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New York-based Pioneer Bancorp discloses exposure to potential fraud

Albany, N.Y.-based Pioneer Bancorp Inc. (MHC) disclosed in a filing that it recently became aware of potentially fraudulent activity associated with transactions conducted in the quarter ending Sept. 30 by an established business customer of its unit, Pioneer Bank (MHC).

The transactions involve deposit and lending relationships with the same customer and related entities. Pioneer Bancorp's potential exposure includes the customer's $16.0 million commercial loan secured by business assets, which represents Pioneer Bank's participation interest in a total credit of $36.0 million for which the bank is the originating lender, and $19.0 million of deposit activity.

The news blog KrebsonSecurity.com reported that the fraudulent activity is related to payroll processor MayPayrollHR, which suddenly shut down Sept. 4, taking approximately $35 million worth of payroll and tax payments with it. The FBI is investigating the matter, according to a tweet from its Albany office.

Pioneer Bancorp continues to investigate the matter to determine its potential exposure and is pursuing all available sources of recovery and other means of mitigating the potential loss. Based on its review of the circumstances of the potentially fraudulent activity, the company believes the incident is an isolated occurrence involving a customer and related entities.

In the filing, Pioneer Bancorp stated it has sufficient capital to absorb the potential loss and expects to remain well-capitalized.

The company noted in the filing that it is working with law enforcement authorities and may be limited in what information it can disclose due to the ongoing investigation.