A $225M Treasury Stake May Be Retired at a Substantial Discount. The Margin Reached 3.86%. A Third of the Loans Are Construction.

Ponce Financial Group, the Bronx holding company for Ponce Bank, has turned a thin margin into a wide one. Net interest income rose 64% in seven quarters to $34.0M, and the net interest margin reached 3.86% in the third quarter of 2026. The company is also working toward retiring $225M of Treasury preferred stock: Treasury confirmed it met the deep impact lending threshold, and its presentation says the price could be as low as 6.11% under current guidelines. The growth runs through New York real estate. Multifamily and construction loans are two thirds of the book, and the company's latest presentation puts commercial real estate at 452% of risk-based capital.

Analysis

Ponce Financial Group is the Bronx holding company for Ponce Bank, National Association. The bank was chartered in 1960 as Ponce De Leon Federal Savings and Loan Association and converted to a national bank on October 10, 2025, when the company became a bank holding company and a financial holding company. It is designated both a Minority Depository Institution and a Community Development Financial Institution, and is a certified SBA lender. It runs 13 full-service branches, four in the Bronx, three each in Queens and Brooklyn, two in Manhattan and one in Union City, New Jersey, plus mortgage offices in Queens and Bergenfield, New Jersey, and a representative office in Coral Gables, Florida. At September 30, 2026 it had $3.69B of assets, $3.08B of net loans, $2.37B of deposits and 236 full-time equivalent employees.

The third quarter is why the desk is writing now. On October 26 the company reported net income of $18.2M, or $0.76 per diluted share, against $6.5M, or $0.27, a year earlier. Net interest income rose 34.6% to $34.0M, and the net interest margin reached 3.86%, from 3.30%. The quarter also carried a $10.5M release of the valuation allowance on New York State and New York City deferred tax assets, which turned the tax line into a $5.9M benefit. Nonperforming assets fell to 0.50% of total assets. The executive chairman reported that the U.S. Treasury has confirmed the company met the deep impact lending threshold, a step toward repurchasing its $225M of preferred stock. The 10-Q followed on November 4.

The Human Translation: Ponce is a neighborhood bank in the Bronx and nearby boroughs that lends mostly against apartment buildings, commercial property and construction projects. In 2022 the Treasury invested $225M in it as preferred stock under a program that charges lower dividends to banks doing more deep impact lending. Ponce says it has met that test and may buy the stake back at a substantial discount to face value. Meanwhile it earns far more on loans than it pays for funds.

The margin is the clearest change in the business. Net interest income was $20.7M in the fourth quarter of 2024, then $22.2M, $24.4M, $25.2M, $27.9M, $28.2M, $30.1M and $34.0M, up 64% over seven quarters. The margin climbed from 2.80% to 3.86% over the same stretch. In the third quarter the yield on interest-earning assets rose to 6.53% from 6.12% a year earlier, with loans yielding 6.94% against 6.59%, while the cost of interest-bearing liabilities fell to 3.42% from 3.61%. The spread widened to 3.11% from 2.51%. One item flatters the quarter: $0.8M of interest came from a former nonaccrual loan that was satisfied. Without it, on the desk's arithmetic, net interest income still rose about 10% from the second quarter.

The loan book is almost entirely real estate. Gross loans were $3.12B at September 30: multifamily $1.05B, or 33.8%; construction and land $1.02B, or 32.6%; nonresidential property $557.4M, or 17.9%; one-to-four family $413.1M, or 13.3%; and business and consumer loans $76.4M, or 2.5%. Gross loans grew $490.5M, or 18.7%, in nine months, led by multifamily, up $295.1M or 39%, and construction, up $162.7M or 19%. The company's third-quarter presentation puts total commercial real estate loans at 452.0% of risk-based capital, without giving a date, up from 425.1% in the second-quarter presentation and 393.0% in the fourth-quarter 2025 presentation. On the desk's arithmetic, construction and land loans alone equal about 180% of the bank's $566.3M of total risk-based capital.

The construction book is where the concentration is sharpest. At the end of 2025 the 10-K described 79 construction and land projects totaling $854.1M: $681.6M across 61 multifamily projects, $67.5M in six nonresidential loans, $100.4M in eight land loans and $4.6M in four investor one-to-four family loans. Queens accounted for 46.5% of the balance and Brooklyn for 34.7%, with Manhattan at 12.1%, the Bronx at 3.9% and Hudson County, New Jersey, at 2.8%. The 10-K describes typical terms of up to 36 months, loan-to-cost of no more than 70%, loan-to-stabilized-value of no more than 65%, and interest reserves. The book has since grown to $1.02B, and the third-quarter presentation cites a weighted average loan-to-value of 53.9% at September 30, without saying which loans it covers.

The permanent property loans sit in the same boroughs. At the end of 2025 the bank held 365 multifamily loans totaling $756.5M, 34.1% in Queens, 33.3% in Brooklyn and 23.4% in the Bronx. Its 222 nonresidential loans totaled $526.2M, led by retail and wholesale property at 24.1%, industrial and warehouse at 16.3% and hotels and motels at 9.8%; the largest was $50.0M. The legal limit on loans to one borrower was $81.5M, and the largest relationship was $58.0M. Multifamily balances have since reached $1.05B, and the 10-K discusses New York's 485-x program, which attaches affordability requirements to new development.

Deposits grew more slowly than loans, and wholesale money filled the gap. Deposits rose $321.1M, or 15.7%, in nine months to $2.37B. Noninterest-bearing deposits were $244.9M, 10.3% of the total; money market accounts were $898.7M, or 38.0%; and certificates were $841.0M, or 35.5%, including $144.6M of brokered certificates, more than double the $67.9M at year end. The 10-K reported $454.5M of uninsured deposits at the end of 2025, about 22% of the total; neither the third-quarter release nor the presentation gives a September figure, and deposits have since grown 15.7%. Net loans were 130% of deposits at September 30, against 127% at year end, and borrowings, all Federal Home Loan Bank of New York advances at year end, rose $100.0M to $696.1M. On the desk's arithmetic, brokered certificates and borrowings together grew $176.6M in nine months. Costs still eased: interest-bearing deposits cost 3.35% in the quarter, against 3.54%, and borrowings 3.67%, against 3.84%.

Credit has improved on the reported measures. Nonperforming assets fell to $18.6M, or 0.50% of total assets, from $27.9M, or 0.88%, a year earlier. Nonaccrual loans were $18.1M, of which $11.1M was multifamily, $4.1M construction and $2.8M one-to-four family. Including accruing modifications, the total was $21.8M, against $32.4M a year earlier. Net charge-offs were $382K, an annualized 0.05% of average loans. The allowance rose to $29.2M but fell to 0.94% of loans from 0.98% a year earlier, as loans grew faster than the reserve; as reported, it covered 156.85% of nonperforming loans. The quarter's $3.2M provision included $1.2M for unfunded commitments. Nine-month provisions were $7.0M, against $2.7M a year earlier.

The securities portfolio is small and carries losses. It totaled $320.7M at September 30, 8.7% of assets. Available-for-sale securities had an amortized cost of $95.9M and a fair value of $79.5M, a $16.4M unrealized loss. Held-to-maturity securities had a fair value $12.5M below amortized cost, a loss that does not run through equity, against $4.3M at year end. Accumulated other comprehensive loss was $12.6M, against $10.8M. On the desk's arithmetic, the combined $29.0M of pretax unrealized losses equals about 8% of the $353.3M of common equity. The company's presentation used a 20-year Treasury yield of 5.68% at September 30, against 4.93% at June 30 and 4.79% at the end of 2025.

Capital ratios are high but falling. At September 30 the holding company reported a common equity tier 1 ratio of 10.93%, a tier 1 ratio of 17.66%, a total capital ratio of 18.66% and a leverage ratio of 16.46%. The gap between tier 1 capital of $590.8M and common equity tier 1 capital of $365.8M is exactly the $225M of preferred stock. The bank itself reported common equity tier 1 of 15.98%, down from 20.53% at the end of 2025, and total capital of 16.98%, down from 21.63%. The bank's common equity tier 1 capital was $532.9M, against $515.5M at year end and $535.9M at June 30, so the ratio fell because risk-weighted assets grew, by about 33% in nine months on the desk's arithmetic, faster than the 18.7% growth in gross loans. The presentation does not explain the difference. Book value per common share was $14.60, up $1.90 in a year.

The $225M of preferred stock is the central capital question. Ponce issued 225,000 shares to the Treasury on June 7, 2022, under the Emergency Capital Investment Program. In years three through ten, dividends run at 2.0%, 1.25% or 0.5% depending on qualified and deep impact lending; the current rate is 0.5%, about $281K a quarter. On December 20, 2024 the company signed an option agreement giving it the right to buy back all the shares during the first fifteen years at a price based on their present value. The 10-Q says the company met the threshold conditions as of June 30, 2026, that closing would follow 30 to 90 days after all conditions are satisfied, and that it expects a substantial discount to face value.

The company has described a possible price. Its third-quarter presentation says the price could be as low as 6.11% under the current guidelines, assuming a 0.50% dividend rate, a 5.68% 20-year Treasury rate, a beta of 0.50 and a 5.00% equity risk premium, and says there can be no assurance as to the final repurchase price. It does not say what the 6.11% is a percentage of. The 10-Q says the price is set by a formula equal to the present value of the preferred stock and that the company expects a substantial discount from face value. The figure was 6.86% in the fourth-quarter 2025 presentation, using a 4.79% Treasury rate at December 31, 2025, and 6.73% in the second-quarter presentation, using 4.93% at June 30. The presentation says the price is based on a dividend discount model; on the desk's arithmetic, each figure matches the 0.50% dividend rate divided by the Treasury rate plus beta times the risk premium, so higher long-term rates lower the price. The earliest timing moved from the third quarter to the fourth, and the company says completion is not assured.

The headline earnings need unpacking. Third-quarter pre-tax income was $12.4M, up 9.5% from the second quarter and 41% from a year earlier; the jump to $18.2M of net income came from the tax line. On the desk's arithmetic, without the $10.5M release net income would have been about $7.7M, against $6.5M a year earlier. Deferred tax assets rose to $25.8M from $13.0M at June 30. Noninterest income fell to $0.85M from $1.49M a year earlier, after a $1.2M loss on moving a Flushing property to held for sale, partly offset by a $0.4M gain on investments in Oaktree and Silvergate funds. Grant income, $0.4M a year earlier, was zero. The efficiency ratio was 55.21%, against 62.15%. Reported return on assets was 1.99% and return on common equity 20.18%, both lifted by the tax release.

Costs are rising with headcount, and the annual record shows the turn. Noninterest expense was $19.2M in the quarter, up 15.8% from a year earlier, driven by compensation for new hires; full-time equivalent employees rose to 236 from 209. For nine months, expense rose 8.4% to $54.6M, with compensation up $5.0M. Net interest income was $76.5M in 2024 and $99.8M in 2025, and the margin rose from 2.70% to 3.28%. Net income went from $11.0M, or $0.46 per diluted share, to $28.7M, or $1.20. In the first nine months of 2026 net income was $35.4M, or $1.47 per diluted share, including the $10.5M tax release, against $18.6M, or $0.77, and the nine-month margin was 3.72%, against 3.18%.

Common shareholders have not received dividends. The equity statements in the 10-Q show no common dividends in 2025 or 2026, and the filings the desk reviewed describe no repurchase program. The ECIP terms bar common dividends and repurchases unless the company meets certain income-based tests, and preferred dividends of $844K were paid in the first nine months. The current holding company was formed in the second-step conversion effective January 27, 2022; the offering results released that January put shares sold at about 13.3 million, at $10.00. The third-quarter presentation lists the ability to return capital to shareholders among its priorities, alongside deploying excess capital into loan growth, without targets.

Two executives speak for the company, and the regulatory frame changed a year ago. Carlos P. Naudon is president and chief executive, and Steven A. Tsavaris is executive chairman. In the earnings releases Tsavaris gives the updates on the preferred stock, reporting deep impact lending of 82% after 14 quarters in January and 16 consecutive quarters above the 60% threshold in October. The 2025 charter conversion made the company a bank holding company, and the bank is regulated by the Office of the Comptroller of the Currency. The bank received an outstanding rating in its most recent Community Reinvestment Act examination. Bank dividends to the holding company that exceed recent retained earnings require OCC approval.

The risks the filings name are concrete. Concentration: on the desk's arithmetic, 84% of gross loans are multifamily, nonresidential or construction loans, and the company's ratio of commercial real estate to risk-based capital rose from 393.0% in its fourth-quarter 2025 presentation to 452.0% in its third-quarter 2026 presentation, neither of which dates the figure. Credit: the release names fluctuations in real estate values, loan default rates and the adequacy of the allowance, which is under 1% of loans. Funding: it names deposit declines that require more borrowing, and loans already exceed deposits by 30%. Rates: it names changes in interest rates and securities values, and held-to-maturity losses nearly tripled in nine months. Policy: the ECIP repurchase may not occur on the expected timeline, on the expected terms, or at all.

The scenario map has three branches. In the first, Treasury and the company complete the repurchase near the price the presentation describes, the margin holds near its current level, and the restrictions tied to the preferred stock no longer bind. In the second, the repurchase is delayed or priced differently as conditions and rates shift, while the bank keeps growing and its ratios of real estate loans to capital keep rising. In the third, New York property values or construction projects come under strain, nonaccrual loans rise from 0.50% of assets, and the concentration that built the margin becomes the main question for capital.

The checkpoint set, stated fully. First, whether the ECIP repurchase closes, when, and at what price against the 6.11% the presentation describes. Second, the net interest margin against 3.86%, and how much of the third quarter's gain repeats without the $0.8M of recovered interest. Third, commercial real estate against 452.0% of risk-based capital and construction against $1.02B. Fourth, nonaccrual loans against $18.1M and the allowance against 0.94% of loans. Fifth, brokered certificates against $144.6M, borrowings against $696.1M, and loans against 130% of deposits. Sixth, the bank's common equity tier 1 ratio against 15.98%. Seventh, any capital return to common shareholders once the preferred stock is settled.

The Human Translation

Ponce is a neighborhood bank in the Bronx and the other boroughs that lends mostly against apartment buildings, commercial property and buildings under construction. In 2022 the Treasury invested $225M in it as preferred stock under a program that charges lower dividends to banks that do more deep impact lending. Ponce says it has met that test and may buy the stake back at a substantial discount to face value. Meanwhile it earns far more on loans than it pays for funds.

Bottom Line

Watch whether the ECIP repurchase closes, when, and at what price against the 6.11% the company describes. Then watch whether the 3.86% margin holds without one-time interest, whether nonaccrual loans stay near $18.1M as the $1.02B construction book grows, and whether brokered deposits and borrowings keep growing faster than core deposits. The bank's 15.98% common equity tier 1 ratio measures the capital behind that growth.

Quick Facts

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