Pioneer Bancorp, Inc. Reports Third Quarter Fiscal 2023 Net Income of $6 Million
May 05, 2023
Pioneer Bancorp, Inc. (“Pioneer”) (NASDAQ: PBFS), the parent company of Pioneer Bank (the “Bank”) today reported the results for the three and nine months ended March 31, 2023, which is the third quarter of Pioneer’s fiscal year ending June 30, 2023.
Third Fiscal Quarter of 2023 Highlights
Net income for the three and nine months ended March 31, 2023 was $6.0 million, or $0.24 per basic and diluted share, and $17.4 million, or $0.69 per basic and diluted share, respectively, as compared to $302,000, or $0.01 per basic and diluted share and $7.9 million, or $0.31 per basic and diluted share for the three and nine months ended March 31, 2022, respectively.
Total consolidated assets were $1.86 billion at March 31, 2023, primarily consisting of $1.09 billion of net loans, $504.2 million of securities available for sale and $145.1 million of cash and cash equivalents. Consolidated deposits totaled $1.56 billion at March 31, 2023, and the deposit base was well diversified across customer segments, consisting of approximately 46.8% retail, 22.4% commercial and 30.8% municipal customer relationships. Estimated uninsured deposits, net of collateralized deposits, represented 14.7% of total deposits at March 31, 2023. Total shareholders’ equity was $259.9 million at March 31, 2023. The Bank has consistently maintained regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 (leverage) capital to average assets ratio of 10.82% and 9.61% at March 31, 2023 and 2022, respectively.
At March 31, 2023, Pioneer’s total available liquidity sources were $579.2 million, including $145.1 million of cash and cash equivalents, $101.3 million of unencumbered securities available for sale, $312.8 million of available borrowing capacity at the Federal Home Loan Bank, and a $20 million unsecured line of credit with a correspondent bank, as well as the ability to borrow from the Federal Reserve Bank through the Bank Term Funding Program and the discount window lending program.
Selected highlights at and for the three and nine months ended March 31, 2023 are as follows:
Net Interest Income and Margin
Net interest income increased $7.6 million, or 76.8%, to $17.5 million for the three months ended March 31, 2023 compared to $9.9 million for the three months ended March 31, 2022. Net interest income increased $18.7 million, or 61.0%, to $49.3 million for the nine months ended March 31, 2023 compared to $30.6 million for the nine months ended March 31, 2022. The increase in net interest income was primarily due to increases in the average interest yield of interest-earning assets of 209 and 145 basis points to 4.45% and 3.89% for the three and nine months ended March 31, 2023, respectively, compared to 2.36% and 2.44% for the three and nine months ended March 31, 2022, respectively.
Interest income increased $8.6 million, or 83.3%, to $18.8 million for the three months ended March 31, 2023, from $10.2 million for the three months ended March 31, 2022. Interest income increased $20.2 million, or 63.8%, to $51.9 million for the nine months ended March 31, 2023, from $31.7 million for the nine months ended March 31, 2022. Increases in interest income for the three and nine months ended March 31, 2023 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 $924,000, or 272.6%, to $1.3 million for the three months ended March 31, 2023 from $339,000 for the three months ended March 31, 2022. Interest expense increased $1.5 million, or 143.1%, to $2.6 million for the nine months ended March 31, 2023 from $1.1 million for the nine months ended March 31, 2022. The average cost of interest-bearing liabilities increased by 38 and 20 basis points to 0.51% and 0.34% for the three and nine months ended March 31, 2023, respectively, compared to 0.13% and 0.14% for the three and nine months ended March 31, 2022, respectively. The average cost of interest-bearing liabilities increased for the three and nine months ended March 31, 2023, as the Federal Reserve Board raised the Federal Funds target rate throughout calendar year 2022 and into calendar year 2023. We continue to monitor the effects the increases in market rates are having on deposit rates and we anticipate the impact will lead to a continued increase in rates on interest-bearing liabilities and may result in pressure on net interest margin during Pioneer’s fourth fiscal quarter of 2023 (quarter ended June 30, 2023).
Net interest margin increased 186 and 133 basis points to 4.14% and 3.69% for the three and nine months ended March 31, 2023, respectively, compared to 2.28% and 2.36% for the three and nine months ended March 31, 2022, respectively.
Asset Quality and Loan Loss Provision
We recorded no provision and a benefit to the provision for loan losses of $280,000 for the three and nine months ended March 31, 2023, respectively, compared to no provision and $250,000 in provision recorded for the three and nine months ended March 31, 2022, respectively. The benefit recorded to the provision for the nine months ended March 31, 2023 was primarily due to improved credit quality and lower net charge-offs.
We recorded net recoveries of $22,000 for the three months ended March 31, 2023, compared to net charge-offs of $63,000 for the three months ended March 31, 2022 and net charge-offs of $30,000 for the nine months ended March 31, 2023, compared to net charge-offs of $934,000 for the nine months ended March 31, 2022.
Non-performing assets decreased to $10.1 million, or 0.54% of total assets, at March 31, 2023, compared to $16.1 million, or 0.82% of total assets, at March 31, 2022. The allowance for loan losses was $22.2 million, or 2.00% of total loans outstanding, at March 31, 2023 and $22.6 million, or 2.29% of total net loans outstanding, at March 31, 2022.
Noninterest Income and Noninterest Expense
Noninterest income of $3.3 million for the three months ended March 31, 2023, decreased $363,000, or 10.0%, as compared to $3.6 million for the three months ended March 31, 2022. The decrease was primarily due to a net gain on disposal of assets of $213,000 related to the sale of other real estate owned for the three months ended March 31, 2022. Noninterest income of $11.0 million for the nine months ended March 31, 2023, increased $239,000, or 2.2%, as compared to $10.8 million for the nine months ended March 31, 2022. The increase was primarily due to an increase in other income of $558,000 and an increase in insurance and wealth management services income of $276,000, offset in part by a decrease in bank fees and service charges of $339,000 and a decrease in net gain on disposal of assets of $275,000 related to the sale of other real estate owned for the nine months ended March 31, 2022. The increase in other income was primarily due to bank-owned life insurance income as a result of a death benefit. The increase in insurance and wealth management services income was due to the recent wealth management acquisitions. The decrease in bank fees and service charges was due to lower deposit service charges.
Noninterest expense was consistent at $13.1 million for the three months ended March 31, 2023 and for the three months ended March 31, 2022. Noninterest expense of $38.5 million for the nine months ended March 31, 2023 increased $7.6 million, or 24.7%, as compared to $30.9 million for the nine months ended March 31, 2022. The increase in non-interest expense was primarily due to recognition in the prior-year period of a non-recurring Employee Retention Credit (“ERC”) benefit of $5.0 million which reduced non-interest expense, offset in part by the recognition, also in the prior-year period, of litigation-related expense of $1.2 million. The ERC, which is a refundable tax credit against certain employment taxes, is one of the numerous tax provisions and other stimulus measures included in the CARES Act, as amended, providing financial assistance to businesses in response to the COVID-19 pandemic. The litigation-related expense includes expenses related to legal proceedings, exclusive of legal fees and expenses. The increase was also due to an increase in salaries and employee benefits expense of $1.9 million, an increase in professional fees of $678,000, and an increase in other expenses of $447,000.
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 Taxes
Income tax expense increased $1.5 million to $1.6 million for the three months ended March 31, 2023 as compared to $154,000 for the three months ended March 31, 2022 primarily due to an increase in income before income taxes. Our effective tax rate was 21.4% for the three months ended March 31, 2023 compared to 33.8% for the three months ended March 31, 2022. Income tax expense increased $2.3 million to $4.7 million for the nine months ended March 31, 2023 from $2.4 million for the nine months ended March 31, 2022, due to an increase in income before income taxes. Our effective tax rate was 21.2% for the nine months ended March 31, 2023 compared to 23.1% for the nine months ended March 31, 2022. The decrease in our effective tax rate was primarily due to the increase in tax-exempt income for the three and nine months ended March 31, 2023 as compared to the prior-year periods.
Balance Sheet Summary
Total assets of $1.86 billion at March 31, 2023 decreased $99.9 million, or 5.1%, from $1.96 billion at June 30, 2022. The decrease was due primarily to a decrease of $231.0 million, or 61.4%, in cash and cash equivalents, offset in part by an increase of $103.7 million, or 10.5%, in net loans receivable and an increase of $22.4 million, or 4.6% in securities available for sale.
Net loans of $1.09 billion at March 31, 2023 increased $103.7 million, or 10.5%, from $982.6 million at June 30, 2022. By loan category, residential mortgage loans increased by $125.7 million, or 46.5%, to $396.0 million at March 31, 2023 from $270.3 million at June 30, 2022, commercial construction loans increased by $15.2 million, or 21.4%, to $86.3 million at March 31, 2023 from $71.1 million at June 30, 2022, and home equity loans and lines of credit increased by $4.2 million, or 5.1%, to $85.4 million at March 31, 2023 from $81.2 million at June 30, 2022. These increases were partially offset by a decrease in commercial real estate loans of $21.9 million, or 4.8%, to $431.6 million at March 31, 2023 from $453.5 million at June 30, 2022, a decrease in commercial and industrial loans of $19.6 million, or 19.0%, to $83.6 million at March 31, 2023 from $103.2 million at June 30, 2022, and a decrease in consumer loans of $2.6 million, or 11.7%, to $19.7 million at March 31, 2023 from $22.3 million at June 30, 2022.
Securities available for sale of $504.2 million at March 31, 2023 increased $22.4 million, or 4.6%, from $481.8 million at June 30, 2022. The increase was primarily due to purchases of U.S Government and agency obligations and municipal obligations of $127.9 million, offset in part by, maturities of $104.4 million and an increase in net unrealized losses of $819,000 during the nine months ended March 31, 2023.
Deposits of $1.56 billion at March 31, 2023 decreased $115.7 million, or 6.9%, from $1.68 billion at June 30, 2022. The decrease in deposits was related to a decrease in money market accounts of $38.2 million, or 7.7%, to $459.0 million at March 31, 2023 from $497.2 million at June 30, 2022, a decrease in demand accounts of $25.7 million, or 14.0%, to $157.2 million at March 31, 2023 from $182.8 million at June 30, 2022, a decrease in non-interest bearing demand accounts of $22.0 million, or 3.7%, to $571.5 million at March 31, 2023 from $593.5 million at June 30, 2022, a decrease in savings accounts of $16.7 million, or 5.1%, to $309.6 million at March 31, 2023 from $326.3 million at June 30, 2022 and a decrease in certificates of deposit of $13.3 million, or 16.6%, to $67.3 million at March 31, 2023 from $80.6 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 of $259.9 million at March 31, 2023 increased $17.3 million, or 7.1%, from $242.6 million at June 30, 2022 primarily as a result of net income of $17.4 million for the nine month period ended March 31, 2023.
Third Fiscal Quarter of 2023 Highlights
- Net income increased $5.7 million to $6.0 million for the three months ended March 31, 2023 from the three months ended March 31, 2022.
- Net interest margin increased 186 basis points to 4.14% for the three months ended March 31, 2023 from the three months ended March 31, 2022.
- Net interest income increased $7.6 million, or 76.8%, to $17.5 million for the three months ended March 31, 2023 from the three months ended March 31, 2022.
- Net loans receivable increased $103.7 million, or 10.5%, to $1.09 billion at March 31, 2023 from $982.6 million at June 30, 2022.
- Return on average assets was 1.29% and 1.20% for the three and nine months ended March 31, 2023, respectively.
- Return on average equity was 9.65% and 9.38% for the three and nine months ended March 31, 2023, respectively.
Net income for the three and nine months ended March 31, 2023 was $6.0 million, or $0.24 per basic and diluted share, and $17.4 million, or $0.69 per basic and diluted share, respectively, as compared to $302,000, or $0.01 per basic and diluted share and $7.9 million, or $0.31 per basic and diluted share for the three and nine months ended March 31, 2022, respectively.
Total consolidated assets were $1.86 billion at March 31, 2023, primarily consisting of $1.09 billion of net loans, $504.2 million of securities available for sale and $145.1 million of cash and cash equivalents. Consolidated deposits totaled $1.56 billion at March 31, 2023, and the deposit base was well diversified across customer segments, consisting of approximately 46.8% retail, 22.4% commercial and 30.8% municipal customer relationships. Estimated uninsured deposits, net of collateralized deposits, represented 14.7% of total deposits at March 31, 2023. Total shareholders’ equity was $259.9 million at March 31, 2023. The Bank has consistently maintained regulatory capital ratios measurably above the Federal “well capitalized” standard, including a Tier 1 (leverage) capital to average assets ratio of 10.82% and 9.61% at March 31, 2023 and 2022, respectively.
At March 31, 2023, Pioneer’s total available liquidity sources were $579.2 million, including $145.1 million of cash and cash equivalents, $101.3 million of unencumbered securities available for sale, $312.8 million of available borrowing capacity at the Federal Home Loan Bank, and a $20 million unsecured line of credit with a correspondent bank, as well as the ability to borrow from the Federal Reserve Bank through the Bank Term Funding Program and the discount window lending program.
Selected highlights at and for the three and nine months ended March 31, 2023 are as follows:
Net Interest Income and Margin
Net interest income increased $7.6 million, or 76.8%, to $17.5 million for the three months ended March 31, 2023 compared to $9.9 million for the three months ended March 31, 2022. Net interest income increased $18.7 million, or 61.0%, to $49.3 million for the nine months ended March 31, 2023 compared to $30.6 million for the nine months ended March 31, 2022. The increase in net interest income was primarily due to increases in the average interest yield of interest-earning assets of 209 and 145 basis points to 4.45% and 3.89% for the three and nine months ended March 31, 2023, respectively, compared to 2.36% and 2.44% for the three and nine months ended March 31, 2022, respectively.
Interest income increased $8.6 million, or 83.3%, to $18.8 million for the three months ended March 31, 2023, from $10.2 million for the three months ended March 31, 2022. Interest income increased $20.2 million, or 63.8%, to $51.9 million for the nine months ended March 31, 2023, from $31.7 million for the nine months ended March 31, 2022. Increases in interest income for the three and nine months ended March 31, 2023 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 $924,000, or 272.6%, to $1.3 million for the three months ended March 31, 2023 from $339,000 for the three months ended March 31, 2022. Interest expense increased $1.5 million, or 143.1%, to $2.6 million for the nine months ended March 31, 2023 from $1.1 million for the nine months ended March 31, 2022. The average cost of interest-bearing liabilities increased by 38 and 20 basis points to 0.51% and 0.34% for the three and nine months ended March 31, 2023, respectively, compared to 0.13% and 0.14% for the three and nine months ended March 31, 2022, respectively. The average cost of interest-bearing liabilities increased for the three and nine months ended March 31, 2023, as the Federal Reserve Board raised the Federal Funds target rate throughout calendar year 2022 and into calendar year 2023. We continue to monitor the effects the increases in market rates are having on deposit rates and we anticipate the impact will lead to a continued increase in rates on interest-bearing liabilities and may result in pressure on net interest margin during Pioneer’s fourth fiscal quarter of 2023 (quarter ended June 30, 2023).
Net interest margin increased 186 and 133 basis points to 4.14% and 3.69% for the three and nine months ended March 31, 2023, respectively, compared to 2.28% and 2.36% for the three and nine months ended March 31, 2022, respectively.
Asset Quality and Loan Loss Provision
We recorded no provision and a benefit to the provision for loan losses of $280,000 for the three and nine months ended March 31, 2023, respectively, compared to no provision and $250,000 in provision recorded for the three and nine months ended March 31, 2022, respectively. The benefit recorded to the provision for the nine months ended March 31, 2023 was primarily due to improved credit quality and lower net charge-offs.
We recorded net recoveries of $22,000 for the three months ended March 31, 2023, compared to net charge-offs of $63,000 for the three months ended March 31, 2022 and net charge-offs of $30,000 for the nine months ended March 31, 2023, compared to net charge-offs of $934,000 for the nine months ended March 31, 2022.
Non-performing assets decreased to $10.1 million, or 0.54% of total assets, at March 31, 2023, compared to $16.1 million, or 0.82% of total assets, at March 31, 2022. The allowance for loan losses was $22.2 million, or 2.00% of total loans outstanding, at March 31, 2023 and $22.6 million, or 2.29% of total net loans outstanding, at March 31, 2022.
Noninterest Income and Noninterest Expense
Noninterest income of $3.3 million for the three months ended March 31, 2023, decreased $363,000, or 10.0%, as compared to $3.6 million for the three months ended March 31, 2022. The decrease was primarily due to a net gain on disposal of assets of $213,000 related to the sale of other real estate owned for the three months ended March 31, 2022. Noninterest income of $11.0 million for the nine months ended March 31, 2023, increased $239,000, or 2.2%, as compared to $10.8 million for the nine months ended March 31, 2022. The increase was primarily due to an increase in other income of $558,000 and an increase in insurance and wealth management services income of $276,000, offset in part by a decrease in bank fees and service charges of $339,000 and a decrease in net gain on disposal of assets of $275,000 related to the sale of other real estate owned for the nine months ended March 31, 2022. The increase in other income was primarily due to bank-owned life insurance income as a result of a death benefit. The increase in insurance and wealth management services income was due to the recent wealth management acquisitions. The decrease in bank fees and service charges was due to lower deposit service charges.
Noninterest expense was consistent at $13.1 million for the three months ended March 31, 2023 and for the three months ended March 31, 2022. Noninterest expense of $38.5 million for the nine months ended March 31, 2023 increased $7.6 million, or 24.7%, as compared to $30.9 million for the nine months ended March 31, 2022. The increase in non-interest expense was primarily due to recognition in the prior-year period of a non-recurring Employee Retention Credit (“ERC”) benefit of $5.0 million which reduced non-interest expense, offset in part by the recognition, also in the prior-year period, of litigation-related expense of $1.2 million. The ERC, which is a refundable tax credit against certain employment taxes, is one of the numerous tax provisions and other stimulus measures included in the CARES Act, as amended, providing financial assistance to businesses in response to the COVID-19 pandemic. The litigation-related expense includes expenses related to legal proceedings, exclusive of legal fees and expenses. The increase was also due to an increase in salaries and employee benefits expense of $1.9 million, an increase in professional fees of $678,000, and an increase in other expenses of $447,000.
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 Taxes
Income tax expense increased $1.5 million to $1.6 million for the three months ended March 31, 2023 as compared to $154,000 for the three months ended March 31, 2022 primarily due to an increase in income before income taxes. Our effective tax rate was 21.4% for the three months ended March 31, 2023 compared to 33.8% for the three months ended March 31, 2022. Income tax expense increased $2.3 million to $4.7 million for the nine months ended March 31, 2023 from $2.4 million for the nine months ended March 31, 2022, due to an increase in income before income taxes. Our effective tax rate was 21.2% for the nine months ended March 31, 2023 compared to 23.1% for the nine months ended March 31, 2022. The decrease in our effective tax rate was primarily due to the increase in tax-exempt income for the three and nine months ended March 31, 2023 as compared to the prior-year periods.
Balance Sheet Summary
Total assets of $1.86 billion at March 31, 2023 decreased $99.9 million, or 5.1%, from $1.96 billion at June 30, 2022. The decrease was due primarily to a decrease of $231.0 million, or 61.4%, in cash and cash equivalents, offset in part by an increase of $103.7 million, or 10.5%, in net loans receivable and an increase of $22.4 million, or 4.6% in securities available for sale.
Net loans of $1.09 billion at March 31, 2023 increased $103.7 million, or 10.5%, from $982.6 million at June 30, 2022. By loan category, residential mortgage loans increased by $125.7 million, or 46.5%, to $396.0 million at March 31, 2023 from $270.3 million at June 30, 2022, commercial construction loans increased by $15.2 million, or 21.4%, to $86.3 million at March 31, 2023 from $71.1 million at June 30, 2022, and home equity loans and lines of credit increased by $4.2 million, or 5.1%, to $85.4 million at March 31, 2023 from $81.2 million at June 30, 2022. These increases were partially offset by a decrease in commercial real estate loans of $21.9 million, or 4.8%, to $431.6 million at March 31, 2023 from $453.5 million at June 30, 2022, a decrease in commercial and industrial loans of $19.6 million, or 19.0%, to $83.6 million at March 31, 2023 from $103.2 million at June 30, 2022, and a decrease in consumer loans of $2.6 million, or 11.7%, to $19.7 million at March 31, 2023 from $22.3 million at June 30, 2022.
Securities available for sale of $504.2 million at March 31, 2023 increased $22.4 million, or 4.6%, from $481.8 million at June 30, 2022. The increase was primarily due to purchases of U.S Government and agency obligations and municipal obligations of $127.9 million, offset in part by, maturities of $104.4 million and an increase in net unrealized losses of $819,000 during the nine months ended March 31, 2023.
Deposits of $1.56 billion at March 31, 2023 decreased $115.7 million, or 6.9%, from $1.68 billion at June 30, 2022. The decrease in deposits was related to a decrease in money market accounts of $38.2 million, or 7.7%, to $459.0 million at March 31, 2023 from $497.2 million at June 30, 2022, a decrease in demand accounts of $25.7 million, or 14.0%, to $157.2 million at March 31, 2023 from $182.8 million at June 30, 2022, a decrease in non-interest bearing demand accounts of $22.0 million, or 3.7%, to $571.5 million at March 31, 2023 from $593.5 million at June 30, 2022, a decrease in savings accounts of $16.7 million, or 5.1%, to $309.6 million at March 31, 2023 from $326.3 million at June 30, 2022 and a decrease in certificates of deposit of $13.3 million, or 16.6%, to $67.3 million at March 31, 2023 from $80.6 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 of $259.9 million at March 31, 2023 increased $17.3 million, or 7.1%, from $242.6 million at June 30, 2022 primarily as a result of net income of $17.4 million for the nine month period ended March 31, 2023.
Contact:
Patrick Hughes, Executive VP & CFO
InvestorRelations@pioneerny.com, 518-730-3025
