Selected highlights at and for the three months ended September 30, 2023 are as follows:
Net Interest Income and Margin
Net interest income increased $1.2 million, or 8.3%, to $15.9 million for the three months ended September 30, 2023 compared to $14.7 million for the three months ended September 30, 2022. The increase in net interest income was primarily due to the increase in the average yield of interest-earning assets of 145 basis points to 4.79% for the three months ended September 30, 2023, compared to 3.34% for the three months ended September 30, 2022.
Interest income increased $5.0 million, or 32.7%, to $20.2 million for the three months ended September 30, 2023, from $15.2 million for the three months ended September 30, 2022. The increases in interest income for the three months ended September 30, 2023 were driven by a significant increase in variable rate loan yields and yields on interest-earning deposits with banks due to rising market interest rates, as well as due to market related increases in interest rates on new loans and securities.
Interest expense increased $3.7 million, or 723.6%, to $4.3 million for the three months ended September 30, 2023 from $518,000 for the three months ended September 30, 2022. The average cost of interest-bearing liabilities increased by 147 basis points to 1.66% for the three months ended September 30, 2023, compared to 0.19% for the three months ended September 30, 2022. The average cost of interest-bearing liabilities increased for the three months ended September 30, 2023 due to the impact of the Federal Reserve Board raising the Federal Funds target rate throughout calendar year 2022 and into calendar year 2023. We continue to monitor the effects the increases in market rates are having on deposit rates and we anticipate the impact will lead to a continued increase in rates on interest-bearing liabilities and pressure on our net interest margin over the next few quarters.
Net interest margin increased 53 basis points to 3.76% for the three months ended September 30, 2023, compared to 3.23% for the three months ended September 30, 2022.
CECL Adoption
Pioneer adopted Accounting Standards Update 2016-13 “Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments,” referred to as the current expected credit losses (CECL) accounting standard, on July 1, 2023. As a result of the day-one CECL adjustment, Pioneer recognized a $2.3 million decrease to the allowance for credit losses, a $1.6 million increase to the reserve for unfunded loan commitments, and a $507,000 increase to retained earnings, net of $180,000 in deferred income taxes, compared to fiscal year end June 30, 2023.
Asset Quality and Provision for Credit Losses on Loans
Non-performing assets were $14.4 million, or 0.73% of total assets, at September 30, 2023, compared to $17.7 million, or 0.96% of total assets, at June 30, 2023 and $12.1 million, or 0.58% of total assets, at September 30, 2022.
The allowance for credit losses on loans was $21.1 million at September 30, 2023 and $22.6 million at September 30, 2022, representing 1.72% and 2.17% of total loans outstanding, respectively.
Net charge-offs were $5,000, or an annualized 0.00% of average loans, for the three months ended September 30, 2023 compared to net charge-offs of $75,000, or an annualized 0.03% of average loans, for the three months ended September 30, 2022.
The provision for credit losses was $750,000 for the three months ended September 30, 2023 as compared to $120,000 for the three months ended September 30, 2022. The provision for credit losses for the three months ended September 30, 2023 was primarily due to growth in the loan portfolio.