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What changed in Pioneer Bancorp, Inc./MD's 10-K — 2023 vs 2024

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Paragraph-level year-over-year comparison of Pioneer Bancorp, Inc./MD's 2023 and 2024 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 2024 report.

+453 added−483 removedSource: 10-K (2024-09-25) vs 10-K (2023-09-26)

Top changes in Pioneer Bancorp, Inc./MD's 2024 10-K

453 paragraphs added · 483 removed · 347 edited across 6 sections

Item 1. Business

Business — how the company describes what it does

158 edited+47 added−56 removed131 unchanged
Biggest changeThe following table sets forth the distribution of total deposits by account type at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2023 ​ 2022 ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ Amount ​ Percent ​ Rate ​ Amount ​ Percent ​ Rate ​ ​ (Dollars in thousands) Non-interest-bearing demand accounts ​ $ 526,119 34.1 % — ​ $ 593,461 35.3 % — ​ Demand accounts ​ 138,817 9.0 % 1.28 % 182,816 10.9 % 0.24 % Savings accounts ​ 297,003 19.3 % 0.05 % 326,261 19.4 % 0.03 % Money market accounts ​ 462,935 30.0 % 1.90 % 497,165 29.6 % 0.10 % Certificates of deposit ​ 116,977 7.6 % 3.14 % 80,580 4.8 % 0.66 % Total ​ $ 1,541,851 100.0 % 0.93 % $ 1,680,283 100.0 % 0.09 % ​ 21 Table of Contents As of June 30, 2023 and 2022, the aggregate amount of uninsured deposits was approximately $688.1 million and $817.3 million, respectively.
Biggest changeThe following table sets forth the distribution of total deposits by account type at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ Average ​ ​ ​ Average ​ ​ Amount ​ Percent ​ Rate ​ Amount ​ Percent ​ Rate ​ ​ (Dollars in thousands) Non-interest-bearing demand accounts ​ $ 445,328 28.7 % — ​ $ 526,119 34.1 % — ​ Demand accounts ​ 157,962 10.2 % 1.88 % 138,817 9.0 % 1.28 % Savings accounts ​ 266,274 17.2 % 0.07 % 297,003 19.3 % 0.05 % Money market accounts ​ 513,658 33.1 % 2.63 % 462,935 30.0 % 1.90 % Certificates of deposit ​ 167,030 10.8 % 3.49 % 116,977 7.6 % 3.14 % Total ​ $ 1,550,252 100.0 % 1.95 % $ 1,541,851 100.0 % 0.93 % ​ ​ 22 Table of Contents The following table sets forth the distribution of total deposits by depositor type as of the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2024 ​ 2023 ​ ​ ​ ​ ​ ​ ​ ​ ​ Amount ​ Percent ​ Amount ​ Percent ​ ​ ​ (Dollars in thousands) Retail deposits ​ $ 768,396 49.6 % $ 736,560 47.8 % Business deposits ​ 302,251 19.5 % 336,673 21.8 % Municipal deposits ​ 440,277 28.4 % 432,082 28.0 % Brokered deposits ​ 39,328 2.5 % 36,536 2.4 % Total ​ $ 1,550,252 100.0 % $ 1,541,851 100.0 % ​ Uninsured deposits represents the portion of deposit accounts that exceed FDIC insurance limits.
The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers such as the Company that file electronically with the SEC. All filed SEC reports and interim filings can also be obtained from the Bank’s website (www.pioneerny.com), on the “Investor Relations” page, without charge from the Company.
The SEC maintains an Internet site (www.sec.gov) that contains reports, proxy and information statements and other information regarding issuers such as the Company that file electronically with the SEC. All filed SEC reports and interim filings can also be obtained from the Bank’s website (www.pioneerny.com), on the “Investor Relations” page, without charge.
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.
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 Senior Vice President, and Commercial Senior Vice Presidents.
In addition, the aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and surplus. Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers. Federal Insurance of Deposit Accounts. The Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC.
In addition, the aggregate amount of extensions of credit by a financial institution to insiders cannot exceed the institution’s unimpaired capital and unimpaired surplus. Section 22(g) of the Federal Reserve Act places additional restrictions on loans to executive officers. Federal Insurance of Deposit Accounts. The Bank is a member of the Deposit Insurance Fund, which is administered by the FDIC.
Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary savings bank. The Federal Reserve Board must generally approve the acquisition of additional banks or savings associations by bank holding companies.
Among other things, this authority permits the Federal Reserve Board to restrict or prohibit activities that are determined to be a serious risk to the subsidiary bank. The Federal Reserve Board must generally approve the acquisition of additional banks or savings associations by bank holding companies.
In the future, Pioneer Bancorp, MHC may convert from the mutual to capital stock form of ownership, in a transaction commonly referred to as a “second-step conversion.” In a second-step conversion, depositors of the Bank would have subscription rights to purchase common stock of the fully-converted the Company and the public stockholders of the Company would be entitled to exchange their shares of common stock for an equal percentage of shares of the fully-converted Company, subject to adjustment if required by the Federal Reserve Board, to reflect any dividends waived by Pioneer Bancorp, MHC or assets owned by Pioneer Bancorp, MHC.
In the future, Pioneer Bancorp, MHC may convert from the mutual to capital stock form of ownership, in a transaction commonly referred to as a “second-step conversion.” In a second-step conversion, depositors of the Bank would have subscription rights to purchase common stock of the fully-converted company and the public stockholders of the Company would be entitled to exchange their shares of common stock for an equal percentage of shares of the fully-converted company, subject to adjustment if required by the Federal Reserve Board, to reflect any dividends waived by Pioneer Bancorp, MHC or assets owned by Pioneer Bancorp, MHC.
For federal income tax purposes, the Company currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns. Net Operating Loss Carryovers.
Method of Accounting. For federal income tax purposes, the Company currently reports its income and expenses on the accrual method of accounting and uses a tax year ending December 31 for filing its federal income tax returns. Net Operating Loss Carryovers.
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.
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 of directors 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.
All of our commercial real estate loans are subject to our underwriting procedures and guidelines, including requiring borrowers to generally have cash infusions of at least 10% of the loan amount or project cost and that properties with a loan in excess of $500,000 are subject to biennial inspections to verify if appropriate maintenance is being performed.
All of our commercial real estate loans are subject to our underwriting procedures and guidelines, including requiring borrowers to generally have cash infusions of at least 10% of the loan amount or project cost and that properties with a loan in excess of $500,000 are subject to inspections to verify if appropriate maintenance is being performed.
Expansion into the insurance and employee benefit services business has enabled the Bank to evolve from a traditional depository institution into a full-service financial services organization. All disclosures in this Annual Report on Form 10-K relating to the Bank are consolidated to include the activities of Anchor Agency, Inc. Pioneer Financial Services, Inc.
Expansion into the insurance and employee benefit services business has enabled the Bank to evolve from a traditional depository institution into a full-service financial services organization. All disclosures in this Annual Report on Form 10-K relating to the Bank are consolidated to include the activities of Pioneer Insurance Agency, Inc. Pioneer Financial Services, Inc.
The decision whether to acquire each loan is made at the time the borrower’s application is submitted to the Mortgage Banking Company and must generally comply with underwriting guidelines that we have approved. However, the Bank typically purchases such loans so long as they meet our underwriting standards.
The decision whether the Bank will acquire each loan is made at the time the borrower’s application is submitted to the Mortgage Banking Company and must generally comply with underwriting guidelines that we have approved. However, the Bank typically purchases such loans so long as they meet our underwriting standards.
We attract deposits from the general public and municipalities and use those funds along with advances from the Federal Home Loan Bank of New York and funds generated from operations to originate commercial real estate loans, commercial and industrial loans, commercial construction loans and home equity loans and lines of credit and, to a lesser extent, consumer loans.
We attract deposits from the general public and municipalities and use those funds along with advances from the Federal Home Loan Bank of New York (“FHLBNY”) and funds generated from operations to originate commercial real estate loans, commercial and industrial loans, commercial construction loans and home equity loans and lines of credit and, to a lesser extent, consumer loans.
Authorized officers, as selected by the board of directors, oversee our investing activities and strategies. The authorized officers include our President and Chief Executive Officer, Chief Financial Officer, and Vice President, Controller. Our investment policy authorizes us to invest in various types of investment securities and liquid assets, including U.S.
Authorized officers, as selected by the board of directors, oversee our investing activities and strategies. The authorized officers include our President and Chief Executive Officer, Chief Financial Officer, and Senior Vice President, Controller. Our investment policy authorizes us to invest in various types of investment securities and liquid assets, including U.S.
The real estate owned is recorded at the lower of carrying amount or fair market value, less estimated costs to sell. Any excess of the recorded value of the loan over the fair market value of the property is charged against the allowance for loan losses, or, if the existing allowance is inadequate, charged to expense in the current period.
The real estate owned is recorded at the lower of carrying amount or fair market value, less estimated costs to sell. Any excess of the recorded value of the loan over the fair market value of the property is charged against the allowance for credit losses, or, if the existing allowance is inadequate, charged to expense in the current period.
Anchor Agency, Inc. also offers employee benefits products and consulting services under the name Pioneer Benefits Consulting, including group health, dental, disability and life insurance products and defined contribution and defined benefit administration and human resource management services. Anchor Agency, Inc. operates from the Bank’s headquarters in Albany, New York.
Pioneer Insurance Agency, Inc. also offers employee benefits products and consulting services under the name Pioneer Benefits Consulting, including group health, dental, disability and life insurance products and defined contribution and defined benefit administration and human resource management services. Pioneer Insurance Agency, Inc. operates from the Bank’s headquarters in Albany, New York.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, rule order or regulatory condition imposed in writing.
Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged in unsafe or unsound practices, is in an unsafe or unsound condition to continue operations or has violated any applicable law, regulation, order or regulatory condition imposed in writing.
Any company that seeks to acquire “control” within the meaning of the Bank Holding Company Act, and the Federal Reserve Board regulations thereunder, must receive the prior approval of the Federal Reserve Board under that Act and, upon the acquisition, becomes a “bank holding company” subject to registration, examination and regulation by the Federal Reserve Board.
Any company that seeks to acquire “control” within the meaning of the Bank Holding Company Act, and the Federal Reserve Board regulations issued thereunder, must receive the prior approval of the Federal Reserve Board under that Act and, upon the acquisition, becomes a “bank holding company” subject to registration, examination and regulation by the Federal Reserve Board.
The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.
The capital standards require the maintenance of common equity Tier 1 capital, Tier 1 capital and total capital to risk-weighted assets ratios of at least 4.5%, 6% and 8%, respectively, and a leverage ratio of at least 4% Tier 1 capital. Common equity Tier 1 capital is generally defined as common stockholders’ equity and retained earnings.
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.
We 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.
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-bank subsidiaries.
The federal banking agencies, including the FDIC, issued a rule pursuant to The Economic Growth Regulatory Relief and Consumer Protection Act of 2018 (the “Regulatory Relief Act”) to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) of 9% that qualifying institutions may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III.
The federal banking agencies, including the OCC, issued a rule pursuant to The Economic Growth Regulatory Relief and Consumer Protection Act of 2018 (the “Regulatory Relief Act”) to establish for institutions with assets of less than $10 billion a “community bank leverage ratio” (the ratio of a bank’s tier 1 capital to average total consolidated assets) of 9% that qualifying institutions may elect to use in lieu of the generally applicable leverage and risk-based capital requirements under Basel III.
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.
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, 2024 the Bank had not elected to be subject to the alternative community bank leverage ratio framework.
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.
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, 2024, the Bank had no capital loss carryovers. Corporate Dividends.
The Company and subsidiaries are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to the Company and the Bank. Method of Accounting.
TAXATION Federal Taxation General. The Company and subsidiaries are subject to federal income taxation in the same general manner as other corporations, with some exceptions discussed below. The following discussion of federal taxation is intended only to summarize material federal income tax matters and is not a comprehensive description of the tax rules applicable to the Company and the Bank.
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.
An institution is classified as “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, 2024, the Bank was classified as a “well capitalized” institution.
Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention.” When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses.
Assets which do not currently expose the insured institution to sufficient risk to warrant classification in one of the aforementioned categories but possess weaknesses are designated as “special mention.” 16 Table of Contents When an insured institution classifies problem assets as either substandard or doubtful, it may establish general allowances in an amount deemed prudent by management to cover probable accrued losses.
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.
At June 30, 2024, 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.
If an “undercapitalized” bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” banks must comply with one or more of a number of additional restrictions, including an order by the FDIC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and restrictions on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company.
If an “undercapitalized” national bank fails to submit an acceptable plan, it is treated as if it is “significantly undercapitalized.” “Significantly undercapitalized” national banks must comply with one or more of a number of additional restrictions, including an order by the OCC to sell sufficient voting stock to become adequately capitalized, requirements to reduce total assets, cease receipt of deposits from correspondent banks or dismiss directors or officers, and limitations on interest rates paid on deposits, compensation of executive officers and capital distributions by the parent holding company.
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.
The total population in our primary market area in 2024 is approximately 1.0 million, as estimated by Claritas, which provides demographic data based on U.S. Census and other data sources.
Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available-for-sale-securities). The Bank exercised the opt-out election regarding the treatment of AOCI. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
Institutions that have not exercised the AOCI opt-out have AOCI incorporated into common equity Tier 1 capital (including unrealized gains and losses on available- 25 Table of Contents for-sale-securities). The Bank exercised the opt-out election regarding the treatment of AOCI. Calculation of all types of regulatory capital is subject to deductions and adjustments specified in the regulations.
An institution is “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 ratio of 4.5% or greater.
An institution is classified as “adequately capitalized” if it has a total risk-based capital ratio of 8.0% or greater, a Tier 1 risk-based capital ratio of 6.0% or greater, a leverage ratio of 4.0% or greater and a common equity Tier 1 capital ratio of 4.5% or greater.
“Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it is determined to be critically undercapitalized. Transaction with Affiliates and Regulation W of the Federal Reserve Regulations. Transactions between banks and their affiliates are governed by federal law.
“Critically undercapitalized” institutions are subject to additional measures including, subject to a narrow exception, the appointment of a receiver or conservator within 270 days after it is determined to be critically undercapitalized. Transactions with Affiliates and Regulation W of the Federal Reserve Board. Transactions between banks and their affiliates are governed by federal law.
An institution is “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 ratio of less than 4.5%.
An institution is classified as “undercapitalized” if it has a total risk-based capital ratio of less than 8.0%, a Tier 1 risk-based capital ratio of less than 6.0%, a leverage ratio of less than 4.0% or a common equity Tier 1 capital ratio of less than 4.5%.
An institution is “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 ratio of less than 3.0%.
An institution is classified as “significantly undercapitalized” if it has a total risk-based capital ratio of less than 6.0%, a Tier 1 risk-based capital ratio of less than 4.0%, a leverage ratio of less than 3.0% or a common equity Tier 1 capital ratio of less than 3.0%.
Our loan origination and purchase activity has been and may continue to be adversely affected by a rising interest rate environment, which typically results in decreased loan demand. We generally do not purchase whole loans from third parties other than the residential mortgage loans described above.
Our loan origination and purchase activity has been and may continue to be adversely affected by the high interest rate environment, which typically results in decreased loan demand. We generally do not purchase whole loans from third parties other than the residential mortgage loans described above.
In 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.
In 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; ● Certain events in the recent past 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; 3 Table of Contents ● changes in the level and direction of loan delinquencies and charge-offs and changes in estimates of the adequacy of our allowance for credit losses; ● 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; ● 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, which may adversely affect our earnings; ● fluctuations in the stock market, which 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; ● political instability or civil unrest; ● acts of war or terrorism or pandemics such as the recent COVID-19 pandemic; 4 Table of Contents ● 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; and ● changes in the financial condition, results of operations or future prospects of issuers of securities that we own.
Also included in Tier 2 capital is the allowance for loan and lease losses limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale securities with readily determinable fair market values.
Also included in Tier 2 capital is the allowance for credit losses on loans limited to a maximum of 1.25% of risk-weighted assets and, for institutions that have exercised an opt-out election regarding the treatment of Accumulated Other Comprehensive Income (“AOCI”), up to 45% of net unrealized gains on available-for-sale securities with readily determinable fair market values.
The Company has policies, procedures and systems designed to comply with these regulations, and the Company will review and document such policies, procedures and systems to ensure continued compliance with these regulations. Incentive Compensation . In October 2022, the SEC adopted a final rule implementing the incentive-based compensation recovery (“clawback”) provisions of the Dodd-Frank Act.
The Company has policies, procedures and systems designed to comply with this Act and its implementing regulations, and the Company will review and document such policies, procedures and systems to ensure continued compliance. Incentive Compensation . In October 2022, the SEC adopted a final rule implementing the incentive-based compensation recovery (“clawback”) provisions of the Dodd-Frank Act.
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.
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. Delinquent Loans .
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.
The following table sets forth the amortized cost and estimated fair value of our securities portfolio (excluding Federal Home Loan Bank of New York and Federal Reserve Bank of New York common stock) at the dates indicated. ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ ​ 2024 ​ 2023 ​ ​ Amortized ​ Estimated ​ Amortized ​ Estimated ​ Cost Fair Value Cost Fair Value ​ ​ (In thousands) Securities available for sale: ​ ​ ​ ​ U.S.
Therefore, unless Federal Reserve Board regulations or policy change by allowing Pioneer Bancorp, MHC to waive the receipt of dividends declared by the Company without diluting minority stockholders, it is unlikely that the Company will pay any dividends. Possible Conversion of Pioneer Bancorp, MHC to Stock Form.
Therefore, unless Federal Reserve Board regulations or policy change by allowing Pioneer Bancorp, MHC to waive the receipt of dividends declared by the Company without diluting minority stockholders, it is unlikely that the Company will pay any dividends. 30 Table of Contents Possible Conversion of Pioneer Bancorp, MHC to Stock Form.
We may generally exclude from our income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. Audit of Tax Returns. The Company’s federal income tax returns and New York State income tax returns have not been audited in the last three years.
We may generally exclude from our income 100% of dividends received from the Bank as a member of the same affiliated group of corporations. 32 Table of Contents Audit of Tax Returns. The Company’s federal income tax returns and New York State income tax returns have not been audited in the last three years.
Decisions to send a demand notice are based on conversations with the borrower to address the delinquency issues. A report of all loans 30 days or more past due is provided to the board of directors monthly. Loans Past Due and Non-Performing Assets . Loans are reviewed on a regular basis.
Decisions to send a demand notice are based on conversations with the borrower to address the delinquency issues. A report of all loans 30 days or more past due is provided to the board of directors monthly. Loans Past Due and Non-Performing Assets .
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.
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.
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.
At June 30, 2024, $41.0 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.
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.
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 loan. We generally do not make unsecured commercial and industrial loans. Personal guarantees are often obtained from commercial and industrial borrowers.
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.
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, no common employees, and no common directors with the Mortgage Banking Company.
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 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 GE Vernova, 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.
We originate loans primarily to established local developers to finance the construction of commercial and multi-family properties or to acquire land for development of commercial and multi-family properties and to fund infrastructure improvements. We also provide construction loans primarily to local developers for the construction of one- to four-family residential developments.
We originate loans primarily to established local developers to finance the construction of commercial and multi-family properties or to acquire land for development of commercial and multi-family properties and to fund infrastructure improvements. We also provide construction loans primarily to local developers for 11 Table of Contents the construction of one- to four-family residential developments.
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 OCC 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, 2024, the Bank exceeded each of its capital requirements. Standards for Safety and Soundness.
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.
An undercapitalized national 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.
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 following table sets forth our amounts of all classified loans and loans designated as special mention as of June 30, 2024 and 2023.
Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% stockholder of a financial institution, and certain affiliated interests of these persons, together with all other outstanding loans to such persons and affiliated interests, may not exceed specified limits.
Under Section 22(h) of the Federal Reserve Act, loans to a director, an executive officer and to a greater than 10.0% stockholder of a financial institution, and to these persons’ related interests, together with all other outstanding loans to such persons and related interests, may not exceed specified limits.
An institution is considered “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 ratio of 6.5% or greater.
An institution is classified as “well capitalized” if it has a total risk-based capital ratio of 10.0% or greater, a Tier 1 risk-based capital ratio of 8.0% or greater, a leverage ratio of 5.0% or greater and a common equity Tier 1 capital ratio of 6.5% or greater.
Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company.
Finally, an emerging growth company may elect to comply with new or amended accounting pronouncements in the same manner as 31 Table of Contents a private company, but must make such election when the company is first required to file a registration statement. Such an election is irrevocable during the period a company is an emerging growth company.
At June 30, 2023, commercial and industrial loans totaled $88.4 million, or 7.6% of our total loan portfolio. Customers for these loans include professional businesses, family-owned businesses and not-for-profit businesses. As part of our relationship-driven focus, we generally require our commercial borrowers to maintain a deposit account with us, which improves our interest rate spread, margin and overall profitability.
At June 30, 2024, commercial and industrial loans totaled $101.2 million, or 7.4% of our total loan portfolio. Customers for these loans include professional businesses, family-owned businesses and not-for-profit businesses. As part of our relationship-driven focus, we generally require our commercial borrowers to maintain a deposit account with us, which improves our interest rate spread, margin and overall profitability.
These statutes and regulations provide for a range of sanctions for non-compliance with their terms, including imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution of a civil action for actual and punitive damages and injunctive relief.
These statutes and regulations provide for a range of sanctions for non-compliance with their terms, including imposition of administrative fines and remedial orders, and referral to the Attorney General for prosecution of a civil action for actual and punitive damages and injunctive relief. 28 Table of Contents Cybersecurity.
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.
Federal 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.
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.
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 history with us and other financial institutions.
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.
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.
We primarily participate in commercial real estate loans (including multi-family real estate loans), commercial and industrial loans and commercial construction loans. From time to time, we may purchase participation interests in loans where we are not the lead lender. We underwrite our participation interest in the loans that we purchase according to our own underwriting criteria and procedures.
We primarily participate in commercial real estate loans (including multi-family real estate loans), commercial and industrial loans and commercial construction loans. We also purchase participation interests in loans where we are not the lead lender. We underwrite our participation interest in the loans that we purchase according to our own underwriting criteria and procedures.
The composition and maturities of the debt securities portfolio at June 30, 2023 are summarized in the following table.
The composition and maturities of the debt securities portfolio at June 30, 2024 are summarized in the following table.
The FDIC has adopted regulations to implement the prompt corrective action framework under the Basel III capital rules.
The OCC has adopted regulations to implement the prompt corrective action framework under the Basel III capital rules.
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.
The following table sets forth the allowance for credit losses on loans allocated by loan category and the percent of the allowance in each category to the total allocated allowance at the dates indicated.
Deposits have traditionally been our primary source of funds for our lending and investment activities. We also use borrowings, primarily Federal Home Loan Bank of New York advances, to supplement cash flows, as needed. In addition, funds are derived from scheduled loan payments, investment maturities, loan sales, loan prepayments, retained earnings and income on interest earning assets.
Deposits have traditionally been our primary source of funds for our lending and investment activities. We also use borrowings, primarily FHLBNY advances, to supplement cash flows, as needed. In addition, funds are derived from scheduled loan payments, investment maturities, loan sales, loan prepayments, retained earnings and income on interest earning assets.
The executive offices of the Company are located at 652 Albany Shaker Road, Albany, New York 12211 , and its telephone number is (518) 730-3025. The Company is subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”) and the New York State Department of Financial Services (the “NYSDFS”).
The executive offices of the Company are located at 652 Albany Shaker Road, Albany, New York 12211 , and its telephone number is (518) 730-3025. The Company is subject to comprehensive regulation and examination by the Board of Governors of the Federal Reserve System (the “Federal Reserve Board”).
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.
Based upon its capital levels, a national 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 OCC, after notice and opportunity for hearing, determines that an unsafe or unsound condition, or an unsafe or unsound practice, warrants such treatment.
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.
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, 2024 was $766,550 for single-family homes in our market area.
System-generated late notices are mailed to a borrower after the late payment “grace period,” which is 15 days in the case of all loans secured by residential or commercial real estate and 15 days in the case of commercial and industrial and most consumer loans.
Delinquencies and Asset Quality Delinquency Procedures. System-generated late notices are mailed to a borrower after the late payment “grace period,” which is 15 days in the case of all loans secured by residential or commercial real estate and 15 days in the case of commercial and industrial and most consumer loans.
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.
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 that set forth the safety and soundness standards to identify and address problems at insured depository institutions before capital becomes impaired.
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.
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.
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.
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, 2024, commercial construction loans totaled $118.4 million, or 8.7% of our total loan portfolio. Most of these loans are secured by properties located in our primary market area.
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.
At June 30, 2024, based on the 15% limitation, the Bank’s loans-to-one-borrower limit was approximately $35.3 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.
Federal laws and regulations provide that no person (including a company) may acquire control of a bank holding company, such as the Company, without the prior non-objection or approval of the Federal Reserve Board pursuant to the Change in Bank Control Act.
Federal laws and regulations provide that no person (including a company) may acquire direct or indirect control of a bank holding company, such as the Company, or a bank without the prior non-objection or approval of the Federal Reserve Board and/or the OCC pursuant to the Change in Bank Control Act and its implementing regulations.
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.
Such activities can include insurance underwriting and investment banking. As of June 30, 2024, Pioneer Bancorp, MHC and the Company were not “financial holding companies.” 29 Table of Contents Capital. The Federal Reserve Board must establish for all bank holding companies minimum consolidated capital requirements that are as stringent as those required for their insured depository subsidiaries.
The Bank, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of New York. The Bank was in compliance with this requirement at June 30, 2023. 28 Table of Contents Holding Company Regulation Federal Holding Company Regulation .
The Bank, as a member of the Federal Home Loan Bank of New York, is required to acquire and hold shares of capital stock in the Federal Home Loan Bank of New York. The Bank was in compliance with this requirement at June 30, 2024. Holding Company Regulation Federal Holding Company Regulation .
We invest in fixed rate collateralized mortgage obligations (“CMOs”) issued by Ginnie Mae, Freddie Mac or Fannie Mae, mortgage-backed securities insured or guaranteed by Ginnie Mae, Freddie Mac or Fannie Mae and in other asset backed securities. 19 Table of Contents Equity Securities.
We invest in fixed rate collateralized mortgage obligations (“CMOs”) issued by Ginnie Mae, Freddie Mac or Fannie Mae, mortgage-backed securities insured or guaranteed by Ginnie Mae, Freddie Mac or Fannie Mae and in other asset backed securities. Equity Securities.
Term loans are generally made with fixed interest rates, indexed to the comparable Federal Home Loan Bank of New York amortizing advance indications, plus a margin, and are for terms up to 10 years. We focus our efforts on experienced, growing small- to medium-sized, privately-held companies with solid operating history and projected cash flow that operate in our market area.
Term loans are generally made with fixed interest rates, indexed to the comparable FHLBNY amortizing advance indications, plus a margin, and are for terms up to 10 years. We focus our efforts on experienced, growing small- to medium-sized, privately-held companies with solid operating history and projected cash flow that operate in our market area.
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.
We also had undrawn amounts on the commercial construction loans totaling $52.7 million at June 30, 2024. 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.
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.
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.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

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Biggest changeRisks 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.
Biggest changeRisks 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. ● 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. 35 Table of Contents 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. ​ Risks Related to Changes in Macroeconomic Conditions, Interest Rates and Inflation Our business may be adversely affected by economic downturns in our market area and the national economy.
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.
We have used a third-party mortgage banking company, Homestead Funding Corp., to underwrite, process and close our residential mortgage loans since January 2016. We use this company in order to offer our customers this loan product without the expense of maintaining and operating an in-house residential mortgage loan department.
We have used a third-party mortgage banking company, Homestead Funding Corp., to underwrite, process and close our residential mortgage loans since January 2016. We use this mortgage banking company in order to offer our customers this loan product without the expense of maintaining and operating an in-house residential mortgage loan department.
Recent developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of those institutions have resulted in decreased confidence in banks among depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets.
Developments and events in the financial services industry, including the large-scale deposit withdrawals over a short period of time at Silicon Valley Bank, Signature Bank and First Republic Bank that resulted in the failure of those institutions have resulted in decreased confidence in banks among depositors, other counterparties and investors, as well as significant disruption, volatility and reduced valuations of equity and other securities of banks in the capital markets.
Our non-performing assets adversely affect our net income in various ways: ● we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned; ● we must provide for probable loan losses through a current period charge to the provision for loan losses; ● non-interest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and ● the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
Our non-performing assets adversely affect our net income in various ways: ● we record interest income only on the cash basis or cost-recovery method for non-accrual loans and we do not record interest income for other real estate owned; ● we must provide for loan losses through a current period charge to the provision for credit losses; ● non-interest expense increases when we write down the value of properties in our other real estate owned portfolio to reflect changing market values; ● there are legal fees associated with the resolution of problem assets, as well as carrying costs, such as taxes, insurance, and maintenance fees; and ● the resolution of non-performing assets requires the active involvement of management, which can distract them from more profitable activity.
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.
This could require increasing our allowance for credit losses on loans 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.
Should we discontinue this relationship or otherwise be unable to use this company in the future, our ability to purchase residential mortgage loans may be disrupted unless we are able to find a suitable replacement or have or re-develop the capability to originate residential mortgage loans through our lending staff.
Should we discontinue this relationship or otherwise be unable to use this mortgage banking company in the future, our ability to purchase residential mortgage loans may be disrupted unless we are able to find a suitable replacement or have or re-develop the capability to originate residential mortgage loans through our lending staff.
We occasionally purchase commercial real estate, commercial and industrial and commercial construction loan participations (loans made by a group of lenders, including us, who share or participate in a specific loan) secured by properties outside our market area in which we are not the lead lender.
We purchase commercial real estate, commercial and industrial and commercial construction loan participations (loans made by a group of lenders, including us, who share or participate in a specific loan) secured by properties outside our market area in which we are not the lead lender.
Increases in interest rates can result in interest rates on our deposits increasing faster than the interest rates we receive on our loans and investments, causing our interest rate spread to decrease, which would have a negative effect on our net interest income and profitability.
Conversely, increases in interest rates can result in interest rates on our deposits increasing faster than the interest rates we receive on our loans and investments, causing our interest rate spread to decrease, which would have a negative effect on our net interest income and profitability.
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 employees.
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.
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. 52 Table of Contents Severe weather, acts of terrorism, geopolitical and other external events could impact our ability to conduct business.
With respect to the fraud described in “Part II, Item 8–Financial Statements and Supplementary Data- Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities,” and the proceedings described in “Item 3 – Legal Proceedings,” our insurance carriers have (a) denied coverage with respect to some of the claims, (b) accepted coverage, subject to certain conditions, with respect to some of the claims, and (c) sought additional information from the Company in order to further evaluate coverage.
With respect to the fraud described in “Part II, Item 8–Financial Statements and Supplementary Data- Note 14 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities,” and the proceedings described in “Item 3 – Legal Proceedings,” our insurance carriers have (a) denied coverage with respect to some of the claims, (b) accepted coverage, subject to certain conditions, with respect to some of the claims, and (c) sought additional information from the Company in order to further evaluate coverage.
Moreover, a significant decline in general economic conditions, caused by inflation, unemployment, recession, acts of terrorism, civil unrest, natural disasters, an outbreak of hostilities or other international or domestic calamities or other factors beyond our control could negatively impact our primary marketplace and could negatively affect our financial performance. ​ 35 Table of Contents Changes in interest rates may reduce our profits.
Moreover, a significant decline in general economic conditions, caused by inflation, unemployment, recession, acts of terrorism, civil unrest, natural disasters, an outbreak of hostilities or other international or domestic calamities or other factors beyond our control could negatively impact our primary marketplace and could negatively affect our financial performance. ​ 36 Table of Contents Changes in interest rates may reduce our profits.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. ​ 45 Table of Contents Risks Related 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.
New government regulations could also result in new or more stringent forms of ESG oversight and expanding mandatory and voluntary reporting, diligence, and disclosure. ​ 46 Table of Contents Risks Related 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.
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.
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 50 Table of Contents products and services or be successful in marketing these products and services to our customers.
Our operations depend upon our ability to protect our computer systems and network infrastructure against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers.
Our operations depend upon our ability to protect our computer systems and network infrastructure against damage from physical theft, fire, power loss, telecommunications failure or a similar catastrophic event, as well as from cybersecurity attacks and other security problems, including security breaches, denial of service attacks, viruses, worms and other disruptive problems caused by hackers.
See “Item 3 – Legal Proceedings,” and “Part II, Item 8–Financial Statements and Supplementary Data- Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities,” for details. We are prosecuting and defending these lawsuits and other proceedings vigorously, and management believes that the Bank has substantial defenses to the claims that have been asserted.
See “Item 3 – Legal Proceedings,” and “Part II, Item 8–Financial Statements and Supplementary Data- Note 14 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities,” for details. We are prosecuting and defending these lawsuits and other proceedings vigorously, and management believes that the Bank has substantial defenses to the claims that have been asserted.
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.
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 high interest rate environment.
We have experienced fraudulent activities that are adversely impacting our current financial performance and results of operations. See “Part II, Item 8–Financial Statements and Supplementary Data- Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities,” for details. We expect these activities to continue to negatively impact our financial performance and results of operations.
We have experienced fraudulent activities that are adversely impacting our current financial performance and results of operations. See “Part II, Item 8–Financial Statements and Supplementary Data- Note 14 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities,” for details. We expect these activities to continue to negatively impact our financial performance and results of operations.
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.
Computer break-ins, phishing and other disruptions could also jeopardize the security of information stored in and transmitted through our computer systems and 51 Table of Contents network infrastructure, which may result in significant liability to us and may cause existing and potential customers to refrain from doing business with us.
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.
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, 53 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.
We make various assumptions and judgments about the collectability of loans in our portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. In determining the adequacy of the allowance for loan losses, we rely on our experience and our evaluation of economic conditions.
We make various assumptions and judgments about the collectability of loans in our portfolio, including the creditworthiness of borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. In determining the adequacy of the allowance for credit losses on loans, we rely on our experience and our evaluation of economic conditions.
The recent downgrade by Fitch Rating Services to the U.S. credit rating could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities, and could result in our counterparties requiring additional collateral for our borrowings.
The 2024 downgrade by Fitch Rating Services to the U.S. credit rating could affect the stability of securities issued or guaranteed by the federal government and the valuation or liquidity of our portfolio of such investment securities, and could result in our counterparties requiring additional collateral for our borrowings.
In addition, certain provisions of our articles of incorporation and bylaws and state and federal banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of the Company without our board of directors’ prior approval.
In addition, certain provisions of our articles of incorporation and bylaws and banking laws, including regulatory approval requirements, could make it more difficult for a third party to acquire control of the Company without our board of directors’ prior approval.
Also, a bank holding company must obtain the prior approval of the Federal Reserve Board and the NYSDFS before, among other things, acquiring direct or indirect ownership or control of more than 5% of any class of voting shares of any bank, including the Bank.
Also, a bank holding company must obtain the prior approval of the Federal Reserve Board before, among other things, acquiring direct or indirect ownership or control of more than 5% of any class of voting shares of any bank, including the Bank.
As described in the section captioned “Supervision and Regulation” included in Part I above, we are subject to extensive regulation, supervision and examination by our banking regulators, the FDIC, the NYSDFS and the Federal Reserve Board.
As described in the section captioned “Supervision and Regulation” included in Part I above, we are subject to extensive regulation, supervision and examination by our banking regulators, the OCC, the FDIC, and the Federal Reserve Board.
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.
It is possible that regulators 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.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse effect on the Company’s business and, in turn, the Company’s financial condition and results of operations.
Failure to successfully keep pace with technological changes affecting the financial services industry could have a material adverse effect on our business and, in turn, our financial condition and results of operations.
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.
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.
Technology has lowered barriers to entry and made it possible for "non-banks" to offer traditional bank products and services using innovative technological platforms such as fintech and blockchain. These "digital banks" may be able to achieve economies of scale and offer better pricing for banking products and services than the Company can.
Technology has lowered barriers to entry and made it possible for "non-banks" to offer traditional bank products and services using innovative technological platforms such as fintech and blockchain. These "digital banks" may be able to achieve economies of scale and offer better pricing for banking products and services than we can.
Further, the effects of climate change may negatively impact regional and local economic activity, which could lead to an adverse effect on our customers and impact the communities in which we operate. Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations.
Further, the effects of climate change may negatively impact regional 45 Table of Contents and local economic activity, which could lead to an adverse effect on our customers and impact the communities in which we operate. Overall, climate change, its effects and the resulting, unknown impact could have a material adverse effect on our financial condition and results of operations.
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.
For example, if it is determined that we have failed to operate according to the regulations, policies and directives of our regulators, we would be subject to sanctions for non-compliance, including seizure of the property and business of the bank and 43 Table of Contents suspension or revocation of our charter.
Because the amounts and timing of such legal fees and litigation-related expenses are inherently difficult to predict, there can be no assurance that legal fees and litigation-related expenses incurred by us in these proceedings will not significantly exceed the applicable insurance coverage limits and deductibles.
Because the amounts and timing of such legal fees and litigation-related expenses are inherently difficult to predict, there can be no assurance that legal fees and litigation-related expenses incurred by us in these proceedings will not continue to materially exceed the applicable insurance coverage limits and deductibles.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. ​ 36 Table of Contents Recent events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock.
Furthermore, our customers are also affected by inflation and the rising costs of goods and services used in their households and businesses, which could have a negative impact on their ability to repay their loans with us. 37 Table of Contents Certain events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock.
The Company’s future success depends, in part, upon its ability to leverage technology to increase our operational efficiency as well as address the current and evolving needs of our customers.
Our future success depends, in part, upon our ability to leverage technology to increase our operational efficiency as well as address the current and evolving needs of our customers.
In addition, the NYSDFS or the FDIC may, under certain circumstances, suspend or remove officers or directors who have violated the law, conducted our business in an unsafe or unsound manner, or contrary to the depositors’ interests, or have been negligent in the performance of their duties.
In addition, our regulators may, under certain circumstances, suspend or remove officers or directors who have violated the law, conducted our business in an unsafe or unsound manner, or contrary to the depositors’ interests, or have been negligent in the performance of their duties.
As of June 30, 2023, we have not elected the community bank leverage ratio framework and accordingly the Basel III capital requirements remain applicable.
As of June 30, 2024, we have not elected the community bank leverage ratio framework and accordingly the Basel III capital requirements remain applicable.
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.
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 credit losses on loans may not be sufficient to cover losses in our loan portfolio, and adjustments may be necessary to address different economic conditions or adverse developments in our loan portfolio.
Demand for deposits has also been adversely affected by the negative impact of recent high-profile bank failures and associated decrease in customer confidence in the safety and soundness of regional banks (see the Risk Factor entitled “Recent events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock” elsewhere in this filing for more information on these recent events.
Demand for deposits has also been adversely affected by the negative impact of bank failures and associated decrease in customer confidence in the safety and soundness of regional banks (see the Risk Factor entitled “Certain events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock” elsewhere in this filing for more information on these events).
While we have established and regularly test disaster recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial condition. Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including the Russia and Ukraine war, terrorism or other geopolitical events.
While we have established and regularly test disaster recovery procedures, the occurrence of any such event could have a material adverse effect on our business, operations and financial condition. Additionally, financial markets may be adversely affected by the current or anticipated impact of military conflict, including wars in Russia and Ukraine, and the Middle East, terrorism or other geopolitical events.
The recent high-profile bank failures of Silicon Valley Bank and Signature Bank in March 2023 and First Republic Bank in May 2023 have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.
The bank failures of Silicon Valley Bank and Signature Bank in March 2023 and First Republic Bank in May 2023 have generated significant market volatility among publicly traded bank holding companies and, in particular, regional banks.
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.
At June 30, 2024, $101.2 million, or 7.4% 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.
For loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to 39 Table of Contents collect amounts due from its customers.
For loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.
The cost of resolving the recent failures may prompt the FDIC to increase its assessment rates above the recently increased levels, to require prepayments in FDIC insurance premiums or to issue additional special assessments that apply to all financial institutions, to the extent that they result in increased deposit insurance costs, would reduce our profitability.
The cost of resolving these failures may prompt the FDIC to increase its assessment rates, to require prepayments in FDIC insurance premiums or to issue additional special assessments that apply to all financial institutions, to the extent that they result in increased deposit insurance costs, would reduce our profitability.
Given that future deterioration in the U.S. credit and financial markets is a possibility, no assurance can be made that losses or significant deterioration in the fair value of our U.S. government issued or guaranteed investments will not occur. At June 30, 2023, we had approximately $377.7 million invested in U.S. government and agency obligations.
Given that future deterioration in the U.S. credit and financial markets is a possibility, no assurance can be made that losses or significant deterioration in the fair value of our U.S. government issued or guaranteed investments will not occur. At June 30, 2024, we had approximately $243.5 million invested in U.S. government and agency obligations.
Although we, with the help of third-party service providers, intend to continue to implement security technology and establish operational procedures designed to prevent such damage, our security measures may not be successful.
Although we, with the help of third-party service providers, intend to continue to implement security technology, establish operational procedures designed to prevent such damage, including cybersecurity controls, our security measures may not be successful.
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.
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 FHLBNY, 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. ​ 48 Table of Contents Risks Related to Our Insurance and Wealth Management Businesses Conditions in insurance markets could adversely affect our earnings.
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.
Based on these factors, we have a concentration in loans of the type described in (ii) above of 138.7% of our total capital at June 30, 2024. 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.
These obligations will increase our operating expenses and could divert our management’s attention from our operations. Risks Related to Liquidity A lack of liquidity could adversely affect our financial condition and results of operations. Liquidity is essential to our business.
These obligations have increased our operating expenses and could divert our management’s attention from our operations. Risks Related to Liquidity A lack of liquidity could adversely affect our financial condition and results of operations. Liquidity is essential to our business.
A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans.
We are subject to environmental liability risk associated with lending activities. A significant portion of our loan portfolio is secured by real estate, and we could become subject to environmental liabilities with respect to one or more of these properties. During the ordinary course of business, we may foreclose on and take title to properties securing defaulted loans.
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. The Company and the Bank are involved in a variety of litigation and other proceedings.
We are a defendant in a variety of litigation and other actions, which may have a material adverse effect on our financial condition and results of operations. The Company and the Bank are involved in a variety of litigation and other proceedings.
These recent events may also result in changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material adverse impact on our businesses.
These events may also result in increased regulatory scrutiny, changes to laws or regulations governing banks and bank holding companies or result in the impositions of restrictions through supervisory or enforcement activities, including higher capital requirements, which could have a material adverse impact on our business.
We also had undrawn amounts on the commercial construction loans totaling $28.9 million at June 30, 2023. The primary credit risks associated with construction lending are underwriting risks, project risks and market risks. Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk, and environmental and other hazard risks.
We also had undrawn amounts on the commercial construction loans totaling $52.7 million at June 30, 2024. The primary credit risks associated with construction lending are underwriting risks, project risks and market risks. Project risks include cost overruns, borrower credit risk, project completion risk, general contractor credit risk, and environmental and other hazard risks.
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.
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, 2024, commercial construction loans were $118.4 million, or 8.7% of our total loan portfolio.
In addition, if it is determined that we have engaged in an unfair or deceptive act or practice, the NYSDFS or FDIC may issue an order to cease and desist and impose a fine us.
In addition, if it is determined that we have engaged in an unfair or deceptive act or practice, our regulators may issue an order to cease and desist and impose a fine us.
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 credit losses on a quarterly basis, with more frequent evaluation for selected issues.
Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff, which are strongly influenced by external factors such as changes in interest rates, local and national economic conditions, the availability and attractiveness of alternative investments, and perceptions of the stability of the financial services industry generally and of our institution specifically.
Our most important source of funds is deposits. 47 Table of Contents Deposit balances can decrease when customers perceive alternative investments as providing a better risk/return tradeoff, which are strongly influenced by external factors such as changes in interest rates, local and national economic conditions, the availability and attractiveness of alternative investments, and perceptions of the stability of the financial services industry generally and of our institution specifically.
An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity. Our most important source of funds is deposits.
An inability to raise funds through deposits, borrowings, the sale and maturities of loans and securities and other sources could have a substantial negative effect on liquidity.
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.
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. ​ 54 Table of Contents
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.
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.
The most significant risks include the following: Risks Related to Changes in Macroeconomic Conditions, Interest Rates and Inflation ● Our business may be adversely affected by economic downturns in our market area and the national economy. ● Changes in interest rates may reduce our profits. ● Inflation can have an adverse impact on our business and on our customers. ● Recent events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock. ● Lawmakers’ failure to address the federal debt ceiling in a timely manner, downgrades of the U.S. credit rating and uncertain credit and financial market conditions may affect the stability of securities issued or guaranteed by the federal government, which may affect the valuation or liquidity of our investment securities portfolio and increase future borrowing costs. ● Transition from the use of the London Interbank Offered Rate (“LIBOR”) may adversely impact the interest rates paid on certain financial instruments. ● Public health emergencies, like the COVID-19 outbreak, may have an adverse impact on our business and results of operations. ● 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.
The most significant risks include the following: Risks Related to Changes in Macroeconomic Conditions, Interest Rates and Inflation ● Our business may be adversely affected by economic downturns in our market area and the national economy. ● Changes in interest rates may reduce our profits. ● Inflation can have an adverse impact on our business and on our customers. ● Certain events involving the failure of financial institutions may adversely affect our business, and the market price of our common stock. ● Lawmakers’ failure to address the federal debt ceiling in a timely manner, downgrades of the U.S. credit rating and uncertain credit and financial market conditions may affect the stability of securities issued or guaranteed by the federal government, which may affect the valuation or liquidity of our investment securities portfolio and increase future borrowing costs. ● 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.
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.
We maintain an allowance for credit losses on loans, which is established through a provision for credit losses that represents management’s best estimate of credit losses within our existing portfolio of loans.
At June 30, 2023, there were no commercial and industrial or commercial construction loan participations outside our market area. At June 30, 2023, no loan participations were delinquent 60 days or more. If our underwriting of these participation loans is not sufficient, our non-performing loans may increase and our earnings may decrease.
At June 30, 2024, there were $14.4 million commercial construction, $2.4 million commercial real estate and no commercial and industrial loan participations outside our market area. At June 30, 2024, no loan participations were delinquent 60 days or more. If our underwriting of these participation loans is not sufficient, our non-performing loans may increase and our earnings may decrease.
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.
Risks Related to Legal, Regulatory, Fraud and Compliance Matters ● We are subject to fraud and compliance risk. ● We are a defendant in a variety of litigation and other actions, which may have a material adverse effect on our 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. ● Conversion to a national bank subjects the Bank to new and potentially heightened examination and reporting requirements that may increase our costs of operations and compliance. ● Non-compliance with the USA PATRIOT Act, Bank Secrecy Act, or other laws and regulations will subject us to fines or sanctions. ● We are subject to the Community Reinvestment Act (“CRA”) and fair lending laws, and failure to comply with these laws could lead to material penalties. ● The level of our commercial real estate loan portfolio subjects us to additional regulatory scrutiny. 34 Table of Contents ● 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.
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.
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 credit losses on loans may not be sufficient to absorb losses in our loan portfolio. ● 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.
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.
At June 30, 2024, approximately $1.3 billion, or 91.6%, 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.
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.
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, 2024, our commercial real estate loans totaled $406.2 million, or 29.7%, of our total loan portfolio.
A material increase in our non-performing construction loans could have a material adverse effect on our financial condition and results of operation. Our allowance for loan losses may not be sufficient to cover actual loan losses.
A material increase in our non-performing construction loans could have a material adverse effect on our financial condition and results of operation. 40 Table of Contents Our allowance for credit losses on loan may not be sufficient to absorb losses in our loan portfolio.
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.
Consequently, a problem with one or more loans could require us to significantly increase our provision for credit losses. In addition, banking regulators periodically review our allowance for credit losses on loans and may require us to increase our provision for credit losses or recognize additional loan charge-offs.
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.
During 2022 and 2023, the Federal Reserve Board in order to combat high inflation increased the Fed Funds target range multiple times to its current target range of 5.25% to 5.50% as of June 30, 2024. The current consensus is that rates will likely be decreased during the second half of calendar 2024 and 2025.
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.
At June 30, 2024, $440.3 million, or 28.4% 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 FHLBNY and investment securities. These deposits may be more volatile than other deposits.
At June 30, 2023, our non-performing assets, which consist of non-performing loans and other real estate owned, were $17.8 million, or 0.96% of total assets.
At June 30, 2024, our non-performing assets, which consist of non-performing loans and other real estate owned, were $9.2 million, or 0.49% of total assets.
The Federal Reserve Board also plans to continue to reduce the size of its balance sheet in 2024. To the extent these interventions do not mitigate the volatility and uncertainty related to inflation and the effects of inflation, or to the extent conditions otherwise worsen, we could experience adverse effects on our business, financial condition, and results of operations.
To the extent these interventions do not mitigate the volatility and uncertainty related to inflation and the effects of inflation, or to the extent conditions otherwise worsen, we could experience adverse effects on our business, financial condition, and results of operations.
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%.
At June 30, 2024 and assuming a 200 basis points decrease in market interest rates, we estimate that our net portfolio value would increase by $52.2 million, or 16.9%. Additionally, at June 30, 2024, and assuming a 200 basis points increase in market interest rates, we estimate that our net portfolio value would decrease by $72.1 million, or 23.4%.
Further, though certain legal fees and expenses associated with these proceedings have been borne by our insurance carriers, up to applicable coverage limits and deductibles, we expect that 42 Table of Contents such limits and deductibles may be met and/or exceeded within the next three months.
Further, though certain legal fees and expenses associated with these proceedings have been borne by our insurance carriers, up to applicable coverage limits and deductibles, such limits 42 Table of Contents and deductibles have been met and/or exceeded, and we do not expect to recognize any additional insurance recoveries related to these claims.
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.
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 14 – 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 and our evaluation of the adequacy of our allowance for credit losses on loans.
Risks Related to Changes in Macroeconomic Conditions, Interest Rates and Inflation Our business may be adversely affected by economic downturns in our market area and the national economy. Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily on the general economic conditions in our primary market area, the Capital Region of New York and surrounding markets.
Unlike larger financial institutions that are more geographically diversified, our profitability depends primarily on the general economic conditions in our primary market area, the Capital Region of New York and surrounding markets.
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.
As our commercial real estate loans increase, the corresponding risks and potential for losses from these loans may also increase, which would adversely affect our business, financial condition and results of operations. 39 Table of Contents 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.
Material additions to the allowance for loan losses would materially decrease our net income and would adversely affect our business, financial condition and results of operations.
Material additions to the allowance for credit losses on loans would materially decrease our net income and would adversely affect our business, financial condition and results of operations. If our non-performing assets increase, our earnings will be adversely affected.
At June 30, 2023, residential mortgage loans acquired from the company totaled $383.4 million, or 33.1%, of our total loans receivable.
At June 30, 2024, residential mortgage loans acquired from the mortgage banking company totaled $559.6 million, or 41.0%, of our total loans receivable.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeThe 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.
Biggest changeProperties The following table sets forth information regarding our offices as of June 30, 2024. ​ ​ ​ ​ ​ ​ Leased or Year Acquired Location ​ Owned ​ or Leased ​ ​ ​ ​ ​ Main Office: 652 Albany Shaker Road, Albany, NY 12211 Owned (1) 2016 ​ ​ ​ ​ ​ Other Properties: 21 Second Street, Troy, NY 12180 Leased 2016 531 Troy-Schenectady Road, Latham, NY 12110 Owned 2008 2000 Second Avenue, Watervliet, NY 12189 Leased 2017 1828 Altamont Avenue, Schenectady, NY 12305 Owned 2012 1208 Route 146, Clifton Park, NY 12065 Leased 1995 10 Kendall Way, Malta, NY 12020 Owned 2016 78 Main Avenue, Wynantskill, NY 12198 Owned 2014 712 Hoosick Street, Brunswick, NY 12180 Owned 2015 329 Glenmont Road, Glenmont, NY 12077 Leased 2014 142 Saratoga Avenue, Waterford, NY 12188 Owned 2015 1770 Central Avenue, Albany, NY 12205 Leased 2019 602 North Greenbush Road, Rensselaer, NY 12144 Leased 2017 90 State Street, Albany, NY 12207 Leased 2013 1881‑1883 Western Avenue, Albany, NY 12203 Owned 2018 184 Delaware Avenue, Delmar, NY 12054 Owned 2010 843 Route 146, Clifton Park, NY 12065 Leased 2012 426 State Street, Schenectady, NY 12305 Leased 2014 440 Main Street, Cairo, NY 12413 Owned 2016 11565 NY‑32, Greenville, NY 12083 Leased 2016 739 Upper Glen Street, Queensbury, NY 12804 Leased 2017 100 Mohawk Street, Cohoes, NY 12047 Owned 2017 1 Hudson City Centre, Hudson, NY 12534 ​ Leased ​ 2023 (1) The property is subject to a ground lease.
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.”
Legal Proceedings Certain legal proceedings in which we are involved are discussed in “Part II, Item 8–Financial Statements and Supplementary Data- Note 14 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities.”
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.
We believe that the current facilities are adequate to meet our present and foreseeable needs, subject to possible future expansion. For more information on the Company’s properties, see Notes 2, 7 and 18 set forth in Part II, Item 8 Financial Statements and Supplementary Data, of this Annual Report. ITEM 3.
Removed
ITEM 2. Properties As of June 30, 2023, the net book value of our office properties was $32.5 million.
Added
The Company and the Bank maintain their executive offices as well as an operations center, customer call center and a retail banking center at the main office. The Bank operates 22 retail banking offices in Albany, Greene, Rensselaer, Saratoga, Schenectady and Warren Counties, as well as a wealth management office in Columbia County in New York.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeITEM 3. Legal Proceedings 55 ITEM 4 Mine Safety Disclosures 55 ITEM 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 55 ITEM 6. [Reserved] 55 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 56
Biggest changeITEM 3. Legal Proceedings 57 ITEM 4 Mine Safety Disclosures 57 ITEM 5 Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities 58 ITEM 6. [Reserved] 59 ITEM 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations 60

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeSpecial 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.
Biggest changeSpecial cash dividends, stock dividends or returns of capital, to the extent permitted by regulations and policies of the Federal Reserve Board and the OCC, may be paid in addition to, or in lieu of, regular cash dividends. There were no sales of unregistered securities during the year ended June 30, 2024.
ITEM 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.
ITEM 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, 2024, the Company had approximately 894 stockholders of record.
Added
The following table reports information regarding repurchases by the Company of its common stock in each month of the quarter ended June 30, 2024: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Total Number ​ ​ ​ ​ ​ ​ ​ of Shares Maximum ​ ​ ​ ​ ​ ​ ​ ​ Purchased as ​ Number of ​ ​ ​ ​ ​ ​ ​ ​ Part of ​ Shares that ​ ​ ​ ​ ​ ​ ​ ​ Publicly ​ May Yet Be ​ ​ Total Number ​ Average Price ​ Announced ​ Purchased ​ ​ of Shares ​ Paid Per ​ Plans or ​ Under Plans or Period ​ Purchased ​ Share ​ Programs ​ Programs (1) April 1 through April 30, 2024 ​ ​ — ​ $ — ​ ​ — ​ ​ — May 1 through May 31, 2024 ​ ​ — ​ ​ — ​ ​ — ​ ​ 1,298,883 June 1 through June 30, 2024 ​ ​ 106,386 ​ ​ 9.97 ​ ​ 106,386 ​ ​ 1,192,497 Total ​ ​ 106,386 ​ $ 9.97 ​ ​ 106,386 ​ ​ 1,192,497 ​ (1) On May 21, 2024, the Company announced it adopted a stock repurchase program.
Added
The stock repurchase program authorizes the Company to repurchase up to an aggregate of 1,298,883 shares, or approximately 5% of its then outstanding shares.
Added
The repurchase program permits shares to be repurchased in open market or private transactions, through block trades, and pursuant to any trading plan that may be adopted in accordance with Rule 10b5-1 of the Securities and Exchange Commission. The repurchase program has no expiration date. ​ 58 Table of Contents ​

Item 7. Management's Discussion & Analysis

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

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Biggest changeSelect 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.
Biggest changeSelect Financial Data The following tables set forth selected historical financial and other data for the Company on a consolidated basis at and for the years ended June 30, 2024 and 2023. ​ ​ ​ ​ ​ ​ ​ ​ ​ At June 30, ​ 2024 2023 ​ ​ (In thousands) Selected Financial Condition Data: ​ ​ Total assets ​ $ 1,895,404 ​ $ 1,856,191 Cash and cash equivalents ​ 165,190 ​ 150,478 Securities available for sale ​ 257,409 ​ 431,667 Securities held to maturity ​ 25,090 ​ 23,949 Equity securities ​ ​ — ​ ​ 2,413 Federal Reserve Bank of New York and Federal Home Loan Bank of New York stock ​ 3,546 ​ 1,196 Net loans receivable ​ 1,344,069 ​ 1,144,169 Premises and equipment, net ​ 40,105 ​ 41,617 Bank-owned life insurance ​ 16,009 ​ 16,322 Deposits ​ 1,550,252 ​ 1,541,851 Shareholders’ equity ​ 296,528 ​ 266,700 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ For the Years Ended June 30, ​ 2024 2023 ​ ​ (In thousands except for per share amounts) Selected Operating Data: ​ ​ Interest and dividend income ​ $ 88,316 ​ $ 71,033 Interest expense ​ 21,803 ​ 5,492 Net interest income ​ 66,513 ​ 65,541 Provision for credit losses ​ 2,700 ​ — Net interest income after provision for credit losses ​ 63,813 ​ 65,541 Noninterest income ​ 16,330 ​ 14,148 Noninterest expense ​ 60,734 ​ 51,834 Income before income taxes ​ 19,409 ​ 27,855 Income tax expense ​ 4,149 ​ 5,907 Net income ​ ​ 15,260 ​ ​ 21,948 Earnings per share (basic and diluted) ​ $ 0.61 ​ $ 0.87 ​ ​ 61 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ At or For the Years Ended June 30, ​ 2024 2023 ​ ​ ​ ​ ​ ​ Performance Ratios: Return on average assets 0.80 % 1.15 % Return on average equity 5.42 % 8.73 % Interest rate spread (1) 3.01 % 3.50 % Net interest margin (2) 3.78 % 3.72 % Non-interest expenses to average assets 3.18 % 2.71 % Efficiency ratio (3) 73.31 % 65.05 % Average interest-earning assets to average interest-bearing liabilities 161.98 % 170.32 % ​ ​ ​ ​ ​ ​ Capital Ratios (4): Average equity to average assets 14.77 % 13.16 % Total capital to risk weighted assets 19.66 % 20.11 % Tier 1 capital to risk weighted assets 18.40 % 18.85 % Common equity tier 1 capital to risk weighted assets 18.40 % 18.85 % Tier 1 capital to average assets 11.65 % 11.47 % ​ ​ ​ ​ ​ ​ Asset Quality Ratios: Allowance for credit losses as a percentage of total loans 1.60 % 1.94 % Allowance for credit losses as a percentage of non-performing loans 240.92 % 126.41 % Net charge-offs to average outstanding loans during the year 0.04 % 0.01 % Non-performing loans as a percentage of total loans 0.66 % 1.53 % Non-performing loans as a percentage of total assets 0.48 % 0.96 % Total non-performing assets as a percentage of total assets 0.49 % 0.96 % ​ ​ ​ ​ ​ ​ Other: Number of offices 23 22 Number of full-time equivalent employees 270 256 (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.
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.
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.
The increase in residential mortgage loans was related to the Bank’s asset allocation shift, using investment securities cash flow and cash to fund higher yielding assets. The Bank’s relationship with the Mortgage Banking Company facilitated a significant increase in residential mortgage loan volume, despite the rising interest rate environment.
The increase in residential mortgage loans was related to the Bank’s asset allocation shift, using investment securities cash flow and cash to fund higher yielding assets. The Bank’s relationship with the Mortgage Banking Company facilitated a significant increase in residential mortgage loan volume, despite the higher interest rate environment.
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.
We provide opportunities for our employees to engage in meaningful ways in the community and expect to 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 matters underlying the accrued liability and estimated range of possible losses are unpredictable and may change from time to time, and actual losses may vary significantly from the current estimate and accrual which could have a material negative effect on our financial results. The estimated range of possible loss does not represent our maximum loss exposure. Income Taxes.
The matters underlying the accrued liability and estimated range of possible losses are unpredictable and may change from time to time, and actual losses may vary significantly from the current estimate and accrual which could have a material negative effect on our financial results. The estimated range of possible loss does not represent our maximum loss exposure.
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.
We believe that we had enough sources of liquidity to satisfy our short and long-term liquidity needs as of June 30, 2024. 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.
Please read the information in this section in conjunction with the business and financial information regarding the Company, the Bank and the audited consolidated financial statements that appear starting on page 70 of this Annual Report on Form 10-K. Overview Net Interest Income. Our primary source of income is net interest income.
Please read the information in this section in conjunction with the business and financial information regarding the Company, the Bank and the audited consolidated financial statements that appear starting on page 74 of this Annual Report on Form 10-K. Overview Net Interest Income. Our primary source of income is net interest income.
(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.
(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. ​ 68 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.
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.
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, 2024.
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.
Recent Accounting Pronouncements Please refer to Note 2 in the Notes to the consolidated financial statements that appear starting on page 81 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 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.
We sell commercial and personal insurance products and provide employee benefits products and services through our wholly-owned subsidiary, Pioneer Insurance Agency, Inc., which we acquired in 2016, and grew with our acquisition of Capital Region Strategic Employee Benefits Services, LLC employee benefits and consulting business in 2017.
We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. Capital Resources. The Bank is subject to various regulatory capital requirements administered by NYSDFS and the FDIC.
We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered. Capital Resources. The Bank is subject to various regulatory capital requirements administered by the OCC.
The information in this section has been derived in part from the audited consolidated financial statements that appear beginning on page 70 of this Annual Report on Form 10-K.
The information in this section has been derived in part from the audited consolidated financial statements that appear beginning on page 74 of this Annual Report on Form 10-K.
At June 30, 2023, we had a $20.0 million unsecured line of credit with a correspondent bank with no outstanding balance, as well as the ability to borrow from the Federal Reserve Bank of New York through the Bank Term Funding Program and the discount window lending program, and access to the reciprocal and brokered deposit markets.
At June 30, 2024, we had a $20.0 million unsecured line of credit with a correspondent bank with no outstanding balance, as well as the ability to borrow from the Federal Reserve Bank of New York through the discount window lending program, and access to the reciprocal and brokered deposit markets.
The decrease in our effective tax rate was primarily due to the increase in tax-exempt income for the year ended June 30, 2023 as compared to the prior-year. ​ 68 Table of Contents Liquidity and Capital Resources Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business.
The increase in our effective tax rate was primarily due to the decrease in tax-exempt income for the year ended June 30, 2024 as compared to the prior year. ​ 72 Table of Contents Liquidity and Capital Resources Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business.
The increase in average yield on securities was due to higher market rates of interest for new securities that were purchased during the year ended June 30, 2023 replacing scheduled maturities of lower yielding U.S. government and agency, and municipal obligation securities.
The increase in average yield on securities was due to higher market rates of interest for new securities that were purchased during the year ended June 30, 2024 partially replacing the sale and scheduled maturities of lower yielding U.S. government and agency and municipal obligation securities.
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.
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 65 Table of Contents customers and clients of Pioneer Insurance Agency, Inc. and Pioneer Financial Services, Inc.
We believe that we have a competitive advantage in the markets we serve because of our over 130-year history in the community, our knowledge of the local marketplace and our long-standing reputation for providing superior, relationship-based customer service. The following are the key elements of our business strategy: Strategically grow our balance sheet .
We believe that we have a competitive advantage in the markets we serve because of our over 130-year history in the community, our knowledge of the local marketplace and our long-standing reputation for providing superior, relationship-based customer service. The following are the key elements of our business strategy: Strategically grow through deepening customer relationships .
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.
For additional details regarding legal, other proceedings and related matters see “Item 8 – Financial Statements and Supplementary Data – Note 14 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities.” ​ ​ 64 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.
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 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.
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 attract and retain transaction accounts by offering competitive products and rates and providing quality customer service. At June 30, 2023, core deposits comprised 92.4% of our total 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 attract and retain transaction accounts by offering competitive products and rates and providing quality customer service. At June 30, 2024, core deposits comprised 89.2% of our total deposits.
During the year ended June 30, 2023 we strategically increased our portfolio of non-commercial loans, in part to take advantage of the substantial recent increase in market rates, through the purchases of residential mortgage loans, increasing that portfolio by $174.6 million or 64.6% as compared to the prior year. Diversify our products and services to increase non-interest income.
During the year ended June 30, 2024 we strategically increased our portfolio of non-commercial loans, in part to take advantage of the substantial recent increase in market rates, through the purchases of residential mortgage loans, increasing that portfolio by $170.6 million or 36.8% as compared to the prior year. Diversify our products and services to increase non-interest income.
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.
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. We also have the ability to borrow from the FHLBNY.
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.
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.
If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay.
If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and FHLBNY advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay.
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 increase was primarily due to a 148 basis points increase in the average cost of interest-bearing liabilities to 2.01% for the year ended June 30, 2024 from 0.53% for the year ended June 30, 2023, as well as, a shift in the mix of interest-bearing liabilities to higher interest rate liability accounts.
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.
In addition, at June 30, 2024, we had $21.9 million in standby letters of credit outstanding. See Note 14 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.
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.
At June 30, 2024, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines. See Note 16 in the Notes to the consolidated financial statements for further information. 73 Table of Contents Off-Balance Sheet Arrangements and Aggregate Contractual Obligations Off-Balance Sheet Arrangements.
Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings. Provision for Loan Losses. The allowance for loan losses is a valuation allowance for probable incurred credit losses.
Net interest income is the difference between interest income, which is the income we earn on our loans and investments, and interest expense, which is the interest we pay on our deposits and borrowings. Provision for Credit Losses.
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.
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, 2024, cash and cash equivalents totaled $165.2 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $257.4 million at June 30, 2024.
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 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, 2024 totaled $156.7 million, or 10.1%, of total 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.
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 due to increased utilization rates of home equity lines of credit. The decrease in commercial real estate loans was related to loan payoffs outpacing loan originations. Deposits.
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.
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.
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.
Comparison of Operating Results for the Years Ended June 30, 2024 and June 30, 2023 General. Net income decreased by $6.6 million, or 30.5%, to $15.3 million for the year ended June 30, 2024 from $21.9 million for the year ended June 30, 2023.
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.
Interest income on interest-earning deposits with banks and other increased $261,000, or 4.4%, to $6.2 million for the year ended June 30, 2024 from $5.9 million for the year ended June 30, 2023.
We substantially grew our wealth management services business with the acquisition of Ward Financial Management, LTD’s business in 2018 and of three wealth management practices’ businesses in fiscal year 2022. At June 30, 2023, Pioneer Financial Services, Inc. had $812.3 million of assets under management.
We substantially grew our wealth management services business with the acquisition of Ward Financial Management, LTD’s business in 2018, three wealth management practices’ businesses in fiscal year 2022 and with the acquisition of certain assets of Hudson Financial, LLC in fiscal year 2024. At June 30, 2024, Pioneer Financial Services, Inc. had $1.13 billion of assets under management.
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 Expense. Interest expense increased $16.3 million, or 297.0%, to $21.8 million for the year ended June 30, 2024 from $5.5 million for the year ended June 30, 2023 as a result of an increase in interest expense on deposits, as well as, on borrowings and other.
(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.
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.
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.
Interest income on loans increased due to a 51 basis points increase in the average yield on loans to 5.72% for the year ended June 30, 2024 from 5.21% for the year ended June 30, 2023, coupled with a $206.2 million increase in the average balance of loans to $1.27 billion for the year ended June 30, 2024 from $1.06 billion for the year ended June 30, 2023.
Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards. The following represent our critical accounting policies and estimates: Allowance for Loan Losses.
Accordingly, our financial statements may not be comparable to companies that comply with such new or revised accounting standards. The following represent our critical accounting policies and estimates: Allowance for Credit Losses. The allowance for credit losses consists of the allowance for credit losses on loans, securities held to maturity and unfunded commitments.
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.
Income tax expense decreased $1.8 million to $4.1 million for the year ended June 30, 2024 from $5.9 million for the year ended June 30, 2023, due to a decrease in income before income taxes. Our effective tax rate was 21.4% for the year ended June 30, 2024 compared to 21.2% for the year ended June 30, 2023.
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.
Interest expense on interest-bearing deposits increased primarily due to a 149 basis points increase in the average cost of interest-bearing deposits to 1.95% for the year ended June 30, 2024 from 0.46% for the year ended June 30, 2023 and an increase in average interest-bearing deposits of $50.0 million to $1.06 billion for the year ended June 30, 2024 from $1.01 billion for the year ended June 30, 2023.
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.
At June 30, 2024, we had $303.9 million of commitments to originate loans, comprised of $183.5 million of commitments under commercial loans and lines of credit (including $52.7 million of unadvanced portions of commercial construction loans), $70.6 million of commitments under home equity loans and lines of credit, $42.8 million of commitments to purchase residential mortgage loans, and $7.0 million of unfunded commitments under consumer lines of credit.
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.
The decrease was primarily due to a $8.9 million increase in non-interest expense and a $2.7 million increase in the provision for credit losses, partially offset by a $2.2 million increase in non-interest income, a $1.0 million increase in net interest income and a $1.8 million decrease in income tax expense. Interest and Dividend Income.
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.
Interest and dividend income increased $17.3 million, or 24.3%, to $88.3 million for the year ended June 30, 2024, from $71.0 million for the year ended June 30, 2023 due to increases in interest income on loans and interest-earning deposits and other.
No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances.
Average Balances and Yields The following table sets forth average balances, average yields and costs, and certain other information for the years indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances.
The increase in the average balance of loans was principally due to purchases of residential mortgage loans. 66 Table of Contents Interest income on securities increased $6.9 million, or 234.3%, to $9.9 million for the year ended June 30, 2023 from $3.0 million for the year ended June 30, 2022.
The increase in the average balance of loans was principally due to purchases of residential mortgage loans. Interest income on securities decreased $125,000, or 1.3%, to $9.8 million for the year ended June 30, 2024 from $9.9 million for the year ended June 30, 2023.
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.
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 credit losses when realized. Non-interest Income. Our primary sources of non-interest income are banking fees and service charges, and insurance and wealth management services income.
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 expense on interest-bearing deposits increased $16.1 million, or 347.4%, to $20.7 million for the year ended June 30, 2024 from $4.6 million for the year ended June 30, 2023.
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.
Non-interest expense increased $8.9 million, or 17.2%, to $60.7 million for the year ended June 30, 2024 compared to $51.8 million for the year ended June 30, 2023.
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.
Our non-interest income also includes litigation-related income, 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. Non-Interest Expense.
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.
Interest income on interest-earning deposits with banks and other increased due to a 212 basis points increase in the average yield on interest-earning deposits with banks and other to 5.47% for the year ended June 30, 2024 from 3.35% for the year ended June 30, 2023 primarily due to an increase in yields on interest-earning deposits with banks due to higher market interest rates, partially offset by a decrease of $63.9 million in average balances on interest-earning deposits with banks and other to $113.1 million for the year ended June 30, 2024 from $177.0 million for the year ended June 30, 2023 related to the shift in composition of interest-earning assets from cash and cash equivalents to loans.
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.
Net Interest Income. Net interest income increased $972,000, or 1.5%, to $66.5 million for the year ended June 30, 2024 compared to $65.5 million for the year ended June 30, 2023.
The increase in the average cost of interest-bearing deposits was primarily due to the increase in market interest rates and a shift in the mix of deposits to higher costing certificates of deposit.
The increase in the average cost of interest-bearing deposits was primarily due to the repricing of certain interest-bearing deposit accounts in response to changes in market interest rates and the higher interest rate environment, as well as a shift in the mix of deposits towards higher cost interest-bearing accounts.
The increase in the average yield on interest-earning assets was driven by a significant increase in variable rate loan yields and yields on interest-earning deposits with banks due to rising market interest rates, as well as due to market related increases in interest rates on new loans and securities.
The increase in the average yield on interest-earning assets was driven by an increase in variable rate loan yields and yields on interest-earning deposits with banks due to the current higher interest rate environment, as well as due to market related increases in interest rates on new loans and an asset allocation shift, using investment securities’ cash flow to fund higher yielding assets.
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.
At June 30, 2024, we had the ability to borrow up to $497.2 million, of which none was utilized for borrowings and $200.0 million was utilized as collateral for letters of credit issued to secure municipal deposits.
During the year ended June 30, 2023, non-performing loans increased primarily with respect to one commercial real estate relationship totaling $7.7 million that was placed on non-accrual status, and one commercial construction relationship totaling $3.2 million that was matured as of June 30, 2023 and was extended subsequent to year end.
During the year ended June 30, 2024, non-performing loans decreased primarily with respect to one commercial real estate loan relationship that included seven loans totaling $7.7 million as of June 30, 2023, which as a result of payments received from the borrower decreased to four loans totaling $3.2 million as of June 30, 2024 and one commercial construction loan relationship totaling $3.2 million that was matured as of June 30, 2023 and was extended during the year ended June 30, 2024.
Interest expense on borrowings and other liabilities increased $775,000 to $872,000 for the year ended June 30, 2023 from $97,000 for the year ended June 30, 2022 due primarily to the increase in average borrowings and other liabilities of $20.4 million to $24.3 million for the year ended June 30, 2023 from $3.9 million for the year ended June 30, 2022, as well as the average cost of borrowings and other liabilities of 108 basis points as a result of the increase in the Federal Funds target rate throughout calendar year 2022 and continued in calendar year 2023.
Interest expense on borrowings and other liabilities increased $259,000 to $1.1 milion for the year ended June 30, 2024 from $872,000 for the year ended June 30, 2023 due primarily to increases in average borrowings and other liabilities of $2.1 million to $26.4 million for the year ended June 30, 2024 from $24.3 million for the year ended June 30, 2023, as well as the average cost of borrowings and other liabilities of 69 basis points as a result of the higher interest rate environment.
The increase was the result of a 154 basis points increase in the average yield on interest-earning assets to 4.03% for the year ended June 30, 2023, from 2.49% for the year ended June 30, 2022.
The increase was the result of a 99 basis points increase in the average yield on interest-earning assets to 5.02% for the year ended June 30, 2024, from 4.03% for the year ended June 30, 2023, partially offset by a decrease in the average balance of interest-earning assets of $1.9 million.
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.
Total deposits of $1.55 billion at June 30, 2024 increased $8.4 million, or 0.5%, from $1.54 billion at June 30, 2023.
Once the loss contingency is deemed to be both probable and estimable, we establish an accrued liability and record a corresponding amount of litigation-related expense. We continue to monitor the matters for further developments, including our interactions with various regulatory agencies with supervisory authority over us, that could affect the amount of the accrued liability that has been previously established.
We continue to monitor the matters for further developments, including our 67 Table of Contents interactions with various regulatory agencies with supervisory authority over us, that could affect the amount of the accrued liability that has been previously established.
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.
Average interest-earning assets of $1.76 billion for the year ended June 30, 2024 decreased by $1.9 milllion from the year ended June 30, 2023. Interest income on loans increased $17.2 million, or 31.0%, to $72.4 million for the year ended June 30, 2024 from $55.2 million for the year ended June 30, 2023.
As a substantial percentage of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans are critical in determining the amount of the allowance required for specific loans. Assumptions are instrumental in determining the value of properties.
All loan information presented as of June 30, 2023 or a prior date is presented in accordance with previously applicable GAAP (the incurred loss method). As a substantial percentage of our loan portfolio is collateralized by real estate, appraisals of the underlying value of property securing loans are critical in determining the amount of the allowance required for specific loans.
These increases were partially offset by a decrease in commercial real estate loans of $29.2 million, or 6.5%, to $424.3 million at June 30, 2023 from $453.5 million at June 30, 2022 and a decrease in commercial and industrial loans of $14.8 million, or 14.3%, to $88.4 million at June 30, 2023 from $103.2 million at June 30, 2022.
These increases were partially offset by a decrease in commercial real estate loans of $5.0 million, or 1.2%, to $406.2 million at June 30, 2024 from $411.2 million at June 30, 2023, and a decrease in consumer loans of $3.3 million, or 19.3%, to $13.5 million at June 30, 2024 from $16.8 million at June 30, 2023.
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.
Interest income on securities decreased due to a $144.2 million decrease in the average balance of securities to $382.3 million for the year ended June 30, 2024 from $526.5 million for the year ended June 30, 2023, partially offset by a 67 basis points increase in the average yield on securities to 2.55% for the year ended June 30, 2024 from 1.88% for the year ended June 30, 2023.
The 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.
The 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, ​ ​ 2024 ​ 2023 ​ ​ Average ​ ​ ​ Average ​ ​ ​ ​ ​ Outstanding ​ ​ ​ ​ Average ​ Outstanding ​ ​ ​ ​ Average ​ ​ ​ Balance ​ Interest ​ Yield/Cost ​ Balance ​ Interest ​ Yield/Cost ​ ​ ​ (Dollars in thousands) Interest-earning assets: ​ ​ ​ ​ Loans ​ $ 1,265,455 ​ $ 72,378 5.72 % $ 1,059,250 ​ $ 55,231 5.21 % Securities ​ 382,258 ​ 9,750 2.55 % 526,460 ​ 9,875 1.88 % Interest-earning deposits ​ 113,092 ​ 6,188 5.47 % 176,965 ​ 5,927 3.35 % Total interest-earning assets ​ 1,760,805 ​ 88,316 5.02 % 1,762,675 ​ 71,033 4.03 % Non-interest-earning assets ​ 146,575 ​ ​ ​ ​ 146,677 ​ ​ ​ ​ Total assets ​ $ 1,907,380 ​ ​ ​ ​ $ 1,909,352 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest-bearing liabilities: ​ ​ ​ ​ ​ Demand deposits ​ $ 167,498 ​ $ 3,153 1.88 % $ 175,227 ​ $ 968 0.55 % Savings deposits ​ 275,317 ​ 199 0.07 % 315,536 ​ 116 0.04 % Money market deposits ​ 493,187 ​ 12,968 2.63 % 450,969 ​ 2,979 0.66 % Certificates of deposit ​ 124,632 ​ 4,352 3.49 % 68,911 ​ 557 0.81 % Total interest-bearing deposits ​ 1,060,634 ​ 20,672 1.95 % 1,010,643 ​ 4,620 0.46 % Borrowings and other ​ 26,399 ​ 1,131 4.28 % 24,284 ​ 872 3.59 % Total interest-bearing liabilities ​ 1,087,033 ​ 21,803 2.01 % 1,034,927 ​ 5,492 0.53 % Non-interest-bearing deposits ​ ​ 494,916 ​ ​ ​ ​ ​ ​ ​ 584,762 ​ ​ ​ ​ ​ ​ Other non interest-bearing liabilities ​ 43,758 ​ ​ ​ ​ 38,394 ​ ​ ​ ​ Total liabilities ​ 1,625,707 ​ ​ ​ ​ 1,658,083 ​ ​ ​ ​ Total shareholders’ equity ​ 281,673 ​ ​ ​ ​ 251,269 ​ ​ ​ ​ Total liabilities and shareholders’ equity ​ $ 1,907,380 ​ ​ ​ ​ $ 1,909,352 ​ ​ ​ ​ Net interest income ​ ​ ​ ​ $ 66,513 ​ ​ ​ $ 65,541 ​ Net interest rate spread (1) ​ ​ ​ ​ ​ ​ 3.01 % ​ ​ ​ ​ 3.50 % Net interest-earning assets (2) ​ $ 673,772 ​ ​ ​ ​ $ 727,748 ​ ​ ​ ​ Net interest margin (3) ​ ​ ​ ​ ​ ​ 3.78 % ​ ​ ​ ​ 3.72 % Average interest-earning assets to interest-bearing liabilities ​ 161.98 % ​ ​ ​ 170.32 % ​ ​ ​ (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.
See Item 3 – “Legal Proceedings” and “Part II, Item 8–Financial Statements and Supplementary Data- Note 15 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities” elsewhere in this report for more information.
We continue to monitor these matters for further developments that could affect the amount of the accrued liability that has been established. See Item 3 – “Legal Proceedings” and “Part II, Item 8–Financial Statements and Supplementary Data- Note 14 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities” elsewhere in this report for more information.
The general component covers non-classified loans and is based on historical loss experience adjusted for qualitative factors. Actual loan losses may be significantly more than the allowance we have established which could have a material negative effect on our financial results. Legal Proceedings and Other Contingent Liabilities.
Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to our reported earnings. Actual loan losses may be significantly more than the allowance we have established which could have a material negative effect on our financial results. Legal Proceedings and Other Contingent Liabilities.
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.
By loan category, residential mortgage loans increased by $170.6 million, or 36.8%, to $633.8 million at June 30, 2024 from $463.2 million at June 30, 2023, commercial construction loans increased by $25.7 million, or 27.7%, to $118.4 million at June 30, 2024 from $92.7 million at June 30, 2023, commercial and industrial 69 Table of Contents loans increased by $3.9 million, or 4.0%, to $101.2 million at June 30, 2024 from $97.3 million at June 30, 2023, and home equity loans and lines of credit increased by $7.3 million, or 8.5%, to $92.8 million at June 30, 2024 from $85.5 million at June 30, 2023.
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.
Total assets of $1.90 billion at June 30, 2024 increased $39.2 million, or 2.1%, from $1.86 billion at June 30, 2023.
Salaries and employee benefits expense increased due to compensation expense from annual merit increases, hiring talent to fill open positions, as well as an enhanced annual award. Professional fees increased due to legal fees and expenses. Other expenses increased due to a tax-deductible contribution to the Pioneer Bank Charitable Foundation. Income Tax Expense.
Salaries and employee benefits expense increased due to compensation expense from annual merit increases, hiring talent to fill open positions, as well as the acquisition of Hudson Financial LLC. Income Tax Expense.
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.
The allowance for credit losses on loans was $21.8 million at June 30, 2024 compared to $22.5 million at June 30, 2023, representing 1.60% and 1.94% of total loans outstanding, respectively.
The increase in the current year was also due to an increase in salaries and employee benefits expense of $1.6 million, an increase in professional fees of $1.2 million, and an increase in other expenses of $585,000.
The increase in noninterest expense for the year ended June 30, 2024 was primarily due to an increase in professional fees of $6.3 million, as well as an increase in salaries and employee benefits expense of $1.8 million. Professional fees increased due to legal fees and expenses.
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.
Professional fees include legal and other consulting expenses. 60 Table of Contents Litigation-related expense includes expenses related to legal proceedings, exclusive of legal fees and expenses. Other general and administrative expenses include expenses for office supplies, postage, telephone, insurance and other miscellaneous operating expenses. Income Tax Expense.
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.
By deposit category, demand accounts increased by $19.2 million, or 13.8%, to $158.0 million at June 30, 2024 from $138.8 million at June 30, 2023, money market accounts increased by $50.7 million, or 11.0%, to $513.6 million at June 30, 2024 from $462.9 million at June 30, 2023, and certificate of deposits increased by $50.0 million, or 42.8%, to $167.0 million at June 30, 2024 from $117.0 million at June 30, 2023, offset in part by a decrease in non-interest-bearing demand accounts of $80.8 million, or 15.4%, to $445.3 million at June 30, 2024 from $526.1 million at June 30, 2023, and a decrease in savings accounts of $30.7 million, or 10.3%, to $266.3 million at June 30, 2024 from $297.0 at June 30, 2023.
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.
The increase was due primarily to an increase of $199.9 million, or 17.5%, in net loans receivable, an increase of $14.7 million, or 9.8%, in cash and cash equivalents and an increase of $1.1 million, or 4.8%, in securities held to maturity, offset in part by a decrease of $174.3 million, or 40.4%, in securities available for sale.
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.
The decrease in the average balance of securities was due to the sales of U.S. government and agency securities, and maturities of U.S. government and agency and municipal obligation securities, outpacing purchases during the year ended June 30, 2024, in conjunction with an asset allocation shift, using investment securities’ cash flow to fund higher yielding assets.
Overly optimistic assumptions or negative changes to assumptions could significantly affect the valuation of a property securing a loan and the related allowance determined.
Assumptions are instrumental in determining the value of properties. 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 carefully reviews the assumptions supporting such appraisals to determine that the resulting values reasonably reflect amounts realizable on the related loans.
(2) Represents net interest income as a percentage of average interest-earning assets. (3) Represents non-interest expenses divided by the sum of net interest income and non-interest income.
(2) Represents net interest income as a percentage of average interest-earning assets. (3) Represents non-interest expenses divided by the sum of net interest income and non-interest income. (4) Capital ratios are for the Bank. ​ 62 Table of Contents Recent Developments Pioneer Commercial Bank Merger Pioneer Commercial Bank is a New York-chartered limited-purpose commercial bank wholly owned by the Bank.
The increase in average yield on loans was primarily due to loans tied to variable short-term rates which increased significantly during the year ended June 30, 2023 as compared to the prior year, offset in part by a $1.7 million decrease in Paycheck Protection Program (“PPP”) loan related interest income for the year ended June 30, 2023 as compared to the year ended June 30, 2022.
The increase in average yield on loans was primarily due to loans tied 70 Table of Contents to variable short-term rates which increased during the year ended June 30, 2024 as well as due to market related increases in interest rates on new loans.

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