PBFS

Business Context and Reporting Period

Pioneer Bancorp, Inc. (PBFS) is a mid-tier stock holding company operating Pioneer Bank, National Association, and Pioneer Capital Markets, Inc. The company provides diversified financial services through 23 offices in the Capital Region of New York State. This Form 10-Q covers the quarterly period ended March 31, 2026.

During the quarter, the company launched its broker-dealer subsidiary, Pioneer Capital Markets, Inc., and completed two significant acquisitions: Targeted Lending Co., LLC (an equipment financing company) and assets of Reiser Consulting Group, Inc. and Wyndham Benefits, LLC (employee benefits providers).

Key Financial Metrics

Material Changes vs. Prior Period

• Profitability: Net income decreased by $473,000 (8.2%) year-over-year, primarily driven by a $3.5 million increase in noninterest expenses, partially offset by a $1.7 million increase in net interest income.
• Expense Growth: Noninterest expenses rose 24.2% to $18.12 million. This was largely due to a $2.7 million increase in professional fees (legal expenses) and a $450,000 increase in salaries and benefits.
• Asset Growth: Total assets increased $70.3 million (3.3%) from the prior quarter, driven by a $54.7 million increase in net loans receivable and a $23.2 million increase in cash equivalents.
• Loan Portfolio: Commercial construction loans grew by $31.7 million (18.6%) and residential mortgages increased by $27.1 million (3.4%). Commercial real estate loans decreased by $8.6 million.
• Deposit Mix: Total deposits grew $113.1 million (6.5%). Money market accounts and non-interest-bearing demand accounts increased significantly, while certificates of deposit (including brokered deposits) declined.
• Asset Quality: Non-accrual loans decreased to $8.9 million from $11.2 million at year-end 2025. Total non-performing assets were $8.99 million, or 0.40% of total assets.

Guidance, Outlook, Risks, and Unusual Items

• Acquisitions: The company completed the acquisition of Targeted Lending Co., LLC for approximately $140 million in enterprise value (including $88 million of debt repayment) to expand into nationwide equipment finance. It also acquired Reiser Consulting Group and Wyndham Benefits to expand employee benefits services.
• Legal Proceedings: The company is involved in significant litigation related to the "Mann Entities" fraudulent activity. A net litigation-related expense of $350,000 was recognized in Q1 2026, partially offset by a $4.5 million reversal of a previously accrued liability. The estimated range of possible loss for pending matters is $0 to $23.5 million in excess of accrued liabilities.
• Capital Position: The company remains "well capitalized" under regulatory guidelines, exceeding all applicable capital requirements. As of March 31, 2026, the Tier 1 leverage ratio was 11.56% and the Total Risk-Based Capital ratio was 17.45%.
• Liquidity: Liquidity is strong with $156.9 million in cash and cash equivalents and $200.9 million in available-for-sale securities. The company has access to $646.8 million in FHLBNY borrowing capacity.
• Forward-Looking Risks: Risks include the outcome of pending litigation, inflation, interest rate volatility, and the ability to integrate recent acquisitions successfully.

Investor Verification Checklist

• Legal Exposure: Verify the status of the Mann Entities litigation and the potential impact of the $23.5 million estimated loss range on future earnings.
• Expense Run Rate: Assess whether the elevated professional fees ($4.65 million in Q1) are a one-time occurrence or indicative of a new baseline for legal costs.
• Acquisition Integration: Monitor the integration progress and financial performance of Targeted Lending Co., LLC and the employee benefits acquisitions.
• Deposit Stability: Review the composition of deposits, specifically the reliance on municipal deposits (32.9% of total) and the reduction in brokered deposits.
• Asset Quality Trends: Track the migration of classified loans (Substandard and Special Mention) and the adequacy of the allowance for credit losses relative to the growing loan portfolio.