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Pioneer Bancorp, Inc. Reports Second Quarter Fiscal 2023 Net Income of $6.2 Million

Albany, N.Y. – January 30, 2023 – Pioneer Bancorp, Inc. (“Pioneer”) (NASDAQ: PBFS), the parent company of Pioneer Bank (the “Bank”) today reported the results for the three and six months ended December 31, 2022, which is the second quarter of Pioneer’s fiscal year ending June 30, 2023. Net income for the three and six months ended December 31, 2022 was $6.2 million, or $0.25 per basic and diluted share, and $11.4 million, or $0.45 per basic and diluted share, respectively, as compared to $6.3 million, or $0.25 per basic and diluted share and $7.6 million, or $0.30 per basic and diluted share for the three and six months ended December 31, 2021, respectively.

Total consolidated assets for Pioneer were $1.83 billion at December 31, 2022, primarily consisting of $1.05 billion of net loans, $507.6 million of securities available for sale and $147.3 million of cash and cash equivalents. Consolidated deposits totaled $1.54 billion at December 31, 2022, consisting of retail, commercial and municipal customer relationships.

Second Fiscal Quarter of 2023 (Quarter Ended December 31, 2022) and Year-to-Date Highlights

·       Net income for the three and six months ended December 31, 2022 was $6.2 million, or $0.25 per basic and diluted share and $11.4 million, or $0.45 per basic and diluted share, respectively.

·       Net interest margin increased 144 basis points to 3.85% for the three months ended December 31, 2022 from the three months ended December 31, 2021.

·       Net interest income increased $6.6 million, or 63.3%, to $17.1 million for the three months ended December 31, 2022 from the three months ended December 31, 2021.

·       Net loans receivable increased $65.5 million, or 6.7%, to $1.05 billion at December 31, 2022 from $982.6 million at June 30, 2022.

Thomas Amell, President and CEO stated, “Second quarter results were solid, reflecting strong growth in net interest income and continued net interest margin expansion supported by rising interest rates and growth in our interest-earning assets. Pioneer’s levels of liquidity and capital at December 31, 2022, position us well to continue to pursue growth in our loan portfolio and to take advantage of new business opportunities as they arise.”

Selected highlights at and for the three and six months ended December 31, 2022 are as follows:

Net Interest Income and Margin

Net interest income increased $6.6 million, or 63.3%, to $17.1 million for the three months ended December 31, 2022 compared to $10.5 million for the three months ended December 31, 2021. Net interest income increased $11.1 million, or 53.5%, to $31.8 million for the six months ended December 31, 2022 compared to $20.7 million for the six months ended December 31, 2021. The increase in net interest income was primarily due to increases in the average interest rate of interest-earning assets of 154 and 117 basis points to 4.04% and 3.67% for the three and six months ended December 31, 2022, respectively, compared to 2.50% for the three and six months ended December 31, 2021, respectively. Additionally, average net interest-earning assets increased by $70.7 million and $79.9 million to $755.3 million and $750.6 million for the three and six months ended December 31, 2022, respectively, compared to $684.6 million and $670.7 million for the three and six months ended December 31, 2021, respectively.

Interest income increased $7.1 million, or 65.7%, to $18.0 million for the three months ended December 31, 2022, from $10.9 million for the three months ended December 31, 2021. Interest income increased $11.7 million, or 54.5%, to $33.2 million for the six months ended December 31, 2022, from $21.5 million for the six months ended December 31, 2021. Increases in interest income for the three and six months ended December 31, 2022 were 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.

Interest expense increased $484,000, or 134.4%, to $844,000 for the three months ended December 31, 2022 from $360,000 for the three months ended December 31, 2021. Interest expense increased $621,000, or 83.8%, to $1.4 million for the six months ended December 31, 2022 from $741,000 for the six months ended December 31, 2021. The average cost of interest-bearing liabilities increased by 18 and 12 basis points to 0.32% and 0.26% for the three and six months ended December 31, 2022, respectively, compared to 0.14% for the three and six months ended December 31, 2021, respectively. The average cost of interest-bearing liabilities increased for the three and six months ended December 31, 2022, as the Federal Reserve Board raised the Federal Funds target rate throughout calendar year 2022. We continue to monitor the effects the increases in market rates are having on deposit rates and we anticipate the impact will lead to an increase in rates on interest-bearing liabilities.

Net interest margin increased 144 and 111 basis points to 3.85% and 3.52% for the three and six months ended December 31, 2022, respectively, compared to 2.41% for the three and six months ended December 31, 2021, respectively.

Asset Quality and Loan Loss Provision

We recorded a benefit to the provision for loan losses of $400,000 and $280,000 for the three and six months ended December 31, 2022, respectively, compared to no provision and $250,000 in provision recorded for the three and six months ended December 31, 2021, respectively. The benefit recorded to the provision for the three and six months ended December 31, 2022 was primarily due to improved credit quality and lower net charge-offs.

We recorded net recoveries of $22,000 for the three months ended December 31, 2022, compared to net charge-offs of $433,000 for the three months ended December 31, 2021 and net charge-offs of $52,000 for the six months ended December 31, 2022, compared to net charge-offs of $871,000 for the six months ended December 31, 2021.

Non-performing assets increased to $18.5 million, or 1.01% of total assets, at December 31, 2022, compared to $15.1 million, or 0.82% of total assets, at December 31, 2021. The allowance for loan losses was $22.2 million, or 2.07% of total loans outstanding, at December 31, 2022 and $22.6 million, or 2.23% of total net loans outstanding, at December 31, 2021.

Noninterest Income and Noninterest Expense

Noninterest income was consistent at $3.9 million for the three months ended December 31, 2022 and for the three months ended December 31, 2021. Noninterest income increased $603,000, or 8.4%, to $7.8 million for the six months ended December 31, 2022 as compared to $7.1 million for the six months ended December 31, 2021. The increase for the six months ended December 31, 2022 compared to the six months ended December 31, 2021 was primarily due to an increase in bank-owned life insurance income of $411,000 and an increase in insurance and wealth management services revenue of $359,000, offset in part by a decrease in bank fees and service charges of $221,000. The increase in bank-owned life insurance income was due to a gain recognized from a death benefit. The increase in insurance and wealth management services revenue was primarily due to the recent wealth management acquisitions. The decrease in bank fees and service charges was primarily due to lower deposit service charges.

Noninterest expense increased $7.1 million, or 111.7%, to $13.5 million for the three months ended December 31, 2022 as compared to $6.4 million for the three months ended December 31, 2021. Noninterest expense increased $7.6 million, or 42.6%, to $25.4 million for the six months ended December 31, 2022 as compared to $17.8 million for the six months ended December 31, 2021. The increase in noninterest expense was primarily due to the recognition of a non-recurring employee retention credit benefit of $5.0 million for the three and six months ended December 31, 2021. The employee retention credit, which is a refundable tax credit against certain employment taxes, is one of the numerous tax provisions and other stimulus measures included in the Coronavirus Aid, Relief, and Economic Security Act, as amended, providing financial assistance to businesses in response to the COVID-19 pandemic. The increase was also due to increases in salaries and employee benefits due to compensation expense from annual merit increases, hiring talent to fill open positions, as well as an enhanced annual incentive award; an increase in professional fees due to legal fees and expenses; and an increase in other expenses due to a tax-deductible contribution to the Pioneer Bank Charitable Foundation.

Income Taxes

Income tax expense was consistent at $1.8 million for the three months ended December 31, 2022 and for the three months ended December 31, 2021. Our effective tax rate was 22.5% for the three months ended December 31, 2022 compared to 22.4% for the three months ended December 31, 2021. Income tax expense increased $830,000 to $3.0 million for the six months ended December 31, 2022 from $2.2 million for the six months ended December 31, 2021, due to an increase in income before income taxes. Our effective tax rate was 21.1% for the six months ended December 31, 2022 compared to 22.6% for the six months ended December 31, 2021. The decrease in our effective tax rate was primarily due to the increase in tax-exempt income for the six months ended December 31, 2022 as compared to the prior year period.

Balance Sheet Summary

Total assets decreased $129.7 million, or 6.6%, to $1.83 billion at December 31, 2022 from $1.96 billion at June 30, 2022. The decrease was due primarily to a decrease of $228.7 million, or 60.8%, in cash and cash equivalents, offset in part by an increase of $65.5 million, or 6.7%, in net loans receivable and an increase of $25.8 million, or 5.4% in securities available for sale.

Net loans of $1.05 billion at December 31, 2022 increased $65.5 million, or 6.7%, from $982.6 million at June 30, 2022. By loan category, residential mortgage loans increased by $82.4 million, or 30.5%, to $352.7 million at December 31, 2022 from $270.3 million at June 30, 2022, commercial construction loans increased by $12.9 million, or 18.1%, to $84.0 million at December 31, 2022 from $71.1 million at June 30, 2022, and home equity loans and lines of credit increased by $5.6 million, or 6.8%, to $86.8 million at December 31, 2022 from $81.2 million at June 30, 2022. These increases were partially offset by a decrease in commercial real estate loans of $30.9 million, or 6.8%, to $422.6 million at December 31, 2022 from $453.5 million at June 30, 2022, a decrease in consumer loans of $3.6 million, or 16.2%, to $18.7 million at December 31, 2022 from $22.3 million at June 30, 2022, and a decrease in commercial and industrial loans of $2.6 million, or 2.5%, to $100.6 million at December 31, 2022 from $103.2 million at June 30, 2022.

Securities available for sale increased $25.8 million, or 5.4%, to $507.6 million at December 31, 2022 from $481.8 million at June 30, 2022. The increase was primarily due to purchases of U.S Government and agency obligations during the six months ended December 31, 2022.

Deposits decreased $141.9 million, or 8.4%, to $1.54 billion at December 31, 2022 from $1.68 billion at June 30, 2022. The decrease in deposits was primarily related to a decrease in money market accounts of $79.8 million, or 16.0%, to $417.4 million at December 31, 2022 from $497.2 million at June 30, 2022, a decrease in demand accounts of $24.1 million, or 13.2%, to $158.7 million at December 31, 2022 from $182.8 million at June 30, 2022, a decrease in certificates of deposit of $16.6 million, or 20.6%, to $64.0 million at December 31, 2022 from $80.6 million at June 30, 2022, a decrease in non-interest bearing demand accounts of $13.8 million, or 2.3%, to $579.7 million at December 31, 2022 from $593.5 million at June 30, 2022 and a decrease in savings accounts of $7.7 million, or 2.4%, to $318.6 million at December 31, 2022 from $326.3 million at June 30, 2022. The decrease in deposits was primarily concentrated in certain larger and more rate-sensitive accounts.  The effects of the Federal Reserve Board’s rapidly tightening monetary policy, inflation, and higher rate alternatives continued to have an impact on deposit balances.

Shareholders’ equity increased $7.1 million, or 2.9%, to $249.7 million at December 31, 2022 from $242.6 million at June 30, 2022 primarily as a result of net income of $11.4 million for the six month period ended December 31, 2022, partially offset by an increase in unrealized holding losses on securities available for sale of $4.6 million due to the increase in market interest rates.