PONCE FINANCIAL GROUP, INC.

(PDLB)
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PONCE FINANCIAL GROUP, INC. Management's Discussion and Analysis of Financial Condition and Results of Operations. (form 10-Q)

05/16/2022 | 03:27pm EDT

General


Management's discussion and analysis of the financial condition and results of
operations at March 31, 2022 and December 31, 2021, and for the three months
ended March 31, 2022 and 2021, 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.

On January 26, 2022, the assets and liabilities of Mortgage World Bankers, Inc.
("Mortgage World"), a wholly owned subsidiary of PDL Community Bancorp, were
transferred to the Bank. Except for the winding up of its operations, Mortgage
World ceased to conduct business as a separate entity and is now operated as a
division of the Bank.

On January 27, 2022, Ponce Financial Group, Inc. and PDL Community Bancorp
announced that the conversion and reorganization of Ponce Bank Mutual Holding
Company from the mutual to stock form of organization and related stock offering
was consummated at the close of business. As a result of the closing of the
conversion and reorganization and stock offering, Ponce Financial Group, Inc. is
now the holding company for Ponce Bank ("Ponce Bank" or the "Bank"). Ponce
Bank's former mutual holding companies, PDL Community Bancorp and Ponce Bank
Mutual Holding Company, have ceased to exist.

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 the COVID-19 pandemic and its related

       economic effects, and their 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;


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• 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;


  • the impact of the Dodd-Frank Act and the implementing regulations;

• 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;

• 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, 2021 under the
heading "Risk Factors" filed with the Securities and Exchange Commission ("SEC")
on March 31, 2022, as updated in this Quarterly Report on Form 10-Q.

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.

Employees and Human Capital Resources


As of March 31, 2022, the Company had 223 full time equivalent employees. None
of the Company's employees are represented by a labor union, and management
considers its relationship with employees to be good. The Company believes its
ability to attract and retain employees is key to its success. Accordingly, the
Company strives to offer competitive salaries and employee benefits to all
employees and monitor salaries and other compensation in its market area.

The Company encourages and supports the growth and development of its employees.
Continual learning and career development is advanced through ongoing
performance and development conversations with employees, internally developed
training programs and educational reimbursement programs.

The Company is responsible for creating an equitable workplace ensuring
diversity at all management levels. The Company prides itself on establishing a
diverse workforce that serves our diverse customer base in the New York metro
area. The Company's inclusion and diversity program focuses on its workforce,
workplace, and community. The Company believes that its business is strengthened
by a diverse workforce that reflects the communities in which it operates. The
Company believes that all of its team members should be treated with respect and
equality, regardless of gender, ethnicity, sexual orientation, gender identity,
religious beliefs, or other characteristics. The Company has also broadened its
focus on inclusion and diversity by including social and racial equity in its
conversations and equipping and empowering its team leaders with appropriate
tools and training.

While it appears the COVID-19 pandemic has entered into an endemic stage,
related measures taken by governments, businesses and individuals as a result of
the pandemic continue to cause uncertainty, volatility and disruption in the
economy, including the economies of the markets that we serve. In response to
the pandemic, we adjusted our business practices, including restricting employee
travel, encouraging employees to work from home when possible, implementing
social distancing guidelines within our offices, and continuing to hold regular
meetings of our pandemic response team. Certain of these measures remain in
place due to the continued prevalence of the virus, though, as of March 31,
2022, all of our customer locations are open and the majority of our employees
have schedules that include work at the office.

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Non-GAAP Financial Measures


The following discussion contains certain non-GAAP financial measures in
addition to results presented in accordance with GAAP. These non-GAAP measures
are intended to provide the reader with additional supplemental perspective on
operating results, performance trends, and financial condition. Non-GAAP
financial measures are not a substitute for GAAP measures; they should be read
and used in conjunction with the Company's GAAP financial information. The
Company's non-GAAP measures may not be comparable to similar non-GAAP
information which may be presented by other companies. In all cases, it should
be understood that non-GAAP operating measures do not depict amounts that accrue
directly to the benefit of shareholders. An item that management excludes when
computing non-GAAP adjusted earnings can be of substantial importance to the
Company's results and condition for any particular year. A reconciliation of
non-GAAP financial measures to GAAP measures is provided below.

The SEC has exempted from the definition of non-GAAP financial measures certain
commonly used financial measures that are not based on GAAP. Management believes
that these non-GAAP financial measures are useful in evaluating the Company's
financial performance and facilitate comparisons with the performance of other
financial institutions. However, the information should be considered
supplemental in nature and not as a substitute for related financial information
prepared in accordance with GAAP.

The table below includes references to the Company's net income (loss) and
earnings (loss) per share for the three months ended March 31, 2022 and 2021
before gain on sale of real property and the Company's contribution to the Ponce
De Leon Foundation. In management's view, that information, which is considered
non-GAAP information, may be useful to investors as it will improve an
understanding of core operations for the current and future periods. The
non-GAAP net (loss) income amount and (loss) earnings per share reflect
adjustments related to the non-recurring gain on sale of real property and the
Company's contribution to the Ponce De Leon Foundation, net of tax effect. A
reconciliation of the non-GAAP information to GAAP net income (loss) and
earnings (loss) per share is provided below.

Non-GAAP Reconciliation - Net (Loss) Income before Gain on Sale of Real Property and Contribution to the Ponce De Leon Foundation (Unaudited)


                                                   Three Months Ended      Three Months Ended
                                                     March 31, 2022          March 31, 2021
                                                             (Dollars in thousands,
                                                             except per share data)
Net (loss) income - GAAP                          $             (6,820 )   $             2,452
Gain on sale of real property                                        -                    (663 )
Contribution to the Ponce De Leon Foundation                     4,995                       -
Income tax provision (benefit)                                  (1,049 )                   139
Net (loss) income - non-GAAP                      $             (2,874 )   $             1,928

(Loss) earnings per common share (GAAP) (1)       $              (0.31 )   $              0.15

(Loss) earnings per common share (non-GAAP) (1)   $              (0.13 )   $              0.12


(1) (Loss) earnings per share were computed (for the GAAP and non-GAAP basis)

       based on the weighted average number of basic shares outstanding for the
       three months ended March 31, 2022 and 2021 (21,721,113 shares and
       16,548,196 shares, respectively).

COVID-19 Pandemic and the CARES Act


On March 27, 2020, Congress passed, and the President signed, the Coronavirus
Aid, Relief, and Economic Security Act (the "CARES Act") to address the economic
effects of the COVID-19 pandemic.

The CARES Act appropriated $349.0 billion for PPP loans and on April 24, 2020,
the U.S. Small Business Administration ("SBA") received another $310.0 billion
in PPP funding. On December 27, 2020, the Economic Aid Act appropriated $284.0
billion for both first and second draw PPP loans, bringing the total
appropriations for PPP loans to $943.0 billion. PPP ended on May 31, 2021. Loans
under the PPP that meet SBA requirements may be forgiven in certain
circumstances, and are 100% guaranteed by the SBA. The Company had received SBA
approval and originated 5,340 PPP loans, of which 737 loans totaling $86.0
million were outstanding at March 31, 2022. PPP loans have a two-year or
five-year term, provide for fees of up to 5% of the loan amount and earn
interest at a rate of 1% per annum. It is our expectation that a significant
portion of these remaining loans will ultimately be forgiven by the SBA in
accordance with the terms of the program. As of March 31, 2022, the average
authorized loan size was $117,000 and the median authorized loan size was
$14,000. The Bank, which is designated as both a Community Development Financial
Institution ("CDFI")

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and a Minority Depository Institution ("MDI"), originated 5,340 PPP loans in the
amount of $261.4 million, which, based upon information provided by the SBA,
significantly exceeded the reported average performance of banks in our peer
group.

As a result of the initial COVID-19 pandemic outbreak, the Company continues to
alter the way it has historically provided services to its deposit customers
while seeking to maintain normal day-to-day back-office operations and lending
functions. To that end, as of March 31, 2022, all back-office and lending
personnel have been formed into teams which alternate between a remote and in
office work environment while the branch network continues to provide
traditional banking services to its communities and has for the most part
returned to normal operating hours while continuing to shift service delivery to
electronic and web-based products. The Company continues its extensive and
intensive communications program geared to informing customers of the
alternative resources provided by the Company for retaining access to financial
services, closing loans and conducting banking transactions, such as ATM
networks, online banking, mobile applications, remote deposits and the Company's
Contact Center. The Company proactively manages its day-to-day operations by
using video and telephonic conferencing. The Company remains vigilant of the
potential for other COVID-19 variant outbreaks and remains prepared to restore
the necessary protocols to minimize any disruptions to its current operations
and services.

Federal Economic Relief Funds To Aid Lending


On August 10, 2021, the Company through its subsidiary, the Bank, received from
the United States Department of the Treasury ("Treasury") a grant in the amount
of $1.8 million in federal Economic Relief Funds for Small Businesses under the
Treasury's Rapid Response Program for CDFIs. The Treasury also has determined
that the Company is eligible to receive up to $225.0 million in capital under
the Treasury's Emergency Capital Investment Program ("ECIP") for CDFI and MDI
institutions, which funding amount Treasury has determined will be $185.6
million, subject to increase as further funds become available. The Company has
indicated to Treasury its willingness to accept such additional funds. Closing
of the ECIP funding has been tentatively scheduled by Treasury to be on June 7,
2022.

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 loan losses.

The allowance for loan losses is established as probable incurred losses are
estimated to have occurred through a provision for loan losses charged to
earnings. Loan losses are charged against the allowance when management believes
the uncollectibility of a loan balance is confirmed. Subsequent recoveries, if
any, are credited to the allowance.

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

Sale of Real Property.


On February 11, 2021, the Company completed the sale of real property located at
3821 Bergenline Avenue, Union City, New Jersey for a sale price of $2.4 million.
Concurrent with the sale, the Bank and the purchaser entered into a fifteen-year
lease agreement whereby the Bank will lease back this real property at an
initial annual base rent of approximately $145,000 subject to annual rent
increases of 1.5%. Under the lease agreement, the Bank has four (4) consecutive
options to extend the term of the lease by five (5) years for each such option.
The sale lease-back resulted in a gain of approximately $623,000, net of
expenses, which is included in other non-interest income in the accompanying
Consolidated Statements of Operations.

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Ponce De Leon Foundation.


On January 27, 2022, the Company made a $5.0 million contribution to the Ponce
De Leon Foundation as part of the conversion and reorganization, which is
included in non-interest expense for the three months ended March 31, 2022, in
the accompanying Consolidated Statements of Operations.

Write-off and Write-Down.


In 2020, the Company entered into a business arrangement with the FinTech
startup company Grain Technologies, Inc. ("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 agreement with Grain, the Bank is the lender for
Grain-originated microloans with credit lines currently up to $1,000 and, where
applicable, the depository for related security deposits. Grain originates and
services these microloans and is responsible for maintaining compliance with the
Bank's origination and servicing standards, as well as applicable regulatory and
legal requirements. If a microloan is found to be fraudulent, becomes 120 days
delinquent upon 120 days of origination or defaults due to a failure of Grain to
properly service the microloan, the Bank's applicable standards for origination
or servicing are deemed to have not been complied with and the microloan is put
back to Grain, who then becomes responsible for the microloan and any related
losses. The microloans put back to Grain are accounted for as an "other asset,"
specifically referred to herein as the "Grain Receivable."

The Bank, pursuant to its agreement with Grain, at December 31, 2021, had 59,180
microloans outstanding, net of put backs, with credit extensions aggregating
$33.9 million. Of these microloans, the Bank estimates that 80 percent have been
made in low- and low-to-moderate income census tracts with an estimated 56
percent made to minority borrowers. At March 31, 2022, the Bank had 54,247
microloans outstanding, net of put backs, with an aggregate balance totaling
$31.0 million and which were performing, in management's opinion, comparably to
similar portfolios. Under the agreement with the Bank, Grain earns origination
and servicing fees based on the Bank's earnings from the microloans. Since
entering into the agreement with Grain in 2020 through March 31, 2022, the Bank
has paid Grain $1.9 million in such fees. The Company also has directly invested
$1.0 million in Grain.

Grain has been victimized by cyber fraud using synthetic and other forms of
fraudulent identifications, a phenomenon that has become prevalent with
FinTechs. Since the beginning of its agreement with Grain through March 31,
2022, 24,719 microloans amounting to $17.0 million have been deemed to be
fraudulent and put back to Grain, of which, as of March 31, 2022, $11.8 million
remain outstanding in the Grain Receivable (inclusive of a $1.8 million reserve
established as of December 31, 2021 by the Bank using a $1.8 million grant
received from the U.S. Treasury Department's Rapid Response Program to reduce
the Grain Receivable at December 31, 2021 to $8.5 million, an amount management
considered collectible at the time under the facts and circumstances then
known). Grain has agreed to apply at least 85% of origination and servicing fees
received from the Bank as payment for the Grain Receivable, and, upon the
completion of a series A financing, pay all amounts due on the Grain Receivable.
Although Grain has successfully held pre-series A fundraising rounds, including
through April 30, 2022, Grain remains a pre-profit startup highly dependent on
earnings from its relationship with the Bank, a new relationship with another
financial institution, and further capital raises which may not materialize.
Accordingly, Grain's ability to pay the Grain Receivable in the short term,
taking into account current economic conditions and regulatory requirements, was
considered.

Based on further investigation, evaluation and financial analysis during the
first quarter of 2022, the Company has assessed the collectability of the $11.8
million remaining Grain Receivable and has determined that it is appropriate to
write-off approximately $6.3 million and provide for an additional reserve of
$1.7 million, after applying a $1.6 million security deposit set-off, leaving a
net Grain Receivable balance of $2.2 million at March 31, 2022. This write-off
and write-down has negatively affected the Company's pre-tax earnings by
approximately $8.1 million and its net income by approximately $5.7 million, or
approximately ($0.26) and ($0.26) per basic and diluted share, respectively, on
an after-tax basis. In arriving at the amounts to be written-off and
written-down, the Company considered, among other things, the Bank's right to
offset security deposits associated with fraudulent loans, payments received
from Grain subsequent to December 31, 2021, and the discounted net present value
of future cash flows reasonably expected to be received by the Bank from Grain
over the next 18 months, based on prior payments, and the Bank's estimate for
any additional incurred fraudulent identities in the Grain portfolio. The Bank
determined that a 12% discount rate was appropriate in calculating net present
value of such payments. In addition, the Bank has considered the likelihood of
Grain prevailing in litigation it has instituted against a third party vendor
where Grain is demanding damages resulting from fraudulent loans originated by
Grain that were subject to the synthetic identifications that Grain's vendor
failed to identify. Grain is presently conducting a capital raise in the form of
a private placement of securities which has not been incorporated into the
analysis. Grain is also currently in the process of reviewing and affirming the
compliance of the remaining loans in the portfolio, which may have additional
fraudulent losses that are currently not estimable.

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The Company continues to closely monitor its portfolio of consumer loans
originated by Grain as well as Grain's refinement of solutions for detecting and
preventing cyber fraud in the application for microloans. The Company has
requested, and Grain has agreed, that no new microloans be originated until
further notice and that further extensions of credit to an existing microloan
borrower only be made upon confirmation that such borrower is not
fraudulent. The Company also evaluates on a monthly basis the likelihood that
Grain will be able to make payments on the Grain Receivable. If, as a result of
its continuing evaluation, the Company determines that Grain will not be able to
make timely payments on the Grain Receivable or additional Grain originated
microloans are found to be fraudulent, the Bank may be required to write-off
some or all of the remaining value of the Grain Receivable, which could
materially decrease the Company's net income. Further, like other start-up
companies, there is a higher level of risk that Grain may not be able to execute
its business plan and may fail. In the event Grain were to cease operations, and
although it has considered contingency plans, the Bank may have greater
difficulty in servicing and collecting the microloan portfolio. In such a case,
the level the Bank has provided for in its allowance for loan losses for its
microloan portfolio may be inadequate and it may need to increase its provision
for loan losses, which could materially decrease the Company's net income. As a
consequence of such events the Bank may determine it appropriate to terminate
its relationship with Grain and the value of the Company's equity investment in
Grain could become impaired.

The $8.1 million write-off and write-down is included in non-interest expense for the three months ended March 31, 2022, in the accompanying Consolidated Statements of Operations.

Vision 2025 Evolves


The Company is now in the later stages of its multi-pronged effort to upgrade
its infrastructure, adopt electronic banking services and restructure its retail
business model. Dubbed internally "Vision 2020," the effort has resulted in
significant beneficial results, continues to involve significant investments and
has served to ameliorate the otherwise detrimental effects of the COVID-19
pandemic.

As part of Vision 2020, the Company partnered with Salesforce to deploy
applications throughout the organization, including retail services, lending
processes, back-office operations, digital banking and loan underwriting.
Although the full implementation of the applications, dubbed internally as "GPS,
a Guided Path to Success," was delayed due to the COVID-19 pandemic, it was
fully implemented by the end 2021.

The infrastructure upgrade has focused primarily on implementing technology,
cybersecurity and network progression while establishing a Virtual Private
Network ("VPN"). To date the infrastructure upgrade has resulted in relocating
and migrating network and in-house servers, replacing outdated PCs, enhancing
internet capabilities, purchasing and deploying VPN-enabled laptops to a
significant majority of the Bank's personnel and the redeployment of disaster
recovery capabilities. The Company has achieved certain manpower-related cost
savings and enabled the uninterrupted continuity of operations by its staff
working remotely during the COVID-19 pandemic using its newly deployed disaster
recovery capabilities. The infrastructure upgrade has added resiliency, capacity
and redundancies to the Company's technology structures and enhances the
capability of the Company to increase its flexibility with alternate locations
of personnel.

The Company has adopted and deployed over 48 new electronic banking services,
products and applications since late 2018. These services range from on-line
banking, mobile banking, bill pay, positive pay, remote deposit capture, cash
management services, e-statements, data storage and management, ACH services,
electronic document storage, a paperless environment, dual-language telephone
banking service and VoIP telecommunications with an automation-based,
dual-language Customer Contact Center. These services have not only enabled the
Company to continue serving its customers as they, and the Company, converted to
a remote work environment; the services have served to increase the product
penetration and deepening relationships with customers.

The Company has also added to its social media capabilities and has begun to use
them in coordination with new targeted marketing campaigns now enabled by GPS
and its Marketing Cloud platform. The combination of social media and targeted
marketing campaigns was particularly effective with PPP loan originations using
many partnerships established with non-profit groups and community-based
organizations. Such efforts enabled the Company to more than triple the number
of second round PPP loan applications compared to the first round, and has
resulted in significant growth in retail deposits and new relationships.

The Company is also in the final stages of deploying 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 upon the easing of the COVID-19
pandemic and completion of a pilot test. 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 SaveBetter, LLC, a fintech
startup focusing on brokered deposits. As of March 31, 2022, the Company had
$42.8 million in such deposits. The recent regulatory easing of brokered deposit
rules may enable the Company to classify such deposits as core deposits.

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The Company's on-going adoption of a new retail business model has been
all-encompassing. It has involved the redesign of its retail branches, the shift
of branch operations to a centralized back office, the deployment of smart
ITM-enabled ATMs and Teller Cash Recyclers, the automation of manual processes
and, importantly, the adoption of universal bankers and retail sales. In 2019,
the Company earned national recognition as Branch Innovators of the Year for its
retail banking model at the 2019 Future Branches Retail Banking Summit in
Austin, Texas.

The Company has renovated most of its branches at costs significantly less than
previous efforts largely as a result of economies of scale, design modifications
and adoption of buildout techniques used by non-bank retail organizations. The
Bank's Riverdale branch was transformed into a new flagship recapturing
previously subleased space. This $1.5 million construction project commenced on
March 1, 2021 and was completed on time and on budget. Our grand re-opening took
place on July 27, 2021 and was attended by the Bronx Borough President who
praised Ponce Bank for remaining committed to the Bronx and for a long history
of leadership within the community. Our Astoria branch renovation project was
also completed in the second quarter of 2021. The Company intends to renovate up
to 7 additional branches in 2022. Renovation is now proceeding at our Smith
Street, Brooklyn, Union City, NJ, and Southern Boulevard, Bronx, banking
branches with the design phase completed at Southern Boulevard and in process at
Smith Street and Union City. Surveys are complete at Forest Hills, Jackson
Heights, and Stuyvesant Town branches. The Company has begun incorporating into
its retail branches loan origination personnel including a branded Ponce
Mortgage Center celebrating our comprehensive offerings made possible by our
subsidiary Ponce De Leon Mortgage Corporation as well as the Bank's new
division, Mortgage World Bankers. The Company still anticipates creating a
full-service branch at its mortgage office located in Flushing, Queens, New York
and a banking satellite at its office in Bergenfield, New Jersey, but these
projects are temporarily on hold pending completion of other renovations. The
Company's mortgage office in Flushing, Queens, expanded the Company's reach into
one of the most underserved areas of Queens according to recently reported PPP
loan penetration data.

Vision 2020 already has had a transformational effect on the Company. The
Company had approximately $1.06 billion in assets, $918.5 million in loans and
$809.8 million in deposits, at December 31, 2018. The Company has since grown to
$1.59 billion in assets, $1.30 billion in loans receivables, net of allowance
for loan losses of $16.9 million, and $1.18 billion in deposits at March 31,
2022, all while investing in infrastructure, implementing digital banking,
acquiring Mortgage World, adopting GPS, diversifying its product offering,
meeting the challenges of the COVID-19 pandemic, partnering with Fintech
companies and assisting its communities with 5,340 PPP loans totaling $261.4
million. The Company raised over $132.0 million in additional capital through
our conversion and reorganization and realized approximately $20.0 million in
net gain while freeing up approximately $40.0 million in investable funds
through our sale-and-leaseback initiative. 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
December 14, 2021, Treasury notified the Company that it is eligible to receive
an amount up to $185.6 million (which may increased to $225.0 million) under the
ECIP. Under the ECIP, Treasury will provide investment capital directly to
depository institutions that are CDFIs or MDIs, such as the Bank or their
holding companies such as the Company, to provide loans, grants, and forbearance
for small businesses, minority-owned businesses, and consumers, in low-income
and underserved communities. If made, Treasury's investment would be in exchange
for the Company issuing senior perpetual noncumulative preferred stock directly
to Treasury on terms established by the Treasury. 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. The preferred stock will provide for customary
preferences, including provisions upon nonpayment of dividends and board seats
in such an event as well as customary protective provisions. Treasury has
notified the Company that it anticipates closing the ECIP transaction on June 7,
2022. The Company is evaluating the proposed standard terms of the investment
provided by the Treasury, as well as other considerations. We cannot provide any
assurance or guarantee concerning what the actual terms, conditions and
preferences of the senior preferred stock will be or whether they will be
acceptable.

The Company is cementing Vision 2025, its roadmap to acquiring the resources
needed to lead efforts to remediate the disparate effects of the COVID-19
pandemic and the wealth and financial gaps present in its communities and
similar communities outside the New York City metropolitan area. The Company
traces its roots to its organization in 1960 as Ponce De Leon Federal Savings
and Loan Association by Latino leaders concerned that the financial needs of the
Bronx and its Latino population were not being recognized and addressed. True to
its roots, the Company remains committed to ensuring that the disparate effects
of the COVID-19 pandemic and the wealth and financial gaps present in minority
communities are addressed in earnest

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The following table presents the Company's PPP loans outstanding as of March 31,
2022:


                                               Aggregate       Median        Average
                                 Number         Amount         Amount        Amount
State        Counties           of Loans       of Loans       of Loans      of Loans
                                               (Dollars in thousands)
New York     Albany                     2     $       116     $      58     $      58
             Bronx                    165          14,382            13            87
             Dutchess                   2              31            15            16
             Kings                     92          31,918            15           347
             Nassau                    43           2,591            11            60
             New York                 107          26,557            16           248
             Orange                     3              36            11            12
             Queens                   208           6,483            15            31
             Richmond                   6             278            17            46
             Rockland                   4             169            22            42
             Suffolk                   15             192            11            13
             Westchester               24             451            11            19
               Total New York         671     $    83,204     $      14     $     124

New Jersey   Bergen                    16     $       678     $      20     $      42
             Burlington                 1              20            20            20
             Camden                     1              21            21            21
             Essex                     16             163            12            10
             Hudson                    15           1,167            19            78
             Mercer                     2              52            26            26
             Monmouth                   2             533           267           267
             Ocean                      3              24             6             8
             Passaic                    6              58            10            10
             Sussex                     1              12            12            12
             Union                      2              16             8             8
               Total New Jersey        65     $     2,744     $      15     $      42

Pennsylvania Berks                      1              16            16            16
             Total                    737     $    85,964     $      14     $     117

Comparison of Financial Condition at March 31, 2022 and December 31, 2021


Total Assets. Total consolidated assets decreased $58.9 million, or 3.6%, to
$1.59 billion at March 31, 2022 from $1.65 billion at December 31, 2021. The
decrease in total assets is attributable to decreases of $84.6 million in cash
and cash equivalents, $7.9 million in mortgage loans held for sale, at fair
value, $6.4 million in other assets, $4.6 million in net loans receivable
(inclusive of $50.8 million net decrease in PPP loans), $581,000 in FHLBNY stock
and $338,000, net, in premises and equipment. The decrease in total assets was
reduced by increases of $41.5 million in available-for-sale securities, $3.6
million in deferred tax assets and $437,000 in accrued interest receivable.

Cash and Cash Equivalents. Cash and cash equivalents decreased $84.6 million, or
55.0%, to $69.3 million at March 31, 2022, compared to $153.9 million at
December 31, 2021. The decrease in cash and cash equivalents was primarily the
result of purchases of available-for-sale securities, a decrease in net
deposits, a decrease in advances of warehouse lines of credit, repayment of
advances from the FHLBNY and a contribution to the Ponce De Leon Foundation. The
decrease in cash and cash equivalents was offset by proceeds from the sale of
loans, proceeds from maturities/calls of available-for-sale securities, increase
in advance payments by borrowers and proceeds from redemption of FHLBNY stock.

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Securities. The composition of securities at March 31, 2022 and December 31,
2021 and the amounts maturing of each classification are summarized as follows:

                                                March 31, 2022             December 31, 2021
                                           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 one year through five years                2,982         2,833          2,981         2,934
More than five years through ten years              -             -              -             -
                                                2,982         2,833          2,981         2,934
Corporate Bonds:
Amounts maturing:
Three months or less                                -             -              -             -
More than three months through one year             -             -              -             -
More one year through five years                4,000         3,801          4,445         4,381
More than five years through ten years         21,849        21,300         16,798        16,803
                                               25,849        25,101         21,243        21,184
Mortgage-Backed Securities                    134,854       126,865         90,950        89,228
Total Available-for-Sale Securities        $  163,685     $ 154,799     $  115,174     $ 113,346

Held-to-Maturity Securities:
Mortgage-Backed Securities                        927           868            934           914

Total Held-to-Maturity Securities $ 927 $ 868 $

934 $ 914




The $41.5 million increase in available-for-sale securities was due to $53.4
million in available-for-sale securities that were purchased during the three
months ended March 31, 2022. The increase was offset primarily by a $8.8 million
in unrealized loss, $4.5 million in principal payments and one
available-for-sale security in the amount of $445,000 was called during the
three months ended March 31, 2022. There were no available-for-sale securities
sold during the three months ended March 31, 2022.

Gross Loans Receivable. The composition of gross loans receivable at March 31,
2022 and at December 31, 2021 and the percentage of each classification to total
loans are summarized as follows:

                                         March 31, 2022             December 31, 2021            Increase (Decrease)
                                      Amount        Percent        Amount        Percent        Dollars        Percent
                                                                  (Dollars in thousands)
Mortgage loans:
1-4 Family residential
Investor-Owned                      $   323,442         24.6 %   $   317,304         24.0 %   $      6,138          1.9 %
Owner-Occupied                           95,234          7.2 %        96,947          7.3 %         (1,713 )       (1.8 %)
Multifamily residential                 368,133         28.0 %      

348,300 26.3 % 19,833 5.7 % Nonresidential properties

               251,893         19.1 %       

239,691 18.1 % 12,202 5.1 % Construction and land

                   144,881         11.0 %       

134,651 10.2 % 10,230 7.6 % Total mortgage loans

                  1,183,583         90.0 %     

1,136,893 86.0 % 46,690 4.1 % Nonmortgage loans: Business loans (1)

                      100,253          7.6 %       

150,512 11.4 % (50,259 ) (33.4 %) Consumer loans (2)

                       31,899          2.4 %        

34,693 2.6 % (2,794 ) (8.1 %) Total nonmortgage loans

                 132,152         10.0 %       

185,205 14.0 % (53,053 ) (28.6 %) Total gross loans

                   $ 1,315,735        100.0 %   $ 

1,322,098 100.0 % $ (6,363 ) (0.5 %)

(1) As of March 31, 2022 and December 31, 2021, business loans include $86.0

million and $136.8 million, respectively, of PPP loans.

(2) As of March 31, 2022 and December 31, 2021, consumer loans include $31.0

million and $33.9 million of microloans originated by the Bank pursuant to

its arrangement with Grain.

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The decrease in the loan portfolio was primarily the result of a $50.8 million
decrease in PPP loans at March 31, 2022 compared to December 31, 2021. Based on
current internal loan reviews, the Company believes that the quality of our
underwriting, our weighted average loan-to-value ratio of 57.3% 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, 2022 and December 31, 2021, approximately 8.6%
and 7.9%, respectively, of the outstanding principal balance of the Bank's
commercial real estate mortgage loans were secured by owner-occupied commercial
real estate. 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 100%
guideline for construction and land mortgage loans and up to 400% for investor
owned commercial real estate mortgage loans. Both ratios are calculated by
dividing certain types of loan balances for each of the two categories by the
Bank's total risk-based capital. At March 31, 2022 and December 31, 2021, the
Bank's construction and land mortgage loans as a percentage of total risk-based
capital was 54.3% and 79.6%, respectively. Investor owned commercial real estate
mortgage loans as a percentage of total risk-based capital was 263.6% and 396.2%
as of March 31, 2022 and December 31, 2021, respectively. At March 31, 2022, the
Bank was within the 100% guideline for construction and land mortgage loans and
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.

Mortgage Loans Held For Sale. Mortgage loans held for sale, at fair value, at March 31, 2022 decreased $7.8 million to $8.0 million from $15.8 million at December 31, 2021.

Deposits. The composition of deposits at March 31, 2022 and December 31, 2021 and changes in dollars and percentages are summarized as follows:

                                              March 31, 2022               December 31, 2021            Increase (Decrease)
                                                          Percent                       Percent
                                           Amount        of Total        Amount        of Total        Dollars        Percent
                                                                        (Dollars in thousands)
Demand (1)                               $   281,132          23.8 %   $   274,956          22.8 %   $      6,176          2.2 %
Interest-bearing deposits:
NOW/IOLA accounts                             33,010           2.8 %        35,280           2.9 %         (2,270 )       (6.4 %)
Money market accounts                        169,847          14.4 %       186,893          15.5 %        (17,046 )       (9.1 %)
Reciprocal deposits                          160,510          13.6 %       143,221          11.9 %         17,289         12.1 %
Savings accounts                             133,966          11.4 %       134,887          11.2 %           (921 )       (0.7 %)
Total NOW, money market, reciprocal
and savings                                  497,333          42.1 %       

500,281 41.5 % (2,948 ) (0.6 %) Certificates of deposit of $250K or more

                                          75,130           6.4 %        78,454           6.5 %         (3,324 )       (4.2 %)
Brokered certificates of deposit              79,282           6.7 %        79,320           6.6 %            (38 )       (0.0 %)
Listing service deposits (2)                  53,876           4.6 %        66,411           5.5 %        (12,535 )      (18.9 %)
Certificates of deposit less than
$250K                                        194,412          16.5 %       

205,294 17.0 % (10,882 ) (5.3 %) Total certificates of deposit

                402,700          34.1 %       

429,479 35.6 % (26,779 ) (6.2 %) Total interest-bearing deposits

              900,033          76.2 %       929,760          77.1 %        (29,727 )       (3.2 %)
Total deposits                           $ 1,181,165         100.0 %   $ 1,204,716         100.0 %   $    (23,551 )       (2.0 %)


(1) As of March 31, 2022 and December 31, 2021, included in demand deposits are

deposits related to net PPP funding.

(2) As of March 31, 2022 and December 31, 2021, there were $19.0 million and

       $29.0 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, 2022
and December 31, 2021. The Management Asset/Liability Committee generally meets
on a bi-weekly basis to review funding needs, if any, and to ensure the Company
operates within the approved limitations.


                                       55
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Advances from FHLBNY. The Bank had outstanding borrowings at March 31, 2022 and December 31, 2021 of $93.4 million and $106.3 million, respectively. These borrowings are in the form of advances from the FHLBNY.


Warehouse Lines of Credit. Mortgage World had maintained two warehouse lines of
credit with financial institutions for the purpose of funding the origination
and sale of residential mortgages. At December 31, 2021, Mortgage World utilized
$15.1 million for funding of mortgage loans held for sale and had unused lines
of credit of $14.9 million. At March 31, 2022, the remaining balance of such
lines of credit was $753,000. During the first quarter of 2022, Mortgage World
became a division of the Bank and the Bank began funding these loans.

Stockholders' Equity. The Company's consolidated stockholders' equity increased
$110.3 million, or 58.3%, to $299.6 million at March 31, 2022 from $189.3
million at December 31, 2021. This increase in stockholders' equity was mainly
attributable to $118.0 million as a result of the sale of equity in the
second-step conversion and reorganization, $4.0 million contribution in common
stock to the Ponce De Leon Foundation, $366,000 in Employee Stock Ownership Plan
shares committed to be released and $351,000 in share-based compensation, offset
by $6.8 million in net loss and $5.6 million in other comprehensive loss.


Comparison of Results of Operations for the Three Months Ended March 31, 2022 and 2021

The discussion of the Company's results of operations for the three months ended March 31, 2022 and 2021 are presented below. The results of operations for interim periods may not be indicative of future results.

Ponce Financial Group, Inc., as the successor by merger with PDL Community Bancorp Consolidated


Overview. Net loss for the three months ended March 31, 2022 was ($6.8 million)
compared to net income of $2.5 million for the three months ended March 31,
2021. Loss per basic and diluted share was ($0.31) for the three months ended
March 31, 2022 compared to earnings per basic and diluted share of $0.15 for
three months ended March 31, 2021. The net loss from net income for the three
months ended March 31, 2022 compared to the three months ended March 31, 2021
was due to an increase of $15.2 million in non-interest expense (of which $8.1
million was attributable to the write-off and write-down related to the Grain
Receivable and $5.0 million was the contribution to the Ponce De Leon
Foundation), a decrease of $1.7 million in non-interest income and an increase
of $572,000 in provision for loan losses. The net loss was offset by increases
of $4.4 million in net interest income and a $2.9 million benefit for income
taxes, rather than a $732,000 provision for income taxes quarter to quarter.

Interest and Dividend Income. Interest and dividend income increased $3.8
million, or 25.3%, to $19.0 million for the three months ended March 31, 2022
from $15.2 million for the three months ended March 31, 2021. Interest income on
loans receivable, which is the Company's primary source of income, increased
$3.3 million, or 21.9%, to $18.2 million for the three months ended March 31,
2022 from $14.9 million for the three months ended March 31, 2021 primarily due
to an increase in average loans receivable due mostly to PPP lending. Average
loans receivable increased $86.3 million, or 7.0% to $1.33 billion for the three
months ended March 31, 2022 as compared to $1.24 billion for the three months
ended March 31, 2021. Interest and dividend income on available-for-sale
securities and FHLBNY stock and deposits due from banks increased $566,000, or
224.6%, to $818,000 for the three months ended March 31, 2022 from $252,000 for
the three months ended March 31, 2021.

Interest Expense. Interest expense decreased $605,000, or 26.5%, to $1.7 million
for the three months ended March 31, 2022 from $2.3 million for the three months
ended March 31, 2021, primarily due to a lower average cost of funds.

Net Interest Income. Net interest income increased $4.4 million, or 34.5%, to
$17.3 million for the three months ended March 31, 2022 from $12.9 million for
the three months ended March 31, 2021. The increase for the three months ended
March 31, 2022 compared to three months ended March 31, 2021 was attributable to
an increase of $3.8 million in interest and dividend income primarily due to an
increase in average loans receivable and a decrease of $605,000 in interest
expense due primarily to a lower average cost of funds on interest bearing
liabilities. Net interest rate spread increased by 72 basis points to 4.48% for
the three months ended March 31, 2022 from 3.76% for the three months ended
March 31, 2021. The increase in the net interest rate spread for the three
months ended March 31, 2022 compared to the three months ended March 31, 2021
was primarily due to an increase in the average yields on interest-earning
assets of 44 basis points to 5.14% for the three months ended March 31, 2022
from 4.70% for the three months ended March 31, 2021, and a decrease in the
average rates paid on interest-bearing liabilities of 28 basis points to 0.66%
for the three months ended March 31, 2022 from 0.94% for the three months ended
March 31, 2021.

Net interest margin increased 68 basis points for the three months ended
March 31, 2022, to 4.68% from 4.00% for the three months ended March 31, 2021,
reflecting both our organic loan growth and the amortization of fee income from
our PPP lending.

                                       56
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The historically low benchmark federal funds interest rate of the last several
years implemented in response the turmoil resulting from COVID-19 pandemic is
ending. The Federal Reserve Board increased the benchmark federal funds interest
rate by 25 basis points on March 16, 2022 and an additional increase on May 5,
2022 of 50 basis points. The Federal Reserve Board has signaled that there will
likely be additional federal funds interest rate increases during 2022; may be
as many as five more. The recent increase and the anticipated increases are 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. The Bank believes it is well
positioned to withstand this rising interest rate environment in the near term
as it is asset sensitive.

Non-Interest Income. Non-interest income decreased $1.7 million, or 42.8%, to
$2.2 million for the three months ended March 31, 2022 from $3.9 million for the
three months ended March 31, 2021. The decrease in non-interest income for the
three months ended March 31, 2022 compared to the three months ended March 31,
2021 was due to decreases of $1.1 million in income on sale of mortgage loans,
$663,000, net of expenses, from the sale of real properties recognized in the
first quarter of 2021, $186,000 in late and prepayment charges and $78,000 in
loan origination fees, offset by increases of $124,000 in other non-interest
income, $115,000 in brokerage commissions and $111,000 in service charges and
fees.

Non-Interest Expense. Non-interest expense increased $15.2 million, or 117.4%,
to $28.1 million for the three months ended March 31, 2022 from $12.9 million
for the three months ended March 31, 2021. The increase in non-interest expense
for the three months ended March 31, 2022, compared to the three months ended
March 31, 2021 was attributable to an aggregate $8.1 million in write-off and
write-down related to the receivable due from Grain for microloans originated by
Grain and put back to Grain due to fraud, $5.0 million in contribution to the
Ponce De Leon Foundation in connection with the second-step conversion and
reorganization, and increases of $1.5 million in compensation and benefits,
$558,000 in occupancy and equipment, $253,000 in data processing expenses,
$72,000 in professional fees and $33,000 in marketing and promotional expense,
offset by decreases of $174,000 in other operating expenses and $135,000 in
direct loan expenses.

Income Tax (Benefit) Provision. The Company had a benefit for income taxes of
($2.9 million) for the three months ended March 31, 2022 compared to a provision
for income taxes of $732,000 for three months ended March 31, 2021, resulting in
effective tax rates of 30.2% and 23.0%, respectively. The increase in
the effective tax rate is attributable to an increase of $168,000 in the
valuation allowance related to the unused non-deductible portion of the
remaining charitable contribution deduction.

Segments. The Company has two reportable segments; the Bank and, for the three
months ended March 31, 2021, Mortgage World, and, for the three months ended
March 31, 2022, Mortgage World as a division of the Bank. Income from the Bank
consists primarily of interest and fees earned on loans and investment
securities and service charges on deposit accounts. Income from Mortgage World
consists primarily of taking of applications from the general public for
residential mortgage loans, underwriting them to investors' standards, closing
and funding them and holding them until they are sold to investors.

The table below shows the results of operations for the Company's segments, the Bank and Mortgage World, for the periods indicated.

                                                                                      Ponce Bank                                                                   Mortgage World
                                                          For the Three Months Ended March 31,            Increase (Decrease)            For the Three Months Ended March 31,           Increase (Decrease)
                                                             2022                       2021              Dollars       Percent             2022                      2021              Dollars       Percent
                                                                                                                       (Dollars in thousands)
Interest and dividend income                          $           18,888         $           15,027     $     3,861         25.7 %    $             130         $             150     $       (20 )      (13.3 %)
Interest expense                                                   1,696                      2,186            (490 )      (22.4 %)                  68                       140             (72 )      (51.4 %)
Net interest income                                               17,192                     12,841           4,351         33.9 %                   62                        10              52            *
Provision for loan losses                                          1,258                        686             572         83.4 %                    -                         -               -            - %
Net interest income after provision for loan losses               15,934                     12,155           3,779         31.1 %                   62                        10              52            *
Non-interest income                                                1,055                      1,804            (749 )      (41.5 %)               1,297                     2,358          (1,061 )      (45.0 %)
Non-interest expense                                              20,118                     10,000          10,118        101.2 %                2,223                     2,291             (68 )       (3.0 %)
(Loss) income before income taxes                                 (3,129 )                    3,959          (7,088 )     (179.0 %)                (864 )                      77            (941 )          *
Provision for income taxes                                           406                      1,105            (699 )      (63.3 %)                   -                        40             (40 )     (100.0 %)
Net (loss) income                                     $           (3,535 )       $            2,854     $    (6,389 )     (223.9 %)   $            (864 )       $              37     $      (901 )          *



* Represents more than 500%.

                                       57
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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

                                                                 2022                                               2021
                                              Average                                            Average
                                            Outstanding                        Average         Outstanding                        Average
                                              Balance        Interest      Yield/Rate (1)        Balance        Interest      Yield/Rate (1)
                                                                                 (Dollars in thousands)
Interest-earning assets:
Loans (2)                                   $  1,325,433     $  18,200                5.57 %   $  1,239,127     $  14,925                4.88 %
Securities (3)                                   138,095           717                2.11 %         22,516           176                3.17 %
Other (4)                                         38,253           101                1.07 %         46,581            76                0.66 %
Total interest-earning assets                  1,501,781        19,018                5.14 %      1,308,224        15,177                4.70 %
Non-interest-earning assets                      225,006                                             63,951
Total assets                                $  1,726,787                                       $  1,372,175
Interest-bearing liabilities:
NOW/IOLA                                    $     33,083     $      16                0.20 %   $     33,085     $      38                0.47 %
Money market                                     319,806           235                0.30 %        277,104           304                0.44 %
Savings                                          135,404            32                0.10 %        126,961            39                0.12 %
Certificates of deposit                          419,104           803                0.78 %        405,980         1,219                1.22 %
Total deposits                                   907,397         1,086                0.49 %        843,130         1,600                0.77 %
Advance payments by borrowers                      9,808             1                0.04 %          8,899             1                0.05 %
Borrowings                                       114,688           593                2.10 %        129,755           684                2.14 %
Total interest-bearing liabilities             1,031,893         1,680                0.66 %        981,784         2,285                0.94 %
Non-interest-bearing liabilities:
Non-interest-bearing demand                      372,433             -                              215,116             -
Other non-interest-bearing liabilities            47,562             -                               13,754             -
Total non-interest-bearing liabilities           419,995             -                              228,870             -
Total liabilities                              1,451,888         1,680                            1,210,654         2,285
Total equity                                     274,899                                            161,521
Total liabilities and total equity          $  1,726,787                              0.66 %   $  1,372,175                              0.94 %
Net interest income                                          $  17,338                                          $  12,892
Net interest rate spread (5)                                                          4.48 %                                             3.76 %
Net interest-earning assets (6)             $    469,888                                       $    326,440
Net interest margin (7)                                                               4.68 %                                             4.00 %
Average interest-earning assets to
interest-bearing liabilities                                                        145.54 %                                           133.25 %


(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.

(5) 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.

(6) Net interest-earning assets represent total interest-earning assets less

total interest-bearing liabilities.



(7) Net interest margin represents net interest income divided by average total
    interest-earning assets.




                                       58
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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,
                                                                       2022 vs. 2021
                                                     Increase (Decrease) Due to            Total Increase
                                                    Volume                 Rate              (Decrease)
                                                                      (In thousands)
Interest-earning assets:
Loans (1)                                        $       1,040         $      2,235       $          3,275
Securities (2)                                             903                 (362 )                  541
Other                                                      (14 )                 39                     25
Total interest-earning assets                            1,929                1,912                  3,841
Interest-bearing liabilities:
NOW/IOLA                                                     -                  (22 )                  (22 )
Money market                                                47                 (116 )                  (69 )
Savings                                                      3                  (10 )                   (7 )
Certificates of deposit                                     39                 (455 )                 (416 )
Total deposits                                              89                 (603 )                 (514 )
Borrowings                                                 (79 )                (12 )                  (91 )
Total interest-bearing liabilities                          10                 (615 )                 (605 )
Change in net interest income                    $       1,919         $    

2,527 $ 4,446

(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.

Ponce Bank Segment


Total Assets. The Bank's, excluding Mortgage World, total assets decreased $55.8
million, or 3.4%, to $1.57 billion at March 31, 2021 from $1.63 billion at
December 31, 2021. The decrease in the Bank's total assets was primarily due to
decreases of $90.1 million in cash and cash equivalents, $4.6 million in net
loans receivable, $4.5 million in other assets, $581,000 in FHLBNY stock and
$320,000 in premises and equipment. The decrease in total assets was offset by
increases of $41.5 million in available-for-sale securities, $2.5 million in
deferred tax assets and $344,000 in accrued interest receivable.

Net Income (Loss). The Bank's net loss was ($3.5 million) for the three months
ended March 31, 2022 compared to net income of $2.9 million for the three months
ended March 31, 2021 primarily due to an increase in non-interest expense as a
resulf of an aggregate $8.1 million write-off and write down related to the
Grain Receivable.

Interest and Dividend Income. Interest and dividend income increased $3.9
million, or 25.7%, to $18.9 million for the three months ended March 31, 2022
from $15.0 million for the three months ended March 31, 2021. Interest income on
loans receivable, which is the Bank's primary source of income, increased $3.3
million, or 22.3% to $18.1 million for the three months ended March 31, 2022
from $14.8 million for the three months ended March 31, 2021.

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The following table presents interest income on loans receivable for the periods
indicated:

                                                For the Three Months Ended
                                                         March 31,                      Change
                                                  2022               2021        Amount      Percent
                                                               (Dollars in thousands)
1-4 Family residential                         $    5,051         $    5,136     $   (85 )       (1.7 %)
Multifamily residential                             3,839              3,507         332          9.5 %
Nonresidential properties                           3,084              2,412         672         27.9 %
Construction and land                               2,099              1,891         208         11.0 %
Business loans                                      2,470                906       1,564        172.6 %
Consumer loans                                      1,527               

923 604 65.4 % Total interest income on loans receivable $ 18,070 $ 14,775 $ 3,295 22.3 %

* Represents more than 500%.

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
                                                     2022                    2021         Amount      Percent
                                                                   (Dollars in thousands)
Interest on deposits due from banks            $             36           $        2     $     34            *
Interest on available-for-sale securities                   716                  176          540        306.8 %
Dividend on FHLBNY stock                                     66                   74           (8 )      (10.8 %)
Total interest and dividend income             $            818           $ 

252 $ 566 224.6 %

* Represents more than 500%.


Interest Expense. Interest expense decreased $490,000, or 22.4%, to $1.7 million
for the three months ended March 31, 2022 from $2.2 million for the three months
ended March 31, 2021.

The following table presents interest expense for the periods indicated:



                                                For the Three Months Ended March 31,                 Change
                                                   2022                      2021             Amount        Percent
                                                                     (Dollars in thousands)
Certificates of deposit                      $             803         $           1,219     $    (416 )       (34.1 %)
Money market                                               237                       308           (71 )       (23.1 %)
Savings                                                     33                        39            (6 )       (15.4 %)
NOW/IOLA                                                    16                        38           (22 )       (57.9 %)
Advance payments by borrowers                                1                         1             -             - %
Borrowings                                                 606                       581            25           4.3 %
Total interest expense                       $           1,696         $           2,186     $    (490 )       (22.4 %)


Net Interest Income. Net interest income increased $4.4 million, or 33.9%, to
$17.2 million for the three months ended March 31, 2022 from $12.8 million for
the three months ended March 31, 2021, primarily as a result of organic loan
growth and a lower average cost of funds on interest bearing liabilities.

Provision for loan losses. The provision for loan losses represents a charge to
earnings necessary to establish the ALLL that, in management's opinion, should
be adequate to provide coverage for the inherent losses on outstanding loans.

In evaluating the level of the ALLL, management analyzes several qualitative
loan portfolio risk factors including, but not limited to, management's ongoing
review and grading of loans, facts and issues related to specific loans,
historical loan loss and delinquency experience, trends in past due and
non-accrual loans, existing risk characteristics of specific loans or loan
pools, the fair value of underlying collateral, current economic conditions and
other qualitative and quantitative factors which could affect potential credit

                                       60
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losses. See Note 1, "Nature of Business and Summary of Significant Accounting Policies -Allowance for Loan Losses" of the Notes to the accompanying Consolidated Financial Statements for additional information.


After an evaluation of these factors, the Bank established a provision for loan
losses for the three months ended March 31, 2022 of $1.3 million compared to
$686,000 for the three months ended March 31, 2021. The provision for loan
losses during the three months ended March 31, 2022 was impacted by the change
in qualitative factors during the period related to the microloans originated by
Grain. The provision for loan losses during the three months ended March 31,
2021 primarily reflects the Bank's assessment of the economic impact of the
COVID-19 pandemic on borrowers and their ability to repay in the short-term.

Non-interest Income. Non-interest income decreased $749,000, or 41.5%, to $1.1 million for the three months ended March 31, 2022 from $1.8 million for the three months ended March 31, 2021.

The following table presents non-interest income for the periods indicated:


                                                 For the Three Months Ended March 31,                 Change
                                                    2022                      2021             Amount       Percent
                                                                      (Dollars in thousands)
Service charges and fees                      $             440         $             329     $     111         33.7 %
Brokerage commissions                                       133                         -           133            - %
Late and prepayment charges                                  58                       244          (186 )      (76.2 %)
Gain on sale of real property                                 -                       663          (663 )     (100.0 %)
Other                                                       424                       568          (144 )      (25.4 %)
Total non-interest income                     $           1,055         $           1,804     $    (749 )      (41.5 %)


Non-interest Expense. Non-interest expense increased $10.1 million, or 101.2%,
to $20.1 million for the three months ended March 31, 2022 from $10.0 million
for the three months ended March 31, 2021. The increase was primarily due to an
aggregate $8.1 million write-off and write-down related to the Grain Receivable
due from Grain for microloans originated by Grain and put back to Grain due to
fraud, and an increase of $1.0 million in compensation and benefits.

The following table presents non-interest expense for the periods indicated:

                                                        For the Three Months Ended March 31,                 Change
                                                           2022                       2021             Amount      Percent
                                                                            (Dollars in thousands)
Compensation and benefits                           $            5,095         $            4,072     $  1,023         25.1 %
Occupancy and equipment                                          3,033                      2,498          535         21.4 %
Data processing expenses                                           836                        581          255         43.9 %
Direct loan expenses                                               768                        462          306         66.2 %
Insurance and surety bond premiums                                 147                        146            1          0.7 %
Office supplies, telephone and postage                             358                        352            6          1.7 %
Professional fees                                                  925                        777          148         19.0 %
Grain write-off and write-down                                   8,074                          -        8,074            - %
Marketing and promotional expenses                                  61                         29           32        110.3 %
Directors fees                                                      71                         69            2          2.9 %
Regulatory dues                                                     83                         60           23         38.3 %
Other operating expenses                                           667                        954         (287 )      (30.1 %)
Total non-interest expense                          $           20,118     
   $           10,000     $ 10,118        101.2 %


Mortgage World Segment

Total Assets. Mortgage World's total assets decreased $4.2 million, or 20.7%, to
$15.9 million at March 31, 2022 from $20.1 million at December 31, 2021. The
decrease in Mortgage World's total assets was primarily due to decreases of $7.9
million in mortgage loans held for sale, at fair value, $503,000 in other
assets, $41,000 in loans receivable and $18,000 in premises and equipment. The

                                       61
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decrease in Mortgage World's total assets was offset by increases of $4.2 million in cash and cash equivalents and $93,000 in accrued interest receivable.

Net Income (Loss). Mortgage World's net loss was ($864,000) for the three months ended March 31, 2022 compared to net income of $37,000 for the three months ended March 31, 2021.


Non-interest Income. Non-interest income decreased $1.1 million, or 45.0%, to
$1.3 million for the three months ended March 31, 2022 from $2.4 million for the
three months ended March 31, 2021. The decrease in non-interest income was
attributable to a decrease of $1.1 million in gain on sale of mortgage loans.

The following table presents non-interest income for the periods indicated:


                                                 For the Three Months Ended March 31,                 Change
                                                    2022                      2021             Amount       Percent
                                                                      (Dollars in thousands)
Brokerage commissions                         $             205         $             223     $    (18 )        (8.1 %)
Gain on sale of mortgage loans                              418                     1,508       (1,090 )       (72.3 %)
Loan origination                                            461                       539          (78 )       (14.5 %)
Other                                                       213                        88          125         142.0 %
Total non-interest income                     $           1,297         $           2,358     $ (1,061 )       (45.0 %)


Non-interest Expense. Non-interest expense decreased $68,000, or 3.0%, to $2.2 million for the three months ended March 31, 2022 from $2.3 million for the three months ended March 31, 2021.


The following table presents non-interest expense for the periods indicated:

                                                       For the Three Months Ended March 31,                Change
                                                          2022                      2021            Amount      Percent
                                                                           (Dollars in thousands)
Compensation and benefits                           $           1,679         $           1,241     $   438         35.3 %
Occupancy and equipment                                           144                       122          22         18.0 %
Data processing                                                    11                        13          (2 )      (15.4 %)
Direct loan expense                                               106                       547        (441 )      (80.6 %)
Office supplies, telephone and postage                             47                        57         (10 )      (17.5 %)
Professional fees                                                  55                       244        (189 )      (77.5 %)
Marketing and promotional expenses                                 10                         9           1         11.1 %
Other operating expenses                                          171                        58         113        194.8 %
Total non-interest expense                          $           2,223         $           2,291     $   (68 )       (3.0 %)


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 Management Committee is responsible for
evaluating the interest rate risk inherent in the Bank's assets and liabilities,
for determining the level of risk that is appropriate, given the business
strategy, operating environment, capital, liquidity and performance objectives,
and for managing this risk consistent with policies and guidelines approved by
the Board of Directors. The Bank 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 does not engage in hedging activities, such as engaging in futures,
options or swap transactions, or investing in high-risk mortgage derivatives,
such as collateralized mortgage obligation residual interests, real estate
mortgage investment conduit residual interests or stripped mortgage backed
securities. Mortgage World did not engage in hedging activities to cover the
risks of interest rate movements while it held mortgages for sale. The then low
mortgage interest rates and their limited volatility had effectively mitigated
such risks.

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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 rates. As of
March 31, 2022, in the event of an instantaneous upward and downward change in
rates from management's interest rate forecast over the next twelve months,
assuming a static balance sheet, the following estimated changes are calculated:


                   Net Interest Income         Year 1 Change
Rate Shift (1)       Year 1 Forecast            from Level
                  (Dollars in thousands)
+400             $                 68,379         (5.15%)
+300                               69,421         (3.71%)
+200                               70,410         (2.33%)
+100                               71,339         (1.05%)
Level                              72,093           -%
-100                               71,961         (0.18%)


(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, 2022, the earnings simulation model indicated that the Bank was in compliance with the Board of Directors approved Interest Rate Risk Policy.


Economic Value of Equity Model. 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, 2022, 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                       $   223,690     $   (77,286 )              (25.68 %)           15.32 %                (2,568 )
+300                           241,665         (59,311 )              (19.71 %)           16.19 %                (1,971 )
+200                           260,186         (40,790 )              (13.55 %)           17.03 %                (1,355 )
+100                           280,786         (20,190 )               (6.71 %)           17.95 %                  (671 )
Level                          300,976               -                     - %            18.79 %                     -
-100                           326,945          25,969                  8.63 %            19.92 %                   863


(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.

                                       63
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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 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, 2022, the EVE model indicated that the Bank was in compliance with the Board of Directors' approved Interest Rate Risk Policy.



Most Likely Earnings Simulation Models.  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 Asset/Liability Committee reviews each of the above interest
rate sensitivity analyses along with several different interest rate scenarios
as part of its responsibility to provide a satisfactory, consistent level of
profitability within the framework of established liquidity, loan, investment,
borrowing and capital policies.

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 Asset/Liability Management Committee may determine that the Company should
over time become more or less asset or liability sensitive depending on the
underlying balance sheet circumstances and its conclusions regarding interest
rate fluctuations in future periods. The historically low benchmark federal
funds interest rate of the last several years implemented in response the
turmoil resulting from COVID-19 pandemic is ending. The Federal Reserve Board
increased the benchmark federal funds interest rate by 25 basis points on March
16, 2022 and an additional increase on May 5, 2022 of 50 basis points. The
Federal Reserve Board has signaled that there will likely be additional federal
funds interest rate increases during 2022; maybe as many as five more. The
recent increase and the anticipated increases are 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. The Bank believes it is well positioned to
withstand this rising interest rate environment in the near term as it is asset
sensitive.

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

                                       64
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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.


The following table sets forth the Company's interest-earning assets and its
interest-bearing liabilities at March 31, 2022, 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, 2022, 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, 2022
                                                                                           Time to Repricing
                                                                                                                                                Non
                                                                                                                             Total            Earning
                                                                                                                            Earning          Assets &
                                                            Zero Days      Zero Days       Zero Days                        Assets &            Non
                               Zero to 90      Zero to        to One         to Two         to Five       Five Years        Costing           Costing
                                  Days        180 Days         Year          Years           Years           Plus         Liabilities       Liabilities         Total
                                                                                        (Dollars in thousands)
Assets:
Interest-bearing deposits in
banks                          $   37,127     $  37,127     $   37,127     $   37,127     $    37,127     $    37,127     $     37,127     $      32,168     $    69,295
Securities (1)                      4,327         8,189         15,273         30,190          90,452         164,820          164,820            (9,094 )       155,726
Placements with banks               2,490         2,490          2,490          2,490           2,490           2,490            2,490                 -           2,490
Net loans (includes LHFS)         180,239       255,233        424,521        688,852       1,347,997       1,407,002        1,407,002           (98,584 )     1,308,418
FHLBNY stock                        5,420         5,420          5,420          5,420           5,420           5,420            5,420                 -           5,420
Other assets                            -             -              -              -               -               -                -            53,248          53,248
Total                          $  229,603     $ 308,459     $  484,831     $  764,079     $ 1,483,486     $ 1,616,859     $  1,616,859     $     (22,262 )   $ 1,594,597
Liabilities:
Non-maturity deposits          $   56,859     $ 113,718     $  227,432     $  294,354     $   453,023     $   524,654     $    524,654     $     253,811     $   778,465
Certificates of deposit            78,842       149,482        242,479        288,139         399,115         403,077          403,077              (377 )       402,700
Other liabilities                       -        65,000         68,600         93,375          93,375          93,375           93,375            20,478         113,853
Total liabilities                 135,701       328,200        538,511        675,868         945,513       1,021,106        1,021,106           273,912       1,295,018
Capital                                 -             -              -              -               -               -                -           299,579         299,579
Total liabilities and
capital                        $  135,701     $ 328,200     $  538,511     $  675,868     $   945,513     $ 1,021,106     $  1,021,106     $     573,491     $ 1,594,597
Asset/liability gap            $   93,902     $ (19,741 )   $  (53,680 )   $   88,211     $   537,973     $   595,753     $    595,753
Gap/assets ratio                   169.20 %       93.99 %        90.03 %       113.05 %        156.90 %        158.34 %         158.34 %


(1) Includes available-for-sale securities and held-to-maturity securities.





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The following table sets forth the Company's interest-earning assets and its
interest-bearing liabilities at December 31, 2021, 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, 2021, 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, 2021
                                                                                          Time to Repricing
                                                                                                                                               Non
                                                                                                                            Total            Earning
                                                                                                                           Earning          Assets &
                                                           Zero Days      Zero Days       Zero Days         Five           Assets &            Non
                                Zero to       Zero to        to One         to Two         to Five          Years          Costing           Costing
                                90 Days      180 Days         Year          Years           Years           Plus         Liabilities       Liabilities         Total
                                                                                        (Dollars in thousands)

Assets:

Interest-bearing deposits in
banks                          $ 153,894     $ 153,894     $  153,894     $  153,894     $   153,894     $   153,894     $    153,894     $           -     $   153,894
Securities (1)                     4,993         8,939         16,365         33,316          79,592         116,270          116,270            (1,990 )       114,280
Placement with banks               2,490         2,490          2,490          2,490           2,490           2,490            2,490                 -           2,490
Net loans (includes LHFS)        166,991       276,112        446,737        670,281       1,249,032       1,309,504        1,309,504            11,410       1,320,914
FHLBNY stock                       6,005         6,005          6,005          6,005           6,005           6,005            6,005                (4 )         6,001
Other assets                           -             -              -              -               -               -                -            55,931          55,931
Total                          $ 334,373     $ 447,440     $  625,491     $  865,986     $ 1,491,013     $ 1,588,163     $  1,588,163     $      65,347     $ 1,653,510
Liabilities:
Non-maturity deposits          $  17,858     $  35,716     $   71,433     $  142,867     $   310,403     $   381,627     $    381,627     $     393,610     $   775,237
Certificates of deposit           73,838       143,956        255,074        303,917         425,479         429,479          429,479                 -         429,479
Other liabilities                 12,880        12,880         47,880        106,255         106,255         106,255          106,255           153,283         259,538
Total liabilities                104,576       192,552        374,387        553,039         842,137         917,361          917,361           546,893       1,464,254
Capital                                -             -              -              -               -               -                -           189,256         189,256
Total liabilities and
capital                        $ 104,576     $ 192,552     $  374,387     $  553,039     $   842,137     $   917,361     $    917,361     $     736,149     $ 1,653,510
Asset/liability gap            $ 229,797     $ 254,888     $  251,104     $  312,947     $   648,876     $   670,802     $    670,802
Gap/assets ratio                  319.74 %      232.37 %       167.07 %       156.59 %        177.05 %        173.12 %         173.12 %


(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 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. The primary sources of funds are
deposits, principal and interest payments on loans and available-for-sale
securities and proceeds from the sale of loans. The Bank also has access to
borrow from the FHLBNY. At March 31, 2022 and December 31, 2021, the Bank had
$93.4 million and $106.3 million, respectively, of term and overnight
outstanding advances from the FHLBNY, and also had a guarantee from the FHLBNY
through letters of credit of up to $21.5 million, both as of March 31, 2022 and
December 31, 2021. At March 31, 2022 and December 31, 2021, there was eligible
collateral of approximately $377.2 million and $362.3 million, respectively, in
mortgage loans available to secure advances from the FHLBNY. The Bank also has
an unsecured line of credit of $25.0 million with a correspondent bank, of which
there was none outstanding at March 31, 2022 and December 31, 2021. The Bank did
not have any outstanding securities sold under repurchase agreements with
brokers as of March 31, 2022 and December 31, 2021. As of December 31, 2021,
Mortgage World maintained two warehouse lines of credit with financial
institutions for the purpose of funding the origination and sale of residential
mortgage loans, with maximum credit lines of $30.0 million, of which $15.1
million was utilized,

                                       66
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with $14.9 million remaining unused. As of March 31, 2022, Mortgage World was a division of the Bank and the Bank was funding these loans.


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.

Net cash provided by operating activities was $12.0 million and $22.6 million
for the three months ended March 31, 2022 and 2021, respectively. Net cash used
in investing activities, which consists primarily of disbursements for loan
originations, purchases of new securities, and purchase of equipment offset by
principal collections on loans, proceeds from maturing securities and pay downs
on mortgage-backed securities, and proceeds from the sale of real estate was
$(44.8 million) and $(86.1 million) for the three months ended March 31, 2022
and 2021, respectively. Net cash (used in) provided by financing activities,
consisting of activities in deposit accounts, advances, and repurchase and sale
of shares as treasury stock, was ($51.8 million) and $81.5 million for the three
months ended March 31, 2022 and 2021, respectively.

Based on the Company's current assessment of the economic impact of the COVID-19
pandemic, the Russia-Ukraine conflict and current global and regional market
conditions on its borrowers, management has determined that these may be a
detriment to borrowers' ability to repay in the short-term and that the
likelihood of long-term detrimental effects will depend significantly on the
resolution of these factors and the resumption of normalized economic
activities, a factor not yet determinable. The Bank's management also took steps
to enhance the Company's liquidity position by increasing its on balance sheet
cash and cash equivalents position in order to meet unforeseen liquidity events
and to fund upcoming funding needs.

At March 31, 2022 and December 31, 2021, all regulatory capital requirements
were met, resulting in the Company and the Bank being categorized as well
capitalized at March 31, 2022 and December 31, 2021. 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, 2022 and
December 31, 2021, the Company had outstanding commitments to originate loans
and extend credit of $234.3 million and $220.5 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 less than one year from March 31, 2022 totaled $242.1 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 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 $7.1 million for the three months ended
March 31, 2022. The Company also has material cash requirements for occupancy
and equipment expenses, excluding depreciation and amortization of $467,000,
related to rental expenses, general maintenance and cleaning supplies, guard
services, software licenses and other miscellaneous expenses, which were $2.7
million for the three months ended March 31, 2022.



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