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Ponce Financial Group, Inc. Reports Second Quarter 2024 Results
NEW YORK, July 30, 2024 (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 2024.
Second Quarter 2024 Highlights (Compared to Prior Periods):
Net income available to common stockholders was $3.1 million, or $0.14 per diluted share for the three months ended June 30, 2024, as compared to net income available to common stockholders of $2.4 million, or $0.11 per diluted share for the three months ended March 31, 2024 and net loss to common stockholders of ($0.1) million, or $0.00 per diluted share for the three months ended June 30, 2023. Net income for the three months ended June 30, 2024, which excludes $0.1 million in dividends on preferred shares, was $3.2 million. The Company began paying dividends on its preferred stock during the quarter ended June 30, 2024, as required by the terms thereof.
Included in the $3.1 million of net income available to common stockholders for the second quarter of 2024 results is $38.8 million in interest and dividend income, $2.3 million in non-interest income and $0.4 million in benefit for credit losses, offset by $20.9 million in interest expense, $16.1 million in non-interest expense and $0.1 million in payments and accrued dividends on preferred shares.
Net interest income of $17.9 million for the second quarter of 2024 decreased $0.9 million, or 4.88%, from the prior quarter and increased $1.6 million, or 9.96%, from the same quarter last year. As discussed in our prior earnings release, the first quarter of 2024 included a $1.0 million recovery of interest from a previously non-performing loan, which increased net interest income in that period as compared to the current period.
Net interest margin was 2.62% for the second quarter of 2024, versus 2.71% for the prior quarter and versus 2.65% for the same quarter last year. A significant driver of the reduction in net interest margin is the aforementioned recovery.
Six Months 2024 Highlights (Compared to 2023):
Net income available to common stockholders was $5.5 million, or $0.25 per diluted share for the six months ended June 30, 2024, as compared to net income available to common stockholders of $0.2 million, or $0.01 per diluted share for the six months ended June 30, 2023. Net income for the six months ended June 30, 2024, which excludes $0.1 million in dividends on preferred shares, was $5.6 million.
Net interest income for the six months ended June 30, 2024 was $36.7 million, an increase of $5.2 million, or 16.49%, compared to $31.5 million for the six months ended June 30, 2023.
Non-interest income for the six months ended June 30, 2024 was $4.0 million, an increase of $0.7 million, or 19.75%, from $3.3 million for the six months ended June 30, 2023.
Non-interest expense for the six months ended June 30, 2024 was $33.1 million, a decrease of $0.4 million, or 1.06%, compared to $33.5 million for the six months ended June 30, 2023.
Cash and equivalents were $103.2 million as of June 30, 2024, a decrease of $36.0 million, or 25.88%, from December 31, 2023.
Securities totaled $555.2 million as of June 30, 2024, a decrease of $26.4 million, or 4.54%, from December 31, 2023 primarily due to regular principal payments.
Net loans receivable were $2.02 billion as of June 30, 2024, an increase of $126.3 million, or 6.66%, from December 31, 2023.
Deposits were $1.61 billion as of June 30, 2024, an increase of $98.5 million, or 6.53%, from December 31, 2023.
President and Chief Executive Officer's Comments
Carlos P. Naudon, Ponce Financial Group's President and CEO, stated "Despite the challenging operating environment, we continue to make progress both in terms of improving our economic performance as well as serving our communities. We have exceeded our qualified lending targets under ECIP and qualified for a 0.50% preferred dividend rate. Book value per share continues to grow and is now $11.45 (up $0.51 vs last year) and total equity per common share stands at $20.90. We're also making progress on the expense side and have reduced headcount by 7% year over year. We continue to show strong levels of capital and liquidity. On the capital front, our total capital ratio at Ponce Bank stands at 22.47%, 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") stands at $679.9 million, approximately 1.7 times of our uninsured deposits of $401.7 million. 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 continue to grow both loans and deposits while maintaining credit quality. While we see resiliency in our client base, our prudent approach might result in lower growth in the coming quarters as we prioritize sound underwriting practices and balance sheet management over loan growth."
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):
2024
2024
2023
2023
2023
Return on average assets (1)
0.45
%
0.33
%
0.08
%
0.39
%
(0.01
%)
Return on average equity (1)
2.59
%
1.97
%
0.42
%
2.11
%
(0.07
%)
Net interest rate spread (1) (2)
1.72
%
1.82
%
1.74
%
1.68
%
1.75
%
Net interest margin (1) (3)
2.62
%
2.71
%
2.66
%
2.58
%
2.65
%
Non-interest expense to average assets (1)
2.28
%
2.35
%
2.66
%
2.58
%
2.65
%
Efficiency ratio (4)
80.09
%
82.56
%
96.83
%
78.11
%
96.15
%
Average interest-earning assets to average interest- bearing liabilities
129.73
%
129.69
%
133.50
%
134.49
%
137.67
%
Average equity to average assets
17.41
%
17.00
%
18.25
%
18.32
%
19.21
%
At or for the Three Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
Capital Ratios (Annualized):
2024
2024
2023
2023
2023
Total capital to risk-weighted assets (Bank only)
22.47
%
22.79
%
23.30
%
25.10
%
26.30
%
Tier 1 capital to risk-weighted assets (Bank only)
21.24
%
21.54
%
22.05
%
23.85
%
25.05
%
Common equity Tier 1 capital to risk-weighted assets (Bank only)
21.24
%
21.54
%
22.05
%
23.85
%
25.05
%
Tier 1 capital to average assets (Bank only)
16.70
%
16.26
%
17.49
%
17.51
%
17.95
%
At or for the Three Months Ended
June 30,
March 31,
December 31,
September 30,
June 30,
Asset Quality Ratios (Annualized):
2024
2024
2023
2023
2023
Allowance for loan losses as a percentage of total loans
1.18
%
1.23
%
1.36
%
1.51
%
1.64
%
Allowance for loan losses as a percentage of nonperforming loans
130.28
%
140.90
%
152.99
%
169.49
%
167.06
%
Net (charge-offs) recoveries to average outstanding loans (1)
(0.10
%)
(0.25
%)
(0.24
%)
(0.34
%)
(0.41
%)
Non-performing loans as a percentage of total gross loans
0.89
%
0.87
%
0.89
%
0.89
%
0.98
%
Non-performing loans as a percentage of total assets
0.65
%
0.62
%
0.62
%
0.62
%
0.63
%
Total non-performing assets as a percentage of total assets
0.65
%
0.62
%
0.62
%
0.62
%
0.63
%
Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (5)
0.82
%
0.79
%
0.81
%
0.82
%
0.83
%
Annualized where appropriate.
Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
Net interest margin represents net interest income divided by average total interest-earning assets.
Efficiency ratio represents noninterest expense divided by the sum of net interest income and noninterest income.
Balances include both modifications to borrowers experiencing financial difficulty, in accordance with ASU 2022-02 adopted on January 1, 2023, and previously existing troubled debt restructurings.
Summary of Results of Operations
Net income for the three months ended June 30, 2024 was $3.2 million compared to net income of $2.4 million for the three months ended March 31, 2024 and net loss of $0.1 million for the three months ended June 30, 2023.
The increase of net income for the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was attributed mainly to a decrease in non-interest expense, an increase in non-interest income, a decrease in provision for income taxes and an increase in benefit for credit losses, partially offset by a decrease in net interest income.
The increase of net income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was largely due to increases in net interest income, an increase to benefit for credit losses, a decrease in non-interest expense and an increase in non-interest income, partially offset by an increase in provision for income taxes.
Net income for the six months ended June 30, 2024 was $5.6 million compared to a net income of $0.2 million for the six months ended June 30, 2023. The increase in net income was attributable to increases in net interest income, benefit for credit losses and non-interest income and a decrease in non-interest expense, partially offset by an increase in provision for income taxes.
Net Interest Income and Net Margin
Net interest income for the three months ended June 30, 2024, decreased $0.9 million, or 4.88%, to $17.9 million compared to $18.8 million for the three months ended March 31, 2024 and increased $1.6 million, or 9.96%, compared to $16.3 million for the three months ended June 30, 2023. As discussed in our prior earnings release, the first quarter of 2024 included a $1.0 million recovery of interest from a previously non-performing loan, which increased net interest income in that period as compared to the current period.
Net interest income for the six months ended June 30, 2024, increased $5.2 million, or 16.49%, to $36.7 million, compared to $31.5 million for the six months ended June 30, 2023.
For the six months ended June 30, 2024, benefit for credit losses amounted to $0.6 million consisting of a benefit for credit losses on loans in the amount of $0.4 million and a release in the provision for credit losses on held-to-maturity securities in the amount of $0.2 million. The $0.4 million benefit for credit losses on loans for the six months ended June 30, 2024 resulted from a benefit of $1.5 million related to micro loans offset by a provision of $1.1 million related to non-micro loans.
Net interest margin was 2.62% for the three months ended June 30, 2024 compared to 2.71% for the prior quarter, a decrease of 9bps and 2.65% for the same period last year, a decrease of 3bps.
Net interest margin was 2.67% for the six months ended June 30, 2024 compared to 2.71% for the six months ended June 30, 2023, a decrease of 4bps.
Non-interest Income
Non-interest income for the three months ended June 30, 2024, was $2.3 million, an increase of $0.6 million, or 32.28%, compared to $1.7 million the three months ended March 31, 2024 and an increase of $0.8 million, or 51.34%, compared to $1.5 million the three months ended June 30, 2023.
The $0.6 million increase in non-interest income for the three months ended June 30, 2024 compared to the three months ended March 31, 2024 was largely attributable to an increase of $0.5 million in other non-interest income related to the mark to market adjustments on a private equity fund and $0.1 million in late and prepayment charges.
The $0.8 million increase in non-interest income for the three months ended June 30, 2024 compared to the three months ended June 30, 2023 was largely attributable to increases of $0.5 million in other non-interest income related to the mark to market adjustments on a private equity fund, $0.2 million in income on sale of mortgage loans and $0.1 million in late and prepayment charges.
Non-interest income for the six months ended June 30, 2024, was $4.0 million, an increase of $0.7 million, or 19.75%, compared to $3.3 million for the six months ended June 30, 2023. The increase was largely attributable to increases of $0.6 million in other non-interest income and $0.4 million in income on sale of mortgage loans, partially offset by a decrease of $0.3 million in late and prepayment charges.
Non-interest Expense
Non-interest expense for the three months ended June 30, 2024, was $16.1 million, a decrease of $0.8 million, or 4.74%, compared to $17.0 million for the three months ended March 31, 2024 and a decrease of $0.9 million, or 5.51%, compared to $17.1 million for the three months ended June 30, 2023.
The $0.8 million decrease from the three months ended March 31, 2024 was mainly attributable to decreases of $0.7 million in provision for contingencies, $0.4 million in professional fees, $0.1 million in compensation and benefits, $0.1 million in occupancy and equipment and $0.1 million in data processing, partially offset by an increase of $0.6 million in other operating expense.
The $0.9 million decrease from the three months ended June 30, 2023 was mainly attributable to decreases of $1.0 million in provision for contingencies, $0.5 million in professional fees, $0.3 million in office supplies, telephone and postage, $0.2 million in occupancy and equipment, $0.2 million in data processing expenses and $0.1 million in marketing and promotional expenses, partially offset by increases of $0.4 million in other operating expense, $0.3 million in direct loan expenses and $0.3 million in compensation and benefits and a decrease of $0.3 million in Grain recoveries.
Non-interest expense for the six months ended June 30, 2024, was $33.1 million, a decrease of $0.4 million, or 1.06%, compared to $33.5 million for the six months ended June 30, 2023. The $0.4 million decrease from the six months ended June 30, 2023 was mainly attributable to decreases of $1.8 million in provision for contingencies, $0.4 million in office supplies, telephone and postage, $0.3 million in professional fees, $0.3 million in data processing expenses, $0.2 million in marketing and promotional expenses and $0.1 million in occupancy and equipment, partially offset by a decrease of $1.1 million in Grain recoveries, and increases of $0.7 million in compensation and benefits and $0.6 million in direct loan expenses.
Balance Sheet Summary
Total assets increased $91.3 million, or 3.32%, to $2.84 billion as of June 30, 2024 from $2.75 billion as of December 31, 2023. The increase in total assets is largely attributable to increases of $126.3 million in net loans receivable, $27.8 million in mortgage loans held for sale and $4.6 million in Federal Home Loan Bank of New York stock, partially offset by decreases of $36.0 million in cash and cash equivalents, $19.6 million in held-to-maturity securities, $6.8 million in available-for-sale securities, $3.2 million in other assets, $1.2 million in deferred tax assets and $0.6 million in accrued interest receivable.
Total liabilities increased $85.0 million, or 3.76%, to $2.34 billion as of June 30, 2024 from $2.26 billion as of December 31, 2023. The increase in total liabilities was largely attributable to an increase of $98.5 million in deposits, partially offset by decreases of $5.1 million in accrued interest payable, $4.0 million in borrowings, $3.5 million in other liabilities and $0.8 million in operating lease liabilities.
Total stockholders' equity increased $6.3 million, or 1.27%, to $497.7 million as of June 30, 2024, from $491.4 million as of December 31, 2023. This increase in stockholders' equity was largely attributable to $5.5 million in net income available to common stockholders, $1.0 million impact to additional paid in capital as a result of share-based compensation and $0.6 million from release of ESOP shares, offset by $0.9 million in other comprehensive loss.
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, 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,
2024
2024
2023
2023
2023
ASSETS
Cash and due from banks:
Cash
$
23,128
$
29,972
$
28,930
$
26,046
$
31,162
Interest-bearing deposits
80,038
104,752
110,260
90,966
212,627
Total cash and cash equivalents
103,166
134,724
139,190
117,012
243,789
Available-for-sale securities, at fair value
113,125
116,044
119,902
116,753
123,720
Held-to-maturity securities, at amortized cost
442,113
452,955
461,748
471,065
481,952
Placement with banks
249
249
249
996
996
Mortgage loans held for sale, at fair value
37,764
7,860
9,980
14,103
10,070
Loans receivable, net
2,022,173
1,981,428
1,895,886
1,787,607
1,695,047
Accrued interest receivable
17,441
18,063
18,010
16,624
16,054
Premises and equipment, net
16,976
17,396
16,053
16,453
16,856
Right of use assets
30,349
31,021
31,272
32,110
32,435
Federal Home Loan Bank of New York stock (FHLBNY), at cost
23,972
23,892
19,377
18,870
19,195
Deferred tax assets
13,172
13,919
14,332
15,984
15,924
Other assets
21,507
21,151
24,723
16,286
15,919
Total assets
$
2,842,007
$
2,818,702
$
2,750,722
$
2,623,863
$
2,671,957
LIABILITIES AND STOCKHOLDERS' EQUITY
Liabilities:
Deposits
$
1,606,097
$
1,585,784
$
1,507,620
$
1,401,132
$
1,442,013
Operating lease liabilities
31,861
32,486
32,684
33,459
33,716
Accrued interest payable
6,820
4,218
11,965
8,385
4,704
Advance payments by borrowers for taxes and insurance
10,838
13,245
10,778
13,743
12,402
Borrowings
680,421
680,421
684,421
675,100
682,100
Other liabilities
8,313
8,866
11,859
6,986
6,540
Total liabilities
2,344,350
2,325,020
2,259,327
2,138,805
2,181,475
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
249
249
Treasury stock, at cost
(9,519
)
(9,702
)
(9,747
)
(10,975
)
(5,202
)
Additional paid-in-capital
207,934
207,584
207,106
207,626
207,287
Retained earnings
102,951
99,834
97,420
96,902
94,312
Accumulated other comprehensive loss
(16,557
)
(16,590
)
(15,649
)
(20,468
)
(17,597
)
Unearned compensation ─ ESOP
(12,401
)
(12,693
)
(12,984
)
(13,276
)
(13,567
)
Total stockholders' equity
497,657
493,682
491,395
485,058
490,482
Total liabilities and stockholders' equity
$
2,842,007
$
2,818,702
$
2,750,722
$
2,623,863
$
2,671,957
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,
2024
2024
2023
2023
2023
Interest and dividend income:
Interest on loans receivable
$
31,281
$
30,664
$
27,814
$
25,276
$
23,015
Interest on deposits due from banks
1,542
2,911
990
1,969
1,817
Interest and dividend on securities and FHLBNY stock
5,969
6,091
6,146
6,261
6,223
Total interest and dividend income
38,792
39,666
34,950
33,506
31,055
Interest expense:
Interest on certificates of deposit
6,358
6,380
5,103
4,362
3,881
Interest on other deposits
7,389
6,540
5,706
5,639
4,413
Interest on borrowings
7,141
7,923
6,944
6,963
6,479
Total interest expense
20,888
20,843
17,753
16,964
14,773
Net interest income
17,904
18,823
17,197
16,542
16,282
(Benefit) provision for credit losses
(374
)
(180
)
(375
)
535
987
Net interest income after (benefit) provision for credit losses
18,278
19,003
17,572
16,007
15,295
Non-interest income:
Service charges and fees
492
473
498
516
481
Brokerage commissions
9
8
13
17
35
Late and prepayment charges
426
359
365
899
372
Income on sale of mortgage loans
274
302
244
173
82
Grant income
—
—
438
3,718
—
Other
1,057
565
(273
)
304
522
Total non-interest income
2,258
1,707
1,285
5,627
1,492
Non-interest expense:
Compensation and benefits
7,724
7,844
8,262
7,566
7,425
Occupancy and equipment
3,564
3,667
3,686
3,588
3,724
Data processing expenses
1,013
1,127
1,101
1,582
1,208
Direct loan expenses
633
732
497
369
345
(Benefit) provision for contingencies
(493
)
164
418
391
517
Insurance and surety bond premiums
263
253
250
255
248
Office supplies, telephone and postage
233
249
294
301
489
Professional fees
1,369
1,723
2,040
1,693
1,904
Grain recoveries
(65
)
(53
)
(152
)
(69
)
(346
)
Marketing and promotional expenses
145
100
146
248
303
Directors fees and regulatory assessment
176
179
173
169
160
Other operating expenses
1,585
965
1,182
1,223
1,112
Total non-interest expense
16,147
16,950
17,897
17,316
17,089
Income (loss) before income taxes
4,389
3,760
960
4,318
(302
)
Provision (benefit) for income taxes
1,197
1,346
442
1,728
(215
)
Net income (loss)
$
3,192
$
2,414
$
518
$
2,590
$
(87
)
Dividends on preferred shares
75
—
—
—
—
Net income (loss) available to common stockholders
$
3,117
$
2,414
$
518
$
2,590
$
(87
)
Earnings per common share:
Basic
$
0.14
$
0.11
$
0.02
$
0.12
$
(0.00
)
Diluted
$
0.14
$
0.11
$
0.02
$
0.12
$
(0.00
)
Weighted average common shares outstanding:
Basic
22,409,803
22,353,492
22,224,945
22,272,076
23,208,168
Diluted
22,419,309
22,366,728
22,406,102
22,349,217
23,208,168
Ponce Financial Group, Inc. and Subsidiaries Consolidated Statements of Operations (Dollars in thousands, except per share data)
For the Six Months Ended June 30,
2024
2023
Variance $
Variance %
Interest and dividend income:
Interest on loans receivable
$
61,945
$
42,715
$
19,230
45.02
%
Interest on deposits due from banks
4,453
2,014
2,439
121.10
%
Interest and dividend on securities and FHLBNY stock
12,060
12,682
(622
)
(4.90
%)
Total interest and dividend income
78,458
57,411
21,047
36.66
%
Interest expense:
Interest on certificates of deposit
12,738
7,106
5,632
79.26
%
Interest on other deposits
13,929
7,225
6,704
92.79
%
Interest on borrowings
15,064
11,553
3,511
30.39
%
Total interest expense
41,731
25,884
15,847
61.22
%
Net interest income
36,727
31,527
5,200
16.49
%
(Benefit) provision for credit losses
(554
)
813