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What changed in Pioneer Bancorp, Inc./MD's 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Pioneer Bancorp, Inc./MD's 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+486 added−456 removedSource: 10-K (2023-09-26) vs 10-K (2022-09-23)

Top changes in Pioneer Bancorp, Inc./MD's 2023 10-K

486 paragraphs added · 456 removed · 353 edited across 5 sections

Item 1. Business

Business — how the company describes what it does

146 edited+19 added−28 removed180 unchanged
Biggest changeIn addition, the factors described under Critical Accounting Policies and Estimates in Part II, Item 7, and Risk Factors in Part I, Item 1A, as well as other possible factors not listed, could cause actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the following: ● inflation and changes in market interest rates that reduce our margins and yields, reduce the fair value of financial instruments or reduce our volume of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make, whether held in portfolio or sold in the secondary market; ● risks related to the variety of litigation and other proceedings described in the “Legal Proceedings” section; ● general economic conditions, either nationally or in our market area, that are worse than expected; ● risks and uncertainties related to the Coronavirus Disease 2019 (“COVID-19”) pandemic and resulting governmental and societal response; ● competition within our market area that is stronger than expected; ● changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of the allowance for loan losses; 3 Table of Contents ● our ability to access cost-effective funding; ● fluctuations in real estate values and both residential and commercial real estate market conditions; ● demand for loans and deposits in our market area; ● changes in our partnership with a third-party mortgage banking company; ● our ability to continue to implement our business strategies; ● competition among depository and other financial institutions; ● adverse changes in the securities markets; ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; ● our ability to manage market risk, credit risk and operational risk; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● the imposition of tariffs or other domestic or international governmental polices impacting the value of the products of our borrowers; ● our ability to successfully integrate into our operations any assets, liabilities or systems we may acquire, as well as new management personnel or customers, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; ● changes in consumer spending, borrowing and savings habits; ● our ability to maintain our reputation; ● our ability to prevent or mitigate fraudulent activity; ● changes in cost of legal expenses, including defending against significant litigation; ● risks and uncertainties related to the restatement of certain of our historical consolidated financial statements; ● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board (the “FASB”), the Securities and Exchange Commission (the “SEC”) or the Public Company Accounting Oversight Board; ● our ability to attract and retain key employees; ● our ability to evaluate the amount and timing of recognition of future tax assets and liabilities; ● our compensation expense associated with equity benefits allocated or awarded to our employees in the future; and ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own. 4 Table of Contents Because of these and other uncertainties, our actual future results may be materially different from the results indicated by these forward-looking statements.
Biggest changeIn addition, the factors described under the headings “Critical Accounting Policies and Estimates” in Part II, Item 7, and “Risk Factors” in Part I, Item 1A, as well as other possible factors not listed, could cause our actual results to differ materially from those expressed in forward-looking statements, including, without limitation, the following: ● inflation and changes in market interest rates that reduce our margins and yields, reduce the fair value of financial instruments or reduce our volume of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make, whether held in our portfolio or sold in the secondary market; ● risks related to the variety of litigation, investigations, and other proceedings described in the “Legal Proceedings” section of this report; ● general economic conditions, either nationally or in our market area, that are worse than expected; ● recent events involving the failure of financial institutions which have adversely affected market sentiment toward regional banks, which may result in decreased deposits and increased regulatory costs that could adversely affect our liquidity, our business, and the market price of our common stock; ● competition within our market area that is stronger than expected; ● changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of our allowance for loan losses; 3 Table of Contents ● our ability to access cost-effective funding; ● fluctuations in real estate values and both residential and commercial real estate market conditions; ● demand for loans and deposits in our market area; ● changes in our partnership with a third-party mortgage banking company; ● our ability to continue to implement our business strategies; ● competition among depository and other financial institutions, as well as other non-traditional competitors; ● risks and uncertainties related to the Coronavirus Disease 2019 (“COVID-19”) pandemic and resulting governmental and societal response; ● adverse changes in the securities markets; ● changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees and capital requirements; ● our ability to manage market risk, credit risk and operational risk; ● our ability to enter new markets successfully and capitalize on growth opportunities; ● the imposition of tariffs or other domestic or international governmental polices impacting the value of the products of our borrowers; ● our ability to successfully integrate into our operations any assets, liabilities or systems we may acquire, as well as new management personnel or customers, and our ability to realize related revenue synergies and cost savings within expected time frames and any goodwill charges related thereto; ● changes in consumer spending, borrowing and savings habits; ● our ability to maintain our reputation; ● our ability to prevent or mitigate fraudulent activity; ● changes in our costs of legal expenses, including defending against significant litigation; ● any future FDIC insurance premium increases, or special assessments may adversely affect our earnings; ● fluctuations in the stock market may have a significant adverse effect on transaction fees, client activity and client investment portfolio gains and losses related to our wealth management business; ● a breach in security of our information systems, including the occurrence of a cyber incident or a deficiency in cyber security; ● changes in accounting policies and practices, as may be adopted by the bank regulatory agencies, the Financial Accounting Standards Board (the “FASB”), the Securities and Exchange Commission (the “SEC”) or the Public Company Accounting Oversight Board; 4 Table of Contents ● our ability to attract and retain key employees; ● our ability to evaluate the amount and timing of recognition of future tax assets and liabilities; ● our compensation expense associated with equity benefits allocated or awarded to our employees in the future; and ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Treasury obligations, securities of various government-sponsored enterprises, municipal securities, residential mortgage-backed securities and collateralized mortgage obligations, deposits at the Federal Home Loan Bank of New York, corporate debt securities (limited to no more than 5% of total assets and no more than 15% of our capital in any single issuer), common or preferred stock of a company trading on the Standard & Poor’s 500 Composite Index or if the company has $5.0 billion or greater in capitalization (limited to no more than 15% of our capital) and common stock of a company with over $2.0 billion, but less than $5.0 billion, in capitalization (limited to less than 10% of our investment portfolio).
Treasury obligations, securities of various government-sponsored enterprises, municipal securities, residential mortgage-backed securities and collateralized mortgage obligations, deposits at the Federal Home Loan Bank of New York, corporate debt securities (limited to no more than 10% of total assets and no more than 15% of our capital in any single issuer), common or preferred stock of a company trading on the Standard & Poor’s 500 Composite Index or if the company has $5.0 billion or greater in capitalization (limited to no more than 15% of our capital) and common stock of a company with over $2.0 billion, but less than $5.0 billion, in capitalization (limited to less than 10% of our investment portfolio).
Under the Community Reinvestment Act, or CRA, as implemented by FDIC, a state non-member bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
Under the Community Reinvestment Act, or CRA, as implemented by the FDIC, a state non-member bank has a continuing and affirmative obligation, consistent with its safe and sound operation, to help meet the credit needs of its entire community, including low- and moderate-income neighborhoods.
The FDIC may also appoint itself as conservator or receiver for an insured bank under specified circumstances, including: (1) insolvency; (2) substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices; (3) existence of an unsafe or unsound condition to transact business; (4) insufficient capital; or (5) the incurrence of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment without federal assistance. ​ 24 Table of Contents Capital Requirements.
The FDIC may also appoint itself as conservator or receiver for an insured bank 24 Table of Contents under specified circumstances, including: (1) insolvency; (2) substantial dissipation of assets or earnings through violations of law or unsafe or unsound practices; (3) existence of an unsafe or unsound condition to transact business; (4) insufficient capital; or (5) the incurrence of losses that will deplete substantially all of the institution’s capital with no reasonable prospect of replenishment without federal assistance.
Certain forward-looking statements are included in this Form 10-K, principally in the sections captioned “Business,” “Risk Factors,” and “Management's Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to: ● statements of our goals, intentions and expectations; ● statements regarding our business plans, prospects, growth and operating strategies; ● statements regarding the quality of our loan and investment portfolios; and ● estimates of our risks and future costs and benefits.
Certain forward-looking statements are included in this Form 10-K, principally in the sections captioned “Business,” “Risk Factors,” and “Management's Discussion and Analysis of Financial Condition and Results of Operations.” These forward-looking statements include, but are not limited to: ● statements of our goals, intentions and expectations; ● statements regarding our business plans, prospects, growth and operating strategies; ● statements regarding the quality of our loan and investment portfolios; and ● estimates of our risks, contingencies and future costs and benefits.
We do not purchase any “subprime loans” (loans that are made with low down-payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (defined as loans having less than full documentation).
We do not purchase any “subprime loans” (loans that are made with low down-payments to borrowers with weakened credit histories typically characterized by payment delinquencies, previous charge-offs, judgments, bankruptcies, or borrowers with questionable repayment capacity as evidenced by low credit scores or high debt-burden ratios) or Alt-A loans (loans having less than full documentation).
The interest rate is generally a variable rate based on an index rate, typically The Wall Street Journal Prime Rate, SOFR or LIBOR, plus a margin. At the end of the construction phase, the loan generally converts to a permanent commercial real estate mortgage loan, but in some cases it may be payable in full.
The interest rate is generally a variable rate based on an index rate, typically The Wall Street Journal Prime Rate or SOFR, plus a margin. At the end of the construction phase, the loan generally converts to a permanent commercial real estate mortgage loan, but in some cases it may be payable in full.
Treasury securities, SOFR, or LIBOR, subject to periodic and lifetime limitations on interest rate changes. All of our adjustable-rate residential real estate loans with initial fixed-rate periods of one, five, seven or ten years have initial and periodic caps of 2% to 5% on interest rate changes, with a current cap of 5% over the life of the loan.
Treasury securities or SOFR, subject to periodic and lifetime limitations on interest rate changes. All of our adjustable-rate residential real estate loans with initial fixed-rate periods of one, five, seven or ten years have initial and periodic caps of 2% to 5% on interest rate changes, with a current cap of 5% over the life of the loan.
A company loses emerging growth company status on the earlier of: (1) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.07 billion or more; (2) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (3) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (4) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, a “large accelerated filer” is defined as a corporation with at least $700 million of voting and non-voting equity held by non-affiliates).
A company loses emerging growth company status on the earlier of: (1) the last day of the fiscal year of the company during which it had total annual gross revenues of $1.235 billion or more; (2) the last day of the fiscal year of the issuer following the fifth anniversary of the date of the first sale of common equity securities of the company pursuant to an effective registration statement under the Securities Act of 1933; (3) the date on which such company has, during the previous three-year period, issued more than $1.0 billion in non-convertible debt; or (4) the date on which such company is deemed to be a “large accelerated filer” under Securities and Exchange Commission regulations (generally, a “large accelerated filer” is defined as a corporation with at least $700 million of voting and non-voting equity held by non-affiliates).
Our purchased loans generally adhere to the following guidelines: (1) the loan is an owner-occupied one- to four-family residential real estate loan; (2) the loan does not provide for negative amortization of principal, such as “Option Arm” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan; (3) the loan is not an “interest only” mortgage loan; (4) the maximum loan term is 30 years; (5) the loan has a loan-to-value ratio up to a maximum of 90%, provided, however, that the loan-to-value ratio may exceed 90% as long as the borrower obtains private mortgage insurance; and (6) the borrower has a maximum debt-to-income ratio of 45%.
Our purchased loans generally adhere to the following guidelines: (1) the loan is an owner-occupied one- to four-family residential mortgage loan; (2) the loan does not provide for negative amortization of principal, such as “Option Arm” loans, where the borrower can pay less than the interest owed on the loan, resulting in an increased principal balance during the life of the loan; (3) the loan is not an “interest only” mortgage loan; (4) the maximum loan term is 30 years; (5) the loan has a loan-to-value ratio up to a maximum of 90%, provided, however, that the loan-to-value ratio may exceed 90% as long as the borrower obtains private mortgage insurance; and (6) the borrower has a maximum debt-to-income ratio of 45%.
These forward-looking statements are based on current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
These forward-looking statements are based on the current beliefs and expectations of our management and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change.
Holding Company Regulation Federal Holding Company Regulation . Pioneer Bancorp, MHC and the Company are bank holding companies registered with the Federal Reserve Board and subject to regulations, examination, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over Pioneer Bancorp, MHC and the Company and their non-savings bank subsidiaries.
Pioneer Bancorp, MHC and the Company are bank holding companies registered with the Federal Reserve Board and subject to regulations, examination, supervision and reporting requirements applicable to bank holding companies. In addition, the Federal Reserve Board has enforcement authority over Pioneer Bancorp, MHC and the Company and their non-savings bank subsidiaries.
Moreover, the Federal Reserve Board has issued an interim final rule applicable to federally-chartered mutual holding companies, stating that it will not object to dividend waivers under certain circumstances, provided (1) the mutual holding company’s members have approved the dividend waivers by a majority of eligible votes, (2) each officer or trustee of the mutual holding company and mid-tier stock holding company, and any tax-qualified or non-tax qualified stock benefit plan in which such individual participates that holds any shares of stock to which the waiver would apply waives the right to receive any dividends declared, or the dividend waivers are approved by a majority of the entire board of trustees of the 29 Table of Contents mutual holding company with any officer or trustee of the mutual holding company having any direct or indirect ownership interest in the common stock of the subsidiary mid-tier holding company abstaining from the board vote, and (3) any dividends waived by the mutual holding company are considered in determining an appropriate exchange ratio in the event of a conversion of the mutual holding company to stock form.
Moreover, the Federal Reserve Board has issued an interim final rule applicable to federally-chartered mutual holding companies, stating that it will not object to dividend waivers under certain circumstances, provided (1) the mutual holding company’s members have approved the dividend waivers by a majority of eligible votes, (2) each officer or trustee of the mutual holding company and mid-tier stock holding company, and any tax-qualified or non-tax qualified stock benefit plan in which such individual participates that holds any shares of stock to which the waiver would apply waives the right to receive any dividends declared, or the dividend waivers are approved by a majority of the entire board of trustees of the mutual holding company with any officer or trustee of the mutual holding company having any direct or indirect ownership interest in the common stock of the subsidiary mid-tier holding company abstaining from the board vote, and (3) any dividends waived by the mutual holding company are considered in determining an appropriate exchange ratio in the event of a conversion of the mutual holding company to stock form.
We do not engage in any investment hedging activities or trading activities, nor do we purchase any high-risk mortgage derivative products, corporate junk bonds, and certain types of structured notes.
We do not engage in any investment hedging activities or trading activities, nor do we purchase any high-risk mortgage derivative products, corporate junk bonds, or certain types of structured notes.
Specifically, NYSDFS requires regulated financial services company to establish a cybersecurity program; adopt a written cybersecurity policy; designate a Chief Information Security Officer responsible for implementing, overseeing and enforcing its program and policy; and have policies and procedures designed to ensure the security of information systems and nonpublic information accessible to, or held by, third-parties, along with a variety of other requirements to protect the confidentiality, integrity and availability of information systems.
Specifically, NYSDFS requires regulated financial services companies to establish a cybersecurity program; adopt a written cybersecurity policy; designate a Chief Information Security Officer responsible for implementing, overseeing and enforcing its program and policy; and have policies and procedures designed to ensure the security of information systems and nonpublic information accessible to, or held by, third-parties, along with a variety of other requirements to protect the confidentiality, integrity and availability of information systems.
Under FDIC regulations, the Bank is subject to a comprehensive capital framework for U.S. banking organizations that was effective January 2015 (the Basel III capital rules).
Capital Requirements. Under FDIC regulations, the Bank is subject to a comprehensive capital framework for U.S. banking organizations that was effective January 2015 (the Basel III capital rules).
Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (1) making or servicing loans; (2) performing certain data processing services; (3) providing discount brokerage services; (4) acting as fiduciary, investment or financial advisor; (5) leasing personal or real property; (6) making investments in corporations or projects 28 Table of Contents designed primarily to promote community welfare; and (7) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
Some of the principal activities that the Federal Reserve Board has determined by regulation to be so closely related to banking are: (1) making or servicing loans; (2) performing certain data processing services; (3) providing discount brokerage services; (4) acting as fiduciary, investment or financial advisor; (5) leasing personal or real property; (6) making investments in corporations or projects designed primarily to promote community welfare; and (7) acquiring a savings and loan association whose direct and indirect activities are limited to those permitted for bank holding companies.
If an election to use the community bank leverage ratio capital framework is made, a qualifying bank with less than $10 billion in assets with capital exceeding the specified community bank leverage ratio is considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized.” As of June 30, 2022 the Bank had not elected to be subject to the alternative framework.
If an election to use the community bank leverage ratio capital framework is made, a qualifying bank with less than $10 billion in assets with capital exceeding the specified community bank leverage ratio is considered compliant with all applicable regulatory capital and leverage requirements, including the requirement to be “well capitalized.” As of June 30, 2023 the Bank had not elected to be subject to the alternative framework.
Such activities can include insurance underwriting and investment banking. As of June 30, 2022, Pioneer Bancorp, MHC and the Company were not “financial holding companies.” Capital. The Federal Reserve Board must establish for all bank and savings and loan holding companies minimum consolidated capital requirements that are as stringent as those required for their insured depository subsidiaries.
Such activities can include insurance underwriting and investment banking. As of June 30, 2023, Pioneer Bancorp, MHC and the Company were not “financial holding companies.” Capital. The Federal Reserve Board must establish for all bank and savings and loan holding companies minimum consolidated capital requirements that are as stringent as those required for their insured depository subsidiaries.
The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. The variety of deposit accounts offered allows us to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, we believe that our deposits are relatively stable.
The flow of deposits is influenced significantly by general economic conditions, changes in money market and other prevailing interest rates and competition. We believe the variety of deposit accounts we offer allows us to be competitive in obtaining funds and responding to changes in consumer demand. Based on experience, we believe that our deposits are relatively stable.
As such, it is grouped with any other capital losses for the year to which carried and is used to offset any capital gains. Any loss remaining after the five year carryover period that has not been deducted is no longer deductible. At June 30, 2022, the Bank had no capital loss carryovers. Corporate Dividends.
As such, it is grouped with any other capital losses for the year to which carried and is used to offset any capital gains. Any loss remaining after the five year carryover period that has not been deducted is no longer deductible. At June 30, 2023, the Bank had no capital loss carryovers. Corporate Dividends.
If the Company meets the current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without 30 Table of Contents registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of the Company, or the average weekly volume of trading in the shares during the preceding four calendar weeks.
If the Company meets the current public information requirements of Rule 144 under the Securities Act of 1933, each affiliate that complies with the other conditions of Rule 144, including those that require the affiliate’s sale to be aggregated with those of other persons, would be able to sell in the public market, without registration, a number of shares not to exceed, in any three-month period, the greater of 1% of the outstanding shares of the Company, or the average weekly volume of trading in the shares during the preceding four calendar weeks.
Emerging Growth Company Status. Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), a company with total annual gross revenues of less than $1.07 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as an emerging growth company under the JOBS Act.
Emerging Growth Company Status. Under the Jumpstart Our Business Startups Act of 2012 (the “JOBS Act”), a company with total annual gross revenues of less than $1.235 billion during its most recently completed fiscal year qualifies as an “emerging growth company.” The Company qualifies as an emerging growth company under the JOBS Act.
The following table sets forth the amortized cost and estimated fair value of our securities portfolio (excluding Federal Home Loan Bank of New York common stock) at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2022 ​ 2021 ​ ​ Amortized ​ Estimated ​ Amortized ​ Estimated ​ Cost Fair Value Cost Fair Value ​ ​ (In thousands) Securities available for sale: ​ ​ ​ ​ U.S.
The following table sets forth the amortized cost and estimated fair value of our securities portfolio (excluding Federal Home Loan Bank of New York common stock) at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2023 ​ 2022 ​ ​ Amortized ​ Estimated ​ Amortized ​ Estimated ​ Cost Fair Value Cost Fair Value ​ ​ (In thousands) Securities available for sale: ​ ​ ​ ​ U.S.
Depending on the collateral used to secure the loans, commercial and industrial loans are made in amounts generally of up to 75% of the value of the collateral securing the 9 Table of Contents loan. We generally do not make unsecured commercial and industrial loans. Personal guarantees are often obtained from commercial and industrial borrowers.
Depending on the collateral used to secure the loans, commercial and industrial loans are made in amounts generally of up to 75% of the value of the collateral securing the 10 Table of Contents loan. We generally do not make unsecured commercial and industrial loans. Personal guarantees are often obtained from commercial and industrial borrowers.
An institution is “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets equal to or less than 2.0%. At June 30, 2022, the Bank was classified as a “well capitalized” institution.
An institution is “critically undercapitalized” if it has a ratio of tangible equity (as defined in the regulations) to total assets equal to or less than 2.0%. At June 30, 2023, the Bank was classified as a “well capitalized” institution.
At June 30, 2022, U.S. Government securities consisted of U.S. Treasury securities. Municipal Securities. We invest in fixed-rate investment grade bonds issued primarily by municipalities in the State of New York. Corporate Debt Securities. We invest in corporate debt securities issued primarily by companies in the financial sector. Other Debt Securities.
At June 30, 2023, U.S. Government securities consisted of U.S. Treasury securities. Municipal Securities. We invest in fixed-rate investment grade bonds issued primarily by municipalities in the State of New York. Corporate Debt Securities. We invest in corporate debt securities issued primarily by companies in the financial sector. Other Debt Securities.
For commercial loans, loans in excess of the commercial officers’ lending limits require approval from our staff loan committee, which is comprised of the President and Chief Executive Officer, Chief Credit Officer, Chief Financial Officer, Chief Banking Officer, Credit Administration Vice President, and Commercial Senior Vice Presidents.
For commercial loans, loans in excess of the commercial officers’ lending limits require approval from our staff loan committee, which is comprised of the President and Chief Executive Officer, Chief Credit Officer, Chief Financial Officer, Chief Banking Officer, Chief Strategy and Innovations Officer, Credit Administration Vice President, and Commercial Senior Vice Presidents.
The total population in our primary market area in 2022 is approximately 1.0 million, as estimated by Claritas, which provides demographic data based on U.S. Census and other data sources.
The total population in our primary market area in 2023 is approximately 1.0 million, as estimated by Claritas, which provides demographic data based on U.S. Census and other data sources.
FDIC regulations generally require that the Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter when the information in the privacy notice has changed since the customer received the previous notice.
Privacy Regulations. FDIC regulations generally require that the Bank disclose its privacy policy, including identifying with whom it shares a customer’s “non-public personal information,” to customers at the time of establishing the customer relationship and annually thereafter when the information in the privacy notice has changed since the 27 Table of Contents customer received the previous notice.
When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment 8 Table of Contents history with us and other financial institutions.
When evaluating the qualifications of the borrower, we consider the financial resources of the borrower, the borrower’s experience in owning or managing similar property and the borrower’s payment 9 Table of Contents history with us and other financial institutions.
An undercapitalized bank’s compliance with a capital restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized.
An undercapitalized bank’s compliance with a capital 26 Table of Contents restoration plan is required to be guaranteed by any company that controls the undercapitalized institution in an amount equal to the lesser of 5.0% of the institution’s total assets when deemed undercapitalized or the amount necessary to achieve the status of adequately capitalized.
In addition, the Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and to not disclose account numbers or access codes to non-affiliated third parties for marketing purposes. ​ 27 Table of Contents Community Reinvestment Act.
In addition, the Bank is required to provide its customers with the ability to “opt-out” of having their personal information shared with unaffiliated third parties and to not disclose account numbers or access codes to non-affiliated third parties for marketing purposes. Community Reinvestment Act.
Consumer and personal loans may also be made with or without security. ​ 23 Table of Contents Investment Activities. In general, the Bank may invest in certain types of debt securities (including certain corporate debt securities, and obligations of federal, state, and local governments and agencies thereof), certain types of corporate equity securities, and certain other assets.
Consumer and personal loans may also be made with or without security. Investment Activities. In general, the Bank may invest in certain types of debt securities (including certain corporate debt securities, and obligations of federal, state, and local governments and agencies thereof), certain types of corporate equity securities, and certain other assets.
For example, state-chartered banks may, with FDIC approval, continue to exercise state authority to invest in common or preferred stocks listed on a national securities exchange or the Nasdaq Stock Market and to invest in the shares of an investment company registered under the Investment Company Act of 1940.
For example, state-chartered banks may, with FDIC approval, continue to exercise state authority to invest in common or preferred stocks listed on a national securities exchange and to invest in the shares of an investment company registered under the Investment Company Act of 1940.
Based upon its capital levels, a bank that is classified as well- 26 Table of Contents capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.
Based upon its capital levels, a bank that is classified as well-capitalized, adequately capitalized, or undercapitalized may be treated as though it were in the next lower capital category if the appropriate federal banking agency, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.
Our marketing strategies focus on the strength of our knowledge of local consumer and small business markets, as well as expanding relationships with current customers and reaching out to develop new, profitable business relationships. Competition We face significant competition for deposits and loans.
Our marketing strategies focus on the strength of our knowledge of local consumer and small business markets, as well as expanding relationships with current customers and reaching out to develop new, profitable business relationships. ​ 6 Table of Contents Competition We face significant competition for deposits and loans.
When an insured institution classifies problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount.
When an insured institution classifies 16 Table of Contents problem assets as “loss,” it is required either to establish a specific allowance for losses equal to 100% of that portion of the asset so classified or to charge-off such amount.
We refer to loans that conform to the Fannie Mae guidelines as “conforming loans.” We also purchase for our portfolio loans above the maximum conforming loan limits as established by the Office of Federal Housing Enterprise Oversight, which at June 30, 2022 was $647,200 for single-family homes in our market area.
We refer to loans that conform to the Fannie Mae guidelines as “conforming loans.” We also purchase for our portfolio loans above the maximum conforming loan limits as established by the Office of Federal Housing Enterprise Oversight, which at June 30, 2023 was $726,200 for single-family homes in our market area.
This fixed aggregate fee is paid by us regardless of whether the loan was originated by the mortgage banking company directly or was due to our customer referral. We receive no fee for referring a customer to Homestead Funding Corp.
This fixed aggregate fee is paid by us regardless of whether the loan was originated by the Mortgage Banking Company directly or was due to our customer referral. We receive no fee for referring a customer to the Mortgage Banking Company.
Through our relationship with Homestead Funding Corp., we can assist applicants in obtaining financing from the mortgage banking company, but we are not required to commit to purchase or portfolio any loan originated by Homestead Funding Corp.
Through our relationship with the Mortgage Banking Company, we can assist applicants in obtaining financing from the Mortgage Banking Company, but we are not required to commit to purchase or portfolio any loan originated by the Mortgage Banking Company.
Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months. Delinquent Loans .
Interest income on restructured loans is accrued after the borrower demonstrates the ability to pay under the restructured terms through a sustained period of repayment performance, which is generally six consecutive months. 14 Table of Contents Delinquent Loans .
The following table sets forth our amounts of all classified loans and loans designated as special mention as of June 30, 2022 and 2021.
The following table sets forth our amounts of all classified loans and loans designated as special mention as of June 30, 2023 and 2022.
The Company’s common stock is traded on the Nasdaq Capital Market under the symbol “PBFS”. As a result of the completed minority stock offering, the Company files interim, quarterly and annual reports with the SEC.
The Company’s common stock is traded on the Nasdaq Capital Market under the symbol “PBFS.” As a result of the completed minority stock offering, the Company files interim, quarterly and annual reports with the SEC.
As required by statute, the federal banking agencies have adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness. The guidelines set forth the safety and soundness standards the federal banking agencies use to identify and address problems at insured depository institutions before capital becomes impaired.
As required by statute, the federal banking agencies have adopted final regulations and Interagency Guidelines Establishing Standards for Safety and Soundness. The federal banking agencies use the guidelines set forth the safety and soundness standards to identify and address problems at insured depository 25 Table of Contents institutions before capital becomes impaired.
Given our strategic partnership with Homestead Funding Corp., we do not process this type of loan in-house; instead, residential mortgage loans are processed through Homestead Funding Corp. The Bank has no ownership interest in this company or any common employees or directors.
Given our strategic partnership with the Mortgage Banking Company, we do not process this type of loan in-house; instead, residential mortgage loans are processed through the Mortgage Banking Company. The Bank has no ownership interest in this company or any common employees or directors.
Purchases of residential real estate loans greater than $750,000 must be approved by our board loan committee, which is comprised of all of the members of the board of directors.
Purchases of residential real estate loans greater than 13 Table of Contents $750,000 must be approved by our board loan committee, which is comprised of all of the members of the board of directors.
After acquisition, all costs incurred in 13 Table of Contents maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.
After acquisition, all costs incurred in maintaining the property are expensed. Costs relating to the development and improvement of the property, however, are capitalized to the extent of estimated fair value less estimated costs to sell.
The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon determination that an institution’s capital level is, or is likely to become, inadequate in light of the particular circumstances. At June 30, 2022, the Bank exceeded each of its capital requirements. ​ 25 Table of Contents Standards for Safety and Soundness.
The FDIC also has authority to establish individual minimum capital requirements in appropriate cases upon determination that an institution’s capital level is, or is likely to become, inadequate in light of the particular circumstances. At June 30, 2023, the Bank exceeded each of its capital requirements. Standards for Safety and Soundness.
The composition and maturities of the debt securities portfolio at June 30, 2022 are summarized in the following table.
The composition and maturities of the debt securities portfolio at June 30, 2023 are summarized in the following table.
The limited-purpose commercial bank subsidiary has enabled us to establish banking relationships with municipalities and other public entities throughout our market area. At June 30, 2022, Pioneer Commercial Bank had $503.0 million in assets, consisting primarily of cash and municipal obligations. Pioneer Commercial Bank is subject to comprehensive regulation by the NYSDFS, as its chartering authority, and by the FDIC.
The limited-purpose commercial bank subsidiary has enabled us to establish banking relationships with municipalities and other public entities throughout our market area. At June 30, 2023, Pioneer Commercial Bank had $480.2 million in assets, consisting primarily of cash and municipal obligations. Pioneer Commercial Bank is subject to comprehensive regulation by the NYSDFS, as its chartering authority, and by the FDIC.
For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien one- to four-family residential mortgages, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
For example, a risk weight of 0% is assigned to cash and U.S. government securities, a risk weight of 50% is generally assigned to prudently underwritten first lien residential mortgage loans, a risk weight of 100% is assigned to commercial and consumer loans, a risk weight of 150% is assigned to certain past due loans and a risk weight of between 0% to 600% is assigned to permissible equity interests, depending on certain specified factors.
At June 30, 2022, $28.9 million of our home equity loans and lines of credit were in a junior lien position, nearly all of which were second mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure, after repayment of the senior mortgages, if applicable.
At June 30, 2023, $32.0 million of our home equity loans and lines of credit were in a junior lien position, nearly all of which were second mortgages. We face the risk that the collateral will be insufficient to compensate us for loan losses and costs of foreclosure, after repayment of the senior mortgages, if applicable.
Loans secured by commercial real estate generally are larger than one- to four-family residential loans and involve greater credit risk. Commercial real estate loans often involve large loan balances to a single borrower or a group of related borrowers.
Loans secured by commercial real estate generally are larger than residential mortgage loans and involve greater credit risk. Commercial real estate loans often involve large loan balances to a single borrower or a group of related borrowers.
Pioneer Bancorp, MHC must receive the prior approval of the Federal Reserve Board before it may waive the receipt of any dividends from the Company.
Pioneer Bancorp, MHC must receive the prior approval 29 Table of Contents of the Federal Reserve Board before it may waive the receipt of any dividends from the Company.
The purchased loans are acquired from Homestead Funding Corp. without recourse or any right against the mortgage banking company to require the loans to be repurchased from us.
The purchased loans are acquired from the Mortgage Banking Company without recourse or any right against the Mortgage Banking Company to require the loans to be repurchased from us.
Our home equity lines of credit generally have 25-year terms and adjustable rates of interest, subject to a contractual floor, which are indexed to The Wall Street Journal Prime Rate. 11 Table of Contents Home equity loans and lines of credit secured by junior mortgages have greater risk than one- to four-family residential mortgage loans secured by first mortgages.
Our home equity lines of credit generally have 25-year terms and adjustable rates of interest, subject to a contractual floor, which are indexed to The Wall Street Journal Prime Rate. Home equity loans and lines of credit secured by junior mortgages have greater risk than residential mortgage loans secured by first mortgages.
Pioneer Financial Services, Inc., a New York corporation and wholly owned subsidiary of the Bank, provides wealth management services to the Bank’s customers in partnership with LPL Financial, a registered broker dealer. The Bank incorporated Pioneer Financial Services, Inc. in 1997. It had $690.8 million of assets under management at June 30, 2022.
Pioneer Financial Services, Inc., a New York corporation and wholly owned subsidiary of the Bank, provides wealth management services to the Bank’s customers in partnership with LPL Financial, a registered broker dealer. The Bank incorporated Pioneer Financial Services, Inc. in 1997. It had $812.3 million of assets under management at June 30, 2023.
An “emerging growth company” may choose not to hold stockholder votes to approve annual executive compensation (more frequently referred to as “say-on-pay” votes) or executive compensation payable in connection with a merger (more frequently referred to as “say-on-golden parachute” votes).
An “emerging growth company” may choose not to hold stockholder votes to approve annual executive compensation (more frequently referred to as “say-on-pay” votes), executive compensation payable in connection with a merger (more frequently referred to as “say-on-golden parachute” votes) or disclose pay vs. performance information.
At June 30, 2022, equity securities were comprised of common stock of companies in the financial, energy, health care, information technology, consumer cyclicals, industrials, materials and utility sectors.
At June 30, 2023, equity securities were comprised of common stock of companies in the energy, health care, information technology, consumer cyclicals, industrials, and utility sectors.
We also originate rehabilitation loans, enabling a borrower to partially or totally refurbish an existing structure, which are structured as construction loans and monitored in the same manner. At June 30, 2022, commercial construction loans totaled $71.1 million, or 7.1% of our total loan portfolio. Most of these loans are secured by properties located in our primary market area.
We also originate rehabilitation loans, enabling a borrower to partially or totally refurbish an existing structure, which are structured as construction loans and monitored in the same manner. At June 30, 2023, commercial construction loans totaled $92.8 million, or 8.0% of our total loan portfolio. Most of these loans are secured by properties located in our primary market area.
Our borrowings consist of advances from the Federal Home Loan Bank of New York (“FHLBNY”). As of June 30, 2022, the Company pledged approximately $377.1 million of residential mortgage, home equity and commercial loans as collateral for borrowings and stand-by letters of credit at the FHLBNY.
Our borrowings consist of advances from the Federal Home Loan Bank of New York (“FHLBNY”). As of June 30, 2023, the Company pledged approximately $476.6 million of residential mortgage, home equity and commercial loans as collateral for borrowings and stand-by letters of credit at the FHLBNY.
We also had undrawn amounts on the commercial construction loans totaling $57.2 million at June 30, 2022. Our commercial construction loans are generally interest-only loans that provide for the payment of interest during the construction phase, which is usually 12 to 24 months.
We also had undrawn amounts on the commercial construction loans totaling $28.9 million at June 30, 2023. Our commercial construction loans are generally interest-only loans that provide for the payment of interest during the construction phase, which is usually 12 to 24 months.
Federal Securities Laws The Company’s common stock is registered with the SEC. The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. The registration under the Securities Act of 1933 of shares of common stock issued in the offering does not cover the resale of those shares.
The Company is subject to the information, proxy solicitation, insider trading restrictions and other requirements under the Securities Exchange Act of 1934. The registration under the Securities Act of 1933 of shares of common stock issued in the offering does not cover the resale of those shares.
Beginning in January 2016, we entered into a strategic partnership with Homestead Funding Corp., a mortgage banking company, to outsource our residential mortgage loan originations, underwriting and closing processes.
Beginning in January 2016, we entered into a strategic partnership with Homestead Funding Corp. (the “Mortgage Banking Company”), an unaffiliated mortgage banking company, to outsource our residential mortgage loan originations, underwriting and closing processes.
As of June 30, 2022, the aggregate amount of all our certificates of deposit in amounts greater than or equal to $250,000 (the FDIC insurance limit) was approximately $18.6 million.
As of June 30, 2023, the aggregate amount of all our certificates of deposit in amounts greater than or equal to $250,000 (the FDIC insurance limit) was approximately $9.9 million.
The Capital Region has a diversified economy and representative industries include educational services, technology and health care, along with a strong state government workforce. Large employers in the Capital Region include General Electric, Regeneron Pharmaceuticals, Inc., GlobalFoundries, the Golub Corporation, St. Peter’s Health Partners, Albany Medical Center, the Rensselaer Polytechnic Institute and the State of New York.
The Capital Region has a diversified economy and representative industries include educational services, technology and health care, along with a strong state government workforce. Large employers in the Capital Region include General Electric, Regeneron Pharmaceuticals, Inc., GlobalFoundries, Albany Med Health System, St. Peter’s Health Partners, Northeast Grocery Inc., Rensselaer Polytechnic Institute and the State of New York.
The following tables set forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.
The following table sets forth the allowance for loan losses allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.
At June 30, 2022, we had $453.5 million in commercial real estate loans, representing 45.3% of our total loan portfolio. Our commercial real estate loans are secured primarily by office buildings, industrial facilities, retail facilities, multi-family properties and other commercial properties, substantially all of which are located in our primary market area.
At June 30, 2023, we had $424.3 million in commercial real estate loans, representing 36.6% of our total loan portfolio. Our commercial real estate loans are secured primarily by office buildings, industrial facilities, retail facilities, multi-family properties and other commercial properties, substantially all of which are located in our primary market area.
At June 30, 2022, the maximum amount of funding available from the FHLBNY was $313.6 million, of which none was utilized for borrowings and $32.0 million was utilized for irrevocable stand-by letters of credit issued to secure municipal deposits, resulting in $281.6 million of available borrowing capacity. Subsidiaries Pioneer Commercial Bank.
At June 30, 2023, the maximum amount of funding available from the FHLBNY was $395.6 million, of which none was utilized for borrowings and $90.0 million was utilized for irrevocable stand-by letters of credit issued to secure municipal deposits, resulting in $305.6 million of available borrowing capacity. Subsidiaries Pioneer Commercial Bank.
Since January 2016, all of our one- to four-family residential real estate loans have been purchases through our relationship with Homestead Funding Corp., an unaffiliated mortgage banking company. We also invest in securities, which have historically consisted primarily of U.S. Government and agency obligations, municipal obligations and Federal Home Loan Bank of New York stock.
Since January 2016, all of our residential mortgage loans have been purchases through our relationship with an unaffiliated mortgage banking company. We also invest in securities, which have historically consisted primarily of U.S. Government and agency obligations, municipal obligations and Federal Home Loan Bank of New York stock.
All disclosures in this Annual Report on Form 10-K relating to the Bank are consolidated to include the activities of Pioneer Financial Services, Inc. Personnel As of June 30, 2022, we had 244 full-time employees and 34 part-time employees. Our employees are not represented by any collective bargaining group.
All disclosures in this 22 Table of Contents Annual Report on Form 10-K relating to the Bank are consolidated to include the activities of Pioneer Financial Services, Inc. Personnel As of June 30, 2023, we had 243 full-time employees and 36 part-time employees. Our employees are not represented by any collective bargaining group.
At June 30, 2022, based on the 15% limitation, the Bank’s loans-to-one-borrower limit was approximately $29.6 million. On the same date, the Bank had no borrower with outstanding balances in excess of this amount. 12 Table of Contents Our lending is subject to written underwriting standards and origination procedures.
At June 30, 2023, based on the 15% limitation, the Bank’s loans-to-one-borrower limit was approximately $32.9 million. On the same date, the Bank had no borrower with outstanding balances in excess of this amount. Our lending is subject to written underwriting standards and origination procedures.
Home Equity Loans and Lines of Credit. We offer home equity loans and home equity lines of credit, both of which are secured by either first mortgages or second mortgages on owner occupied, one- to four-family residences. At June 30, 2022, outstanding home equity loans and equity lines of credit totaled $81.2 million, or 8.1% of total loans outstanding.
Home Equity Loans and Lines of Credit. We offer home equity loans and home equity lines of credit, both of which are secured by either first mortgages or second mortgages on owner occupied, one- to four-family residences. At June 30, 2023, outstanding home equity loans and equity lines of credit totaled $84.1 million, or 7.3% of total loans outstanding.
As of June 30, 2022, the unemployment rates for the United States, New York State and the Capital Region of New York were 3.6%, 4.4% and 3.0%, respectively.
As of June 30, 2023, the unemployment rates for the United States, New York State and the Capital Region of New York were 3.6%, 4.3% and 2.9%, respectively.
We may also purchase one- to four-family residential real estate loans from Homestead Funding Corp. to customers who were not referred to the mortgage banking company by the Bank. For each purchased loan, we generally pay a fixed aggregate fee to Homestead Funding Corp. of 1.75% of the loan balance.
We may also purchase residential mortgage loans from the Mortgage Banking Company to customers who were not referred to the Mortgage Banking Company by the Bank. For each purchased loan, we generally pay a fixed aggregate fee to the Mortgage Banking Company of 1.75% of the loan balance.
Our commercial lines of credit are typically made with adjustable interest rates, indexed to either the Secured Overnight Financing Rate (“SOFR”), London Interbank Offered Rate (“LIBOR”) or The Wall Street Journal Prime Rate, plus a margin, and we can demand repayment of the borrowed amount due at any time.
Commercial lending products include revolving lines of credit and term loans. Our commercial lines of credit are typically made with adjustable interest rates, indexed to either the Secured Overnight Financing Rate (“SOFR”) or The Wall Street Journal Prime Rate, plus a margin, and we can demand repayment of the borrowed amount due at any time.
By the 90 th day of delinquency, we will issue a pre-foreclosure notice that will require the borrower to bring the loan current within 30 days in order to avoid the beginning of foreclosure proceedings for loans secured by residential real estate.
By the 90 th day of delinquency, we will issue a pre-foreclosure notice that will require the borrower to bring the loan current within 30 days in order to avoid the beginning of foreclosure proceedings for loans secured by residential real estate. Commercial real estate, commercial and industrial, commercial construction and consumer loans are managed on a loan-by-loan basis.
Purchases of residential real estate loans up to $750,000 from Homestead Funding Corp. must be approved by one of the following officers: the President and Chief Executive Officer, Chief Credit Officer, Chief Financial Officer, Chief Administrative Officer, Bank Operations Vice President or the Consumer Lending Officer.
Purchases of residential real estate loans up to $750,000 from the Mortgage Banking Company must be approved by one of the following officers: the President and Chief Executive Officer, Chief Credit Officer, Chief Financial Officer, Chief Administrative Officer or the Bank Operations Vice President.
As of June 30, 2022, unemployment rates, according to the New York State Department of Labor, were 3.0% for Albany County, 3.3% for Greene County, 3.0% for Rensselaer County, 2.6% for Saratoga County, 3.3% for Schenectady County and 3.0% for Warren County.
As of June 30, 2023, unemployment rates, according to the New York State Department of Labor, were 3.0% for Albany County, 3.3% for Greene County, 2.9% for Rensselaer County, 2.5% for Saratoga County, 3.1% for Schenectady County and 2.8% for Warren County.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeEconomic conditions in our primary market have recently been adversely affected by the COVID-19 pandemic and inflationary environment and further deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations: ● demand for our products and services may decrease; ● loan delinquencies, problem assets and foreclosures may increase; ● collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; ● the value of our securities portfolio may decrease; and ● the net worth and liquidity of loan guarantors may decrease, thereby impairing their ability to honor commitments made to us. 37 Table of Contents Moreover, a significant decline in general economic conditions, caused by inflation, acts of terrorism, an outbreak of hostilities or other international or domestic calamities or other factors beyond our control could further impact these local economic conditions and could further negatively affect our financial performance.
Biggest changeAny further deterioration in economic conditions could result in the following consequences, any of which could have a material adverse effect on our business, financial condition, liquidity and results of operations: ● continued decreases in deposits may impact our liquidity; ● demand for our products and services may decrease; ● loan delinquencies, problem assets and foreclosures may increase; ● collateral for loans, especially real estate, may decline in value, thereby reducing customers’ future borrowing power, and reducing the value of assets and collateral associated with existing loans; ● the value of our securities portfolio may decrease; and ● the net worth and liquidity of loan guarantors may decrease, thereby impairing their ability to honor commitments made to us.
If our assumptions prove to be incorrect, or if certain intervening events occur (like fraud by a customer or the COVID-19 pandemic), our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, and adjustments may be necessary to address different economic conditions or adverse developments in the loan portfolio.
If our assumptions prove to be incorrect, or if certain intervening events occur (like fraud by a customer or the COVID-19 pandemic), our allowance for loan losses may not be sufficient to cover losses inherent in our loan portfolio, and adjustments may be necessary to address different economic conditions or adverse developments in our loan portfolio.
Given our dependence on high-average balance municipal funds deposits as a source of funds, our inability to retain such funds could significantly and adversely affect our liquidity. Further, our municipal deposits are primarily demand deposit accounts and are therefore more sensitive to interest rate risk.
Given our dependence on high-average balance municipal deposits as a source of funds, our inability to retain such funds could significantly and adversely affect our liquidity. Further, our municipal deposits are primarily demand deposit accounts and are therefore more sensitive to interest rate risk.
While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance growth opportunities will be available or that we will successfully manage our growth.
While we believe we have the management resources and internal systems in place to successfully manage our future growth, there can be no assurance that growth opportunities will be available or that we will successfully manage our growth.
The Company’s and the Bank’s legal fees, costs and expenses related to these actions are significant and are expected to continue being significant. In addition, costs associated with potentially prosecuting, litigating or settling any litigation, satisfying any adverse judgments, if any, or other proceedings, could be significant.
The Company’s and the Bank’s legal fees, costs and expenses related to these actions are significant and are expected to continue to be significant. In addition, costs associated with potentially prosecuting, litigating or settling any litigation, satisfying any adverse judgments, if any, or other proceedings, could be significant.
A large portion of our loan portfolio is comprised of commercial and industrial loans secured by accounts receivable, inventory, equipment or other business assets, the deterioration in value of which could increase the potential for future losses.
A portion of our loan portfolio is comprised of commercial and industrial loans secured by accounts receivable, inventory, equipment or other business assets, the deterioration in value of which could increase the potential for future losses.
The NYSDFS also has the authority to appoint a receiver or conservator if it determines that we have or are conducting our business in an unsafe or unauthorized manner, and under certain other circumstances.
The NYSDFS also has the authority to appoint a monitor, a receiver, or conservator if it determines that we have or are conducting our business in an unsafe or unauthorized manner, and under certain other circumstances.
The funded status and benefit obligations of our tax-qualified defined benefit plan (“pension plan”) is dependent upon many factors, including returns on invested assets, certain market interest rates, the discount rates and mortality assumptions used to determine pension obligations.
The funded status and benefit obligations of our tax-qualified defined benefit plan (“pension plan”) are dependent upon many factors, including returns on invested assets, certain market interest rates, and the discount rates and mortality assumptions used to determine pension obligations.
Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate or individual business activities of our 36 Table of Contents commercial customers could cause rapid declines in loan collectability and the values associated with general business assets, resulting in inadequate collateral coverage that may expose us to credit losses and could adversely affect our business, financial condition and results of operations.
Significant adverse changes in the economy or local market conditions in which our commercial lending customers operate or individual business activities of our commercial customers could cause rapid declines in loan collectability and the values associated with general business assets, resulting in inadequate collateral coverage that may expose us to credit losses and could adversely affect our business, financial condition and results of operations.
These estimates are based upon currently available information and are subject to significant judgment, a variety of assumptions and known and unknown uncertainties. See Item 3 – “Legal Proceedings,” for details. As a result, the ultimate outcome of our legal or regulatory actions could have a material adverse effect on the Company’s financial condition and results of operations.
These estimates are based upon currently available information and are subject to significant judgment, a variety of assumptions and known and unknown uncertainties. See “Item 3 – Legal Proceedings,” for details. As a result, the ultimate outcome of our legal or regulatory actions could have a material adverse effect on the Company’s financial condition and results of operations.
Our involvement in any such matters, whether tangential or otherwise, and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management attention from the operation of our business.
Our involvement in any such matters, whether tangential or otherwise, and even if the matters are ultimately determined in our favor, could also cause significant harm to our reputation and divert management’s attention from the operation of our business.
Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating Basel III regulatory capital and/or additional Basel III capital conservation buffers could result in management modifying its business strategy, and could limit our ability to pay dividends or repurchase our shares. ​ 46 Table of Contents Our success depends on attracting and retaining certain key personnel.
Implementation of changes to asset risk weightings for risk-based capital calculations, items included or deducted in calculating Basel III regulatory capital and/or additional Basel III capital conservation buffers could result in management modifying its business strategy, and could limit our ability to pay dividends or repurchase our shares. Our success depends on attracting and retaining certain key personnel.
For as long as we continue to be an emerging growth company, we currently intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
For as long as we continue to be an emerging growth company, we currently intend to take advantage of exemptions from various reporting requirements applicable to other public companies but not to “emerging growth companies,” including, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements, and exemptions from the requirements of disclosing pay vs. performance, holding a non-binding advisory vote on executive compensation and stockholder approval of any golden parachute payments not previously approved.
An unexpected adverse development on one or more of these types of loans can expose us to a significantly greater risk of loss compared to an adverse development with respect to a one- to four-family residential mortgage loan.
An unexpected adverse development on one or more of these types of loans can expose us to a significantly greater risk of loss compared to an adverse development with respect to a residential mortgage loan.
In addition, a decrease in the discount rate and/or changes in the mortality assumptions used to determine pension obligations could increase the estimated value of our pension obligations, which would require us to increase the amounts of future contributions to the plan, thereby reducing our equity and our costs associated with the plan may substantially increase in future periods.
In addition, a decrease in the discount rate and/or changes in the mortality assumptions 38 Table of Contents used to determine pension obligations could increase the estimated value of our pension obligations, which would require us to increase the amounts of future contributions to the plan, thereby reducing our equity and our costs associated with the plan may substantially increase in future periods.
We face potential heightened cybersecurity risks during the COVID-19 pandemic as people continue to work from home, including our customers, our employees and the employees of our vendors. While we have implemented appropriate safeguards to protect our employees from potential cybersecurity threats while they work from home, these security measures may not be successful.
We face potential heightened cybersecurity risks as more people continue to work from home following the COVID-19 pandemic, including our customers, our employees and the employees of our vendors. While we have implemented appropriate safeguards to protect our employees from potential cybersecurity threats while they work from home, these security measures may not be successful.
Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us.
Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and network infrastructure, which may result in significant liability 50 Table of Contents to us and may cause existing and potential customers to refrain from doing business with us.
We maintain an allowance for loan losses, which is established through a provision for loan losses that represents management’s best estimate of probable incurred losses within the existing portfolio of loans.
We maintain an allowance for loan losses, which is established through a provision for loan losses that represents management’s best estimate of probable incurred losses within our existing portfolio of loans.
For example, if it is determined that we have failed to operate according to the regulations, policies and directives of the NYSDFS, we would be subject to sanctions for non-compliance, including seizure of the property and business of the savings bank and suspension or revocation of our charter.
For example, if it is determined that we have failed to operate according to the regulations, policies and directives of the NYSDFS, we would be subject to sanctions for non-compliance, including seizure of the property and business of the savings bank and 43 Table of Contents suspension or revocation of our charter.
This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions 47 Table of Contents or their implementation, and customer attrition due to potential negative publicity.
This risk of loss also includes the potential legal actions that could arise as a result of an operational deficiency or as a result of noncompliance with applicable regulatory standards, adverse business decisions or their implementation, and customer attrition due to potential negative publicity.
Any future determination to pay cash dividends will be made by our board of directors and will depend upon our financial condition, results of operations, capital requirements, restrictions under Federal Reserve Board regulations and policy, our business strategy and other factors that our board of directors deems relevant.
Any future determination to pay cash dividends will be made by our board of directors and will depend upon our financial condition, results of operations, 52 Table of Contents capital requirements, restrictions under Federal Reserve Board regulations and policy, our business strategy and other factors that our board of directors deems relevant.
Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks. We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.
Accordingly, we could suffer losses if we fail to properly anticipate and manage these risks. We are a community financial institution and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.
In addition, we may need to hire additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired.
In addition, we may need to hire 46 Table of Contents additional compliance, accounting and financial staff with appropriate public company experience and technical knowledge, and we may not be able to do so in a timely fashion. As a result, we may need to rely on outside consultants to provide these services for us until qualified personnel are hired.
As of June 30, 2022, we have not elected the community bank leverage ratio framework and accordingly the Basel III capital requirements remain applicable.
As of June 30, 2023, we have not elected the community bank leverage ratio framework and accordingly the Basel III capital requirements remain applicable.
We are also subject to fraud and compliance risk in connection with the origination of loans, ACH transactions, wire transactions, ATM transactions, checking transactions, and debit cards that we have issued to our customers and through our online banking portals.
We are also subject to fraud and compliance risk, and have experienced fraudulent activities, in connection with the origination of loans, ACH transactions, wire transactions, ATM transactions, checking transactions, and debit cards that we have issued to our customers and through our online banking portals.
Declines in market value may result in other-than-temporary impairments of these assets, which may lead to 44 Table of Contents accounting charges that could have a material adverse effect on our net income and stockholders’ equity.
Declines in market value may result in other-than-temporary impairments of these assets, which may lead to accounting charges that could have a material adverse effect on our net income and stockholders’ equity.
Risks Relating to Ownership of Our Common Stock ● Pioneer Bancorp, MHC’s majority control of our common stock will enable it to exercise voting control over most matters put to a vote of stockholders and will prevent stockholders from forcing a sale or a second-step conversion transaction you may find advantageous. ● Our common stock is not heavily traded, and the stock price may fluctuate significantly. ● Federal Reserve Board regulations and policy effectively prohibit Pioneer Bancorp, MHC from waiving the receipt of dividends, which will likely preclude us from paying any dividends on our common stock. ● Various factors may make takeover attempts more difficult to achieve. ● We are an emerging growth company, and if we elect to comply only with the reduced reporting and disclosure requirements applicable to emerging growth companies, our common stock may be less attractive to investors. ● Our contribution to the charitable foundation may not be tax deductible, which could reduce our profits. 34 Table of Contents Risks Related to Changes in Interest Rates and Inflation Changes in interest rates may reduce our profits.
Risks Relating to Ownership of Our Common Stock ● Pioneer Bancorp, MHC’s majority control of our common stock will enable it to exercise voting control over most matters put to a vote of stockholders and will prevent stockholders from forcing a sale or a second-step conversion transaction you may find advantageous. ● Our common stock is not heavily traded, and the stock price may fluctuate significantly. ● Federal Reserve Board regulations and policy effectively prohibit Pioneer Bancorp, MHC from waiving the receipt of dividends, which will likely preclude us from paying any dividends on our common stock. ● Various factors may make takeover attempts more difficult to achieve. ● We are an emerging growth company, and if we elect to comply only with the reduced reporting and disclosure requirements applicable to emerging growth companies, our common stock may be less attractive to investors. ● Our contribution to the Pioneer Bank Charitable Foundation may not be tax deductible, which could reduce our profits.
However, our competitors may have greater resources to invest in technological improvements, we may not always have capital levels which are sufficient to support a robust investment in our technology infrastructure or we may not be able to effectively implement new technology-driven products and services or be successful in marketing these products and services to our customers.
However, our competitors may have greater resources to invest in technological improvements, we may not always have capital levels which are sufficient to support a robust investment in our technology infrastructure or we may not be able to effectively implement new 49 Table of Contents technology-driven products and services or be successful in marketing these products and services to our customers.
Third parties upon which we rely for our technology needs may not be able to develop on a cost effective basis systems that will enable us to keep pace with such developments.
Third parties upon which we rely for our technology needs may not be able to develop cost effective systems that will enable us to keep pace with such developments.
Consequently, a problem with one or more loans could require us to significantly increase our provision for loan losses. In addition, federal and state regulators periodically review our allowance for loan losses and may require us to increase our provision for loan losses or recognize additional loan charge-offs.
Consequently, a problem with one or more loans could require us to significantly increase our provision for loan losses. In addition, federal and state regulators periodically review our allowance for loan losses and may require us to increase our provision for loan 40 Table of Contents losses or recognize additional loan charge-offs.
In addition, we are involved in a number of legal, regulatory, governmental and other proceedings, claims or investigations. See Item 3 – “Legal Proceedings,” for details.
In addition, we are involved in a number of legal, regulatory, governmental and other proceedings, claims or investigations. See “Item 3 – Legal Proceedings,” for details.
Based on these factors, we have a concentration in loans of the type described in (ii) above of 155.7% of our total capital at June 30, 2022. The purpose of the guidance is to assist banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations.
Based on these factors, we have a concentration in loans of the type described in (ii) above of 141.5% of our total capital at June 30, 2023. The purpose of the guidance is to assist banks in developing risk management practices and capital levels commensurate with the level and nature of real estate concentrations.
Risks Related to Operations ● We use a third party to originate one- to four-family residential mortgage loans. ● Our business strategy involves moderate growth, and our financial condition and results of operations may be adversely affected if we fail to grow or fail to manage our growth effectively. ● We continually encounter technological changes and the failure to understand and adapt to these changes could hurt our business. ● We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or restrict us from paying dividends or repurchasing shares. ● Our success depends on attracting and retaining certain key personnel. ● Systems failures or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities. ● Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses. ● We are a community bank and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance.
Risks Related to Operations ● We use a third party to originate residential mortgage loans. ● Our business strategy involves moderate growth, and our financial condition and results of operations may be adversely affected if we fail to grow or fail to manage our growth effectively. ● We continually encounter technological changes and the failure to understand and adapt to these changes could hurt our business. ● We are subject to stringent capital requirements, which may adversely impact our return on equity, require us to raise additional capital, or restrict us from paying dividends or repurchasing shares. ● Our success depends on attracting and retaining certain key personnel. ● Systems failures or breaches of our network security could subject us to increased operating costs as well as litigation and other liabilities. ● Our risk management framework may not be effective in mitigating risk and reducing the potential for significant losses. 34 Table of Contents ● We are a community financial institution and our ability to maintain our reputation is critical to the success of our business and the failure to do so may materially adversely affect our performance. ● Severe weather, acts of terrorism, geopolitical and other external events could impact our ability to conduct business.
LIBOR is used as a reference rate for certain of the Company’s floating rate commercial loans and residential mortgages, as well as its interest rate swaps. In 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that the publication of LIBOR is not guaranteed beyond 2021.
LIBOR was used as a reference rate for certain of the Company’s floating rate commercial loans and residential mortgage loans, as well as its interest rate swaps. In 2017, the U.K. Financial Conduct Authority, which regulates LIBOR, announced that the publication of LIBOR would not be guaranteed beyond 2021.
We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.
Risks Related to Lending We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability.
This standard, referred to as Current Expected Credit Loss, or CECL, will require financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses.
This standard, referred to as Current Expected Credit Loss, or CECL, requires, upon adoption, financial institutions to determine periodic estimates of lifetime expected credit losses on loans, and recognize the expected credit losses as allowances for loan losses.
At June 30, 2022, $103.2 million, or 10.3% of our total loan portfolio, was comprised of commercial and industrial loans and lines of credit to a variety of small and medium-sized businesses in our market area collateralized by general business assets including, among other things, accounts receivable and inventory, and we may augment this collateral with additional liens on real property.
At June 30, 2023, $88.4 million, or 7.6% of our total loan portfolio, was comprised of commercial and industrial loans and lines of credit to a variety of small and medium-sized businesses in our market area collateralized by general business assets including, among other things, accounts receivable and inventory, and we may augment this collateral with additional liens on real property.
These loans carry a greater credit risk than loans secured by one- to four-family properties. Our loan portfolio includes commercial real estate loans, primarily loans secured by office buildings, industrial facilities, retail facilities, multi-family properties and other commercial properties. At June 30, 2022, our commercial real estate loans totaled $453.5 million, or 45.3%, of our total loan portfolio.
These loans carry a greater credit risk than loans secured by one- to four-family properties. Our loan portfolio includes commercial real estate loans, primarily loans secured by multi-family properties, office buildings, industrial facilities, retail facilities and other commercial properties. At June 30, 2023, our commercial real estate loans totaled $424.3 million, or 36.6%, of our total loan portfolio.
This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects.
This could require increasing our allowance for loan losses to address the decrease in the value of the real estate securing our loans, which could have a material adverse effect on our business, financial condition, results of operations and growth prospects. Our loan portfolio consists of a high percentage of loans secured by commercial real estate.
Our ability to grow successfully will depend on a variety of factors, including our ability to attract and retain experienced bankers, the availability of attractive business opportunities, competition from other financial institutions in our market area and our 45 Table of Contents ability to manage our growth.
Our ability to grow successfully will depend on a variety of factors, including our ability to attract and retain experienced bankers, the availability of attractive business opportunities, competition from other financial institutions and our ability to manage our growth.
Our bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us or that may result in a curtailment of our commercial real estate and multi-family lending and/or the requirement that we maintain higher levels of regulatory capital, either of which would adversely affect our loan originations and profitability.
Our bank regulators could require us to implement additional policies and procedures consistent with their interpretation of the guidance that may result in additional costs to us or that may result in a curtailment of our commercial real estate and multi-family lending and/or the requirement that we maintain higher levels of regulatory capital, either of which would adversely affect our loan originations and profitability. 44 Table of Contents We are subject to environmental liability risk associated with lending activities.
While these types of arrangements may generate more income than our traditional commercial loans that we originate and hold in portfolio, they generally have greater credit risk because they involve lending to borrowers with higher risk profiles, the issuance of more complex financial instruments and the valuation of more complex underlying collateral. ​ 38 Table of Contents We are subject to environmental liability risk associated with lending activities.
While these types of arrangements may generate more income than our traditional commercial loans that we originate and hold in our portfolio, they generally have greater credit risk because they involve lending to borrowers with higher risk profiles, the issuance of more complex financial instruments and the valuation of more complex underlying collateral.
We also provide commercial construction loans to local developers for the construction of one- to four-family residential developments, and originate rehabilitation loans, enabling the borrower to partially or totally refurbish an existing structure. At June 30, 2022, commercial construction loans were $71.1 million, or 7.1% of our total loan portfolio.
We also provide commercial construction loans to local developers for the construction of one- to four-family residential developments, and originate rehabilitation loans, enabling the borrower to partially or totally refurbish an existing structure. At June 30, 2023, commercial construction loans were $92.8 million, or 8.0% of our total loan portfolio.
During 2022, the Federal Reserve Board in order to combat high inflation increased the Fed Funds target range multiple times to a target range of 3.00% to 3.25%. The consensus is that rates will be increased additional times during calendar 2022.
During 2022 and 2023, the Federal Reserve Board in order to combat high inflation increased the Fed Funds target range multiple times to a target range of 5.25% to 5.50%. The consensus is that rates will likely be increased additional times during calendar 2023.
Any failure on our part to comply with current laws, regulations, other regulatory requirements or safe and sound banking, insurance, or investment advisory practices or concerns about our financial condition, or any related regulatory sanctions or adverse actions against us, could have a material adverse effect on our business, financial condition or results of operations, increase our costs or restrict our ability to expand our business and result in damage to our reputation.
If any of these regulatory agencies suspect or determine that there has been a failure on our part to comply with current laws, regulations, other regulatory requirements or safe and sound banking, insurance, or investment advisory practices or concerns about our financial condition, or any related regulatory proceedings, investigations, sanctions, penalties or adverse actions against us, could have a material adverse effect on our business, financial condition or results of operations, increase our costs or restrict our ability to expand our business and result in damage to our reputation.
We also increase or decrease our stockholders’ equity by the amount of change in the fair value of equity securities through net income in the consolidated statement of operations. Risks Related to Competition and Market Conditions Strong competition within our market area may reduce our profits and slow growth. We face strong competition in making loans and attracting deposits.
We also increase or decrease our stockholders’ equity by the amount of change in the fair value of equity securities through net income in the consolidated statement of operations. ​ 48 Table of Contents Risks Related to Competition Strong competition within our market area may reduce our profits and slow growth.
Any substantial, unexpected or prolonged change in market interest rates could have a material adverse effect on our financial condition, liquidity and results of operations. While we pursue an asset/liability strategy designed to mitigate our risk from changes in interest rates, changes in interest rates can still have a material adverse effect on our financial condition and results of operations.
While we pursue an asset/liability strategy designed to mitigate our risk from changes in interest rates, changes in interest rates can still have a material adverse effect on our financial condition, liquidity and results of operations.
If we are forced to pay higher rates on our municipal accounts to retain those funds, or if we are unable to retain such funds and we are forced to resort to other sources of funds for our lending and investment activities, such as borrowings from the Federal Home Loan Bank of New York, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our municipal deposits, which would adversely affect our net income.
If we are forced to pay higher rates on our municipal accounts to retain those funds, or if we are unable to retain such funds and we are forced to resort to other sources of funds for our lending and investment activities, such as borrowings from the Federal Home Loan Bank of New York, the interest expense associated with these other funding sources may be higher than the rates we are currently paying on our municipal deposits, which would adversely affect our net income. ​ 47 Table of Contents Risks Related to Our Insurance and Wealth Management Businesses Conditions in insurance markets could adversely affect our earnings.
Risks Relating to Accounting Matters ● Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results. ● Changes in accounting standards could affect reported earnings. ● The restatement of certain of our historical consolidated financial statements may have an adverse effect on us. 33 Table of Contents ● The cost of additional finance and accounting systems, procedures and controls in order to satisfy our public company reporting requirements will increase our expenses.
Risks Relating to Accounting Matters ● Changes in management’s estimates and assumptions may have a material impact on our consolidated financial statements and our financial condition or operating results. ● Changes in accounting standards could affect reported earnings. ● The cost of additional finance and accounting systems, procedures and controls in order to satisfy our public company reporting requirements has increased and will continue to increase our expenses.
Declines in the real estate values in the Capital Region of New York and surrounding markets as a result of a recession could significantly impair the value of the particular collateral securing our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s obligations to us.
Declines in real estate values in the Capital Region of New York and surrounding markets as a result of unemployment, inflation, changes in tax laws, a recession or other factors outside our control could significantly impair the value of the collateral securing our loans and our ability to sell the collateral upon foreclosure for an amount necessary to satisfy the borrower’s obligations to us.
We are involved in numerous legal and other proceedings due to, among other reasons the fraud. See Item 3 – “Legal Proceedings,” for details. See “We are subject to sanctions and other negative actions if regulatory agencies with supervisory authority over us determine that we failed to comply with applicable laws and regulations,” below.
We are involved in numerous legal and other proceedings due to, among other reasons, the Mann Entities related fraudulent activity. See “Item 3 – Legal Proceedings,” for details. See “We are subject to sanctions and other negative actions if regulatory agencies with supervisory authority over us determine that we failed to comply with applicable laws and regulations” below.
Our securities portfolio may be affected by fluctuations in market value, potentially reducing accumulated other comprehensive income or earnings. Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand. Management evaluates securities for other-than-temporary impairment on a quarterly basis, with more frequent evaluation for selected issues.
Fluctuations in market value may be caused by changes in market interest rates, lower market prices for securities and limited investor demand. Management evaluates securities for other-than-temporary impairment on a quarterly basis, with more frequent evaluation for selected issues.
If we are unable to effectively compete in our market area, our profitability would be negatively affected. The greater resources and broader offering of deposit and loan products of some of our competitors may also limit our ability to increase our interest-earning assets.
If we are unable to effectively compete in our market area, our profitability would be negatively affected. The greater resources and broader offering of deposit and loan products of some of our competitors may also limit our ability to increase our interest-earning assets. Risks Related to Operations We use a third party to originate residential mortgage loans.
We will cease to be an emerging growth company upon the earliest of: (1) the end of the fiscal year following the fifth anniversary of this offering; (2) the first fiscal year after our annual gross revenues are $1.07 billion or more; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (4) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year.
We will cease to be an emerging growth company upon the earliest of: (1) the end of the fiscal year following the fifth anniversary of our initial public offering; (2) the first fiscal year after our annual gross revenues are $1.235 billion or more; (3) the date on which we have, during the previous three-year period, issued more than $1.0 billion in non-convertible debt securities; or (4) the end of any fiscal year in which the market value of our common stock held by non-affiliates exceeded $700 million at the end of the second quarter of that fiscal year. 53 Table of Contents Our contribution to the Pioneer Bank Charitable Foundation may not be tax deductible, which could reduce our profits.
At June 30, 2022, approximately $876.2 million, or 87.5%, of our total loan portfolio was secured by real estate, most of which is located in our primary lending market, the Capital Region of New York and surrounding markets.
At June 30, 2023, approximately $1.0 billion, or 90.2%, of our total loan portfolio was secured by real estate, most of which is located in our primary lending market, the Capital Region of New York and surrounding markets.
As such, we strive to conduct our business in a manner that enhances our reputation. This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates.
This is done, in part, by recruiting, hiring and retaining employees who share our core values of being an integral part of the communities we serve, delivering superior service to our customers and caring about our customers and associates.
Loan participations may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring. ● We are subject to environmental liability risk associated with lending activities.
Loan participations may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring.
It is possible that the NYSDFS or the FDIC may take one or more of these sanctions if they determine that we have failed to comply with applicable laws or regulations. 40 Table of Contents As described in this filing, we have experienced fraudulent activities that are adversely impacting our current financial performance and results of operations.
It is possible that the NYSDFS or the FDIC may impose any or all of these sanctions if they determine that we have failed to comply with applicable laws or regulations. As described in our filings with the SEC, we have experienced fraudulent activities that are adversely impacting our current financial performance and results of operations.
Risks Related to Our Insurance and Wealth Management Businesses Conditions in insurance markets could adversely affect our earnings. As we have diversified our sources of income, we have become increasingly reliant on non-interest income, particularly insurance fees and commissions. Revenue from these sources could be negatively affected by fluctuating premiums in the insurance markets or other factors beyond our control.
As we have diversified our sources of income, we have become increasingly reliant on non-interest income, including insurance fees and commissions. Revenue from these sources could be negatively affected by fluctuating premiums in the insurance markets or other factors beyond our control.
Areas requiring significant estimates and assumptions by management includes the items discussed in the proceedings described in Item 3 – “Legal Proceedings,” Item 7 – “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Mann Entities Related Fraudulent Activity,” and the items described in our “Critical Accounting Policies and Estimates,” our evaluation of the legal remedies available to the Bank related to the potentially fraudulent activities, our evaluation of the adequacy of our allowance for loan losses, the determination of our deferred income taxes, our fair value measurements, our determination of other-than-temporary impairment of investment securities, impairment of goodwill, our evaluation of contingent liabilities, and our evaluation of our defined benefit pension plan obligations.
Areas requiring significant estimates and assumptions by management includes the items discussed in the proceedings described in “Item 3 – Legal Proceedings,” “Part II, Item 8–Financial Statements and Supplementary Data- Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities,” and the items described in our “Critical Accounting Policies and Estimates,” our evaluation of the legal remedies available to the Bank related to the potentially fraudulent activities, our evaluation of the adequacy of our allowance for loan losses, the determination of our deferred income taxes, our fair value measurements, our determination of other-than-temporary impairment of investment securities, impairment of goodwill, our evaluation of contingent liabilities, and our evaluation of our defined benefit pension plan obligations.
At June 30, 2022, $456.2 million, or 27.1% of our total deposits, consisted of municipal deposits from local government entities such as towns, cities, school districts and other municipalities, which are collateralized by letters of credit from the Federal Home Loan Bank of New York and investment securities.
At June 30, 2023, $432.1 million, or 28.0% of our total deposits, consisted of municipal deposits from local government entities such as towns, cities, school districts and other municipalities, which are collateralized by letters of credit from the Federal Home Loan Bank of New York and investment securities. These deposits may be more volatile than other deposits.
If our reputation is negatively affected as a result of certain actions we take, by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected.
If our reputation is negatively affected as a result of certain actions we take, by the actions of our employees, by our inability to conduct our operations in a manner that is appealing to current or prospective customers, or otherwise, our business and, therefore, our operating results may be materially adversely affected. 51 Table of Contents Severe weather, acts of terrorism, geopolitical and other external events could impact our ability to conduct business.
Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk, and environmental and other hazard risks. Market risks are risks associated with the sale of the completed project. They include affordability risk, which means the risk of affordability of financing by borrowers, product design risk, and risks posed by competing projects.
Market risks are risks associated with the sale of the completed project. They include affordability risk, which means the risk of affordability of financing by borrowers, product design risk, and risks posed by competing projects.
Local economic conditions have a significant impact on our residential real estate, commercial real estate, construction, commercial and industrial and consumer lending, including, the ability of borrowers to repay these loans and the value of the collateral securing these loans.
Local economic conditions have a significant impact on our residential real estate, commercial real estate, construction, commercial and industrial and consumer lending, including, the ability of borrowers to repay these loans and the value of the collateral securing these loans. Economic conditions in our primary market continue to be impacted by the inflationary and rising interest rate environment.
A portion of our loan portfolio consists of loan participations secured by properties outside our market area. Loan participations may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring.
Loan participations may have a higher risk of loss than loans we originate because we are not the lead lender and we have limited control over credit monitoring.
Risks Related to Our Securities Portfolio ● Changes in the valuation of our securities portfolio may reduce our profits and our capital levels.
Risks Related to Our Securities Portfolio ● Changes in the valuation of our securities portfolio may reduce our profits and our capital levels. Risks Related to Competition ● Strong competition within our market area may reduce our profits and slow growth.
At June 30, 2022, and assuming a 200 basis points increase in market interest rates, we estimate that our net portfolio value would decrease by $2.8 million, or 0.7%. Additionally, at June 30, 2022 and assuming a 200 basis points decrease in market interest rates, we estimate that our net portfolio value would decrease by $18.7 million, or 4.6%.
At June 30, 2023, and assuming a 200 basis points increase in market interest rates, we estimate that our net portfolio value would decrease by $38.0 million, or 9.0%. Additionally, at June 30, 2023 and assuming a 200 basis points decrease in market interest rates, we estimate that our net portfolio value would increase by $22.2 million, or 5.3%.
We are a community bank, and our reputation is one of the most valuable components of our business. A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas.
A key component of our business strategy is to rely on our reputation for customer service and knowledge of local markets to expand our presence by capturing new business opportunities from existing and prospective customers in our market area and contiguous areas. As such, we strive to conduct our business in a manner that enhances our reputation.
Risks Related to Legal, Regulatory, Fraud and Compliance Matters ● We are subject to fraud and compliance risk. ● The Company is a defendant in a variety of litigation and other actions, which may have a material adverse effect on the Company’s financial condition and results of operations. ● We are subject to sanctions and other negative actions if regulatory agencies with supervisory authority over us determine that we failed to comply with applicable laws and regulations. ● Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations will subject us to fines or sanctions. ● The level of our commercial real estate loan portfolio subjects us to additional regulatory scrutiny.
Risks Related to Legal, Regulatory, Fraud and Compliance Matters ● We are subject to fraud and compliance risk. ● The Company is a defendant in a variety of litigation and other actions, which may have a material adverse effect on the Company’s financial condition and results of operations. ● We are subject to sanctions and other negative actions if regulatory agencies with supervisory authority over us determine that we failed to comply with applicable laws and regulations. 33 Table of Contents ● Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations will subject us to fines or sanctions. ● The level of our commercial real estate loan portfolio subjects us to additional regulatory scrutiny. ● We are subject to environmental liability risk associated with lending activities. ● Climate change and related legislative and regulatory initiatives may materially affect our business and results of operations. ● Increasing scrutiny and evolving expectations from customers, regulators, investors, and other stakeholders with respect to our environmental, social and governance practices may impose additional costs on us or expose us to new or additional risks.
The Company’s board of directors will have the authority to declare dividends on our common stock subject to statutory and regulatory requirements. We currently intend to retain all our future earnings, if any, for use in our business and do not expect to pay any cash dividends on our common stock for the foreseeable future.
We currently intend to retain all our future earnings, if any, for use in our business and do not expect to pay any cash dividends on our common stock for the foreseeable future.
Inflation can have an adverse impact on our business and on our customers. Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
Inflation risk is the risk that the value of assets or income from investments will be worth less in the future as inflation decreases the value of money.
These loans carry a greater credit risk than loans secured by one- to four-family properties. ● A large portion of our loan portfolio is comprised of commercial and industrial loans secured by accounts receivable, inventory, equipment or other business assets, the deterioration in value of which could increase the potential for future losses. ● We make and hold in our portfolio commercial construction loans, which are considered to have greater credit risk than residential loans made by financial institutions. ● We have a significant number of loans secured by real estate, and a downturn in the local real estate market could negatively impact our profitability. ● Our allowance for loan losses may not be sufficient to cover actual loan losses. ● A portion of our loan portfolio consists of loan participations secured by properties outside our market area.
These loans carry a greater credit risk than loans secured by one- to four-family properties. ● A portion of our loan portfolio is comprised of commercial and industrial loans secured by accounts receivable, inventory, equipment or other business assets, the deterioration in value of which could increase the potential for future losses. ● We make and hold in our portfolio commercial construction loans, which are considered to have greater credit risk than residential loans made by financial institutions. ● Our allowance for loan losses may not be sufficient to cover actual loan losses. ● The implementation of the Current Expected Credit Loss accounting standard could require us to increase our allowance for credit losses and may have a material adverse effect on our financial condition and results of operations. ● If our non-performing assets increase, our earnings will be adversely affected. ● A portion of our loan portfolio consists of loan participations secured by properties outside our market area.
This will change the current method of establishing allowances for loan losses that are probable, which may require us to increase our allowance for loan losses, and increase the data we would need to collect and review to determine the appropriate level of our allowance for loan losses.
This change will increase the amount of data we will need to collect and review to determine the appropriate allowance for loan losses and may require us to increase our allowance for loan losses.
We are susceptible to fraudulent activity committed against us or our clients, which may result in financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation or damage to our reputation.
We are susceptible to fraudulent activity committed against us or our clients, which has in the past and may continue to result in negative impacts to the Company which may include, but are not limited to, financial losses or increased costs to us or our clients, disclosure or misuse of our information or our client information, misappropriation of assets, privacy breaches against our clients, litigation, governmental and regulatory sanctions and penalties, or damage to our reputation.
These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively. ​ 42 Table of Contents The restatement of certain of our historical consolidated financial statements may have an adverse effect on us .
These changes can be hard to predict and can materially impact how we record and report our financial condition and results of operations. In some cases, we could be required to apply new or revised guidance retroactively.
Accordingly, charge-offs on commercial real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.
In addition, commercial real estate loans typically involve larger loan balances to single borrowers or groups of related borrowers compared to residential mortgage loans. Accordingly, charge-offs on commercial real estate loans may be larger on a per loan basis than those incurred with our residential or consumer loan portfolios.
Changes in market conditions, changes in discount rates, changes in mortality assumptions or lower returns on assets may increase required contributions to, and costs associated with, our tax-qualified defined benefit plan in future periods.
Any one or a combination of the foregoing factors could negatively impact our business, financial condition, results of operations and prospects. Changes in market conditions, changes in discount rates, changes in mortality assumptions or lower returns on assets may increase required contributions to, and costs associated with, our tax-qualified defined benefit plan in future periods.
Loan participations may have a higher risk of loss than loans we originate because we rely on the lead lender to monitor the performance of the loan. Moreover, our decisions regarding the classification of a loan participation and loan loss provisions associated with a loan participation are made in part based upon information provided by the lead lender.
Moreover, our decisions regarding the classification of a loan participation and loan loss provisions associated with a loan participation are made in part based upon information provided by the lead lender. A lead lender also may not monitor a participation loan in the same manner as we would for loans that we originate.
A significant decline in fees and commissions or trading losses suffered in the investment portfolio could adversely affect our income and potentially require the contribution of additional capital to support our operations. Risks Related to Our Securities Portfolio Changes in the valuation of our securities portfolio may reduce our profits and our capital levels.
A significant decline in fees and commissions or trading losses suffered in the investment portfolio could adversely affect our income and potentially require the contribution of additional capital to support our operations. We may not be able to attract and retain wealth management clients.
Under the Internal Revenue Code, an entity is permitted to deduct up to 10% of its taxable income (generally income before federal income taxes and charitable contributions expense) in any one year for charitable contributions.
We may not have sufficient profits to be able to fully use the tax deduction from our contribution to the Pioneer Bank Charitable Foundation. Under the Internal Revenue Code, an entity is permitted to deduct up to 10% of its taxable income (generally income before federal income taxes and charitable contributions expense) in any one year for charitable contributions.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe that the current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion. ITEM 3. Legal Proceedings Certain legal proceedings in which we are involved are discussed in “Part II, Item 8–Financial Statements and Supplementary Data – Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities”.
Biggest changeLegal Proceedings Certain legal proceedings in which we are involved are discussed in “Part II, Item 8–Financial Statements and Supplementary Data- Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities.”
The following table sets forth information regarding our offices. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or Year Acquired Net Book Value of Location ​ Owned ​ or Leased ​ Real Property ​ ​ ​ ​ ​ ​ (In thousands) Main Office: ​ 652 Albany Shaker Road, Albany, NY 12211 Owned (1) 2016 ​ $ 14,995 ​ ​ ​ ​ ​ ​ ​ ​ Other Properties: ​ 21 Second Street, Troy, NY 12180 Leased 2016 ​ 37 531 Troy-Schenectady Road, Latham, NY 12110 Owned 2008 ​ 1,871 2000 Second Avenue, Watervliet, NY 12189 Leased 2017 ​ 130 1828 Altamont Avenue, Schenectady, NY 12305 Owned 2012 ​ 1,843 1208 Route 146, Clifton Park, NY 12065 Leased 1995 ​ 1 10 Kendall Way, Malta, NY 12020 Owned 2016 ​ 1,749 78 Main Avenue, Wynantskill, NY 12198 Owned 2014 ​ 1,764 712 Hoosick Street, Brunswick, NY 12180 Owned 2015 ​ 1,809 329 Glenmont Road, Glenmont, NY 12077 Leased 2014 ​ 186 142 Saratoga Avenue, Waterford, NY 12188 Owned 2015 ​ 1,481 1770 Central Avenue, Albany, NY 12205 Leased 2019 ​ 225 602 North Greenbush Road, Rensselaer, NY 12144 Leased 2017 ​ 265 90 State Street, Albany, NY 12207 Leased 2013 ​ 165 1881‑1883 Western Avenue, Albany, NY 12203 Owned 2018 ​ 4,620 184 Delaware Avenue, Delmar, NY 12054 Owned 2010 ​ 907 843 Route 146, Clifton Park, NY 12065 Leased 2012 ​ 185 426 State Street, Schenectady, NY 12305 Leased 2014 ​ 174 440 Main Street, Cairo, NY 12413 Owned 2016 ​ 363 11565 NY‑32, Greenville, NY 12083 Leased 2016 ​ 11 739 Upper Glen Street, Queensbury, NY 12804 Leased 2017 ​ 63 100 Mohawk Street, Cohoes, NY 12047 Owned 2017 ​ 511 (1) The property is subject to a ground lease.
The following table sets forth information regarding our offices. ​ ​ ​ ​ ​ ​ ​ ​ ​ Leased or Year Acquired Net Book Value of Location ​ Owned ​ or Leased ​ Real Property ​ ​ ​ ​ ​ ​ (In thousands) Main Office: ​ 652 Albany Shaker Road, Albany, NY 12211 Owned (1) 2016 ​ $ 14,606 ​ ​ ​ ​ ​ ​ ​ ​ Other Properties: ​ 21 Second Street, Troy, NY 12180 Leased 2016 ​ 28 531 Troy-Schenectady Road, Latham, NY 12110 Owned 2008 ​ 1,838 2000 Second Avenue, Watervliet, NY 12189 Leased 2017 ​ 125 1828 Altamont Avenue, Schenectady, NY 12305 Owned 2012 ​ 1,809 1208 Route 146, Clifton Park, NY 12065 Leased 1995 ​ 1 10 Kendall Way, Malta, NY 12020 Owned 2016 ​ 1,704 78 Main Avenue, Wynantskill, NY 12198 Owned 2014 ​ 1,722 712 Hoosick Street, Brunswick, NY 12180 Owned 2015 ​ 1,758 329 Glenmont Road, Glenmont, NY 12077 Leased 2014 ​ 171 142 Saratoga Avenue, Waterford, NY 12188 Owned 2015 ​ 1,442 1770 Central Avenue, Albany, NY 12205 Leased 2019 ​ 215 602 North Greenbush Road, Rensselaer, NY 12144 Leased 2017 ​ 247 90 State Street, Albany, NY 12207 Leased 2013 ​ 140 1881‑1883 Western Avenue, Albany, NY 12203 Owned 2018 ​ 4,541 184 Delaware Avenue, Delmar, NY 12054 Owned 2010 ​ 891 843 Route 146, Clifton Park, NY 12065 Leased 2012 ​ 175 426 State Street, Schenectady, NY 12305 Leased 2014 ​ 151 440 Main Street, Cairo, NY 12413 Owned 2016 ​ 355 11565 NY‑32, Greenville, NY 12083 Leased 2016 ​ 2 739 Upper Glen Street, Queensbury, NY 12804 Leased 2017 ​ 59 100 Mohawk Street, Cohoes, NY 12047 Owned 2017 ​ 499 (1) The property is subject to a ground lease.
ITEM 2. Properties As of June 30, 2022, the net book value of our office properties was $33.4 million.
ITEM 2. Properties As of June 30, 2023, the net book value of our office properties was $32.5 million.
Added
We believe that the current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion. 54 Table of Contents ITEM 3.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of the Company has been listed on The Nasdaq Capital Market under the symbol “PBFS” since July 18, 2019. At September 13, 2022, the Company had approximately 1,023 stockholders of record.
Biggest changeITEM 5. Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities The common stock of the Company has been listed on The Nasdaq Capital Market under the symbol “PBFS” since July 18, 2019. At September 12, 2023, the Company had approximately 958 stockholders of record.
Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the NYSDFS, may be paid in addition to, or in lieu of, regular cash dividends. There were no sales of unregistered securities or repurchases of shares of common stock during the year ended June 30, 2022.
Special cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the NYSDFS, may be paid in addition to, or in lieu of, regular cash dividends. There were no sales of unregistered securities or repurchases of shares of common stock during the year ended June 30, 2023.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeThe yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended June 30, ​ ​ 2022 ​ 2021 ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ ​ ​ (Dollars in thousands) Interest-earning assets: ​ ​ ​ ​ Loans ​ $ 1,012,125 ​ $ 39,557 3.91 % $ 1,127,282 ​ $ 42,394 3.76 % Securities ​ 381,685 ​ 2,954 0.77 % 155,946 ​ 1,218 0.78 % Interest-earning deposits ​ 367,509 ​ 1,331 0.36 % 217,957 ​ 315 0.14 % Total interest-earning assets ​ 1,761,319 ​ 43,842 2.49 % 1,501,185 ​ 43,927 2.93 % Non-interest-earning assets ​ 131,794 ​ ​ 143,397 ​ ​ Total assets ​ $ 1,893,113 ​ ​ $ 1,644,582 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Demand deposits ​ $ 196,450 ​ 252 0.13 % $ 151,211 ​ 181 0.12 % Savings deposits ​ 312,177 ​ 103 0.03 % 275,095 ​ 125 0.05 % Money market deposits ​ 465,603 ​ 385 0.08 % 370,506 ​ 519 0.14 % Certificates of deposit ​ 86,770 ​ 627 0.72 % 102,628 ​ 1,201 1.17 % Total interest-bearing deposits ​ 1,061,000 ​ 1,367 0.13 % 899,440 ​ 2,026 0.23 % Borrowings and other ​ 3,867 ​ 97 2.51 % 3,890 ​ 84 2.16 % Total interest-bearing liabilities ​ 1,064,867 ​ 1,464 0.14 % 903,330 ​ 2,110 0.23 % Non-interest-bearing deposits ​ 567,286 ​ ​ 492,035 ​ ​ Other non interest-bearing liabilities ​ ​ 21,870 ​ ​ ​ ​ ​ ​ ​ 22,801 ​ ​ ​ ​ ​ ​ Total liabilities ​ 1,654,023 ​ ​ 1,418,166 ​ ​ Total shareholders' equity ​ 239,090 ​ ​ 226,416 ​ ​ Total liabilities and shareholders' equity ​ $ 1,893,113 ​ ​ $ 1,644,582 ​ ​ Net interest income ​ ​ $ 42,378 ​ ​ $ 41,817 ​ Net interest rate spread (1) ​ ​ 2.35 % ​ 2.69 % Net interest-earning assets (2) ​ $ 696,452 ​ ​ $ 597,855 ​ ​ Net interest margin (3) ​ ​ 2.41 % ​ 2.79 % Average interest-earning assets to interest-bearing liabilities ​ 165.40 % ​ 166.18 % ​ (1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
Biggest changeThe yields set forth below include the effect of deferred costs and fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended June 30, ​ ​ 2023 ​ 2022 ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ ​ ​ (Dollars in thousands) Interest-earning assets: ​ ​ ​ ​ Loans ​ $ 1,059,250 ​ $ 55,231 5.21 % $ 1,012,125 ​ $ 39,557 3.91 % Securities ​ 526,460 ​ 9,875 1.88 % 381,685 ​ 2,954 0.77 % Interest-earning deposits ​ 176,965 ​ 5,927 3.35 % 367,509 ​ 1,331 0.36 % Total interest-earning assets ​ 1,762,675 ​ 71,033 4.03 % 1,761,319 ​ 43,842 2.49 % Non-interest-earning assets ​ 146,677 ​ ​ ​ ​ 131,794 ​ ​ Total assets ​ $ 1,909,352 ​ ​ ​ ​ $ 1,893,113 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Demand deposits ​ $ 175,227 ​ $ 968 0.55 % $ 196,450 ​ $ 252 0.13 % Savings deposits ​ 315,536 ​ 116 0.04 % 312,177 ​ 103 0.03 % Money market deposits ​ 450,969 ​ 2,979 0.66 % 465,603 ​ 385 0.08 % Certificates of deposit ​ 68,911 ​ 557 0.81 % 86,770 ​ 627 0.72 % Total interest-bearing deposits ​ 1,010,643 ​ 4,620 0.46 % 1,061,000 ​ 1,367 0.13 % Borrowings and other ​ 24,284 ​ 872 3.59 % 3,867 ​ 97 2.51 % Total interest-bearing liabilities ​ 1,034,927 ​ 5,492 0.53 % 1,064,867 ​ 1,464 0.14 % Non-interest-bearing deposits ​ ​ 584,762 ​ ​ ​ ​ ​ ​ ​ 567,286 ​ ​ ​ ​ ​ ​ Other non interest-bearing liabilities ​ 38,394 ​ ​ ​ ​ 21,870 ​ ​ Total liabilities ​ 1,658,083 ​ ​ ​ ​ 1,654,023 ​ ​ Total shareholders’ equity ​ 251,269 ​ ​ ​ ​ 239,090 ​ ​ Total liabilities and shareholders’ equity ​ $ 1,909,352 ​ ​ ​ ​ $ 1,893,113 ​ ​ Net interest income ​ ​ ​ ​ $ 65,541 ​ ​ $ 42,378 ​ Net interest rate spread (1) ​ ​ ​ ​ ​ ​ 3.50 % ​ 2.35 % Net interest-earning assets (2) ​ $ 727,748 ​ ​ ​ ​ $ 696,452 ​ ​ Net interest margin (3) ​ ​ ​ ​ ​ ​ 3.72 % ​ 2.41 % Average interest-earning assets to interest-bearing liabilities ​ 170.32 % ​ ​ ​ 165.40 % ​ (1) Net interest rate spread represents the difference between the weighted average yield on interest-earning assets and the weighted average cost of interest-bearing liabilities.
Our non-interest expenses consist of salaries and employee benefits, net occupancy and equipment, data processing, advertising and marketing, federal deposit insurance premiums, professional fees, litigation-related expense, and other general and administrative expenses, as well as employee retention credits.
Non-Interest Expense. Our non-interest expenses consist of salaries and employee benefits, net occupancy and equipment, data processing, advertising and marketing, insurance premiums, federal deposit insurance premiums, professional fees, litigation-related expense, and other general and administrative expenses, as well as employee retention credits.
Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates.
Income Tax Expense. Our income tax expense is the total of the current year income tax due or refundable and the change in deferred tax assets and liabilities. Deferred tax assets and liabilities are the expected future tax amounts for the temporary differences between the carrying amounts and the tax basis of assets and liabilities, computed using enacted tax rates.
By offering personalized relationship-based customer service, along with our extensive knowledge of our local markets and a wide range of product offerings, we believe it has allowed us to establish strong relationships with our customers. We believe we can leverage these strengths to attract and retain customers.
By offering personalized relationship-based customer service, along with our extensive knowledge of our local markets and a wide range of product offerings, we believe it has allowed us to establish strong relationships with our customers. We believe we can continue to leverage these strengths to attract and retain customers.
Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk Not applicable, as the Company is a “smaller reporting company.”
Interest rates do not necessarily move in the same direction or to the same extent as the prices of goods and services. ITEM 7A. Quantitative and Qualitative Disclosures About Market Risk This Item is not applicable, as the Company is a “smaller reporting company.”
We initially entered into the wealth management services business by establishing Pioneer Financial Services, Inc. in 1997 as a wholly-owned subsidiary of the Bank (which operates under the name Pioneer Wealth Management).
We entered into the wealth management services business by establishing Pioneer Financial Services, Inc. in 1997 as a wholly-owned subsidiary of the Bank (which operates under the name Pioneer Wealth Management).
We believe that we had enough sources of liquidity to satisfy our short and long-term liquidity needs as of June 30, 2022. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.
We believe that we had enough sources of liquidity to satisfy our short and long-term liquidity needs as of June 30, 2023. While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition.
Acquired identifiable intangible assets that are amortized are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may be impaired. ​ 61 Table of Contents Average Balances and Yields The following table sets forth average balances, average yields and costs, and certain other information for the years indicated.
Acquired identifiable intangible assets that are amortized are reviewed for impairment when events or changes in circumstances indicate that the carrying amounts may be impaired. ​ 63 Table of Contents Average Balances and Yields The following table sets forth average balances, average yields and costs, and certain other information for the years indicated.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (3) Net interest margin represents net interest income divided by average total interest-earning assets. ​ 62 Table of Contents Rate/Volume Analysis The following table presents the effects of changing rates and volumes on our net interest income for the years indicated.
(2) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities. (3) Net interest margin represents net interest income divided by average total interest-earning assets. ​ 64 Table of Contents Rate/Volume Analysis The following table presents the effects of changing rates and volumes on our net interest income for the years indicated.
Recent Accounting Pronouncements Please refer to Note 2 in the Notes to the consolidated financial statements that appear starting on page 75 of this Annual Report on Form 10-K for a description of recent accounting pronouncements that may affect our financial condition and results of operations.
Recent Accounting Pronouncements Please refer to Note 2 in the Notes to the consolidated financial statements that appear starting on page 77 of this Annual Report on Form 10-K for a description of recent accounting pronouncements that may affect our financial condition and results of operations.
We distinguish ourselves by maintaining the culture of a local community bank, emphasizing an engaged workforce, creating positive community impact all while offering a full range of comprehensive financial products and services, in a consultative approach.
We distinguish ourselves by maintaining the culture of a local community financial institution, emphasizing an engaged workforce, creating positive community impact all while offering a full range of comprehensive financial products and services, in a consultative approach.
Impact of Inflation and Changing Prices The financial statements and related data presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering 67 Table of Contents changes in the relative purchasing power of money over time due to inflation.
Impact of Inflation and Changing Prices The financial statements and related data presented herein have been prepared in accordance with GAAP, which requires the measurement of financial position and operating results in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation.
As expanded, the ERC is equal to 70% of qualified wages paid to employees (including employer qualified health plan expenses) and is capped at $10,000 of qualified wages for each employee, such that the maximum ERC that can be claimed 56 Table of Contents is $7,000 per employee per applicable calendar quarter in 2021.
As expanded, the ERC is equal to 70% of qualified wages paid to employees (including employer qualified health plan expenses) and is capped at $10,000 of qualified wages for each employee, such that the maximum ERC that can be claimed is $7,000 per employee per applicable calendar quarter in 2021.
The allowance for loan losses is increased (decreased) through charges (credits) to the provision for loan losses. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for loan losses when realized. 52 Table of Contents Non-interest Income.
The allowance for loan losses is increased (decreased) through charges (credits) to the provision for loan losses. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for loan losses when realized. Non-interest Income.
We believe that there will be opportunities to cross-sell these products to our deposit and borrower customers which may further increase our non-interest income, and also to cross-sell our banking services and products to customers and clients of Anchor Agency, Inc. and Pioneer Financial Services, Inc.
We believe that there will be opportunities to cross-sell these products to our deposit and borrower customers which may 60 Table of Contents further increase our non-interest income, and also to cross-sell our banking services and products to customers and clients of Anchor Agency, Inc. and Pioneer Financial Services, Inc.
In accordance with applicable accounting guidance, we establish an accrued liability when those matters present loss contingencies that are both probable and estimable. Our estimate of potential losses will change over time and the actual losses may vary significantly, and there may be an exposure to loss in excess of any amounts accrued.
In accordance with applicable accounting guidance, we establish an accrued liability when those matters present loss contingencies that are both probable and estimable. Our estimate of potential losses will change over time and the actual losses may exceed these estimates, and there may be an exposure to loss in excess of any amounts accrued.
The judgments and estimates we make in determining our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income may require us to record a valuation allowance against our deferred tax assets.
The judgments and estimates we make in determining the future realization of our deferred tax assets are inherently subjective and are reviewed on a regular basis as regulatory or business factors change. Any reduction in estimated future taxable income 62 Table of Contents may require us to record a valuation allowance against our deferred tax assets.
In addition, at June 30, 2022, we had $30.2 million in standby letters of credit outstanding. See Note 15 in the Notes to the consolidated financial statements for further information. Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.
In addition, at June 30, 2023, we had $28.4 million in standby letters of credit outstanding. See Note 15 in the Notes to the consolidated financial statements for further information. Contractual Obligations. In the ordinary course of our operations, we enter into certain contractual obligations.
Since there is not any GAAP guidance for for-profit business entities that receive government assistance that is not in the form of a loan, an income tax credit or revenue from a contract with a customer, the Company accounted for the employee retention credit by analogy to FASB ASC Subtopic 958-605, Not-for-Profit Entities: Revenue Recognition (“ASC 958-605”).
Since there was no GAAP guidance for for-profit business entities that addresses the recognition and measurement of government assistance that is not in the form of a loan, an income tax credit or revenue from a contract with a customer, the Company accounted for the employee retention credit by analogy to FASB ASC Subtopic 958-605, Not-for-Profit Entities: Revenue Recognition (“ASC 958-605”).
At June 30, 2022 and 2021, no valuation allowance was required. 60 Table of Contents We exercise significant judgment in evaluating the amount and timing of recognition of the resulting tax assets and liabilities. These judgments require us to make projections of future taxable income.
At June 30, 2023 and 2022, no valuation allowance was required. We exercise significant judgment in evaluating the amount and timing of recognition of the resulting deferred tax assets and liabilities. These judgments require us to make projections of future taxable income.
For those matters for which a loss is reasonably possible and estimable, whether in excess of an accrued liability or where there is no accrued liability, the Company’s estimated range of possible loss is $0 to $51.3 million in excess of the accrued liability, if any, as of June 30, 2022.
For those matters for which a loss is reasonably possible and estimable, whether in excess of an accrued liability or where there is no accrued liability, the Company’s estimated range of possible loss is $0 to $54.4 million in excess of the accrued liability, if any, as of June 30, 2023.
At June 30, 2022, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines. See Note 17 in the Notes to the consolidated financial statements. Off-Balance Sheet Arrangements and Aggregate Contractual Obligations Off-Balance Sheet Arrangements.
At June 30, 2023, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines. See Note 17 in the Notes to the consolidated financial statements. 69 Table of Contents Off-Balance Sheet Arrangements and Aggregate Contractual Obligations Off-Balance Sheet Arrangements.
Litigation-related expense include expenses related to legal proceedings, exclusive of legal fees and expenses. Employee retention credit is the benefit recorded related to a refundable credit against certain employment taxes as described in “Recent Developments – Employee Retention Credit.” Other expenses include expenses for office supplies, postage, telephone, insurance and other miscellaneous operating expenses. Income Tax Expense.
Litigation-related expense includes expenses related to legal proceedings, exclusive of legal fees and expenses. 56 Table of Contents Employee retention credit is the benefit recorded related to a refundable credit against certain employment taxes as described in “Recent Developments – Employee Retention Credit.” Other general and administrative expenses include expenses for office supplies, postage, telephone, insurance and other miscellaneous operating expenses.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of June 30, 2022 totaled $56.8 million, or 3.4%, of total deposits.
We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of June 30, 2023 totaled $97.0 million, or 6.3%, of total deposits.
We sell commercial and personal insurance products and provide employee benefits products and services through our wholly-owned subsidiary, Anchor Agency, Inc., which we acquired in 2016, and grew with our acquisition in 2017 of substantially all of the operating assets of Capital Region Strategic Employee Benefits Services, LLC, an employee benefits and consulting firm.
We sell commercial and personal insurance products and provide employee benefits products and services through our wholly-owned subsidiary, Anchor Agency, Inc., which we acquired in 2016, and grew with our acquisition in 2017 of Capital Region Strategic Employee Benefits Services, LLC employee benefits and consulting business.
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period. At June 30, 2022, cash and cash equivalents totaled $376.1 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $481.8 million at June 30, 2022.
Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period. At June 30, 2023, cash and cash equivalents totaled $150.5 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $431.7 million at June 30, 2023.
Management performs an evaluation of the adequacy of the allowance for loan losses at least quarterly. We consider a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, credit concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors.
We consider a variety of factors in establishing this estimate including, but not limited to, current economic conditions, delinquency statistics, credit concentrations, the adequacy of the underlying collateral, the financial strength of the borrower, results of internal loan reviews and other relevant factors.
Advertising and marketing includes most marketing expenses including multi-media advertising (public and in-store), promotional events and materials, civic and sales focused memberships, and community support. Federal deposit insurance premiums are payments we make to the FDIC for insurance of our deposit accounts. Professional fees includes legal and other consulting expenses.
Advertising and marketing includes most marketing expenses including multi-media advertising (public and in-store), promotional events and materials, civic and sales focused memberships, and community support. Insurance premiums include expense related to various insurance policies, excluding federal deposit insurance premiums. Federal deposit insurance premiums are payments we make to the FDIC for insurance of our deposit accounts.
We are focused on growing our broad range of financial products and services for individual, business and municipal customers by continuing to expand our banking, insurance, consulting, and wealth management businesses.
At Pioneer, we are “More Than a Bank” which means that we are focused on growing our broad range of financial products and services for individual, business and municipal customers by continuing to expand our banking, insurance, consulting, and wealth management businesses.
We continue to focus on ways to further enhance the employee engagement of our team. We seek to retain our position as an employer of choice for top talent in the Capital Region through a focus on career and leadership development opportunities, and attention to providing a robust and competitive benefits package for our employees.
We seek to retain our position as an employer of choice for top talent in the Capital Region through a focus on career and leadership development opportunities, and attention to providing a robust and competitive benefits package for our employees. We do this through the lens of an inclusive and diverse workforce.
Interest expense on interest-bearing deposits decreased primarily due to a 10 basis points decrease in the average cost of interest-bearing deposits to 0.13% for the year ended June 30, 2022 from 0.23% for the prior year, offset in part by a $161.6 million increase in the average balance of deposits to $1.06 billion for the year ended June 30, 2022 from $899.4 million for the year ended June 30, 2021.
Interest expense on interest-bearing deposits increased primarily due to a 33 basis points increase in the average cost of interest-bearing deposits to 0.46% for the year ended June 30, 2023 from 0.13% for the year ended June 30, 2022 offset in part by a decrease in average interest-bearing deposits of $50.4 million to $1.01 billion for the year ended June 30, 2023 from $1.06 billion for the year ended June 30, 2022.
Comparison of Operating Results for the Years Ended June 30, 2022 and June 30, 2021 General. Net income increased by $9.2 million, or 854.4%, to $10.3 million for the year ended June 30, 2022 from $1.1 million for the year ended June 30, 2021.
Comparison of Operating Results for the Years Ended June 30, 2023 and June 30, 2022 General. Net income increased by $11.6 million, or 113.5%, to $21.9 million for the year ended June 30, 2023 from $10.3 million for the year ended June 30, 2022.
We believe there is a large customer base in our market that prefers doing business with local institutions and may be seeking more relationship-based service than they receive from the larger regional banks and other financial services providers.
Integral to our strategy is our belief that there is a large customer base in our market that prefers doing business with local institutions that are grounded in the success of their customers and communities. These customers are seeking more relationship-based service than they receive from the larger regional banks and other financial services providers.
The decrease in consumer loans was related to reduced line of credit utilization. The increase in commercial construction loans was due to funding of increased construction commitments. The increase in home equity loans and lines of credit was related to loan originations outpacing amortization and prepayments. Deposits.
The increase in commercial construction loans was due to funding of increased construction commitments. The decrease in commercial real estate loans was related to loan payoffs outpacing loan originations. The decrease in commercial and industrial loans was primarily due to reduced line of credit utilization rates. Deposits.
A valuation allowance, if needed, reduces deferred tax assets to the amounts expected to be realized. ​ 53 Table of Contents Select Financial Data The following tables set forth selected consolidated historical financial and other data for the Company on a consolidated basis at and for the years ended June 30, 2022 and 2021. ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ 2022 2021 ​ ​ (In thousands) Selected Financial Condition Data: ​ ​ Total assets ​ $ 1,964,229 ​ $ 1,796,252 Cash and cash equivalents ​ 376,060 ​ 324,963 Securities available for sale ​ 481,790 ​ 264,602 Securities held to maturity ​ 23,952 ​ 10,878 Equity securities ​ ​ 2,039 ​ ​ 2,879 Federal Home Loan Bank stock ​ 1,091 ​ 1,215 Loans, net of allowance for loan losses ​ 982,566 ​ 1,081,799 Bank-owned life insurance ​ 17,165 ​ 17,212 Premises and equipment, net ​ 37,312 ​ 38,918 Deposits ​ 1,680,283 ​ 1,530,896 Shareholders' equity ​ 242,627 ​ 237,822 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended June 30, ​ 2022 2021 ​ ​ (In thousands except for per share amounts) Selected Operating Data: ​ ​ Interest and dividend income ​ $ 43,842 ​ $ 43,927 Interest expense ​ 1,464 ​ 2,110 Net interest income ​ 42,378 ​ 41,817 Provision for loan losses ​ (550) ​ 4,050 Net interest income after provision for loan losses ​ 42,928 ​ 37,767 Noninterest income ​ 14,074 ​ 15,750 Noninterest expense ​ 43,664 ​ 50,857 Income before income taxes ​ 13,338 ​ 2,660 Income tax expense ​ 3,059 ​ 1,583 Net income ​ ​ 10,279 ​ ​ 1,077 Earnings per share ​ $ 0.41 ​ $ 0.04 ​ ​ 54 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended June 30, ​ 2022 2021 ​ ​ ​ ​ ​ ​ Performance Ratios: Return on average assets 0.54 % 0.07 % Return on average equity 4.30 % 0.48 % Interest rate spread (1) 2.35 % 2.69 % Net interest margin (2) 2.41 % 2.79 % Non-interest expenses to average assets 2.31 % 3.09 % Efficiency ratio (3) 77.35 % 88.34 % Average interest-earning assets to average interest-bearing liabilities 165.40 % 166.18 % ​ ​ ​ ​ ​ ​ Capital Ratios (4): Average equity to average assets 12.63 % 13.77 % Total capital to risk weighted assets 19.25 % 18.08 % Tier 1 capital to risk weighted assets 17.98 % 16.82 % Common equity tier 1 capital to risk weighted assets 17.98 % 16.82 % Tier 1 capital to average assets 9.48 % 10.00 % ​ ​ ​ ​ ​ ​ Asset Quality Ratios: Allowance for loan losses as a percentage of total loans 2.04 % 2.11 % Allowance for loan losses as a percentage of non-performing loans 320.85 % 106.08 % Net charge-offs to average outstanding loans during the year 0.02 % 0.32 % Non-performing loans as a percentage of total loans 0.70 % 1.99 % Non-performing loans as a percentage of total assets 0.36 % 1.22 % Total non-performing assets as a percentage of total assets 0.36 % 1.24 % ​ ​ ​ ​ ​ ​ Other: Number of offices 22 22 Number of full-time equivalent employees 256 245 (1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities for the years.
Select Financial Data The following tables set forth selected consolidated historical financial and other data for the Company on a consolidated basis at and for the years ended June 30, 2023 and 2022. ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ 2023 2022 ​ ​ (In thousands) Selected Financial Condition Data: ​ ​ Total assets ​ $ 1,856,191 ​ $ 1,964,229 Cash and cash equivalents ​ 150,478 ​ 376,060 Securities available for sale ​ 431,667 ​ 481,790 Securities held to maturity ​ 23,949 ​ 23,952 Equity securities ​ ​ 2,413 ​ ​ 2,039 Federal Home Loan Bank stock ​ 1,196 ​ 1,091 Net loans receivable ​ 1,144,169 ​ 982,566 Bank-owned life insurance ​ 16,322 ​ 17,165 Premises and equipment, net ​ 41,617 ​ 37,312 Deposits ​ 1,541,851 ​ 1,680,283 Shareholders’ equity ​ 266,700 ​ 242,627 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended June 30, ​ 2023 2022 ​ ​ (In thousands except for per share amounts) Selected Operating Data: ​ ​ Interest and dividend income ​ $ 71,033 ​ $ 43,842 Interest expense ​ 5,492 ​ 1,464 Net interest income ​ 65,541 ​ 42,378 Provision for loan losses ​ — ​ (550) Net interest income after provision for loan losses ​ 65,541 ​ 42,928 Noninterest income ​ 14,148 ​ 14,074 Noninterest expense ​ 51,834 ​ 43,664 Income before income taxes ​ 27,855 ​ 13,338 Income tax expense ​ 5,907 ​ 3,059 Net income ​ ​ 21,948 ​ ​ 10,279 Earnings per share ​ $ 0.87 ​ $ 0.41 ​ ​ 57 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended June 30, ​ 2023 2022 ​ ​ ​ ​ ​ ​ Performance Ratios: Return on average assets 1.15 % 0.54 % Return on average equity 8.73 % 4.30 % Interest rate spread (1) 3.50 % 2.35 % Net interest margin (2) 3.72 % 2.41 % Non-interest expenses to average assets 2.71 % 2.31 % Efficiency ratio (3) 65.05 % 77.35 % Average interest-earning assets to average interest-bearing liabilities 170.32 % 165.40 % ​ ​ ​ ​ ​ ​ Capital Ratios (4): Average equity to average assets 13.16 % 12.63 % Total capital to risk weighted assets 20.11 % 19.25 % Tier 1 capital to risk weighted assets 18.85 % 17.98 % Common equity tier 1 capital to risk weighted assets 18.85 % 17.98 % Tier 1 capital to average assets 11.47 % 9.48 % ​ ​ ​ ​ ​ ​ Asset Quality Ratios: Allowance for loan losses as a percentage of total loans 1.94 % 2.04 % Allowance for loan losses as a percentage of non-performing loans 126.41 % 320.85 % Net charge-offs to average outstanding loans during the year 0.01 % 0.02 % Non-performing loans as a percentage of total loans 1.53 % 0.70 % Non-performing loans as a percentage of total assets 0.96 % 0.36 % Total non-performing assets as a percentage of total assets 0.96 % 0.36 % ​ ​ ​ ​ ​ ​ Other: Number of offices 22 22 Number of full-time equivalent employees 256 256 (1) Represents the difference between the weighted average yield on average interest-earning assets and the weighted average cost of interest-bearing liabilities for the years.
The increase in the average balance of securities was due to increased purchases of U.S. government and agency and municipal obligation securities during the year ended June 30, 2022 as compared to the year ended June 30, 2021.
The increase in the average balance of securities was due to purchases of U.S. government and agency, and municipal obligation securities outpacing maturities and sales throughout the later part of fiscal year 2022 and continuing during the year ended June 30, 2023.
Interest expense on interest-bearing deposits decreased $659,000, or 32.5%, to $1.4 million for the year ended June 30, 2022 from $2.0 million for the year ended June 30, 2021.
Interest expense on interest-bearing deposits increased $3.2 million, or 238.0%, to $4.6 million for the year ended June 30, 2023 from $1.4 million for the year ended June 30, 2022.
Interest and dividend income decreased $85,000, or 0.2%, to $43.8 million for the year ended June 30, 2022, from $43.9 million for the year ended June 30, 2021 due to a decrease in interest income on loans, partially offset by increases in interest income on securities and interest-earning deposits.
Interest and dividend income increased $27.2 million, or 62.0%, to $71.0 million for the year ended June 30, 2023, from $43.8 million for the year ended June 30, 2022 due to increases in interest income on loans, securities, and interest-earning deposits and other.
At June 30, 2022, core deposits comprised 95.2% of our total deposits. Core deposits are our least costly source of funds which improves our interest rate spread and also contributes non-interest income from account- related services. Continue to focus on our commitment to an engaged workforce.
Core deposits are our least costly source of funds which improves our interest rate spread and also contributes non-interest income from account- related services. Ongoing focus on our commitment to an engaged workforce. We maintain our focus on ways to further enhance the employee engagement of our team.
The increase was primarily due to a $7.2 million decrease in non-interest expense, a $4.6 million decrease in the provision for loan losses and a $561,000 increase in net interest income, partially offset by a $1.7 million decrease in non-interest income and a $1.5 million increase in income tax expense. Interest and Dividend Income.
The increase was primarily due to a $23.1 million increase in net interest income, partially offset by an $8.1 million increase in non-interest expense and a $2.8 million increase in income tax expense. Interest and Dividend Income.
(4) Capital Ratios are for the Bank. ​ 55 Table of Contents Recent Developments Acquisitions On December 10, 2021 and December 22, 2021, respectively, the Company, through its subsidiary, Pioneer Financial Services, Inc., completed the acquisition of certain assets of two practices engaged in the wealth management services business in the Capital Region.
(4) Capital ratios are for the Bank. ​ 58 Table of Contents Recent Developments Acquisition On July 13, 2023, the Company, through its subsidiary, Pioneer Financial Services, Inc., completed the acquisition of certain assets of Hudson Financial LLC, a company engaged in the wealth management services business in the Hudson Valley Region of New York.
Our non-interest income also includes net gain or losses on equity securities, net gain or losses on sales and calls of available for sale securities, net gains or losses in cash surrender value of bank owned life insurance, net gain or loss on disposal of assets, other gains and losses, and miscellaneous income. Non-Interest Expense.
Our primary sources of non-interest income are banking fees and service charges, and insurance and wealth management services income. Our non-interest income also includes net gain or losses on equity securities, net gain or losses on sales and calls of available for sale securities, net gain or loss on disposal of assets, other gains and losses, and miscellaneous income.
Business Strategy Our business strategy is to operate as a well-capitalized and profitable diversified financial institution focused on our relationship-based model of customer engagement which we believe will result in growth through new customer acquisition, deepened existing customer relationships, and further market penetration.
For additional details regarding legal, other proceedings and related matters see “Part II, Item 8–Financial Statements and Supplementary Data - Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities.” 59 Table of Contents Business Strategy Our business strategy is to operate as a well-capitalized and profitable diversified financial institution focused on our relationship-based model of customer engagement which we believe will result in growth through new customer acquisition, deepened existing customer relationships, and further market penetration.
Net interest income increased $561,000, or 1.3%, to $42.4 million for the year ended June 30, 2022 compared to $41.8 million for the year ended June 30, 2021.
Net interest income increased $23.1 million, or 54.7%, to $65.5 million for the year ended June 30, 2023 compared to $42.4 million for the year ended June 30, 2022.
Income tax expense increased $1.5 million to $3.1 million for the year ended June 30, 2022 from $1.6 million for the year ended June 30, 2021 and resulted in an effective tax rate of 22.9% for the year ended June 30, 2022 compared to 59.5% for the year ended June 30, 2021.
Income tax expense increased $2.8 million to $5.9 million for the year ended June 30, 2023 from $3.1 million for the year ended June 30, 2022, due to an increase in income before income taxes. Our effective tax rate was 21.2% for the year ended June 30, 2023 compared to 22.9% for the year ended June 30, 2022.
These legal, regulatory, governmental and other proceedings, claims or investigations, costs, settlements, judgments, sanctions or other expenses could have a material adverse effect on our business, prospects, financial condition, results of operations or cash flows or cause significant reputational harm and subject us to face civil litigation, significant fines, damage awards or other material regulatory consequences. 66 Table of Contents The board of directors is responsible for establishing and monitoring our liquidity targets and strategies in order to ensure that sufficient liquidity exists for meeting the borrowing needs and deposit withdrawals of our customers as well as unanticipated contingencies.
These legal, regulatory, governmental and other proceedings, claims or investigations, costs, settlements, judgments, sanctions or other expenses could have a material adverse effect on our business, prospects, financial condition, results of operations or cash flows or cause significant reputational harm and subject us to civil litigation, significant fines, damage awards or other material regulatory consequences.
Interest income on interest-earning deposits increased $1.0 million, or 322.5%, to $1.3 million for the year ended June 30, 2022 from $315,000 for the year ended June 30, 2021.
Interest income on interest-earning deposits with banks and other increased $4.6 million, or 345.3%, to $5.9 million for the year ended June 30, 2023 from $1.3 million for the year ended June 30, 2022.
The Company paid an aggregate of $1.5 million in cash and recorded $728,000 in contingent consideration payable to acquire the assets and recorded an $890,000 customer list intangible asset and goodwill in the amount of $1.3 million in conjunction with the acquisitions.
The Company paid an aggregate of $2.0 million in cash and recorded $1.5 million in contingent consideration payable to acquire the assets and recorded a $1.4 million customer list intangible asset and goodwill in the amount of $2.1 million in conjunction with the acquisition. This acquisition was made to expand the Company’s wealth management services activities.
At June 30, 2022, we had $279.9 million of commitments to originate loans, comprised of $158.8 million of commitments under commercial loans and lines of credit (including $57.2 million of unadvanced portions of commercial construction loans), $61.6 million of commitments under home equity loans and lines of credit, $51.9 million of commitments to purchase one- to four-family residential real estate loans and $7.6 million of unfunded commitments under consumer lines of credit.
At June 30, 2023, we had $297.6 million of commitments to originate loans, comprised of $165.7 million of commitments under commercial loans and lines of credit (including $28.9 million of unadvanced portions of commercial construction loans), $64.5 million of commitments under home equity loans and lines of credit, $60.0 million of commitments to purchase residential mortgage loans and $7.5 million of unfunded commitments under consumer lines of credit.
Based on the foregoing, our attractive market area and strategic investment in technology to enhance the customer experience, we believe we are well-positioned to strategically grow our balance sheet. Continue our emphasis on commercial customer acquisition, with a targeted focus on commercial lending.
We have embarked on a sales enablement strategy that is focused on engaging in a multidisciplinary approach to customer interaction. Based on the foregoing, our attractive market area and strategic investment in technology to enhance the customer experience, we believe we are well-positioned to strategically grow our balance sheet.
At June 30, 2022, we had the ability to borrow up to $313.6 million, of which none was utilized for borrowings and $32.0 million was utilized as collateral for letters of credit issued to secure municipal deposits. At June 30, 2022, we had a $20.0 million unsecured line of credit with a correspondent bank with no outstanding balance.
We also have the ability to borrow from the Federal Home Loan Bank of New York. At June 30, 2023, we had the ability to borrow up to $395.6 million, of which none was utilized for borrowings and $90.0 million was utilized as collateral for letters of credit issued to secure municipal deposits.
Interest income on securities increased primarily due to an increase in the average balance of securities of $225.8 million to $381.7 million for the year ended June 30, 2022 from $155.9 million for the year ended June 30, 2021, marginally offset by a one basis point decrease in the average yield on securities to 0.77% for the year ended June 30, 2022 from 0.78% for the year ended June 30, 2021.
Interest income on securities increased due to a 111 basis points increase in the average yield on securities to 1.88% for the year ended June 30, 2023 from 0.77% for the year ended June 30, 2022, as well as, a $144.8 million increase in the average balance of securities to $526.5 million for the year ended June 30, 2023 from $381.7 million for the year ended June 30, 2022.
Non-performing assets decreased to $7.0 million, or 0.36% of total assets, at June 30, 2022, compared to $22.3 65 Table of Contents million, or 1.24% of total assets, at June 30, 2021.
Non-performing assets increased to $17.7 million, or 0.96% of total assets, at June 30, 2023, compared to $7.0 million, or 0.36% of total assets, at June 30, 2022.
Non-interest expense decreased $7.2 million, or 14.1%, to $43.7 million for the year ended June 30, 2022 from $50.9 million for the year ended June 30, 2021.
Non-interest expense increased $8.1 million, or 18.7%, to $51.8 million for the year ended June 30, 2023 compared to $43.7 million for the year ended June 30, 2022.
Interest Expense. Interest expense decreased $646,000, or 30.6%, to $1.5 million for the year ended June 30, 2022 from $2.1 million for the year ended June 30, 2021 as a result of a decrease in interest expense on deposits.
Interest Expense. Interest expense increased $4.0 million, or 275.1%, to $5.5 million for the year ended June 30, 2023 from $1.5 million for the year ended June 30, 2022 as a result of an increase in interest expense on deposits, as well as, on borrowings and other.
Interest income on loans decreased primarily due to a $115.2 million decrease in the average balance of loans to $1.01 billion for the year ended June 30, 2022 from $1.13 billion for the year 64 Table of Contents ended June 30, 2021, partially offset by a 15 basis points increase in the average yield on loans to 3.91% for the year ended June 30, 2022 from 3.76% for the year ended June 30, 2021.
Interest income on loans increased due to a 130 basis points increase in the average yield on loans to 5.21% for the year ended June 30, 2023 from 3.91% for the year ended June 30, 2022, coupled with a $47.1 million increase in the average balance of loans to $1.06 billion for the year ended June 30, 2023 from $1.01 billion for the year ended June 30, 2022.
The transactions in question related both to deposit and lending activity with the Mann Entities. For the fraudulent activity related to the Mann Entities, the Bank’s potential exposure with respect to its deposit activity was approximately $18.5 million.
The transactions in question related both to deposit and lending activity with the Mann Entities.
Total deposits increased $149.4 million, or 9.8%, to $1.68 billion at June 30, 2022 from $1.53 billion at June 30, 2021.
Total deposits of $1.54 billion at June 30, 2023 decreased $138.4 million, or 8.2%, from $1.68 billion at June 30, 2022.
During the year ended June 30, 2022, the Company recorded an ERC benefit of $5.0 million in noninterest expenses in the consolidated statements of operations. The Company has recorded an ERC grant receivable of $5.0 million in other assets in the consolidated statements of condition at June 30, 2022.
During the fiscal year ended June 30, 2022, the Company recorded an ERC benefit of $5.0 million in noninterest expenses in the consolidated statements of operations. The Company received the $5.0 million ERC refund along with interest totaling $171,000 in the fourth fiscal quarter of 2023.
Critical Accounting Policies and Estimates The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with GAAP.
We provide opportunities for our employees to engage in meaningful ways in the community and will enhance this engagement through the philanthropic efforts of the Pioneer Bank Charitable Foundation. Critical Accounting Policies and Estimates The discussion and analysis of the financial condition and results of operations are based on our financial statements, which are prepared in conformity with GAAP.
The allowance for loan losses was $22.5 million, or 2.04% of net loans outstanding, at June 30, 2022 and $23.3 million, or 2.11% of net loans outstanding, at June 30, 2021. Non-Interest Income. Non-interest income decreased $1.7 million, or 10.6%, to $14.1 million for the year ended June 30, 2022 from $15.8 million for the year ended June 30, 2021.
The allowance for loan losses was $22.5 million at June 30, 2023 and 2022, representing 1.94% and 2.04% of total loans outstanding, respectively. Non-Interest Income. Non-interest income was consistent at $14.1 million for the years ended June 30, 2023 and 2022.
Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined. Management 59 Table of Contents carefully reviews the assumptions supporting such appraisals to determine that the resulting values reasonably reflect amounts realizable on the related loans.
Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined.
The increase was a result of a $98.6 million increase in the average balance of net interest-earning assets to $696.5 million for the year ended June 30, 2022 from $597.9 million for the year ended June 30, 2021, offset by a 34 basis points decrease in the net interest rate spread to 2.35% for the year ended June 30, 2022 from 2.69% for the year ended June 30, 2021.
The increase was a result of a 115 basis points increase in the net interest rate spread to 3.50% for the year ended June 30, 2023 from 2.35% for the year ended June 30, 2022.
Total assets increased $168.0 million, or 9.4%, to $1.96 billion at June 30, 2022 from $1.80 billion at June 30, 2021.
Total assets of $1.86 billion at June 30, 2023 decreased $108.0 million, or 5.5%, from $1.96 billion at June 30, 2022.
The net interest margin decreased 38 basis points to 2.41% for the year ended June 30, 2022 from 2.79% for the year ended June 30, 2021. Provision for Loan Losses. We recorded a credit to the provision of $550,000 for the year ended June 30, 2022, a decrease of $4.6 million as compared to the year ended June 30, 2021.
We recorded no provision for loan losses for the year ended June 30, 2023 as compared to a benefit to the provision for loan losses of $550,000 for the year ended June 30, 2022. Net charge-offs decreased to $55,000 for the year ended June 30, 2023, compared to $185,000 for the year ended June 30, 2022.
The increase was due primarily to an increase of $217.2 million, or 82.1%, in securities available for sale as well as a $51.1 million, or 15.7%, increase in cash and cash equivalents partially offset by a decrease of $99.2 million, or 9.2%, in net loans receivable and a decrease of $14.3 million, or 35.1%, in other assets.
The decrease was due primarily to a decrease of $225.6 million, or 60.0%, in cash and cash equivalents and a decrease of $50.1 million, or 10.4% in securities available for sale, offset in part by an increase of $161.6 million, or 16.4%, in net loans receivable as we shifted the composition of interest-earning assets from cash and cash equivalents, and securities available for sale to net loans receivable.
Total cash and cash equivalents increased $51.1 million, or 15.7%, to $376.1 million at June 30, 2022 from $325.0 million at June 30, 2021.
Cash and Cash Equivalents. Total cash and cash equivalents of $150.5 million at June 30 2023, decreased $225.6 million, or 60.0%, from $376.1 million at June 30, 2022.
We cannot accurately predict what the impact of the events described in “Recent Developments – COVID-19 Pandemic and Mann Entities Related Fraudulent Activity” above and in the “Legal Proceedings” section may have on our liquidity and capital resources.
We cannot accurately predict what the impact of the events described in “Mann Entities Related Fraudulent Activity” above and in the “Legal Proceedings” section may have on our liquidity and capital resources. For example, costs associated with potentially prosecuting, litigating or settling any litigation, satisfying any adverse judgments, if any, or other regulatory proceedings, could be significant.
We intend to consider future acquisition opportunities to expand our insurance, wealth management or other complementary financial services businesses. Increase our Share of Lower-Cost Core Deposits . We continue to emphasize offering core deposits (demand deposit accounts, savings accounts and money market accounts) to individuals, businesses and municipalities located in our market area.
We intend to consider future acquisition opportunities to expand our insurance, wealth management or other complementary financial services businesses. Increase our Share of Lower-Cost Core Deposits . Core deposits represent our best opportunity to develop customer relationships that enable us to cross-sell the products and services of our complementary subsidiaries.
The increase in deposits reflected an increase in non-interest-bearing demand accounts of $88.6 million, or 17.5%, to $593.5 million at June 30, 2022 from $504.9 million at June 30, 2021; money market accounts of $42.7 million, or 9.4%, to $497.2 million at June 30, 2022 from $454.5 million at June 30, 2021; an increase in savings accounts of $25.5 million, or 8.5%, to $326.3 million at June 30, 2022 from $300.8 million at June 30, 2021 and an increase in interest-bearing demand accounts of $7.0 million, or 4.0%, to $182.8 million at June 30, 2022 from $175.8 million at June 30, 2021.
By deposit category, non-interest bearing demand accounts decreased by $67.4 million, or 11.3%, to $526.1 million at June 30, 2023 from $593.5 million at June 30, 2022, interest-bearing demand accounts decreased by $44.0 million, or 24.1%, to $138.8 million at June 30, 2023 from $182.8 million at June 30, 2022, money market accounts decreased by $34.3 million, or 6.9%, to $462.9 million at June 30, 2023 from $497.2 million at June 30, 2022, and savings accounts decreased by $29.3 million, or 9.0%, to $297.0 million at June 30, 2023 from $326.3 million at June 30, 2022, partially offset by an increase in certificates of deposit of $36.4 million, or 45.2%, to $117.0 million at June 30, 2023 from $80.6 million at June 30, 2022.
We generally require that commercial and industrial loan borrowers establish a commercial deposit account with us, which assists our efforts to grow core deposits and cross-sell our other products and services. Our focus on commercial lending also has the benefits of increasing the yield on our loan portfolio while reducing the average term to repricing of our loans.
These relationships will offer a recurring and we believe broader source of fee income through commercial deposits, commercial insurance and employee benefits products and consulting. We generally require that commercial borrowers establish a commercial deposit account with us, which assists our efforts to grow core deposits and cross-sell our other products and services.
Interest income on loans decreased $2.8 million, or 6.7%, to $39.6 million for the year ended June 30, 2022 from $42.4 million for the year ended June 30, 2021.
Average interest-earning assets of $1.76 billion for the year ended June 30, 2023 were relatively unchanged from the year ended June 30, 2022. Interest income on loans increased $15.6 million, or 39.6%, to $55.2 million for the year ended June 30, 2023 from $39.6 million for the year ended June 30, 2022.
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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ ​ 2022 vs. 2021 ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Increase (Decrease) Due to ​ Increase ​ ​ Volume ​ Rate ​ (Decrease) ​ ​ (In thousands) Interest-earning assets: ​ ​ ​ Loans ​ $ (4,454) ​ $ 1,617 ​ $ (2,837) Securities ​ 1,747 ​ (11) ​ 1,736 Interest-earning deposits ​ 318 ​ 698 ​ 1,016 Total interest-earning assets ​ (2,389) ​ 2,304 ​ (85) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ Demand deposits ​ 57 ​ 14 ​ 71 Savings deposits ​ 15 ​ (37) ​ (22) Money market deposits ​ 112 ​ (246) ​ (134) Certificates of deposit ​ (165) ​ (409) ​ (574) Total interest-bearing deposits ​ 19 ​ (678) ​ (659) Borrowings and other ​ — ​ 13 ​ 13 Total interest-bearing liabilities ​ 19 ​ (665) ​ (646) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in net interest income ​ $ (2,408) ​ $ 2,969 ​ $ 561 ​ Comparison of Financial Condition at June 30, 2022 and June 30, 2021 Total Assets.
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. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended June 30, ​ ​ 2023 vs. 2022 ​ ​ ​ ​ ​ ​ ​ ​ Total ​ ​ Increase (Decrease) Due to ​ Increase ​ ​ Volume ​ Rate ​ (Decrease) ​ ​ (In thousands) Interest-earning assets: ​ ​ ​ Loans ​ $ 1,917 ​ $ 13,757 ​ $ 15,674 Securities ​ 1,456 ​ 5,465 ​ 6,921 Interest-earning deposits ​ (1,027) ​ 5,623 ​ 4,596 Total interest-earning assets ​ 2,346 ​ 24,845 ​ 27,191 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ Demand deposits ​ (30) ​ 746 ​ 716 Savings deposits ​ 1 ​ 12 ​ 13 Money market deposits ​ (12) ​ 2,606 ​ 2,594 Certificates of deposit ​ (139) ​ 69 ​ (70) Total interest-bearing deposits ​ (180) ​ 3,433 ​ 3,253 Borrowings and other ​ 716 ​ 59 ​ 775 Total interest-bearing liabilities ​ 536 ​ 3,492 ​ 4,028 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Change in net interest income ​ $ 1,810 ​ $ 21,353 ​ $ 23,163 ​ Comparison of Financial Condition at June 30, 2023 and June 30, 2022 Total Assets.
The decrease primarily reflected a nine basis points decrease in the average cost of interest-bearing liabilities to 0.14% for the year ended June 30, 2022 from 0.23% for the year ended June 30, 2021, offset in part by a $161.6 million increase in the average balance of interest-bearing liabilities.
The increase was primarily due to a 39 basis points increase in the average cost of interest-bearing liabilities to 0.53% for the year ended June 30, 2023 from 0.14% for the year ended June 30, 2022, as well as, a marginal shift in the mix of interest-bearing liabilities to higher interest rate liability accounts.
The Company has amended certain payroll tax filings to apply for a refund for each of the first three quarters of calendar 2021. The Internal Revenue Service has a significant backlog of ERC refunds to process. Taxpayers have reported waiting anywhere from ten to twelve months and in some cases longer for their ERC refunds.
The Company has amended certain payroll tax filings to apply for a refund for each of the first three quarters of calendar 2021.
However, we have sought to maintain an appropriate balance in the overall loan portfolio between our commercial and non-commercial loans to diversify our credit risk. Diversify our products and services to increase non-interest income. We continue to seek ways of increasing our customer base and non-interest income by growing our financial services businesses.
Our focus on commercial lending also has the benefits of increasing the yield on our loan portfolio while reducing the average term to repricing of our loans. However, we will continue to maintain an appropriate balance in the overall loan portfolio between our commercial and non-commercial loans to diversify our credit risk.
Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of securities. We also have the ability to borrow from the Federal Home Loan Bank of New York.
Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of securities.
In relation to its commercial and consumer borrowers, as of June 30, 2022, the Company had no COVID-19 related financial hardship payment deferrals. Employee Retention Credit The CARES Act provided numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes.
Employee Retention Credit The Coronavirus Aid, Relief, and Economic Security Act (“CARES Act”) provided numerous tax provisions and other stimulus measures, including an employee retention credit (“ERC”), which is a refundable tax credit against certain employment taxes.
Interest income on interest-earning deposits increased due to a 22 basis points increase in the average yield on interest-earning deposits to 0.36% for the year ended June 30, 2022 from 0.14% for the year ended June 30, 2021 as market interest rates increased, as well as an increase in the average balance of interest-earning deposits to $367.5 million for the year ended June 30, 2022 from $218.0 million for the year ended June 30, 2021, as management favored maintaining increased levels of cash and cash equivalents during the COVID-19 pandemic.
Interest income on interest-earning deposits with banks and other increased due to a 299 basis points increase in the average yield on interest-earning deposits with banks and other to 3.35% for the year ended June 30, 2023 from 0.36% for the year ended June 30, 2022 primarily as a result of the increase in the Federal Funds target rate during calendar year 2022 and continuing in calendar year 2023, partially offset by a decrease of $190.5 million in average balances on interest-earning deposits with banks and other to $177.0 million for the year ended June 30, 2023 from $367.5 million for the year ended June 30, 2022 related to the shift in composition of interest-earning assets from cash and cash equivalents to loans.
These decreases were partially offset by an increase in commercial construction loans of $6.2 million, or 9.5%, to $71.1 million at June 30, 2022 from $64.9 million at June 30, 2021 and an increase in home equity loans and lines of credit of $5.7 million, or 7.6%, to $81.2 million at June 30, 2022 from $75.5 million at June 30, 2021.
By loan category, residential mortgage loans increased by $174.6 million, or 64.6%, to $444.9 million at June 30, 2023 from $270.3 million at June 30, 2022, commercial construction loans increased by $21.7 million, or 30.6%, to $92.8 million at June 30, 2023 from $71.1 million at June 30, 2022, consumer loans increased by $3.0 million, or 13.6%, to $25.3 million at June 30, 2023 from $22.3 million at June 30, 2022, and home equity loans 65 Table of Contents and lines of credit increased by $2.9 million, or 3.6%, to $84.1 million at June 30, 2023 from $81.2 million at June 30, 2022.

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