Pioneer Bancorp(PBFS) - 2022 Q2 - Quarterly Report

PART I - FINANCIAL INFORMATION Item 1 – Consolidated Financial Statements (Unaudited) Pioneer Bancorp's unaudited consolidated financial statements for December 31, 2021, reflect $1.84 billion in total assets, increased net income, and a strong financial position Consolidated Statements of Condition This section presents the company's consolidated balance sheet, detailing assets, liabilities, and shareholders' equity at period-end Consolidated Balance Sheet Highlights (in thousands) | Account | December 31, 2021 | June 30, 2021 | | :--- | :--- | :--- | | Total Assets | $1,843,188 | $1,796,252 | | Cash and cash equivalents | $349,142 | $324,963 | | Securities available for sale | $365,638 | $264,602 | | Net loans receivable | $993,675 | $1,081,799 | | Total Liabilities | $1,599,178 | $1,558,430 | | Total deposits | $1,578,915 | $1,530,896 | | Total Shareholders' Equity | $244,010 | $237,822 | - Total assets increased by $46.9 million, or 2.6%, primarily due to a $101.0 million increase in securities available for sale, partially offset by an $88.1 million decrease in net loans[6][206] Consolidated Statements of Operations This section outlines the company's consolidated income statement, detailing net interest income, noninterest items, and net income Quarterly and Six-Month Operating Results (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $10,491 | $10,679 | $20,727 | $21,030 | | Provision for Loan Losses | $0 | $1,550 | $250 | $2,300 | | Noninterest Income | $3,949 | $4,723 | $7,148 | $8,250 | | Noninterest Expense | $6,379 | $11,403 | $17,793 | $22,834 | | Net Income | $6,257 | $1,895 | $7,614 | $3,289 | | Diluted EPS | $0.25 | $0.08 | $0.30 | $0.13 | - A significant driver for the increase in net income was the recognition of a $5.0 million Employee Retention Credit, recorded as a reduction in noninterest expense[7][38] Consolidated Statements of Comprehensive Income This section presents the company's comprehensive income, including net income and other comprehensive loss components Comprehensive Income (in thousands) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Six Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2020 | | :--- | :--- | :--- | :--- | :--- | | Net Income | $6,257 | $1,895 | $7,614 | $3,289 | | Total other comprehensive loss | $(1,551) | $(14) | $(1,738) | $(86) | | Comprehensive Income | $4,706 | $1,881 | $5,876 | $3,203 | - Other comprehensive loss for the three and six months ended December 31, 2021, was primarily driven by unrealized holding losses on securities[8] Consolidated Statements of Changes in Shareholders' Equity This section details changes in shareholders' equity, reflecting net income, comprehensive loss, and other adjustments - Total shareholders' equity increased from $237.8 million at July 1, 2021, to $244.0 million at December 31, 2021, driven by $7.6 million in net income, partially offset by $1.7 million in other comprehensive loss[10][213] Consolidated Statements of Cash Flows This section presents the company's cash flows from operating, investing, and financing activities Cash Flow Summary for the Six Months Ended Dec 31 (in thousands) | Cash Flow Category | 2021 | 2020 | | :--- | :--- | :--- | | Net cash provided by operating activities | $5,792 | $5,764 | | Net cash used in investing activities | $(28,566) | $(18,038) | | Net cash provided by financing activities | $46,953 | $51,376 | | Net increase in cash and cash equivalents | $24,179 | $39,102 | - Investing activities primarily consisted of $148.3 million in purchases of securities available for sale, largely funded by a $48.0 million net increase in deposits and an $87.2 million net decrease in loans receivable[11] Notes to Unaudited Consolidated Financial Statements This section provides detailed disclosures and explanations supporting the unaudited consolidated financial statements - The Company recorded a $5.0 million Employee Retention Credit (ERC) benefit for the first three quarters of calendar 2021, significantly reducing noninterest expenses[35][38] - In December 2021, the Company acquired two wealth management practices for $1.5 million in cash and $728,000 in contingent consideration, recording $1.3 million in goodwill[39] - The Company is involved in legal proceedings and regulatory inquiries related to fraudulent activity by a former customer, with an estimated possible loss range from $0 to $52.5 million in excess of accrued liability[96][99] - The NYSDFS is investigating the Bank's practices related to the Mann Parties, potentially resulting in monetary penalties up to $30.0 million[120][121][122] Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations Management's discussion highlights a significant increase in net income, driven by an Employee Retention Credit and lower loan loss provisions, alongside balance sheet expansion and improved asset quality Comparison of Financial Condition (at Dec 31, 2021 vs. Jun 30, 2021) This section compares the company's financial condition at December 31, 2021, against June 30, 2021, highlighting key balance sheet changes - Total assets increased by $46.9 million (2.6%) to $1.84 billion, driven by a $101.0 million (38.2%) increase in securities available for sale[206][208] - Net loans decreased by $88.1 million (8.1%) to $993.7 million, largely due to the forgiveness of $37.4 million in Paycheck Protection Program (PPP) loans[206][211] - Total deposits grew by $48.0 million (3.1%) to $1.58 billion, led by a $49.3 million increase in non-interest bearing demand accounts[212] Comparison of Operating Results This section analyzes the company's operating performance, comparing net income, net interest income, and expenses across periods Quarterly Performance Comparison (Q2'22 vs Q2'21) | Metric | Three Months Ended Dec 31, 2021 | Three Months Ended Dec 31, 2020 | Change (%) | | :--- | :--- | :--- | :--- | | Net Income | $6.3 million | $1.9 million | +230.1% | | Net Interest Income | $10.5 million | $10.7 million | -1.8% | | Non-Interest Expense | $6.4 million | $11.4 million | -44.1% | | Provision for Loan Losses | $0 | $1.6 million | -100.0% | - The 230.1% increase in quarterly net income was primarily due to a $5.0 million decrease in non-interest expense from the Employee Retention Credit and a $1.6 million decrease in the provision for loan losses[214][226] - Net interest margin for the quarter decreased by 60 basis points to 2.41% from 3.01% in the prior-year quarter, reflecting a lower yield on interest-earning assets[222] Asset Quality and Allowance for Loan Losses This section discusses the company's asset quality, including non-performing assets and the allowance for loan losses Asset Quality Indicators | Metric | December 31, 2021 | June 30, 2021 | | :--- | :--- | :--- | | Total non-performing assets | $15.1 million | $22.3 million | | Non-performing assets to total assets | 0.82% | 1.24% | | Allowance for loan losses to total loans | 2.23% | 2.11% (recalculated from source) | - Non-accrual loans decreased significantly by $6.2 million to $12.6 million at December 31, 2021, from $18.8 million at June 30, 2021[248] - As of December 31, 2021, the company had only four consumer loans totaling $1.1 million remaining under COVID-19 related payment deferral programs[56][262] Liquidity and Capital Resources This section evaluates the company's liquidity position and capital adequacy, including regulatory capital ratios - The company maintains a strong liquidity position with primary sources from deposits, loan and security payments, and access to Federal Home Loan Bank of New York borrowings, with unused capacity of $306.8 million at December 31, 2021[167][264] Pioneer Bank Regulatory Capital Ratios (as of Dec 31, 2021) | Ratio | Actual | Well-Capitalized Minimum | | :--- | :--- | :--- | | Tier 1 (leverage) capital | 9.80% | 5.00% | | Common Equity Tier 1 capital | 17.76% | 6.50% | | Tier 1 risk-based capital | 17.76% | 8.00% | | Total risk-based capital | 19.02% | 10.00% | - At December 31, 2021, the Bank exceeded all applicable regulatory capital requirements and was considered 'well capitalized' under regulatory guidelines[269] Item 3 – Quantitative and Qualitative Disclosures About Market Risk As a smaller reporting company, Pioneer Bancorp, Inc. is exempt from providing market risk disclosures - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[279] Item 4 – Controls and Procedures Management concluded that disclosure controls and procedures were effective, with no material changes to internal control over financial reporting during the quarter - The CEO and CFO concluded that the company's disclosure controls and procedures were effective as of the end of the reporting period[281] - No material changes in internal control over financial reporting occurred during the second fiscal quarter[284] PART II – OTHER INFORMATION Item 1 – Legal Proceedings This section refers to detailed legal proceedings disclosures found in Note 10 of the Consolidated Financial Statements - Information regarding legal proceedings is discussed in Note 10 – Commitments and Contingent Liabilities within Item 1 of the financial statements[285] Item 1A – Risk Factors No material changes to risk factors have occurred since the Annual Report on Form 10-K for June 30, 2021 - No material changes have been made to the risk factors disclosed in the Company's Annual Report on Form 10-K for the year ended June 30, 2021[286] Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds The company reported no unregistered sales of equity securities during the reporting period - No unregistered sales of equity securities or use of proceeds were reported[287] Item 5 – Other Information No other information required for disclosure under this item was reported by the company - No other information required for disclosure under this item was reported[287] Item 6 – Exhibits This section lists exhibits filed with Form 10-Q, including CEO/CFO certifications and Inline XBRL financial data - Exhibits filed include CEO and CFO certifications under Rule 13a-14(a) and Section 1350, and financial statements in Inline XBRL format[288]