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​

​

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

OR

☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _______ to _______

PIONEER BANCORP, INC.

(Exact Name of Company as Specified in its Charter)

​

Maryland

001-38991

83-4274253

(State of Other Jurisdiction of Incorporation)

(Commission File No.)

(I.R.S. Employer Identification No.)

​

652 Albany Shaker Road, Albany, New York 12211

(Address of Principal Executive Office) (Zip Code)

(518) 730-3025

(Issuer’s Telephone Number including area code)

Securities registered pursuant to Section 12(b) of the Act:

​

​

Title of each class

 

Trading
Symbol(s)

 

Name of each exchange on which registered

Common Stock, par value $0.01

 

PBFS

 

The Nasdaq Stock Market, LLC

​

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

YES ☒         NO   ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (Section 232.405 of this Chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).

YES ☒        NO   ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

​

​

​

​

​

Large accelerated filer

☐

Accelerated filer

☐

Non-accelerated filer

☒

Smaller reporting company

☒

​

​

Emerging growth company

☒

​

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.      ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). YES ☐      NO   ☒

As of November 13, 2023, there were 25,977,679 shares outstanding of the registrant’s common stock.

​

​

​

PIONEER BANCORP, INC.

INDEX

​

​

PART I - FINANCIAL INFORMATION

3

Item 1 – Consolidated Financial Statements-unaudited

3

Consolidated Statements of Condition

3

Consolidated Statements of Operations

4

Consolidated Statements of Comprehensive Income (Loss)

5

Consolidated Statements of Changes in Shareholders’ Equity

6

Consolidated Statements of Cash Flows

7

Notes to Unaudited Consolidated Financial Statements

8

Item 2 - Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 3 – Quantitative and Qualitative Disclosures About Market Risk

58

Item 4 – Controls and Procedures

58

PART II – OTHER INFORMATION

59

Item 1 – Legal Proceedings

59

Item 1A – Risk Factors

59

Item 2 – Unregistered Sales of Equity Securities and Use of Proceeds

59

Item 3 – Defaults Upon Senior Securities

59

Item 4 – Mine Safety Disclosures

59

Item 5 – Other Information

59

Item 6 – Exhibits

60

​

​

​

​

2

​

PART I - FINANCIAL INFORMATION

Item 1 – Consolidated Financial Statements

PIONEER BANCORP, INC.

CONSOLIDATED STATEMENTS OF CONDITION (unaudited)

(in thousands, except share and per share amounts)

​

​

​

​

​

​

​

​

​

    

September 30, 

    

June 30, 

​

​

2023

​

2023

Assets

 

​

  

 

​

  

Cash and due from banks

​

$

83,784

​

$

33,584

Federal funds sold

​

 

2,373

​

 

2,167

Interest-earning deposits with banks

​

 

130,387

​

 

114,727

Cash and cash equivalents

​

 

216,544

​

 

150,478

​

​

​

​

​

​

​

Securities available for sale, at fair value

​

 

412,275

​

 

431,667

Securities held to maturity (fair value of $21,903 at September 30, 2023; and $21,744 at June 30, 2023)

​

 

23,908

​

 

23,949

Equity securities, at fair value

​

​

2,493

​

​

2,413

Federal Home Loan Bank of New York stock

​

 

1,234

​

 

1,196

Loans receivable

​

​

1,224,573

​

​

1,166,638

Allowance for credit losses

​

​

(21,069)

​

​

(22,469)

Net loans receivable

​

 

1,203,504

​

 

1,144,169

Accrued interest receivable

​

 

7,124

​

 

7,194

Premises and equipment, net

​

 

41,455

​

 

41,617

Bank-owned life insurance

​

 

16,266

​

 

16,322

Goodwill

​

 

10,879

​

 

8,799

Other intangible assets, net

​

 

3,351

​

 

2,096

Other assets

​

 

24,374

​

 

26,291

Total assets

​

$

1,963,407

​

$

1,856,191

​

​

​

​

​

​

​

Liabilities and Shareholders’ Equity

​

 

  

​

 

  

Liabilities

​

 

  

​

 

  

Deposits:

​

 

  

​

 

  

Non-interest bearing deposits

​

$

607,931

​

$

526,119

Interest bearing deposits

​

 

1,030,904

​

 

1,015,732

Total deposits

​

 

1,638,835

​

 

1,541,851

Mortgagors’ escrow deposits

​

 

3,524

​

 

7,888

Other liabilities

​

 

49,277

​

 

39,752

Total liabilities

​

 

1,691,636

​

 

1,589,491

​

​

​

​

​

​

​

Commitments and contingent liabilities – See Note 9

​

​

​

​

​

​

​

​

​

​

​

​

​

Shareholders’ Equity

​

 

  

​

 

  

Preferred stock ($0.01 par value, 5,000,000 shares authorized, no shares issued or outstanding as of September 30, 2023 and June 30, 2023)

​

​

—

​

​

—

Common stock ($0.01 par value, 75,000,000 shares authorized, 25,977,679 shares issued and outstanding as of September 30, 2023 and June 30, 2023)

​

​

260

​

​

260

Additional paid in capital

​

​

113,491

​

​

113,543

Retained earnings

​

 

176,964

​

 

173,038

Unallocated common stock of Employee Stock Ownership Plan (“ESOP”)

​

 

(10,404)

​

 

(10,573)

Accumulated other comprehensive loss

​

 

(8,540)

​

 

(9,568)

Total shareholders’ equity

​

 

271,771

​

 

266,700

Total liabilities and shareholders’ equity

​

$

1,963,407

​

$

1,856,191

​

See accompanying notes to unaudited consolidated financial statements.

3

PIONEER BANCORP, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS (unaudited)

(in thousands, except share and per share amounts)

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

September 30, 

​

​

    

2023

    

2022

    

Interest and dividend income:

 

​

  

 

​

  

 

Loans

​

$

16,533

​

$

11,513

​

Securities

​

 

2,568

​

 

1,934

​

Interest-earning deposits with banks and other

​

 

1,055

​

 

1,745

​

Total interest and dividend income

​

 

20,156

​

 

15,192

​

​

​

​

​

​

​

​

​

Interest expense:

​

 

  

​

 

  

​

Deposits

​

 

3,954

​

 

406

​

Borrowings and other

​

 

312

​

 

112

​

Total interest expense

​

 

4,266

​

 

518

​

Net interest income

​

 

15,890

​

 

14,674

​

Provision for credit losses

​

 

750

​

 

120

​

Net interest income after provision for credit losses

​

 

15,140

​

 

14,554

​

​

​

​

​

​

​

​

​

Noninterest income:

​

 

  

​

 

  

​

Bank fees and service charges

​

 

1,446

​

 

1,570

​

Insurance and wealth management services

​

 

1,981

​

 

1,734

​

Net gain (loss) on equity securities

​

 

80

​

 

(39)

​

Bank-owned life insurance

​

 

(56)

​

 

461

​

Other

​

 

123

​

 

79

​

Total noninterest income

​

 

3,574

​

 

3,805

​

​

​

​

​

​

​

​

​

Noninterest expense:

​

 

  

​

 

  

​

Salaries and employee benefits

​

 

6,923

​

 

6,592

​

Net occupancy and equipment

​

 

1,831

​

 

1,711

​

Data processing

​

 

1,189

​

 

1,037

​

Advertising and marketing

​

 

141

​

 

141

​

Insurance premiums

​

​

239

​

​

231

​

Federal Deposit Insurance Corporation insurance premiums

​

 

262

​

 

171

​

Professional fees

​

​

2,587

​

​

773

​

Other

​

 

1,233

​

 

1,212

​

Total noninterest expense

​

 

14,405

​

 

11,868

​

Income before income taxes

​

 

4,309

​

 

6,491

​

Income tax expense

​

 

890

​

 

1,257

​

Net income

​

$

3,419

​

$

5,234

​

​

​

​

​

​

​

​

​

Net earnings per common share:

​

​

​

​

​

​

​

Basic

​

$

0.14

​

$

0.21

​

Diluted

​

$

0.14

​

$

0.21

​

​

​

​

​

​

​

​

​

Weighted average shares outstanding – basic and diluted

​

​

25,194,841

​

​

25,143,924

​

​

​

​

​

See accompanying notes to unaudited consolidated financial statements.

4

PIONEER BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS) (unaudited)

(in thousands)

​

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

​

September 30, 

​

​

    

2023

    

2022

    

​

​

​

​

​

​

​

Net income

​

$

3,419

​

$

5,234

​

​

​

​

​

​

​

​

​

Other comprehensive income (loss):

​

 

  

​

 

  

​

Unrealized losses on securities:

​

 

  

​

 

  

​

Unrealized holding gains (losses) arising during the period

​

 

1,391

​

 

(8,496)

​

​

​

 

1,391

​

 

(8,496)

​

Tax expense (benefit)

​

 

363

​

 

(2,222)

​

​

​

 

1,028

​

 

(6,274)

​

Defined benefit plan:

​

 

  

​

 

  

​

Change in funded status of defined benefit plans

​

 

—

​

 

—

​

Reclassification adjustment for amortization of net actuarial gain

​

 

—

​

 

—

​

​

​

 

—

​

 

—

​

Tax expense

​

 

—

​

 

—

​

​

​

 

—

​

 

—

​

Total other comprehensive income (loss)

​

 

1,028

​

 

(6,274)

​

Comprehensive income (loss)

​

$

4,447

​

$

(1,040)

​

​

​

​

See accompanying notes to unaudited consolidated financial statements.

5

PIONEER BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY (unaudited)

(in thousands, except share amounts)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Additional

​

​

​

Unallocated

​

Accumulated Other

​

Total

​

​

Common Stock

​

Paid-in

​

Retained

​

Common

​

Comprehensive

​

Shareholders’

​

    

Shares

​

Amount

    

Capital

    

Earnings

    

Stock of ESOP

    

Loss

    

Equity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance as of July 1, 2022

​

​

25,977,679

​

$

260

​

$

113,713

​

$

151,090

​

​

(11,256)

​

$

(11,180)

​

$

242,627

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

—

​

​

—

​

​

—

​

​

5,234

​

​

—

​

​

—

​

​

5,234

Other comprehensive loss

​

​

—

​

​

—

​

​

—

​

 

—

​

 

—

​

 

(6,274)

​

 

(6,274)

ESOP shares committed to be released (12,729 shares)

​

 

—

​

​

—

​

 

(48)

​

​

—

​

​

170

​

​

—

​

​

122

Balance as of September 30, 2022

​

​

25,977,679

​

$

260

​

$

113,665

​

$

156,324

​

$

(11,086)

​

$

(17,454)

​

$

241,709

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Additional

​

​

​

Unallocated

​

Accumulated Other

​

Total

​

​

Common Stock

​

Paid-in

​

Retained

​

Common

​

Comprehensive

​

Shareholders’

​

​

Shares

​

Amount

    

Capital

    

Earnings

    

Stock of ESOP

    

Loss

    

Equity

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Balance as of July 1, 2023

​

​

25,977,679

​

$

260

​

$

113,543

​

$

173,038

​

​

(10,573)

​

$

(9,568)

​

$

266,700

Cumulative effect of change in accounting principle - Current Expected Credit Losses (1)

​

​

—

​

​

—

​

​

—

​

​

507

​

​

—

​

​

—

​

​

507

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Net income

​

​

—

​

​

—

​

​

—

​

​

3,419

​

​

—

​

​

—

​

​

3,419

Other comprehensive income

​

​

—

​

​

—

​

​

—

​

 

—

​

 

—

​

 

1,028

​

 

1,028

ESOP shares committed to be released (12,729 shares)

​

​

—

​

​

—

​

​

(52)

​

​

—

​

​

169

​

​

—

​

​

117

Balance as of September 30, 2023

​

​

25,977,679

​

$

260

​

$

113,491

​

$

176,964

​

$

(10,404)

​

$

(8,540)

​

$

271,771

(1)Adoption of Accounting Standard Update 2016-13.

​

See accompanying notes to unaudited consolidated financial statements.

6

PIONEER BANCORP, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS (unaudited)

(in thousands)

​

​

​

​

​

​

​

​

​

​

For the Three Months Ended

​

​

September 30, 

​

    

2023

    

2022

​

​

​

​

​

​

Cash flows from operating activities:

 

​

  

 

​

  

Net income

​

$

3,419

​

$

5,234

Adjustments to reconcile net income to net cash provided by operating activities:

​

 

  

​

 

  

Depreciation and amortization

​

 

671

​

 

692

Provision for credit losses

​

 

750

​

 

120

Net (accretion) amortization on securities

​

 

(370)

​

 

268

ESOP compensation

​

​

117

​

​

122

Loss (earnings) on bank-owned life insurance

​

 

56

​

 

(461)

Proceeds from sale of loans

​

 

—

​

 

100

Net gain on sale of loans

​

 

—

​

 

(2)

Net (gain) loss on equity securities

​

 

(80)

​

 

39

Deferred tax expense

​

 

37

​

 

243

Decrease (increase) in accrued interest receivable

​

 

70

​

 

(1,272)

Increase in other assets

​

 

(156)

​

 

(1,738)

Increase in other liabilities

​

 

7,920

​

 

4,624

Changes in operating leases

​

​

8

​

​

6

Net cash provided by operating activities

​

 

12,442

​

 

7,975

​

​

​

​

​

​

​

Cash flows from investing activities:

​

 

  

​

 

  

Proceeds from maturities, paydowns and calls of securities available for sale

​

 

45,077

​

 

39,329

Purchases of securities available for sale

​

 

(23,924)

​

 

(80,173)

Proceeds from maturities and paydowns of securities held to maturity

​

 

1,617

​

 

1,630

Purchases of securities held to maturity

​

 

(1,576)

​

 

(1,527)

Net purchases of FHLBNY stock

​

 

(38)

​

 

(35)

Net increase in loans receivable

​

 

(57,774)

​

 

(37,288)

Purchases of premises and equipment

​

 

(373)

​

 

(65)

Proceeds from bank-owned life insurance death benefit

​

​

—

​

​

1,143

Cash paid for acquisitions

​

​

(1,980)

​

​

—

Net cash used in investing activities

​

 

(38,971)

​

 

(76,986)

​

​

​

​

​

​

​

Cash flows from financing activities:

​

 

  

​

 

  

Net increase in deposits

​

 

96,984

​

 

98,739

Net decrease in mortgagors’ escrow deposits

​

 

(4,364)

​

 

(2,894)

Repayment of finance lease liability

​

​

(25)

​

​

(25)

Net cash provided by financing activities

​

 

92,595

​

 

95,820

​

​

​

​

​

​

​

Net increase in cash and cash equivalents

​

 

66,066

​

 

26,809

Cash and cash equivalents at beginning of period

​

 

150,478

​

 

376,060

Cash and cash equivalents at end of period

​

$

216,544

​

$

402,869

​

​

​

​

​

​

​

Supplemental disclosure of cash flow information:

​

 

  

​

 

  

Cash paid during the period for:

​

 

  

​

 

  

Interest

​

$

4,280

​

$

503

Income taxes

​

$

1,000

​

$

900

Non-cash investing and financing activity:

​

 

  

​

 

  

Loans transferred to other real estate owned

​

$

—

​

$

—

Acquisition contingent consideration payable

​

$

1,499

​

$

—

Adoption of lease accounting standard:

​

​

​

​

​

​

Right of use assets

​

$

—

​

$

6,535

Lease liabilities

​

$

—

​

$

6,883

​

​

​

See accompanying notes to unaudited consolidated financial statements.

7

​

PIONEER BANCORP, INC.

NOTES TO UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS

SEPTEMBER 30, 2023

1.NATURE OF OPERATIONS

Pioneer Bancorp, Inc. (the “Company”) is a mid-tier stock holding company whose wholly owned subsidiary is Pioneer Bank (the “Bank”). The Bank is a New York State chartered savings bank whose wholly owned subsidiaries are Pioneer Commercial Bank, Anchor Agency, Inc. and Pioneer Financial Services, Inc. On July 17, 2019, the Company became the holding company of the Bank when it closed its stock offering in connection with the completion of the reorganization of the Bank into the two-tier mutual holding company form of organization.

The Company provides diversified financial services through the Bank and its subsidiaries, with 23 offices in the Capital Region of New York State. The Company, through its subsidiaries, offers a broad array of deposit, lending, and other financial services to individuals, businesses, and municipalities.  

The interim financial data as of September 30, 2023 and for the three months ended September 30, 2023 and 2022, respectively, is unaudited and reflects all normal recurring adjustments that are, in the opinion of management, necessary for a fair presentation of the results for the interim periods presented in conformance with accounting principles generally accepted in the United States of America (“GAAP”). The results of operations for the three months ended September 30, 2023 are not necessarily indicative of the results to be achieved for the remainder of fiscal 2024 or any other period.

These unaudited interim consolidated financial statements should be read in conjunction with the Company’s Annual Report on Form 10-K, for the year ended June 30, 2023.

2.SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation

The consolidated financial statements include the accounts of the Company, the Bank, and the Bank’s wholly owned subsidiaries. All significant intercompany accounts and transactions have been eliminated in consolidation.

Use of Estimates

The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amount of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ substantially from those estimates. The allowance for credit losses, valuation of securities and other financial instruments, the funded status and expense of employee benefit plans, legal proceedings and other contingent liabilities, and the realizability of deferred tax assets are particularly subject to change.

Reclassifications

Amounts in the prior period’s consolidated financial statements are reclassified whenever necessary to conform to the current period’s presentation.

​

8

Adoption of Recent Accounting Pronouncements

Financial Instruments - Credit Losses - Topic 326

In June 2016, the Financial Accounting Standards Board (the “FASB”) issued Accounting Standards Update (“ASU”) 2016-13 to its guidance on “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments”. ASU 2016-13 requires credit losses on most financial assets measured at amortized cost and certain other instruments to be measured using an expected credit loss model (referred to as the current expected credit loss model). Under this model, entities will estimate credit losses over the entire contractual term of the instrument (considering estimated prepayments, but not expected extensions or modifications unless reasonable expectation of a troubled debt restructuring exists) from the date of initial recognition of that instrument. The ASU also replaces the current accounting model for purchased credit impaired loans and debt securities. The allowance for credit losses for purchased financial assets with a more-than insignificant amount of credit deterioration since origination (“PCD assets”), should be determined in a similar manner to other financial assets measured on an amortized cost basis. However, upon initial recognition, the allowance for credit losses is added to the purchase price (“gross up approach”) to determine the initial amortized cost basis. The subsequent accounting for PCD financial assets is the same expected loss model described above. Further, the ASU made certain targeted amendments to the existing impairment model for available for sale debt securities. For an available for sale debt security for which there is neither the intent nor a more-likely-than-not requirement to sell, an entity will record credit losses as an allowance rather than a write-down of the amortized cost basis. The amendments in this ASU are effective for the Company for the fiscal year beginning July 1, 2023. An entity will apply the amendments in this ASU through a cumulative-effect adjustment to retained earnings as of the beginning of the first reporting period in which the guidance is effective (that is, a modified-retrospective approach). In November 2018, the FASB issued ASU 2018-19, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, which aligns the implementation date for nonpublic entities’ annual financial statements with the implementation date for their interim financial statements and clarifies the scope of the guidance in the amendments in ASU 2016-13. In April 2019, the FASB issued ASU 2019-04, Codification Improvements to Topic 326, Financial Instruments-Credit Losses, Topic 815, Derivatives and Hedging, and Topic 825, Financial Instruments. ASU 2019-04 clarifies or addresses stakeholders’ specific issues about certain aspects of the amendments in ASU 2016-13 related to measuring the allowance for loan losses under the new guidance. The effective dates and transition requirements for the amendments related to this ASU are the same as the effective dates and transition requirements in ASU 2016-13. In November 2019, the FASB issued ASU 2019-11, Codification Improvements to Topic 326, Financial Instruments-Credit Losses clarifying certain amendments to various provisions of ASU 2016-13 relating to (1) purchased financial assets with credit deterioration, (2) financial assets secured by collateral maintenance agreements, (3) transition relief for troubled debt restructurings, and (4) disclosure relief when the practical expedient for accrued interest receivables is applied.

On July 1, 2023, the Company adopted ASU 2016-13 Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments, as amended, which replaces the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss (CECL) methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loan receivables and held to maturity debt securities. It also applies to off-balance sheet credit exposures (loan commitments, standby letters of credit, financial guarantees, and other similar instruments). In addition, ASC 326 made changes to the accounting for available for sale debt securities. One such change is to require credit losses to be presented as an allowance rather than as a write-down on available for sale debt securities which management does not intend to sell or believes that it is more likely than not they will be required to sell.

The Company adopted ASC 326 using the modified retrospective method for all financial assets measured at amortized cost, and off-balance-sheet credit exposures, except for debt securities for which other-than-temporary impairment had been recognized prior to July 1, 2023 for which the Company adopted ASC 326 using the prospective transition approach. Results for reporting periods beginning after July 1, 2023, are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable GAAP. The Company recorded a net increase to retained earnings of $507,000 as of July 1, 2023 for the cumulative effect of adopting ASC 326.  The transition adjustment includes a $2.3 million decrease to the allowance for credit losses, a $1.6 million increase to the allowance for credit losses on unfunded commitments, and a $180,000 impact to the deferred tax assets. The Company did not record an allowance for credit losses on held to maturity and available for sale debt securities on July 1, 2023, as the amount of credit risk was deemed immaterial.

9

Allowance for Credit Losses on Loans

The CECL approach requires an estimate of the credit losses expected over the life of a loan (or pool of loans). The allowance for credit losses is a valuation account deducted from the amortized cost basis of loans to present the net, lifetime amount expected to be collected on the loans. Expected losses are evaluated and calculated on a collective, or pooled, basis for those loans which share similar risk characteristics. If the loan does not share risk characteristics with other loans, the Company will evaluate the loan on an individual basis. Individually evaluated loans are primarily non-accrual and collateral dependent loans. Loan losses are charged off against the allowance when management believes a loan balance is confirmed to be uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and amounts expected to be charged-off.

The loan portfolio is segmented at the level at which the Company develops and documents a systematic methodology to determine its allowance for credit losses. Upon adoption of CECL, management revised the manner in which loans were pooled for similar risk characteristics. Management developed the following segments for estimating loss based on type of borrower and collateral which is generally based upon federal call report segmentation and have been combined or subsegmented as needed to ensure loans of similar risk profiles are appropriately pooled: commercial (commercial real estate, commercial and industrial, and commercial construction), residential mortgages, home equity loans and lines, and consumer loans.

Management estimates the allowance for credit losses on loans by using relevant available information, from internal and external sources, related to past events, current conditions, and reasonable and supportable forecasts that affect the collectability of loans. Historical loss experience was considered by the Company for estimating expected credit losses and determined the need to use peer data, with similar risk profiles, to develop and calculate the CECL reserve models.

Historical credit loss experience for the Company and peer losses by loan segments, provide a foundation for estimating an expected credit loss. The observed credit losses are converted to probability of default (“PD”) rate curves through the use of loss given default (“LGD”) risk factors that converts default rates to estimated loss for each loan segment. This is based on industry-level, observed relationships between the PD and LGD variables for each segment. The historical PD curves correspond to economic variables through historical economic cycles, which establishes a quantitative relationship between forecasted economic conditions and loan performance.

Using the historical quantitative relationship between economic conditions and loan performance, management developed a model, using selected external economic forecasts that is highly correlated for each loan segment. These forecasts are then applied over a period that management has determined to be reasonable and supportable. Beyond the period over which management can develop or source a reasonable and supportable forecast, the model will revert to long-term average economic conditions using a straight-line methodology.

The allowance for credit losses on loans is measured on a collective basis, when similar risk characteristics are present, with both a quantitative and qualitative analysis that is applied on a quarterly basis. The respective quantitative reserve for each segment is calculated using a PD/LGD modeling methodology, with segment-specific regression models. The discounted cash flows methodology uses expected credit losses estimated over the effective life of each loan by measuring the difference between the net present value of modeled cash flows and amortized cost basis. Contractual cash flows over the contractual life of the loans are the basis for modeled cash flows, adjusted for modeled defaults and expected prepayments and discounted at the loan-level stated interest rate.

Management applies a qualitative adjustment for each segment as of the consolidated statements of condition date. The qualitative adjustments include limitations inherent in the quantitative model; changes in lending policies and procedures; changes in international, national, regional, and local economic conditions; changes in the nature and volume of the portfolio and terms of loans; the experience, ability and depth of lending management and staff; changes in the volume and severity of past due loans; changes in value of underlying collateral; existence and effect of any concentrations of credit and changes in the levels of such concentrations; and the effect of external factors; such as competition, legal and regulatory requirements.

On a case-by-case basis, the Company may conclude that a loan should be evaluated on an individual basis based on its disparate risk characteristics. When the Company determines that a loan no longer shares similar risk characteristics

10

with other loans in the portfolio, the allowance will be determined on an individual basis using the present value of expected cash flows or, for collateral-dependent loans, the estimated fair value of the collateral, as applicable.

Allowance for Credit Losses on Unfunded Commitments

The Company estimates expected credit losses over the contractual period in which the Company has exposure to a contractual obligation to extend credit unless that obligation is unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments exposure is recognized in other liabilities on the consolidated statement of condition and is adjusted by the provision for credit losses on the consolidated statement of operations. The estimate includes consideration of the likelihood that funding will occur and an estimate of expected credit losses on commitments expected to be funded over the estimated contractual life. The probable funding amount by segment is multiplied by the respective reserve percentage calculated in the allowance for credit losses on loans to calculate a reserve on unfunded commitments.

Allowance for Credit Losses on Securities Held to Maturity

The Company is required to utilize the CECL approach to estimate expected credit losses. Management measures expected credit losses on held to maturity debt securities on a collective basis by major security types that share similar risk characteristics. Management classifies the held to maturity debt securities portfolio into the following major security types: Corporate debt securities and municipal obligations. Expected losses are calculated on a pooled basis using a probability of default/loss given default (PD/LGD) model, based on historical credit loss data from a reliable source. Management utilizes corporate and municipal default and loss rates which provides decades of data across all corporate and municipal sectors and geographies. Management may exercise discretion to make adjustments based on environmental factors. The model calculates the expected loss for each security over the contractual life. If the risk of a held to maturity debt security no longer matches the collective assessment pool, it is removed and individually assessed for credit deterioration. Utilizing the CECL approach the Company determined that the expected credit loss on its corporate debt securities and municipal obligations portfolio was immaterial and therefore no allowance for credit losses was recorded as of July 1, 2023.

Allowance for Credit Losses on Securities Available for Sale

The impairment model for available for sale debt securities differs from the CECL approach utilized for held to maturity debt securities because available for sale debt securities are measured at fair value rather than amortized cost. For available for sale securities in an unrealized loss position, the Company first assesses whether it intends to sell, or it is more than likely than not that it will be required to sell the security before recovery of its amortized cost basis. If either of the criteria regarding intent or requirement to sell is met, the security’s amortized cost basis is written down to fair value through income. For securities available for sale that do not meet the above criteria, the Company evaluates whether the decline in fair value has resulted from credit losses or other factors. In making this assessment, the Company considers the extent to which fair value is less than amortized cost and adverse conditions related to the security, among other factors. If this assessment indicates that a credit loss exists, the present value of cash flows expected to be collected from the security are compared to the amortized cost basis of the security. If the present value of the cash flows expected to be collected is less than the amortized cost basis, a credit loss exists and an allowance for credit losses is recorded for the credit loss, limited by the amount that the fair value is less than the amortized cost. Any impairment that has not been recorded through an allowance for credit losses is recognized in other comprehensive income, net of tax. Changes in the allowance for credit losses are recorded as provision for, or reversal of, credit loss expense. Losses are charged against the allowance when management believes the uncollectibility of an available for sale security is confirmed or when either of the criteria regarding intent or requirement to sell is met.  The Company determined that the unrealized loss positions in the available for sale securities were not the result of credit losses, and therefore, an allowance for credit losses was not recorded as of July 1, 2023.

Accrued Interest Receivable

Accrued interest receivable balances are presented separately on the consolidated statements of financial condition and are not included in amortized cost when determining the allowance for credit losses. The Company does not estimate expected credit losses on accrued interest receivable on loans and investment securities, as accrued interest

11

receivable is reversed or written off when the full collection of the accrued interest receivable related to a loan or investment security becomes doubtful.

Troubled Debt Restructurings and Vintage Disclosures - Topic 326

In March 2022, the FASB issued ASU 2022-02, amendments related to Troubled Debt Restructurings (TDRs) for all entities after they adopt ASU 2016-13 and amendments related to vintage disclosures that affect public business entities with investments in financing receivables, under Financial Instruments-Credit Losses (Topic 326). This ASU eliminates the guidance on TDRs in Subtopic 310-40, Receivables-Troubled Debt Restructurings, while enhancing disclosure requirements for certain loan refinancings and restructurings by creditors when a borrower is experiencing financial difficulty. The ASU also requires that public business entities disclose current-period gross charge-offs by year of origination. The Company adopted the standard prospectively, beginning July 1, 2023, concurrently with the adoption of ASU 2016-13. The adoption of this guidance did not have a material impact on our consolidated financial statements.

Reference Rate Reform - Topic 848

In March 2020, the FASB issued ASU 2020-04, Reference Rate Reform (Topic 848). The ASU and related amendments provide optional expedients and exceptions for applying GAAP to contracts, hedging relationships, and other transactions affected by reference rate reform if certain criteria are met. The amendments in this update apply only to contracts, hedging relationships, and other transactions that reference LIBOR or another reference rate expected to be discontinued because of reference rate reform. The amendments (1) apply to contract modifications that replace a reference rate affected by reference rate reform, (2) provide exceptions to existing guidance related to changes to the critical terms of a hedging relationship due to reference rate reform (3) provide optional expedients for fair value hedging relationships, cash flow hedging relationships, and net investment hedging relationships, and (4) provide a one-time election to sell, transfer, or both sell and transfer debt securities classified as held to maturity that reference a rate affected by reference rate reform and that are classified as held to maturity before January 1, 2020. The amendments in this ASU are effective for all entities as of March 12, 2020 through December 31, 2022. The amendments for contract modifications can be elected to be applied as of any date from the beginning of an interim period that includes or is subsequent to March 12, 2020, or prospectively from a date within an interim period that includes or is subsequent to March 12, 2020. The amendments for existing hedging relationships can be elected to be applied as of the beginning of the interim period that includes March 12, 2020 and to new eligible hedging relationships entered into after the beginning of the interim period that includes March 12, 2020. On December 21, 2022, the FASB issued ASU 2022-06, Reference Rate Reform (Topic 848): Deferral of the Sunset Date of Topic 848, which extends the sunset (or expiration) date of ASC Topic 848, Reference Rate Reform, from December 31, 2022, to December 31, 2024. On July 1, 2023, the Company adopted ASC 848, as amended. The adoption of this guidance did not have a material impact on our consolidated financial statements.

​

3.ACQUISITIONS

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. 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 acquisitions. No contingent consideration was paid during the three months ended September 30, 2023. The effects of the acquired assets have been included in the consolidated financial statements since the acquisition date. The above referenced acquisition was made to expand the Company’s wealth management services activities.

​

12

4.INVESTMENT SECURITIES

The amortized cost and estimated fair value of securities available for sale are as follows (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross

​

Gross

​

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Estimated

​

    

Cost

    

Gains

    

Losses

    

Fair Value

September 30, 2023

 

​

  

 

​

  

​

​

​

 

​

  

U.S. Government and agency obligations

​

$

401,100

​

$

—

​

$

(17,286)

​

$

383,814

Municipal obligations

​

 

28,087

​

 

—

​

 

(113)

​

 

27,974

Other debt securities

​

​

247

​

​

309

​

​

(69)

​

​

487

Total available for sale securities

​

$

429,434

​

$

309

​

$

(17,468)

​

$

412,275

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2023

​

​

​

​

​

​

​

​

​

​

​

​

U.S. Government and agency obligations

​

$

396,464

​

$

2

​

$

(18,737)

​

$

377,729

Municipal obligations

​

 

53,492

​

 

9

​

 

(67)

​

 

53,434

Other debt securities

​

​

261

​

​

309

​

​

(66)

​

​

504

Total available for sale securities

​

$

450,217

​

$

320

​

$

(18,870)

​

$

431,667

​

Accrued interest receivable on available for sale debt securities totaled $1.9 million at September 30, 2023 and is excluded from the estimate of credit losses.

There was no allowance for credit losses for securities available for sale as of September 30, 2023.

The amortized cost and estimated fair value of securities held to maturity are as follows (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Gross

​

Gross

​

​

​

​

​

Amortized

​

Unrealized

​

Unrealized

​

Estimated

​

    

Cost

    

Gains

    

Losses

    

Fair Value

September 30, 2023

​

 

  

​

 

  

​

 

  

​

 

  

Corporate debt securities

​

$

20,000

​

$

—

​

$

(1,870)

​

$

18,130

Municipal obligations

​

​

3,908

​

​

—

​

​

(135)

​

​

3,773

Total held to maturity securities

​

$

23,908

​

$

—

​

$

(2,005)

​

$

21,903

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2023

​

 

  

​

 

  

​

 

  

​

 

  

Corporate debt securities

​

$

20,000

​

$

—

​

$

(2,049)

​

$

17,951

Municipal obligations

​

​

3,949

​

​

—

​

​

(156)

​

​

3,793

Total held to maturity securities

​

$

23,949

​

$

—

​

$

(2,205)

​

$

21,744

​

Accrued interest receivable on held to maturity debt securities totaled $159,000 at September 30, 2023 and is excluded from the estimate of credit losses.

There was no allowance for credit losses for securities held to maturity as of September 30, 2023.

​

13

The estimated fair value and gross unrealized losses aggregated by security category and length of time such securities have been in a continuous unrealized loss position, is summarized as follows (dollars in thousands):

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

September 30, 2023

​

​

Less than 12 Months

​

12 Months or Longer

​

Total

​

​

Estimated

​

Unrealized

​

Estimated

​

Unrealized

​

Estimated

​

Unrealized

​

    

Fair Value

    

Losses

    

Fair Value

    

Losses

    

Fair Value

    

Losses

Securities available for sale:

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

U.S. Government and agency obligations

​

$

57,422

​

$

(296)

​

$

326,392

​

$

(16,990)

​

$

383,814

​

$

(17,286)

Municipal obligations

​

 

27,974

​

 

(113)

​

 

—

​

 

—

​

 

27,974

​

 

(113)

Other debt securities

​

 

3

​

 

—

​

 

111

​

 

(69)

​

 

114

​

 

(69)

​

​

$

85,399

​

$

(409)

​

$

326,503

​

$

(17,059)

​

$

411,902

​

$

(17,468)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities held to maturity:

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Corporate debt securities

​

$

—

​

$

—

​

$

18,130

​

$

(1,870)

​

$

18,130

​

$

(1,870)

Municipal obligations

​

​

—

​

​

—

​

​

3,773

​

​

(135)

​

​

3,773

​

​

(135)

​

​

$

—

​

$

—

​

$

21,903

​

$

(2,005)

​

$

21,903

​

$

(2,005)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

June 30, 2023

​

​

Less than 12 Months

​

12 Months or Longer

​

Total

​

​

Estimated

​

Unrealized

​

Estimated

​

Unrealized

​

Estimated

​

Unrealized

​

    

Fair Value

    

Losses

    

Fair Value

    

Losses

    

Fair Value

​

Losses

Securities available for sale:

​

​

​

 

​

  

 

​

  

 

​

  

 

​

  

 

​

  

U.S. Government and agency obligations

​

$

104,145

​

$

(1,975)

​

$

268,782

​

$

(16,762)

​

$

372,927

​

$

(18,737)

Municipal obligations

​

 

47,781

​

 

(67)

​

 

—

​

 

—

​

 

47,781

​

 

(67)

Other debt securities

​

 

14

​

 

(1)

​

 

107

​

 

(65)

​

 

121

​

 

(66)

​

​

$

151,940

​

$

(2,043)

​

$

268,889

​

$

(16,827)

​

$

420,829

​

$

(18,870)

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

​

Securities held to maturity:

​

​

​

​

​

​