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PCSB Financial Corporation Announces Second Fiscal Quarter Results and Declares Quarterly Cash Dividend

Company Release - 1/24/2019 8:30 AM ET

YORKTOWN HEIGHTS, N.Y., Jan. 24, 2019 (GLOBE NEWSWIRE) -- PCSB Financial Corporation (the “Company”) (NASDAQ: PCSB), parent of PCSB Bank (the "Bank"), today announced net income of $2.3 million, or $0.14 per basic and diluted share, for the three months ended December 31, 2018 compared to $2.3 million, or $0.14 per basic and diluted share, for the three months ended September 30, 2018 and $2,000, or $0.00 per basic and diluted share, for the three months ended December 31, 2017.

On a non-GAAP basis, which excludes certain nonrecurring items, the Company recorded net income of $2.2 million, or $0.13 per diluted share for the three months ended December 31, 2018 as compared to net income of $2.3 million, or $0.14 per diluted share for the three months ended September 30, 2018 and $1.8 million, or $0.11 per diluted share, for the three months ended December 31, 2017. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

In conjunction with grants under the stockholder-approved 2018 Equity Incentive Plan, the Company recorded $482,000, $364,000 net of taxes, of stock-based compensation expense in the current quarter. No such expense was recorded in the previous quarter or prior year period. The $482,000 of expense is a partial quarter's worth of expense, the annualized cost of which is approximately $3.3 million, or $829,000 quarterly.

President’s Comments
Commenting on the Company’s results, Joseph Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation, said, “We are pleased with our achievements in our second year as a public company. Some of these achievements include current year asset growth and deposit growth of 5.2% and 5.9%, respectively, and a year-over-year increase in adjusted net income of 32.8%. The current quarter also showed a continued decline in problem assets as the ratio of non-performing assets to total assets decreased to 0.27% from 0.43% for the September quarter and decreased by more than half, from 0.57% a year ago. During the second quarter, we also began the process of capital management by announcing our first share repurchase program. As we continue to move forward in our second year as a public company, we hope to build on these results as we strive to create value for our shareholders.

Additionally, as of December 31, 2018, we are excited by our recently announced conversion to a commercial bank and look forward to the business opportunities this organizational change will provide us including additional products and services to our customers and a better position in which to compete in the Municipal deposit markets.”

Income Statement Summary
Net interest income increased $558,000, or 5.5%, to $10.7 million for the three months ended December 31, 2018, compared to the same period in 2017 and increased $280,000 or 2.7% from the previous quarter. The increase in net interest income compared to the prior year is primarily a result of a $79.5 million increase in average interest earning assets. The increase in average interest earning assets is primarily due to loan portfolio growth, partially offset by a decrease in investment securities. The net interest margin was 3.00% for the three months ended December 31, 2018, unchanged from the prior year quarter, as asset growth and a higher yielding asset mix offset the increased cost of funds driven by higher market interest rates. The increase in net interest income compared to the prior quarter is primarily due to continued balance sheet growth and a six basis point increase in net interest margin, driven by the Company’s ability to control the increase in the cost of funds despite continued increases in short-term market rates.

The provision for loan losses was $6,000 for the three months ended December 31, 2018 compared to $58,000 in the prior quarter and $200,000 for the same period in 2017. Charge-offs, net of recoveries, were $21,000 for the three months ended December 31, 2018 compared to $3,000 for the three months ended September 30, 2018 and $997,000 for the three months ended December 31, 2017. Loans classified as substandard and doubtful decreased $2.8 million, or 22.1%, to $10.2 million at December 31, 2018 from $13.0 million at September 30, 2018 and decreased $8.1 million, or 44.3%, from $18.3 million at December 31, 2017. Non-performing loans as a percent of total loans receivable was 0.39% as of December 31, 2018, a decrease from 0.62% as of September 30, 2018 and 0.97% as of December 31, 2017.

Noninterest income increased $228,000 to $920,000 for the three months ended December 31, 2018 compared to the same period in 2017, primarily due to a $155,000 gain on the sale of bank premises, $55,000 in gains on the sale of securities, and $76,000 of swap income recorded in the current quarter, partially offset by $99,000 of one-time loan related fee income recorded in the prior year quarter. Noninterest income increased $279,000 from the three months ended September 30, 2018, primarily due to the aforementioned gains on the sale of bank premises and securities, as well as $24,000 of gains on the sale of REO and increases in deposit-related fees.

Noninterest expense increased $455,000 to $8.6 million for the three months ended December 31, 2018 compared to the same period in 2017 and increased $572,000 compared to the three months ended September 30, 2018. The $455,000 increase from 2017 was caused primarily by a $574,000 increase in salaries and employee benefits, partially offset by a $110,000 decrease in losses on a receivable. The increase in salaries and employee benefits was primarily due to $482,000 of stock-based compensation expense recorded in the current quarter, as well as a $199,000 increase in salaries and short-term incentive comp as a result of additional staffing, partially offset by lower retirement and medical benefits costs. The $572,000 increase in noninterest expense from the three months ended September 30, 2018 was primarily due to a $304,000 increase in salaries and benefits expense driven primarily by higher stock-based compensation, partially offset by lower salary expense, a $90,000 loss on a receivable recorded in the current quarter, and a net increase of $178,000 in all other expenses.

The effective income tax rate was 24.5% for the three months ended December 31, 2018, as compared to a tax rate, adjusted for the one-time effects of the Tax Cuts and Jobs Act, of 31.3% for the three months ended December 31, 2017 and 23.4% for the three months ended September 30, 2018. Beginning on July 1, 2018, the Company began to realize the full benefits of the reduction in the corporate income tax rate which became effective in January 2018.

Balance Sheet Summary
Total assets increased $77.1 million to $1.56 billion at December 31, 2018 from $1.48 billion at June 30, 2018. This increase was primarily due to increases of $81.0 million in cash and cash equivalents and $2.0 million in loans receivable, partially offset by a decrease of $6.2 million in total investment securities. The increase in cash and cash equivalents is primarily due to increases in deposits and FHLB advances. The $2.0 million increase in loans was the result of $75.3 million of originations, partially offset by $73.3 million of net amortization on the remaining portfolio, highlighted by $25.0 million of loan prepayments on four commercial mortgage loans and one residential mortgage loan.

Total liabilities increased $75.9 million to $1.27 billion at December 31, 2018 from $1.19 billion at June 30, 2018. This increase was primarily due to increases of $67.9 million in total deposits and $7.4 million in FHLB advances. Deposits as of December 31, 2018 includes a $7.5 million net increase in brokered time deposits and a transient balance of $28.4 million in one non-interest bearing customer account, the majority of which is expected to be withdrawn from the Bank in January 2019. Excluding this transient balance, deposit growth year to date is $39.5 million or 3.4%, concentrated primarily in money market and time deposit accounts.

Total shareholders’ equity increased $1.2 million to $288.8 million at December 31, 2018 from $287.6 million at June 30, 2018. This increase was primarily due to net income of $4.7 million and a $970,000 reduction in unearned ESOP shares for plan shares earned during the period, partially offset by the repurchase of $4.3 million in common stock and $1.0 million of cash dividends paid. As of December 31, 2018, the Company had repurchased 222,070 shares, at an average cost of $19.52 per share, which represents 24% of the 908,256 shares authorized for repurchase under the existing plan. At December 31, 2018, the Company’s book value per share and tangible book value per share were $15.62 and $15.27, respectively, compared to $15.83 and $15.47, respectively, at June 30, 2018. Reconciliations of book value per share (GAAP measure) to tangible book value per share (non-GAAP measure) appear at the end of this release. At December 31, 2018, the Bank was considered “well capitalized” under applicable regulatory guidelines.

Dividend
The Board of Directors declared a regular quarterly cash dividend of $0.03 per share. The dividend is payable on or about March 1, 2019 to stockholders of record on February 15, 2019.

About PCSB Financial Corporation and PCSB Bank

PCSB Financial Corporation is the bank holding company for PCSB Bank. PCSB Bank is a New York-chartered commercial bank and has served the banking needs of its customers in the Lower Hudson Valley of New York State since 1871. It operates from its executive offices/headquarters and 15 branch offices located in Dutchess, Putnam, Rockland and Westchester Counties in New York.

This News Release contains a number of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended. These statements may be identified by use of words such as "anticipate," "believe," "could," "estimate," "expect," "intend," "may," "outlook," "plan," "potential," "predict," "project," "should," "will," "would" and similar terms and phrases, including references to assumptions.

Forward-looking statements are based upon various assumptions and analyses made by the Company in light of management's experience and its perception of historical trends, current conditions and expected future developments, as well as other factors it believes are appropriate under the circumstances. These statements are not guarantees of future performance and are subject to risks, uncertainties and other factors (many of which are beyond the Company's control) that could cause actual results to differ materially from future results expressed or implied by such forward-looking statements. These factors include, without limitation, the following: the timing and occurrence or non-occurrence of events may be subject to circumstances beyond the Company’s control; there may be increases in competitive pressure among financial institutions or from non-financial institutions; changes in the interest rate environment may reduce interest margins; changes in deposit flows, loan demand or real estate values may adversely affect the Company's business; changes in accounting principles, policies or guidelines may cause the Company’s financial condition to be perceived differently; changes in corporate and/or individual income tax laws may adversely affect the Company's financial condition or results of operations; general economic conditions, either nationally or locally in some or all areas in which the Company conducts business, or conditions in the securities markets or the banking industry may be less favorable than the Company currently anticipates; legislation or regulatory changes may adversely affect the Company’s business; technological changes may be more difficult or expensive than the Company anticipates; success or consummation of new business initiatives may be more difficult or expensive than the Company anticipates; or litigation or other matters before regulatory agencies, whether currently existing or commencing in the future, may delay the occurrence or non-occurrence of events longer than the Company anticipates. The Company assumes no obligation to update any forward-looking statements except as may be required by applicable law or regulation.

Contact: Joseph D. Roberto
Chairman, President and Chief Executive Officer
(914) 248-7272


PCSB Financial Corporation and Subsidiaries
Consolidated Balance Sheets (unaudited)
(amounts in thousands, except share data)

  December 31,  June 30, 
  2018  2018 
ASSETS        
Cash and due from banks $141,569  $60,684 
Federal funds sold  1,550   1,461 
Cash and cash equivalents  143,119   62,145 
Held to maturity debt securities, at amortized cost
   (fair value of $351,701 and $343,188, respectively)
  359,777   353,183 
Available for sale debt securities, at fair value  92,686   105,472 
Total investment securities  452,463   458,655 
Loans receivable, net of allowance for loan losses of $4,943 and $4,904,
respectively
  904,377   902,336 
Accrued interest receivable  4,457   4,358 
Federal Home Loan Bank stock  2,385   2,050 
Premises and equipment, net  11,429   11,598 
Deferred tax asset, net  2,436   2,622 
Foreclosed real estate  572   460 
Bank-owned life insurance  24,026   23,747 
Goodwill  6,106   6,106 
Other intangible assets  376   433 
Other assets  5,569   5,677 
Total assets $1,557,315  $1,480,187 
LIABILITIES AND SHAREHOLDERS' EQUITY        
Interest bearing deposits $1,063,211  $1,025,574 
Non-interest bearing deposits  162,113   131,883 
Total deposits  1,225,324   1,157,457 
Mortgage escrow funds  9,085   8,803 
Advances from Federal Home Loan Bank  26,279   18,841 
Other liabilities  7,845   7,527 
Total liabilities  1,268,533   1,192,628 
Commitments and contingencies  -   - 
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares
issued or outstanding as of December 31, 2018 and June 30, 2018,
respectively)
  -   - 
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295
and 18,165,110 shares issued, and 18,490,225 and 18,165,110 shares
outstanding as of December 31, 2018 and June 30, 2018, respectively)
  187   182 
Additional paid in capital  180,003   179,045 
Retained earnings  131,993   128,365 
Unearned compensation - ESOP  (12,594)  (13,083)
Accumulated other comprehensive loss, net of income taxes  (6,471)  (6,950)
Treasury stock, at cost (222,070 shares as of December 31, 2018 and no
shares as of June 30, 2018)
  (4,336)  - 
Total shareholders' equity  288,782   287,559 
Total liabilities and shareholders' equity $1,557,315  $1,480,187 


PCSB Financial Corporation and Subsidiaries

Consolidated Statements of Operations (unaudited)
(amounts in thousands, except share and per share data)

  Three Months Ended  Six Months Ended 
  December 31,  December 31, 
  2018  2017  2018  2017 
                 
Interest and dividend income                
Loans receivable $10,321  $9,171  $20,219  $17,989 
Investment securities  2,428   2,269   4,794   4,514 
Federal funds and other  491   217   836   451 
Total interest and dividend income  13,240   11,657   25,849   22,954 
Interest expense                
Deposits  2,375   1,307   4,431   2,574 
FHLB advances  121   164   210   318 
Total interest expense  2,496   1,471   4,641   2,892 
Net interest income  10,744   10,186   21,208   20,062 
Provision for loan losses  6   200   64   335 
Net interest income after provision for loan
losses
  10,738   9,986   21,144   19,727 
Noninterest income                
Fees and service charges  457   412   875   793 
Bank-owned life insurance  139   145   279   294 
Gains on sales of securities, net  55   -   55   173 
Other  269   135   352   146 
Total noninterest income  920   692   1,561   1,406 
Noninterest expense                
Salaries and employee benefits  5,444   4,870   10,584   9,730 
Occupancy and equipment  1,284   1,296   2,525   2,578 
Communications and data processing  482   479   954   970 
Professional fees  417   379   786   792 
Postage, printing, stationary and supplies  178   142   316   274 
FDIC assessment  124   64   217   142 
Advertising  131   179   218   344 
Amortization of intangible assets  28   33   56   65 
Other operating expenses  492   683   932   1,124 
Total noninterest expense  8,580   8,125   16,588   16,019 
Net income before income tax expense  3,078   2,553   6,117   5,114 
Income tax expense  754   2,551   1,464   3,356 
Net income $2,324  $2  $4,653  $1,758 
Earnings per common share:                
Basic $0.14  $-  $0.28  $0.10 
Diluted $0.14  $-  $0.28  $0.10 
Weighted average common shares:                
Basic  16,852,718   16,791,305   16,860,942   16,773,883 
Diluted  16,868,464   16,791,305   16,868,815   16,773,883 


PCSB Financial Corporation and Subsidiaries

Net Interest Margin Analysis (unaudited)
(dollar amounts in thousands)

                        
 Three Months Ended December 31, 
 2018  2017 
 Average
Balance
  Interest /
Dividends
  Average
Rate
  Average
Balance
  Interest /
Dividends
  Average
Rate
 
Assets:                       
Loans receivable$909,368  $10,321   4.53% $827,614  $9,171   4.43%
Investment securities 439,919   2,428   2.21   473,641   2,269   1.92 
Other interest-earning assets 85,874   491   2.27   54,388   217   1.58 
Total interest-earning assets 1,435,161   13,240   3.69   1,355,643   11,657   3.44 
Non-interest-earning assets 57,567           58,665         
Total assets$1,492,728          $1,414,308         
                        
Liabilities and equity:                       
NOW accounts$116,381   52   0.18  $112,147   48   0.17 
Money market accounts 101,078   280   1.10   29,014   22   0.30 
Savings accounts and escrow 416,687   252   0.24   509,888   309   0.24 
Time deposits 403,652   1,791   1.76   306,756   928   1.20 
Total interest-bearing deposits 1,037,798   2,375   0.91   957,805   1,307   0.54 
Federal Home Loan Bank advances 22,106   121   2.15   35,293   164   1.85 
Total interest-bearing liabilities 1,059,904   2,496   0.94   993,098   1,471   0.59 
Non-interest-bearing deposits 135,470           130,614         
Other non-interest-bearing liabilities 6,506           7,765         
Total liabilities 1,201,880           1,131,477         
Total shareholders' equity 290,848           282,831         
Total liabilities and shareholders' equity$1,492,728          $1,414,308         
                        
                        
Net interest income    $10,744          $10,186     
Interest rate spread (1)         2.75           2.85 
Net interest margin (2)         3.00           3.00 
Average interest-earning assets to interest-
bearing liabilities
 135.40%          136.51%        
                        
(1) Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities. 
(2) Net interest margin represents annualized net interest income divided by average interest-earning assets. 


PCSB Financial Corporation and Subsidiaries

Net Interest Margin Analysis (unaudited) - Continued
(dollar amounts in thousands)

                        
 Six Months Ended December 31, 
 2018  2017 
 Average
Balance
  Interest /
Dividends
  Average
Rate
  Average
Balance
  Interest /
Dividends
  Average
Rate
 
Assets:                       
Loans receivable$906,194  $20,219   4.46% $820,429  $17,989   4.38%
Investment securities 446,795   4,794   2.15   479,833   4,514   1.88 
Other interest-earning assets 76,548   836   2.17   61,822   451   1.45 
Total interest-earning assets 1,429,537   25,849   3.61   1,362,084   22,954   3.37 
Non-interest-earning assets 53,731           58,453         
Total assets$1,483,268          $1,420,537         
                        
Liabilities and equity:                       
NOW accounts$117,893   105   0.18  $113,458   97   0.17 
Money market accounts 79,891   419   1.04   29,557   43   0.29 
Savings accounts and escrow 439,615   540   0.25   514,102   633   0.25 
Time deposits 397,994   3,367   1.68   302,382   1,801   1.18 
Total interest-bearing deposits 1,035,393   4,431   0.85   959,499   2,574   0.53 
Federal Home Loan Bank advances 20,463   210   2.03   38,346   318   1.65 
Total interest-bearing liabilities 1,055,856   4,641   0.87   997,845   2,892   0.58 
Non-interest-bearing deposits 130,425           132,491         
Other non-interest-bearing liabilities 6,894           8,026         
Total liabilities 1,193,175           1,138,362         
Total shareholders' equity 290,093           282,175         
Total liabilities and shareholders' equity$1,483,268          $1,420,537         
                        
                        
Net interest income    $21,208          $20,062     
Interest rate spread (1)         2.74           2.79 
Net interest margin (2)         2.97           2.95 
Average interest-earning assets to interest-
bearing liabilities
 135.39%          136.50%        
  
(1) Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities. 
(2) Net interest margin represents annualized net interest income divided by average interest-earning assets. 


PCSB Financial Corporation and Subsidiaries

Condensed Financial Information (unaudited)
(amounts in thousands, except per share data)

                 
 As of 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 
Condensed Balance Sheets             
Cash and cash equivalents$143,119 $68,323 $62,145 $36,505 $77,106 
Total investment securities 452,463  441,748  458,655  473,651  470,328 
Loans receivable, net 904,377  905,093  902,336  886,718  838,120 
Other assets 57,356  59,331  57,051  60,095  57,714 
Total assets$1,557,315 $1,474,495 $1,480,187 $1,456,969 $1,443,268 
                
Total deposits and escrow$1,234,409 $1,158,102 $1,166,260 $1,095,581 $1,122,558 
Advances from Federal Home Loan Bank 26,279  18,810  18,841  68,872  30,720 
Other liabilities 7,845  7,706  7,527  7,856  7,579 
Total liabilities 1,268,533  1,184,618  1,192,628  1,172,309  1,160,857 
Total shareholders' equity 288,782  289,877  287,559  284,660  282,411 
Total liabilities and shareholders' equity$1,557,315 $1,474,495 $1,480,187 $1,456,969 $1,443,268 
                


 Quarter Ended Six Months Ended 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 December 31,
2018
 December 31,
2017
 
Condensed Income Statements                   
Interest income$13,240 $12,609 $13,358 $11,648 $11,657 $25,849 $22,954 
Interest expense 2,496  2,145  1,926  1,505  1,471  4,641  2,892 
Net interest income 10,744  10,464  11,432  10,143  10,186  21,208  20,062 
Provision for loan losses 6  58  25  54  200  64  335 
Noninterest income 920  641  601  512  692  1,561  1,406 
Noninterest expense 8,580  8,008  8,264  7,833  8,125  16,588  16,019 
Income before income tax expense 3,078  3,039  3,744  2,768  2,553  6,117  5,114 
Income tax expense 754  710  1,075  591  2,551  1,464  3,356 
Net income$2,324 $2,329 $2,669 $2,177 $2 $4,653 $1,758 
                      
Earnings per share:                     
Basic$0.14 $0.14 $0.16 $0.13 $0.00 $0.28 $0.10 
Diluted$0.14 $0.14 $0.16 $0.13 $0.00 $0.28 $0.10 


PCSB Financial Corporation and Subsidiaries

Selected Financial Data (unaudited)

 Quarter Ended Six Months Ended 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 December 31,
2018
 December 31,
2017
 
Performance Ratios (1):                   
Return on average assets 0.62% 0.63% 0.72% 0.62% 0.00% 0.63% 0.25%
Return on average equity 3.20% 3.22% 3.73% 3.06% 0.00% 3.21% 1.25%
Interest rate spread 2.75% 2.73% 3.04% 2.82% 2.85% 2.74% 2.79%
Net interest margin 3.00% 2.94% 3.23% 2.99% 3.00% 2.97% 2.95%
Adjusted Efficiency ratio (2) 74.12% 72.11% 71.17% 73.51% 73.82% 73.13% 74.78%
                      
Noninterest income to average assets 0.25% 0.17% 0.16% 0.14% 0.20% 0.21% 0.20%
Noninterest expense to average assets 2.30% 2.17% 2.24% 2.21% 2.30% 2.24% 2.26%
                      
Average interest-earning assets to average interest-bearing liabilities 135.40% 135.38% 134.26% 136.59% 136.51% 135.39% 136.50%
Average equity to average assets 19.48% 19.63% 19.41% 20.08% 20.00% 19.56% 19.86%
Dividend payout ratio (5) 22.42% 21.64% 18.88% 0.00% 0.00% 22.03% 0.00%


PCSB Financial Corporation and Subsidiaries

Selected Financial Data (unaudited) - Continued
(dollar amounts in thousands, except share and per share data)

 As of and for the quarter ended 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 
Loans to deposits 73.81% 78.49% 77.96% 81.50% 75.21%
                
Share Data:               
Shares outstanding 18,490,225  18,165,110  18,165,110  18,165,110  18,165,110 
Book value per common share$15.62 $15.96 $15.83 $15.67 $15.55 
Tangible book value per common share (3)$15.27 $15.60 $15.47 $15.31 $15.18 
                
Asset Quality Ratios:               
Non-performing assets$4,148 $6,384 $6,462 $7,307 $8,191 
Allowance for loan losses as a percent
of total loans receivable
 0.54% 0.54% 0.54% 0.52% 0.53%
Total valuation adjustment as a percent
of total gross loans (6)
 0.69% 0.70% 0.71% 0.70% 0.74%
Allowance for loan losses as a percent
of non-performing loans
 138.23% 88.08% 81.71% 64.54% 54.58%
Non-performing loans as a percent of
total loans receivable, net
 0.39% 0.62% 0.66% 0.80% 0.97%
Non-performing assets as a percent of
total assets
 0.27% 0.43% 0.44% 0.50% 0.57%
                
Net charge-offs (recoveries)$21 $3 $(255)$(99)$997 
Net charge-offs (recoveries) to average
outstanding loans during the period (1)
 0.00% 0.00% (0.11%) (0.05%) 0.48%
                
Capital Ratios (4):               
Tier 1 capital (to adjusted total assets) 13.78% 13.85% 13.61% 13.97% 13.84%
Common equity Tier 1 capital (to risk-
weighted assets)
 20.66% 21.10% 21.11% 21.16% 21.64%
Tier 1 capital (to risk-weighted assets) 20.66% 21.10% 21.11% 21.16% 21.64%
Total capital (to risk-weighted assets) 21.15% 21.61% 21.62% 21.65% 22.13%
                
(1) Performance ratios are annualized. 
(2) Adjusted efficiency ratio is a non-GAAP measure and is defined as noninterest expense, less certain nonrecurring items, divided by operating revenue, which is equal to net interest income plus non-interest income excluding certain nonrecurring items. In our judgment, the adjustments made to operating revenue allow investors and analysts to better assess our operating expenses in relation to our core operating revenue by removing the impact of certain one-time items and other discrete items that are unrelated to our core business. Reconciliations of GAAP to non-GAAP measures appear at the end of this release. 
(3) Tangible book value per share is a non-GAAP measure and equals total shareholders’ equity, less goodwill and other intangible assets, divided by shares outstanding.  We believe this disclosure may be meaningful to those investors who seek to evaluate our equity without giving effect to goodwill and other intangible assets. Reconciliations of GAAP to non-GAAP measures appear at the end of this release. 
(4) Represents Bank ratios. 


PCSB Financial Corporation and Subsidiaries

Selected Financial Data (unaudited) - Continued
(dollar amounts in thousands)

(5) Dividends declared per share divided by net income per share.
(6) Loans acquired in 2015 as part of the CMS Bancorp. Inc./CMS Bank acquisition were recorded at their estimated fair value at the acquisition date and did not include a carry-over of the related pre-acquisition allowance for loan losses. Total valuation adjustments equal the allowance for loan losses plus the remaining discounts on acquired loans. We believe this ratio provides investors a more meaningful comparison to periods presented prior to the 2015 acquisition, as well as to our peers. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

PCSB Financial Corporation and Subsidiaries
Loan and Deposit Portfolio (unaudited)
(amounts in thousands)

 As of 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 
Mortgage loans:               
Residential mortgages$248,575 $249,894 $250,578 $253,847 $213,716 
Commercial mortgage 499,930  495,944  495,265  484,810  481,169 
Construction 16,023  16,890  17,352  16,098  16,379 
Net deferred loan origination costs 842  859  1,041  1,203  210 
Total mortgage loans 765,370  763,587  764,236  755,958  711,474 
Commercial and consumer loans:               
Commercial loans 107,899  110,196  104,135  96,096  89,941 
Home equity credit lines 35,029  35,191  37,395  38,220  40,158 
Consumer and overdrafts 321  344  745  344  251 
Net deferred loan origination costs 701  734  729  724  767 
Total commercial and consumer loans 143,950  146,465  143,004  135,384  131,117 
Total loans receivable 909,320  910,052  907,240  891,342  842,591 
Allowance for loan loss (4,943) (4,959) (4,904) (4,624) (4,471)
Loans receivable, net$904,377 $905,093 $902,336 $886,718 $838,120 
                


 As of 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 
Demand deposits$162,113 $131,024 $131,883 $127,319 $150,830 
Now accounts 123,251  121,449  117,875  114,899  118,462 
Money market accounts 121,146  79,266  49,885  40,374  31,021 
Savings 397,460  425,189  465,441  482,968  502,469 
Time deposits 421,354  396,193  392,373  322,425  311,547 
Total deposits$1,225,324 $1,153,121 $1,157,457 $1,087,985 $1,114,329 
                


PCSB Financial Corporation and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures (unaudited)
(dollar amounts in thousands, except share and per share data)

  Quarter Ended Six Months Ended 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 December 31,
2018
 December 31,
2017
 
Computation of Adjusted Net Income and Earnings Per Share       
Net income applicable to common stock$2,324 $2,329 $2,669 $2,177 $2 $4,653 $1,758 
                      
Adjustments (1):                     
Losses on other receivables 68  -  292  -  132  68  132 
Nonaccrual loan interest earned -  -  (694) -  (94) -  (94)
Gain on sale of securities (42) -  (49) -  -  (42) (114)
Gain on sale of bank premises (118) -  -  -  -  (118) - 
Deferred tax re-measurement charge -  -  -  (182) 1,752  -  1,752 
Adjusted net income$2,232 $2,329 $2,218 $1,995 $1,792 $4,561 $3,434 
                      
Average number of common shares outstanding:             
Basic 16,852,718  16,869,100  16,844,747  16,820,726  16,791,305  16,860,942  16,773,883 
Diluted 16,868,464  16,869,100  16,844,747  16,820,726  16,791,305  16,868,815  16,773,883 
Adjusted earnings per common share:             
Basic$0.13 $0.14 $0.13 $0.12 $0.11 $0.27 $0.21 
Diluted$0.13 $0.14 $0.13 $0.12 $0.11 $0.27 $0.21 
                      
(1) Amounts included in income before income tax expense are presented net of tax.       


PCSB Financial Corporation and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures (unaudited) - Continued
(dollar amounts in thousands, except share and per share data)

 Quarter Ended Six Months Ended 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 December 31,
2018
 December 31,
2017
 
Computation of Efficiency Ratio          
Noninterest expense$8,580 $8,008 $8,264 $7,833 $8,125 $16,588 $16,019 
Adjustments:                     
Losses on other receivables (90) -  (370) -  (200) (90) (200)
Adjusted noninterest expense$8,490 $8,008 $7,894 $7,833 $7,925 $16,498 $15,819 
                      
Net interest income$10,744 $10,464 $11,432 $10,143 $10,186 $21,208 $20,062 
Noninterest income 920  641  601  512  692  1,561  1,406 
Total revenue 11,664  11,105  12,033  10,655  10,878  22,769  21,468 
Adjustments:                     
Nonaccrual loan interest earned -  -  (879) -  (142) -  (142)
Gain on sale of securities (55) -  (63) -  -  (55) (173)
Gain on sale of bank premises (155) -  -  -  -  (155) - 
Adjusted operating revenue$11,454 $11,105 $11,091 $10,655 $10,736 $22,559 $21,153 
                      
Efficiency ratio 73.56% 72.11% 68.68% 73.51% 74.69% 72.85% 74.62%
Adjusted efficiency ratio 74.12% 72.11% 71.17% 73.51% 73.82% 73.13% 74.78%


PCSB Financial Corporation and Subsidiaries

Reconciliation of GAAP to Non-GAAP Measures (unaudited) - Continued
(dollar amounts in thousands, except share and per share data)

 As of 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 
Computation of Tangible Book Value per Common Share    
Total shareholders' equity$288,782 $289,877 $287,559 $284,660 $282,411 
Adjustments:               
Preferred stock -  -  -  -  - 
Common shareholders' equity 288,782  289,877  287,559  284,660  282,411 
Adjustments:               
Goodwill (6,106) (6,106) (6,106) (6,106) (6,106)
Other intangible assets (376) (405) (433) (463) (495)
Tangible common shareholders' equity$282,300 $283,366 $281,020 $278,091 $275,810 
                
Common shares outstanding 18,490,225  18,165,110  18,165,110  18,165,110  18,165,110 
                
Book value per share$15.62 $15.96 $15.83 $15.67 $15.55 
Adjustments:               
Effects of intangible assets (0.35) (0.36) (0.36) (0.36) (0.37)
                
Tangible book value per common share$15.27 $15.60 $15.47 $15.31 $15.18 


 Quarter Ended 
 December 31,
2018
 September 30,
2018
 June 30,
2018
 March 31,
2018
 December 31,
2017
 
Computation of valuation adjustment          
Allowance for Loan losses$4,943 $4,959 $4,904 $4,624 $4,471 
Add: Purchase accounting marks 1,349  1,442  1,538  1,630  1,730 
Total valuation adjustments$6,292 $6,401 $6,442 $6,254 $6,201 
Total gross loans$909,320 $910,052 $907,240 $891,342 $842,591 
Total valuation adjustments as a percent of total gross loans 0.69% 0.70% 0.71% 0.70% 0.74%


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Source: PCSB Financial Corporation