10q10k10q10k.net

What changed in Ponce Financial Group, Inc.'s 10-K — 2022 vs 2023

vs

Paragraph-level year-over-year comparison of Ponce Financial Group, Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+444 added−496 removedSource: 10-K (2024-03-19) vs 10-K (2023-03-21)

Top changes in Ponce Financial Group, Inc.'s 2023 10-K

444 paragraphs added · 496 removed · 327 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

133 edited+35 added−80 removed175 unchanged
Biggest changeAt December 31, 2022 2021 2020 2019 2018 (in thousands) Nonaccrual loans: Mortgage loans: 1-4 family residential Investor-owned $ 2,844 $ 3,349 $ 2,808 $ 2,312 $ 205 Owner-occupied 961 1,284 1,053 1,009 1,092 Multifamily residential — 1,200 946 — 16 Nonresidential properties — 2,163 3,776 3,555 706 Construction and land 7,567 917 — 1,118 1,115 Nonmortgage loans: Business — — — — — Consumer — — — — — Total nonaccrual loans (not including non-accruing troubled debt restructured loans) $ 11,372 $ 8,913 $ 8,583 $ 7,994 $ 3,134 Non-accruing troubled debt restructured loans: Mortgage loans: 1-4 family residential Investor-owned $ 217 $ 234 $ 249 $ 467 $ 1,053 Owner-occupied 2,027 2,196 2,197 2,491 1,987 Multifamily residential — — — — — Nonresidential properties 93 100 654 646 604 Construction and land — — — — — Nonmortgage loans: Business — — — — — Consumer — — — — — Total non-accruing troubled debt restructured loans 2,337 2,530 3,100 3,604 3,644 Total nonaccrual loans $ 13,709 $ 11,443 $ 11,683 $ 11,598 $ 6,778 Accruing troubled debt restructured loans: Mortgage loans: 1-4 family residential Investor-owned $ 2,207 $ 3,089 $ 3,378 $ 5,191 $ 5,192 Owner-occupied 1,328 2,374 2,505 2,090 3,456 Multifamily residential — — — — — Nonresidential properties 708 732 754 1,306 1,438 Construction and land — — — — — Nonmortgage loans: Business — — — 14 374 Consumer — — — — — Total accruing troubled debt restructured loans $ 4,243 $ 6,195 $ 6,637 $ 8,601 $ 10,460 Total nonperforming assets and accruing troubled debt restructured loans $ 17,952 $ 17,638 $ 18,320 $ 20,199 $ 17,238 Total nonperforming loans to total gross loans 0.90 % 0.87 % 1.00 % 1.20 % 0.73 % Total nonperforming assets to total assets 0.59 % 0.69 % 0.86 % 1.10 % 0.64 % Total nonperforming assets and accruing troubled debt restructured loans to total assets 0.78 % 1.07 % 1.35 % 1.92 % 1.63 % Classified Assets.
Biggest changeAt December 31, 2023 2022 2021 2020 2019 (in thousands) Nonaccrual loans: Mortgage loans: 1-4 family residential Investor-owned $ 793 $ 2,844 $ 3,349 $ 2,808 $ 2,312 Owner-occupied 1,683 961 1,284 1,053 1,009 Multifamily residential 2,979 — 1,200 946 — Nonresidential properties — — 2,163 3,776 3,555 Construction and land 6,659 7,567 917 — 1,118 Nonmortgage loans: Business 19 — — — — Consumer 146 — — — — Total nonaccrual loans (not including non-accruing modifications to borrowers experiencing financial difficulty) (1) $ 12,279 $ 11,372 $ 8,913 $ 8,583 $ 7,994 Non-accruing modifications to borrowers experiencing financial difficulty (1) : Mortgage loans: 1-4 family residential Investor-owned $ — $ 217 $ 234 $ 249 $ 467 Owner-occupied 447 2,027 2,196 2,197 2,491 Multifamily residential — — — — — Nonresidential properties — 93 100 654 646 Construction and land — — — — — Nonmortgage loans: Business — — — — — Consumer — — — — — Total non-accruing modifications to borrowers experiencing financial difficulty (1) 447 2,337 2,530 3,100 3,604 Total nonaccrual loans $ 12,726 $ 13,709 $ 11,443 $ 11,683 $ 11,598 Accruing modifications to borrowers experiencing financial difficulty (1) : Mortgage loans: 1-4 family residential Investor-owned $ 2,112 $ 2,207 $ 3,089 $ 3,378 $ 5,191 Owner-occupied 2,313 1,328 2,374 2,505 2,090 Multifamily residential — — — — — Nonresidential properties 757 708 732 754 1,306 Construction and land — — — — — Nonmortgage loans: Business — — — — 14 Consumer — — — — — Total accruing modifications to borrowers experiencing financial difficulty (1) $ 5,182 $ 4,243 $ 6,195 $ 6,637 $ 8,601 Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty (1) $ 17,908 $ 17,952 $ 17,638 $ 18,320 $ 20,199 Total nonperforming loans to total gross loans 0.66 % 0.90 % 0.87 % 1.00 % 1.20 % Total nonperforming assets to total assets 0.46 % 0.59 % 0.69 % 0.86 % 1.10 % Total non-performing assets and accruing modifications to borrowers experiencing financial difficulty as a percentage of total assets (1) 0.65 % 0.78 % 1.07 % 1.35 % 1.92 % 12 (1) For periods in 2023, 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.
As a federal savings association, the Bank must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, the Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of every 12-month period.
Qualified Thrift Lender Test . As a federal savings association, the Bank must satisfy the qualified thrift lender, or “QTL,” test. Under the QTL test, the Bank must maintain at least 65% of its “portfolio assets” in “qualified thrift investments” (primarily residential mortgages and related investments, including mortgage-backed securities) in at least nine months of every 12-month period.
The Federal Reserve Board adopted a final rule on January 30, 2020, effective April 1, 2020, providing further guidance regarding under what circumstances “control” will be found to exist. 30 Federal Securities Laws The Company’s common stock is registered with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”).
The Federal Reserve Board adopted a final rule on January 30, 2020, effective April 1, 2020, providing further guidance regarding under what circumstances “control” will be found to exist. Federal Securities Laws The Company’s common stock is registered with the SEC under the Securities Exchange Act of 1934, as amended (“Exchange Act”).
The Bank’s operations are also subject to federal laws applicable to credit transactions, such as the: • Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; 28 • Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; • Truth in Savings Act, mandating certain disclosures to depositors; and • Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
The Bank’s operations are also subject to federal laws applicable to credit transactions, such as the: • Truth-In-Lending Act, governing disclosures of credit terms to consumer borrowers; • Home Mortgage Disclosure Act, requiring financial institutions to provide information to enable the public and public officials to determine whether a financial institution is fulfilling its obligation to help meet the housing needs of the community it serves; • Equal Credit Opportunity Act, prohibiting discrimination on the basis of race, creed or other prohibited factors in extending credit; • Fair Credit Reporting Act, governing the use and provision of information to credit reporting agencies; • Fair Debt Collection Act, governing the manner in which consumer debts may be collected by collection agencies; • Truth in Savings Act, mandating certain disclosures to depositors; and • Rules and regulations of the various federal agencies charged with the responsibility of implementing such federal laws.
Among other things, these provisions generally require that extensions of credit to insiders: 27 • be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and • not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital.
Among other things, these provisions generally require that extensions of credit to insiders: • be made on terms that are substantially the same as, and follow credit underwriting procedures that are not less stringent than, those prevailing for comparable transactions with unaffiliated persons and that do not involve more than the normal risk of repayment or present other unfavorable features; and • not exceed certain limitations on the amount of credit extended to such persons, individually and in the aggregate, which limits are based, in part, on the amount of the Bank’s capital.
The regulatory guidance also states that a savings and loan holding company should inform Federal Reserve Bank supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the savings and loan holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with the beginning of the quarter in which the redemption or repurchase occurred.
The regulatory guidance also states that a savings and loan holding company should inform Federal Reserve Bank supervisory staff prior to redeeming or repurchasing common stock or perpetual preferred stock if the savings and loan holding company is experiencing financial weaknesses or the repurchase or redemption would result in a net reduction, at the end of a quarter, in the amount of such equity instruments outstanding compared with 27 the beginning of the quarter in which the redemption or repurchase occurred.
The maximum loan term is 30 years, self-amortizing. As a portfolio lender, the Bank presently does not offer a fixed-rate product. The Bank currently offers mostly 5/1 and 5/5 adjustable rate loans that adjust based on a spread ranging between 2.75% to 3.00% over the one or five-year FHLBNY rate.
The maximum loan term is 30 years, self-amortizing. As a portfolio lender, the Bank presently does offer a fixed-rate product. The Bank currently offers mostly 5/1 and 5/5 adjustable rate loans that adjust based on a spread ranging between 2.75% to 3.00% over the one or five-year FHLBNY rate.
The Bank currently utilizes the specific charge-off method under Section 582(a) of the Internal Revenue Code. Net Operating Loss Carryovers . A financial institution may not carry back net operating losses (“NOL”) to earlier tax years. The NOL can be carried forward indefinitely. The use of NOLs to offset income is limited to 80%.
The Bank currently utilizes the specific charge-off method under Section 582(a) of the Internal Revenue Code. Net Operating Loss Carryovers . A financial institution may not carry back net operating losses (“NOL”) to earlier tax years. The NOL can be carried forward indefinitely. The use of NOLs to offset income is limited to 80% of taxable income.
For example, a risk weight of 0.0% is assigned to cash and U.S. government securities, 25 a risk weight of 50.0% is generally assigned to prudently underwritten first lien one-to-four family residential mortgages, a risk weight of 100.0% is assigned to commercial and consumer loans, a risk weight of 150.0% is assigned to certain past due loans and a risk weight of between 0.0% to 600.0% is assigned to permissible equity interests, depending on certain specified factors.
For example, a risk weight of 0.0% is assigned to cash and U.S. government securities, a risk weight of 50.0% is generally assigned to prudently underwritten first lien one-to-four family residential mortgages, a risk weight of 100.0% is assigned to commercial and consumer loans, a risk weight of 150.0% is assigned to certain past due loans and a risk weight of between 0.0% to 600.0% is assigned to permissible equity interests, depending on certain specified factors.
The Small Business Protection Act of 1996 eliminated the use of the reserve method of accounting for income taxes on bad debt reserves by savings institutions. For taxable years beginning after 1995, Ponce De Leon Federal Bank, the predecessor of Ponce Bank, and Ponce Bank have been subject to the same bad debt reserve rules as commercial banks.
The Small Business Protection Act of 1996 eliminated 28 the use of the reserve method of accounting for income taxes on bad debt reserves by savings institutions. For taxable years beginning after 1995, Ponce De Leon Federal Bank, the predecessor of Ponce Bank, and Ponce Bank have been subject to the same bad debt reserve rules as commercial banks.
As a CDFI, the Bank is authorized to originate non-qualified mortgages. Non-qualified mortgages generally require greater down payments and have higher yields. The Bank generally limits one-to-four family loans to a maximum loan-to-value ratio of 90% for a purchase and 80% for a refinance, based on the lower of the purchase price or appraised value.
As a CDFI, the Bank is authorized to originate non-qualified mortgages. Non-qualified mortgages generally require greater down payments and have higher yields. The Bank generally limits one-to-four family loans to a maximum loan-to-value ("LTV") ratio of 90% for a purchase and 80% for a refinance, based on the lower of the purchase price or appraised value.
The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice. The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating.
The failure to comply with the Equal Credit Opportunity Act and the Fair Housing Act could result in enforcement actions by the OCC, as well as other federal regulatory agencies and the Department of Justice. 24 The Community Reinvestment Act requires all institutions insured by the FDIC to publicly disclose their rating.
The CFPB has broad rule-making authority for a wide range of consumer protection laws that apply to all banks and savings institutions, such as Ponce Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. Holding Company Regulations General .
The CFPB has broad rule-making authority for a wide range of consumer protection laws 26 that apply to all banks and savings institutions, such as Ponce Bank, including the authority to prohibit “unfair, deceptive or abusive” acts and practices. Holding Company Regulations General .
Alternatively, the Bank may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code. 26 A savings association that fails the qualified thrift lender test must operate under specified restrictions set forth in the Home Owners’ Loan Act.
Alternatively, the Bank may satisfy the QTL test by qualifying as a “domestic building and loan association” as defined in the Internal Revenue Code. A savings association that fails the qualified thrift lender test must operate under specified restrictions set forth in the Home Owners’ Loan Act.
The collateral, such as accounts receivable, securing these loans may fluctuate in value. 7 Although the Bank’s loan policy allows for the extension of secured and unsecured financing, the Bank usually seeks to obtain collateral when in initial discussions with potential borrowers.
The collateral, such as accounts receivable, securing these loans may fluctuate in value. Although the Bank’s loan policy allows for the extension of secured and unsecured financing, the Bank usually seeks to obtain collateral when in initial discussions with potential borrowers.
The Bank also uses borrowings, primarily from the FHLBNY, brokered and listing service deposits, and unsecured lines of credit with correspondent banks, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk and manage the cost of funds.
The Bank also uses borrowings, primarily from the FHLBNY and the FRBNY, brokered and listing service deposits, and unsecured lines of credit with correspondent banks, to supplement cash flow needs, lengthen the maturities of liabilities for interest rate risk and manage the cost of funds.
The states of Connecticut, New York, and New Jersey subject financial institutions to all state and local taxes in the same manner and to the same extent as other business corporations in Connecticut, New York and New Jersey. Additionally, depository financial institutions are subject to local business license taxes and a special occupation tax. Consolidated Group Return .
The states of Connecticut, Florida, New York, and New Jersey subject financial institutions to all state and local taxes in the same manner and to the same extent as other business corporations in Connecticut, Florida, New York and New Jersey. Additionally, depository financial institutions are subject to local business license taxes and a special occupation tax. Consolidated Group Return .
The primary concern in this type of lending is the borrower’s creditworthiness and the viability and cash flow potential of the property. Payments on loans secured by income-producing properties often depend on successful operation and management of the properties.
The primary concern in this type of lending is the borrower’s creditworthiness and the viability and cash flow potential of the property. Payments on loans secured by income-producing properties often depend on successful operation and management of the 6 properties.
The Company believes that all of its team members should be treated with respect and equality, regardless of gender, ethnicity, sexual orientation, gender identity, religious beliefs, or other 2 characteristics.
The Company believes that all of its team members should be treated with respect and equality, regardless of gender, ethnicity, sexual orientation, gender identity, religious beliefs, or other characteristics.
A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance, 29 as well as activities that are incidental to financial activities or complementary to a financial activity.
A financial holding company may engage in activities that are financial in nature, including underwriting equity securities and insurance, as well as activities that are incidental to financial activities or complementary to a financial activity.
The Dodd-Frank Act made noncompliance with the QTL test subject to agency enforcement action for a violation of law. At December 31, 2022, the Bank satisfied the QTL test. Capital Distributions . Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account.
The Dodd-Frank Act made noncompliance with the QTL test subject to agency enforcement action for a violation of law. At December 31, 2023, the Bank satisfied the QTL test. Capital Distributions . Federal regulations govern capital distributions by a federal savings association, which include cash dividends, stock repurchases and other transactions charged to the savings association’s capital account.
All other concentrations by county, which account for 4.2% of this category, have balances of $3.3 million or less.
All other concentrations by county, which account for 3.0% of this category, have balances of $2.4 million or less.
Treasury pursuant to its Emergency Capital Investment Program and from cash received from deposits made by its customers. At December 31, 2022 and 2021, there were no securities of which the amortized cost or estimated value exceeded 10% of total equity . Mortgage-Backed Securities .
Treasury pursuant to its Emergency Capital Investment Program and from cash received from deposits made by its customers. At December 31, 2023 and 2022, there were no securities of which the amortized cost or estimated value exceeded 10% of total equity . Mortgage-Backed Securities .
Prior to acquiring property through foreclosure proceedings, the Bank will obtain an updated appraisal to determine the fair market value and proceed with net adjustments according to accounting principles. Board of Directors approval is required to pursue a foreclosure.
Prior to acquiring property through foreclosure proceedings, the Bank will obtain an updated appraisal to determine the fair market value and proceed with net adjustments according to accounting principles. Board of Directors approval is required to pursue a foreclosure. Delinquent Loans.
Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments. Portfolio Maturities and Yields . The composition and maturities of the investment securities portfolio at December 31, 2022 are summarized in the following table.
Current prepayment speeds determine whether prepayment estimates require modification that could cause amortization or accretion adjustments. Portfolio Maturities and Yields . The composition and maturities of the investment securities portfolio at December 31, 2023 are summarized in the following table.
As of December 31, 2022, the Bank was in compliance with the loans-to-one borrower limitations. Standards for Safety and Soundness . Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions.
As of December 31, 2023, the Bank was in compliance with the loans-to-one borrower limitations. Standards for Safety and Soundness . Federal law requires each federal banking agency to prescribe certain standards for all insured depository institutions.
Federal Taxation Method of Accounting . For federal income tax purposes, the Bank currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns. For the year ended December 31, 2022, the Company and the Bank file a consolidated federal income tax return.
Federal Taxation Method of Accounting . For federal income tax purposes, the Bank currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns. For the year ended December 31, 2023, the Company and the Bank file a consolidated federal income tax return.
Furthermore, although the Bank believes that it has established the ALLL in conformity with GAAP, after a review of the loan portfolio by regulators, the Bank may determine it is appropriate to increase the ALLL.
Furthermore, although the Bank believes that it has established the ACL in conformity with GAAP, after a review of the loan portfolio by regulators, the Bank may determine it is appropriate to increase the ACL.
The Bank’s business primarily consists of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in mortgage loans, consisting of one-to-four family residential (both investor-owned and owner-occupied), multifamily residential, nonresidential properties, construction and land, and in business and consumer loans.
The Bank’s business primarily consists of taking deposits from the general public and investing those deposits, together with funds generated from operations and borrowings, in mortgage loans, consisting of one-to-four family residential (both investor-owned and owner-occupied), multifamily residential, nonresidential properties and construction and land, and, to a lesser extent, in business and consumer loans.
The following table provides a breakdown of the Bank’s loan portfolio by product type and principal balance outstanding at December 31, 2022, excluding mortgage loans held for sale.
The following table provides a breakdown of the Bank’s loan portfolio by product type and principal balance outstanding at December 31, 2023, excluding mortgage loans held for sale.
The Bank also invests in securities, which have historically consisted of U.S. government and federal agency securities and securities issued by government-sponsored or owned enterprises, as well as, mortgage-backed securities, corporate bonds and Federal Home Loan Bank of New York (the “FHLBNY”) stock.
The Bank also invests in securities, which have historically consisted of U.S. government and federal agency securities and securities issued by government-sponsored or owned enterprises, corporate securities, mortgage-backed securities and Federal Home Loan Bank of New York (the “FHLBNY”) stock.
The market share of bank deposits in the New York area can be difficult to quantify, as some “mega” banks will include large scale deposits from around the world as held at headquarters. However, in Bronx County, New York, where the Bank maintains four branches, it holds 1.67% (as of June 30, 2022) of the market’s deposits.
The market share of bank deposits in the New York area can be difficult to quantify, as some “mega” banks will include large scale deposits from around the world as held at headquarters. However, in Bronx County, New York, where the Bank maintains four branches, it holds 1.63% (as of June 30, 2023) of the market’s deposits.
In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, the existing ALLL may not be adequate and increases may be necessary should the quality of any loan or lease deteriorate as a result of the factors discussed above. Any material increase in the ALLL may adversely affect the Bank’s financial condition and results of operations.
In addition, because future events affecting borrowers and collateral cannot be predicted with certainty, the existing ACL may not be adequate and increases may be necessary should the quality of any loan deteriorate as a result of the factors discussed above. Any material increase in the ACL may adversely affect the Bank’s financial condition and results of operations.
Mortgage World was a mortgage banking entity which primarily operated in the New York City metropolitan area. It was a Federal Housing Administration (“FHA”) approved Title II lender. To maintain its license, Mortgage World needed to comply with certain regulations set forth by the U.S. Department of Housing and Urban Development (“HUD”).
Mortgage World was a mortgage banking entity which primarily operated in the New York City metropolitan area. It was a FHA approved Title II lender. To maintain its license, Mortgage World needed to comply with certain regulations set forth by the U.S. Department of Housing and Urban Development (“HUD”).
The capital conservation buffer requirement is 2.5% of risk-weighted assets. At December 31, 2022 and 2021, the Bank’s capital exceeded all applicable requirements. See Note 15, “Regulatory Capital Requirements” of the Notes to the accompanying Consolidated Financial Statements for additional information. Loans-to-One Borrower .
The capital conservation buffer requirement is 2.5% of risk-weighted assets. At December 31, 2023 and 2022, the Bank’s capital exceeded all applicable requirements. See Note 16, “Regulatory Capital Requirements” of the Notes to the accompanying Consolidated Financial Statements for additional information. Loans-to-One Borrower .
For additional information related to our business strategies, see “Management's Discussion and Analysis of Financial Condition and Results of Operations—Vision 2025 Evolves." Employees and Human Capital Resources As of December 31, 2022, the Company had 253 full time equivalent employees.
For additional information related to our business strategies, see “Management's Discussion and Analysis of Financial Condition and Results of Operations—Vision 2025 Evolves." Employees and Human Capital Resources As of December 31, 2023, the Company had 237 full time equivalent employees.
For the year ended December 31, 2022, the Company was subject to U.S. federal income tax, New York State income tax, Connecticut income tax, New Jersey income tax, Florida income tax, Pennsylvania income tax and New York City income tax. The Company is generally no longer subject to examination by taxing authorities for years before 2019.
For the year ended December 31, 2023, the Company was subject to U.S. federal income tax, New York State income tax, Connecticut income tax, New Jersey income tax, Florida income tax, Pennsylvania income tax and New York City income tax. The Company is generally no longer subject to examination by taxing authorities for years before 2020.
The Bank generally limits the maximum LTVs on these loans to 75%, based on the lower of the purchase price or appraised value of the subject property (70% on the refinance of nonresidential properties such as retail spaces, office buildings, and warehouses) and a DSCR of 1.20%. The maximum 6 loan term ranges between 25 and 30 years.
The Bank generally limits the maximum LTVs on these loans to 75%, based on the lower of the purchase price or appraised value of the subject property (70% on the refinance of nonresidential properties such as retail spaces, office buildings, and warehouses) and a DSCR of 1.20%. The maximum loan term ranges between 5 to 15 years.
The rest of this category, less than 12.0%, is spread out in other counties and no other concentration exceeded $3.7 million, or 2.7%. It is the Bank’s policy to underwrite loans secured by one-to-four family owner-occupied residential real estate in a manner that ensures strict compliance with Dodd-Frank regulatory requirements.
The rest of this category, less than 2.0%, is spread out in other counties and no other concentration exceeded $1.5 million, or 0.9%. It is the Bank’s policy to underwrite loans secured by one-to-four family owner-occupied residential real estate in a manner that ensures strict compliance with Dodd-Frank regulatory requirements.
(2) Includes $18.2 million of microloans which were outstanding and serviced by the Bank pursuant to its arrangement with Grain at December 31, 2022. Loan Approval Procedures and Authority. The Bank’s total loans or extensions of credit to a single borrower or group of related borrowers cannot exceed, with specified exemptions, 15% of its total regulatory capital.
(2) Includes $8.0 million of microloans which were outstanding and serviced by the Bank pursuant to its former arrangement with Grain at December 31, 2023. Loan Approval Procedures and Authority. The Bank’s total loans or extensions of credit to a single borrower or group of related borrowers cannot exceed, with specified exemptions, 15% of its total regulatory capital.
Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different terms to repricing than the Bank’s deposits, they can change the Bank’s interest rate risk profile.
The Bank may also obtain advances from the FRBNY. Such advances may be made pursuant to several different credit programs, each of which has its own interest rate and range of maturities. To the extent such borrowings have different terms to repricing than the Bank’s deposits, they can change the Bank’s interest rate risk profile.
At December 31, 2022, passbook savings accounts and certificates of deposit with a passbook feature totaled $130.0 million, reflecting depositors’ preference for traditional banking services. Borrowings . The Bank may obtain advances from the FHLBNY by pledging as security its capital stock at the FHLBNY and certain of its mortgage loans and mortgage-backed securities.
At December 31, 2023, passbook savings accounts and certificates of deposit with a passbook feature totaled $119.9 million, reflecting depositors’ preference for traditional banking services. Borrowings . The Bank may obtain advances from the FHLBNY by pledging as security its capital stock at the FHLBNY and certain of its mortgage loans and mortgage-backed securities.
Subject to market conditions and its asset-liability analysis, the Bank looks to maintain its emphasis on multifamily residential and nonresidential property loans while growing the overall loan portfolio and increasing the overall yield earned on loans. Additionally, the Bank has entered into a partnership with Grain.
Subject to market conditions and its asset-liability analysis, the Bank looks to maintain its emphasis on multifamily residential and nonresidential property loans while growing the overall loan portfolio and increasing the overall yield earned on loans. In 2020, the Bank had entered into a partnership with Grain.
The Bank’s lending limit as of December 31, 2022 was $71.5 million, with the ability to lend additional amounts up to 10% if the loans or extensions of credit are fully secured by readily-marketable collateral. At December 31, 2022, the Bank complied with these loans-to-one borrower limitations.
The Bank’s lending limit as of December 31, 2023 was $73.9 million, with the ability to lend additional amounts up to 10% if the loans or extensions of credit are fully secured by readily-marketable collateral. At December 31, 2023, the Bank complied with these loans-to-one borrower limitations.
No other loan or loans-to-one borrower, individually or cumulatively, exceeded $25.0 million, or 35.0% of the lending limit. 10 The Bank’s real estate lending is subject to written policies, underwriting standards and operating procedures.
No other loan or loans-to-one borrower, individually or cumulatively, exceeded $44.0 million, or 59.5% of the lending limit. 10 The Bank’s real estate lending is subject to written policies, underwriting standards and operating procedures.
The following table sets forth the maturity of those certificates as of December 31, 2022.
The following table sets forth the maturity of those certificates as of December 31, 2023.
At December 31, 2022 and 2021, the investment portfolio consisted of available-for-sale and held-to-maturity securities and obligations issued by the U.S. government and government-sponsored enterprises, corporate bonds and the FHLBNY stock. At December 31, 2022 and 2021, the Bank owned $24.7 million and $6.0 million, respectively, of FHLBNY stock.
At December 31, 2023 and 2022, the investment portfolio consisted of available-for-sale and held-to-maturity securities and obligations issued by the U.S. government and government-sponsored enterprises, corporate bonds and the FHLBNY stock. At December 31, 2023 and 2022, the Bank owned $19.4 million and $24.7 million, respectively, of FHLBNY stock.
Ponce De Leon Federal Bank, the predecessor of Ponce Bank, has pre-2015 carryforwards of $0.6 million for New York State purposes and $0.5 million for New York City purposes. Furthermore, there are post-2015 carryforwards available of $60.9 million for New York State purposes and $33.9 million for New York City purposes.
Ponce De Leon Federal Bank, the predecessor of Ponce Bank, has pre-2015 carryforwards of $0.6 million for New York State purposes and $0.5 million for New York City purposes. Furthermore, there are post-2015 carryforwards available of $64.1 million for New York State purposes and $33.2 million for New York City purposes.
Additionally, the Bank has been using alternative funding sources such as brokered deposits and FHLBNY advances to support loan growth. Competition The Company faces significant competition within its market area both in originating loans and attracting deposits.
Additionally, the Bank has been using alternative funding sources such as brokered deposits, FHLBNY and Federal Reserve Bank of New York ("FRBNY") advances to support loan growth. Competition The Company faces significant competition within its market area both in originating loans and attracting deposits.
At December 31, 2022 2021 2020 2019 2018 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value (Dollars in thousands) Available-for-Sale Securities: U.S. Government and Federal Agencies $ — $ — $ — $ — $ — $ — $ 16,373 $ 16,354 $ 20,924 $ 20,515 U.S.
At December 31, 2023 2022 2021 2020 2019 Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value Amortized Cost Fair Value (Dollars in thousands) Available-for-Sale Securities: U.S. Government and Federal Agencies $ — $ — $ — $ — $ — $ — $ — $ — $ 16,373 $ 16,354 U.S.
The following table sets forth the composition of the Bank’s loan portfolio by type of loan (excluding mortgage loans held for sale) at the dates indicated. Loans in process at December 31, 2022 and 2021 were $205.6 million and $118.9 million, respectively.
Loan Portfolio Composition. The following table sets forth the composition of the Bank’s loan portfolio by type of loan (excluding mortgage loans held for sale) at the dates indicated. Loans in process at December 31, 2023 and 2022 were $520.3 million and $205.6 million, respectively.
Consumer loans generally have higher interest rates than mortgage loans. The risk involved in consumer loans fluctuates based on the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans include passbook loans and other secured and unsecured loans that have been made for a variety of consumer purposes.
The risk involved in consumer loans fluctuates based on the type and nature of the collateral and, in certain cases, the absence of collateral. Consumer loans include passbook loans and other secured and unsecured loans that have been made for a variety of consumer purposes.
At December 31, 2022 and 2021, the Bank had mortgage-backed securities with a carrying value of $516.5 million and $91.9 million, respectively. Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages.
At December 31, 2023 and 2022, the Bank had mortgage-backed securities with a carrying value of $465.6 million and $516.5 million, respectively. Mortgage-backed securities are securities issued in the secondary market that are collateralized by pools of mortgages.
The Company believes there is a significant opportunity for an immigrant community-focused, minority directed bank to provide a full range of financial services to commercial and retail customers in our market area and other similar communities. Our current business strategy consists of the following: • Achieve above average growth.
The Company believes there is a significant opportunity for an immigrant community-focused, minority directed bank to provide a full range of financial services to commercial and retail customers in our market area and other similar communities. Our current business strategy consists of the following: • Execute balance sheet reallocation strategy.
Special mention loans decreased $4.1 million, or 29.4%, to $9.7 million at December 31, 2022 compared to $13.8 million at December 31, 2021. The decrease was primarily attributable to decreases of $6.7 million in construction and land loans and $3.9 million in multifamily loans, offset by an increase of $5.9 in 1-4 family loans and $0.6 million in nonresidential loans.
The decrease of substandard loans was primarily attributable to decreases of $5.0 million in construction and land loans and $0.9 million in 1-4 family loans, offset by an increase of $2.3 million in multifamily loans. Special mention loans decreased $3.9 million, or 40.6%, to $5.8 million at December 31, 2023 compared to $9.7 million at December 31, 2022.
There were $5.8 million and $1.2 million in net charge-offs during the year ended December 31, 2022 and 2021, respectively. 19 Although the Bank believes that it uses the best information available to establish the ALLL, future adjustments to the allowance may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
There were $6.6 million and $5.8 million in net charge-offs during the years ended December 31, 2023 and 2022, respectively. 16 Although the Bank believes that it uses the best information available to establish the ACL, future adjustments to the allowance may be necessary and results of operations could be adversely affected if circumstances differ substantially from the assumptions used in making the determinations.
At or For the Years December 31, 2022 2021 2020 (Dollars in thousands) FHLBNY Advances: Balance outstanding at end of period $ 517,375 $ 106,255 $ 117,255 Average amount outstanding during the period 206,969 108,005 116,947 Maximum outstanding at any month-end during the period 517,375 109,255 152,284 Weighted average interest rate during the period 3.00 % 2.02 % 2.03 % Weighted average interest rate at the end of the period 3.90 % 2.02 % 1.90 % Warehouse Lines of Credit: Balance outstanding at end of period $ — $ 15,090 $ 29,961 Average amount outstanding during the period — 11,675 8,461 Maximum outstanding at any month-end during the period — 16,385 29,961 Weighted average interest rate during the period — 3.29 % 3.34 % Weighted average interest rate at the end of the period — 3.21 % 3.37 % Subsidiaries At December 31, 2022, the Company had one operating subsidiary, Ponce Bank, and Ponce Bank had one subsidiary, Ponce de Leon Mortgage Corp., a New York State chartered mortgage brokerage entity, whose employees are registered in New York and New Jersey.
At or For the Years December 31, 2023 2022 2021 (Dollars in thousands) FHLBNY and FRBNY Advances: Balance outstanding at end of period $ 684,421 $ 517,375 $ 106,255 Average amount outstanding during the period 633,116 206,969 108,005 Maximum outstanding at any month-end during the period 684,421 517,375 109,255 Weighted average interest rate during the period 4.02 % 3.00 % 2.02 % Weighted average interest rate at the end of the period 4.10 % 3.90 % 2.02 % Warehouse Lines of Credit: Balance outstanding at end of period $ — $ — $ 15,090 Average amount outstanding during the period — — 11,675 Maximum outstanding at any month-end during the period — — 16,385 Weighted average interest rate during the period — — 3.29 % Weighted average interest rate at the end of the period — — 3.21 % Subsidiaries At December 31, 2023, the Company had one operating subsidiary, Ponce Bank, and Ponce Bank had one subsidiary, Ponce de Leon Mortgage Corp., a New York State chartered mortgage brokerage entity, whose employees are registered in New York and New Jersey.
At December 31, 2022 2021 2020 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due (in thousands) Mortgages: 1-4 Family residential Investor-owned $ 1,530 $ 78 $ 1,865 $ 321 $ 2,969 $ 1,096 $ 2,222 $ 1,507 $ 1,907 Owner-occupied 2,553 — 815 2,961 471 1,947 1,572 348 1,100 Multifamily residential 4,643 — — 1,704 187 — 1,140 — 946 Nonresidential properties 4,246 607 — 934 1,168 — — — 3,272 Construction and land — 4,100 7,567 — — — — — — Nonmortgage Loans: — — — Business 1,466 7,869 2,973 4,036 544 13 100 — — Consumer 1,267 1,119 — 2,570 1,759 5 497 316 175 Total $ 15,705 $ 13,773 $ 13,220 $ 12,526 $ 7,098 $ 3,061 $ 5,531 $ 2,171 $ 7,400 At December 31, 2019 2018 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due (in thousands) Mortgages: 1-4 Family residential Investor-owned $ 3,866 $ — $ 1,082 $ 6,539 $ 470 $ — Owner-occupied 3,405 — 1,295 1,609 574 995 Multifamily residential 3,921 — — 995 — — Nonresidential properties 3 — 3,708 — 4 1,052 Construction and land — — — — — — Nonmortgage Loans: Business — — — 292 — — Consumer — — — — — — Total $ 11,195 $ — $ 6,085 $ 9,435 $ 1,048 $ 2,047 12 Non-Performing Assets.
At December 31, 2023 2022 2021 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due (in thousands) Mortgages: 1-4 Family residential Investor-owned $ — $ — $ 793 $ 1,530 $ 78 $ 1,865 $ 321 $ 2,969 $ 1,096 Owner-occupied — — 2,130 2,553 — 815 2,961 471 1,947 Multifamily residential 1,109 — 2,979 4,643 — — 1,704 187 — Nonresidential properties — — — 4,246 607 — 934 1,168 — Construction and land — — 6,659 — 4,100 7,567 — — — Nonmortgage Loans: Business 366 8 165 1,466 7,869 2,973 4,036 544 13 Consumer 536 1,007 — 1,267 1,119 — 2,570 1,759 5 Total $ 2,011 $ 1,015 $ 12,726 $ 15,705 $ 13,773 $ 13,220 $ 12,526 $ 7,098 $ 3,061 11 At December 31, 2020 2019 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due 30-59 Days Past Due 60-89 Days Past Due 90 Days or More Past Due (in thousands) Mortgages: 1-4 Family residential Investor-owned $ 2,222 $ 1,507 $ 1,907 $ 3,866 $ — $ 1,082 Owner-occupied 1,572 348 1,100 3,405 — 1,295 Multifamily residential 1,140 — 946 3,921 — — Nonresidential properties — — 3,272 3 — 3,708 Construction and land — — — — — — Nonmortgage Loans: Business 100 — — — — — Consumer 497 316 175 — — — Total $ 5,531 $ 2,171 $ 7,400 $ 11,195 $ — $ 6,085 Non-Performing Assets.
At December 31, 2022, the Bank has a federal NOL carryforwards of $13.1 million. 31 State Taxation The Company is treated as a financial institution under Connecticut, New York, and New Jersey state income tax law.
At December 31, 2023, the Bank has a federal NOL carryforwards of $7.6 million. State Taxation The Company is treated as a financial institution under Connecticut, Florida, New York, and New Jersey state income tax law.
At December 31, 2022 2021 2020 Allowance for Loan Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Allowance for Loan Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Allowance for Loan Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans (Dollars in thousands) Mortgage loans: 1-4 family residential Investor-owned $ 3,863 11.16 % 22.54 % $ 3,540 21.65 % 24.01 % $ 3,850 25.90 % 27.27 % Owner-occupied 1,723 4.98 % 8.84 % 1,178 7.20 % 7.33 % 1,260 8.47 % 8.43 % Multifamily residential 8,021 23.19 % 32.42 % 5,684 34.76 % 26.34 % 5,214 35.06 % 26.23 % Nonresidential properties 2,724 7.87 % 20.19 % 2,165 13.24 % 18.13 % 2,194 14.75 % 18.68 % Construction and land 2,683 7.76 % 12.13 % 2,024 12.38 % 10.19 % 1,820 12.24 % 9.03 % Total mortgage loans 19,014 54.96 % 96.12 % 14,591 89.23 % 86.00 % 14,338 96.42 % 89.64 % Nonmortgage loans: Business 120 0.35 % 2.62 % 306 1.87 % 11.38 % 254 1.71 % 8.10 % Consumer 15,458 44.69 % 1.26 % 1,455 8.90 % 2.62 % 278 1.87 % 2.26 % Total nonmortgage loans 15,578 45.04 % 3.88 % 1,761 10.77 % 14.00 % 532 3.58 % 10.36 % Total $ 34,592 100.00 % 100.00 % $ 16,352 100.00 % 100.00 % $ 14,870 100.00 % 100.00 % At December 31, 2019 2018 Allowance for Loan Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Allowance for Loan Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans (Dollars in thousands) Mortgage loans: 1-4 family residential Investor-owned $ 3,503 28.42 % 31.60 % $ 3,799 30.01 % 32.61 % Owner-occupied 1,067 8.65 % 9.52 % 1,208 9.55 % 9.98 % Multifamily residential 3,865 31.35 % 25.90 % 3,829 30.25 % 25.01 % Nonresidential properties 1,849 15.00 % 21.45 % 1,925 15.20 % 21.18 % Construction and land 1,782 14.45 % 10.28 % 1,631 12.88 % 9.42 % Total mortgage loans 12,066 97.87 % 98.75 % 12,392 97.89 % 98.20 % Nonmortgage loans: Business 254 2.06 % 1.13 % 260 2.05 % 1.69 % Consumer 9 0.07 % 0.12 % 7 0.06 % 0.11 % Total nonmortgage loans 263 2.13 % 1.25 % 267 2.11 % 1.80 % Total $ 12,329 100.00 % 100.00 % $ 12,659 100.00 % 100.00 % At December 31, 2022, the allowance for loan and lease losses represented 2.27% of total gross loans and 252.33% of nonperforming loans compared to 1.24% of total loans and 142.90% of nonperforming loans at December 31, 2021.
At December 31, 2023 2022 2021 Allowance for Credit Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Allowance for Credit Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Allowance for Credit Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans (Dollars in thousands) Mortgage loans: 1-4 family residential Investor-owned $ 4,415 16.89 % 17.89 % $ 3,863 11.16 % 22.54 % $ 3,540 21.65 % 24.01 % Owner-occupied 2,012 7.69 % 7.93 % 1,723 4.98 % 8.84 % 1,178 7.20 % 7.33 % Multifamily residential 4,365 16.69 % 28.65 % 8,021 23.19 % 32.42 % 5,684 34.76 % 26.34 % Nonresidential properties 3,176 12.14 % 17.81 % 2,724 7.87 % 20.19 % 2,165 13.24 % 18.13 % Construction and land 4,807 18.38 % 26.22 % 2,683 7.76 % 12.13 % 2,024 12.38 % 10.19 % Total mortgage loans 18,775 71.79 % 98.50 % 19,014 54.96 % 96.12 % 14,591 89.23 % 86.00 % Nonmortgage loans: Business 531 2.03 % 1.03 % 120 0.35 % 2.62 % 306 1.87 % 11.38 % Consumer 6,848 26.18 % 0.47 % 15,458 44.69 % 1.26 % 1,455 8.90 % 2.62 % Total nonmortgage loans 7,379 28.21 % 1.50 % 15,578 45.04 % 3.88 % 1,761 10.77 % 14.00 % Total $ 26,154 100.00 % 100.00 % $ 34,592 100.00 % 100.00 % $ 16,352 100.00 % 100.00 % At December 31, 2020 2019 Allowance for Credit Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans Allowance for Credit Losses Percent of Allowance in Each Category to Total Allocated Allowance Percent of Loans in Each Category to Total Loans (Dollars in thousands) Mortgage loans: 1-4 family residential Investor-owned $ 3,850 25.90 % 27.27 % $ 3,503 28.42 % 31.60 % Owner-occupied 1,260 8.47 % 8.43 % 1,067 8.65 % 9.52 % Multifamily residential 5,214 35.06 % 26.23 % 3,865 31.35 % 25.90 % Nonresidential properties 2,194 14.75 % 18.68 % 1,849 15.00 % 21.45 % Construction and land 1,820 12.24 % 9.03 % 1,782 14.45 % 10.28 % Total mortgage loans 14,338 96.42 % 89.64 % 12,066 97.87 % 98.75 % Nonmortgage loans: Business 254 1.71 % 8.10 % 254 2.06 % 1.13 % Consumer 278 1.87 % 2.26 % 9 0.07 % 0.12 % Total nonmortgage loans 532 3.58 % 10.36 % 263 2.13 % 1.25 % Total $ 14,870 100.00 % 100.00 % $ 12,329 100.00 % 100.00 % At December 31, 2023, allowance for credit losses represented 1.36% of total gross loans and 205.52% of nonperforming loans compared to 2.27% of total gross loans and 252.33% of nonperforming loans at December 31, 2022.
Finally, for New Jersey purposes, losses may only be carried forward 20 years, with no allowable carryback period. At December 31, 2022, the Bank has federal net operating loss carryforward of $13.1 million, Connecticut net operation loss carryforward of $0.1 million and New Jersey net operating loss carryforward of $0.5 million.
Finally, for New Jersey purposes, losses may only be carried forward 20 years, with no allowable carryback period. At December 31, 2023, the Bank has federal net operating loss carryforward of $7.6 million, Connecticut net operation loss carryforward of $0.01 million and New Jersey net operating loss carryforward of $0.2 million.
In the nonresidential portfolio, the overall mix is diverse in terms of property types, with the largest concentration being retail and wholesale at $105.3 million, or 34.2% of the portfolio, industrial and warehouse at $68.3 million, or 22.2%, offices at $44.0 million, or 14.3%, hotels and motels at $38.1 million, or 12.4%, service, doctor, dentist, daycare and schools at $22.2 million, or 7.2%, restaurants at $8.6 million, or 2.8%, churches at $8.3 million, or 2.7%, medical, nursing home and hospital at $7.8 million, or 2.5%, and the rest of the portfolio accounts for other property types, with none exceeding 1.0% as a portfolio concentration.
In the nonresidential portfolio, the overall mix is diverse in terms of property types, with the largest concentration being retail and wholesale at $117.0 million, or 34.2% of the portfolio, industrial and warehouse at $78.6 million, or 23.0%, offices at $43.3 million, or 12.7%, hotels and motels at $36.3 million, or 10.6%, service, doctor, dentist, daycare and schools at $22.6 million, or 6.6%, land at $15.9 million, or 4.7%, churches at $8.9 million, or 2.6%, medical, nursing home and hospital at $7.7 million, or 2.2%, restaurants at $7.6 million, or 2.2%, and the rest of the portfolio accounts for other property types, with none exceeding 1.0% as a portfolio concentration.
At December 31, 2022 and 2021 the Bank had $517.4 million and $106.3 million of outstanding FHLBNY advances, respectively. Additionally, the Bank has two unsecured lines of credit in the amount of $90.0 million and $25.0 million with two correspondent banks, under which there was nothing outstanding at December 31, 2022 and 2021, respectively.
At December 31, 2023 and 2022 the Bank had $684.4 million and $517.4 million of outstanding FHLBNY and FRBNY advances, 20 respectively. Additionally, the Bank has two unsecured lines of credit in the amount of $75.0 million and $90.0 million with two correspondent banks, under which there was nothing outstanding at December 31, 2023 and 2022, respectively.
For the Years Ended December 31, 2022 2021 2020 2019 2018 (Dollars in thousands) Allowance at beginning of year $ 16,352 $ 14,870 $ 12,329 $ 12,659 $ 11,071 Provision (recovery) for loan losses 24,046 2,717 2,443 258 1,249 Charge-offs: Mortgage loans: 1-4 family residential Investor-owned — — — (8 ) — Owner-occupied — — — — — Multifamily residential — (38 ) — — — Nonresidential properties — — — — — Construction and land — — — — — Nonmortgage loans: Business — — — (724 ) (34 ) Consumer (1) (6,659 ) (1,342 ) (6 ) — (14 ) Total charge-offs (6,659 ) (1,380 ) (6 ) (732 ) (48 ) Recoveries: Mortgage loans: 1-4 family residential Investor-owned 156 8 — 23 1 Owner-occupied 39 45 — — 250 Multifamily residential — — — — — Nonresidential properties — — 4 9 9 Construction and land — — — — — Nonmortgage loans: Business 94 84 95 110 122 Consumer (1) 564 8 5 2 5 Total recoveries 853 145 104 144 387 Net recoveries (charge-offs) (5,806 ) (1,235 ) 98 (588 ) 339 Allowance at end of year $ 34,592 $ 16,352 $ 14,870 $ 12,329 $ 12,659 Allowance for loan losses as a percentage for nonperforming loans 252.33 % 142.90 % 127.28 % 106.30 % 186.77 % Allowance for loan losses as a percentage of total loans 2.27 % 1.24 % 1.27 % 1.28 % 1.36 % Net recoveries (charge-offs) to average loans outstanding during the year (0.42 %) (0.09 %) 0.01 % (0.06 %) 0.04 % (1) At December 31, 2022 and 2021, includes $6.7 million and $1.2 million of charge-offs and $0.6 million and $0.01 million of recoveries related to loans associated with Grain, respectively. 18 Allowance for Loan and Lease Losses .
For the Years Ended December 31, 2023 2022 2021 2020 2019 (Dollars in thousands) Allowance at beginning of year $ 34,592 $ 16,352 $ 14,870 $ 12,329 $ 12,659 Provision (recovery) for loan losses 1,237 24,046 2,717 2,443 258 Adoption of CECL (3,090 ) Charge-offs: Mortgage loans: 1-4 family residential Investor-owned — — — — (8 ) Owner-occupied — — — — — Multifamily residential — — (38 ) — — Nonresidential properties — — — — — Construction and land — — — — — Nonmortgage loans: Business (63 ) — — — (724 ) Consumer (1) (7,227 ) (6,659 ) (1,342 ) (6 ) — Total charge-offs (7,290 ) (6,659 ) (1,380 ) (6 ) (732 ) Recoveries: Mortgage loans: 1-4 family residential Investor-owned — 156 8 — 23 Owner-occupied — 39 45 — — Multifamily residential — — — — — Nonresidential properties — — — 4 9 Construction and land — — — — — Nonmortgage loans: Business 3 94 84 95 110 Consumer (1) 702 564 8 5 2 Total recoveries 705 853 145 104 144 Net recoveries (charge-offs) (6,585 ) (5,806 ) (1,235 ) 98 (588 ) Allowance at end of year $ 26,154 $ 34,592 $ 16,352 $ 14,870 $ 12,329 Allowance for loan losses as a percentage for nonperforming loans 205.52 % 252.33 % 142.90 % 127.28 % 106.30 % Allowance for loan losses as a percentage of total loans 1.36 % 2.27 % 1.24 % 1.27 % 1.28 % Net recoveries (charge-offs) to average loans outstanding during the year (0.38 %) (0.42 %) (0.09 %) 0.01 % (0.06 %) (1) At December 31, 2023, 2022 and 2021, includes $7.2 million, $6.7 million and $1.2 million of charge-offs and $0.7 million, $0.6 million and $0.01 million of recoveries related to loans associated with Grain, respectively. 15 Allowance for Credit Losses .
Securities and Exchange Commission Proposal On March 21, 2022, the SEC proposed new ‎rules (the "Proposal") that, if finalized, will require reporting companies, such as the Company, to disclose ‎climate-related risks, metrics, and other information in their audited financial ‎statements, registration statements, annual reports (such as Form 10-K) and other ‎SEC filings.
Securities and Exchange Commission Climate Rules On March 6, 2024, the SEC adopted new ‎rules (the "Climate Rules") that require reporting companies, such as the Company, to disclose ‎climate-related risks, metrics, and other information in their audited financial ‎statements, registration statements, annual reports (such as Form 10-K) and other ‎SEC filings.
The following table sets forth information regarding non-performing assets excluding mortgage loans held for sale at fair value. Non-performing assets are comprised of non-accrual loans and non-accrual troubled debt restructured loans. There was no other real estate owned at the dates indicated.
The following table sets forth information regarding non-performing assets excluding mortgage loans held for sale at fair value. Non-performing assets are comprised of non-accrual loans and non-accrual modifications to borrowers experiencing financial difficulty. There was no other real estate owned at the dates indicated.
Mortgage Loans Held for Sale, at Fair Value. At December 31, 2022 and 2021, Mortgage World loans held for sale, at fair value, was $2.0 million and $15.8 million, respectively, included residential mortgages that were originated in accordance with secondary market pricing and underwriting standards. Mortgage World’s intent was to sell these loans on the secondary market.
Mortgage Loans Held for Sale, at Fair Value. At December 31, 2023 and 2022, mortgage loans held for sale, at fair value, was $10.0 million and $2.0 million, respectively, including residential mortgages that were originated in accordance with secondary market pricing and underwriting standards. The Bank’s intent was to sell these loans on the secondary market.
Non-accrual loans include non-accruing troubled debt restructured loans of $2.3 million, $2.5 million, $3.1 million, $3.6 million, and $3.6 million at December 31, 2022, 2021, 2020, 2019 and 2018, respectively. There were no accruing loans past due 90 days or more at the dates indicated.
Non-accrual loans include non-accruing previously existing troubled debt restructured loans, prior to ASU 2022-02, of $0.7 million, $2.3 million, $2.5 million, $3.1 million, and $3.6 million at December 31, 2023, 2022, 2021, 2020 and 2019, respectively. There were no accruing loans past due 90 days or more at the dates indicated.
In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset.
Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations. 22 In determining the amount of risk-weighted assets for purposes of calculating risk-based capital ratios, an institution’s assets, including certain off-balance sheet assets (e.g., recourse obligations, direct credit substitutes, residual interests), are multiplied by a risk weight factor assigned by the regulations based on the risk deemed inherent in the type of asset.
At December 31, 2022 2021 2020 2019 2018 Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent (Dollars in thousands) Mortgage loans: 1-4 family residential Investor-owned $ 343,968 22.54 % $ 317,304 24.01 % $ 319,596 27.27 % $ 305,272 31.60 % $ 303,197 32.61 % Owner-occupied 134,878 8.84 % 96,947 7.33 % 98,795 8.43 % 91,943 9.52 % 92,788 9.98 % Multifamily residential 494,667 32.42 % 348,300 26.34 % 307,411 26.23 % 250,239 25.90 % 232,509 25.01 % Nonresidential properties 308,043 20.19 % 239,691 18.13 % 218,929 18.68 % 207,225 21.45 % 196,917 21.18 % Construction and land 185,018 12.13 % 134,651 10.19 % 105,858 9.03 % 99,309 10.28 % 87,572 9.42 % Total mortgage loans 1,466,574 96.12 % 1,136,893 86.00 % 1,050,589 89.64 % 953,988 98.75 % 912,983 98.20 % Nonmortgage loans: Business loans (1) 39,965 2.62 % 150,512 11.38 % 94,947 8.10 % 10,877 1.13 % 15,710 1.69 % Consumer loans (2) 19,129 1.26 % 34,693 2.62 % 26,517 2.26 % 1,231 0.12 % 1,068 0.11 % Total nonmortgage loans 59,094 3.88 % 185,205 14.00 % 121,464 10.36 % 12,108 1.25 % 16,778 1.80 % Total loans, gross 1,525,668 100.00 % 1,322,098 100.00 % 1,172,053 100.00 % 966,096 100.00 % 929,761 100.00 % Net deferred loan origination costs 2,051 (668 ) 1,457 1,970 1,407 Allowance for loan losses (34,592 ) (16,352 ) (14,870 ) (12,329 ) (12,659 ) Loans receivable, net $ 1,493,127 $ 1,305,078 $ 1,158,640 $ 955,737 $ 918,509 (1) As of December 31, 2022 and 2021, business loans include $20.0 million and $136.8 million, respectively, of PPP loans.
At December 31, 2023 2022 2021 2020 2019 Amount Percent Amount Percent Amount Percent Amount Percent Amount Percent (Dollars in thousands) Mortgage loans: 1-4 family residential Investor-owned $ 343,689 17.89 % $ 343,968 22.54 % $ 317,304 24.01 % $ 319,596 27.27 % $ 305,272 31.60 % Owner-occupied 152,311 7.93 % 134,878 8.84 % 96,947 7.33 % 98,795 8.43 % 91,943 9.52 % Multifamily residential 550,559 28.65 % 494,667 32.42 % 348,300 26.34 % 307,411 26.23 % 250,239 25.90 % Nonresidential properties 342,343 17.81 % 308,043 20.19 % 239,691 18.13 % 218,929 18.68 % 207,225 21.45 % Construction and land 503,925 26.22 % 185,018 12.13 % 134,651 10.19 % 105,858 9.03 % 99,309 10.28 % Total mortgage loans 1,892,827 98.50 % 1,466,574 96.12 % 1,136,893 86.00 % 1,050,589 89.64 % 953,988 98.75 % Nonmortgage loans: Business loans (1) 19,779 1.03 % 39,965 2.62 % 150,512 11.38 % 94,947 8.10 % 10,877 1.13 % Consumer loans (2) 8,966 0.47 % 19,129 1.26 % 34,693 2.62 % 26,517 2.26 % 1,231 0.12 % Total nonmortgage loans 28,745 1.50 % 59,094 3.88 % 185,205 14.00 % 121,464 10.36 % 12,108 1.25 % Total loans, gross 1,921,572 100.00 % 1,525,668 100.00 % 1,322,098 100.00 % 1,172,053 100.00 % 966,096 100.00 % Net deferred loan origination costs 468 2,051 (668 ) 1,457 1,970 Allowance for loan losses (26,154 ) (34,592 ) (16,352 ) (14,870 ) (12,329 ) Loans receivable, net $ 1,895,886 $ 1,493,127 $ 1,305,078 $ 1,158,640 $ 955,737 (1) As of December 31, 2023, 2022, 2021, 2020 and 2019, business loans include $1.0 million, $20.0 million, $136.8 million, $85.3 million and $0.0 million, respectively, of SBA Paycheck Protection Program (“PPP”) loans.
All other concentrations by county, which account for 0.7% of this category, have balances of $1.0 million or less. Nonresidential Loans. Nonresidential loans totaled $308.0 million, or 20.2% of the Bank’s total loan portfolio at December 31, 2022. Loans secured by nonresidential properties that represent the Bank’s third largest concentration.
All other concentrations by county, which account for 1.2% of this category, have balances of $1.7 million or less. Nonresidential Loans. Nonresidential loans totaled $342.3 million, or 17.8% of the Bank’s total loan portfolio at December 31, 2023. Loans secured by nonresidential properties that represent the Bank’s fourth largest concentration.
One-to-four family owner-occupied loans totaled $134.9 million, or 8.8% of the Bank’s total loan portfolio at December 31, 2022. The three largest loans outstanding in this category had outstanding balances of $2.6 million, $2.2 million and $2.0 million. There are 28 loans with an outstanding balance in excess of $1.0 million, totaling $39.1 million, or approximately 29.0% of this category.
One-to-four family owner-occupied loans totaled $152.3 million, or 7.9% of the Bank’s total loan portfolio at December 31, 2023. The three largest loans outstanding in this category had outstanding balances of $2.6 million, $2.2 million and $2.0 million. There are 26 loans with an outstanding balance in excess of $1.0 million, totaling $36.8 million, or approximately 23.5% of this category.
For the Years Ended December 31, 2022 2021 2020 2019 2018 (in thousands) Total loans at beginning of year $ 1,322,098 $ 1,172,053 $ 966,096 $ 929,761 $ 808,754 Loans originated: Mortgage loans: 1-4 family residential Investor-owned 58,333 42,631 36,522 32,827 38,738 Owner-occupied 54,001 15,346 15,090 9,117 6,430 Multifamily residential 181,227 73,128 90,481 53,288 66,674 Nonresidential properties 89,370 65,463 34,154 37,975 72,926 Construction and land 231,334 109,294 81,465 69,240 55,295 Total mortgage loans 614,265 305,862 257,712 202,447 240,063 Nonmortgage loans: Business (1) 6,325 122,254 89,110 1,175 5,101 Consumer (2) 3,898 59,760 30,050 755 697 Total nonmortgage loans 10,223 182,014 119,160 1,930 5,798 Total loans originated 624,488 487,876 376,872 204,377 245,861 Loans purchased: Mortgage loans: 1-4 family residential Investor-owned — 5,845 — — — Multifamily residential — 5,540 — — — Total loans purchased — 11,385 — — — Loans sold: Mortgage loans: 1-4 family residential Investor-owned (3,040 ) (5,661 ) (781 ) (3,520 ) (1,759 ) Owner-occupied (311 ) — — — (2,502 ) Multifamily residential — (2,299 ) (2,748 ) — (535 ) Nonresidential properties (767 ) (2,713 ) (510 ) (196 ) (2,045 ) Construction and land (5,734 ) (3,500 ) — — — Total mortgage loans (9,852 ) (14,173 ) (4,039 ) (3,716 ) (6,841 ) Total loans sold (9,852 ) (14,173 ) (4,039 ) (3,716 ) (6,841 ) Principal repayments and other (411,066 ) (335,043 ) (166,876 ) (164,326 ) (118,013 ) Net loan activity 203,570 150,045 205,957 36,335 121,007 Total loans at end of year $ 1,525,668 $ 1,322,098 $ 1,172,053 $ 966,096 $ 929,761 (1) For the years ended December 31, 2021 and 2020, business loans originated include $117.3 million and $85.3 million, respectively, of PPP loans .
For the Years Ended December 31, 2023 2022 2021 2020 2019 (in thousands) Total loans at beginning of year $ 1,525,668 $ 1,322,098 $ 1,172,053 $ 966,096 $ 929,761 Loans originated: Mortgage loans: 1-4 family residential Investor-owned 28,999 58,333 42,631 36,522 32,827 Owner-occupied 24,137 54,001 15,346 15,090 9,117 Multifamily residential 88,464 181,227 73,128 90,481 53,288 Nonresidential properties 55,649 89,370 65,463 34,154 37,975 Construction and land 700,904 231,334 109,294 81,465 69,240 Total mortgage loans 898,153 614,265 305,862 257,712 202,447 Nonmortgage loans: Business (1) 14,285 6,325 122,254 89,110 1,175 Consumer (2) 737 3,898 59,760 30,050 755 Total nonmortgage loans 15,022 10,223 182,014 119,160 1,930 Total loans originated 913,175 624,488 487,876 376,872 204,377 Loans purchased: Mortgage loans: 1-4 family residential Investor-owned — — 5,845 — — Owner-occupied — — — — — Multifamily residential — — 5,540 — — Total loans purchased — — 11,385 — — Loans sold and transferred to held-for-sale: Mortgage loans: 1-4 family residential — — — — — Investor-owned (2,129 ) (3,040 ) (5,661 ) (781 ) (3,520 ) Owner-occupied — (311 ) — — — Multifamily residential (1,435 ) — (2,299 ) (2,748 ) — Nonresidential properties — (767 ) (2,713 ) (510 ) (196 ) Construction and land (5,017 ) (5,734 ) (3,500 ) — — Total loans sold (8,581 ) (9,852 ) (14,173 ) (4,039 ) (3,716 ) Principal repayments and other (508,690 ) (411,066 ) (335,043 ) (166,876 ) (164,326 ) Net loan activity 395,904 203,570 150,045 205,957 36,335 Total loans at end of year $ 1,921,572 $ 1,525,668 $ 1,322,098 $ 1,172,053 $ 966,096 (1) For the years ended December 31, 2021 and 2020, business loans originated include $117.3 million and $85.3 million, respectively, of PPP loans .
C&I loans (excluding PPP loans) and lines of credit represent 2.6% of the Bank’s total loan portfolio at December 31, 2022.
C&I loans (excluding PPP loans) and lines of credit represent 1.0% of the Bank’s total loan portfolio at December 31, 2023.
Agency Bonds $ 35,000 $ 34,620 $ — $ — $ — $ — $ — $ — $ — $ — Corporate Bonds 82,500 78,738 — — — — — — — — Mortgage-Backed Securities: Collateralized Mortgage Obligations (1) 235,479 230,113 — — — — — — — — FHLMC Certificates 4,120 3,852 934 914 1,743 1,722 — — — — FNMA Certificates 131,918 126,691 — — — — — — — — SBA Certificates 21,803 21,837 — — — — — — — — Total held-to-maturity securities $ 510,820 $ 495,851 $ 934 $ 914 $ 1,743 $ 1,722 $ — $ — $ — $ — (1) Comprised of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Ginnie Mae (“GNMA”) issued securities. 20 During the year ended December 31, 2022, the Company invested primarily in held-to-maturity securities utilizing the $225.0 million the Company received from the issuance of preferred stock to the U.S.
Agency Bonds $ 25,000 $ 24,819 $ 35,000 $ 34,620 $ — $ — $ — $ — $ — $ — Corporate Bonds 82,500 79,809 82,500 78,738 — — — — — — Mortgage-Backed Securities: Collateralized Mortgage Obligations (1) 212,093 207,027 235,479 230,113 — — — — — — FHLMC Certificates 3,897 3,653 4,120 3,852 934 914 1,743 1,722 — — FNMA Certificates 118,944 114,856 131,918 126,691 — — — — — — SBA Certificates 19,712 19,878 21,803 21,837 — — — — — — Allowance for Credit Losses (398 ) — — — — — — — — — Total held-to-maturity securities $ 461,748 $ 450,042 $ 510,820 $ 495,851 $ 934 $ 914 $ 1,743 $ 1,722 $ — $ — (1) Comprised of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Ginnie Mae (“GNMA”) issued securities. 17 During the year ended December 31, 2022, the Company invested primarily in held-to-maturity securities utilizing the $225.0 million the Company received from the issuance of preferred stock to the U.S.
Government Bonds 2,985 2,689 2,981 2,934 — — — — — — US Treasury — — — — — — — — 4,997 4,995 Corporate Bonds 25,824 23,359 21,243 21,184 10,381 10,463 — — — — Mortgage-Backed Securities Collateralized Mortgage Obligations (1) 44,503 37,777 18,845 18,348 — — — — — — FHLMC Certificates 11,310 9,634 — — 3,201 3,196 FNMA Certificates 67,199 55,928 71,930 70,699 3,506 3,567 4,680 4,659 778 759 GNMA Certificates 122 118 175 181 263 272 482 491 870 875 Total available-for-sale securities $ 151,943 $ 129,505 $ 115,174 $ 113,346 $ 17,351 $ 17,498 $ 21,535 $ 21,504 $ 27,569 $ 27,144 Held-to-Maturity Securities: U.S.
Government Bonds 2,990 2,784 2,985 2,689 2,981 2,934 — — — — Corporate Bonds 25,790 23,668 25,824 23,359 21,243 21,184 10,381 10,463 — — Mortgage-Backed Securities Collateralized Mortgage Obligations (1) 39,375 33,148 44,503 37,777 18,845 18,348 — — — — FHLMC Certificates 10,163 8,681 11,310 9,634 — — 3,201 3,196 FNMA Certificates 61,359 51,517 67,199 55,928 71,930 70,699 3,506 3,567 4,680 4,659 GNMA Certificates 104 104 122 118 175 181 263 272 482 491 Total available-for-sale securities $ 139,781 $ 119,902 $ 151,943 $ 129,505 $ 115,174 $ 113,346 $ 17,351 $ 17,498 $ 21,535 $ 21,504 Held-to-Maturity Securities: U.S.
At or For the Years Ended December 31, 2022 2021 2020 (in thousands) Beginning balance $ 1,204,716 $ 1,029,579 $ 782,043 Net deposits before interest credited 37,746 169,466 238,786 Interest credited 9,950 5,671 8,750 Net increase in deposits 47,696 175,137 247,536 Ending balance $ 1,252,412 $ 1,204,716 $ 1,029,579 22 The following table sets forth certificates of deposit classified by interest rate as of the dates indicated.
At or For the Years Ended December 31, 2023 2022 2021 (in thousands) Beginning balance $ 1,252,412 $ 1,204,716 $ 1,029,579 Net deposits before interest credited 220,067 37,746 169,466 Interest credited 35,141 9,950 5,671 Net increase in deposits 255,208 47,696 175,137 Ending balance $ 1,507,620 $ 1,252,412 $ 1,204,716 19 The following table sets forth certificates of deposit classified by interest rate as of the dates indicated.
On the basis of this review of loans, the Bank’s classified and special mention loans at the dates indicated were as follows: At December 31, 2022 2021 2020 2019 2018 (in thousands) Classified Loans: Substandard $ 21,499 $ 17,317 $ 20,508 $ 22,787 $ 18,665 Total classified loans 21,499 17,317 20,508 22,787 18,665 Special mention loans 9,735 13,798 19,546 17,355 14,394 Total classified and special mention loans $ 31,234 $ 31,115 $ 40,054 $ 40,142 $ 33,059 Substandard loans increased $4.2 million, or 24.1%, to $21.5 million at December 31, 2022 compared to $17.3 million at December 31, 2021.
On the basis of this review of loans, the Bank’s classified and special mention loans at the dates indicated were as follows: At December 31, 2023 2022 2021 2020 2019 (in thousands) Classified Loans: Substandard $ 17,851 $ 21,499 $ 17,317 $ 20,508 $ 22,787 Total classified loans 17,851 21,499 17,317 20,508 22,787 Special mention loans 5,786 9,735 13,798 19,546 17,355 Total classified and special mention loans $ 23,637 $ 31,234 $ 31,115 $ 40,054 $ 40,142 Substandard loans decreased $3.6 million, or 16.97%, to $17.9 million at December 31, 2023 compared to $21.5 million at December 31, 2022.
(2) Includes $18.2 million of loans which were outstanding and serviced by the Bank pursuant to its arrangement with Grain at December 31, 2022. The following table sets forth the Bank’s fixed and adjustable-rate loans at December 31, 2022 that are contractually due after December 31, 2023.
(2) Includes $8.0 million of loans which were outstanding and are now serviced by the Bank at December 31, 2023. The following table sets forth the Bank’s fixed and adjustable-rate loans at December 31, 2023 that are contractually due after December 31, 2024.
There were no PPP loans originated f or the year ended December 31, 2022. (2) For the years ended December 31, 2022, 2021 and 2020, consumer loans originated include $3.2 million, $59.3 million and $29.5 million, respectively, of microloans pursuant to the Bank’s arrangement with Grain .
The PPP program ended on May 31, 2021. (2) For the years ended December 31, 2022, 2021 and 2020, consumer loans originated include $3.2 million, $59.3 million and $29.5 million, respectively, of microloans pursuant to the Bank’s former arrangement with Grain. No new Grain loans were made by the Bank after May 31, 2022.

… 168 more changes not shown on this page.

Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

72 edited+50 added−31 removed139 unchanged
Biggest changeFrom time to time, we may implement new lines of business or offer new products and services within existing lines of business. In addition, we will continue to make investments in research, development, and marketing for new products and services. There are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed.
Biggest changeThere are substantial risks and uncertainties associated with these efforts, particularly in instances where the markets are not fully developed. In developing and marketing new lines of business and/or new products and services we may invest significant time and resources.
In addition, our regulators, as an integral part of their examination process, periodically review the allowance for loan losses and, as a result of such reviews, we may determine that it is appropriate to increase the allowance for loan losses by recognizing additional provisions for loan losses charged to income, or to charge off loans, which, net of any recoveries, would decrease the allowance for loan losses.
In addition, our regulators, as an integral part of their examination process, periodically review the allowance for credit losses and, as a result of such reviews, we may determine that it is appropriate to increase the allowance for credit losses by recognizing additional provisions for loan losses charged to income, or to charge off loans, which, net of any recoveries, would decrease the allowance for credit losses.
These restrictions may make it difficult to adequately compensate our management team, which could impact 37 our ability to retain qualified management. Additionally, under the ECIP regulations, the Company cannot pay dividends or repurchase its common stock unless it meets certain income-based tests and has paid the required dividends on the Preferred Stock.
These restrictions may make it difficult to adequately compensate our management team, which could impact our ability to retain qualified management. Additionally, under the ECIP regulations, the Company cannot pay dividends or repurchase its common stock unless it meets certain income-based tests and has paid the required dividends on the Preferred Stock.
The Bank’s borrowing capacity may be adjusted by the FHLBNY and may take into account factors such as the Bank’s tangible common equity ratio, collateral margins required by the lender or other factors. A possible future downgrade of securities and loans pledged as collateral could also impact the amount of available funding.
The Bank’s borrowing capacity may be adjusted by the FHLBNY and FRB and may take into account factors such as the Bank’s tangible common equity ratio, collateral margins required by the lender or other factors. A possible future downgrade of securities and loans pledged as collateral could also impact the amount of available funding.
Lenders must also verify and document the income and financial resources relied upon to qualify a borrower for the loan 41 and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments.
Lenders must also verify and document the income and financial resources relied upon to qualify a borrower for the loan and underwrite the loan based on a fully amortizing payment schedule and maximum interest rate during the first five years, taking into account all applicable taxes, insurance and assessments.
Areas requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses, the valuation of loans held for sale, the valuation of deferred tax assets and investment securities, the estimates relating to the valuation for share-based awards, and our determinations with respect to amounts owed for income taxes.
Areas 42 requiring significant estimates and assumptions by management include our evaluation of the adequacy of our allowance for loan losses, the valuation of loans held for sale, the valuation of deferred tax assets and investment securities, the estimates relating to the valuation for share-based awards, and our determinations with respect to amounts owed for income taxes.
Borrowings from the FHLBNY are generally higher cost as compared to core deposits, which will generally lead to decreases in our net interest margin and lower net revenues. Additionally, the Bank’s FHLBNY membership does not represent a legal commitment to extend credit to the Bank.
Borrowings from the FHLBNY and FRB are generally higher cost as compared to core deposits, which will generally lead to decreases in our net interest margin and lower net revenues. Additionally, the Bank’s FHLBNY and FRB membership does not represent a legal commitment to extend credit to the Bank.
We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance. The Bank is a community bank, and our reputation is one of the most valuable components of our business.
We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance. 43 The Bank is a community bank, and our reputation is one of the most valuable components of our business.
Consequently, the ability of many of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition 33 The unseasoned nature of our multifamily, nonresidential and construction and land loans portfolio may result in changes to our estimates of collectability, which may lead to additional provisions or charge-offs, which could hurt our profits.
Consequently, the ability of many of our business customers to repay their loans may deteriorate, and in some cases this deterioration may occur quickly, which would adversely impact our results of operations and financial condition. 30 The unseasoned nature of our multifamily, nonresidential and construction and land loans portfolio may result in changes to our estimates of collectability, which may lead to additional provisions or charge-offs, which could hurt our profits.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. 42 We are a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.
The effects of such policies upon our business, financial condition and results of operations cannot be predicted. 40 We are a smaller reporting company, and any decision on our part to comply only with certain reduced reporting and disclosure requirements applicable to smaller reporting companies could make our common stock less attractive to investors.
Any such additional provisions for loan losses or charge-offs could have a material adverse effect on our financial condition and results of operations. A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of nonperforming loans, which could adversely affect our operations, financial condition and earnings.
Any such additional provisions for credit losses or charge-offs could have a material adverse effect on our financial condition and results of operations. A worsening of economic conditions in our market area could reduce demand for our products and services and/or result in increases in our level of nonperforming loans, which could adversely affect our operations, financial condition and earnings.
Finally, as a smaller institution, we are disproportionately affected by the continually increasing costs of compliance with new banking and other regulations. 38 Risks Related to Our Management. We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.
Finally, as a smaller institution, we are disproportionately affected by the continually increasing costs of compliance with new banking and other regulations. 35 Risks Related to Our Management. We depend on our management team to implement our business strategy and execute successful operations and we could be harmed by the loss of their services.
The Company may fund the 2018 Long-Term Incentive Plan either through open market purchases or authorized but unissued shares of common stock.
The Company may fund the Long-Term Incentive Plan either through open market purchases or authorized but unissued shares of common stock.
Non-credit related OTTI for debt securities is recognized in other comprehensive income net of applicable taxes for all securities classified as available-for-sale. A decline in the market value of our securities portfolio could adversely affect our earnings. Risks Related to Laws and Regulations.
Non-credit related impairment for debt securities is recognized in other comprehensive income net of applicable taxes for all securities classified as available-for-sale. A decline in the market value of our securities portfolio could adversely affect our earnings. Risks Related to Laws and Regulations.
While we strive to ensure the accuracy of our modeled interest rate risk profile, there are inherent limitations and imprecisions in this determination and actual results may differ. 39 Future changes in interest rates could reduce our profits and asset values.
While we strive to ensure the accuracy of our modeled interest rate risk profile, there are inherent limitations and imprecisions in this determination and actual results may differ. 36 Future changes in interest rates could reduce our profits and asset values.
In determining the amount of the allowance for loan losses, we review our loans, loss and delinquency experience, and business and commercial real estate peer data, and we evaluate other factors including, but not limited to, current economic conditions.
In determining the amount of the allowance for credit losses, we review our loans, loss and delinquency experience, and business and commercial real estate peer data, and we evaluate other factors including, but not limited to, current economic conditions.
Regulatory authorities have extensive discretion 40 in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets and influencing the level of our allowance for loan losses.
Regulatory authorities have extensive discretion in their supervisory and enforcement activities, including the imposition of restrictions on our operations, the classification of our assets 37 and influencing the level of our allowance for loan losses.
Summary Specific risks related to our business include, but are not limited to, those related to: (1) the Russia-Ukraine conflicts; (2) inflationary pressures; (3) our planned increase in multifamily, nonresidential and construction and land lending and the unseasoned nature of these loans; (4) residential property and investor-owned properties; (5) loans that we make through our FinTech partnerships, including Grain; (6) our allowance for loan losses; (7) local and national economic conditions, including conditions specific to the banking industry; (8) environmental liability risks; (9) our SBA PPP lending; (10) our ability to achieve and manage our growth strategy; (11) our minority investments in financial technology related companies; (12) competition within the financial services industry, nationally and within our market area and that our small size makes it more difficult to compete; (13) our implementation of new lines of business or offering new products and services; (14) our reliance on our management team; (15) changes in interest rates and the valuation of securities held by us; (16) changes in and compliance with laws and regulations; (17) operational risks including technology, cybersecurity and reputational risks; (18) changes in accounting standards and in management’s estimates and assumptions; (19) our liquidity management; (20) dilution of our stockholders’ ownership interests from our 2018 Equity Incentive Plan and likely new stock-based benefit plans; (21) societal responses to climate change; and (22) the gentrification of our markets.
Summary Specific risks related to our business include, but are not limited to, those related to: (1) our status as a CDFI and MDI; (2) inflationary pressures; (3) our planned increase in multifamily, nonresidential and construction and land lending and the unseasoned nature of these loans; (4) residential property and investor-owned properties; (5) loans that we make through our FinTech partnerships; (6) our allowance for credit losses; (7) local and national economic conditions, including conditions specific to the banking industry; (8) environmental liability risks; (9) our ability to achieve and manage our growth strategy; (10) our minority investments in financial technology related companies; (11) competition within the financial services industry, nationally and within our market area and that our small size makes it more difficult to compete; (12) our implementation of new lines of business or offering new products and services; (13) our reliance on our management team; (14) changes in interest rates and the valuation of securities held by us; (15) changes in and compliance with laws and regulations; (16) operational risks including technology, cybersecurity and reputational risks; (17) changes in accounting standards and in management’s estimates and assumptions; (18) our liquidity management; (19) dilution of our stockholders’ ownership interests from our Equity Incentive Plan and stock-based benefit plans; (20) societal responses to climate change; and (21) the gentrification of our markets; (22) the Russia-Ukraine conflicts.
For impaired debt securities that are intended to be sold, or more likely than not will be required to be sold, the full amount of market decline is recognized as OTTI through earnings. Credit-related OTTI for all other impaired debt securities is recognized through earnings.
For impaired debt securities that are intended to be sold, or more likely than not will be required to be sold, the full amount of market decline is recognized through earnings. Credit-related impairment for all other impaired debt securities is recognized through earnings.
Risks Related to Interest Rates. Interest rates are rising and expected to continue to rise and the possibility that we may access higher-cost funds to support our loan growth and operations may adversely affect our net interest income and profitability.
Risks Related to Interest Rates. Interest rates may continue to rise and the possibility that we may access higher-cost funds to support our loan growth and operations may adversely affect our net interest income and profitability.
Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us.
Our policies, which require us to perform an environmental review before initiating any foreclosure action on non-residential real property, may not be sufficient to detect all potential environmental hazards. The remediation costs and any other financial liabilities associated with an environmental hazard could have a material adverse effect on us. 32 Risks Related to our Business Strategy.
Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities, including the Russia—Ukraine conflict, a pandemic, or other international or domestic calamities, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations.
Moreover, a significant decline in general economic conditions caused by inflation, recession, acts of terrorism, an outbreak of hostilities, or other international or domestic calamities, unemployment or other factors beyond our control could further impact these local economic conditions and could further negatively affect the financial results of our banking operations.
The continuing displacement of minorities due to gentrification of our communities may adversely affect us unless we are able to adapt and increase the acceptance of our products and services by non-minority customers. We may also be unfavorably impacted by political developments unfavorable to markets that are dependent on immigrant populations.
The continuing displacement of minorities due to gentrification of our communities may adversely affect us unless we are able to adapt and increase the acceptance of our products and services by non-minority customers. We may also be unfavorably impacted by political developments unfavorable to markets that are dependent on immigrant populations. Risks Related to Russia—Ukraine Conflict.
Any deterioration in economic conditions, such as those that could resulted from the Russia—Ukraine conflict, could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations: • demand for our products and services may decline; 35 • loan delinquencies, problem assets and foreclosures may increase; • collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.
Any deterioration in economic conditions could have the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations: • demand for our products and services may decline; • loan delinquencies, problem assets and foreclosures may increase; • collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; and • the net worth and liquidity of loan guarantors may decline, impairing their ability to honor commitments to us.
At least quarterly, and more frequently when warranted by economic or market conditions, management evaluates all securities with a decline in fair value below the amortized cost of the investment to determine whether the impairment is deemed to be other-than-temporary impairment (“OTTI”).
At least quarterly, and more frequently when warranted by economic or market conditions, management evaluates all securities with a decline in fair value below the amortized cost of the investment to determine whether the impairment is deemed to be credit related impairment.
We consider most of the proceedings to be in the normal course of our business or typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation.
We have been and may in the future become involved in legal and regulatory proceedings. We consider most of the proceedings to be in the normal course of our business or typical for the industry; however, it is inherently difficult to assess the outcome of these matters, and we may not prevail in any proceedings or litigation.
At December 31, 2022 and 2021, our allowance for loan losses totaled $34.6 million and $16.4 million, which represented 2.27%, and 1.24% of total loans, respectively. Included in the allowance for loan losses were $15.4 million and 1.4 million related to Grain at December 31, 2022 and 2021, respectively.
At December 31, 2023 and 2022, our ACL totaled $26.2 million and $34.6 million, which represented 1.36%, and 2.27% of total loans, respectively. Included in the allowance for loan losses were $6.8 million and $15.4 million related to Grain at December 31, 2023 and 2022, respectively.
Risks Related to our Business Strategy. Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. Growing our operations could also cause our expenses to increase faster than our revenues.
Our business strategy includes growth, and our financial condition and results of operations could be negatively affected if we fail to grow or fail to manage our growth effectively. Growing our operations could also cause our expenses to increase faster than our revenues. Our business strategy includes growth in assets, loans, deposits and the scale of our operations.
As a result of the required change in approach toward determining estimated credit losses from the current “incurred loss” model to one based on estimated cash flows over a loan’s contractual life, adjusted for prepayments (a “life of loan” model), the Company expects that the new guidance will result in an increase in the allowance for loan losses, particularly for longer duration loan portfolios and this could have an adverse effect on our earnings. 44 Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results.
As a result of the required change in approach toward determining estimated credit losses from the current “incurred loss” model to one based on estimated cash flows over a loan’s contractual life, adjusted for prepayments (a “life of loan” model), the Company expects that the new guidance will result in an increase in the allowance for loan losses, particularly for longer duration loan portfolios and this could have an adverse effect on our earnings.
At December 31, 2022 and 2021, our securities portfolio totaled $640.3 million and $114.3 million, which represented 27.7% and 6.9% of total assets, respectively. The securities portfolio as of December 31, 2022 and 2021 were classified as available-for-sale in the amount of $129.5 and $113.3 million and held-to-maturity in the amount of $510.8 million and $0.9 million, respectively.
At December 31, 2023 and 2022, our securities portfolio totaled $581.7 million and $640.3 million, which represented 21.1% and 27.7% of total assets, respectively. The securities portfolio as of December 31, 2023 and 2022 were classified as available-for-sale in the amount of $119.9 and $129.5 million and held-to-maturity in the amount of $461.7 million and $510.8 million, respectively.
As of December 31, 2022, 61.1% of our deposits are estimated to be FDIC-insured, and an additional 1.1% of deposits were fully collateralized. The average account size of our consumer deposits is less than $30,000, and the average account size of our business deposits is less than $60,000. Ineffective liquidity management could adversely affect our financial results and condition.
As of December 31, 2023, 74.6% of our deposits are estimated to be FDIC-insured, and an additional 4.4% of deposits were fully collateralized. The average account size of our consumer deposits is less than $40,000, and the average account size of our business deposits is less than $50,000. Ineffective liquidity management could adversely affect our financial results and condition.
At December 31, 2022 and 2021, one-to-four family residential real estate loans amounted to $478.8 million and $414.3 million, or 31.4% and 31.3%, respectively, of our total loan portfolio. Of these amounts, $344.0 million and $317.3 million, or 71.8% and 76.6%, respectively, is comprised of one-to-four family residential investor-owned properties.
At December 31, 2023 and 2022, one-to-four family residential real estate loans amounted to $496.0 million and $478.8 million, or 25.8% and 31.4%, respectively, of our total loan portfolio. Of these amounts, $343.7 million and $344.0 million, or 69.3% and 71.8%, respectively, is comprised of one-to-four family residential investor-owned properties.
Our efficiency ratio was 117.53% and 61.13% for the years ended December 31, 2022 and 2021, respectively. Our efficiency ratio for the year ended December 31, 2022 improved compared with prior year due to the inclusion of $17.9 million Grain write-off and write-down of Grain receivable and a $5.0 million of contribution to the Ponce De Leon Foundation.
Our efficiency ratio for the year ended December 31, 2023 improved compared with prior year due to the $17.9 million Grain write-off and write-down of Grain receivable and a $5.0 million of contribution to the Ponce De Leon Foundation in 2022.
We have received an investment under the Emergency Capital Investment Program (“ECIP”) from the U.S. Treasury, in exchange for the issuance of senior perpetual preferred stock, which preferred stock has certain rights and preferences as compared to shares of our common stock. We are subject to certain contractual and regulatory restrictions under the ECIP which may hinder our operations.
Treasury, in exchange for the issuance of senior perpetual preferred stock, which preferred stock has certain rights and preferences as compared to shares of our common stock. We are subject to certain contractual and regulatory restrictions under the ECIP which may hinder our operations.
The Federal Reserve Board has announced that it will provide funding to ensure that banks have sufficient liquidity to meet the needs of their depositors, but there can be no assurance whether such funding will be adequate to address these issues. The Company maintains a diversified deposit base and has a comparatively low level of uninsured deposits.
The Federal Reserve Board provided funding to ensure that banks had sufficient liquidity to meet the needs of their depositors, but there can be no assurance whether such funding will be provided in the future if similar issues recur. The Company maintains a diversified deposit base and has a comparatively low level of uninsured deposits.
We may be dependent on borrowings from the FHLBNY to grow our lending activities, which may negatively impact our results of operations. In recent periods, we have relied on non-core funding sources, primarily borrowings from the FHLBNY, to fund a portion of our lending activities when we do not have sufficient core deposits.
In recent periods, we have relied on non-core funding sources, primarily borrowings from the FHLBNY and FRB, to fund a portion of our lending activities when we do not have sufficient core deposits.
Negative developments in the U.S. in our primary markets may adversely impact our results in the future. Our financial performance is highly dependent on the business environment in the markets where we operate and in the U.S. as a whole.
Our financial performance is highly dependent on the business environment in the markets where we operate and in the U.S. as a whole.
If our assumptions are incorrect, or if delinquencies or non-performing loans increase, our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance, which in turn, could materially decrease our net income.
If our assumptions are incorrect, or if delinquencies or non-performing loans increase, our allowance for credit losses may not be sufficient to cover losses inherent in our loan portfolio, which would require additions to our allowance, which in turn, could materially decrease our net income. 31 On January 1, 2023, the Company adopted Current Expected Credit Loss, or CECL.
At December 31, 2022, in the event of an instantaneous 100 basis point increase in interest rates, we estimate that we would experience a 3.76% decrease in EVE and a 1.72% decrease in net interest income.
At December 31, 2023, in the event of an instantaneous 100 basis point increase in interest rates, we estimate that we would experience a 4.33% decrease in EVE and a 2.78% decrease in net interest income.
Our multifamily, nonresidential and construction and land loan portfolio has increased approximately $265.1 million, or 36.7%, to $987.7 million at December 31, 2022 from $722.6 million at December 31, 2021 and increased approximately $90.4 million, or 14.3%, to $722.2 million at December 31, 2021 from $632.2 million at December 31, 2020.
Our multifamily, nonresidential and construction and land loan portfolio has increased approximately $409.1 million, or 41.4%, to $1.40 billion at December 31, 2023 from $987.7 million at December 31, 2022 and increased approximately $265.1 million, or 36.7%, to $987.7 million at December 31, 2022 from $722.6 million at December 31, 2021.
Small to medium-sized businesses may be impacted more during periods of high inflation as they are not as able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
Although inflationary pressures have begun to stabilize, inflation is currently expected to remain high throughout 2024. Small to medium-sized businesses may be impacted more during periods of high inflation as they are not as able to leverage economics of scale to mitigate cost pressures compared to larger businesses.
If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected. 45 Our 2018 Equity Incentive Plan has increased our expenses and reduced our income, and may dilute your ownership interests.
If our reputation is negatively affected by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected.
Our non-interest expense totaled $85.8 million and $57.1 million for the years ended December 31, 2022 and 2021, respectively. Although we continue to analyze our expenses and pursue efficiencies where available, our efficiency ratio remains high as a result of the implementation of our business strategy combined with operating in an expensive market.
Although we continue to analyze our expenses and pursue efficiencies where available, our efficiency ratio remains high as a result of the implementation of our business strategy combined with operating in an expensive market. Our efficiency ratio was 90.96% and 117.53% for the years ended December 31, 2023 and 2022, respectively.
Among other provisions recently enacted, the threshold to qualify for the Federal Reserve Board’s Small Bank Holding Company Policy Statement was increased to $3.0 billion and federally-chartered savings banks and associations have been provided flexibility to adopt the powers of a national bank. Our New York State multi-family loan portfolio could be adversely impacted by changes in legislation or regulation.
Among other provisions recently enacted, the threshold to qualify for the Federal Reserve Board’s Small Bank Holding Company Policy Statement was increased to $3.0 billion and federally-chartered savings banks and associations have been provided flexibility to adopt the powers of a national bank.
Current Expected Credit Loss, or CECL, became effective for Ponce Financial and Ponce Bank on January 1, 2023. CECL requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for credit losses.
CECL requires financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for credit losses.
We may incur losses due to minority investments in other financial technology related companies. 36 As part of our business strategy, we have made minority investments in technology related companies, and may from time to time make or consider making similar additional investments. At December 31, 2022, the Company had written-off its entire $1.0 million investment in Grain.
We may incur losses due to minority investments in other financial technology related companies. As part of our business strategy, we have made minority investments in technology related companies, and may from time to time make or consider making similar additional investments.
Our business strategy includes growth in assets, loans, deposits and the scale of our operations. Achieving such growth will require us to attract customers that currently bank at other financial institutions in our market area.
Achieving such growth will require us to attract customers that currently bank at other financial institutions in our market area.
These loans may carry greater credit risk than loans secured by one-to-four family real estate that could adversely affect our financial condition and net income. Our focus is primarily on prudently growing our multifamily, nonresidential and construction and land loan portfolio.
We have increased our multifamily, nonresidential and construction and land loans, and intend to continue to increase originations of these types of loans. These loans may carry greater credit risk than loans secured by one-to-four family real estate that could adversely affect our financial condition and net income.
At December 31, 2022, 40,473 loans with an aggregate balance of $1.37 billion are to borrowers with only one loan. Another 190 loans are to borrowers with two loans each with a corresponding aggregate balance of $137.4 million.
At December 31, 2023, 16,218 loans with an aggregate balance of $1.77 billion are to borrowers with only one loan. Another 170 loans are to borrowers with two loans each with a corresponding aggregate balance of $128.5 million.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations. Our efficiency ratio is high, and we anticipate that it may remain high, as a result of the ongoing implementation of our business strategy.
Failure to successfully manage these risks in the development and implementation of new lines of business or new products or services could have a material adverse effect on our business, financial condition and results of operations. Our emphasis on construction lending involves risks that could adversely affect our financial condition and results of operations.
We may experience negative impacts to our financial condition and results of operations if our partners are subject to cyber fraud or other security breaches, as we have experienced in our partnership with Grain. 43 In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, face regulatory action, civil litigation and/or suffer damage to our reputation.
In the event of a breakdown in our internal control systems, improper operation of systems or improper employee actions, or a breach of our security systems, including if confidential or proprietary information were to be mishandled, misused or lost, we could suffer financial loss, face regulatory action, civil litigation and/or suffer damage to our reputation. 41 Negative developments in the U.S. in our primary markets may adversely impact our results in the future.
Furthermore, if customers do not perceive our new offerings as providing significant value, they may fail to accept our new products and services. External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
External factors, such as compliance with regulations, competitive alternatives, and shifting market preferences, may also impact the successful implementation of a new line of business or a new product or service.
At December 31, 2022, $987.7 million, or 64.7%, of our loan portfolio consisted of multifamily, nonresidential and construction and land loans as compared to $722.6 million, or 54.7%, of our loan portfolio at December 31, 2021.
Our focus is primarily on prudently growing our multifamily, nonresidential and construction and land loan portfolio. At December 31, 2023, $1.40 billion, or 72.7%, of our loan portfolio consisted of multifamily, nonresidential and construction and land loans as compared to $987.7 million, or 64.7%, of our loan portfolio at December 31, 2022.
If we are unable to obtain funding through the FHLBNY, we may be forced to seek additional alternative funding sources, which may be higher cost, in order to fund our loan growth. Risks Related to Competitive Matters Strong competition within our market areas may limit our growth and profitability. Competition in the banking and financial services industry is intense.
If we are unable to obtain funding through the FHLBNY and FRB, we may be forced to seek additional alternative funding sources, which may be higher cost, in order to fund our loan growth.
The CFPB has a rule intended to clarify how lenders can avoid legal liability under the Dodd-Frank Act, which holds lenders accountable for ensuring a borrower’s ability to repay a mortgage loan. Under the rule, loans that meet the “qualified mortgage” definition will be presumed to have complied with the ability-to-repay standard.
Our ability to originate loans could be restricted by recently adopted federal regulations. The CFPB has a rule intended to clarify how lenders can avoid legal liability under the Dodd-Frank Act, which holds lenders accountable for ensuring a borrower’s ability to repay a mortgage loan.
Stockholders previously approved the PDL Community Bancorp 2018 Long-Term Incentive Plan. During the years ended December 31, 2022 and 2021, the Company recognized in $1.6 million and $1.4 million, respectively, in non-interest expense relating to this stock benefit plan, and we will recognize additional expenses in the future as additional grants are made and awards vest.
During the years ended December 31, 2023 and 2022, the Company recognized in $1.8 million for both periods, in non-interest expense relating to its stock benefit plans, and we will recognize additional expenses in the future as additional grants are made and awards vest.
You should read this entire document carefully, including the Risk Factors below that discusses the above risks in further detail. Risks Related to Russia—Ukraine Conflict. The impact of the military action in Ukraine may affect our business. On February 24, 2022, Russian forces launched significant military action against Ukraine, and sustained conflict and disruption in the region is possible.
The impact of the military action in Ukraine may affect our business. On February 24, 2022, Russian forces launched significant military action against Ukraine, and sustained conflict and disruption in the region is possible.
In addition, the CFPB has adopted rules and published forms that combine certain disclosures that consumers receive in connection with applying for and closing on certain mortgage loans under the Truth in Lending Act and the Real Estate Settlement Procedures Act.
In addition, the CFPB has adopted rules and published forms that combine certain disclosures that consumers receive in connection with applying for and closing on certain mortgage loans under the Truth in Lending Act and the Real Estate Settlement Procedures Act. 39 We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or limit our ability to pay dividends or repurchase shares.
The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations. Our ability to originate loans could be restricted by recently adopted federal regulations.
Failure to comply with these regulations could result in fines or sanctions, including restrictions on conducting acquisitions or establishing new branches. The policies and procedures we have adopted that are designed to assist in compliance with these laws and regulations may not be effective in preventing violations of these laws and regulations.
A rise in interest rates may result in lower demand for loans and mortgage-backed and related securities as borrowers may reduce their debts due to the higher costs of borrowings. Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations.
In addition, any future rate increases can affect the average life of loans and mortgage-backed and related securities. A rise in interest rates may result in lower demand for loans and mortgage-backed and related securities as borrowers may reduce their debts due to the higher costs of borrowings.
In developing and marketing new lines of business and/or new products and services we may invest significant time and resources. Initial timetables for the development and introduction of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible.
Initial timetables for the development and introduction of new lines of business and/or new products or services may not be achieved and price and profitability targets may not prove feasible. Furthermore, if customers do not perceive our new offerings as providing significant value, they may fail to accept our new products and services.
The recent increase and the anticipated increases are in response to inflation rising at a rate not seen in over 40 years.
At the January 31, 2024 meeting, the Federal Reserve signaled that it will holds interest steady and indicated it is not ready to start cutting rates. The recent increase and the anticipated increases are in response to inflation rising at a rate not seen in over 40 years.
Stockholders would experience a reduction in ownership interest in the event newly issued shares of our common stock are used to fund stock issuances under the plan. New stock-based benefit plans will increase our expenses and reduce our income.
Stockholders would experience a reduction in ownership interest in the event newly issued shares of our common stock are used to fund stock issuances under the plan. Societal responses to climate change could adversely affect our business and performance, including indirectly through impacts on our customers.
The USA PATRIOT and Bank Secrecy Acts require financial institutions to develop programs to prevent financial institutions from being used for money laundering and terrorist activities. If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network.
If such activities are detected, financial institutions are obligated to file suspicious activity reports with the U.S. Treasury’s Office of Financial Crimes Enforcement Network. These rules require financial institutions to establish procedures for identifying and verifying the identity of customers seeking to open new financial accounts.
Changes in the level of interest rates also may negatively affect the value of our assets and ultimately affect our earnings.
Any substantial, unexpected, prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. Changes in the level of interest rates also may negatively affect the value of our assets and ultimately affect our earnings.
The information contained in this section is accurate as of the date hereof, but may become outdated due to changing circumstances beyond our present awareness or control. 32 Risks Related to our Lending Activities. We have increased our multifamily, nonresidential and construction and land loans, and intend to continue to increase originations of these types of loans.
The information contained in this section is accurate as of the date hereof, but may become outdated due to changing circumstances beyond our present awareness or control. 44 Item 1B. Unresolve d Staff Comments. Not applicable.
In addition, there are 7 borrowers with three loans each with a corresponding aggregate balance of $18.3 million and two borrowers with four loans with an aggregate balance of $1.1 million.
In addition, 24 loans are to borrowers with three loans each with a corresponding aggregate balance of $17.9 million and 8 loans are to borrowers with four loans with an aggregate balance of $0.9 million. Our business and our customers are impacted by inflationary pressures.
A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition. Legal and regulatory proceedings and related matters could adversely affect us. We have been and may in the future become involved in legal and regulatory proceedings.
A failure to maintain adequate liquidity could materially and adversely affect our business, results of operations or financial condition. By engaging in derivative transactions, we are exposed to additional credit and market risk in our banking business.
We may not be able to influence the activities of companies in which we invest and may suffer additional losses in the future due to these activities. New lines of business or new products and services may subject us to additional risks.
During 2022, the Company had wrote-off its entire $1.0 million investment in Grain, and may be subject to similar losses in connection with other investments in the future. We may not be able to influence the activities of companies in which we invest and may suffer additional losses in the future due to these activities.
In addition, the physical condition of non-owner occupied properties is often below that of owner occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties. 34 The Company’s net income and earnings per share for the year ended December 31, 2022 have been adversely affected by a significant write-off and write-down related to its relationship with Grain Technologies, Inc.
In addition, the physical condition of non-owner occupied properties is often below that of owner occupied properties due to lax property maintenance standards, which has a negative impact on the value of the collateral properties. If our allowance for credit losses is not sufficient to cover actual loan losses, our earnings and capital could decrease.
The Federal Reserve raised the target range for the federal funds rate by 25 basis points to 4.50%-4.75% during its January 31, 2023 to February 1, 2023 meeting, the eighth consecutive rate hike since March 2022, and increasing borrowing costs. The Federal Reserve has signaled that there will likely be additional federal funds interest rate increases.
The Federal Reserve had raised the target range for the federal funds rate by 25 basis points to 5.25%-5.50% during its July 26, 2023 meeting, pushing borrowing costs to the highest level in 22 years.
We are also subject to risks related to the cyber vulnerabilities of our partners.
We are also subject to risks related to the cyber vulnerabilities of our partners. We may experience negative impacts to our financial condition and results of operations if our partners are subject to cyber fraud or other security breaches, as we have experienced in our partnership with Grain.
Removed
During periods of slower economic growth or challenging economic periods like those resulting from the COVID-19 pandemic, small to medium-sized businesses, which make up the majority of our customers, may be impacted more severely and more quickly than larger businesses. Inflationary Pressures and Rising Prices for Goods and Services, Including Energy.
Added
You should read this entire document carefully, including the Risk Factors below that discusses the above risks in further detail. Risks Related to CDFI and MDI Status. If we were to lose our status as a CDFI and/or MDI, we may lose the ability to obtain grants and awards available to such institutions.
Removed
Inflation rose sharply at the end of 2022 and has continued rising in 2023 at levels not seen for over 40 years. Inflationary pressures are currently expected to remain elevated throughout 2022.
Added
The Bank and the Company are certified as CDFIs and MDIs by the United States Department of the Treasury. Such status increases a financial institution’s potential for receiving grants and awards that, in turn, enable the financial institution to increase the level of community development financial services that it provides to communities.
Removed
The Company’s results may be further adversely affected as a result of its lending relationship with Grain.
Added
We have received over $4.2 million in such awards over the last two years. We reinvest the proceeds from such grants and awards back into the communities we serve.
Removed
As discussed under Item 7, Management’s Discussion and Analysis of Financial Condition and Results of Operations‎, Factors Affecting the Comparability of Results, Write-off and Write-Down of this Annual Report on Form 10-K, the Company has taken a significant write-off and write-down related to microloans originated by FinTech startup company Grain as a result of cyber fraud in the application for microloans originated by Grain.
Added
While we believe 29 we will be able to meet the certification criteria required to continue our CDFI and MDI status, there is no certainty that we will be able to do so.

… 73 more changes not shown on this page.

Item 2. Properties

Properties — owned and leased real estate

3 edited+1 added−1 removed0 unchanged
Biggest changeLeased 1990 800 Bronx, NY 10459 37-60 82nd Street Leased 2021 — Jackson Heights, NY 11372 51 East 170th Street Leased 2018 741 Bronx, NY 10452 169 Smith Street Leased 2021 — Brooklyn, NY 11201 207 East 106th Street Leased 2006 1,488 New York, NY 10029 2244 Westchester Avenue Leased 2021 — Bronx, NY 10462 5560 Broadway Leased 2021 1,584 Bronx, NY 10463 3405 Broadway Leased 2001 829 Astoria, NY 11106 3821 Bergenline Avenue Leased 2021 — Union City, NJ 07087 1900 Ralph Avenue Leased 2007 518 Brooklyn, NY 11234 20-47 86th Street Owned 2010 3,431 Brooklyn, NY 11214 100-20 Queens Boulevard Leased 2010 234 Forest Hills, NY 11375 319 1st Avenue Leased 2010 540 New York, NY 10003 32-75 Steinway Street Leased 2020 128 Astoria, NY 11103 2612 East 16th Street Leased 2020 — Brooklyn, NY 11235 42 South Washington Avenue Leased 2020 — Bergenfield, NJ 07621 135-14 Northern Blvd.
Biggest changeLeased 1990 676 Bronx, NY 10459 37-60 82nd Street Leased 2021 — Jackson Heights, NY 11372 51 East 170th Street Leased 2018 678 Bronx, NY 10452 169 Smith Street Leased 2021 — Brooklyn, NY 11201 207 East 106th Street Leased 2006 1,374 New York, NY 10029 2244 Westchester Avenue Leased 2021 — Bronx, NY 10462 5560 Broadway Leased 2021 1,476 Bronx, NY 10463 34-05 Broadway Leased 2001 761 Astoria, NY 11106 3821 Bergenline Avenue Leased 2021 — Union City, NJ 07087 1900 Ralph Avenue Leased 2007 442 Brooklyn, NY 11234 20-47 86th Street Owned 2010 3,340 Brooklyn, NY 11214 100-20 Queens Boulevard Leased 2010 154 Forest Hills, NY 11375 319 1st Avenue Leased 2010 416 New York, NY 10003 32-75 Steinway Street Leased 2020 99 Astoria, NY 11103 2612 East 16th Street Leased 2020 — Brooklyn, NY 11235 42 South Washington Avenue Leased 2020 — Bergenfield, NJ 07621 135-14 Northern Blvd.
The following table sets forth information regarding the Company’s offices as of December 31, 2022. Location Leased or Owned Year Acquired or Leased Net Book Value of Real Property (in thousands) Main Office: 2244 Westchester Avenue Leased 2021 $ 302 Bronx, NY 10462 Other Properties: 980 Southern Blvd.
The following table sets forth information regarding the Company’s offices as of December 31, 2023. Location Leased or Owned Year Acquired or Leased Net Book Value of Real Property (in thousands) Main Office: 2244 Westchester Avenue Leased 2021 $ 426 Bronx, NY 10462 Other Properties: 980 Southern Blvd.
Item 2. Pro perties. As of December 31, 2022, the net book value of the Company’s office properties including leasehold improvements was $14.2 million, and the net book value of its furniture, fixtures and other equipment and software was $3.3 million. The Company’s and Bank’s executive offices are located at 2244 Westchester Avenue, Bronx, New York.
Item 2. Pro perties. As of December 31, 2023, the net book value of the Company’s office properties including leasehold improvements was $13.4 million, and the net book value of its furniture, fixtures and other equipment and software was $2.7 million. The Company’s and Bank’s executive offices are located at 2244 Westchester Avenue, Bronx, New York.
Removed
Owned 2020 3,598 Flushing, NY 11354 189-10 Hillside Avenue Leased 2020 — Hollis, NY 11423 $ 14,193 47
Added
Owned 2020 3,505 Flushing, NY 11354 $ 13,347 46

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

1 edited+0 added−0 removed1 unchanged
Biggest changeWe are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Saf ety Disclosures. Not applicable. 48 PAR T II
Biggest changeWe are not a party to any pending legal proceedings that we believe would have a material adverse effect on our financial condition, results of operations or cash flows. Item 4. Mine Saf ety Disclosures. Not applicable. 47 PAR T II

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

4 edited+0 added−2 removed10 unchanged
Biggest changePonce Bank does not intend to make any distribution to the Company that would create such a federal tax liability.
Biggest changePonce Bank does not intend to make any distribution to the Company that would create such a federal tax liability. See “Taxation.” Item 6. R eserved. 48
The Company‎ closed a private placement of 225,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A‎, par value $0.01 for an aggregate purchase price equal to $225.0 million in cash, to the Treasury pursuant to the ECIP.‎ The Preferred Stock will have a priority over the holders of our shares of common stock with respect to the payment of dividends.
The Company‎ closed a private placement of 225,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A‎, par value $0.01 for an aggregate purchase price equal to $225.0 million in cash, to the Treasury pursuant to the ECIP.‎ The Preferred Stock has priority over the holders of our shares of common stock with respect to the payment of dividends.
The number of record-holders may not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms and other nominees. To date, the Company (or its predecessor PDL Community Bancorp) has not paid any dividends to its stockholders. We have no current plan or intention to pay cash dividends to our common stockholders.
The number of record-holders may not reflect the number of persons or entities holding stock in nominee name through banks, brokerage firms and other nominees. To date, the Company has not paid any dividends to its stockholders. We have no current plan or intention to pay cash dividends to our common stockholders.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. The Company’s shares of common stock are traded on the NASDAQ Stock Market, LLC under the symbol “PDLB”. The number of stockholders of record of the Company’s common stock as of March 16, 2023 was 379.
Item 5. Market for Registrant’s Common Equity, Related Stoc kholder Matters and Issuer Purchases of Equity Securities. The Company’s shares of common stock are traded on the NASDAQ Stock Market, LLC under the symbol “PDLB”. The number of stockholders of record of the Company’s common stock as of March 18, 2024 was 352.
Removed
See “Taxation.” Recent Sales of Unregistered Securities; Use of Proceeds from Registered Securities On June 7, 2022, the Company issued 225,000 shares of Senior Non-Cumulative Perpetual Preferred Stock, Series A‎, par value $0.01 for the capital investment of $225.0 million from the Treasury under the ECIP.
Removed
For additional information, see Note 2, “Preferred Stock Issuance; Plan of Conversion and Stock Offering,” to the accompanying Financial Statements. Item 6. R eserved. 49

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

113 edited+31 added−55 removed67 unchanged
Biggest changeThe composition of deposits at December 31, 2022 and 2021 and changes in dollars and percentages are summarized as follows: December 31, 2022 December 31, 2021 Increase (Decrease) Percent Percent Amount of Total Amount of Total Dollars Percent (Dollars in thousands) Demand $ 289,149 23.1 % $ 274,956 22.8 % $ 14,193 5.2 % Interest-bearing deposits: NOW/IOLA accounts 24,349 1.9 % 35,280 2.9 % (10,931 ) (31.0 %) Money market accounts 317,815 25.4 % 186,893 15.5 % 130,922 70.1 % Reciprocal deposits 114,049 9.1 % 143,221 11.9 % (29,172 ) (20.4 %) Savings accounts 130,432 10.4 % 134,887 11.2 % (4,455 ) (3.3 %) Total NOW, money market, reciprocal and savings 586,645 46.8 % 500,281 41.5 % 86,364 17.3 % Certificates of deposit of $250K or more 70,113 5.6 % 78,454 6.5 % (8,341 ) (10.6 %) Brokered certificates of deposit (1) 98,754 7.9 % 79,320 6.6 % 19,434 24.5 % Listing service deposits (1) 35,813 2.9 % 66,411 5.5 % (30,598 ) (46.1 %) Certificates of deposit less than $250K 171,938 13.7 % 205,294 17.1 % (33,356 ) (16.2 %) Total certificates of deposit 376,618 30.1 % 429,479 35.7 % (52,861 ) (12.3 %) Total interest-bearing deposits 963,263 76.9 % 929,760 77.2 % 33,503 3.6 % Total deposits $ 1,252,412 100.0 % $ 1,204,716 100.0 % $ 47,696 4.0 % (1) As of December 31, 2022 and 2021, there were $13.6 million and $29.0 million, respectively, in individual listing service deposits amounting to $250,000 or more.
Biggest changeThe composition of deposits at December 31, 2023 and 2022 and changes in dollars and percentages are summarized as follows: December 31, 2023 December 31, 2022 Increase (Decrease) Percent Percent Amount of Total Amount of Total Dollars Percent (Dollars in thousands) Demand $ 243,384 16.1 % $ 289,149 23.1 % $ (45,765 ) (15.8 %) Interest-bearing deposits: NOW/IOLA accounts 19,676 1.3 % 24,349 1.9 % (4,673 ) (19.2 %) Money market accounts (1) 432,735 28.7 % 236,143 18.9 % 196,592 83.3 % Reciprocal deposits 96,860 6.4 % 114,049 9.1 % (17,189 ) (15.1 %) Savings accounts 114,139 7.6 % 130,432 10.4 % (16,293 ) (12.5 %) Total NOW, money market, reciprocal and savings 663,410 44.0 % 504,973 40.3 % 158,437 31.4 % Certificates of deposit of $250K or more (1) 132,153 8.8 % 106,336 8.5 % 25,817 24.3 % Brokered certificates of deposit (2) 98,729 6.6 % 98,754 7.9 % (25 ) (0.0 %) Listing service deposits (2) 14,433 1.0 % 35,813 2.9 % (21,380 ) (59.7 %) Certificates of deposit less than $250K (1) 355,511 23.6 % 217,387 17.4 % 138,124 63.5 % Total certificates of deposit 600,826 39.9 % 458,290 36.6 % 142,536 31.1 % Total interest-bearing deposits 1,264,236 83.9 % 963,263 76.9 % 300,973 31.2 % Total deposits $ 1,507,620 100.0 % $ 1,252,412 100.0 % $ 255,208 20.4 % (1) As of December 31, 2022, $81.7 million of Raisin (formerly known as SaveBetter) deposits were reclassified from money market accounts to certificates of deposits. $36.2 million were reclassified to Certificates of deposits of $250K or more and $45.5 million were reclassified to certificates of deposit less than $250K.
The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The total column represents the sum of the prior columns.
The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate). The rate column shows the effects attributable to changes in rate (changes in rate multiplied by prior volume). The total column represents the sum of the prior columns.
Although an instantaneous and severe shift in interest rates was used in this analysis to provide an estimate of exposure under these scenarios, management believes that a gradual shift in interest rates would have a more modest impact.
Although an instantaneous and severe shift in interest rates was used in this analysis to provide an estimate of exposure under these scenarios, management believes that a gradual shift in interest rates would have a more modest impact.
Because of this rising rate environment, the speed with which it is anticipated to be implemented, the significant competitive pressures in our markets and the potential negative impact of these factors on our deposit and loan pricing, our net interest margin may be negatively impacted.
Because of this rising rate environment, the speed with which it is anticipated to be implemented, the significant competitive pressures in our markets and the potential negative impact of these factors on our deposit and loan pricing, our net interest margin may be negatively impacted.
The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability.
The amounts of assets and liabilities shown which reprice or mature during a particular period were determined in accordance with the earlier of term to repricing or the contractual maturity of the asset or liability.
A “Regulatory Capital Treatment Event” means a good-faith determination that, as a result of (i) any amendment to, or change in, the laws, rules or regulations of the United States or any political subdivision of or in the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other appropriate federal bank regulatory agencies) that is enacted or becomes effective after the initial issuance of any share of the Preferred Stock; (ii) any proposed change in those laws, rules or regulations that is announced after the initial issuance of any share of the Preferred Stock; or (iii) any official administrative or judicial decision or administrative action or other official pronouncement interpreting or applying those laws, rules or regulations or policies with respect thereto that is announced or becomes effective after the initial issuance of the Preferred Stock, there is more than an insubstantial risk that we will not be entitled to treat the full liquidation preferences of the shares of Preferred Stock then outstanding as “Additional Tier 1 Capital” (or its equivalent) for purposes of the capital adequacy standards of Federal Reserve Regulation Q, 12 C.F.R.
A “Regulatory Capital Treatment Event” means a good-faith determination that, as a result of (i) any amendment to, or change in, the laws, rules or regulations of the United States or any political subdivision of or in the United States (including, for the avoidance of doubt, any agency or instrumentality of the United States, including the Federal Reserve and other appropriate federal bank regulatory agencies) that is enacted or becomes effective after the initial issuance of any share of the Preferred Stock; (ii) any proposed change in those laws, rules or regulations that is announced after the initial issuance of any share of the Preferred Stock; or (iii) any official administrative or judicial decision or administrative action or other official pronouncement interpreting or applying those laws, rules or 53 regulations or policies with respect thereto that is announced or becomes effective after the initial issuance of the Preferred Stock, there is more than an insubstantial risk that we will not be entitled to treat the full liquidation preferences of the shares of Preferred Stock then outstanding as “Additional Tier 1 Capital” (or its equivalent) for purposes of the capital adequacy standards of Federal Reserve Regulation Q, 12 C.F.R.
Banking regulations have established guidelines relating to the amount of construction and land mortgage loans and investor- owned commercial real estate mortgage loans of 100% and 300% of total risk-based capital, respectively. Should a bank’s ratios be in 57 excess of these guidelines, banking regulations generally require an increased level of monitoring in these lending areas by bank management.
Banking regulations have established guidelines relating to the amount of construction and land mortgage loans and investor- owned commercial real estate mortgage loans of 100% and 300% of total risk-based capital, respectively. Should a bank’s ratios be in excess of these guidelines, banking regulations generally require an increased level of monitoring in these lending areas by bank management.
As a general matter, our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets, which can result in interest expense increasing more rapidly than increases in interest income. Therefore, increases in interest rates may adversely affect our net interest income and net economic value, which in turn would likely have an adverse effect on our results of operations.
As a general matter, our interest-bearing liabilities reprice or mature more quickly than our interest-earning assets, which can result in interest expense increasing more rapidly than increases in interest income. Therefore, increases in interest rates adversely affect our net interest income and net economic value, which in turn would likely have an adverse effect on our results of operations.
Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case EVE. Rates are then shocked as prescribed by the Interest Rate Risk Policy to measure the sensitivity in EVE values for each of those shocked rate scenarios versus the base case.
Economic values are determined by discounting expected cash flows from assets, liabilities and off-balance sheet items, which establishes a base case EVE. Rates are then shocked as 63 prescribed by the Interest Rate Risk Policy to measure the sensitivity in EVE values for each of those shocked rate scenarios versus the base case.
The actual dividend rate that will be paid by the Company on the Preferred Stock cannot be determined at this time. 51 The ECIP investment by the Treasury is part of a program to invest over $8.7 billion into CDFI or ‎MDI, of which Ponce Bank is both.
The actual dividend rate that will be paid by the Company on the Preferred Stock cannot be determined at this time. The ECIP investment by the Treasury is part of a program to invest over $8.7 billion into CDFI or ‎MDI, of which Ponce Bank is both.
However, during those same periods, we have been able to significantly grow the Bank’s loan portfolio while maintaining a moderate risk profile and strengthening its capital. Abrupt changes in interest rates will present us with a challenge in managing our interest rate risk.
However, during those same periods, we have been able to significantly grow the Bank’s loan portfolio while maintaining a moderate risk profile and strengthening its capital. Abrupt changes in interest rates present us with a challenge in managing our interest rate risk.
We have made significant investments over the last several years in adding experienced bankers, expanding our lending and relationship staff, absorbing the costs of being a public company, upgrading technology and facilities. These investments have increased our operating expenses during those periods.
Overview We have made significant investments over the last several years in adding experienced bankers, expanding our lending and relationship staff, absorbing the costs of being a public company, upgrading technology and facilities. These investments have increased our operating expenses during those periods.
The assumptions are formulated by combining observations gleaned from the Bank’s historical studies of financial instruments and the best estimations of how, if at all, these instruments may behave in the future given changes in economic conditions, technology, etc. These assumptions may prove to be 65 inaccurate.
The assumptions are formulated by combining observations gleaned from the Bank’s historical studies of financial instruments and the best estimations of how, if at all, these instruments may behave in the future given changes in economic conditions, technology, etc. These assumptions may prove to be inaccurate.
Management believes that the most critical accounting policy relates to the allowance for loan losses. The allowance for loan losses is established as probable incurred losses are estimated to have occurred through a provision for loan losses charged to earnings. Loan losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.
Management believes that the most critical accounting policy relates to the allowance for credit losses. The allowance for credit losses is established as probable incurred losses are estimated to have occurred through a provision for credit losses charged to earnings. Credit losses are charged against the allowance when management believes the uncollectibility of a loan balance is confirmed.
The Bank’s management also took steps to enhance the Company’s liquidity position by increasing its on balance sheet cash and cash equivalents position in order to meet unforeseen liquidity events and to fund upcoming funding needs.
The Bank’s management took steps to enhance the Company’s liquidity position by increasing its on balance sheet cash and cash equivalents position in order to meet unforeseen liquidity events and to fund upcoming funding needs.
Management's model governance, model implementation and model validation processes and controls are subject to review in the Bank’s regulatory examinations to ensure they are in compliance with the most recent regulatory guidelines and industry and regulatory practices.
Management's model governance, model implementation and model validation processes and controls are subject to review in the Bank’s regulatory examinations to ensure they are in compliance with the most recent regulatory guidelines and industry and regulatory 64 practices.
At December 31, 2022, the Bank had 27,886 Grain microloans outstanding, net of put backs, with an aggregate balance totaling $18.2 million and which were performing, in management’s opinion, comparably to similar portfolios, offset by a $15.4 million allowance for loan losses, resulting in $2.8 million in Grain microloans, net of allowance for loan losses.
At December 31, 2022, the Bank had 27,886 Grain microloans outstanding, net of put backs, with an aggregate balance totaling $18.2 million and which were performing, in management's opinion, comparably to similar portfolios, offset by a $15.4 million allowance for credit losses, resulting in $2.8 million in Grain microloans, net of allowance for credit losses.
The Bank’s Asset/Liability Management Committee is responsible for evaluating the interest rate risk inherent in the Bank’s assets and liabilities, for determining the level of risk that is appropriate, given the business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with policies and guidelines approved by the Board of Directors.
The Bank’s Asset/Liability Committee ("ALCO") is responsible for evaluating the interest rate risk inherent in the Bank’s assets and liabilities, for determining the level of risk that is appropriate, given the business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with policies and guidelines approved by the Board of Directors.
Our net interest income may also be negatively impacted if the demand for loans decreases due to the rate increases, alone or in tandem with the concurrent inflationary pressures. We may be negatively impacted if we are unable to appropriately time adjustments to our funding costs and the rates we earn on our loans.
Our net interest income may also be negatively impacted if the demand for loans decreases due to the rate increases, alone or in tandem with the concurrent inflationary pressures. We may be negatively impacted if we are unable to appropriately time adjustments to our funding costs and the rates we earn on our loans. 59 Non-Interest Income.
Our net interest income may also be negatively impacted if the demand for loans decreases due to the rate increases, alone or in tandem with the concurrent inflationary pressures. We may be negatively impacted if we are unable to appropriately time adjustments to our funding costs and the rates we earn on our loans.
Our net interest income may also be negatively impacted if the demand for loans decreases due to the rate increases, alone or in tandem with the concurrent inflationary pressures. We may be negatively impacted if we are unable to appropriately time adjustments to our funding costs and the rates we earn on our loans. GAP Analysis .
The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $1.8 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $12.1 million the year ended December 31, 2022.
The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $1.8 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $12.8 million the year ended December 31, 2023.
Discussion and analysis of our 2021 fiscal year specifically, as well as the year-over-year comparison of our 2021 financial performance to 2020, are located under Part II, Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2021 filed with the SEC on March 31, 2022, which is available on our investor relations website at poncebank.gcs-web.com and the SEC's website at sec.gov.
Discussion and analysis of our 2022 fiscal year specifically, as well as the year-over-year comparison of our 2022 financial performance to 2021, are located under Part II, Item 7 — Management's Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the fiscal year ended December 31, 2022 filed with the SEC on March 21, 2023, which is available on our investor relations website at poncebank.gcs-web.com and the SEC's website at sec.gov.
At December 31, 2022 and 2021, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized at December 31, 2022 and 2021. Management is not aware of any conditions or events that would change this categorization. Material Cash Requirements Commitments .
At December 31, 2023 and 2022, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized at December 31, 2023 and 2022. Management is not aware of any conditions or events that would change this categorization. Material Cash Requirements Commitments .
(2) Securities include available-for-sale securities and held-to-maturity securities. 63 Management of Market Risk General . The most significant form of market risk is interest rate risk because, as a financial institution, the majority of the Bank’s assets and liabilities are sensitive to changes in interest rates.
(2) Securities include available-for-sale securities and held-to-maturity securities. 62 Management of Market Risk General . The most significant form of market risk is interest rate risk because, as a financial institution, the majority of the Bank’s assets and liabilities are sensitive to changes in interest rates.
The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at December 31, 2022, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions.
The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at December 31, 2023, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions.
For example, decreases in market interest rates can increase the fair values of loans, deposits and borrowings. 67 Liquidity and Capital Resources Liquidity describes the ability to meet the financial obligations that arise in the ordinary course of business.
For example, decreases in market interest rates can increase the fair values of loans, deposits and borrowings. 66 Liquidity and Capital Resources Liquidity describes the ability to meet the financial obligations that arise in the ordinary course of business.
At December 31, 2022, the EVE model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy. Most Likely Earnings Simulation Models .
At December 31, 2023, the EVE model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy. Most Likely Earnings Simulation Models .
At December 31, 2022, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy. Economic Value of Equity Model .
At December 31, 2023, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy. Economic Value of Equity Model .
The Asset/Liability Committee reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing and capital policies.
The ALCO Committee reviews each of the above interest rate sensitivity analyses along with several different interest rate scenarios as part of its responsibility to provide a satisfactory, consistent level of profitability within the framework of established liquidity, loan, investment, borrowing and capital policies.
Such commitments are subject to the same credit policies and approval process accorded to loans originated. At December 31, 2022 and 2021, the Company had outstanding commitments to originate loans, and extend credit of $284.1 million and $220.5 million, respectively. It is anticipated that the Company will have sufficient funds available to meet its current lending commitments.
Such commitments are subject to the same credit policies and approval process accorded to loans originated. At December 31, 2023 and 2022, the Company had outstanding commitments to originate loans, and extend credit of $591.5 million and $284.1 million, respectively. It is anticipated that the Company will have sufficient funds available to meet its current lending commitments.
The table below includes references to the Company's net (loss) income and (loss) earnings per share for the years ended December 31, 2022 and 2021 before loss (gain) on sale of premises and equipment and the Company’s contribution to the Ponce De Leon Foundation.
The table below includes references to the Company's net income (loss) and earnings (loss) per share for the years ended December 31, 2023 and 2022 before loss on sale of premises and equipment and the Company’s contribution to the Ponce De Leon Foundation.
The Bank’s policy is to operate within the 100% guideline for construction and land mortgage loans and up to 400% for investor owned commercial real estate mortgage loans. Both ratios are calculated by dividing certain types of loan balances for each of the two categories by the Bank’s total risk-based capital.
The Bank’s policy is to operate within the 150% guideline for construction and land mortgage loans and up to 450% for investor owned commercial real estate mortgage loans. Both ratios are calculated by dividing certain types of loan balances for each of the two categories by the Bank’s total risk-based capital.
The composition of securities at December 31, 2022 and 2021 and the amounts maturing of each classification are summarized as follows: 55 December 31, 2022 December 31, 2021 Amortized Fair Amortized Fair Cost Value Cost Value (in thousands) Available-for-Sale Securities: U.S.
The composition of securities at December 31, 2023 and 2022 and the amounts maturing of each classification are summarized as follows: December 31, 2023 December 31, 2022 Amortized Fair Amortized Fair Cost Value Cost Value (in thousands) Available-for-Sale Securities: U.S.
Based on current internal loan reviews, the Company believes that the quality of our underwriting, our weighted average loan-to-value ratio of 58.6% and our customer selection processes have served us well and provided us with a reliable base with which to maintain a well-protected loan portfolio.
Based on current internal loan reviews, the Company believes that the quality of our underwriting, our weighted average loan-to-value ratio of 57.8% and our customer selection processes have served us well and provided us with a reliable base with which to maintain a well-protected loan portfolio.
On June 7, 2022, the Company‎ closed a private placement (the “Private Placement”) of 225,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A‎, par value $0.01 (the “Preferred Stock”) for an aggregate purchase price equal to $225,000,000 in cash, to the United States Department of the Treasury (the “Treasury”) pursuant to the Emergency Capital Investment Program (“ECIP”).‎ The holders of the Preferred Stock will be entitled to a dividend payable in cash quarterly at an annual rate dependent on certain factors as reported by the Company to Treasury in a quarterly supplemental report.
Federal Economic Relief Funds To Aid Lending to Small Businesses Emergency Capital Investment Program On June 7, 2022, the Company‎ closed a private placement (the “Private Placement”) of 225,000 shares of the Company’s Senior Non-Cumulative Perpetual Preferred Stock, Series A‎, par value $0.01 (the “Preferred Stock”) for an aggregate purchase price equal to $225,000,000 in cash, to the United States Department of the Treasury (the “Treasury”) pursuant to the Emergency Capital Investment Program (“ECIP”).‎ The holders of the Preferred Stock will be entitled to a dividend payable in cash quarterly at an annual rate dependent on certain factors as reported by the Company to Treasury in a quarterly supplemental report.
The Company had received SBA approval and originated 5,340 PPP loans, of which 71 loans totaling $20.0 million were outstanding at December 31, 2022. PPP loans have a two-year or five-year term, provide for fees of up to 5% of the loan amount and earn interest at a rate of 1% per annum.
The Company had received SBA approval and originated 5,340 PPP loans, of which 7 loans totaling $1.0 million were outstanding at December 31, 2023. PPP loans have a two-year or five-year term, provide for fees of up to 5% of the loan amount and earn interest at a rate of 1% per annum.
On January 27, 2022, the Company made a $5.0 million contribution to the Ponce De Leon Foundation as part of the conversion and reorganization, which is included in non-interest expense for the year ended December 31, 2022, in the accompanying Consolidated Statements of Operations. Write-off and Write-Down.
Factors Affecting the Comparability of Results Ponce De Leon Foundation. On January 27, 2022, the Company made a $5.0 million contribution to the Ponce De Leon Foundation as part of the conversion and reorganization, which is included in non-interest expense for the year ended December 31, 2022, in the accompanying Consolidated Statements of Operations. 51 Write-off and Write-Down.
Under the terms of its agreement with Grain, the Bank is the lender for Grain-originated microloans with credit lines currently up to $1,500 and, where applicable, the depository for related security deposits. Grain originates and services these microloans and is responsible for maintaining compliance with the Bank's origination and servicing standards, as well as applicable regulatory and legal requirements.
Under the terms of its former agreement with Grain, the Bank was the lender for Grain-originated microloans with credit lines currently up to $1,500 and, where applicable, the depository for related security deposits. Grain originated and serviced these microloans and is responsible for maintaining compliance with the Bank's origination and servicing standards, as well as applicable regulatory and legal requirements.
On October 1, 2022, Ponce Bank entered into a Membership Interest Purchase Agreement with Bamboo Payment Holding LLC ("Bamboo"). Under this agreement, Ponce Bank purchased from Bamboo 180 Membership Interest Units representing an aggregate amount equal to up to 18% of total issued and outstanding Membership Interest in Bamboo for a purchase price of $2.5 million.
On October 1, 2022, the Company entered into a Membership Interest Purchase Agreement with Bamboo Payment Holding LLC ("Bamboo"). Under the agreement, the Company purchased from Bamboo 180 Membership Interest Units representing an aggregate amount equal to up to 18% of total issued and outstanding Membership Interest in Bamboo for a purchase price of $2.5 million.
Commercial real estate loans, as defined by applicable banking regulations, include multifamily residential, nonresidential properties, and construction and land mortgage loans. At December 31, 2022 and 2021, approximately 6.4% and 7.9%, respectively, of the outstanding principal balance of the Bank’s commercial real estate mortgage loans were secured by owner-occupied commercial real estate.
Commercial real estate loans, as defined by applicable banking regulations, include multifamily residential, nonresidential properties, and construction and land mortgage loans. At December 31, 2023 and 2022, approximately 5.3% and 6.4%, respectively, of the outstanding principal balance of the Bank’s commercial real estate mortgage loans were secured by owner-occupied commercial real estate.
The overall reliance on wholesale funding and noncore funding were within those policy limitations as of December 31, 2022 and 2021. The Management Asset/Liability Committee generally meets on a bi-weekly basis to review funding needs, if any, and to ensure the Company operates within the approved limitations. Advances from FHLBNY.
The overall reliance on wholesale funding and noncore funding were within those policy limitations as of December 31, 2023 and 2022. The Management Asset/Liability Committee generally meets on a bi-weekly basis to review funding needs, if any, and to ensure the Company operates within the approved limitations. Borrowings.
Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of the Company’s customers and to fund current and future planned expenditures. The primary sources of funds are deposits, principal and interest payments on loans and available-for-sale securities and proceeds from the sale of loans. The Bank also has access to borrow from the FHLBNY.
Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of the Company’s customers and to fund current and future planned expenditures. The primary sources of funds are deposits, principal and interest payments on loans and available-for-sale securities and proceeds from the sale of loans.
The Bank currently utilizes a third-party modeling solution that is prepared on a quarterly basis, to evaluate its sensitivity to changing interest rates, given the Bank’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors.
The Bank currently utilizes a third-party modeling solution that is prepared on a quarterly basis, to evaluate its sensitivity to changing interest rates, given the Bank’s business strategy, operating environment, capital, liquidity and performance objectives, and for managing this risk consistent with the guidelines approved by the Board of Directors. The Bank engages in hedging activities, such as swap transactions.
December 31, 2022 Time to Repricing Zero to 90 Days Zero to 180 Days Zero Days to One Year Zero Days to Two Years Zero Days to Five Years Five Years Plus Total Earning Assets & Costing Liabilities Non Earning Assets & Non Costing Liabilities Total (Dollars in thousands) Assets: Interest-bearing deposits in banks $ 20,286 $ 20,286 $ 20,286 $ 20,286 $ 20,286 $ — $ 20,286 $ 34,074 $ 54,360 Securities (1) 21,817 56,680 87,373 185,290 442,280 224,760 667,040 (26,715 ) 640,325 Placements with banks 1,494 1,494 1,494 1,494 1,494 — 1,494 — 1,494 Net loans (includes LHFS) 146,397 239,265 372,573 560,220 1,400,720 111,402 1,512,122 (17,016 ) 1,495,106 FHLBNY stock 24,665 24,665 24,665 24,665 24,665 — 24,665 (4 ) 24,661 Other assets — — — — — — — 96,043 96,043 Total $ 214,659 $ 342,390 $ 506,391 $ 791,955 $ 1,889,445 $ 336,162 $ 2,225,607 $ 86,382 $ 2,311,989 Liabilities: Non-maturity deposits $ 31,380 $ 62,760 $ 125,520 $ 251,041 $ 558,631 $ 73,985 $ 632,616 $ 243,178 $ 875,794 Certificates of deposit 59,736 103,461 196,339 245,796 376,618 — 376,618 — 376,618 Other liabilities 159,600 177,375 184,375 234,375 467,375 50,000 517,375 49,502 566,877 Total liabilities 250,716 343,596 506,234 731,212 1,402,624 123,985 1,526,609 292,680 1,819,289 Capital — — — — — — — 492,700 492,700 Total liabilities and capital $ 250,716 $ 343,596 $ 506,234 $ 731,212 $ 1,402,624 $ 123,985 $ 1,526,609 $ 785,380 $ 2,311,989 Asset/liability gap $ (36,057 ) $ (1,206 ) $ 157 $ 60,743 $ 486,821 $ 212,177 $ 698,998 Gap/assets ratio 85.62 % 99.65 % 100.03 % 108.31 % 134.71 % 271.13 % 145.79 % (1) Includes available-for-sale securities and held-to-maturity securities.
December 31, 2022 Time to Repricing Zero to 90 Days Zero to 180 Days Zero Days to One Year Zero Days to Two Years Zero Days to Five Years Five Years Plus Total Earning Assets & Costing Liabilities Non Earning Assets & Non Costing Liabilities Total (Dollars in thousands) Assets: Interest-bearing deposits in banks $ 20,286 $ 20,286 $ 20,286 $ 20,286 $ 20,286 $ — $ 20,286 $ 34,074 $ 54,360 Securities (1) 21,817 56,680 87,373 185,290 442,280 224,760 667,040 (26,715 ) 640,325 Placement with banks 1,494 1,494 1,494 1,494 1,494 — 1,494 — 1,494 Net loans (includes LHFS) 146,397 239,265 372,573 560,220 1,400,720 111,402 1,512,122 (17,016 ) 1,495,106 FHLBNY stock 24,665 24,665 24,665 24,665 24,665 — 24,665 (4 ) 24,661 Other assets — — — — — — — 96,043 96,043 Total $ 214,659 $ 342,390 $ 506,391 $ 791,955 $ 1,889,445 $ 336,162 $ 2,225,607 $ 86,382 $ 2,311,989 Liabilities: Non-maturity deposits $ 31,380 $ 62,760 $ 43,848 $ 169,369 $ 476,959 $ 73,985 550,944 243,178 $ 794,122 Certificates of deposit 59,736 103,461 278,011 327,468 458,290 — 458,290 — 458,290 Borrowings 159,600 177,375 184,375 234,375 467,375 50,000 517,375 — 517,375 Other liabilities — — — — — — — 49,502 49,502 Total liabilities 250,716 343,596 506,234 731,212 1,402,624 123,985 1,526,609 292,680 1,819,289 Capital — — — — — — — 492,700 492,700 Total liabilities and capital $ 250,716 $ 343,596 $ 506,234 $ 731,212 $ 1,402,624 $ 123,985 $ 1,526,609 $ 785,380 $ 2,311,989 Asset/liability gap $ (36,057 ) $ (1,206 ) $ 157 $ 60,743 $ 486,821 $ 212,177 $ 698,998 Gap/assets ratio 85.62 % 99.65 % 100.03 % 108.31 % 134.71 % 271.13 % 145.79 % (1) Includes available-for-sale securities and held-to-maturity securities.
If a microloan is found to be fraudulent, becomes 90 days delinquent upon 90 days of origination or defaults due to a failure of Grain to properly service the microloan, the Bank’s applicable standards for origination or servicing are deemed to have not been complied with and the microloan is put back to Grain, who then becomes responsible for the microloan and any related losses.
If a microloan was found to be fraudulent, became 90 days delinquent upon 90 days of origination or defaulted due to a failure of Grain to properly service the microloan, the Bank’s applicable standards for origination or servicing were deemed to have not been complied with and the microloan was put back to Grain, who then became responsible for the microloan and any related losses.
Certificates of deposits that are scheduled to mature in less than one year from December 31, 2022 totaled $196.3 million. Management expects that a substantial portion of the maturing time deposits will be renewed.
Certificates of deposits that are scheduled to mature in less than one year from December 31, 2023 totaled $449.5 million. Management expects that a substantial portion of the maturing time deposits will be renewed.
However, if a substantial portion of these deposits are not retained, the Company may utilize FHLBNY advances, unsecured credit lines with correspondent banks, or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. Contractual Obligations . In the ordinary course of its operations, the Company enters into certain contractual obligations.
However, if a substantial portion of these deposits are not retained, the Company may utilize FHLBNY and FRBNY advances, unsecured credit lines with correspondent banks, or raise interest rates on deposits to attract new accounts, which may result in higher levels of interest expense. Contractual Obligations .
As of December 31, 2022, the Company’s total remaining exposure to Grain was $2.8 million of the remaining microloans, net of allowance for loan losses excluding $0.4 million of unused commitments available to Grain borrowers and $1.4 million of security deposits by Grain borrowers.
As of December 31, 2023, the Company’s total exposure related to Grain was $1.0 million of the remaining microloans, net of allowance for credit losses, excluding $2.4 million of unused commitments available to Grain borrowers and $1.6 million of security deposits by Grain borrowers.
In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $27.9 million the year ended December 31, 2022.
In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $30.7 million the year ended December 31, 2023.
Since the beginning of the Bank’s agreement with Grain and through December 31, 2022, 45,322 microloans amounting to $25.5 million have been deemed to be fraudulent and put back to Grain.
Since the beginning of the Bank’s agreement with Grain and through December 31, 2023, 45,322 microloans amounting to $24.1 million have been deemed to be fraudulent and put back to Grain.
All brokered certificates of deposit individually amounted to less than $250,000. When wholesale funding is necessary to complement the Company's core deposit base, management determines which source is best suited to address both liquidity risk and interest rate risk in line with management objectives. The Company’s Interest Rate Risk Policy imposes limitations on overall wholesale funding and noncore funding reliance.
When wholesale funding is necessary to complement the Company's core deposit base, management determines which source is best suited to address both liquidity risk and interest rate risk in line with management objectives. The Company’s Interest Rate Risk Policy imposes limitations on overall wholesale funding and noncore funding reliance.
The $7.8 million increase in net interest income for the year ended December 31, 2022 compared to the year ended December 31, 2021 was attributable to an increase of $15.7 million in interest and dividend income primarily due to increases in average loans receivable and interest and dividend on securities and FHLBNY stock and deposits due from banks, offset by an increase of $7.9 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities.
The $1.3 million decrease in net interest income for the year ended December 31, 2023 compared to the year ended December 31, 2022 was attributable to an increase of $44.4 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities, offset by an increase of $43.1 million in interest and dividend income primarily due to increases in average loans receivable and interest and dividend on securities and FHLBNY stock and deposits due from banks.
The Company has written-down a total of $17.5 million of the Grain Receivable for the year ended December 31, 2022 and received $6.2 million in cash from Grain and through the application of security deposits connected to fraudulent loan accounts. The Bank also opted to use the $1.8 million grant it received from the U.S.
The Company has written-down a total of $15.5 million, net of recoveries, of the Grain Receivable and received $6.8 million in cash from Grain and through the application of security deposits connected to fraudulent loan accounts. The Bank also opted to use the $1.8 million grant it received from the U.S.
At December 31, 2022 and 2021, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 38.5% and 79.6%, respectively. Investor owned commercial real estate mortgage loans as a percentage of total risk-based capital was 194.0% and 396.2% as of December 31, 2022 and 2021, respectively.
At December 31, 2023 and 2022, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 102.5% and 38.5%, respectively. Investor owned commercial real estate mortgage loans as a percentage of total risk-based capital was 269.1% and 194.0% as of December 31, 2023 and 2022, respectively.
Interest and dividend income on securities, FHLBNY stock and deposits due from banks increased $11.3 million, or 722.9%, to $12.9 million for the year ended December 31, 2022 from $1.6 million for the year ended December 31, 2021.
Interest and dividend income on securities, FHLBNY stock and deposits due from banks increased $17.2 million, or 133.3%, to $30.1 million for the year ended December 31, 2023 from $12.9 million for the year ended December 31, 2022.
Treasury Department’s Rapid Response ‎Program to defray the Grain Receivable. The application of those amounts resulted in no net receivable. Additionally, the Company has also written-off its equity investment in Grain of $1.0 million.
Treasury Department’s Rapid Response ‎Program to defray the Grain Receivable. The application of those amounts resulted in no net receivable. Additionally, the Company wrote-off its equity investment in Grain of $1.0 million during the year ended December 31, 2022.
("Grain") Total Exposure as of December 31, 2022 (in thousands) Receivable from Grain Microloans originated - put back to Grain (inception-to-December 31, 2022) $ 25,467 Write-downs, net of recoveries (year to date as of December 31, 2022) (17,455 ) Cash receipts from Grain (inception-to-December 31, 2022) (6,186 ) Grant/reserve (inception-to-December 31, 2022) (1,826 ) Net receivable as of December 31, 2022 $ — Microloan receivables from Grain borrowers Grain originated loans receivable as of December 31, 2022 $ 18,158 Allowance for loan losses as of December 31, 2022 (1) (15,415 ) Microloans, net of allowance for loan losses as of December 31, 2022 $ 2,743 Investments Investment in Grain $ 1,000 Investment in Grain write-off (1,000 ) Investment in Grain as of December 31, 2022 $ — Total exposure to Grain as of December 31, 2022 $ 2,743 (1) Includes $0.03 million for allowance for unused commitments on the $0.4 million of unused commitments available to Grain originated borrowers reported in other liabilities in the accompanying Consolidated Statements of Financial Conditions.
("Grain") Total Exposure as of December 31, 2023 (in thousands) Receivable from Grain Microloans originated - put back to Grain (inception-to-December 31, 2023) $ 24,104 Write-downs, net of recoveries (year to date as of December 31, 2023) (15,459 ) Cash receipts from Grain (inception-to-December 31, 2023) (6,819 ) Grant/reserve (inception-to-December 31, 2023) (1,826 ) Net receivable as of December 31, 2022 $ — Microloan receivables from Grain borrowers Grain originated loans receivable as of December 31, 2023 $ 7,985 Allowance for credit losses on loan as of December 31, 2023 (1) (7,026 ) Microloans, net of allowance for credit losses on loans as of December 31, 2023 $ 959 Investments Investment in Grain $ 1,000 Investment in Grain write-off (1,000 ) Investment in Grain as of December 31, 2023 $ — Total exposure related to Grain as of December 31, 2023 (2) $ 959 52 (1) Includes $0.3 million for allowance for unused commitments on the $2.4 million of unused commitments available to Grain originated borrowers reported in other liabilities in the accompanying Consolidated Statements of Financial Conditions.
Included in allowance for loan losses were $15.4 million and 1.4 million related to Grain at December 31, 2022 and 2021, respectively.
Included in allowance for credit losses were $6.8 million and 15.4 million related to Grain at December 31, 2023 and 2022, respectively.
The decrease in the net interest rate spread for the year ended December 31, 2022 compared to the year ended December 31, 2021 was primarily due to an increase in the average rates paid on interest-bearing liabilities of 59 basis points to 1.39% for the year ended December 31, 2022 from 0.80% for the year ended December 31, 2021 and a decrease in the average yields on interest-earning assets of 4 basis points to 4.66% for the year ended December 31, 2022 from 4.70% for the year ended December 31, 2021.
The decrease in the net interest rate spread for the year ended December 31, 2023 compared to the year ended December 31, 2022 was primarily due to an increase in the average rates paid on interest-bearing liabilities of 208 basis points to 3.47% for the year ended December 31, 2023 from 1.39% for the year ended December 31, 2022 and an increase in the average yields on interest-earning assets of 57 basis points to 5.12% for the year ended December 31, 2023 from 4.55% for the year ended December 31, 2022.
Non-GAAP Reconciliation – Net Income Before (Loss) Gain on Sale of Premises and Equipment and Contribution to the Ponce De Leon Foundation (Unaudited) For the Years Ended December 31, 2022 2021 (Dollars in thousands, except per share data) Net (loss) income - GAAP $ (30,001 ) $ 25,415 Loss (gain) on sale of premises and equipment 436 (20,270 ) Contribution to the Ponce De Leon Foundation 4,995 — Income tax (benefit) provision (1,141 ) 4,257 Net (loss) income - non-GAAP $ (25,711 ) $ 9,402 (Loss) earnings per common share (GAAP) (1) $ (1.32 ) $ 1.52 (Loss) earnings per common share (non-GAAP) (1) $ (1.13 ) $ 0.56 (1) (Loss) earnings per share were computed (for the GAAP and non-GAAP basis) based on the weighted average number of shares outstanding during the years ended December 31, 2022 and 2021, (22,690,943 shares and 16,744,561 shares, respectively).
A reconciliation of the non-GAAP information to GAAP net (loss) income and earnings (loss) per share is provided below. 49 Non-GAAP Reconciliation – Net Income Before Loss on Sale of Premises and Equipment and Contribution to the Ponce De Leon Foundation (Unaudited) For the Years Ended December 31, 2023 2022 (Dollars in thousands, except per share data) Net income (loss) - GAAP $ 3,352 $ (30,001 ) Loss on sale of premises and equipment — 436 Contribution to the Ponce De Leon Foundation — 4,995 Income tax benefit — (1,141 ) Net income (loss) - non-GAAP $ 3,352 $ (25,711 ) Earnings (loss) per common share (GAAP) (1) $ 0.15 $ (1.32 ) Earnings (loss) per common share (non-GAAP) (1) $ 0.15 $ (1.13 ) (1) Earnings (loss) per share were computed (for the GAAP and non-GAAP basis) based on the weighted average number of shares outstanding during the years ended December 31, 2023 and 2022, (22,745,317 shares and 22,690,943 shares, respectively).
Net cash used in investing activities, which consists primarily of disbursements for loan originations, purchases of new securities, and purchase of equipment offset by principal collections on loans, proceeds from maturing securities and pay downs on mortgage-backed securities, and proceeds from the sale of real estate was ($777.1) million and ($211.1) million for the years ended December 31, 2022 and 2021, respectively.
Net cash used in investing activities, which consists primarily of disbursements for loan originations, purchases of new securities, and purchase of equipment offset by principal collections on loans, proceeds from maturities, calls and principal repayments on securities was ($332.9) million and ($777.1) million for the years ended December 31, 2023 and 2022, respectively.
The non-GAAP net (loss) income amount and 50 (loss) earnings per share reflect adjustments related to the non-recurring gain on sale of real property and the Company’s contribution to the Ponce De Leon Foundation, net of tax effect. A reconciliation of the non-GAAP information to GAAP net (loss) income and (loss) earnings per share is provided below.
The non-GAAP net income (loss) amount and earnings (loss) per share reflect adjustments related to the non-recurring loss on sale of premises and equipment and the Company’s contribution to the Ponce De Leon Foundation, net of tax effect.
Management utilizes a respected, sophisticated third party designed asset liability modeling software that measures the Bank’s earnings through simulation modeling. Earning assets, interest-bearing liabilities and off-balance sheet financial instruments are combined with forecasts of interest rates for the next 12 months and are combined with other factors in order to produce various earnings simulations over that same 12-month period.
Earning assets, interest-bearing liabilities and off-balance sheet financial instruments are combined with forecasts of interest rates for the next 12 months and are combined with other factors in order to produce various earnings simulations over that same 12-month period.
The Company also established a relationship with SaveBetter, LLC, a fintech startup focusing on brokered deposits. As of December 31, 2022, the Company had $156.7 million in such deposits. The recent regulatory easing of brokered deposit rules may enable the Company to classify such deposits as core deposits.
The Company also established a relationship with Raisin Solutions US LLC ("Raisin") (formerly known as SaveBetter, LLC), a fintech startup focusing on brokered deposits. As of December 31, 2023, the Company had $386.6 million in such deposits. The recent regulatory easing of brokered deposit rules enables the Company to classify such deposits as core deposits.
In the event of a liquidation, dissolution or winding up of the Company, the Preferred Stock will be entitled to a liquidation preference, subject to certain limitations, in the amount of the sum of $1,000 per share plus declared and unpaid dividends (without accumulation of undeclared dividends) on each share.
In the event of a liquidation, dissolution or winding up of the Company, the Preferred Stock will be entitled to a liquidation preference, subject to certain limitations, in the amount of the sum of $1,000 per share plus declared and unpaid dividends (without accumulation of undeclared dividends) on each share. 50 CDFI Equitable Recovery Program On September 26, 2023, the Bank received a $3.7 million grant from the U.S.
The $16.9 million write-off and write-down, net of $0.5 million of recoveries for the year ended December 31, 2022 is included in non-interest expense in the accompanying Consolidated Statements of Operations. 53 Grain Technologies, Inc.
The $1.5 million of recoveries for the year ended December 31, 2023 and the $17.9 million write-off for the year ended December 31, 2022 related to Grain is included in non-interest expense in the accompanying Consolidated Statements of Operations.
Interest income on loans receivable, which is the Bank’s primary source of income, increased $4.3 million, or 6.6% to $69.9 million for the year ended December 31, 2022 from $65.5 million for the year ended December 31, 2021.
Interest income on loans receivable, which is the Bank’s primary source of income, increased $25.9 million, or 37.1% to $95.8 million for the year ended December 31, 2023 from $69.9 million for the year ended December 31, 2022.
Net interest rate spread decreased by 63 basis point to 3.27% for the year ended December 31, 2022 from 3.90% for the year ended December 31, 2021.
Net interest rate spread decreased by 151 basis point to 1.65% for the year ended December 31, 2023 from 3.16% for the year ended December 31, 2022.
Interest and dividend income increased $15.7 million, or 23.3%, to $82.8 million for the year ended December 31, 2022 from $67.1 million for the year ended December 31, 2021.
Interest and dividend income increased $43.1 million, or 52.1%, to $125.9 million for the year ended December 31, 2023 from $82.8 million for the year ended December 31, 2022.
The Company has since grown to $2.31 billion in assets, $1.49 billion in loans receivables, net of allowance for loan losses of 54 $34.6 million, and $1.25 billion in deposits at December 31, 2022, all while investing in infrastructure, implementing digital banking, acquiring Mortgage World, adopting GPS, diversifying its product offering, partnering with Fintech companies and assisting its communities with 5,340 PPP loans totaling $261.4 million.
The Company has since grown to $2.75 billion in assets, $1.90 billion in loans receivables, net of allowance for credit losses of $26.2 million, and $1.51 billion in deposits at December 31, 2023, all while investing in infrastructure, implementing digital banking, adopting GPS, diversifying its product offering and partnering with Fintech companies.
(6) Net interest margin represents net interest income divided by average total interest-earning assets. 62 Rate/Volume Analysis The following table presents the effects of changing rates and volumes on the Company’s net interest income for the periods indicated. The volume column shows the effects attributable to changes in volume (changes in volume multiplied by prior rate).
(7) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (8) Net interest margin represents net interest income divided by average total interest-earning assets. 61 Rate/Volume Analysis The following table presents the effects of changing rates and volumes on the Company’s net interest income for the periods indicated.
Agency Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year — — — — More than one year through five years 35,000 34,620 — — More than five years through ten years — — — — 35,000 34,620 — — Corporate Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year — — — — More than one year through five years 75,000 71,328 — — More than five years through ten years 7,500 7,410 — — 82,500 78,738 — — Mortgage-Backed Securities 393,320 382,493 934 914 Total Held-to-Maturity Securities $ 510,820 $ 495,851 $ 934 $ 914 The Company securities portfolio increased $509.9 million in held-to-maturity and $16.2 million in available-for-sale during the year ended December 31, 2022.
Agency Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year — — — — More than one year through five years 25,000 24,819 35,000 34,620 More than five years through ten years — — — — 25,000 24,819 35,000 34,620 Corporate Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year 25,000 24,650 — — More than one year through five years 50,000 48,265 75,000 71,328 More than five years through ten years 7,500 6,894 7,500 7,410 82,500 79,809 82,500 78,738 Mortgage-Backed Securities 354,646 345,414 393,320 382,493 Allowance for Credit Losses (398 ) — — — Total Held-to-Maturity Securities $ 461,748 $ 450,042 $ 510,820 $ 495,851 55 The Company securities portfolio decreased $49.1 million in held-to-maturity and $9.6 million in available-for-sale during the year ended December 31, 2023.
Loss per basic share and diluted share was ($1.32) for the year ended December 31, 2022 compared to earnings per basic share of $1.52 and earnings per diluted share of $1.51 for the year ended December 31, 2021.
Net income for the year ended December 31, 2023 was $3.4 million compared to net loss of ($30.0) million for the year ended December 31, 2022. Earnings per basic and diluted share was $0.15 for the year ended December 31, 2023 compared to loss per basic and diluted share of ($1.32) for the year ended December 31, 2022.
As of December 31, 2022, in the event of an instantaneous upward and downward change in rates from management's interest rate forecast over the next twelve months, assuming a static balance sheet, the following estimated changes are calculated: Net Interest Income Year 1 Change Rate Shift (1) Year 1 Forecast from Level (Dollars in thousands) +400 $ 61,821 (7.07%) +300 63,049 (5.22%) +200 64,168 (3.54%) +100 65,376 (1.72%) Level 66,521 — % -100 68,213 2.54% (1) Assumes an instantaneous uniform change in interest rates at all maturities.
As of December 31, 2023, in the event of an instantaneous upward and downward change in rates from management's interest rate forecast over the next twelve months, assuming a static balance sheet, the following estimated changes are calculated: Net Interest Income Year 1 Change Rate Shift (1) Year 1 Forecast from Level (Dollars in thousands) +400 $ 61,046 (11.37%) +300 63,004 (8.53%) +200 65,000 (5.63%) +100 66,964 (2.78%) Level 68,878 — % -100 70,068 1.73% -200 70,932 2.98% -300 70,130 1.82% -400 69,333 0.66% (1) Assumes an instantaneous uniform change in interest rates at all maturities.
Interest expense increased $7.9 million, or 95.7%, to $16.1 million for the year ended December 31, 2022 from $8.3 million for the year ended December 31, 2021, primarily due to lower market interest rates.
Interest expense increased $44.5 million, or 275.3%, to $60.6 million for the year ended December 31, 2023 from $16.1 million for the year ended December 31, 2022, primarily due to higher market interest rates.
The Asset/Liability Management Committee may determine that the Company should over time become more or less asset or liability sensitive depending on the underlying balance sheet circumstances and its conclusions regarding interest rate fluctuations in future periods.
The ALCO Committee may determine that the Company should over time become more or less asset or liability sensitive depending on the underlying balance sheet circumstances and its conclusions regarding interest rate fluctuations in future periods. The historically low benchmark federal funds interest rate of the last several years implemented in response the turmoil resulting from COVID-19 pandemic has ended.
Government Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year — — — — More than one year through five years 2,985 2,689 2,981 2,934 More than five years through ten years — — — — 2,985 2,689 2,981 2,934 Corporate Bonds: Amounts maturing: Three months or less — — — — More than three months through one year — — — — More than one year through five years 4,000 3,710 4,445 4,381 More than five years through ten years 21,824 19,649 16,798 16,803 25,824 23,359 21,243 21,184 Mortgage-Backed Securities 123,134 103,457 90,950 89,228 Total Available-for-Sale Securities $ 151,943 $ 129,505 $ 115,174 $ 113,346 Held-to-Maturity Securities: U.S.
Government Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year — — — — More than one year through five years 2,990 2,784 2,985 2,689 More than five years through ten years — — — — 2,990 2,784 2,985 2,689 Corporate Bonds: Amounts maturing: Three months or less — — — — More than three months through one year 4,000 3,863 — — More than one year through five years 1,000 536 4,000 3,710 More than five years through ten years 20,790 19,269 21,824 19,649 25,790 23,668 25,824 23,359 Mortgage-Backed Securities 111,001 93,450 123,134 103,457 Total Available-for-Sale Securities $ 139,781 $ 119,902 $ 151,943 $ 129,505 Held-to-Maturity Securities: U.S.
Non-interest expense increased $28.7 million, or 50.2%, to $85.8 million for the year ended December 31, 2022 from $57.1 million for the year ended December 31, 2021.
Non-interest expense decreased $17.2 million, or 20.0%, to $68.7 million for the year ended December 31, 2023 from $85.8 million for the year ended December 31, 2022.
Comparison of Financial Condition at December 31, 2022 and December 31, 2021 Total Assets . Total consolidated assets increased $658.5 million, or 39.8%, to $2.31 billion at December 31, 2022 from $1.65 billion at December 31, 2021.
Comparison of Financial Condition at December 31, 2023 and December 31, 2022 Total Assets . Total consolidated assets increased $438.7 million, or 19.0%, to $2.75 billion at December 31, 2023 from $2.31 billion at December 31, 2022.
The table sets forth an approximation of the projected repricing of assets and liabilities at December 31, 2021, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments. 66 The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans.
The loan amounts in the table reflect principal balances expected to be redeployed and/or repriced as a result of contractual amortization and as a result of contractual rate adjustments on adjustable-rate loans.

… 119 more changes not shown on this page.

Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

1 edited+0 added−0 removed0 unchanged
Biggest changeItem 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Information regarding quantitative and qualitative disclosures about market risk appears under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk.” 69
Biggest changeItem 7A. Quantitative and Qualitati ve Disclosures About Market Risk. Information regarding quantitative and qualitative disclosures about market risk appears under Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Management of Market Risk.” 68

Other PDLB 10-K year-over-year comparisons