Pioneer Bancorp IncMD

Previous wording

Provision for Credit Losses. We charge provisions for credit losses to operations in order to maintain our allowance for credit losses on loans, securities held to maturity and unfunded commitments at a level that is considered reasonable and necessary to absorb expected credit losses inherent in the loan portfolio and securities held to maturity portfolio, as well as expected losses on commitments to grant loans that are expected to be advanced at the statements of condition date. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for credit losses when realized.

Current wording

Provision for Credit Losses. We charge (credit) provisions for credit losses to operations in order to maintain our allowance for credit losses on loans, securities held to maturity and unfunded commitments at a level that is considered reasonable and necessary to absorb expected credit losses inherent in the loan portfolio and securities held to maturity portfolio, as well as expected losses on commitments to grant loans that are expected to be advanced at the statements of condition date. Loans are charged against the allowance when management believes that the collectability of the principal loan amount is not probable. Recoveries on loans previously charged-off, if any, are credited to the allowance for credit losses when realized.

Previous wording

Non-interest Income. Our primary sources of non-interest income are banking fees and service charges, insurance and wealth management services income. Our non-interest income also includes net gains or losses on equity securities, net gains or losses on securities available for sale transactions, litigation-related income and other income.

Current wording

Non-interest Income. Our primary sources of non-interest income are banking fees and service charges, and insurance and wealth management services income. Our non-interest income also includes net gain or losses on equity securities, net gain or losses on sales and calls of available for sale securities, and miscellaneous income.

Previous wording

Occupancy and equipment expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, rental expenses, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Depreciation of premises and equipment is computed using a straight-line method based on the estimated useful lives of the related assets or the expected lease terms, if shorter.

Current wording

Net occupancy and equipment expenses, which are the fixed and variable costs of buildings and equipment, consist primarily of depreciation charges, rental expenses, furniture and equipment expenses, maintenance, real estate taxes and costs of utilities. Depreciation of premises and equipment is computed using a straight-line method based on the estimated useful lives of the related assets or the expected lease terms, if shorter.

Previous wording

Advertising and marketing include most marketing expenses including multi-media advertising (public and in-store), promotional events and materials, civic and sales focused memberships, and community support.

Current wording

Advertising and marketing includes most marketing expenses including multi-media advertising (public and in-store), promotional events and materials, civic and sales focused memberships, and community support.

Previous wording

Insurance premiums include expenses related to various insurance policies, excluding federal deposit insurance premiums.

Current wording

Insurance premiums include expense related to various insurance policies, excluding federal deposit insurance premiums.

Previous wording

Other expenses include expenses for office supplies, postage, telephone and other miscellaneous operating expenses.

Current wording

Other general and administrative expenses include expenses for office supplies, postage, telephone, insurance and other miscellaneous operating expenses.

Previous wording

While the Bank has been reimbursed in the past by its insurer for certain legal fees and expenses associated with this matter, the Bank does not expect to recognize any such insurance recoveries in the future, as the applicable policy limits and deductibles have been exceeded. For additional details regarding legal, other proceedings and related matters see “Item 1 – Consolidated Financial Statements – Note 9 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities.”

Current wording

For additional details regarding legal, other proceedings and related matters see “Item 1 – Consolidated Financial Statements – Note 9 – Commitments and Contingent Liabilities – Legal Proceedings and Other Contingent Liabilities.”

Previous wording

Allowance for Credit Losses. The allowance for credit losses consists of the allowance for credit losses on loans, securities held to maturity and unfunded commitments. Effective July 1, 2023, the measurement of Current Expected Credit Losses (“CECL”) on financial instruments requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. 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 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. The allowance for credit losses on loans and securities held to maturity, as reported in our consolidated statements of condition, are adjusted by a provision for credit losses, which is recognized in earnings, and reduced by the charge-offs, net of recoveries. The allowance for credit losses on unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments is

Current wording

credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. 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 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. The allowance for credit losses on loans and securities held to maturity, as reported in our consolidated statements of condition, are adjusted by a provision for credit losses, which is recognized in earnings, and reduced by the charge-offs, net of recoveries. The allowance for credit losses on unfunded commitments represents the expected credit losses on off-balance sheet commitments such as unfunded commitments to extend credit and standby letters of credit. However, a liability is not recognized for commitments unconditionally cancellable by the Company. The allowance for credit losses on unfunded commitments is determined by estimating future draws and applying the expected loss rates on those draws and is included in other liabilities on the Company’s consolidated statements of condition.

Previous wording

Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical accounting estimate given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolios. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolios, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. Going forward, the impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to our reported earnings.

Current wording

Management of the Company considers the accounting policy relating to the allowance for credit losses to be a critical accounting estimate given the uncertainty in evaluating the level of the allowance required to cover management’s estimate of all expected credit losses over the expected contractual life of our loan portfolios. Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain, including making significant estimates of current credit risks and trends using existing quantitative and qualitative information, and reasonable and supportable forecasts of future economic conditions, which may undergo frequent and material changes. Subsequent evaluations of the then-existing loan portfolios, in light of changes in economic conditions, new information regarding existing loans and other factors, may result in significant changes in the allowance for credit losses in those future periods. For example, changes to the FOMC’s forecasted civilian unemployment rate and year-over-year U.S. GDP growth could have a material impact on the model’s estimation of the allowance for credit losses on loans. An immediate increase of 100 basis points in the FOMC’s projected rate of civilian unemployment and a decrease of 100 basis points in the FOMC’s projected rate of U.S. GDP growth would increase the model’s total calculated allowance for credit losses on loans by $1.2 million, or 5.6%, assuming qualitative adjustments are kept at current levels. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. Additionally, changes in those factors and inputs may not occur at the same rate and inputs may be directionally inconsistent, such that improvements in one factor may offset deterioration in in others. Going forward, the impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to our reported earnings.

Previous wording

Legal Proceedings and Other Contingent Liabilities. In the ordinary course of business, we are involved in a number of legal, regulatory, governmental and other proceedings, claims or investigations that could result in losses, including damages, fines and/or civil penalties, which could be significant concerning matters arising from the conduct of our business. In view of the inherent difficulty of predicting the outcome of such matters, particularly where the claimants seek large or indeterminate damages, we generally cannot predict the eventual outcome of the pending matters, timing of the ultimate resolution of these matters, or eventual loss, fines or penalties related to each pending matter. In accordance with applicable accounting guidance, we will establish an accrued liability when those matters present loss contingencies that are both probable and estimable. Our estimate of potential losses will change over time and the actual losses may vary significantly, and there may be an exposure to loss in excess of any amounts accrued. As a matter develops, management, in conjunction with any outside counsel handling the matter, evaluate on an ongoing basis whether such matter presents a loss contingency that is probable and estimable; or where a loss is reasonably possible, whether in excess of a related accrued liability or where there is no accrued liability, whether it is possible to estimate a range of possible loss. Once the loss contingency is deemed to be both probable and estimable, we establish an accrued liability and record a corresponding amount of litigation-related expense. We continue to monitor the matters for further developments, including our interactions with various regulatory agencies with supervisory authority over us, that could affect the amount of the accrued liability that has been previously established. These estimates are based upon currently available information and are subject to significant judgment, a variety of assumptions and known and unknown uncertainties. The matters underlying the accrued liability and estimated range of possible losses are unpredictable and may change from time to time, and actual losses may vary significantly from the current estimate and accrual which could have a material negative effect on our financial results. The estimated range of possible loss does not represent our maximum loss exposure.

Current wording

these estimates, and there may be an exposure to loss in excess of any amounts accrued. As a matter develops, management, in conjunction with any outside counsel handling the matter, evaluate on an ongoing basis whether such matter presents a loss contingency that is probable and estimable; or where a loss is reasonably possible, whether in excess of a related accrued liability or where there is no accrued liability, whether it is possible to estimate a range of possible loss. Once the loss contingency is deemed to be both probable and estimable, we establish an accrued liability and record a corresponding amount of litigation-related expense. We continue to monitor the matters for further developments, including our interactions with various regulatory agencies with supervisory authority over us, that could affect the amount of the accrued liability that has been previously established. These estimates are based upon currently available information and are subject to significant judgment, a variety of assumptions and known and unknown uncertainties. The matters underlying the accrued liability and estimated range of possible losses are unpredictable and may change from time to time, and actual losses may vary significantly from the current estimate and accrual which could have a material negative effect on our financial results. The estimated range of possible loss does not represent our maximum loss exposure.

Previous wording

The following tables set forth average balances, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable.

Current wording

The following table sets forth average balances, average yields and costs, and certain other information for the periods indicated. No tax-equivalent yield adjustments have been made, as the effects would be immaterial. All average balances are daily average balances. Non-accrual loans were included in the computation of average balances. The yields set forth below include the effect of deferred fees, discounts, and premiums that are amortized or accreted to interest income or interest expense, as applicable.

Previous wording

Total Assets. Total assets of $1.98 billion at March 31, 2024 increased $125.6 million, or 6.8%, from $1.86 billion at June 30, 2023. The increase was due primarily to an increase of $168.0 million, or 14.7%, in net loans receivable, and an increase of $96.1 million, or 63.8% in cash and cash equivalents, offset in part by a decrease of $134.8 million, or 31.2% in securities available for sale.

Current wording

Total Assets. Total assets of $2.01 billion at September 30, 2024 increased $119.2 million, or 6.3%, from $1.90 billion at June 30, 2024. The increase was due primarily to an increase of $55.7 million, or 4.1%, in net loans receivable, an increase of $59.8 million, or 36.2% in cash and cash equivalents, and an increase of $5.1 million, or 2.0% in securities available for sale.

Previous wording

Net Loans Receivable. Net loans receivable of $1.31 billion at March 31, 2024 increased $168.0 million, or 14.7%, from $1.14 billion at June 30, 2023. By loan category, residential mortgage loans increased by $143.2 million, or 30.9%, to $606.4 million at March 31, 2024 from $463.2 million at June 30, 2023, commercial construction loans increased by $14.7 million, or 15.9%, to $107.4 million at March 31, 2024 from $92.7 million at June 30, 2023, commercial real estate loans increased by $4.0 million, or 1.0%, to $415.2 million at March 31, 2024 from $411.2 million at June 30, 2023, and home equity loans and lines of credit increased by $7.3 million, or 8.6%, to $92.8 million at March 31, 2024 from $85.5 million at June 30, 2023. These increases were partially offset by a decrease in consumer loans of $2.1 million, or 12.7%, to $14.7 million at March 31, 2024 from $16.8 million at June 30, 2023. Commercial and industrial loans were unchanged at $97.3 million at March 31, 2024 and June 30, 2023.

Current wording

Net Loans Receivable. Net loans receivable of $1.40 billion at September 30, 2024 increased $55.7 million, or 4.1%, from $1.34 billion at June 30, 2024. By loan category, residential mortgage loans increased by $31.2 million, or 4.9%, to $665.0 million at September 30, 2024 from $633.8 million at June 30, 2024, commercial real estate loans increased by $15.2 million, or 3.7%, to $421.4 million at September 30, 2024 from $406.2 million at June 30, 2024, commercial and industrial loans increased by $8.2 million, or 8.1%, to $109.4 million at September 30, 2024 from $101.2 million at June 30, 2024, consumer loans increased by $4.6 million, or 33.7%, to $18.1 million at September 30, 2024 from $13.5 million at June 30, 2024, and home equity loans and lines of credit increased by $1.0 million, or 1.2%, to $93.8 million at September 30, 2024 from $92.8 million at June 30, 2024. These increases were partially offset by a decrease in commercial construction loans of $5.1 million, or 4.3%, to $113.3 million at September 30, 2024 from $118.4 million at June 30, 2024.

Previous wording

The increase in residential mortgage loans was primarily related to the Bank’s asset allocation shift, using investment securities cash flow and cash to fund higher yielding assets. The Bank’s relationship with a third-party mortgage banking company facilitated a significant increase in residential mortgage loan volume, despite the rising interest rate environment. The increase in commercial construction loans was due to funding of increased construction commitments. The increase in home equity loans and lines of credit was due to increased utilization rates of home equity lines of credit.

Current wording

The increase in residential mortgage loans was primarily related to the Bank’s relationship with a third-party mortgage banking company which facilitated an increase in residential mortgage loan volume, despite the higher interest rate environment. The increase in commercial real estate loans and commercial and industrial loans was due to loan funding

Previous wording

Deposits. Total deposits of $1.65 billion at March 31, 2024 increased $106.2 million, or 6.9%, from $1.54 billion at June 30, 2023. By deposit category, money market accounts increased by $73.0 million, or 15.8%, to $535.9 million at March 31, 2024 from $462.9 million at June 30, 2023, demand accounts increased by $69.3 million, or 49.9%, to $208.1 million at March 31, 2024 from $138.8 million at June 30, 2023, and certificates of deposit increased by $25.1 million, or 21.5%, to $142.1 million at March 31, 2024 from $117.0 million at June 30, 2023 (included in certificates of deposit were brokered deposits which decreased by $21.8 million to $14.7 million at March 31, 2024 from $36.5 million at June 30, 2023). These increases were partially offset by a decrease in non-interest-bearing demand accounts by $33.6 million, or 6.4%, to $492.5 million at March 31, 2024 from $526.1 million at June 30, 2023 and a decrease in savings accounts by $27.6 million, or 9.3%, to $269.4 million at March 31, 2024 from $297.0 million at June 30, 2023.

Current wording

Deposits. Total deposits of $1.68 billion at September 30, 2024 increased $125.0 million, or 8.1%, from $1.55 billion at June 30, 2024. By deposit category, non-interest-bearing demand deposits increased by $92.6 million, or 20.8%, to $537.9 million at September 30, 2024 from $445.3 million at June 30, 2024, money market accounts increased by $37.6 million, or 7.3%, to $551.3 million at September 30, 2024 from $513.7 million at June 30, 2024, and demand accounts increased by $12.0 million, or 7.6%, to $170.0 million at September 30, 2024 from $158.0 million at June 30, 2024. These increases were partially offset by a decrease in certificates of deposit by $10.6 million, or 6.4%, to $156.4 million at September 30, 2024 from $167.0 million at June 30, 2024 (included in certificates of deposit were brokered deposits which decreased by $19.5 million to $19.8 million at September 30, 2024 from $39.3 million at June 30, 2024) and a decrease in savings accounts by $6.6 million, or 2.5%, to $259.7 million at September 30, 2024 from $266.3 million at June 30, 2024.

Previous wording

The increase in demand accounts and money market accounts was primarily related to growth in municipal deposits due to seasonality. The increase in certificates of deposit was primarily related to a migration of funds from non-interest-bearing demand, savings, and other lower rate interest-bearing accounts. The decrease in non-interest-bearing demand and savings accounts was primarily related to migration of funds to higher interest-bearing accounts. As of March 31, 2024 and June 30, 2023, estimated uninsured deposits, net of collateralized deposits, totaled $229.4 million and $228.4 million, or 13.9% and 14.8% of total deposits, respectively.

Current wording

The increase in non-interest-bearing demand accounts and demand accounts was primarily related to growth in municipal deposits due to seasonality. The increase in money market accounts was primarily due to growth in municipal and commercial deposits and migration of funds from non-interest-bearing demand, savings and other lower rate interest-bearing accounts. The decrease in certificates of deposit was primarily due to a decrease in brokered deposits, partially offset by a migration of funds from non-interest-bearing demand, savings and other lower rate interest-bearing accounts. The decrease in savings accounts was primarily related to migration of funds to higher interest-bearing accounts.

Previous wording

Total Shareholders’ Equity. Total shareholders’ equity of $289.0 million at March 31, 2024 increased $22.3 million, or 8.3%, from $266.7 million at June 30, 2023 primarily as a result of net income of $11.3 million, an increase in accumulated other comprehensive income of $10.1 million and the net increase of $507,000 related to the day-one CECL adjustment during the nine months ended March 31, 2024.

Current wording

Total Shareholders’ Equity. Total shareholders’ equity of $303.8 million at September 30, 2024 increased $7.3 million, or 2.5%, from $296.5 million at June 30, 2024 primarily as a result of net income of $6.3 million and an increase in accumulated other comprehensive income of $1.7 million, partially offset by the repurchase of common stock of $1.2 million.

Previous wording

General. Net income decreased by $6.1 million to $11.3 million for the nine months ended March 31, 2024 as compared to $17.4 million for the nine months ended March 31, 2023. The decrease was primarily due to an increase in non-interest expense of $7.2 million and an increase in provision for credit losses of $2.2 million, partially offset by a decrease in income tax expense of $1.6 million, and an increase in non-interest income of $1.6 million.

Current wording

General. Net income increased by $2.9 million to $6.3 million for the three months ended September 30, 2024 as compared to $3.4 million for the three months ended September 30, 2023. The increase was primarily due to an increase in net interest income of $2.0 million, a decrease in the provision for credit losses of $1.6 million, and an increase in non-interest income of $544,000, offset in part by an increase in income tax expense of $998,000 and an increase in non-interest expense of $284,000.

Previous wording

Interest and Dividend Income. Interest and dividend income increased $4.3 million, or 23.1%, to $23.1 million for the three months ended March 31, 2024, from $18.8 million for the three months ended March 31, 2023 due to increases in interest income on loans and interest-earning deposits with banks and other, offset in part by a decrease in interest income on securities. The increase was the result of an 85 basis points increase in the average yield on interest-earning assets to 5.30% for the three months ended March 31, 2024, from 4.45% for the three months ended March 31, 2023. The increase in the average yield on interest-earning assets was driven by an increase in variable rate loan yields and yields on interest-earning deposits with banks due to rising market interest rates, as well as due to market related increases in interest rates on new loans. Average interest-earning assets increased by $46.1 million from $1.74 billion for the three months ended March 31, 2023 to $1.79 billion for the three months ended March 31, 2024 due to the increase in the average balance of loans.

Current wording

Interest and Dividend Income. Interest and dividend income increased $4.2 million, or 21.0%, to $24.4 million for the three months ended September 30, 2024, from $20.2 million for the three months ended September 30, 2023 due to increases in interest income on loans and interest-earning deposits with banks and other, offset in part by a decrease in interest income on securities. The increase was the result of an 85 basis points increase in the average yield on interest-earning assets to 5.64% for the three months ended September 30, 2024, from 4.79% for the three months ended September 30, 2023. The increase in the average yield on interest-earning assets was driven by an increase in variable rate loan yields, as well as due to market related increases in interest rates on new loans and an asset allocation shift, using investment securities’ cash flow to fund higher yielding assets. Average interest-earning assets increased by $52.6 million from $1.70 billion for the three months ended September 30, 2023 to $1.75 billion for the three months ended September 30, 2024 primarily due to the increase in the average balance of loans.

Previous wording

Interest income on loans increased $4.0 million, or 27.8%, to $18.7 million for the three months ended March 31, 2024 from $14.7 million for the three months ended March 31, 2023. Interest income on loans increased due to a $221.7 million increase in the average balance of loans to $1.30 billion for the three months ended March 31, 2024 from $1.08 billion for the three months ended March 31, 2023, coupled with a 30 basis points increase in the average yield on loans to 5.92% for the three months ended March 31, 2024 from 5.62% for the three months ended March 31, 2023. The increase in the average balance of loans was principally due to purchases of residential mortgage loans. The increase in average yield on loans was primarily due to loans tied to variable short-term rates which increased during the three months

Current wording

Interest income on loans increased $4.4 million, or 26.6%, to $20.9 million for the three months ended September 30, 2024 from $16.5 million for the three months ended September 30, 2023. Interest income on loans increased due to a $203.8 million increase in the average balance of loans to $1.38 billion for the three months ended September 30, 2024 from $1.18 billion for the three months ended September 30, 2023, coupled with a 46 basis points increase in the average

Previous wording

Interest income on loans increased $13.3 million, or 33.6%, to $53.0 million for the nine months ended March 31, 2024 from $39.7 million for the nine months ended March 31, 2023. Interest income on loans increased due to a $198.3 million increase in the average balance of loans to $1.24 billion for the nine months ended March 31, 2024 from $1.04 billion for the nine months ended March 31, 2023, coupled with a 62 basis points increase in the average yield on loans to 5.74% for the nine months ended March 31, 2024 from 5.12% for the nine months ended March 31, 2023. The increase in the average balance of loans was principally due to purchases of residential mortgage loans. The increase in average yield on loans was primarily due to loans tied to variable short-term rates which increased during the nine months ended March 31, 2024 and market related increases in interest rates on new loans as compared to the same period in the prior year.

Current wording

yield on loans to 6.16% for the three months ended September 30, 2024 from 5.70% for the three months ended September 30, 2023. The increase in the average balance of loans was principally due to purchases of residential mortgage loans. The increase in average yield on loans was primarily due to loans tied to variable short-term rates and market related increases in interest rates on new loans as compared to the same period in the prior year.

Previous wording

Interest income on securities decreased $283,000, or 10.8%, to $2.3 million for the three months ended March 31, 2024 from $2.6 million for the three months ended March 31, 2023. Interest income on securities decreased due to a $193.8 million decrease in the average balance of securities to $337.4 million for the three months ended March 31, 2024 from $531.2 million for the three months ended March 31, 2023, offset in part by a 80 basis points increase in the average yield on securities to 2.82% for the three months ended March 31, 2024 from 2.02% for the three months ended March 31, 2023. The decrease in the average balance of securities was due to the sales of U.S. government and agency securities, and maturities of U.S. government and agency and municipal obligation securities, outpacing purchases during the three months ended March 31, 2024, in conjunction with an asset allocation shift, using investment securirties cash flow to fund higher yielding assets. The increase in average yield on securities was due to higher market rates of interest for new securities that were purchased during the three and nine months ended March 31, 2024 partially replacing scheduled maturities of lower yielding U.S. government and agency and municipal obligation securities.

Current wording

Interest income on securities decreased $403,000, or 15.7%, to $2.2 million for the three months ended September 30, 2024 from $2.6 million for the three months ended September 30, 2023. Interest income on securities decreased due to a $165.4 million decrease in the average balance of securities to $280.8 million for the three months ended September 30, 2024 from $446.2 million for the three months ended September 30, 2023, offset in part by a 79 basis points increase in the average yield on securities to 3.09% for the three months ended September 30, 2024 from 2.30% for the three months ended September 30, 2023. The decrease in the average balance of securities was primarily due to the sales of U.S. government and agency securities during the three months ended December 31, 2023 as part of a balance sheet repositioning in which the Company sold $74.5 million of lower-yielding available for sale securities with an average book yield of approximately 0.83%, and maturities of U.S. government and agency and municipal obligation securities, in conjunction with an asset allocation shift, using investment securities’ cash flow to fund higher yielding assets. The increase in average yield on securities was due to higher market rates of interest for new securities that were purchased replacing lower yielding available for sale securities.

Previous wording

Interest income on interest-earning deposits with banks and other increased $537,000 to $2.0 million for the three months ended March 31, 2024 from $1.5 million for the three months ended March 31, 2023. Interest income on interest-earning deposits with banks and other increased due to a $18.2 million increase in average balances on interest-earning deposits with banks and other to $148.5 million for the three months ended March 31, 2024 from $130.3 million for the three months ended March 31, 2023 primarily due to a net increase in deposits, as well as a 88 basis points increase in the average yield on interest-earning deposits with banks and other to 5.62% for the three months ended March 31, 2024 from 4.74% for the three months ended March 31, 2023 primarily due to an increase in yields on interest-earning deposits with banks due to rising market interest rates.

Current wording

Interest income on interest-earning deposits with banks and other increased $229,000 to $1.3 million for the three months ended September 30, 2024 from $1.1 million for the three months ended September 30, 2023. Interest income on interest-earning deposits with banks and other increased due to a $14.1 million increase in the average balances on interest-earning deposits with banks and other to $90.7 million for the three months ended September 30, 2024 from $76.6 million for the three months ended September 30, 2023 primarily due to a net increase in deposits, as well as a 16 basis points increase in the average yield on interest-earning deposits with banks and other to 5.74% for the three months ended September 30, 2024 from 5.58% for the three months ended September 30, 2023 primarily due to the purchase of Federal Reserve Bank of New York stock during the three months ended June 30, 2024.

Previous wording

Interest Expense. Interest expense increased $4.5 million to $5.8 million for the three months ended March 31, 2024 from $1.3 million for the three months ended March 31, 2023 as a result of increases in interest expense on deposits and on borrowings and other. The increase was primarily due to a 160 basis points increase in the average cost of interest-bearing liabilities to 2.11% for the three months ended March 31, 2024 from 0.51% for the three months ended March 31, 2023, as well as a shift in the mix of interest-bearing liabilities to higher interest rate liability accounts.

Current wording

Interest Expense. Interest expense increased $2.2 million to $6.5 million for the three months ended September 30, 2024 from $4.3 million for the three months ended September 30, 2023 as a result of increases in interest expense on deposits. The increase was primarily due to a 69 basis points increase in the average cost of interest-bearing liabilities to 2.35% for the three months ended September 30, 2024 from 1.66% for the three months ended September 30, 2023, as well as a shift in the mix of interest-bearing liabilities to higher interest rate liability accounts.

Previous wording

Interest expense on interest-bearing deposits increased $4.5 million to $5.5 million for the three months ended March 31, 2024 from $1.0 million for the three months ended March 31, 2023. Interest expense on interest-bearing deposits increased primarily due to a 164 basis points increase in the average cost of interest-bearing deposits to 2.07% for the three months ended March 31, 2024 from 0.43% for the three months ended March 31, 2023, as well as a shift in the mix of interest-bearing deposits to higher interest rate deposit accounts and an increase in average interest-bearing deposits of $96.0 million to $1.09 billion for the three months ended March 31, 2024 from $990.6 million for the three months ended March 31, 2023. The increase in the average cost of interest-bearing deposits was primarily due to the increase in market interest rates and a shift in the mix of deposits to higher-cost money market deposits and certificates of deposit. The increase in the average balance of interest-bearing deposits was due to higher average certificates of deposit balances (included in certificates of deposit were brokered deposits which increased by $4.7 million, on average, for the three months ended March 31, 2024 as compared to the same period in the prior year).

Current wording

Interest expense on interest-bearing deposits increased $2.3 million to $6.3 million for the three months ended September 30, 2024 from $4.0 million for the three months ended September 30, 2023. Interest expense on interest-bearing deposits increased primarily due to a 74 basis points increase in the average cost of interest-bearing deposits to 2.32% for the three months ended September 30, 2024 from 1.58% for the three months ended September 30, 2023, as well as a shift in the mix of interest-bearing deposits to higher interest rate deposit accounts and an increase in average interest-bearing deposits of $83.2 million to $1.08 billion for the three months ended September 30, 2024 from $1.00 billion for the three months ended September 30, 2023. The increase in the average cost of interest-bearing deposits was primarily due to the repricing of certain interest-bearing deposit accounts in response to changes in market interest rates and the higher interest rate environment, as well as a shift in the mix of deposits towards higher cost interest-bearing accounts. The increase in the average balance of interest-bearing deposits was due to higher average money market and certificates of deposit balances.

Previous wording

Interest expense on borrowings and other liabilities increased $34,000 to $248,000 for the three months ended March 31, 2024 from $214,000 for the three months ended March 31, 2023 due primarily to the increase in average cost of borrowings and other liabilities of 73 basis points to 4.60% for the three months ended March 31, 2024 from 3.87% for the three months ended March 31, 2023, as a result of the increase in the Federal Funds target rate throughout calendar year 2022 and continued in the first half of calendar year 2023, offset in part by a decrease in average borrowings and other liabilities of $686,000 to $22.1 million for the three months ended March 31, 2024 from $22.8 million for the three months ended March 31, 2023.

Current wording

Interest expense on borrowings and other liabilities decreased $100,000 to $212,000 for the three months ended September 30, 2024 from $312,000 for the three months ended September 30, 2023 due primarily to the decrease in the average borrowings and other liabilities of $4.5 million to $23.4 million for the three months ended September 30, 2024 from $27.9 million for the three months ended September 30, 2023, and by a decrease in the average cost of borrowings and other liabilities of 87 basis points to 3.64% for the three months ended September 30, 2024 from 4.51% for the three months ended September 30, 2023.

Previous wording

Provision for Credit Losses. The provision for credit losses was $80,000 for the three months ended March 31, 2024 as compared to no provision for the three months ended March 31, 2023. The provision for credit losses for the three months ended March 31, 2024 was primarily due to growth in the loan portfolio offset in part by improvements in asset quality. Non-performing assets were $8.7 million, or 0.44% of total assets, at March 31, 2024, compared to $17.7 million, or 0.96% of total assets, at June 30, 2023 and $10.1 million, or 0.54% of total assets, at March 31, 2023. The allowance for credit losses on loans was $21.6 million at March 31, 2024 and $22.2 million at March 31, 2023, representing 1.62% and 2.00% of total loans outstanding, respectively. Net charge-offs were $20,000, or an annualized 0.01% of average loans, for the three months ended March 31, 2024 compared to net recoveries of $22,000, or an annualized (0.01%) of average loans, for the three months ended March 31, 2023.

Current wording

Provision for Credit Losses. A credit to the provision for credit losses of $870,000 was recorded for the three months ended September 30, 2024, as compared to a provision for credit losses of $750,000 for the three months ended September 30, 2023. The credit to the provision for credit losses for the three months ended September 30, 2024 was primarily due to improvements in asset quality, economic conditions, and net recoveries, offset in part by growth in the loan portfolio. Non-performing assets were $5.4 million, or 0.27% of total assets, at September 30, 2024, compared to $9.2 million, or 0.49% of total assets, at June 30, 2024 and $14.4 million, or 0.73% of total assets, at September 30, 2023. The allowance for credit losses on loans was $21.2 million at September 30, 2024 and $21.1 million at September 30, 2023, representing 1.49% and 1.72% of total loans outstanding, respectively. Net recoveries were $134,000 or an annualized (0.04)% of average loans, for the three months ended September 30, 2024 compared to net charge-offs of $5,000, or an annualized 0.00% of average loans, for the three months ended September 30, 2023.

Previous wording

Non-Interest Income. Non-interest income increased $984,000, or 30.3%, to $4.2 million for the three months ended March 31, 2024 as compared to $3.3 million for the three months ended March 31, 2023. Noninterest income increased primarily from a $583,000 increase in insurance and wealth management services income and a $445,000 increase in net gain on equity securities. The increase in insurance and wealth management services income was primarily due to the acquisition of Hudson Financial LLC which expanded our wealth management business into the Hudson Valley Region of New York. The net gain on equity securities was primarily related to the Bank’s sale of its entire equity securities portfolio in March 2024, which was done in conjunction with the previously announced conversion to a national bank.

Current wording

Non-Interest Income. Non-interest income increased $544,000, or 15.2%, to $4.1 million for the three months ended September 30, 2024 as compared to $3.6 million for the three months ended September 30, 2023. Noninterest income increased primarily due to a $190,000 increase in insurance and wealth management services income, and a $165,000 net gain on the sale of securities available for sale. The increase in insurance and wealth management services income was primarily as a result of organic growth and positive market performance related to our wealth management services.

Previous wording

Non-Interest Expense. Non-interest expense increased $2.3 million, or 17.8%, to $15.4 million for the three months ended March 31, 2024 as compared to $13.1 million for the three months ended March 31, 2023. The increase was primarily due to an increase in professional fees of $1.9 million, and an increase in salaries and employee benefits expense of $319,000. Professional fees increased due to increased legal fees and expenses. Salaries and employee benefits expense increased due to compensation expense from annual merit increases.

Current wording

Non-Interest Expense. Non-interest expense increased $284,000, or 2.0%, to $14.7 million for the three months ended September 30, 2024 as compared to $14.4 million for the three months ended September 30, 2023. The increase was primarily due to an increase in salaries and employee benefits of $743,000, offset in part by a decrease in professional fees of $634,000. Salaries and employee benefits increased due to compensation expense from annual merit increases, hiring talent to fill open positions, as well as due to share-based compensation costs recognized during the three months ended September 30, 2024 for the stock awards granted during the three months ended June 30, 2024. Professional fees decreased due to lower legal fees and expenses as compared to the prior-year period.

Previous wording

Income Tax Expense. Income tax expense decreased $307,000 to $1.3 million for the three months ended March 31, 2024 as compared to $1.6 million for the three months ended March 31, 2023 primarily due to a decrease in income before income taxes. Our effective tax rate was 22.1% for the three months ended March 31, 2024 compared to 21.4% for the three months ended March 31, 2023.

Current wording

Income Tax Expense. Income tax expense increased $998,000 to $1.9 million for the three months ended September 30, 2024 as compared to $890,000 for the three months ended September 30, 2023 primarily due to an increase in income before income taxes. Our effective tax rate was 23.0% for the three months ended September 30, 2024 compared to 20.7% for the three months ended September 30, 2023. The increase in our effective tax rate was primarily due to the decrease in tax-exempt income for the three months ended September 30, 2024 as compared to the prior-year period.

Previous wording

Asset Quality. Loans are reviewed on a regular basis. Management determines that a loan is non-performing when it is probable that at least a portion of the loan will not be collected in accordance with the original terms due to a deterioration in the financial condition of the borrower or the value of the underlying collateral if the loan is collateral dependent. When a loan is individually analyzed, the measurement of the loan in the allowance for credit losses is based on the present value of expected future cash flows, except that all collateral-dependent loans are measured based on the fair value of the collateral. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and is in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

Current wording

Asset Quality. Non-accrual loans are loans for which collectability is questionable and, therefore, interest on such loans will no longer be recognized on an accrual basis. All loans that become 90 days or more delinquent are placed on non-accrual status unless the loan is well secured and in the process of collection. When loans are placed on non-accrual status, unpaid accrued interest is fully reversed, and further income is recognized only to the extent received on a cash basis or cost recovery method.

Previous wording

Total special mention loans increased by $22.9 million to $26.5 million at March 31, 2024 from $3.6 million at June 30, 2023 primarily due to the migration from the substandard category to the special mention category of two commercial real estate loan relationships, a $16.5 million loan secured by a hotel, and a $4.9 million loan secured by a senior housing facility.

Current wording

Total substandard loans increased $3.9 million to $26.5 million at September 30, 2024 from $22.6 million at June 30, 2024 primarily due to the migration from the special mention category to the substandard category of a $4.7 million commercial real estate loan relationship consisting of four loans secured by multiple office, warehouse and industrial properties. The increase was partially offset by the upgrade to the pass category of a commercial real estate relationship and paydowns on a commercial real estate loan relationship secured by various multi-family properties.

Previous wording

Allowance for Credit Losses on Loans. Effective July 1, 2023, the measurement of CECL on loans requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. 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 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. The allowance for credit losses on loans, as reported in our consolidated statements of condition, are adjusted by a provision for credit losses, which is recognized in earnings, and reduced by the charge-off of loans, net of recoveries. All loan information presented as of June 30, 2023 or a prior date is presented in accordance with previously applicable GAAP (the incurred loss method).

Current wording

Allowance for Credit Losses on Loans. The measurement of Current Expected Credit Losses (“CECL”) on loans requires an estimate of the credit losses expected over the life of an exposure (or pool of exposures). The estimate of expected credit losses under the CECL approach is based on relevant information about past events, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amounts. Historical loss experience is generally the starting point for estimating expected credit losses. The Company then considers whether the historical loss experience should be adjusted for asset-specific risk characteristics or current conditions at the reporting date that did not exist over the period from which historical experience was used. Finally, the Company considers forecasts about future economic conditions that are reasonable and supportable. 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 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. The allowance for credit losses on loans, as reported in our consolidated statements of condition, is adjusted by a provision for credit losses, which is recognized in earnings, and reduced by the charge-off of loans, net of recoveries.

Previous wording

Determining the appropriateness of the allowance is complex and requires judgment by management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolios, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. Going forward, the impact of utilizing the CECL approach to calculate the allowance for credit losses will be significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts

Current wording

Determining the appropriateness of the allowance is complex and requires judgments by our management about the effect of matters that are inherently uncertain. Subsequent evaluations of the then-existing loan portfolios, in light of the factors then prevailing, may result in significant changes in the allowance for credit losses in those future periods. While management’s current evaluation of the allowance for credit losses indicates that the allowance is appropriate, the allowance may need to be increased under adversely different conditions or assumptions. The impact of utilizing the CECL approach to calculate the allowance for credit losses is significantly influenced by the composition, characteristics and quality of our loan portfolios, as well as the prevailing economic conditions and forecasts utilized. Material changes to these and other relevant factors may result in greater volatility to the allowance for credit losses, and therefore, greater volatility to our reported earnings.

Previous wording

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of securities. We also have the ability to borrow from the Federal Home Loan Bank of New York. At March 31, 2024, we had the ability to borrow up to $497.5 million from the Federal Home Loan Bank of New York, of which none was utilized for borrowings and $270.0 million was utilized as collateral for letters of credit issued to secure municipal deposits. At March 31, 2024, we also had a $20.0 million unsecured line of credit with a correspondent bank with no outstanding balance, as well as the ability to borrow from the Federal Reserve Bank of New York through the discount window lending program, and access to the reciprocal and brokered

Current wording

Liquidity. Liquidity describes our ability to meet the financial obligations that arise in the ordinary course of business. Liquidity is primarily needed to meet the borrowing and deposit withdrawal requirements of our customers and to fund current and planned expenditures. Our primary sources of funds are deposits, principal and interest payments on loans and securities, and proceeds from calls, maturities and sales of securities. We also have the ability to borrow from the Federal Home Loan Bank of New York. At September 30, 2024, we had the ability to borrow up to $514.5 million from the Federal Home Loan Bank of New York, of which none was utilized for borrowings and $280.0 million was utilized as collateral for letters of credit issued to secure municipal deposits. At September 30, 2024, we also had a $20.0

Previous wording

deposit markets. We cannot predict what the impact of the events described in “Recent Developments – Mann Entities Related Fraudulent Activity” above may have on our Liquidity and Capital Resources beyond the third quarter of fiscal 2024.

Current wording

million unsecured line of credit with a correspondent bank with no outstanding balance, as well as the ability to borrow from the Federal Reserve Bank of New York through the discount window lending program, and access to the reciprocal and brokered deposit markets. We cannot predict what the impact of the events described in “Recent Developments – Mann Entities Related Fraudulent Activity” above may have on our Liquidity and Capital Resources beyond the quarter ended September 30, 2024.

Previous wording

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period. At March 31, 2024, cash and cash equivalents totaled $246.5 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $296.9 million at March 31, 2024.

Current wording

While maturities and scheduled amortization of loans and securities are predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions, and competition. Our most liquid assets are cash and cash equivalents. The levels of these assets are dependent on our operating, financing, lending and investing activities during any period. At September 30, 2024, cash and cash equivalents totaled $225.0 million. Securities classified as available-for-sale, which provide additional sources of liquidity, totaled $262.5 million at September 30, 2024.

Previous wording

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of March 31, 2024 totaled $115.6 million, or 7.01%, of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Current wording

We are committed to maintaining a strong liquidity position. We monitor our liquidity position on a daily basis. We anticipate that we will have sufficient funds to meet our current funding commitments. Certificates of deposit due within one year of September 30, 2024 totaled $146.1 million, or 8.72%, of total deposits. If these deposits do not remain with us, we will be required to seek other sources of funds, including other deposits and Federal Home Loan Bank of New York advances. Depending on market conditions, we may be required to pay higher rates on such deposits or borrowings than we currently pay. We believe, however, based on past experience that a significant portion of such deposits will remain with us. We have the ability to attract and retain deposits by adjusting the interest rates offered.

Previous wording

Capital Resources. We are subject to various regulatory capital requirements administered by the OCC, NYSDFS and the FDIC. At March 31, 2024, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines.

Current wording

Capital Resources. We are subject to various regulatory capital requirements administered by the OCC. At September 30, 2024, we exceeded all applicable regulatory capital requirements, and were considered “well capitalized” under regulatory guidelines.

Previous wording

The Bank and Pioneer Commercial Bank are subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, banks must meet specific capital guidelines that involve quantitative measures of the bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors.

Current wording

The Bank is and Pioneer Commercial Bank was subject to various regulatory capital requirements administered by federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, banks must meet specific capital guidelines that involve quantitative measures of the bank’s assets, liabilities, and certain off-balance sheet items as calculated under regulatory accounting practices. Capital amounts and classifications are also subject to qualitative judgements by the regulators about components, risk weightings, and other factors.