Pioneer Bancorp, Inc. — Form 10-Q Summary
Business context and period. Pioneer Bancorp is a New York-based bank holding company operating through Pioneer Bank and subsidiaries, with 23 offices in the Capital Region. This filing covers the quarter and six months ended December 31, 2023—the company’s fiscal second quarter and first half of fiscal 2024. Financial statements are unaudited.
Key financial results
Amounts are in millions, except per-share figures and percentages.
| Metric | Quarter ended Dec. 31, 2023 | Prior-year quarter | Six months ended Dec. 31, 2023 | Prior-year six months |
|---|---|---|---|---|
| Interest and dividend income | $21.5 | $18.0 | $41.6 | $33.2 |
| Interest expense | $5.4 | $0.8 | $9.7 | $1.4 |
| Net interest income | $16.1 | $17.1 | $32.0 | $31.8 |
| Provision for credit losses | $1.1 | $(0.4) credit | $1.9 | $(0.3) credit |
| Noninterest income | $4.8 | $3.9 | $8.4 | $7.8 |
| Noninterest expense | $15.8 | $13.5 | $30.2 | $25.4 |
| Net income | $3.2 | $6.2 | $6.6 | $11.4 |
| Basic and diluted EPS | $0.13 | $0.25 | $0.26 | $0.45 |
| Net interest margin | 3.70% | 3.85% | 3.71% | 3.52% |
Balance sheet, cash flow and capital
- At December 31, 2023, total assets were $1.853 billion, net loans $1.264 billion, deposits $1.522 billion, and shareholders’ equity $283.8 million. Total assets were nearly unchanged from June 30, 2023.
- Net loans grew $119.6 million (10.5%) from June 30, led by residential mortgages, which rose $105.3 million. Available-for-sale securities declined $111.3 million to $320.4 million.
- Deposits declined $19.8 million (1.3%). Noninterest-bearing deposits fell $52.4 million, partly offset by growth in certificates of deposit. Estimated uninsured deposits, net of collateralized deposits, were $239.6 million, or 15.7% of deposits.
- Six-month operating cash flow was $11.5 million; investing cash flow was $(1.8) million and financing cash flow was $(20.5) million. Cash and cash equivalents decreased $10.8 million to $139.6 million.
- The filing reports no outstanding FHLB borrowings at quarter-end; $130 million of FHLB capacity was used to collateralize municipal-deposit letters of credit. An additional $20 million unsecured correspondent line was unused. The Bank and Pioneer Commercial Bank were reported as well capitalized; Pioneer Bank’s Tier 1 leverage ratio was 11.30% and total risk-based capital ratio was 19.57%.
Material changes and management commentary
- Funding costs pressured earnings. Quarterly net interest income declined 6.1% year over year as deposit costs rose sharply: average cost of interest-bearing deposits increased to 1.95% from 0.25%. Management expects deposit and other funding costs to continue rising and sees potential net interest margin pressure in the next quarter.
- Unusual securities repositioning. On December 28, the company sold $74.5 million of lower-yielding securities, recognizing a $5.6 million pretax loss, and placed proceeds in interest-earning bank deposits yielding an estimated 5.40%. Management estimates about $3.4 million of additional interest income over the next 12 months and expects benefits to begin in the quarter ending March 31, 2024. It intends ultimately to reinvest in securities and loans at current market yields.
- Litigation settlement and expenses. A $5.95 million settlement payment from the TBC parties was recognized as litigation-related income. Professional fees increased $1.7 million in the quarter, primarily due to legal fees and expenses. The settlement resolved the Bank’s professional-malpractice action against those parties.
- Credit quality. Nonperforming assets were $12.0 million, or 0.65% of assets, versus $17.8 million, or 0.96%, at June 30, 2023. The loan allowance was $21.4 million, or 1.66% of loans; six-month net charge-offs were $371,000. The provision primarily reflected loan growth. The allowance methodology changed with CECL adoption on July 1, 2023, limiting direct comparison with earlier periods.
- Liquidity and charter. Management said liquidity was sufficient at quarter-end. The Bank’s $448.7 million of potential FHLB borrowing capacity included $130 million supporting letters of credit. The Bank Term Funding Program was scheduled to stop making new loans March 11, 2024. The Bank applied to convert from a New York-chartered savings bank to a national bank; approval and timing were uncertain.
- Acquisition. In July 2023, the company acquired certain Hudson Financial LLC wealth-management assets for $2.0 million cash plus $1.5 million contingent consideration, recording a $1.4 million customer-list intangible and $2.1 million goodwill.
Risks, contingencies and outlook
- The company disclosed multiple proceedings connected to alleged Mann Entities fraud, including claims by payroll-service firms, loan participants, the DOJ, and putative class plaintiffs. Some matters remain in discovery, and certain motions or settlement discussions remain pending.
- For matters where a loss is reasonably possible and estimable, the disclosed range is $0 to $54.4 million in excess of any accrued liability; the company says this range is not its maximum exposure. A potential NYSDFS penalty could be up to $30 million, of which $15 million relates to, and is not incremental to, damages sought in specified related proceedings. Outcomes and timing are uncertain.
- Management identifies interest-rate and deposit competition, regional-bank sentiment, credit quality and real-estate conditions, litigation and regulatory actions, and the ability to access cost-effective funding as significant risks. No broader earnings or balance-sheet guidance is provided; the $3.4 million repositioning benefit is management’s estimate, not a guarantee.
Most important facts for investors to verify
- Progress, accrued liabilities and potential outcomes of the Mann-related lawsuits and regulatory inquiries, including whether any resolution changes the disclosed loss range.
- Whether deposit costs and deposit migration continue to pressure net interest margin, and how much of the $3.4 million repositioning benefit is realized.
- Loan growth, criticized/classified exposures, delinquencies, charge-offs and the adequacy of the CECL allowance as forecasts and portfolio mix change.
- Liquidity sources and deposit retention, including uninsured deposits, brokered funding, pledged collateral and the loss of the Bank Term Funding Program as a new-loan source.
- Status and possible consequences of the national-bank charter application and related regulatory oversight.