest income as well as net interest margin, while expenses are down year on year, reflecting both reduced development and continued adoption of our new technology. We remain committed to the communities we serve and our status as a Minority Depository Institution (“MDI”)/Community Development Financial Institution ("CDFI"), and we 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,“We are working diligently to ensure that we will meet the conditions necessary to allow us to repurchase our ECIP preferred stock in the future. The agreement we executed with the U.S. Treasury in December 2024, allows for a repurchase of the ECIP preferred stock once we have achieved Deep Impact Lending, as defined under the ECIP program, that is at least 60% of our total originations on average over 16 consecutive quarters, provided that we also meet certain other conditions at the time we exercise the repurchase option. As of December 31, 2024, our Deep Impact Lending over the last 10 consecutive quarters stands at 79%, well above the threshold. Also, from second quarter of 2024 to fourth quarter of 2024, we have originated $514 million of Deep Impact Lending as well as $54 million of qualified lending which represents 383% of our base, which period, together with the first quarter of 2025, will determine the rate of dividends payable on the ECIP preferred stock from the third quarter of 2025 to the second quarter of 2026. With one quarter to go, we are confident that we will get to over 400% of our base and ensure another year of preferred dividends of 0.50%, which is the lowest dividend rate.”

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

Summary of Results of Operations

Net income for the three months ended December 31, 2024 was $2.9 million compared to net income of $2.4 million for the three months ended September 30, 2024 and net income of $0.5 million for the three months ended December 31, 2023.

The $0.5 million increase of net income for the three months ended December 31, 2024 compared to the three months ended September 30, 2024 was attributed mainly to increases of $1.7 million in net interest income and $1.0 million in non-interest income, partially offset by increases of $1.0 million in non-interest expense, $0.9 million in provision for income taxes and $0.3 million in provision for credit losses.

The $2.4 million increase of net income for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 was largely due to increases of $3.5 million in net interest income and $0.9 million in non-interest income and a decrease of $0.5 million in non-interest expense, partially offset by increases of $1.5 million in provision for credit losses and $1.1 million in provision for income taxes.

Net income for the year ended December 31, 2024 was $11.0 million compared to a net income of $3.4 million for the year ended December 31, 2023. The $7.6 million increase in net income was attributable to an increase of $11.2 million in net interest income and
a decrease of $1.9 million in non-interest expense, partially offset by a decrease of $2.9 million in non-interest income and increases of $2.2 million in provision for income taxes and $0.4 million in provision for credit losses.

Net Interest Income and Net Margin

Net interest income for the three months ended December 31, 2024, increased $1.7 million, or 8.97%, to $20.7 million compared to $19.0 million for the three months ended September 30, 2024 and increased $3.5 million, or 20.54%, compared to $17.2 million for the three months ended December 31, 2023.

Net interest income for the year ended December 31, 2024, increased $11.2 million, or 17.18%, to $76.5 million, compared to $65.3 million for the year ended December 31, 2023. The $11.2 million increase in net interest income was attributable to an increase of $36.8 million in total interest and dividend income, offset by an increase of $25.6 million in total interest expense.

For the year ended December 31, 2024, provision for credit losses amounted to $1.3 million, consisting of a provision for credit losses on loans in the amount of $1.5 million and a benefit on credit losses on held-to-maturity securities in the amount of $0.2 million.

Net interest margin was 2.80% for the three months ended December 31, 2024 compared to 2.65% for the prior quarter, an increase of 15bps and 2.66% for the same period last year, an increase of 14bps.

Net interest margin was 2.70% for the year ended December 31, 2024 compared to 2.66% for the year ended December 31, 2023, an increase of 4bps.

Non-interest Income

Non-interest income for the three months ended December 31, 2024, was $2.1 million, an increase of $0.9 million, or 82.19%, compared to $1.2 million for the three months ended September 30, 2024 and an increase of $0.8 million, or 63.19%, compared to $1.3 million for the three months ended December 31, 2023.

The $0.9 million increase in non-interest income for the three months ended December 31, 2024 compared to the three months ended September 30, 2024 was largely attributable to increases of $0.5 million in other non-interest income, $0.2 million in late and prepayment charges and $0.1 million in income on sale of SBA loans.

The $0.8 million increase in non-interest income for the three months ended December 31, 2024 compared to the three months ended December 31, 2023 was largely attributable to increases of $1.1 million in other non-interest income and $0.1 million in income on sale of SBA loans, partially offset by a decrease of $0.4 million in grant income received in the fourth quarter of 2023.

Non-interest income for the year ended December 31, 2024, was $7.2 million, a decrease of $3.0 million, or 29.44%, compared to $10.2 million for the year ended December 31, 2023. The $3.0 million decrease in non-interest income was largely attributable to $4.2 million related to grants received in 2023 and a decrease of $1.2 million in late and prepayment charges, partially offset by increases of $1.8 million in other non-interest income, $0.5 million in income on sale of mortgage loans and $0.1 million in income on sale of SBA loans.

Non-interest Expense

Non-interest expense for the three months ended December 31, 2024, was $17.3 million, an increase of $0.9 million, or 5.82%, compared to $16.3 million for the three months ended September 30, 2024 and a decrease of $0.6 million, or 3.54%, compared to $17.9 million for the three months ended December 31, 2023.

The $0.9 million increase in non-interest expense from the three months ended September 30, 2024 was mainly attributable to increases of $0.4 million in professional fees, $0.2 million in other operating expense, $0.1 million in marketing and promotional expenses, $0.1 million in office supplies, telephone and postage and $0.1 million in occupancy and equipment.

The $0.6 million decrease in non-interest expense from the three months ended December 31, 2023 was mainly attributable to decreases of $0.6 million in provision for contingencies, $0.6 million in compensation and benefits and $0.3 million in professional fees, partially offset by increases of $0.3 million in other operating expense, $0.2 million in occupancy and equipment, $0.1 million in marketing and promotional expenses and $0.1 million in direct loan expenses.

Non-interest expense for the year ended December 31, 2024, was $66.7 million, a decrease of $2.0 million, or 2.90%, compared to $68.7 million for the year ended December 31, 2023. The $2.0 million decrease in non-interest expense from the year ended December 31, 2023 was mainly attributable to decreases of $3.1 million in provision for contingencies, $0.9 million in professional fees, $0.7 million in data processing expenses, $0.5 million in office supplies, telephone and postage, partially offset by a decrease in microloans recoveries of $1.3 million and increases of $0.9 million in direct loan expenses, $0.3 million in occupancy and equipment and $0.2 million in compensation and benefits.

Balance Sheet Summary

Total assets increased $289.2 million, or 10.51%, to $3.04 billion as of December 31, 2024 from $2.75 billion as of December 31, 2023. The increase in total assets is largely attributable to increases of $390.7 million in net loans receivable, $9.8 million in Federal Home Loan Bank of New York stock, $0.8 million in mortgage loans held for sale, $0.7 million in premises and equipment and $0.6 million in cash and cash equivalents, partially offset by decreases of $93.8 million in held-to-maturity securities, $14.9 million in available-for-sale securities, $2.3 million in deferred tax assets and $2.2 million in right of use assets.

Total liabilities increased $275.1 million, or 12.18%, to $2.53 billion as of December 31, 2024 from $2.26 billion as of December 31, 2023. The increase in total liabilities was largely attributable to an increase of $377.2 million in deposits, partially offset by decreases of $88.3 million in borrowings, $8.3 million in accrued interest payable, $3.1 million in other liabilities, $2.0 million in operating lease liabilities and $0.4 million in advance payments by borrowers for taxes.

Total stockholders' equity increased $14.1 million, or 2.87%, to $505.5 million as of December 31, 2024, from $491.4 million as of December 31, 2023. The $14.1 million increase in stockholders' equity was largely attributable to $11.0 million in net income, $2.1 million impact to additional paid in capital as a result of share-based compensation and $1.4 million from release of ESOP shares and $0.3 million in other comprehensive income, offset by $0.6 million in dividends on preferred shares.

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; 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, . 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)

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

⁽¹⁾ For the three months ended September 30, 2024, June 30, 2024, March 31, 2024 and December 31, 2023, $0.3 million of federal deposit insurance was reclassified from other operating expenses to federal deposit insurance and regulatory assessments and $0.1 million of directors fees were reclassified from federal deposit insurance and regulatory assessments to other operating expenses for each periods.

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

⁽¹⁾ For the year ended December 31, 2023, $1.2 million of federal deposit insurance was reclassified from other operating expenses to federal deposit insurance and regulatory assessments and $0.4 million of directors fees were reclassified from federal deposit insurance and regulatory assessments to other operating expenses.

Ponce Financial Group, Inc. and Subsidiaries
Key Metrics

Ponce Financial Group, Inc. and Subsidiaries
Securities Portfolio

⁽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.

Ponce Financial Group, Inc. and Subsidiaries
Loan Portfolio

⁽¹⁾ As of September 30, 2024, June 30, 2024, March 31, 2024 and December 31, 2023, consumer loans include $3.0 million, $4.3 million, $5.7 million and $8.0 million, respectively, of microloans originated by the Bank. As of December 31, 2024, these microloans were charged-off.

Ponce Financial Group, Inc. and Subsidiaries
Microloans Exposure (previously originated by the Bank under its arrangement with Grain)

⁽¹⁾ As of December 31, 2024, the remaining microloans were charged-off.

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

Ponce Financial Group, Inc. and Subsidiaries
Deposits

Ponce Financial Group, Inc. and Subsidiaries
Borrowings

Ponce Financial Group, Inc. and Subsidiaries
Nonperforming Assets