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Ponce Financial Group, Inc. (PDLB)·Q2 2024 Earnings Summary

Executive Summary

  • Q2 2024 delivered improved profitability: net income available to common rose to $3.12M and diluted EPS to $0.14, up from $0.11 in Q1 and breakeven in Q2 2023, driven by higher non-interest income and lower non-interest expense while net interest margin stepped down on lapping a Q1 interest recovery .
  • Net interest income was $17.9M (-4.9% QoQ, +10.0% YoY) and NIM was 2.62% (vs 2.71% in Q1 and 2.65% in Q2 2023); the QoQ decline reflects the absence of a $1.0M nonperforming loan interest recovery that boosted Q1 results .
  • Capital and liquidity remain strong: total capital ratio 22.47%; liquid assets plus FHLB capacity of $679.9M ~1.7x uninsured deposits of $401.7M; book value per share reached $11.45 (+$0.51 YoY) .
  • Structural cost tailwinds: ECIP qualified lending achieved, reducing the preferred dividend rate on $225M ECIP preferred stock from 2.00% to 0.50% through June 2025 (~$3.375M annualized savings), supporting EPS and capital accrual over the next year .

What Went Well and What Went Wrong

What Went Well

  • EPS and net income up QoQ/YoY as non-interest income rose 32% QoQ (mark-to-market on a private equity fund and higher late/prepayment fees) and non-interest expense fell 4.7% QoQ (lower contingencies and professional fees) .
  • Strong balance sheet growth and mix: net loans reached $2.02B (+6.7% vs YE’23), deposits hit $1.61B (+6.5% vs YE’23), while NPLs/loans held at 0.89% and allowance coverage remained robust (130% of NPLs) .
  • Management emphasized durable capital/liquidity and operating discipline: “qualified for a 0.50% preferred dividend rate… total capital ratio 22.47%… liquid assets + FHLB capacity $679.9M ~1.7x uninsured deposits”; “reduced headcount by 7% YoY” .

What Went Wrong

  • Net interest margin compressed to 2.62% (from 2.71% in Q1) as Q1 benefited from a one-time $1.0M interest recovery; absent that, NII softened sequentially .
  • Continued net charge-offs in consumer (“Grain” legacy microloans) though exposure is now de minimis: microloan net exposure $0.65M at Q2, with ongoing charge-off/recovery activity impacting credit loss metrics .
  • Management signaled more cautious loan growth ahead given underwriting discipline and balance sheet priorities, which may temper volume-driven earnings momentum near term .

Financial Results

MetricQ4 2023Q1 2024Q2 2024
Total interest & dividend income ($USD Millions)$34.95 $39.67 $38.79
Net interest income ($USD Millions)$17.20 $18.82 $17.90
Non-interest income ($USD Millions)$1.29 $1.71 $2.26
Net income available to common ($USD Millions)$0.52 $2.41 $3.12
Diluted EPS ($USD)$0.02 $0.11 $0.14
Net interest margin (%)2.66% 2.71% 2.62%
Efficiency ratio (%)96.83% 82.56% 80.09%
ROAA (%)0.08% 0.33% 0.45%
ROAE (%)0.42% 1.97% 2.59%

Segment/Portfolio Mix (Loans)

Loan Category ($USD Millions)Q4 2023Q1 2024Q2 2024
1-4 Family Investor-Owned$343.69 $339.33 $337.29
1-4 Family Owner-Occupied$152.31 $150.84 $147.49
Multifamily Residential$550.56 $545.83 $545.32
Nonresidential Properties$342.34 $327.35 $337.58
Construction & Land$503.93 $608.67 $641.88
Total Mortgage Loans$1,892.83 $1,972.01 $2,009.56
Business Loans$19.78 $26.66 $30.22
Consumer Loans$8.97 $6.74 $5.31
Total Loans, Gross$1,921.57 $2,005.42 $2,045.09
Loans, Net$1,895.89 $1,981.43 $2,022.17

Key KPIs

KPIQ4 2023Q1 2024Q2 2024
Total Assets ($USD Billions)$2.75 $2.82 $2.84
Deposits ($USD Billions)$1.51 $1.59 $1.61
Tier 1 Capital / RWA (Bank) (%)22.05% 21.54% 21.24%
Total Capital / RWA (Bank) (%)23.30% 22.79% 22.47%
Tier 1 Capital to Average Assets (%)17.49% 16.26% 16.70%
NPLs / Gross Loans (%)0.89% 0.87% 0.89%
NPA / Assets (%)0.62% 0.62% 0.65%
Allowance / Total Loans (%)1.36% 1.23% 1.18%
Allowance / NPLs (%)152.99% 140.90% 130.28%
Book Value Per Share ($)$11.20 $11.29 $11.45

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Preferred dividend rate (ECIP $225M Senior Non‑Cumulative Perpetual Preferred)Jul 2024 – Jun 20252.00% 0.50% Lowered
Loan growth outlookNear-term quartersGrowth prioritized in prior updates “Prudent approach might result in lower growth” (sound underwriting and balance sheet management prioritized) Lowered/More cautious
Formal revenue/EPS/OpEx guidance2024Not providedNot providedMaintained (no formal guidance)

Earnings Call Themes & Trends

TopicPrevious Mentions (Q4’23 & Q1’24)Current Period (Q2’24)Trend
Capital & liquidityEmphasis on strong ratios; swaps to manage IRR; liquid assets + FHLB capacity ≥2x uninsured deposits Total capital 22.47%; liquid assets + FHLB capacity $679.9M ~1.7x uninsured deposits; continued focus on efficiency Stable strong
ECIP/qualified lendingPositive structural benefits discussed; groundwork laid Achieved ECIP threshold; preferred dividend rate reduced to 0.50% through June 2025 Improving tailwind
Expense disciplineSequential reductions noted in Q4→Q1; lower contingencies/pro fees Lower non-interest expense QoQ; headcount -7% YoY Improving
Loan growth & underwritingGrowth in loans; focus on credit quality Continued growth with caution; prioritizing sound underwriting, possibly lower growth ahead More cautious
Asset qualityNPLs stable; Grain runoff progressing NPLs at 0.89%; allowance 1.18% of loans; Grain exposure down to $0.65M Stable
NIM driversCost of funds pressure; Q1 interest recovery provided one-time boost NIM down to 2.62% on lapping Q1 recovery; deposit mix shifts toward MM/CDs Mixed

Note: No Q2’24 earnings call transcript is available in the document set; themes reflect management press release commentary and filings .

Management Commentary

  • “We have exceeded our qualified lending targets under ECIP and qualified for a 0.50% preferred dividend rate… Book value per share… $11.45… total capital ratio… 22.47%… liquid assets plus FHLBNY borrowing capacity… $679.9 million ~1.7x uninsured deposits… reduced headcount by 7% YoY.” — Carlos P. Naudon, President & CEO .
  • “We continue to grow both loans and deposits while maintaining credit quality… prudent approach might result in lower growth in the coming quarters.” — Steven A. Tsavaris, Executive Chairman .
  • Q1 set the stage: “Net interest income grew for the fourth quarter in a row, and net interest margin grew for the second quarter in a row… liquid assets plus FHLBNY borrowing capacity $724.1M ~1.7x uninsured deposits.” — Carlos P. Naudon .

Q&A Highlights

  • No Q&A section available; a Q2 2024 earnings call transcript was not found in the document catalog (no transcript returned) [ListDocuments: earnings-call-transcript 0 results].

Estimates Context

  • Wall Street consensus (S&P Global) for Q2 2024 EPS and revenue was unavailable due to SPGI daily request limit; therefore, estimate comparisons cannot be provided at this time. Values would be retrieved from S&P Global; consensus estimates unavailable.
  • Implication: With EPS of $0.14 and net income of $3.12M, results were supported by higher non-interest income and lower expenses; NIM decline was expected on lapping Q1’s one-time recovery .

Key Takeaways for Investors

  • Earnings quality improved: sequential EPS/NI growth driven by operating leverage (non-interest income up, non-interest expense down) even as NIM normalized without Q1’s one-off recovery .
  • Structural dividend cost tailwind: ECIP achievement reduces preferred dividend rate to 0.50% through June 2025, adding multi-quarter EPS/capital support (~$3.375M annualized) .
  • Balance sheet resilience: capital ratios remain well above requirements; liquidity coverage of uninsured deposits remains robust, supporting confidence through rate/macro volatility .
  • Credit stable: NPLs/loans at 0.89% and allowance at 1.18% of loans with coverage of 130% of NPLs; Grain legacy exposure now immaterial ($0.65M) .
  • Growth outlook tempered: management flags prudence and underwriting discipline that could slow loan growth near term; investors should model lower volume growth with a focus on margin and fees .
  • Operating efficiency trend: efficiency ratio improved to 80.1% from 82.6% in Q1; ongoing expense initiatives (headcount reduction) may further support operating leverage in H2 .
  • Deposit mix and funding cost: money market and CD balances remain elevated; cost of funds will be a key swing factor for NIM; watch for deposit pricing actions and mix shifts .

Additional relevant updates post-quarter:

  • BDD designation and receipt of $35M program deposits at the Westchester Avenue branch (potential low-cost funding and community impact), with potential for an additional $20M pending NYC approval .
  • Expansion into South Florida via a representative office in Coral Gables, leveraging digital platform and small business relationships (potential loan/deposit growth in new market) .