Ponce Financial Group, Inc. 10-Q

10-Q Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number: 001-41255 Ponce Financial Group, Inc. (Exact Name of Registrant as Specified in its Charter) Maryland 87-1893965 (State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 2244 Westchester Avenue Bronx , NY 10462 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: ( 718 ) 931-9000 Securities registered pursuant to Section 12(b) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common stock, par value $0.01 per share PDLB The NASDAQ Stock Market, LLC Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ As of May 8, 2024, the registrant had 23,811,732 shares of common stock, $0.01 par value per share, outstanding. Auditor Firm Id: 339 Auditor Name: Mazars USA LLP Auditor Location: New York, New York, USA Table of Contents Tabl e of Contents Page PART I. FINANCIAL INFORMATION 1 Item 1. Consolidated Financial Statements 1 Consolidated Statements of Financial Condition (Unaudited) 1 Consolidated Statements of Operations (Unaudited) 2 Consolidated Statements of Comprehensive Income (Unaudited) 3 Consolidated Statements of Stockholders’ Equity (Unaudited) 4 Consolidated Statements of Cash Flows (Unaudited) 5 Notes to Consolidated Financial Statements (Unaudited) 6 Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 30 Item 3. Quantitative and Qualitative Disclosures About Market Risk 47 Item 4. Controls and Procedures 47 PART II. OTHER INFORMATION 48 Item 1. Legal Proceedings 48 Item 1A. Risk Factors 48 Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 48 Item 3. Defaults Upon Senior Securities 48 Item 4. Mine Safety Disclosures 48 Item 5. Other Information 48 Item 6. Exhibits 49 Signatures 50 i Table of Contents PART I—FINANCI AL INFORMATION Item 1. Consolidated Financi al Statements. Ponce Financial Group, Inc. and Subsidiaries Consolidated Statements of Financial Condition (Unaudited) March 31, 2024 and December 31, 2023 (Dollars in thousands, except share data) March 31, December 31, 2024 2023 (unaudited) ASSETS Cash and due from banks: Cash $ 29,972 $ 28,930 Interest-bearing deposits 104,752 110,260 Total cash and cash equivalents 134,724 139,190 Available-for-sale securities, at fair value (Note 3) 116,044 119,902 Held-to-maturity securities, net of allowance for credit losses of $ 473 at March 31, 2024 and $ 398 at December 31, 2023; at amortized cost (fair value 2024 $ 438,113 ; 2023 $ 450,042 ) (Note 3) 452,955 461,748 Placements with banks 249 249 Mortgage loans held for sale, at fair value (Note 4) 7,860 9,980 Loans receivable, net of allowance for credit losses of $ 24,664 at March 31, 2024 and $ 26,154 at December 31, 2023 (Note 5) 1,981,428 1,895,886 Accrued interest receivable 18,063 18,010 Premises and equipment, net 17,396 16,053 Right of use assets (Note 6) 31,021 31,272 Federal Home Loan Bank of New York (FHLBNY) stock, at cost 23,892 19,377 Deferred tax assets 13,919 14,332 Other assets 21,151 24,723 Total assets $ 2,818,702 $ 2,750,722 LIABILITIES AND STOCKHOLDERS' EQUITY Liabilities: Deposits (Note 7) $ 1,585,784 $ 1,507,620 Operating lease liabilities 32,486 32,684 Accrued interest payable 4,218 11,965 Advance payments by borrowers for taxes and insurance 13,245 10,778 Borrowings (Note 8) 680,421 684,421 Other liabilities 8,866 11,859 Total liabilities 2,325,020 2,259,327 Commitments and contingencies (Note 11) Stockholders' Equity: Preferred stock, $ 0.01 par value; 100,000,000 shares authorized, 225,000 shares issued and outstanding as of March 31, 2024 and as of December 31, 2023. 225,000 225,000 Common stock, $ 0.01 par value; 200,000,000 shares authorized; 24,886,711 shares issued and 23,790,497 shares outstanding as of March 31, 2024 and 24,886,711 shares issued and 23,785,520 shares outstanding as of December 31, 2023 249 249 Treasury stock, at cost; 1,096,214 shares as of March 31, 2024 and 1,101,191 shares as of December 31, 2023 ( 9,702 ) ( 9,747 ) Additional paid-in-capital 207,584 207,106 Retained earnings 99,834 97,420 Accumulated other comprehensive loss (Note 14) ( 16,590 ) ( 15,649 ) Unearned compensation ─ ESOP; 1,402,296 shares as of March 31, 2024 and 1,435,732 shares as of December 31, 2023 ( 12,693 ) ( 12,984 ) Total stockholders' equity 493,682 491,395 Total liabilities and stockholders' equity $ 2,818,702 $ 2,750,722 The accompanying notes are an integral part of the consolidated financial statements (unaudited). 1 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Consolidated Statements of Operations (Unaudited) Three Months Ended March 31, 2024 and 2023 (Dollars in thousands, except share data) For the Three Months Ended March 31, 2024 2023 Interest and dividend income: Interest on loans receivable $ 30,664 $ 19,700 Interest on deposits due from banks 2,911 197 Interest and dividend on securities and FHLBNY stock 6,091 6,459 Total interest and dividend income 39,666 26,356 Interest expense: Interest on certificates of deposit (1) 6,380 3,225 Interest on other deposits (1) 6,540 2,812 Interest on borrowings 7,923 5,074 Total interest expense 20,843 11,111 Net interest income 18,823 15,245 Benefit for credit losses (Note 3) (Note 5) ( 180 ) ( 174 ) Net interest income after benefit for credit losses 19,003 15,419 Non-interest income: Service charges and fees 473 491 Brokerage commissions 8 15 Late and prepayment charges 359 729 Income on sale of mortgage loans 302 99 Other 565 485 Total non-interest income 1,707 1,819 Non-interest expense: Compensation and benefits 7,844 7,446 Occupancy and equipment 3,667 3,570 Data processing expenses 1,127 1,192 Direct loan expenses 732 412 Provision for contingencies 164 985 Insurance and surety bond premiums 253 265 Office supplies, telephone and postage 249 399 Professional fees 1,723 1,455 Grain recoveries (Note 5) ( 53 ) ( 914 ) Marketing and promotional expenses 100 128 Directors' fees and regulatory assessment 179 155 Other operating expenses 965 1,268 Total non-interest expense 16,950 16,361 Income before income taxes 3,760 877 Provision for income taxes 1,346 546 Net income $ 2,414 $ 331 Earnings per common share (Note 10): Basic $ 0.11 $ 0.01 Diluted $ 0.11 $ 0.01 Weighted average common shares outstanding (Note 10): Basic 22,353,492 23,293,013 Diluted 22,366,728 23,324,532 (1) For the three months ended March 31, 20 23, $ 1.4 million of in terest expense were reclassified from Interest on other deposits to Interest on certificates of deposits. The accompanying notes are an integral part of the consolidated financial statements (unaudited). 2 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Consolidated Statements of Com prehensive Income (Unaudited) Three Months Ended March 31, 2024 and 2023 (In thousands) For the Three Months Ended March 31, 2024 2023 Net income $ 2,414 $ 331 Net change in unrealized (losses) gain on securities: Unrealized (losses) gain ( 1,196 ) 1,564 Income benefit (tax) effect 255 ( 333 ) Total other comprehensive (loss) income, net of tax ( 941 ) 1,231 Total comprehensive income $ 1,473 $ 1,562 The accompanying notes are an integral part of the consolidated financial statements (unaudited). 3 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Consolidated Statements of Stockholders’ Equity (Unaudited) Three Months Ended March 31, 2024 and 2023 (Dollars in thousands, except share data) Accumulated Unallocated Treasury Additional Other Common Preferred Stock Common Stock Stock, Paid-in Retained Comprehensive Stock Shares Amount Shares Amount At Cost Capital Earnings Income (Loss) of ESOP Total Balance, December 31, 2023 225,000 $ 225,000 23,785,520 $ 249 $ ( 9,747 ) $ 207,106 $ 97,420 $ ( 15,649 ) $ ( 12,984 ) $ 491,395 Net income — — — — — — 2,414 — — 2,414 Other comprehensive loss, net of tax — — — — — — — ( 941 ) — ( 941 ) Release of restricted stock units — — 4,977 — 45 ( 45 ) — — — ESOP shares committed to be released ( 33,436 shares) — — — — — 6 — — 291 297 Share-based compensation — — — — — 517 — — — 517 Balance, March 31, 2024 225,000 $ 225,000 23,790,497 $ 249 $ ( 9,702 ) $ 207,584 $ 99,834 $ ( 16,590 ) $ ( 12,693 ) $ 493,682 Accumulated Unallocated Treasury Additional Other Common Preferred Stock Common Stock Stock, Paid-in Retained Comprehensive Stock Shares Amount Shares Amount At Cost Capital Earnings Loss of ESOP Total Balance, December 31, 2022 225,000 $ 225,000 24,859,353 $ 249 $ ( 2 ) $ 206,508 $ 92,955 $ ( 17,860 ) $ ( 14,150 ) 492,700 Net income — — — — — — 331 — — 331 Other comprehensive income, net of tax — — — — — — — 1,231 — 1,231 Impact of CECL adoption, net of tax — — — — — — 1,113 — — 1,113 Release of restricted stock units — — 4,147 — — — — — — — ESOP shares committed to be released ( 33,436 shares) — — — — — ( 29 ) — — 291 262 Share-based compensation — — — — — 404 — — — 404 Balance, March 31, 2023 225,000 $ 225,000 24,863,500 $ 249 $ ( 2 ) $ 206,883 $ 94,399 $ ( 16,629 ) $ ( 13,859 ) $ 496,041 The accompanying notes are an integral part of the consolidated financial statements (unaudited). 4 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Consolidated Statements o f Cash Flows (Unaudited) Three Months Ended March 31, 2024 and 2023 (In thousands) Three Months Ended March 31, 2024 2023 Cash Flows From Operating Activities: Net income $ 2,414 $ 331 Adjustments to reconcile net income to net cash provided by operating activities: Amortization of premiums/discounts on securities, net ( 39 ) ( 30 ) Gain on sale of loans ( 276 ) — Gain on derivatives — ( 119 ) Grain recoveries ( 53 ) ( 914 ) Benefit for credit losses ( 180 ) ( 174 ) Depreciation and amortization 673 742 ESOP compensation expense 297 262 Share-based compensation expense 517 404 Deferred income taxes 667 391 Changes in assets and liabilities: Decrease (increase) in mortgage loans held for sale, fair value 2,396 ( 1,008 ) Increase in accrued interest receivable ( 53 ) ( 386 ) Decrease (increase) in other assets 3,572 ( 778 ) (Decrease) increase in accrued interest payable ( 7,747 ) 377 Decrease in operating lease liabilities ( 198 ) ( 224 ) Increase in advance payments by borrowers 2,467 5,178 (Decrease) increase in other liabilities ( 2,996 ) 2,094 Net cash provided by operating activities 1,461 6,146 Cash Flows From Investing Activities: Net purchase and redemption of FHLBNY stock ( 4,500 ) 5,452 Proceeds from maturities, calls and principal repayments on securities 11,419 21,140 Placements with banks — 249 Net increase in loans ( 79,278 ) ( 117,890 ) Purchase of loans ( 5,956 ) — Purchases of premises and equipment ( 1,776 ) ( 235 ) Net cash used in investing activities ( 80,091 ) ( 91,284 ) Cash Flows From Financing Activities: Net increase in deposits 78,164 84,465 Net proceeds from borrowings ( 4,000 ) 131,000 Net cash provided by financing activities 74,164 215,465 Net (decrease) increase in cash and cash equivalents ( 4,466 ) 130,327 Cash and cash equivalents at beginning of period 139,190 54,360 Cash and cash equivalents at end of period $ 134,724 $ 184,687 Supplemental disclosures of cash flow information: Cash paid for interest on deposits and borrowings $ 28,590 $ 10,734 Cash paid for income taxes $ 290 $ 37 The accompanying notes are an integral part of the consolidated financial statements (unaudited). 5 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note 1. Nature of Business Basis of Presentation and Consolidation: Ponce Financial Group, Inc. (hereafter referred to as “we,” “our,” “us,” “Ponce Financial Group, Inc.,” or the “Company”) is the holding company of Ponce Bank (“Ponce Bank” or the “Bank”), a federally chartered stock savings association. The Company’s Consolidated Financial Statements presented herein have been prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Consolidated Financial Statements include the accounts of the Company, its wholly-owned subsidiary Ponce Bank (the “Bank”) and the Bank’s wholly-owned subsidiary, Ponce De Leon Mortgage Corp., which is a mortgage banking entity. All significant intercompany transactions and balances have been eliminated in consolidation. For further information, refer to the audited Consolidated Financial Statements and Notes included in the Company' Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on March 19, 2024 (the "2023 Form 10-K"). Reclassification of Prior Periods Presentation : Certain prior periods amounts have been reclassified for consistency with the current period presentation. These reclassifications had no effect on the reporting results of operations and did not affect previously reported amounts in the Consolidated Statements of Operations. Refer to Deposits (Note 8) for the Three Months Ended March 31, 2023 for details on the reclassification. Recent Accounting Pronouncements Not Yet Adopted: In November 2023, FASB issued ASU 2023-07, "Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures." The amendments in this ASU require improved reportable segment information on an annual and interim basis, primarily through enhanced disclosures about significant segment expenses. This update will be effective for financial statements issued for fiscal years beginning after December 15, 2023, and interim periods for fiscal years beginning after December 15, 2024. Early adoptions is permitted. The Company does not expect this standard to have an impact on the consolidated financial statements. In December 2023, the FASB issued ASU 2023-09, "Improvements to Income Tax Disclosures (Topic 740) . " The amendment to this update addresses investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This update also includes certain other amendments to improve the effectiveness of income tax disclosures. The amendments in this update are effective for annual periods beginning after December 15, 2024. Early adoption is permitted for annual financial statements that have not yet been issued or made available for issuance. Note 2. Preferred Stock Preferred Stock 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 $ 225.0 million 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 initial dividend rate is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50 % and the ceiling dividend rate is 2.00 %. After 10 years of issuance, the perpetual dividend rate in effect, will be determined based on said floor and ceiling. 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 Community Development Financial Institution (“CDFI”) or ‎Minority Depository Institution (“MDI”), of which Ponce Bank is both. The ECIP is intended to incentivize CDFIs and MDIs to provide loans, grants, ‎and forbearance to small businesses, minority-owned businesses, and consumers in low-income and underserved communities that may have been ‎disproportionately impacted by the economic effects of the COVID-19 pandemic.‎ 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. 6 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note 3. Securities The amortized cost, gross unrealized gains and losses, and fair value of securities at March 31, 2024 and December 31, 2023 are summarized as follows: March 31, 2024 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value (in thousands) Available-for-Sale Securities: U.S. Government Bonds $ 2,991 $ — $ ( 211 ) $ 2,780 Corporate Bonds 25,782 — ( 2,262 ) 23,520 Mortgage-Backed Securities: Collateralized Mortgage Obligations (1) 38,183 — ( 6,229 ) 31,954 FHLMC Certificates 9,903 — ( 1,424 ) 8,479 FNMA Certificates 60,158 — ( 10,948 ) 49,210 GNMA Certificates 102 — ( 1 ) 101 Total available-for-sale securities $ 137,119 $ — $ ( 21,075 ) $ 116,044 Held-to-Maturity Securities: U.S. Agency Bonds $ 25,000 $ — $ ( 289 ) $ 24,711 Corporate Bonds 82,500 — ( 2,211 ) 80,289 Mortgage-Backed Securities: Collateralized Mortgage Obligations (1) 207,079 — ( 7,468 ) 199,611 FHLMC Certificates 3,819 — ( 253 ) 3,566 FNMA Certificates 116,085 — ( 5,263 ) 110,822 SBA Certificates 18,945 169 — 19,114 Allowance for Credit Losses ( 473 ) — — — Total held-to-maturity securities $ 452,955 $ 169 $ ( 15,484 ) $ 438,113 (1) Comprised of Federal Home Loan Mortgage Corporation (“FHLMC”), Federal National Mortgage Association (“FNMA”) and Ginnie Mae (“GNMA”) issued securities. 7 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) December 31, 2023 Gross Gross Amortized Unrealized Unrealized Cost Gains Losses Fair Value (in thousands) Available-for-Sale Securities: U.S. Government Bonds $ 2,990 $ — $ ( 206 ) $ 2,784 Corporate Bonds 25,790 — ( 2,122 ) 23,668 Mortgage-Backed Securities: Collateralized Mortgage Obligations (1) 39,375 — ( 6,227 ) 33,148 FHLMC Certificates 10,163 — ( 1,482 ) 8,681 FNMA Certificates 61,359 — ( 9,842 ) 51,517 GNMA Certificates 104 — — 104 Total available-for-sale securities $ 139,781 $ — $ ( 19,879 ) $ 119,902 Held-to-Maturity Securities: U.S. Agency Bonds $ 25,000 $ — $ ( 181 ) $ 24,819 Corporate Bonds 82,500 — ( 2,691 ) 79,809 Mortgage-Backed Securities: Collateralized Mortgage Obligations (1) 212,093 104 ( 5,170 ) 207,027 FHLMC Certificates 3,897 — ( 244 ) 3,653 FNMA Certificates 118,944 — ( 4,088 ) 114,856 SBA Certificates 19,712 166 — 19,878 Allowance for Credit Losses ( 398 ) — — — Total held-to-maturity securities $ 461,748 $ 270 $ ( 12,374 ) $ 450,042 (1) Comprised of FHLMC, FNMA and GNMA issued securities. The Company’s securities portfolio had 40 available-for-sale securities and 33 held-to-maturity securities at both March 31, 2024 and December 31, 2023 . There were no available-for-sale and held-to-maturity securities sold during the three months ended March 31, 2024 and for the year ended December 31, 2023. One held-to-maturity security in the amount of $ 10.0 million matured and/or was called during the year ended December 31, 2023. There were no securities that matured and/or were called during the three months ended March 31, 2024. The Company did no t purchase any available-for-sale securities and held-to-maturity securities during the three months ended March 31, 2024 and during the year ended December 31, 2023. 8 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The following table presents the Company's gross unrealized losses and fair values of its securities, aggregated by the length of time the individual securities have been in a continuous unrealized loss position, at March 31, 2024 and December 31, 2023: March 31, 2024 Securities With Gross Unrealized Losses Less Than 12 Months 12 Months or More Total Total Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (in thousands) Available-for-Sale Securities: U.S. Government Bonds $ — $ — $ 2,780 $ ( 211 ) $ 2,780 $ ( 211 ) Corporate Bonds — — 23,520 ( 2,262 ) 23,520 ( 2,262 ) Mortgage-Backed Securities: Collateralized Mortgage Obligations — — 31,954 ( 6,229 ) 31,954 ( 6,229 ) FHLMC Certificates — — 8,479 ( 1,424 ) 8,479 ( 1,424 ) FNMA Certificates — — 49,210 ( 10,948 ) 49,210 ( 10,948 ) GNMA Certificates — — 101 ( 1 ) 101 ( 1 ) Total available-for-sale securities $ — $ — $ 116,044 $ ( 21,075 ) $ 116,044 $ ( 21,075 ) Held-to-Maturity Securities: U.S. Agency Bonds $ — $ — $ 24,711 $ ( 289 ) $ 24,711 $ ( 289 ) Corporate Bonds 3,304 ( 196 ) 76,985 ( 2,015 ) 80,289 ( 2,211 ) Mortgage-Backed Securities: Collateralized Mortgage Obligations 33,444 ( 423 ) 166,167 ( 7,045 ) 199,611 ( 7,468 ) FHLMC Certificates — — 3,566 ( 253 ) 3,566 ( 253 ) FNMA Certificates — — 110,822 ( 5,263 ) 110,822 ( 5,263 ) Total held-to-maturity securities $ 36,748 $ ( 619 ) $ 382,251 $ ( 14,865 ) $ 418,999 $ ( 15,484 ) December 31, 2023 Securities With Gross Unrealized Losses Less Than 12 Months 12 Months or More Total Total Fair Unrealized Fair Unrealized Fair Unrealized Value Losses Value Losses Value Losses (in thousands) Available-for-Sale Securities: U.S. Government Bonds $ — $ — $ 2,784 $ ( 206 ) $ 2,784 $ ( 206 ) Corporate Bonds — — 23,668 ( 2,122 ) 23,668 ( 2,122 ) Mortgage-Backed Securities: Collateralized Mortgage Obligations — — 33,148 ( 6,227 ) 33,148 ( 6,227 ) FHLMC Certificates — — 8,681 ( 1,482 ) 8,681 ( 1,482 ) FNMA Certificates — — 51,517 ( 9,842 ) 51,517 ( 9,842 ) GNMA Certificates — — — — — — Total available-for-sale securities $ — $ — $ 119,798 $ ( 19,879 ) $ 119,798 $ ( 19,879 ) Held-to-Maturity Securities: U.S. Agency Bonds $ — $ — $ 24,819 $ ( 181 ) $ 24,819 $ ( 181 ) Corporate Bonds 3,288 ( 212 ) 76,521 ( 2,479 ) 79,809 ( 2,691 ) Mortgage-Backed Securities: Collateralized Mortgage Obligations 81,875 ( 725 ) 112,339 ( 4,445 ) 194,214 ( 5,170 ) FHLMC Certificates — — 3,653 ( 244 ) 3,653 ( 244 ) FNMA Certificates — — 114,856 ( 4,088 ) 114,856 ( 4,088 ) Total held-to-maturity securities $ 85,163 $ ( 937 ) $ 332,188 $ ( 11,437 ) $ 417,351 $ ( 12,374 ) At March 31, 2024 and December 31, 2023 , the Company had 40 available-for-sale securities, for both periods, and 30 and 31 held-to-maturity securities at March 31, 2024 and December 31, 2023, respectively, with gross unrealized loss positions. Management reviewed the financial condition of the entities underlying the securities at both March 31, 2024 and December 31, 2023. The unrealized losses related to the Company debt securities were issued by U.S. government-sponsored entities and agencies. The Company does not believe 9 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) that the debt securities that were in an unrealized loss position as of March 31, 2024 represents a credit loss impairment. The gross unrealized loss positions related to mortgage-backed securities and other obligations issued by the U.S. government agencies or U.S. government-sponsored enterprises carry the explicit and/or implicit guarantee of the U.S. government and have a long history of zero credit loss. Total gross unrealized losses were primarily attributable to changes in interest rates relative to when the investment securities were purchased and not due to the credit quality of the investment securities. Management reviewed the collectability of the corporate bonds taking into consideration of such factors as the financial condition of the issuers, reported regulatory capital ratios of the issuers, credit ratings, including ratings in effect as of the reporting date. Management believes the unrealized losses on the corporate bonds are primarily attributable to changes in the interest rates and not changes in the credit quality of the issuers of the corporate bonds. The following is a summary of maturities of securities at March 31, 2024 and December 31, 2023. Amounts are shown by contractual maturity. Because borrowers for mortgage-backed securities have the right to prepay obligations with or without prepayment penalties, at any time, these securities are included as a total within the table. March 31, 2024 Amortized Fair Cost Value (in thousands) Available-for-Sale 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 2,991 2,780 More than five years through ten years — — 2,991 2,780 Corporate Bonds: Amounts maturing: Three months or less $ — $ — More than three months through one year 4,000 3,910 More than one year through five years 1,000 137 More than five years through ten years 20,782 19,473 25,782 23,520 Mortgage-Backed Securities 108,346 89,744 Total available-for-sale securities $ 137,119 $ 116,044 Held-to-Maturity Securities: U.S. Agency Bonds: Amounts maturing: Three months or less $ — $ — More than three months through one year — — More than one year through five years 25,000 24,711 More than five years through ten years — — 25,000 24,711 Corporate Bonds: Amounts maturing: Three months or less $ — $ — More than three months through one year 25,000 24,673 More than one year through five years 50,000 48,851 More than five years through ten years 7,500 6,765 82,500 80,289 Mortgage-Backed Securities 345,928 333,113 Allowance for Credit Losses ( 473 ) — Total held-to-maturity securities $ 452,955 $ 438,113 10 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) December 31, 2023 Amortized Fair Cost Value (in thousands) Available-for-Sale 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 More than five years through ten years — — 2,990 2,784 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 More than five years through ten years 20,790 19,269 25,790 23,668 Mortgage-Backed Securities 111,001 93,450 Total available-for-sale securities $ 139,781 $ 119,902 Held-to-Maturity Securities: U.S. 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 More than five years through ten years — — 25,000 24,819 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 More than five years through ten years 7,500 6,894 82,500 79,809 Mortgage-Backed Securities 354,646 345,414 Allowance for Credit Losses ( 398 ) — Total held-to-maturity securities $ 461,748 $ 450,042 At March 31, 2024 , 20 available-for-sale securities with a fair value totaling $ 66.0 million and 11 held-to-maturity securities with an amortized cost totaling $ 136.6 million were pledged at the Federal Reserve Bank of New York ("FRBNY") as collateral for borrowing activities. At December 31, 2023, 26 available-for-sale securities with a fair value totaling $ 93.3 million and 17 held-to-maturity securities with an amortized cost totaling $ 193.3 million were pledged at the FRBNY as collateral for borrowing activities. The following table presents the activity in the allowance for credit losses for held-to-maturity securities: For the Three Months Ended For the Year Ended March 31, 2024 December 31, 2023 Allowance for credit losses on securities at beginning of period $ 398 $ — Impact on CECL adoption — 662 Provision (benefit) for credit losses 75 ( 264 ) Allowance for credit losses on securities at end of period $ 473 $ 398 At March 31, 2024 and December 31, 2023, the entire allowance for credit losses on securities was allocated to corporate bonds. 11 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note 4. Mortgage Loans Held for Sale The following table provides the fair value and contractual principal balance outstanding of loans held for sale accounted for under the fair value options: March 31, December 31, 2024 2023 (in thousands) Mortgage loans held for sale, at fair value $ 7,860 $ 9,980 Mortgage loans held for sale, contractual principal outstanding 7,776 9,864 Fair value less unpaid principal balance $ 84 $ 116 At March 31, 2024 and December 31, 2023, the Bank had 10 loans and 19 loans in the amount of $ 7.9 million and $ 10.0 million, respectively, that were classified as held for sale and accounted for under the fair value option accounting guidance for financial assets and financial liabilities. At March 31, 2024 and December 31, 2023, there were $ 4.4 million, for both periods, in loans held for sale that were greater than 90 days past due and non-accrual with a substandard risk rating. 12 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note 5. Loans Receivable and Allowance for Credit Losses Loans receivable at March 31, 2024 and December 31, 2023 are summarized as follows: March 31, December 31, 2024 2023 (in thousands) Mortgage loans: 1-4 Family residential Investor-Owned $ 339,331 $ 343,689 Owner-Occupied 150,842 152,311 Multifamily residential 545,825 550,559 Nonresidential properties 327,350 342,343 Construction and land 608,665 503,925 Total mortgage loans 1,972,013 1,892,827 Nonmortgage loans: Business loans 26,664 19,779 Consumer loans (1) 6,741 8,966 Total non-mortgage loans 33,405 28,745 Total loans, gross 2,005,418 1,921,572 Net deferred loan origination costs 674 468 Allowance for Credit Losses ( 24,664 ) ( 26,154 ) Loans receivable, net $ 1,981,428 $ 1,895,886 (1) As of March 31, 2024 and December 31, 2023, consumer loans include $ 5.7 million and $ 8.0 million, respectively, of microloans originated by the Bank pursuant to its arrangement with Grain. The Company’s lending activities are conducted principally in metropolitan New York City. The Company primarily grants loans secured by real estate to individuals and businesses pursuant to an established credit policy applicable to each type of lending activity in which it engages. Although collateral provides assurance as a secondary source of repayment, the Company ordinarily requires the primary source of repayment to be based on the borrowers’ ability to generate continuing cash flows. The Company also evaluates the collateral and creditworthiness of each customer. The credit policy provides that depending on the borrowers’ creditworthiness and type of collateral, credit may be extended up to predetermined percentages of the market value of the collateral or on an unsecured basis. Real estate is the primary form of collateral. Other important forms of collateral are time deposits and marketable securities. For disclosures related to the allowance for credit losses and credit quality, the Company does not have any disaggregated classes of loans below the segment level. Credit-Quality Indicators : Internally assigned risk ratings are used as credit-quality indicators, which are reviewed by management on a quarterly basis. The objectives of the Company’s risk-rating system are to provide the Board of Directors and senior management with an objective assessment of the overall quality of the loan portfolio, to promptly and accurately identify loans with well-defined credit weaknesses so that timely action can be taken to minimize credit loss, to identify relevant trends affecting the collectability of the loan portfolio, to isolate potential problem areas and to provide essential information for determining the adequacy of the allowance for credit losses. Below are the definitions of the internally assigned risk ratings: • Strong Pass – Loans to a new or existing borrower collateralized at least 90 percent by an unimpaired deposit account at the Company. • Good Pass – Loans to a new or existing borrower in a well-established enterprise in excellent financial condition with strong liquidity and a history of consistently high level of earnings, cash flow and debt service capacity. • Satisfactory Pass – Loans to a new or existing borrower of average strength with acceptable financial condition, satisfactory record of earnings and sufficient historical and projected cash flow to service the debt. • Performance Pass – Existing loans that evidence strong payment history but document less than average strength, financial condition, record of earnings, or projected cash flows with which to service the debt. • Special Mention – Loans in this category are currently protected but show one or more potential weaknesses and risks which may inadequately protect collectability or borrower’s ability to meet repayment terms at some future date if the weakness or weaknesses are not monitored or remediated. 13 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) • Substandard – Loans that are inadequately protected by the repayment capacity of the borrower or the current sound net worth of the collateral pledged, if any. Loans in this category have well defined weaknesses and risks that jeopardize the repayment. They are characterized by the distinct possibility that some loss may be sustained if the deficiencies are not remediated. • Doubtful – Loans that have all the weaknesses of loans classified as “Substandard” with the added characteristics that the weaknesses make collection or liquidation in full, on the basis of current existing facts, conditions, and values, highly questionable and improbable. Loans within the top four categories above are considered pass rated, as commonly defined. Risk ratings are assigned as necessary to differentiate risk within the portfolio. Risk ratings are reviewed on an ongoing basis and revised to reflect changes in the borrowers’ financial condition and outlook, debt service coverage capability, repayment performance, collateral value and coverage as well as other considerations. The following tables present credit risk ratings by loan segment as of March 31, 2024 and December 31, 2023: March 31, 2024 Mortgage Loans Nonmortgage Loans Construction Total 1-4 Family Multifamily Nonresidential and Land Business Consumer Loans (in thousands) Risk Rating: Pass $ 480,635 $ 540,088 $ 324,319 $ 602,489 $ 26,434 $ 6,741 $ 1,980,706 Special mention 1,855 — 2,517 — 230 — 4,602 Substandard 7,683 5,737 514 6,176 — — 20,110 Total $ 490,173 $ 545,825 $ 327,350 $ 608,665 $ 26,664 $ 6,741 $ 2,005,418 December 31, 2023 Mortgage Loans Nonmortgage Loans Construction Total 1-4 Family Multifamily Nonresidential and Land Business Consumer Loans (in thousands) Risk Rating: Pass $ 485,747 $ 546,471 $ 339,726 $ 497,266 $ 19,759 $ 8,966 $ 1,897,935 Special mention 2,150 1,109 2,527 — — — 5,786 Substandard 8,103 2,979 90 6,659 20 — 17,851 Total $ 496,000 $ 550,559 $ 342,343 $ 503,925 $ 19,779 $ 8,966 $ 1,921,572 An aging analysis of loans, as of March 31, 2024 and December 31, 2023, is as follows: March 31, 2024 30-59 60-89 90 Days 90 Days Days Days or More Nonaccrual or More Current Past Due Past Due Past Due Total Loans Accruing (in thousands) Mortgage loans: 1-4 Family residential Investor-Owned $ 338,650 $ — $ 281 $ 400 $ 339,331 $ 400 $ — Owner-Occupied 148,969 — — 1,873 150,842 1,873 — Multifamily residential 540,088 — 1,639 4,098 545,825 4,098 — Nonresidential properties 324,392 2,517 — 441 327,350 441 — Construction and land 602,488 — — 6,177 608,665 6,177 — Nonmortgage loans: Business 26,005 274 9 376 26,664 146 230 Consumer 5,983 364 394 — 6,741 — — Total $ 1,986,575 $ 3,155 $ 2,323 $ 13,365 $ 2,005,418 $ 13,135 $ 230 14 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) December 31, 2023 30-59 60-89 90 Days 90 Days Days Days or More Nonaccrual or More Current Past Due Past Due Past Due Total Loans Accruing (in thousands) Mortgage loans: 1-4 Family residential Investor-Owned $ 342,896 $ — $ — $ 793 $ 343,689 $ 793 $ — Owner-Occupied 150,181 — — 2,130 152,311 2,130 — Multifamily residential 546,471 1,109 — 2,979 550,559 2,979 — Nonresidential properties 342,343 — — — 342,343 — — Construction and land 497,266 — — 6,659 503,925 6,659 — Nonmortgage loans: Business 19,240 366 8 165 19,779 165 — Consumer 7,423 536 1,007 — 8,966 — — Total $ 1,905,820 $ 2,011 $ 1,015 $ 12,726 $ 1,921,572 $ 12,726 $ — The following schedules detail the composition of the allowance for credit losses on loans and the related recorded investment in loans as of and for the three months ended March 31, 2024 and 2023, and as of and for the year ended December 31, 2023: For the Three Months Ended March 31, 2024 Mortgage Loans Nonmortgage Loans Total 1-4 Family Investor Owned 1-4 Family Owner Occupied Multifamily Nonresidential Construction and Land Business Consumer For the Period (in thousands) Allowance for Credit Losses: Balance, beginning of period $ 4,415 $ 2,012 $ 4,365 $ 3,176 $ 4,807 $ 531 $ 6,848 $ 26,154 Provision (benefit) charged to expense ( 158 ) ( 49 ) ( 151 ) ( 940 ) 1,596 82 ( 635 ) ( 255 ) Charge-offs — — — — — ( 52 ) ( 1,302 ) ( 1,354 ) Recoveries — — — — — — 119 119 Balance, end of period $ 4,257 $ 1,963 $ 4,214 $ 2,236 $ 6,403 $ 561 $ 5,030 $ 24,664 Ending balance: individually evaluated for impairment $ — $ 75 $ — $ — $ — $ 142 $ — $ 217 Ending balance: collectively evaluated for impairment 4,257 1,888 4,214 2,236 6,403 419 5,030 24,447 Total $ 4,257 $ 1,963 $ 4,214 $ 2,236 $ 6,403 $ 561 $ 5,030 $ 24,664 Loans: Ending balance: individually evaluated for impairment $ 399 $ 1,874 $ 4,098 $ 441 $ 6,177 $ 146 $ — $ 13,135 Ending balance: collectively evaluated for impairment 338,932 148,968 541,727 326,909 602,488 26,518 6,741 1,992,283 Total $ 339,331 $ 150,842 $ 545,825 $ 327,350 $ 608,665 $ 26,664 $ 6,741 $ 2,005,418 15 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) For the Three Months Ended March 31, 2023 Mortgage Loans Nonmortgage Loans Total 1-4 Family Investor Owned 1-4 Family Owner Occupied Multifamily Nonresidential Construction and Land Business Consumer For the Period (in thousands) Allowance for loan losses: Balance, beginning of period $ 3,863 $ 1,723 $ 8,021 $ 2,724 $ 2,683 $ 120 $ 15,458 $ 34,592 Provision (benefit) charged to expense 135 182 455 16 750 1 ( 1,860 ) ( 321 ) Impact of CECL adoption 766 146 ( 3,962 ) 578 ( 911 ) 236 57 ( 3,090 ) Charge-offs — — — — — — ( 2,569 ) ( 2,569 ) Recoveries — — — — — — 363 363 Balance, end of period $ 4,764 $ 2,051 $ 4,514 $ 3,318 $ 2,522 $ 357 $ 11,449 $ 28,975 Ending balance: individually evaluated for impairment $ 60 $ 100 $ — $ 37 $ — $ 40 $ — $ 237 Ending balance: collectively evaluated for impairment 4,704 1,951 4,514 3,281 2,522 317 11,449 28,738 Total $ 4,764 $ 2,051 $ 4,514 $ 3,318 $ 2,522 $ 357 $ 11,449 $ 28,975 Loans: Ending balance: individually evaluated for impairment $ 5,234 $ 5,576 $ 1,439 $ 792 $ 11,905 $ 40 $ — $ 24,986 Ending balance: collectively evaluated for impairment 349,325 143,905 551,991 313,768 223,252 19,850 14,227 1,616,318 Total $ 354,559 $ 149,481 $ 553,430 $ 314,560 $ 235,157 $ 19,890 $ 14,227 $ 1,641,304 For the Year Ended December 31, 2023 Mortgage Loans Nonmortgage Loans Total 1-4 Family Investor Owned 1-4 Family Owner Occupied Multifamily Nonresidential Construction and Land Business Consumer For the Period (in thousands) Allowance for loan losses: Balance, beginning of year $ 3,863 $ 1,723 $ 8,021 $ 2,724 $ 2,683 $ 120 $ 15,458 $ 34,592 Provision (benefit) charged to expense ( 214 ) 143 306 ( 126 ) 3,035 235 ( 2,142 ) 1,237 Impact of CECL adoption 766 146 ( 3,962 ) 578 ( 911 ) 236 57 ( 3,090 ) Charge-offs — — — — — ( 63 ) ( 7,227 ) ( 7,290 ) Recoveries — — — — — 3 702 705 Balance, end of year $ 4,415 $ 2,012 $ 4,365 $ 3,176 $ 4,807 $ 531 $ 6,848 $ 26,154 Ending balance: individually evaluated for impairment $ — $ 72 $ — $ — $ — $ 161 $ — $ 233 Ending balance: collectively evaluated for impairment 4,415 1,940 4,365 3,176 4,807 370 6,848 25,921 Total $ 4,415 $ 2,012 $ 4,365 $ 3,176 $ 4,807 $ 531 $ 6,848 $ 26,154 Loans: Ending balance: individually evaluated for impairment $ 793 $ 2,130 $ 2,979 $ — $ 6,659 $ 165 $ — $ 12,726 Ending balance: collectively evaluated for impairment 342,896 150,181 547,580 342,343 497,266 19,614 8,966 1,908,846 Total $ 343,689 $ 152,311 $ 550,559 $ 342,343 $ 503,925 $ 19,779 $ 8,966 $ 1,921,572 Loans are considered impaired when current information and events indicate all amounts due may not be collectable according to the contractual terms of the related loan agreements. Impaired loans are identified by applying normal loan review procedures in accordance with the allowance for credit losses methodology. Management periodically assesses loans to determine whether impairment exists. Any loan that is, or will potentially be, no longer performing in accordance with the terms of the original loan contract is evaluated to determine impairment. 16 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The following information relates to impaired loans as of and for the three months ended March 31, 2024 and 2023 and as of and for the year ended December 31, 2023: Unpaid Contractual Recorded Investment Recorded Investment Total Average Interest Income Principal With No With Recorded Related Recorded Recognized As of and For the Three Months Ended March 31, 2024 Balance Allowance Allowance Investment Allowance Investment on a Cash Basis (in thousands) Mortgage loans: 1-4 Family residential $ 2,256 $ 1,825 $ 448 $ 2,273 $ 75 $ 2,598 $ 4 Multifamily residential 4,069 4,098 — 4,098 — 3,539 35 Nonresidential properties 441 441 — 441 — 221 — Construction and land 6,177 6,177 — 6,177 — 6,418 987 Nonmortgage loans: Business 146 — 146 146 142 156 — Consumer — — — — — — — Total $ 13,089 $ 12,541 $ 594 $ 13,135 $ 217 $ 12,932 $ 1,026 Unpaid Contractual Recorded Investment Recorded Investment Total Average Interest Income Principal With No With Recorded Related Recorded Recognized As of and For the Three Months Ended March 31, 2023 Balance Allowance Allowance Investment Allowance Investment on a Cash Basis (in thousands) Mortgage loans: 1-4 Family residential $ 11,212 $ 9,452 $ 1,358 $ 10,810 $ 160 $ 10,197 $ 83 Multifamily residential 1,437 1,439 — 1,439 — 720 — Nonresidential properties 833 452 340 792 37 796 7 Construction and land 11,905 11,905 — 11,905 — 9,736 — Nonmortgage loans: Business 40 — 40 40 40 20 — Consumer — — — — — — — Total $ 25,427 $ 23,248 $ 1,738 $ 24,986 $ 237 $ 21,469 $ 90 Unpaid Contractual Recorded Investment Recorded Investment Total Average Interest Income Principal With No With Recorded Related Recorded Recognized As of and for the Year Ended December 31, 2023 Balance Allowance Allowance Investment Allowance Investment on a Cash Basis (in thousands) Mortgage loans: 1-4 Family residential $ 2,906 $ 2,475 $ 448 $ 2,923 $ 72 $ 4,812 $ 82 Multifamily residential 2,966 2,979 — 2,979 — 1,463 151 Nonresidential properties — — — — — 198 — Construction and land 6,650 6,659 — 6,659 — 8,211 — Nonmortgage loans: Business 165 — 165 165 161 104 — Consumer — — — — — — — Total $ 12,687 $ 12,113 $ 613 $ 12,726 $ 233 $ 14,788 $ 233 The Company adopted Accounting Standards Update (“ASU”) 2022-02 on January 1, 2023 . Since adoption, the Company has not modified any loans with borrowers experiencing financial difficulty. These modifications may include a reduction in interest rate, an extension in term, principal forgiveness and/or other than insignificant payment delay. At March 31, 2024 and December 31, 2023, there were no loans with modifications to borrowers experiencing financial difficulty. Prior to the adoption of ASU 2022-02 on January 1, 2023, the Company classified certain loans as troubled debt restructuring (“TDR”) loans when credit terms to a borrower in financial difficulty were modified, in accordance with ASC 310-40. With the adoption of ASU 17 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) 2022-02 as of January 1, 2023, the Company has ceased to recognize or measure for new TDRs but those existing at December 31, 2022 will remain until settled. At March 31, 2024 and December 31, 2023, there were 20 and 21 troubled debt restructured loans totaling $ 5.6 million and $ 5.9 million of which $ 4.9 million and $ 5.2 million are on accrual status, respectively. There were no commitments to lend additional funds to borrowers whose loans have been modified in a troubled debt restructuring. Write-off and write-down of Microloans In 2020, the Company entered into a business arrangement with the FinTech startup company Grain. Grain’s product is a mobile application geared to the underbanked, minorities and new generations entering the financial services market. In employing this mobile application, the Bank uses non-traditional underwriting methodologies to provide revolving credit to borrowers who otherwise may gravitate to using alternative non-bank lenders. 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. 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. The microloans put back to Grain were accounted for as an “other asset,” specifically referred to herein as the “Grain Receivable.” On November 1, 2023, Ponce Financial Group, Inc. and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining Grain loans. In order to facilitate the transfer of the servicing responsibilities to the Bank, Grain granted the Bank a perpetual right and license to use the Grain software, including the source code to service the remaining loans. At March 31, 2024 , the Bank had 11,939 Grain microloans outstanding, net of put backs, with an aggregate balance totaling $ 5.7 million and which were performing, in management’s opinion, comparably to similar portfolios, offset by an $ 4.9 million allowance for credit losses, resulting in $ 0.9 million in Grain microloans. Since the beginning of the Bank’s agreement with Grain and through March 31, 2024 , 45,322 microloans amounting to $ 24.1 million have been deemed to be fraudulent and put back to Grain. The Company has written-down a total of $ 15.4 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. 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. As of March 31, 2024 , the Company’s total exposure to Grain was $ 0.9 million of the remaining microloans, net of allowance for credit losses, excluding $ 1.6 million of security deposits by Grain borrowers. The $ 0.1 million of recoveries for the three months ended March 31, 2024 and the $ 0.9 million recoveries for the three months ended March 31, 2023 related to Grain is included in non-interest expense in the accompanying Consolidated Statements of Operations. Grain Technology, Inc. ("Grain") Total Exposure as of March 31, 2024 (in thousands) Receivable from Grain Microloans originated - put back to Grain (inception-to-March 31, 2024) $ 24,051 Write-downs, net of recoveries (inception-to-date as of March 31, 2024) ( 15,406 ) Cash receipts from Grain (inception-to-March 31, 2024) ( 6,819 ) Grant/reserve (inception-to-March 31, 2024) ( 1,826 ) Net receivable as of March 31, 2024 $ — Microloan receivables from Grain borrowers Grain originated loans receivable as of March 31, 2024 $ 5,731 Allowance for credit losses as of March 31, 2024 (1) ( 4,868 ) Microloans, net of allowance for credit losses as of March 31, 2024 $ 863 Investments Investment in Grain $ 1,000 Investment in Grain write-off ( 1,000 ) Investment in Grain as of March 31, 2024 $ — Total exposure to Grain as of March 31, 2024 (2) $ 863 18 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (1) Excludes $ 1.6 million of security deposits by Grain originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions. (2) Total remaining exposure to Grain borrowers. These loans are now serviced by the Bank. Off-Balance Sheet Credit Losses Also included within the scope of the CECL standard are off-balance sheet loan commitments, which includes the unfunded portion of committed lines of credit and construction loans. The Company estimates expected credit losses over the contractual period in which the company is exposed to credit risk through a contractual obligation to extend credit, unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on off-balance sheet exposures is adjusted as a provision for credit loss expense. The Company uses similar assumptions and risk factors that are developed for collectively evaluated financing receivables. This estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments to be funded over its estimated life. At March 31, 2024 and December 31, 2023, the allowance for off-balance sheet credit losses was $ 3.8 million and $ 3.6 million, respectively, which is included in the "Other liabilities" on the Consolidated Statements of Financial Condition. During the three months ended March 31, 2024 and 2023, the Company had $ 0.2 million and $ 1.0 million, respectively, in credit loss provision for off-balance-sheet items, which are included in "Provision for contingencies" on the Consolidated Statements of Operations. The following table presents the activity in the allowance for off-balance-sheet credit losses: For the Three Months Ended For the Year Ended March 31, 2024 December 31, 2023 Allowance for credit losses on unfunded commitment at beginning of period $ 3,613 $ 354 Impact on CECL adoption — 948 Provision for credit losses 164 2,311 Allowance for credit losses on unfunded commitment at end of period $ 3,777 $ 3,613 Note 6. Leases The Company has 16 operating leases for branches (including headquarters) and office spaces and five operating leases for equipment. Our leases have remaining lease terms ranging from less than one year to approximately 14.8 years, none of which has a renewal option reasonably certain of exercise, which has been reflected in the Company’s calculation of lease term. Certain leases have escalation clauses for operating expenses and real estate taxes. The Company’s non-cancelable operating lease agreements expire through 2038 . Supplemental balance sheet information related to leases was as follows: March 31, December 31, 2024 2023 (Dollars in thousands) Operating lease ROU assets $ 31,021 $ 31,272 Operating lease liabilities 32,486 32,684 Weighted-average remaining lease term-operating leases 12.4 years 12.6 years Weighted average discount rate-operating leases 4.9 % 4.9 % 19 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The components of lease expense and cash flow information related to leases were as follows: For the Three Months Ended March 31, 2024 2023 (Dollars in thousands) Lease Cost Operating lease cost Occupancy and equipment $ 1,026 $ 1,015 Operating lease cost Other operating expenses 3 4 Short-term lease cost Other operating expenses 5 6 Variable lease cost Occupancy and equipment 39 31 Total lease cost $ 1,073 $ 1,056 The Company’s minimum annual rental payments under the terms of the leases are as follows at March 31, 2024: Minimum Rental Years ended December 31: (in thousands) Remainder of 2024 $ 2,912 2025 3,818 2026 3,668 2027 3,537 2028 3,594 Thereafter 25,474 Total Minimum payments required 43,003 Less: implied interest 10,517 Present value of lease liabilities $ 32,486 Note 7. Deposits Deposits at March 31, 2024 and December 31, 2023 are summarized as follows: March 31, December 31, 2024 2023 (in thousands) Demand (1) $ 191,541 $ 185,151 Interest-bearing deposits: NOW/IOLA accounts (1) 73,202 77,909 Money market accounts 482,344 432,735 Reciprocal deposits 97,718 96,860 Savings accounts 112,713 114,139 Total NOW, money market, reciprocal and savings 765,977 721,643 Certificates of deposit of $250K or more 146,296 132,153 Brokered certificates of deposits (2) 94,689 98,729 Listing service deposits (2) 12,688 14,433 Certificates of deposit less than $250K 374,593 355,511 Total certificates of deposit 628,266 600,826 Total interest-bearing deposits 1,394,243 1,322,469 Total deposits $ 1,585,784 $ 1,507,620 20 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) (1) A s of December 31, 2023, $ 58.2 million were reclassified from demand to NOW/IOLA accounts. (2) A s of March 31, 2024 and December 31, 2023, there were $ 1.5 million and $ 0.3 million, respectively, in individual listing service deposits amounting to $ 250,000 or more. All brokered certificates of deposit individually amounted to less than $ 250,000 . At March 31, 2024 scheduled maturities of certificates of deposit were as follows: (in thousands) 2024 $ 406,857 2025 127,741 2026 43,472 2027 47,284 2028 2,245 Thereafter 667 $ 628,266 Overdrawn deposit accounts that have been reclassified to loans amounted to $ 0.1 million as of both March 31, 2024 and December 31, 2023 . Note 8. Borrowings The Bank had outstanding term advances from the FHLBNY and the FRBNY at March 31, 2024 and December 31, 2023 as indicated below. FHLBNY Advances : As a member of the FHLBNY, the Bank has the ability to borrow from the FHLBNY based on a certain percentage of the value of the Bank's qualified collateral, as defined in the FHLBNY Statement of Credit Policy, at the time of the borrowing. In accordance with an agreement with the FHLBNY, the qualified collateral must be free and clear of liens, pledges and encumbrances. The Bank had $ 480.4 million and $ 380.4 million of outstanding term advances from the FHLBNY at March 31, 2024 and December 31, 2023 , respectively. The Bank had no overnight line of credit advance from the FHLBNY at March 31, 2024 and December 31, 2023. FRBNY Advances : The Bank also has additional borrowing capacity under a secured line with the FRBNY secured by 36.7 % of our total securities portfolio with amortized cost of $ 216.8 million at March 31, 2024. The Bank had $ 200.0 million and $ 304.0 million of outstanding term advances from the FRBNY at March 31, 2024 and December 31, 2023, respectively. Borrowed funds at March 31, 2024 and December 31, 2023 consist of the following and are summarized by maturity and call date below: March 31, December 31, 2024 2023 Scheduled Maturity Redeemable at Call Date Weighted Average Rate Scheduled Maturity Redeemable at Call Date Weighted Average Rate (Dollars in thousands) Term advances ending: 2024 $ 109,321 $ 109,321 5.15 % $ 363,321 $ 363,321 4.55 % 2025 250,000 250,000 4.69 50,000 50,000 4.41 2026 50,000 50,000 4.83 — — — 2027 212,000 212,000 3.44 212,000 212,000 3.44 2028 9,100 9,100 3.84 9,100 9,100 3.84 Thereafter 50,000 50,000 3.35 50,000 50,000 3.35 $ 680,421 $ 680,421 4.28 % $ 684,421 $ 684,421 4.10 % Interest expense on term advances totaled $ 7.9 million and $ 3.9 million for the three months ended March 31, 2024 and 2023 , respectively. Note 9. Derivatives and Hedging During 2023, the Company entered into two derivative financial instruments contracts to enhance its ability to manage interest rate risk that exist as part of its ongoing operations. The Company manages these risks as part of its asset and liability management process. The 21 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Company utilized derivative financial instruments to accommodate the business needs and to hedge the exposure that this creates for the Company. All derivatives are recognized as either assets or liabilities on the balance sheet and are measured at fair value. The Company does not use derivative financial instruments for trading purposes. Interest Rate Swaps The Bank is a party to two interest rate swap transactions designated as fair value hedges. One interest rate swap is for a period of two years effective October 12, 2023 and terminates on November 1, 2025 with a notional amount of $ 150.0 million. The Bank will pay a fixed rate of interest of 4.885 % and receive the Secured Overnight Financing Rate ("SOFR") rate. The other interest rate swap is for a period of three years effective October 12, 2023 and terminates on November 1, 2026 with a notional amount of $ 100.0 million. The Bank will pay a fixed rate of interest of 4.62 % and receive the SOFR rate. The tables present the notional amount and fair value of derivatives designated as hedging instruments, as well as their location on the Consolidated Statements of Financial Condition. Fair Value Notional Loans Receivable Other Liabilities (in thousands) As of March 31, 2024 Derivatives Designated as Hedging Instruments Interest rate swap contracts $ 250,000 $ 1,496 $ 1,496 Total Derivatives $ 250,000 $ 1,496 $ 1,496 Fair Value Notional Loans Receivable Other Liabilities (in thousands) As of December 31, 2023 Derivatives Designated as Hedging Instruments Interest rate swap contracts $ 250,000 $ 4,435 $ 4,435 Total Derivatives $ 250,000 $ 4,435 $ 4,435 Note 10. Earnings Per Share The following table presents a reconciliation of the number of shares used in the calculation of basic and diluted earnings per common share: For the Three Months Ended March 31, 2024 2023 (Dollars in thousands except share data) Net income $ 2,414 $ 331 Common shares outstanding for basic EPS: Weighted average common shares outstanding 23,788,856 24,862,118 Less: Weighted average unallocated Employee Stock Ownership Plan (ESOP) shares 1,435,364 1,569,105 Basic weighted average common shares outstanding 22,353,492 23,293,013 Basic earnings per common share $ 0.11 $ 0.01 Potential dilutive common shares: Add: Dilutive effect of restricted stock awards and stock options 13,236 31,519 Diluted weighted average common shares outstanding 22,366,728 23,324,532 Diluted earnings per common share $ 0.11 $ 0.01 22 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note 11. Commitments, Contingencies and Credit Risk Financial Instruments With Off-Balance-Sheet Risk : In the normal course of business, financial instruments with off-balance-sheet risk may be used to meet the financing needs of customers. These financial instruments include commitments to extend credit and letters of credit. These instruments involve, to varying degrees, elements of credit risk and interest rate risk in excess of the amounts recognized on the Consolidated Statements of Financial Condition. The contractual amounts of these instruments reflect the extent of involvement in particular classes of financial instruments. The contractual amounts of commitments to extend credit represent the amounts of potential accounting loss should the contract be fully drawn upon, the customer default, and the value of any existing collateral become worthless. The same credit policies are used in making commitments and contractual obligations as for on-balance-sheet instruments. Financial instruments whose contractual amounts represent credit risk at March 31, 2024 and December 31, 2023 are as follows: March 31, December 31, 2024 2023 (in thousands) Commitments to grant mortgage loans $ 540,823 $ 529,768 Unfunded commitments under lines of credit 64,807 61,739 $ 605,630 $ 591,507 Commitments to Grant Mortgage Loans : Commitments to grant mortgage loans are agreements to lend to a customer as long as all terms and conditions are met as established in the contract. Commitments generally have fixed expiration dates or other termination clauses, and may require payment of a fee by the borrower. Since some of the commitments are expected to expire without being drawn upon, the total commitment amounts do not necessarily represent future cash requirements. Each customer's creditworthiness is evaluated on a case-by-case basis. The amount of collateral obtained, if deemed necessary upon extension of credit, is based on management's credit evaluation of the counterparty. Collateral held varies, but may include accounts receivable, inventory, property and equipment, residential real estate and income-producing commercial properties. Material losses are not anticipated as a result of these transactions. Commitments to Sell Loans at Lock-in Rates: In order to assure itself of a marketplace to sell its loans, The Bank has agreements with investors who will commit to purchase loans at locked-in rates. The Bank has off-balance sheet market risk to the extent that the Bank does not obtain matching commitments from these investors to purchase the loans. This will expose the Bank to the lower of cost or market valuation environment. Repurchases, Indemnifications and Premium Recaptures : Loans sold by the Bank under investor programs are subject to repurchase or indemnification if they fail to meet the origination criteria of those programs. In addition, loans sold to investors are also subject to repurchase or indemnifications if the loan is two or three months delinquent during a set period which usually varies from six months to a year after the loan is sold. There are no open repurchase or indemnification requests for loans sold as a correspondent lender or where the Company acted as a broker in the transaction as of March 31, 2024. Unfunded Commitments Under Lines of Credit : Unfunded commitments under commercial lines of credit, revolving credit lines and overdraft protection agreements are commitments for possible future extension of credit to existing customers. These lines of credit are uncollateralized and usually contain a specified maturity date and, ultimately, may not be drawn upon to the total extent to which the Company is committed. Unfunded Commitments with Bamboo : 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 19.84 % of total issued and outstanding Membership Interest in Bamboo for a purchase price of $ 2.5 million. During 2023, the Company made additional contributions for a total of $ 1.2 million. During the first quarter of 2024, the Company made two additional contributions for a total of $ 0.5 million and then made an additional payment of $ 0.2 million in April of 2024 for a total investment in Bamboo of $ 4.4 million. With over a decade processing payments in Latin America, Bamboo has a diverse network connects Latin American local payment processing to global companies as well as domestic solutions to locally based organizations. Unfunded Commitments with Oaktree : In December of 2021, the Bank committed to invest $ 5.0 million in Oaktree SBIC Fund, L.P. ("Oaktree"). As of March 31, 2024 , the total unfunded commitment was $ 2.4 million. Unfunded Commitments with Silvergate : In April of 2022, the Company committed to invest $ 5.2 million in EJF Silvergate Ventures Fund LP ("Silvergate"). As of March 31, 2024 , the total unfunded commitment was $ 2.3 million. 23 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Letters of Credit : Letters of credit are conditional commitments issued to guarantee the performance of a customer to a third party. These guarantees are primarily issued to support public and private borrowing arrangements. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loan facilities to customers. Letters of credit are largely cash secured. Concentration by Geographic Location : Loans, commitments to extend credit and letters of credit have been granted to customers who are located primarily in the New York City metropolitan area. Generally, such loans most often are secured by residential properties. The loans are expected to be repaid from the borrowers' cash flows. Legal Matters : The Company is involved in various legal proceedings which have arisen in the normal course of business. Management believes that resolution of these matters will not have a material effect on the Company’s financial condition or results of operations. Note 12. Fair Value The following fair value hierarchy is used based on the lowest level of input significant to the fair value measurement. There are three levels of inputs that may be used to measure fair values: Level 1 – Quoted prices (unadjusted) for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date. Level 2 – Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data. Level 3 – Significant unobservable inputs that reflect a company’s own assumptions about the assumptions that market participants would use in pricing an asset or liability. The Company used the following methods and significant assumptions to estimate fair value: Cash and Cash Equivalents, Placements with Banks, Accrued Interest Receivable, Advance Payments by Borrowers for Taxes and Insurance, and Accrued Interest Payable : The carrying amount is a reasonable estimate of fair value. These assets and liabilities are not recorded at fair value on a recurring basis. Available-for-Sale Securities : These financial instruments are recorded at fair value in the consolidated financial statements on a recurring basis. Where quoted prices are available in an active market, securities are classified within Level 1 of the valuation hierarchy. If quoted prices are not available, then fair values are estimated by using pricing models (e.g., matrix pricing) or quoted prices of securities with similar characteristics and are classified within Level 2 of the valuation hierarchy. Examples of such instruments include government agency bonds and mortgage-backed securities. Level 3 securities are securities for which significant unobservable inputs are utilized. There were no changes in valuation techniques used to measure similar assets during the period. FHLBNY Stock : The carrying value of FHLBNY stock approximates fair value since the Bank can redeem such stock with FHLBNY at cost. As a member of the FHLBNY, the Company is required to purchase this stock, which is carried at cost and classified as restricted equity securities. Loans Receivable : For variable rate loans, which reprice frequently and have no significant change in credit risk, carrying values are a reasonable estimate of fair values, adjusted for credit losses inherent in the portfolios. The fair value of fixed rate loans is estimated by discounting the future cash flows using estimated market rates at which similar loans would be made to borrowers with similar credit ratings and for the same remaining maturities, adjusted for credit losses inherent in the portfolios. Impaired loans are valued using a present value discounted cash flow method, or the fair value of the collateral. Loans are not recorded at fair value on a recurring basis. Loans Held for Sale : Loans held for sale, at fair value, consists of loans originated for sale by the Bank and accounted for under the fair value option. These assets are valued using stated investor pricing for substantially equivalent loans as Level 2. In determining fair value, such measurements are derived based on observable market data, including whole-loan transaction pricing and similar market transactions adjusted for portfolio composition, servicing value and market conditions. Loans held for sale by the Bank are carried at the lower of cost or fair value as determined by investor bid prices. Under the fair value option, management has elected, on an instrument-by-instrument basis, fair value for substantially all forms of mortgage loans originated for sale on a recurring basis. The fair value carrying amount of mortgages held for sale measured under the fair value option was $ 7.9 million and the aggregate unpaid principal amounted to $ 7.8 million. Other Real Estate Owned : Other real estate owned represents real estate acquired through foreclosure, and is recorded at fair value less estimated disposal costs on a nonrecurring basis. Fair value is based upon independent market prices, appraised values of the collateral or management's estimation of the value of the collateral. When the fair value of the collateral is based on an observable market price 24 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) or a current appraised value, the asset is classified as Level 2. When an appraised value is not available or management determines the fair value of the collateral is further impaired below the appraised value and there is no observable market price, the asset is classified as Level 3. Deposits : The fair values of demand deposits, savings, NOW and money market accounts equal their carrying amounts, which represent the amounts payable on demand at the reporting date. Fair values for fixed-term, fixed-rate certificates of deposit are estimated using a discounted cash flow calculation that applies market interest rates on certificates of deposit to a schedule of aggregated expected monthly maturities on such deposits. Deposits are not recorded at fair value on a recurring basis. FHLBNY Advances : The fair value of the advances is estimated using a discounted cash flow calculation that applies current market-based FHLBNY interest rates for advances of similar maturity to a schedule of maturities of such advances. These borrowings are not recorded at fair value on a recurring basis. Derivatives : The Company works directly with a third-party vendor to provide periodic valuations for its interest-rate risk-management agreements to determine fair value of its interest rate swaps executed for interest-rate risk management. The vendor utilizes standard valuation methodologies applicable to interest rate derivatives based on readily observable market data and are therefore considered Level 2 valuations. Off-Balance-Sheet Instruments : Fair values for off-balance-sheet instruments (lending commitments and standby letters of credit) are based on fees currently charged to enter into similar agreements, taking into account the remaining terms of the agreements and the counterparties' credit standing. Off-balance-sheet instruments are not recorded at fair value on a recurring basis. The following tables detail the assets that are carried at fair value and measured at fair value on a recurring basis as of March 31, 2024 and December 31, 2023, and indicate the level within the fair value hierarchy utilized to determine the fair value: March 31, 2024 Description Total Level 1 Level 2 Level 3 (in thousands) Available-for-Sale Securities, at fair value: U.S. Government Bonds $ 2,780 $ 2,780 $ — $ — Corporate bonds 23,520 — 23,520 — Mortgage-Backed Securities: Collateralized Mortgage Obligations 31,954 — 31,954 — FHLMC Certificates 8,479 — 8,479 — FNMA Certificates 49,210 — 49,210 — GNMA Certificates 101 — 101 — Mortgage Loans Held for Sale, at fair value 7,860 — 7,860 — Interest rate swap 1,496 — 1,496 — $ 125,400 $ 2,780 $ 122,620 $ — December 31, 2023 Description Total Level 1 Level 2 Level 3 (in thousands) Available-for-Sale Securities, at fair value: U.S. Government Bonds $ 2,784 $ 2,784 $ — $ — Corporate bonds 23,668 536 23,132 — Mortgage-Backed Securities: Collateralized Mortgage Obligations 33,148 — 33,148 — FHLMC Certificates 8,681 — 8,681 — FNMA Certificates 51,517 — 51,517 — GNMA Certificates 104 — 104 — Mortgage Loans Held for Sale, at fair value 9,980 — 9,980 — Interest rate swap 4,435 — 4,435 — $ 134,317 $ 3,320 $ 130,997 $ — Management’s assessment and classification of an investment within a level can change over time based upon maturity or liquidity of the investment and would be reflected at the beginning of the quarter in which the change occurred. 25 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) The following tables detail the assets carried at fair value and measured at fair value on a nonrecurring basis as of March 31, 2024 and December 31, 2023 and indicate the fair value hierarchy utilized to determine the fair value: March 31, 2024 Total Level 1 Level 2 Level 3 (in thousands) Impaired loans $ 13,135 $ — $ — $ 13,135 December 31, 2023 Total Level 1 Level 2 Level 3 (in thousands) Impaired loans $ 12,726 $ — $ — $ 12,726 Losses on assets carried at fair value on a nonrecurring basis were de minimis for the three months ended March 31, 2024 and 2023, respectively. As of March 31, 2024 and December 31, 2023, the carrying values and estimated fair values of the Company's financial instruments were as follows: Carrying Fair Value Measurements Amount Level 1 Level 2 Level 3 Total (in thousands) March 31, 2024 Financial assets: Cash and cash equivalents $ 134,724 $ 134,724 $ — $ — $ 134,724 Available-for-sale securities, at fair value 116,044 2,780 113,264 — 116,044 Held-to-maturity securities, at amortized cost, net 452,955 — 438,113 — 438,113 Placements with banks 249 — 249 — 249 Mortgage loans held for sale, at fair value 7,860 — 7,860 — 7,860 Loans receivable, net 1,981,428 — — 1,935,063 1,935,063 Accrued interest receivable 18,063 — 18,063 — 18,063 FHLBNY stock 23,892 23,892 — — 23,892 Interest rate swap 1,496 — 1,496 — 1,496 Financial liabilities: Deposits: Demand deposits 191,541 191,541 — — 191,541 Interest-bearing deposits 765,977 765,977 — — 765,977 Certificates of deposit 628,266 — 621,250 — 621,250 Advance payments by borrowers for taxes and insurance 13,245 — 13,245 — 13,245 Borrowings 680,421 — 667,493 — 667,493 Interest rate swap 1,496 — 1,496 — 1,496 Accrued interest payable 4,218 — 4,218 — 4,218 26 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Carrying Fair Value Measurements Amount Level 1 Level 2 Level 3 Total (in thousands) December 31, 2023 Financial assets: Cash and cash equivalents $ 139,190 $ 139,190 $ — $ — $ 139,190 Available-for-sale securities, at fair value 119,902 3,320 116,582 — 119,902 Held-to-maturity securities, at amortized cost 461,748 — 450,042 — 450,042 Placements with banks 249 — 249 — 249 Mortgage loans held for sale, at fair value 9,980 — 9,980 — 9,980 Loans receivable, net 1,895,886 — — 1,844,507 1,844,507 Accrued interest receivable 18,010 — 18,010 — 18,010 FHLBNY stock 19,377 19,377 — — 19,377 Interest rate swap 4,435 4,435 4,435 Financial liabilities: Deposits: Demand deposits (1) 185,151 185,151 — — 185,151 Interest-bearing deposits (1) 721,643 721,643 — — 721,643 Certificates of deposit 600,826 — 594,234 — 594,234 Advance payments by borrowers for taxes and insurance 10,778 — 10,778 — 10,778 Borrowings 684,421 — 674,155 — 674,155 Interest rate swap 4,435 — 4,435 — 4,435 Accrued interest payable 11,965 — 11,965 — 11,965 (1) A s of December 31, 2023, $ 58.2 million were reclassified from demand deposits to interest-bearing deposits. The Company recognizes transfers between levels of the valuation hierarchy at the end of the applicable reporting periods. There were no transfers of Level 3 assets in the fair value hierarchy at March 31, 2024 and December 31, 2023. Fair value for Level 3 securities was determined using a third-party pricing service with limited levels of activity and price transparency. Off-Balance-Sheet Instruments : Loan commitments on which the committed interest rate is less than the current market rate are insignificant at March 31, 2024 and December 31, 2023. The fair value information about financial instruments are disclosed, whether or not recognized in the consolidated statements of financial condition, for which it is practicable to estimate that value. Accordingly, the aggregate fair value amounts presented do not represent the underlying value of the Company. The estimated fair value amounts for 2024 and 2023 have been measured as of their respective period-ends and have not been reevaluated or updated for purposes of these consolidated financial statements subsequent to those respective dates. As such, the estimated fair values of these financial instruments subsequent to the respective reporting dates may be different than amounts reported at each period. The information presented should not be interpreted as an estimate of the fair value of the entire Company since a fair value calculation is only required for a limited portion of the Company's assets and liabilities. Due to the wide range of valuation techniques and the degree of subjectivity used in making the estimates, comparisons between the Company's disclosures and those of other banks may not be meaningful. Note 13. Regulatory Capital Requirements The Company and the Bank are subject to various regulatory capital requirements administered by the Federal Reserve Board, the OCC and the U.S. Department of Housing and Urban Development. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s operations and financial statements. Under the regulatory capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company must meet specific capital guidelines that involve quantitative measures of the Company's assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Company's capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors. Quantitative measures established by regulation require the maintenance of minimum amounts and ratios (set forth in the table below) of total risk-based and Tier 1 capital to risk-weighted assets (as defined), common equity Tier 1 capital (as defined), and Tier 1 capital 27 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) to adjusted total assets (as defined) adjusted total assets (as defined). As of March 31, 2024 and December 31, 2023, the applicable capital adequacy requirements specified below have been met. The below minimum capital requirements exclude the capital conservation buffer required to avoid limitations on capital distributions including dividend payments and certain discretionary bonus payments to executive officers. The applicable capital buffer for the Bank was 14.8 % at March 31, 2024 and 15.3 % at December 31, 2023. The most recent notification from the OCC categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Company and the Bank must maintain minimum total risk-based, common equity risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the table below. There were no conditions or events since then that have changed the Bank's category. The Company's and the Bank’s actual capital amounts and ratios as of March 31, 2024 and December 31, 2023 as compared to regulatory requirements are as follows: To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) March 31, 2024 Ponce Financial Group, Inc. Total Capital to Risk-Weighted Assets $ 537,748 24.47 % $ 175,777 8.00 % $ 219,721 10.00 % Tier 1 Capital to Risk-Weighted Assets 510,271 23.22 % 131,833 6.00 % 175,777 8.00 % Common Equity Tier 1 Capital Ratio 285,271 12.98 % 98,874 4.50 % 142,819 6.50 % Tier 1 Capital to Total Assets 510,271 17.59 % 116,020 4.00 % 145,025 5.00 % Ponce Bank Total Capital to Risk-Weighted Assets $ 497,240 22.79 % $ 174,565 8.00 % $ 218,206 10.00 % Tier 1 Capital to Risk-Weighted Assets 469,950 21.54 % 130,924 6.00 % 174,565 8.00 % Common Equity Tier 1 Capital Ratio 469,950 21.54 % 98,193 4.50 % 141,834 6.50 % Tier 1 Capital to Total Assets 469,950 16.26 % 115,642 4.00 % 144,552 5.00 % To Be Well Capitalized Under For Capital Prompt Corrective Actual Adequacy Purposes Action Provisions Amount Ratio Amount Ratio Amount Ratio (Dollars in thousands) December 31, 2023 Ponce Financial Group, Inc. Total Capital to Risk-Weighted Assets $ 533,513 25.06 % $ 170,302 8.00 % $ 212,878 10.00 % Tier 1 Capital to Risk-Weighted Assets 507,042 23.82 % 127,727 6.00 % 170,302 8.00 % Common Equity Tier 1 Capital Ratio 282,042 13.25 % 95,795 4.50 % 138,371 6.50 % Tier 1 Capital to Total Assets 507,042 19.71 % 102,911 4.00 % 128,639 5.00 % Ponce Bank Total Capital to Risk-Weighted Assets $ 492,622 23.30 % $ 169,153 8.00 % $ 211,441 10.00 % Tier 1 Capital to Risk-Weighted Assets 466,151 22.05 % 126,865 6.00 % 169,153 8.00 % Common Equity Tier 1 Capital Ratio 466,151 22.05 % 95,149 4.50 % 137,437 6.50 % Tier 1 Capital to Total Assets 466,151 17.49 % 106,591 4.00 % 133,239 5.00 % Ponce Bank, through its Mortgage World division, is subject to various net worth requirements in connection with lending agreements that Ponce Bank has entered with purchase facility lenders. Failure to maintain minimum capital requirements could result in the Bank’s Mortgage World division being unable to originate and service loans, and, therefore, could have a direct material effect on the Company’s consolidated financial statements. As of March 31, 2024 and December 31, 2023, the Bank was in compliance with the applicable minimum capital requirements specified above. 28 Table of Contents Ponce Financial Group, Inc. and Subsidiaries Notes to Consolidated Financial Statements (Unaudited) Note 14. Accumulated Other Comprehensive Loss The accumulated other comprehensive loss is as follows: March 31, 2024 December 31, 2023 Change March 31, 2024 (in thousands) Unrealized losses on available-for-sale securities, net $ ( 15,649 ) $ ( 941 ) $ ( 16,590 ) Total $ ( 15,649 ) $ ( 941 ) $ ( 16,590 ) December 31, 2023 December 31, 2022 Change December 31, 2023 (in thousands) Unrealized losses on available-for-sale securities, net $ ( 17,860 ) $ 2,211 $ ( 15,649 ) Total $ ( 17,860 ) $ 2,211 $ ( 15,649 ) Note 15. Transactions with Related Parties Directors, executive officers and non-executive officers of the Company have been customers of and have had transactions with the Bank, and it is expected that such persons will continue to have such transactions in the future. Aggregate loan transactions with related parties for the three months ended March 31, 2024 and 2023 were as follows: For the Three Months Ended March 31, 2024 2023 (in thousand) Beginning balance $ 8,810 $ 8,318 Originations 1,182 578 Payments ( 50 ) ( 65 ) Ending balance $ 9,942 $ 8,831 The Company held deposits in the amount of $ 8.8 million and $ 8.4 million from directors, executive officers and non-executive officers at March 31, 2024 and December 31, 2023 , respectively. 29 Table of Contents Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations. General Management’s discussion and analysis of the financial condition at March 31, 2024 and December 31, 2023, and results of operations for the three months ended March 31, 2024 and 2023, is intended to assist in understanding the financial condition and results of operations of Ponce Financial Group, Inc. (the “Company”). The information contained in this section should be read in conjunction with the unaudited financial statements and the notes thereto appearing in Part I, Item 1, of this quarterly report on Form 10-Q. Cautionary Note Regarding Forward-Looking Statements This quarterly report contains forward-looking statements, which can be identified by the use of words such as "estimate," "project," "intend," "anticipate," "assume," "plan," "seek," "expect," "will," "may," "should," "indicate," "would," "believe," "contemplate," "continue," "target" and words of similar meaning. These forward-looking statements include, but are not limited to: • statements of the Company’s goals, intentions and expectations; • statements regarding its business plans, prospects, growth and operating strategies; • statements regarding the quality of its loan and investment portfolios; and • estimates of the risks and future costs and benefits; These forward-looking statements are based on current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond the Company’s control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements: • the scope, duration and severity of rising interest rates, and its effects on our business and operations, our customers, including their ability to make timely payments on loans, our service providers, and on the economy and financial markets in general; • changes in consumer spending, borrowing and savings habits; • general economic conditions, either nationally or in the market areas, that are worse than expected; • the Company’s ability to manage market risk, credit risk and operational risk in the current economic environment; • changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses; • the ability to access cost-effective funding; • fluctuations in real estate values and real estate market conditions; • demand for loans and deposits in the market area; • the Company’s ability to implement and change its business strategies; • competition among depository and other financial institutions; • inflation and changes in the interest rate environment that reduce the Company’s margins and yields, its mortgage banking revenues, the fair value of financial instruments or the level of loan originations, or increase the level of defaults, losses and prepayments on loans the Company have made and make; • adverse changes in the securities or secondary mortgage markets; • changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; • adverse changes related to the businesses of our partners, including Grain Technology, Inc. (“Grain”) specifically (as defined herein); • changes in the quality or composition of the Company’s loan or investment portfolios; • technological changes that may be more difficult or expensive than expected; • the inability of third party providers to perform as expected; 30 Table of Contents • the Company’s ability to enter new markets successfully and capitalize on growth opportunities; • the Company’s ability to successfully integrate into its operations, any assets, liabilities, customers, systems and management personnel the Company may acquire and management’s ability to realize related revenue synergies and cost savings within expected time frames, and any goodwill charges related thereto; • changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board, the Securities and Exchange Commission or the Public Company Accounting Oversight Board; • the Company’s ability to retain key employees; • the Company’s compensation expense associated with equity allocated or awarded to its employees; and • changes in the financial condition, results of operations or future prospects of issuers of securities that the Company may own. Additional factors that may affect the Company’s results are discussed in our Annual Report on Form 10-K for the year ended December 31, 2023 under the heading “Risk Factors” filed with the Securities and Exchange Commission (“SEC”) on March 19, 2024. Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements. The Company is under no duty to and does not assume any obligation to update any forward-looking statements after the date they were made, whether as a result of new information, future events or otherwise. Federal Economic Relief Funds To Aid Lending Emergency Capital Investment Program On June 7, 2022, Ponce Financial Group, Inc. (the “Company”), the holding company for Ponce Bank,‎ 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 initial dividend rate is zero percent for the first two years after issuance, and thereafter the floor dividend rate is 0.50% and the ceiling dividend rate is 2.00%. After 10 years of issuance, the perpetual dividend rate in effect, will be determined based on said floor and ceiling. 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 Community Development Financial Institution (“CDFI”) or ‎Minority Depository Institution (“MDI”), of which Ponce Bank is both. The ECIP is intended to incentivize CDFIs and MDIs to provide loans, grants, ‎and forbearance to small businesses, minority-owned businesses, and consumers in low-income and underserved communities that may have been ‎disproportionately impacted by the economic effects of the COVID-19 pandemic. 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. CDFI Equitable Recovery Program On September 26, 2023, the Bank received a $3.7 million grant from the U.S. Treasury as part of the CDFI Equitable Recovery Program ("ERP") which aims to help CDFI's further their mission of helping low and low-to-moderate income communities recover from the impact of the COVID-19 pandemic. Bank Enterprise Award Program On November 6, 2023, the Bank received a $0.5 million grant as part of the Bank Enterprise Award Program from the CDFI. Awards under the Bank Enterprise Award Program are subject to the program terms and must be used for qualified activities, which include providing loans, investments and financial services to residents and businesses in distressed communities. 31 Table of Contents Derivatives and Hedging During 2023, the Company entered into two derivative financial instruments contracts to enhance its ability to manage interest rate risk that exist as part of its ongoing operations. The Company manages these risks as part of its asset and liability management process. The Company utilized derivative financial instruments to accommodate the business needs and to hedge the exposure that this creates for the Company. The Company does not use derivative financial instruments for trading purposes. Interest Rate Swaps The Bank is a party to two interest rate swap transactions. One interest rate swap is for a period of two years effective October 12, 2023 and terminates on November 1, 2025 with a notional amount of $150.0 million. The Bank will pay a fixed rate of interest of 4.885% and receive the Secured Overnight Financing Rate ("SOFR") rate. The other interest rate swap is for a period of three years effective October 12, 2023 and terminates on November 1, 2026 with a notional amount of $100.0 million. The Bank will pay a fixed rate of interest of 4.62% and receive the SOFR rate. Critical Accounting Policies Accounting estimates are necessary in the application of certain accounting policies and procedures and are particularly susceptible to significant change. Critical accounting policies are defined as those involving significant judgments and assumptions by management and that could have a material impact on the carrying value of certain assets, liabilities or on income under different assumptions or conditions. 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. Subsequent recoveries, if any, are credited to the allowance. If our loss rate factor was to increase 10 basis points, our reserve would increase by approximately $2.0 million. Likewise, if our loss rate factor was to decrease 10 basis points, our reserve would decrease by approximately $2.0 million. The discussion and analysis of the financial condition and results of operations are based on the Company’s consolidated financial statements, which are prepared in conformity with GAAP. The preparation of these consolidated financial statements requires management to make estimates and assumptions affecting the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities, and the reported amounts of income and expenses. The estimates and assumptions used are based on historical experience and various other factors and are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions, resulting in a change that could have a material impact on the carrying value of our assets and liabilities and our results of operations. See Note 1, “Nature of Business and Summary of Significant Accounting Policies,” to the accompanying Financial Statements for a discussion of significant accounting policies. Factors Affecting the Comparability of Results Write-off and Write-Down. In 2020, the Company entered into a business arrangement with the FinTech startup company Grain. Grain’s product is a mobile application geared to the underbanked, minorities and new generations entering the financial services market. In employing this mobile application, the Bank uses non-traditional underwriting methodologies to provide revolving credit to borrowers who otherwise may gravitate to using alternative non-bank lenders. 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. 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. The microloans put back to Grain were accounted for as an “other asset,” specifically referred to herein as the “Grain Receivable.” Grain was victimized by cyber fraud using synthetic and other forms of fraudulent identifications, a phenomenon that has become prevalent with Fintechs. Pursuant to the terms of its arrangement with Grain, loans found to be fraudulent were put back to Grain and the Company discontinued originating new loans with Grain after May 31, 2022. On November 1, 2023, the Company and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining Grain loans. In order to facilitate the transfer of the servicing responsibilities to the Bank, Grain granted the Bank a perpetual right and license to use the Grain software, including the source code to service the ‎remaining loans. 32 Table of Contents On November 1, 2023, Ponce Financial Group, Inc. and Grain signed a Perpetual Software License Agreement in order for the Bank to assume the servicing of the remaining Grain loans. In order to facilitate the transfer of the servicing responsibilities to the Bank, Grain granted the Bank a perpetual right and license to use the Grain software, including the source code to service the remaining loans. At March 31, 2024, the Bank had 11,939 Grain microloans outstanding, net of put backs, with an aggregate balance totaling $5.7 million and which were performing, in management’s opinion, comparably to similar portfolios, offset by an $4.9 million allowance for credit losses, resulting in $0.9 million in Grain microloans. Since the beginning of the Bank’s agreement with Grain and through March 31, 2024, 45,322 microloans amounting to $24.1 million have been deemed to be fraudulent and put back to Grain. The Company has written-down a total of $15.4 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. 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. As of March 31, 2024, the Company’s total exposure to Grain was $0.9 million of the remaining microloans, net of allowance for credit losses, excluding $1.6 million of security deposits by Grain borrowers. The $0.1 million of recoveries for the three months ended March 31, 2024 and the $0.9 million recoveries for the three months ended March 31, 2023 related to Grain is included in non-interest expense in the accompanying Consolidated Statements of Operations. Grain Technology, Inc. ("Grain") Total Exposure as of March 31, 2024 (in thousands) Receivable from Grain Microloans originated - put back to Grain (inception-to-March 31, 2024) $ 24,051 Write-downs, net of recoveries (inception-to-date as of March 31, 2024) (15,406 ) Cash receipts from Grain (inception-to-March 31, 2024) (6,819 ) Grant/reserve (inception-to-March 31, 2024) (1,826 ) Net receivable as of March 31, 2024 $ — Microloan receivables from Grain borrowers Grain originated loans receivable as of March 31, 2024 $ 5,731 Allowance for credit losses as of March 31, 2024 (1) (4,868 ) Microloans, net of allowance for credit losses as of March 31, 2024 $ 863 Investments Investment in Grain $ 1,000 Investment in Grain write-off (1,000 ) Investment in Grain as of March 31, 2024 $ — Total exposure to Grain as of March 31, 2024 (2) $ 863 (1) Excludes $1.6 million of security deposits by Grain originated borrowers reported in deposits in the accompanying Consolidated Statements of Financial Conditions. (2) Total remaining exposure to Grain borrowers. These loans are now serviced by the Bank. Vision 2025 Evolves The Company has deployed a Fintech-based small business automated lending technology in partnership with LendingFront Technologies, Inc. The technology is a mobile application that digitizes the lending workflow from pre-approval to servicing and enables the Company to originate, close and fund small business loans within very short spans of time, without requiring a physical presence within banking offices and with automated underwriting using both traditional and non-traditional methods. The application has full loan origination and servicing capabilities and is integrated with Salesforce. All Commercial Relationship Officers and Business Development Managers will utilize these capabilities. The Company is seeking to establish loan origination partnerships with non-profit and community-based organizations to ensure penetration in underserved and underbanked markets. The Company also established a relationship with Raisin Solutions US LLC ("Raisin") (formerly known as SaveBetter, LLC), a fintech startup focusing on deposits. As of March 31, 2024, the Company had $445.9 million in such deposits. The recent regulatory easing of brokered deposit rules enables the Company to classify such deposits as core deposits. 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 19.84% of total issued and outstanding Membership Interest in Bamboo for a purchase price of $2.5 million. During 2023, the Company made additional contributions for a total of $1.2 million. During the first quarter of 2024, the Company 33 Table of Contents made two additional contributions for a total of $0.5 million and made an additional payment of $0.2 million in April of 2024 for a total investment in Bamboo of $4.4 million. With over a decade processing payments in Latin America, Bamboo has a diverse network connects Latin American local payment processing to global companies as well as domestic solutions to locally based organizations. At December 31, 2018, the Company had approximately $1.06 billion in assets, $918.5 million in loans and $809.8 million in deposits. The Company has since grown to $2.82 billion in assets, $1.98 billion in loans receivables, net of allowance for credit losses of $24.7 million, and $1.59 billion in deposits at March 31, 2024, all while investing in infrastructure, implementing digital banking, diversifying its product offering and partnering with Fintech companies. Now, the Company believes that it is poised to enhance its presence, locally and in similar communities outside New York, as a leading CDFI and MDI financial institution holding company. On June 7, 2022, the Company issued 225,000 shares of the Company’s Preferred Stock‎, par value $0.01 for an aggregate purchase price equal to $225.0 million in cash to the Treasury, pursuant to the Treasury’s ECIP‎. Under the ECIP, Treasury provided investment capital directly to depository institutions that are CDFIs or MDIs or their holding companies, to provide loans, grants, and forbearance for small businesses, minority-owned businesses, and consumers, in low-income and underserved communities. Treasury has indicated that the investment will qualify as Tier 1 capital. No dividends will accrue or be due for the first two years after issuance. For years three through ten, depending upon the level of qualified and/or deep impact lending made in targeted communities, as defined in the ECIP guidelines, dividends will be at an annual rate of either 2.0%, 1.25% or 0.5% and, thereafter, will be fixed at one of the foregoing rates. Holders of Preferred Stock generally do not have any voting rights, with the exception of voting rights on certain matters as outlined in the Certificate of Designations. The Company has the option to redeem the shares of Preferred Stock (i) in whole or in part on any dividend payment date on or after June 15, 2027, or (ii) in whole but not in part at any time within ninety days following a Regulatory Capital Treatment Event, as defined below, in each case at a cash redemption price equal to the liquidation amount, with an amount equal to any dividends that have been declared but not paid prior to the redemption date. The Company may not redeem shares of Preferred Stock without having received the prior approval of the appropriate Federal banking agency for the Company, as defined in Section 3(q) of the Federal Deposit Insurance Act, to the extent required under applicable capital rules. Such redemptions are subject to certain conditions and limitations. 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. 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. Part 217 (or, as and if applicable, the successor capital adequacy guidelines, rules or regulations of the Federal Reserve or the capital adequacy guidelines, rules or regulations of any successor appropriate federal banking agency), as then in effect and applicable, for as long as any share of Preferred Stock is outstanding. Comparison of Financial Condition at March 31, 2024 and December 31, 2023 Total Assets . Total consolidated assets increased $68.0 million, or 2.5%, to $2.82 billion at March 31, 2024 from $2.75 billion at December 31, 2023. The increase in total assets is largely attributable to increases of $85.5 million in net loans receivable, $4.5 million in Federal Home Loan Bank of New York stock and $1.3 million in premises and equipment, partially offset by decreases of $8.8 million in held-to-maturity securities, $4.5 million in cash and cash equivalents, $3.9 million in available-for-sale securities, $3.6 million in other assets and $2.1 million in mortgage loans held for sale. Cash and Cash Equivalents . Cash and cash equivalents decreased $4.5 million, or 3.2%, to $134.7 million at March 31, 2024, compared to $139.2 million at December 31, 2023. The decrease in cash and cash equivalents was primarily the result of increases of $79.3 million in net loans, $7.7 million decrease in accrued interest in payable, $6.0 million purchase of loans, $4.5 million in net redemption of FHLB stock and $4.0 million repayment of borrowings. The decrease was offset by an increase of $78.2 million in net deposits, $11.4 million in principal repayment on securities, $3.6 million decrease in other assets, $2.5 million from advance payments by borrowers and $2.4 million in net loans held for sale. 34 Table of Contents Securities. The composition of securities at March 31, 2024 and December 31, 2023 and the amounts maturing of each classification are summarized as follows: March 31, 2024 December 31, 2023 Amortized Fair Amortized Fair Cost Value Cost Value (in thousands) Available-for-Sale 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 2,991 2,780 2,990 2,784 More than five years through ten years — — — — 2,991 2,780 2,990 2,784 Corporate Bonds: Amounts maturing: Three months or less — — — — More than three months through one year 4,000 3,910 4,000 3,863 More than one year through five years 1,000 137 1,000 536 More than five years through ten years 20,782 19,473 20,790 19,269 25,782 23,520 25,790 23,668 Mortgage-Backed Securities 108,346 89,744 111,001 93,450 Total Available-for-Sale Securities $ 137,119 $ 116,044 $ 139,781 $ 119,902 Held-to-Maturity Securities: U.S. Agency Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year — — — — More than one year through five years 25,000 24,711 25,000 24,819 More than five years through ten years — — — — 25,000 24,711 25,000 24,819 Corporate Bonds: Amounts maturing: Three months or less $ — $ — $ — $ — More than three months through one year 25,000 24,673 25,000 24,650 More than one year through five years 50,000 48,851 50,000 48,265 More than five years through ten years 7,500 6,765 7,500 6,894 82,500 80,289 82,500 79,809 Mortgage-Backed Securities 345,928 333,113 354,646 345,414 Allowance for Credit Losses (473 ) — (398 ) — Total Held-to-Maturity Securities $ 452,955 $ 438,113 $ 461,748 $ 450,042 The Company securities portfolio decreased $8.8 million in held-to-maturity and $3.9 million in available-for-sale during the three months ended March 31, 2024. The decrease was primarily due to changes in principal. 35 Table of Contents Gross Loans Receivable. The composition of gross loans receivable at March 31, 2024 and at December 31, 2023 and the percentage of each classification to total loans are summarized as follows: March 31, 2024 December 31, 2023 Increase (Decrease) Amount Percent Amount Percent Dollars Percent (Dollars in thousands) Mortgage loans: 1-4 Family residential Investor-Owned $ 339,331 16.9 % $ 343,689 17.9 % $ (4,358 ) (1.3 %) Owner-Occupied 150,842 7.5 % 152,311 7.9 % (1,469 ) (1.0 %) Multifamily residential 545,825 27.2 % 550,559 28.7 % (4,734 ) (0.9 %) Nonresidential properties 327,350 16.3 % 342,343 17.8 % (14,993 ) (4.4 %) Construction and land 608,665 30.4 % 503,925 26.2 % 104,740 20.8 % Total mortgage loans 1,972,013 98.3 % 1,892,827 98.5 % 79,186 4.2 % Nonmortgage loans: Business loans 26,664 1.4 % 19,779 1.0 % 6,885 34.8 % Consumer loans (1) 6,741 0.3 % 8,966 0.5 % (2,225 ) (24.8 %) 33,405 1.7 % 28,745 1.5 % 4,660 16.2 % Total $ 2,005,418 100.0 % $ 1,921,572 100.0 % $ 83,846 4.4 % (1) As of March 31, 2024 and December 31, 2023, consumer loans include $5.7 million and $8.0 million of microloans originated by the Bank pursuant to its arrangement with Grain. Based on current internal loan reviews, the Company believes that the quality of our underwriting, our weighted average loan-to-value ratio of 57.6% 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. Commercial real estate loans, as defined by applicable banking regulations, include multifamily residential, nonresidential properties, and construction and land mortgage loans. At March 31, 2024 and December 31, 2023, approximately 5.0% and 5.3%, respectively, of the outstanding principal balance of the Bank’s commercial real estate mortgage loans were secured by owner-occupied commercial real estate. Owner-occupied commercial real estate is similar in many ways to commercial and industrial lending in that these loans are generally made to businesses predominantly on the basis of the cash flows of the business rather than on valuation of the real estate. 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. 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. At March 31, 2024 and December 31, 2023, the Bank’s construction and land mortgage loans as a percentage of total risk-based capital was 122.8% and 102.5%, respectively. Investor owned commercial real estate mortgage loans as a percentage of total risk-based capital was 299.0% and 269.1% as of March 31, 2024 and December 31, 2023, respectively. At March 31, 2024, the Bank was slightly above the 100% guidelines established by the banking regulations but under the 150% guidelines set by the Bank for construction and land mortgage loans and within the 300% guideline for investor owned commercial real estate mortgage loans established by banking regulators. Management believes that it has established the appropriate level of controls to monitor the Bank’s lending in these areas. Loans Held For Sale . Loans held for sale, at fair value, at March 31, 2024 decreased $2.1 million, or 21.2%, to $7.9 million from $10.0 million at December 31, 2023. 36 Table of Contents Deposits. The composition of deposits at March 31, 2024 and December 31, 2023 and changes in dollars and percentages are summarized as follows: March 31, 2024 December 31, 2023 Increase (Decrease) Percent Percent Amount of Total Amount of Total Dollars Percent (Dollars in thousands) Demand (1) $ 191,541 12.1 % $ 185,151 12.3 % $ 6,390 3.5 % Interest-bearing deposits: NOW/IOLA accounts (1) 73,202 4.6 % 77,909 5.2 % (4,707 ) (6.0 %) Money market accounts 482,344 30.4 % 432,735 28.7 % 49,609 11.5 % Reciprocal deposits 97,718 6.2 % 96,860 6.4 % 858 0.9 % Savings accounts 112,713 7.1 % 114,139 7.6 % (1,426 ) (1.2 %) Total NOW, money market, reciprocal and savings 765,977 48.3 % 721,643 47.9 % 44,334 6.1 % Certificates of deposit of $250K or more 146,296 9.2 % 132,153 8.7 % 14,143 10.7 % Brokered certificates of deposit (2) 94,689 6.0 % 98,729 6.6 % (4,040 ) (4.1 %) Listing service deposits (2) 12,688 0.8 % 14,433 1.0 % (1,745 ) (12.1 %) Certificates of deposit less than $250K (1) 374,593 23.6 % 355,511 23.5 % 19,082 5.4 % Total certificates of deposit 628,266 39.6 % 600,826 39.8 % 27,440 4.6 % Total interest-bearing deposits 1,394,243 87.9 % 1,322,469 87.7 % 71,774 5.4 % Total deposits $ 1,585,784 100.0 % $ 1,507,620 100.0 % $ 78,164 5.2 % (1) As of December 31, 2023, $58.2 million were reclassified from demand to NOW/IOLA accounts. (2) As of March 31, 2024 and December 31, 2023, there were $1.5 million and $0.3 million, respectively, in individual listing service deposits amounting to $250,000 or more. 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. The overall reliance on wholesale funding and noncore funding were within those policy limitations as of March 31, 2024 and December 31, 2023. 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 . The Bank had outstanding borrowings at March 31, 2024 and December 31, 2023 of $680.4 million and $684.4 million, respectively, in term advances from the FHLBNY and FRBNY. Additionally, the Bank had two unsecured lines of credit in the amount of $75.0 million with two correspondent banks for both periods at March 31, 2024 and December 31, 2023, under which there was nothing outstanding at both March 31, 2024 and December 31, 2023. The Bank had no overnight line of credit advance at March 31, 2024 and December 31, 2023. Stockholders’ Equity . The Company’s consolidated stockholders’ equity increased $2.3 million, or 0.47%, to $493.7 million at March 31, 2024 from $491.4 million at December 31, 2023. This increase in stockholders’ equity was largely attributable to $2.4 million in net income, $0.5 million impact to additional paid in capital as a result of share-based compensation and $0.3 million from release of ESOP shares, offset by $0.9 million in other comprehensive loss. Comparison of Results of Operations for the Three Months Ended March 31, 2024 and 2023 The discussion of the Company’s results of operations for the three months ended March 31, 2024 and 2023 are presented below. The results of operations for interim periods may not be indicative of future results. Overview. Net income for the three months ended March 31, 2024 was $2.4 million compared to net income of $0.3 million for the three months ended March 31, 2023. Earnings per basic and diluted share was $0.11 for the three months ended March 31, 2024 compared to earnings per basic and diluted share of $0.01 for three months ended March 31, 2023. The $2.1 million increase of net income from the three months ended March 31, 2023, was due to increases of $3.6 million in net interest income, partially offset by increases of $0.8 million in provision for income taxes and $0.6 million in non-interest expense and a decrease of $0.1 million in noninterest income. 37 Table of Contents The following table presents the results of operations for the periods indicated: For the Three Months Ended March 31, Increase (Decrease) 2024 2023 Dollars Percent (Dollars in thousands) Interest and dividend income $ 39,666 $ 26,356 $ 13,310 50.5 % Interest expense 20,843 11,111 9,732 87.6 % Net interest income 18,823 15,245 3,578 23.5 % Benefit for credit losses (180 ) (174 ) (6 ) 3.4 % Net interest income benefit provision for loan losses 19,003 15,419 3,584 23.2 % Non-interest income 1,707 1,819 (112 ) (6.2 %) Non-interest expense 16,950 16,361 589 3.6 % Income before income taxes 3,760 877 2,883 328.7 % Provision for income taxes 1,346 546 800 146.5 % Net income $ 2,414 $ 331 $ 2,083 629.3 % Earnings per share: Basic $ 0.11 $ 0.01 $ 0.08 589.6 % Diluted $ 0.11 $ 0.01 $ 0.08 590.1 % Interest and Dividend Income. Interest and dividend income increased $13.3 million, or 50.5%, to $39.7 million for the three months ended March 31, 2024 from $26.4 million for the three months ended March 31, 2023. Interest income on loans receivable, which is the Company’s primary source of income, increased $11.0 million, or 55.7%, to $30.7 million for the three months ended March 31, 2024 from $19.7 million for the three months ended March 31, 2023. Included in this increase was the recovery of $1.0 million in interest income from a construction loan that was previously nonperforming. Interest and dividend income on securities and FHLBNY stock and deposits due from banks increased $2.3 million, or 35.2%, to $9.0 million for the three months ended March 31, 2024 from $6.7 million for the three months ended March 31, 2023. The following table presents interest income on loans receivable for the periods indicated: For the Three Months Ended March 31, Change 2024 2023 Amount Percent (Dollars in thousands) 1-4 Family residential $ 7,546 $ 6,053 $ 1,493 24.7 % Multifamily residential 6,921 6,096 825 13.5 % Nonresidential properties 4,359 3,673 686 18.7 % Construction and land 11,224 2,762 8,462 306.4 % Business loans 412 588 (176 ) (29.9 %) Consumer loans 202 528 (326 ) (61.7 %) Total interest income on loans receivable $ 30,664 $ 19,700 $ 10,964 55.7 % The following table presents interest and dividend income on securities and FHLBNY stock and deposits due from banks for the periods indicated: For the Three Months Ended March 31, Change 2024 2023 Amount Percent (Dollars in thousands) Interest on deposits due from banks $ 2,911 $ 197 $ 2,714 1,377.7 % Interest on securities 5,619 6,075 (456 ) (7.5 %) Dividend on FHLBNY stock 472 384 88 22.9 % Total interest and dividend income $ 9,002 $ 6,656 $ 2,346 35.2 % Interest Expense. Interest expense increased $9.7 million, or 87.6%, to $20.8 million for the three months ended March 31, 2024 from $11.1 million for the three months ended March 31, 2023, primarily due to an increase in the average cost of funds. 38 Table of Contents For the Three Months Ended March 31, Change 2024 2023 Amount Percent (Dollars in thousands) Certificates of deposit $ 6,380 $ 3,225 $ 3,155 97.8 % Money market 6,292 2,091 4,201 200.9 % Savings 28 30 (2 ) (6.7 %) NOW/IOLA 218 688 (470 ) (68.3 %) Advance payments by borrowers 2 3 (1 ) (33.3 %) Borrowings 7,923 5,074 2,849 56.1 % Total interest expense $ 20,843 $ 11,111 $ 9,732 87.6 % Net Interest Income. Net interest income increased $3.6 million, or 23.5%, to $18.8 million for the three months ended March 31, 2024 from $15.2 million for the three months ended March 31, 2023. The $3.6 million increase in net interest income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was attributable to an increase of $13.3 million in interest and dividend income primarily due to increases in average loans receivable, interest and dividend income on securities and FHLBNY stock and deposits due from banks, partially offset by an increase of $9.7 million in interest expense due primarily to a higher average cost of funds on interest bearing liabilities, Net interest rate spread decreased by 6 basis points to 1.82% for the three months ended March 31, 2024 from 1.88% for the three months ended March 31, 2023. The decrease in the net interest rate spread for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was primarily due to an increase in the average rates paid on interest-bearing liabilities of 102 basis points to 3.89% for the three months ended March 31, 2024 from 2.87% for the three months ended March 31, 2023 and an increase in the average yields on interest-earning assets of 96 basis points to 5.71% for the three months ended March 31, 2024 from 4.75% for the three months ended March 31, 2023. Net interest margin decreased 4 basis points for the three months ended March 31, 2024, to 2.71% from 2.75% for three months ended March 31, 2023, reflecting an increase in cost of funds. The Federal Reserve 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. At the January 31, 2024 meeting, the Federal Reserve signaled that it will hold interest steady and indicated it is not ready to start cutting rates. The prior rate increases were in response to inflation rising at a rate not seen in over 40 years. 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. 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. Non-Interest Income. Non-interest income decreased $0.1 million, or 6.2%, to $1.7 million for the three months ended March 31, 2024 from $1.8 million for the three months ended March 31, 2023. The $0.1 million decrease in non-interest income for the three months ended March 31, 2024 compared to the three months ended March 31, 2023 was attributable to a decrease of $0.4 million in late and prepayment charges, partially offset by an increase of $0.2 million in income from mortgage loans and $0.1 million in other non-interest income. The following table presents non-interest income for the periods indicated: For the Three Months Ended March 31, Change 2024 2023 Amount Percent (Dollars in thousands) Service charges and fees $ 473 $ 491 $ (18 ) (3.7 %) Brokerage commissions 8 15 (7 ) (46.7 %) Late and prepayment charges 359 729 (370 ) (50.8 %) Income on sale of mortgage loans 302 99 203 205.1 % Other 565 485 80 16.5 % Total non-interest income $ 1,707 $ 1,819 $ (112 ) (6.2 %) Non-Interest Expense. Non-interest expense increased $0.6 million, or 3.60%, to $17.0 million for the three months ended March 31, 2024 from $16.4 million for the three months ended March 31, 2023. The $0.6 million increase in non-interest expense for the three months ended March 31, 2024, compared to the three months ended March 31, 2023 was attributable to a $0.9 million decrease in Grain consumer microloan recoveries, increases of $0.4 million in compensation and benefits, $0.3 million in direct loan expense and 39 Table of Contents $0.3 million in professional fees, partially offset by decreases of $0.8 million in provision for contingencies, $0.3 million in other operating expenses and $0.2 million in office supplies, telephone and postage. The following table presents non-interest expense for the periods indicated: For the Three Months Ended March 31, Change 2024 2023 Amount Percent (Dollars in thousands) Compensation and benefits $ 7,844 $ 7,446 $ 398 5.3 % Occupancy and equipment 3,667 3,570 97 2.7 % Data processing expenses 1,127 1,192 (65 ) (5.5 %) Direct loan expense 732 412 320 77.7 % Provision for contingencies 164 985 (821 ) (83.4 %) Insurance and surety bond premiums 253 265 (12 ) (4.5 %) Office supplies, telephone and postage 249 399 (150 ) (37.6 %) Professional fees 1,723 1,455 268 18.4 % Grain recoveries (53 ) (914 ) 861 (94.2 %) Marketing and promotional expenses 100 128 (28 ) (21.9 %) Directors' fees and regulatory assessment 179 155 24 15.5 % Other operating expenses 965 1,268 (303 ) (23.9 %) Total non-interest expense $ 16,950 $ 16,361 $ 589 3.6 % Income Tax Provision. The Company had a provision for income taxes of $1.3 million for the three months ended March 31, 2024 compared to a provision for income taxes of $0.5 million for three months ended March 31, 2023. 40 Table of Contents Average Balance Sheets The following table sets forth average outstanding balances, average yields and rates, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. Average balances are derived from average daily balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense. For the Three Months Ended March 31, 2024 2023 Average Average Outstanding Average Outstanding Average Balance Interest Yield/Rate (1) Balance Interest Yield/Rate (1) (Dollars in thousands) Interest-earning assets: Loans (2) $ 1,979,263 30,664 6.23 % $ 1,572,148 $ 19,700 5.08 % Securities (3) 576,235 5,619 3.92 % 631,138 6,075 3.90 % Other (4) (5) 238,432 3,383 5.71 % 48,473 581 4.86 % Total interest-earning assets 2,793,930 39,666 5.71 % 2,251,759 26,356 4.75 % Non-interest-earning assets (5) 106,566 123,007 Total assets $ 2,900,496 $ 2,374,766 Interest-bearing liabilities: NOW/IOLA (6) (7) $ 82,849 $ 218 1.06 % $ 71,765 $ 688 3.89 % Money market (7) (8) 544,563 6,292 4.65 % 314,241 2,091 2.70 % Savings 113,501 28 0.10 % 128,876 30 0.09 % Certificates of deposit (8) 629,528 6,380 4.08 % 516,327 3,225 2.53 % Total deposits 1,370,441 12,918 3.79 % 1,031,209 6,034 2.37 % Advance payments by borrowers 12,886 2 0.06 % 12,919 3 0.09 % Borrowings 771,070 7,923 4.13 % 523,705 5,074 3.93 % Total interest-bearing liabilities 2,154,397 20,843 3.89 % 1,567,833 11,111 2.87 % Non-interest-bearing liabilities: Non-interest-bearing demand (6) 198,862 — 268,372 — Other non-interest-bearing liabilities 54,061 — 42,038 — Total non-interest-bearing liabilities 252,923 — 310,410 — Total liabilities 2,407,320 20,843 1,878,243 11,111 Total equity 493,176 496,523 Total liabilities and total equity $ 2,900,496 3.89 % $ 2,374,766 2.87 % Net interest income $ 18,823 $ 15,245 Net interest rate spread (9) 1.82 % 1.88 % Net interest-earning assets (10) $ 639,533 $ 683,926 Net interest margin (11) 2.71 % 2.75 % Average interest-earning assets to interest-bearing liabilities 129.69 % 143.62 % (1) Annualized where appropriate. (2) Loans include loans and mortgage loans held for sale, at fair value. (3) Securities include available-for-sale securities and held-to-maturity securities. (4) Includes FHLBNY demand account and FHLBNY stock dividends and FRBNY demand deposits. (5) FRBNY demand deposits for prior period have been reclassified for consistency. (6) Includes reclassification of $48.4 million average outstanding balances from non-interest bearing demand to NOW/IOLA for the three months ended March 31, 2023. (7) Include $0.7 million of interest expense reclassified from money market to NOW/IOLA for the three months ended March 31, 2023. (8) Includes reclassification of $135.0 million average outstanding balances and $1.4 million of interest expenses from money market to certificates of deposit for the three months ended March 31, 2023. (9) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average rate of interest-bearing liabilities. (10) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (11) Net interest margin represents net interest income divided by average total interest-earning assets. 41 Table of Contents 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). 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. For purposes of this table, changes attributable to both rate and volume, which cannot be segregated, have been allocated proportionately based on the changes due to rate and the changes due to volume. For the Three Months Ended March 31, 2024 vs. 2023 Increase (Decrease) Due to Total Increase Volume Rate (Decrease) (In thousands) Interest-earning assets: Loans (1) $ 5,308 $ 5,656 $ 10,964 Securities (2) (482 ) 26 (456 ) Other 2,301 501 2,802 Total interest-earning assets 7,127 6,183 13,310 Interest-bearing liabilities: NOW/IOLA 113 (583 ) (470 ) Money market 1,563 2,638 4,201 Savings (3 ) 1 (2 ) Certificates of deposit 740 2,415 3,155 Total deposits 2,413 4,471 6,884 Advance payments by borrowers 3 (4 ) (1 ) Borrowings 2,459 390 2,849 Total interest-bearing liabilities 4,875 4,857 9,732 Change in net interest income $ 2,252 $ 1,326 $ 3,578 (1) Loans include loans and mortgage loans held for sale, at fair value. (2) Securities include available-for-sale securities and held-to-maturity securities. 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. Therefore, a principal part of our operations is to manage interest rate risk and limit the exposure of its financial condition and results of operations to changes in market interest rates. 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. 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. The Bank is a party to two interest rate swap transactions. One interest rate swap is for a period of two years effective October 12, 2023 and terminates on November 1, 2025 with a notional amount of $150.0 million. The Bank will pay a fixed rate of interest of 4.885% and receive the Secured Overnight Financing Rate ("SOFR") rate. The other interest rate swap is for a period of three years effective October 12, 2023 and terminates on November 1, 2026 with a notional amount of $100.0 million. The Bank will pay a fixed rate of interest of 4.62% and receive the SOFR rate (see Note 9 of the Notes to the Consolidated Financial Statements). Net Interest Income Simulation Models . 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. To limit interest rate risk, the Bank has policy guidelines for earnings risk which seek to limit the variance of net interest income in both gradual and instantaneous changes to interest 42 Table of Contents rates. As of March 31, 2024, 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 $ 70,939 (4.59%) +300 71,890 (3.31%) +200 72,812 (2.07%) +100 73,650 (0.95%) Level 74,354 — % -100 75,052 0.94% -200 76,598 3.02% -300 76,993 3.55% -400 77,488 4.21% (1) Assumes an instantaneous uniform change in interest rates at all maturities. 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. Further, the earnings simulation model does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing product spreads that could alter any potential adverse impact of changes in interest rates. The behavior of the deposit portfolio in the baseline forecast and in alternate interest rate scenarios set out in the table above is a key assumption in the projected estimates of net interest income. The projected impact on net interest income in the table above assumes no change in deposit portfolio size or mix from the baseline forecast in alternative rate environments. In higher rate scenarios, any customer activity resulting in the replacement of low-cost or noninterest-bearing deposits with higher-yielding deposits or market-based funding would reduce the benefit in those scenarios. At March 31, 2024, 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 . While earnings simulation modeling attempts to determine the impact of a changing rate environment to net interest income, the Economic Value of Equity Model (“EVE”) measures estimated changes to the economic values of assets, liabilities and off-balance sheet items as a result of interest rate changes. 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. The Interest Rate Risk Policy sets limits for those sensitivities. At March 31, 2024, the EVE modeling calculated the following estimated changes in EVE due to instantaneous upward and downward changes in rates: EVE as a Percentage of Present Value of Assets (3) Estimated Increase (Decrease) in Increase Change in Interest Estimated EVE EVE (Decrease) Rates (basis points) (1) EVE (2) Amount Percent Ratio (4) (basis points) (Dollars in thousands) +400 $ 380,026 $ (121,447 ) (24.22 %) 14.85 % (2,422 ) +300 412,842 (88,631 ) (17.67 %) 15.79 % (1,767 ) +200 440,660 (60,813 ) (12.13 %) 16.52 % (1,213 ) +100 466,941 (34,532 ) (6.89 %) 17.17 % (689 ) Level 501,473 — — % 18.12 % — -100 507,223 5,750 1.15 % 18.03 % 115 -200 518,464 16,991 3.39 % 20.04 % 339 -300 529,416 27,943 5.57 % 18.23 % 557 -400 554,601 53,128 10.59 % 18.68 % 1,059 (1) Assumes an instantaneous uniform change in interest rates at all maturities. (2) EVE is the discounted present value of expected cash flows from assets, liabilities and off-balance sheet contracts. (3) Present value of assets represents the discounted present value of incoming cash flows on interest-earning assets. (4) EVE Ratio represents EVE divided by the present value of assets. 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. Since EVE measures the 43 Table of Contents discounted present value of cash flows over the estimated lives of instruments, the change in EVE does not directly correlate to the degree that earnings would be impacted over a shorter time horizon (i.e., the current year). Further, EVE does not take into account factors such as future balance sheet growth, changes in product mix, changes in yield curve relationships, and changing product spreads that could alter the adverse impact of changes in interest rates. At March 31, 2024, 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 . Management also analyzes a most-likely earnings simulation scenario that projects the expected change in rates based on a forward yield curve adopted by management using expected balance sheet volumes forecasted by management. Separate growth assumptions are developed for loans, investments, deposits, etc. Other interest rate scenarios analyzed by management may include delayed rate shocks, yield curve steepening or flattening, or other variations in rate movements to further analyze or stress the balance sheet under various interest rate scenarios. Each scenario is evaluated by management and weighted to determine the most likely result. These processes assist management to better anticipate financial results and, as a result, management may determine the need to review other operating strategies and tactics which might enhance results or better position the balance sheet to reduce interest rate risk going forward. Each of the above analyses may not, on its own, be an accurate indicator of how net interest income will be affected by changes in interest rates. Income associated with interest-earning assets and costs associated with interest-bearing liabilities may not be affected uniformly by changes in interest rates. In addition, the magnitude and duration of changes in interest rates may have a significant impact on net interest income. For example, although certain assets and liabilities may have similar maturities or periods of repricing, they may react in different degrees to changes in market interest rates. Interest rates on certain types of assets and liabilities fluctuate in advance of changes in general market rates, while interest rates on other types may lag behind changes in general market rates. In addition, certain assets, such as adjustable rate mortgage loans, have features (generally referred to as interest rate caps and floors) which limit changes in interest rates. Prepayment and early withdrawal levels also could deviate significantly from those assumed in calculating the maturity of certain instruments. The ability of many borrowers to service their debts also may decrease during periods of rising interest rates. 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. 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 utilizes a respected, sophisticated third party designed asset liability modeling software to help ensure implementation of management's assumptions into the model are processed as intended in a robust manner. That said, there are numerous assumptions regarding financial instrument behaviors that are integrated into the model. 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. Additionally, given the large number of assumptions built into Bank’s asset liability modeling software, it is difficult, at best, to compare its results to other banks. 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. The Federal Reserve 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. At the January 31, 2024 meeting, the Federal Reserve signaled that it will hold interest steady and indicated it is not ready to start cutting rates. The recent increases were in response to inflation rising at a rate not seen in over 40 years. 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. 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 . In addition, management analyzes interest rate sensitivity by monitoring the Bank’s interest rate sensitivity "gap." The interest rate sensitivity gap is the difference between the amount of interest-earning assets maturing or repricing within a specific time period and the amount of interest bearing-liabilities maturing or repricing within that same time period. A gap is considered positive when the amount of interest rate sensitive assets maturing or repricing during a period exceeds the amount of interest rate sensitive liabilities maturing or repricing during the same period, and a gap is considered negative when the amount of interest rate sensitive liabilities maturing or repricing during a period exceeds the amount of interest rate sensitive assets maturing or repricing during the same period. 44 Table of Contents The following table sets forth the Company’s interest-earning assets and its interest-bearing liabilities at March 31, 2024, which are anticipated to reprice or mature in each of the future time periods shown based upon certain assumptions. 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 table sets forth an approximation of the projected repricing of assets and liabilities at March 31, 2024, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments. 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. March 31, 2024 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 $ 104,752 $ 104,752 $ 104,752 $ 104,752 $ 104,752 $ — $ 104,752 $ 29,972 $ 134,724 Securities (1) 27,326 73,223 118,594 205,072 345,586 245,056 590,642 (21,643 ) 568,999 Placements with banks 249 249 249 249 249 — 249 — 249 Net loans (includes LHFS) 240,783 347,450 601,938 1,095,788 1,894,501 102,601 1,997,102 (7,814 ) 1,989,288 FHLBNY stock — — — — — — — 23,892 23,892 Other assets — — — — — — — 101,550 101,550 Total $ 373,110 $ 525,674 $ 825,533 $ 1,405,861 $ 2,345,088 $ 347,657 $ 2,692,745 $ 125,957 $ 2,818,702 Liabilities: Non-maturity deposits $ 47,142 $ 94,284 $ 188,568 $ 377,135 $ 695,328 $ 67,792 763,120 $ 194,398 $ 957,518 Certificates of deposit 217,467 298,694 487,897 569,981 628,266 — 628,266 — 628,266 Borrowings 50,000 50,000 309,321 409,321 630,421 50,000 680,421 — 680,421 Other liabilities — — — — — — — 58,815 58,815 Total liabilities 314,609 442,978 985,786 1,356,437 1,954,015 117,792 2,071,807 253,213 2,325,020 Capital — — — — — — — 493,682 493,682 Total liabilities and capital $ 314,609 $ 442,978 $ 985,786 $ 1,356,437 $ 1,954,015 $ 117,792 $ 2,071,807 $ 746,895 $ 2,818,702 Asset/liability gap $ 58,501 $ 82,696 $ (160,253 ) $ 49,424 $ 391,073 $ 229,865 $ 620,938 Gap/assets ratio 118.59 % 118.67 % 83.74 % 103.64 % 120.01 % 295.14 % 129.97 % (1) Includes available-for-sale securities and held-to-maturity securities. 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. 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 table sets forth an approximation of the projected repricing of assets and liabilities at December 31, 2023, on the basis of contractual maturities, anticipated prepayments and scheduled rate adjustments. 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. December 31, 2023 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 $ 110,260 $ 110,260 $ 110,260 $ 110,260 $ 110,260 $ — $ 110,260 $ 28,930 $ 139,190 Securities (1) 26,981 68,513 116,391 208,107 359,754 242,162 601,916 (20,266 ) 581,650 Placement with banks 249 249 249 249 249 — 249 — 249 Net loans (includes LHFS) 192,336 295,027 500,951 982,210 1,797,535 111,445 1,908,980 (3,114 ) 1,905,866 FHLBNY stock 19,392 19,392 19,392 19,392 19,392 — 19,392 (15 ) 19,377 Other assets — — — — — — — 104,390 104,390 Total $ 349,218 $ 493,441 $ 747,243 $ 1,320,218 $ 2,287,190 $ 353,607 $ 2,640,797 $ 109,925 $ 2,750,722 Liabilities: Non-maturity deposits $ 43,026 $ 86,052 $ 172,104 $ 344,208 $ 647,511 $ 69,506 $ 717,017 $ 189,777 $ 906,794 Certificates of deposit 220,322 291,437 449,484 508,888 600,826 — 600,826 — 600,826 Borrowings 204,000 304,000 363,321 413,321 634,421 50,000 684,421 — 684,421 Other liabilities — — — — — — — 67,286 67,286 Total liabilities 467,348 681,489 984,909 1,266,417 1,882,758 119,506 2,002,264 257,063 2,259,327 Capital — — — — — — — 491,395 491,395 Total liabilities and capital $ 467,348 $ 681,489 $ 984,909 $ 1,266,417 $ 1,882,758 $ 119,506 $ 2,002,264 $ 748,458 $ 2,750,722 Asset/liability gap $ (118,130 ) $ (188,048 ) $ (237,666 ) $ 53,801 $ 404,432 $ 234,101 $ 638,533 Gap/assets ratio 74.72 % 72.41 % 75.87 % 104.25 % 121.48 % 295.89 % 131.89 % (1) Includes available-for-sale securities and held-to-maturity securities. Certain shortcomings are inherent in the methodologies used in the above interest rate risk measurements. Modeling changes require making certain assumptions that may or may not reflect the manner in which actual yields and costs respond to changes in market interest rates. In this regard, the net interest income and EVE tables presented assume that the composition of the interest-sensitive assets 45 Table of Contents and liabilities existing at the beginning of a period remains constant over the period being measured and assumes that a particular change in interest rates is reflected uniformly across the yield curve regardless of the duration or repricing of specific assets and liabilities. Accordingly, although the net interest income and EVE tables provide an indication of the interest rate risk exposure at a particular point in time, such measurements are not intended to and do not provide a precise forecast of the effect of changes in market interest rates on net interest income and EVE and will differ from actual results. Furthermore, although certain assets and liabilities may have similar maturities or periods to repricing, they may react in different degrees to changes in market interest rates. Additionally, certain assets, such as adjustable-rate loans, have features that restrict changes in interest rates both on a short-term basis and over the life of the asset. In the event of changes in interest rates, prepayment and early withdrawal levels would likely deviate significantly from those assumed in calculating the gap table. Interest rate risk calculations also may not reflect the fair values of financial instruments. For example, decreases in market interest rates can increase the fair values of loans, deposits and borrowings. Liquidity and Capital Resources Liquidity describes the ability to meet the financial obligations that arise in the ordinary course of business. 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. Although maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by market interest rates, economic conditions, and competition. The most liquid assets are cash and interest-bearing deposits in banks. The levels of these assets are dependent on operating, financing, lending, and investing activities during any given period. The Bank had $480.4 million and $380.4 million of outstanding term advances from FHLBNY at March 31, 2024 and December 31, 2023, respectively. The Bank had no overnight line of credit advance from the FHLBNY at March 31, 2024 and December 31, 2023. The Bank also has additional borrowing capacity of $222.5 million with the FHLBNY secured by the Bank's loans portfolio at March 31, 2024. The Bank had $200.0 million and $304.0 million of outstanding term advances from the FRBNY at March 31, 2024 and December 31, 2023, respectively. Net cash provided by operating activities was $1.5 million and $6.1 million for the three months ended March 31, 2024 and 2023, respectively. Net cash used in investing activities, which consists primarily of disbursements for loan originations and purchase of equipment offset by principal collections on loans and proceeds from maturities, calls and principal repayments on securities was ($80.1) million and ($91.3) million for the three months ended March 31, 2024 and 2023, respectively. Net cash provided by financing activities, consisting of activities in borrowing and deposit accounts, was $74.2 million and $215.5 million for the three months ended March 31, 2024 and 2023, respectively. 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. At March 31, 2024 and December 31, 2023, all regulatory capital requirements were met, resulting in the Company and the Bank being categorized as well capitalized at March 31, 2024 and December 31, 2023. Management is not aware of any conditions or events that would change this categorization. Material Cash Requirements Commitments . As a financial services provider, the Company routinely is a party to various financial instruments with off-balance-sheet risks, such as commitments to extend credit and unused lines of credit. Although these contractual obligations represent the Company’s future cash requirements, a significant portion of commitments to extend credit may expire without being drawn upon. Such commitments are subject to the same credit policies and approval process accorded to loans originated. At March 31, 2024 and December 31, 2023, the Company had outstanding commitments to originate loans and extend credit of $605.6 million and $591.5 million, respectively. It is anticipated that the Company will have sufficient funds available to meet its current lending commitments. Certificates of deposit that are scheduled to mature in 2024 totaled $406.9 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. Such obligations include data processing services, operating leases for premises and equipment, agreements with respect to borrowed funds 46 Table of Contents and deposit liabilities. There have been no material changes in the Company’s material cash requirements under its contractual obligations as discussed in its most recent annual report on Form 10-K. Other Material Cash Requirements. In addition to contractual obligations, the Company’s material cash requirements also includes compensation and benefits expenses for its employees, which were $7.8 million for the three months ended March 31, 2024. The Company also has material cash requirements for occupancy and equipment expenses, excluding depreciation and amortization of $0.4 million, related to rental expenses, general maintenance and cleaning supplies, guard services, software licenses and other miscellaneous expenses, which were $3.2 million for the three months ended March 31, 2024. Item 3. Quantitative and Qualitati ve Disclosures About Market Risk. The information required by this item is included in Part I, Item 2 of this report under “Management of Market Risk”. Item 4. Controls and Procedures. An evaluation was performed under the supervision and with the participation of the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rule 13a-15(e) or Rule 15d-15(e) promulgated under the Securities and Exchange Act of 1934, as amended) as of March 31, 2024. Based on that evaluation, the Company’s management, including the Chief Executive Officer and the Chief Financial Officer, concluded that the Registrant’s disclosure controls and procedures were effective. During the three months ended March 31, 2024, there were no changes in the Company’s internal controls over financial reporting that have materially affected, or are reasonably likely to materially affect, its internal controls over financial reporting. 47 Table of Contents PART II—OTHER INFORMATION Item 1. Legal Proceedings. The Company is not involved in any pending legal proceedings as a plaintiff or a defendant other than routine legal proceeding occurring in the ordinary course of business. At March 31, 2024, the Company was not involved in any legal proceedings the outcome of which management believes would be material to its financial condition or results of operations. Item 1A. Ris k Factors. In addition to the other information set forth in this Quarterly Report, you should carefully consider the risk factors and other cautionary statements described under the heading “Item 1A. Risk Factors” included in our 2023 Form 10-K and the risk factors and other cautionary statements contained in our other SEC filings, which could materially affect our businesses, financial condition or future results. Additional risks and uncertainties not currently known to us or that we currently deem to be immaterial also may materially adversely affect our business, financial condition or future results. There have been no material changes in our Risk Factors from those disclosed in Item 1A of our 2023 Form 10-K or our other SEC filings. Item 2. Unregistered Sales of Equi ty Securities and Use of Proceeds. None Item 3. Defaults Upo n Senior Securities. None Item 4. Mine Saf ety Disclosures. None Item 5. Other Information. None 48 Table of Contents Item 6. E xhibits Exhibit Number Description 3.1 Articles of Incorporation of Ponce Financial Group, Inc. (attached as Exhibit 3.1 to the Registrant’s Form S-1 (File No. 333-258394) filed with the Commission on August 3, 2021). 3.2 Bylaws of Ponce Financial Group, Inc. (attached as Exhibit 3.2 to the Registrant’s Form S-1 (File No. 333-258394) filed with the Commission on August 3, 2021). 3.3 Articles Supplementary to the Charter of Ponce Financial Group, Inc. (attached as Exhibit 3.1 to the Registrant’s Current Report on Form 8-K (File No. 001-41255) filed with the Commission on June 9, 2022). 31.1* Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 31.2* Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. 32.1* Certification of Principal Executive Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 32.2* Certification of Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 101.INS Inline XBRL Instance Document 101.SCH Inline XBRL Taxonomy Extension Schema Document 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101) * Filed herewith. 49 Table of Contents SIGNAT URES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Ponce Financial Group, Inc. (Registrant) Date: May 9, 2024 By: /s/ Carlos P. Naudon Carlos P. Naudon President and Chief Executive Officer Date: May 9, 2024 By: /s/ Sergio J. Vaccaro Sergio J. Vaccaro Executive Vice President and Chief Financial Officer 50