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PCSB Financial Corporation Announces Fourth Fiscal Quarter and Year End Financial Results and Declares Quarterly Cash Dividend

Company Release - 8/1/2019 8:30 AM ET

YORKTOWN HEIGHTS, N.Y., Aug. 01, 2019 (GLOBE NEWSWIRE) -- PCSB Financial Corporation (the “Company”) (NASDAQ: PCSB), parent of PCSB Bank (the "Bank"), today announced its results for the three months and year ended June 30, 2019. For the three months ended June 30, 2019, net income was $1.7 million, or $0.10 per share, compared to $2.0 million, or $0.12 per share, for the three months ended March 31, 2019 and $2.7 million, or $0.16 per share, for the three months ended June 30, 2018. Provision for loan losses was $737,000, or $0.03 per share, net of tax, for the three months ended June 30, 2019, driven by a $157.4 million increase in net loans during the quarter. Net income was $8.3 million, or $0.50 per share, for the year ended June 30, 2019 compared to $6.6 million, or $0.39 per share, for the year ended June 30, 2018.

On a non-GAAP basis, which excludes certain nonrecurring items, the Company recorded net income of $1.7 million, or $0.10 per share for the three months ended June 30, 2019 as compared to net income of $2.0 million, or $0.12 per share for the three months ended March 31, 2019 and $2.2 million, or $0.13 per share, for the three months ended June 30, 2018. On a non-GAAP basis, the Company recorded net income of $8.2 million, or $0.50 per share, for the year ended June 30, 2019 compared to $7.6 million, or $0.46 per share, for the year ended June 30, 2018. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

In conjunction with grants made under the stockholder-approved 2018 Equity Incentive Plan, the Company recorded $829,000, or $627,000 net of taxes, of stock-based compensation expense in the current and prior quarter. No such expense was recorded in the prior year quarter. This additional expense reduced earnings per share by $0.04 in the current and prior quarter and had no impact in the prior year quarter as the plan was not in effect. Stock-based compensation expense for the year ended June 30, 2019 was $2.1 million, or $1.6 million net of taxes, or $0.10 per share, compared to no such expense in the year ended June 30, 2018.

President’s Comments

Commenting on the Company’s results, Joseph D. Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation, said, “I am pleased to report continued progress and strong growth in our core business as we complete our second fiscal year as a public company. Strong loan growth in the fourth quarter has resulted in a year over year 21.1% increase in total loan receivables while driving increased non-interest income through swap fees. Although the fourth quarter earnings were impacted by the loan loss provision on the growth in the loan portfolio, the increase in loans is expected to have a positive impact on future earnings. In addition, asset quality remains extremely strong as the ratio of non-performing assets to total assets decreased to 0.24% at June 30, 2019 from 0.43% at June 30, 2018.  We are also pleased to report that although our year over year net interest margin decreased 7 basis points to 2.96% from 3.03%, our linked quarter’s net interest margin held steady at 2.94%. During the fourth fiscal quarter we also announced the commencement of our second share repurchase program as we continue to deploy our excess capital. As we move forward in our third year as a public company, we hope to continue to build on these results in order to create value for our shareholders.”

Year End Results

Net income totaled $8.3 million for the year ended June 30, 2019, an increase of $1.7 million, or 26.0%, compared to $6.6 million for the year ended June 30, 2018. The increase is primarily due to a $1.1 million increase in net interest income, a $2.3 million decrease in income tax expense, and a $583,000 increase in noninterest income, partially offset by a $1.9 million increase in noninterest expense and an increase of $394,000 in the provision for loan losses. The increase in net interest income was primarily due to a $70.1 million, or 5.1%, increase in average interest earning assets, partially offset by a 7 basis point decrease in net interest margin. Despite continued asset growth and a higher yielding asset mix, which resulted in a 21 basis point increase in the yield on interest earning assets, the margin has been impacted by rising funding costs due to higher short-term interest rates along with competitive pricing, which caused a 37 basis point increase in the average cost of interest bearing liabilities. The income tax expense decrease is a result of a $1.6 million one-time deferred tax remeasurement charge recorded in the prior year, and a lower effective tax rate in the current year, both a result of federal tax reform legislation enacted in December 2017. The increase in noninterest income is largely due to a $507,000 increase in swap income. Despite continued improvements in asset quality, which resulted in minimal charge-offs and a decrease in the ratio of non-performing loans as a percent of total loans receivable from 0.66% as of June 30, 2018 to 0.25% as of June 30, 2019, a $190.8 million increase in the loan portfolio resulted in a provision for loan losses of $808,000 for the year, an increase of $394,000 compared to the prior year. As of June 30, 2019, the allowance for loan losses as a percent of total loans receivable was 0.52%, a decrease from 0.54% as of June 30, 2018.

Income Statement Summary

Net interest income decreased $673,000, or 5.9%, to $10.8 million for the three months ended June 30, 2019, compared to the same period in 2018 and increased $22,000 from the previous quarter. The decrease in net interest income compared to the prior year period is primarily a result of a 29 basis point decrease in net interest margin, partially offset by a $45.8 million, or 3.2%, increase in average interest earning assets. Included in prior year quarter net interest income is $879,000 of interest income recorded from the pay-off of two nonaccrual loans. Excluding this interest income, net interest margin for the quarter ended June 30, 2018 would have been 2.98%. Despite a 29 basis point increase in the yield on interest earning assets (adjusted for the impact of the nonaccrual loan interest discussed above), the cost of interest-bearing deposits increased 47 basis points to 1.12% for the three months ended June 30, 2019 compared to 0.65% for the three months ended June 30, 2018. The Company has experienced a shift in the deposit mix as some customers in lower yielding saving products moved to higher rate money market and time deposit accounts. The increase in average interest earning assets is primarily due to a $69.7 million increase in average loans, partially offset by a $28.3 million decrease in average investment securities.

Net interest income was largely unchanged compared to the prior quarter as a result of minimal growth in average interest earning assets and an unchanged net interest margin. Net interest margin remained at 2.94% as a 6 basis point increase in the yield on assets, driven by a shift from lower yielding cash and cash equivalent and investment securities into higher yielding loans, was offset by an 8 basis point increase in the cost of interest-bearing liabilities.

The provision for loan losses was $737,000 for the three months ended June 30, 2019 compared to $7,000 in the prior quarter and $25,000 for the same period in 2018. Charge-offs, net of recoveries, were $18,000 for the three months ended June 30, 2019 compared to $5,000 for the three months ended March 31, 2019 and recoveries, net of charge-offs, of $255,000 for the three months ended June 30, 2018.  Loans classified as substandard or doubtful decreased $559,000, or 6.2%, to $8.5 million at June 30, 2019 from $9.0 million at March 31, 2019 and decreased $6.9 million, or 45.0%, from $15.4 million at June 30, 2018. Non-performing loans as a percent of total loans receivable was 0.25% as of June 30, 2019, a decrease from 0.30% as of March 31, 2019 and 0.66% as of June 30, 2018.

Noninterest income increased $361,000 to $962,000 for the three months ended June 30, 2019 compared to the same period in 2018, primarily due to increases of $361,000 in swap income and $68,000 in fees and services charges, partially offset by a $56,000 decrease in gains on the sale of securities. Noninterest income increased $383,000 from the three months ended March 31, 2019, primarily due to a $361,000 increase in swap income.

Noninterest expense increased $444,000 to $8.7 million for the three months ended June 30, 2019 compared to the same period in 2018 and increased $10,000 compared to the three months ended March 31, 2019. The $444,000 increase from the prior year period was caused primarily by $829,000 of stock-based compensation expense recorded in the current quarter, compared to no such expense in the prior year period, partially offset by a $370,000 loss on a receivable recorded in the prior year quarter and a $15,000 decrease in all other noninterest expenses.

The effective income tax rate was 26.2% for the three months ended June 30, 2019, as compared to 23.9% for the three months ended March 31, 2019 and 28.7% for the three months ended June 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 $157.4 million to $1.64 billion at June 30, 2019 from $1.48 billion at June 30, 2018.  This increase was primarily due to an increase of $190.8 million in net loans receivable, partially offset by a decrease of $40.9 million in total investment securities. The $190.8 million increase in loans was the result of $213.6 million of originations and $94.5 million of loan purchases, partially offset by $117.3 million of net amortization and repayments on the remaining portfolio. Commercial mortgages increased $156.1 million or 31.5%, commercial loans increased $29.5 million, or 28.3%, and residential mortgages increased $14.6 million, or 5.8%, with net decreases in all other loan types of $9.4 million.

Total liabilities increased $163.6 million to $1.36 billion at June 30, 2019 from $1.19 billion at June 30, 2018.  This increase was primarily due to increases of $92.4 million in FHLB advances and $68.4 million, or 5.9%, in total deposits.

Total shareholders’ equity decreased $6.3 million to $281.3 million at June 30, 2019 from $287.6 million at June 30, 2018.  This decrease was primarily due to the repurchase of $18.3 million in common stock and $2.2 million of cash dividends declared, partially offset by net income of $8.3 million, $4.1 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period, and other comprehensive income of $1.9 million. During the current quarter, the Company announced its second stock repurchase plan, under which up to 890,021 shares may be repurchased, representing 5% of its outstanding shares of common stock.

At June 30, 2019, the Company’s book value per share and tangible book value per share were $15.80 and $15.44, 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 June 30, 2019, the Bank was considered “well capitalized” under applicable regulatory guidelines.

Dividend

The Board of Directors declared a regular quarterly cash dividend of $0.04 per share. The dividend is payable on or about August 30, 2019 to stockholders of record on August 16, 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)

  June 30,  June 30, 
  2019  2018 
         
ASSETS        
Cash and due from banks $58,756  $60,684 
Federal funds sold  1,273   1,461 
Cash and cash equivalents  60,029   62,145 
Held to maturity debt securities, at amortized cost
  (fair value of $346,243 and $343,188, respectively)
  345,545   353,183 
Available for sale debt securities, at fair value  72,228   105,472 
Total investment securities  417,773   458,655 
Loans receivable, net of allowance for loan losses of $5,664 and $4,904, respectively  1,093,121   902,336 
Accrued interest receivable  4,797   4,358 
Federal Home Loan Bank stock  6,255   2,050 
Premises and equipment, net  11,802   11,598 
Deferred tax asset, net  2,478   2,622 
Foreclosed real estate  1,158   460 
Bank-owned life insurance  24,291   23,747 
Goodwill  6,106   6,106 
Other intangible assets  323   433 
Other assets  9,446   5,677 
Total assets $1,637,579  $1,480,187 
LIABILITIES AND SHAREHOLDERS' EQUITY        
Interest bearing deposits $1,084,442  $1,025,574 
Non-interest bearing deposits  141,379   131,883 
Total deposits  1,225,821   1,157,457 
Mortgage escrow funds  9,355   8,803 
Advances from Federal Home Loan Bank  111,216   18,841 
Other liabilities  9,880   7,527 
Total liabilities  1,356,272   1,192,628 
Commitments and contingencies  -   - 
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of June 30, 2019 and June 30, 2018)  -   - 
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 and 18,165,110 shares issued, and 17,804,039 and 18,165,110 shares outstanding as of June 30, 2019 and June 30, 2018, respectively)  187   182 
Additional paid in capital  182,129   179,045 
Retained earnings  134,500   128,365 
Unearned compensation - ESOP  (12,114)  (13,083)
Accumulated other comprehensive loss, net of income taxes  (5,090)  (6,950)
Treasury stock, at cost (908,256 shares as of June 30, 2019 and no shares as of June 30, 2018)  (18,305)  - 
Total shareholders' equity  281,307   287,559 
Total liabilities and shareholders' equity $1,637,579  $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  Year Ended 
  June 30,  June 30, 
  2019  2018  2019  2018 
Interest and dividend income                
Loans receivable $10,987  $10,706  $41,619  $37,798 
Investment securities  2,609   2,384   10,022   9,266 
Federal funds and other  356   268   1,806   896 
Total interest and dividend income  13,952   13,358   53,447   47,960 
Interest expense                
Deposits  3,005   1,600   10,177   5,554 
FHLB advances  188   326   566   769 
Total interest expense  3,193   1,926   10,743   6,323 
Net interest income  10,759   11,432   42,704   41,637 
Provision for loan losses  737   25   808   414 
Net interest income after provision for loan losses  10,022   11,407   41,896   41,223 
Noninterest income                
Fees and service charges  452   384   1,763   1,529 
Bank-owned life insurance  134   138   544   568 
Swap income  361   -   507   - 
Gains on sales of securities, net  7   63   62   236 
Other  8   16   226   186 
Total noninterest income  962   601   3,102   2,519 
Noninterest expense                
Salaries and employee benefits  5,270   4,889   21,611   19,419 
Occupancy and equipment  1,320   1,289   5,185   5,193 
Communications and data processing  523   527   1,953   1,974 
Professional fees  369   452   1,551   1,709 
Postage, printing, stationary and supplies  132   143   586   578 
FDIC assessment  99   93   421   328 
Advertising  -   -   349   456 
Loss on receivable  -   370   90   570 
Amortization of intangible assets  25   29   110   126 
Other operating expenses  970   472   2,138   1,763 
Total noninterest expense  8,708   8,264   33,994   32,116 
Net income before income tax expense  2,276   3,744   11,004   11,626 
Income tax expense  597   1,075   2,686   5,022 
Net income $1,679  $2,669  $8,318  $6,604 
Earnings per common share:                
Basic $0.10  $0.16  $0.50  $0.39 
Diluted $0.10  $0.16  $0.50  $0.39 
Weighted average common shares:                
Basic  16,033,505   16,844,747   16,492,760   16,802,894 
Diluted  16,099,846   16,844,747   16,527,117   16,802,894 

PCSB Financial Corporation and Subsidiaries
Net Interest Margin Analysis (unaudited)
(dollar amounts in thousands)

                        
 Three Months Ended June 30, 
 2019  2018 
 Average Balance  Interest / Dividends  Average Rate  Average Balance  Interest / Dividends  Average Rate 
Assets:                       
Loans receivable$970,707  $10,987   4.53% $900,998  $10,706   4.75%
Investment securities 436,903   2,609   2.39   465,206   2,384   2.05 
Other interest-earning assets 55,988   356   2.55   51,605   268   2.09 
Total interest-earning assets 1,463,598   13,952   3.81   1,417,809   13,358   3.77 
Non-interest-earning assets 58,295           57,004         
Total assets$1,521,893          $1,474,813         
                        
Liabilities and equity:                       
NOW accounts$120,577   53   0.18  $115,711   51   0.18 
Money market accounts 143,576   428   1.20   46,104   70   0.61 
Savings accounts and escrow 373,238   239   0.26   484,463   293   0.24 
Time deposits 434,073   2,285   2.11   343,027   1,186   1.39 
Total interest-bearing deposits 1,071,464   3,005   1.12   989,305   1,600   0.65 
Federal Home Loan Bank advances 29,283   188   2.57   66,740   326   1.96 
Total interest-bearing liabilities 1,100,747   3,193   1.16   1,056,045   1,926   0.73 
Non-interest-bearing deposits 133,706           125,898         
Other non-interest-bearing liabilities 7,403           6,671         
Total liabilities 1,241,856           1,188,614         
Total shareholders' equity 280,037           286,199         
Total liabilities and shareholders' equity$1,521,893          $1,474,813         
                        
                        
Net interest income    $10,759          $11,432     
Interest rate spread (1)         2.65           3.04 
Net interest margin (2)         2.94           3.23 
Average interest-earning assets to interest-bearing liabilities 132.96%          134.26%        
                        
(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)

                        
 Year Ended June 30, 
 2019  2018 
 Average Balance  Interest / Dividends  Average Rate  Average Balance  Interest / Dividends  Average Rate 
Assets:                       
Loans receivable$924,182  $41,619   4.50% $846,353  $37,798   4.47%
Investment securities 444,024   10,022   2.26   474,201   9,266   1.95 
Other interest-earning assets 76,950   1,806   2.35   54,528   896   1.64 
Total interest-earning assets 1,445,156   53,447   3.70   1,375,082   47,960   3.49 
Non-interest-earning assets 56,075           57,696         
Total assets$1,501,231          $1,432,778         
                        
Liabilities and equity:                       
NOW accounts$118,286   210   0.18  $113,952   197   0.17 
Money market accounts 107,449   1,216   1.13   36,917   163   0.44 
Savings accounts and escrow 411,251   1,019   0.25   502,310   1,223   0.24 
Time deposits 414,676   7,732   1.86   315,652   3,971   1.26 
Total interest-bearing deposits 1,051,662   10,177   0.97   968,831   5,554   0.57 
Federal Home Loan Bank advances 24,117   566   2.34   42,719   769   1.80 
Total interest-bearing liabilities 1,075,779   10,743   1.00   1,011,550   6,323   0.63 
Non-interest-bearing deposits 132,057           130,196         
Other non-interest-bearing liabilities 8,108           7,360         
Total liabilities 1,215,944           1,149,106         
Total shareholders' equity 285,287           283,672         
Total liabilities and shareholders' equity$1,501,231          $1,432,778         
                        
                        
Net interest income    $42,704          $41,637     
Interest rate spread (1)         2.70           2.86 
Net interest margin (2)         2.96           3.03 
Average interest-earning assets to interest-bearing liabilities 134.34%          135.94%        
  
(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 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 
Condensed Balance Sheets             
Cash and cash equivalents$60,029 $87,105 $143,119 $68,323 $62,145 
Total investment securities 417,773  440,014  452,463  441,748  458,655 
Loans receivable, net 1,093,121  935,680  904,377  905,093  902,336 
Other assets 66,656  60,959  57,356  59,331  57,051 
Total assets$1,637,579 $1,523,758 $1,557,315 $1,474,495 $1,480,187 
                
Total deposits and escrow$1,235,176 $1,209,868 $1,234,409 $1,158,102 $1,166,260 
Advances from Federal Home Loan Bank 111,216  26,248  26,279  18,810  18,841 
Other liabilities 9,880  9,326  7,845  7,706  7,527 
Total liabilities 1,356,272  1,245,442  1,268,533  1,184,618  1,192,628 
Total shareholders' equity 281,307  278,316  288,782  289,877  287,559 
Total liabilities and shareholders' equity$1,637,579 $1,523,758 $1,557,315 $1,474,495 $1,480,187 
                


     
  Quarter Ended Year Ended 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 June 30,
2019
 June 30,
2018
 
Condensed Income Statements                   
Interest income$13,952 $13,646 $13,240 $12,609 $13,358 $53,447 $47,960 
Interest expense 3,193  2,909  2,496  2,145  1,926  10,743  6,323 
Net interest income 10,759  10,737  10,744  10,464  11,432  42,704  41,637 
Provision for loan losses 737  7  6  58  25  808  414 
Noninterest income 962  579  920  641  601  3,102  2,519 
Noninterest expense 8,708  8,698  8,580  8,008  8,264  33,994  32,116 
Income before income tax expense 2,276  2,611  3,078  3,039  3,744  11,004  11,626 
Income tax expense 597  625  754  710  1,075  2,686  5,022 
Net income$1,679 $1,986 $2,324 $2,329 $2,669 $8,318 $6,604 
                      
Earnings per share:                     
Basic$0.10 $0.12 $0.14 $0.14 $0.16 $0.50 $0.39 
Diluted$0.10 $0.12 $0.14 $0.14 $0.16 $0.50 $0.39 

PCSB Financial Corporation and Subsidiaries
Selected Financial Data (unaudited)


 Quarter Ended Year Ended 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 June 30,
2019
 June 30,
2018
 
Performance Ratios (1):                   
Return on average assets 0.44% 0.52% 0.62% 0.63% 0.72% 0.55% 0.46%
Return on average equity 2.40% 2.83% 3.20% 3.22% 3.73% 2.92% 2.33%
Interest rate spread 2.65% 2.67% 2.75% 2.73% 3.04% 2.70% 2.86%
Net interest margin 2.94% 2.94% 3.00% 2.94% 3.23% 2.96% 3.03%
Adjusted Efficiency ratio (2) 74.34% 76.86% 74.12% 72.11% 71.17% 74.37% 73.54%
                      
Noninterest income to average assets 0.25% 0.15% 0.25% 0.17% 0.16% 0.21% 0.18%
Noninterest expense to average assets 2.29% 2.29% 2.30% 2.17% 2.24% 2.26% 2.24%
                      
Average interest-earning assets to average interest-bearing liabilities 132.96% 133.68% 135.40% 135.38% 134.26% 134.34% 135.94%
Average equity to average assets 18.40% 18.52% 19.48% 19.63% 19.41% 19.00% 19.80%
Dividend payout ratio (3) 39.43% 24.97% 22.42% 21.64% 18.88% 26.24% 7.63%


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 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 
Loans to deposits 89.17% 77.83% 73.81% 78.49% 77.96%
                
Share Data:               
Shares outstanding 17,804,039  17,804,039  18,490,225  18,165,110  18,165,110 
Book value per common share$15.80 $15.63 $15.62 $15.96 $15.83 
Tangible book value per common share (4)$15.44 $15.27 $15.27 $15.60 $15.47 
                
Asset Quality Ratios:               
Non-performing loans receivable$2,727 $2,847 $3,576 $5,630 $6,002 
Non-performing assets$3,885 $3,500 $4,148 $6,384 $6,462 
Allowance for loan losses as a percent of total loans receivable 0.52% 0.53% 0.54% 0.54% 0.54%
Total valuation adjustment as a percent of total gross loans receivable (5) 0.62% 0.66% 0.69% 0.70% 0.71%
Allowance for loan losses as a percent of non-performing loans receivable 207.70% 173.67% 138.23% 88.08% 81.71%
Non-performing loans as a percent of total loans receivable, net 0.25% 0.30% 0.39% 0.62% 0.66%
Non-performing assets as a percent of total assets 0.24% 0.23% 0.27% 0.43% 0.44%
                
Net charge-offs (recoveries)$18 $5 $22 $3 $(255)
Net charge-offs (recoveries) to average outstanding loans during the period (1) 0.01% 0.00% 0.00% 0.00% (0.11%)
                
Capital Ratios (6):               
Tier 1 capital (to adjusted total assets) 13.81% 13.71% 13.78% 13.80% 13.61%
Common equity Tier 1 capital (to risk-weighted assets) 17.96% 20.47% 20.73% 21.17% 21.11%
Tier 1 capital (to risk-weighted assets) 17.96% 20.47% 20.73% 21.17% 21.11%
Total capital (to risk-weighted assets) 18.45% 20.96% 21.23% 21.68% 21.62%
                
(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) Dividends declared per share divided by net income per share. 
(4) 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. 

 
PCSB Financial Corporation and Subsidiaries

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

 (5) 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.
(6) Represents Bank ratios.


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

 As of 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 
Mortgage loans:               
Residential mortgages$265,167 $261,970 $248,575 $249,894 $250,578 
Commercial mortgage 651,396  499,284  499,930  495,944  495,265 
Construction 13,231  16,302  16,023  16,890  17,352 
Net deferred loan origination costs 1,031  843  842  859  1,041 
Total mortgage loans 930,825  778,399  765,370  763,587  764,236 
Commercial and consumer loans:               
Commercial loans 133,614  126,514  107,899  110,196  104,135 
Home equity credit lines 33,204  34,525  35,029  35,191  37,395 
Consumer and overdrafts 365  459  321  344  745 
Net deferred loan origination costs 777  728  701  734  729 
Total commercial and consumer loans 167,960  162,226  143,950  146,465  143,004 
Total loans receivable 1,098,785  940,625  909,320  910,052  907,240 
Allowance for loan loss (5,664) (4,945) (4,943) (4,959) (4,904)
Loans receivable, net$1,093,121 $935,680 $904,377 $905,093 $902,336 
                
                


 As of 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 
Demand deposits$141,379 $137,899 $162,113 $131,024 $131,883 
Now accounts 123,069  120,353  123,251  121,449  117,875 
Money market accounts 148,134  137,197  121,146  79,266  49,885 
Savings 357,844  379,550  397,460  425,189  465,441 
Time deposits 455,395  427,194  421,354  396,193  392,373 
Total deposits$1,225,821 $1,202,193 $1,225,324 $1,153,121 $1,157,457 
                



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 Year Ended 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 June 30,
2019
 June 30,
2018
 
Computation of Adjusted Net Income and Earnings Per Share       
Net income applicable to common stock$1,679 $1,986 $2,324 $2,329 $2,669 $8,318 $6,604 
                      
Adjustments (1):                     
Losses on other receivables -  -  68  -  292  68  424 
Nonaccrual loan interest earned -  -  -  -  (694) -  (788)
Gain on sale of securities (5) -  (42) -  (49) (47) (163)
Gain on sale of bank premises -  -  (118) -  -  (118) - 
Deferred tax re-measurement charge -  -  -  -  -  -  1,570 
Adjusted net income$1,674 $1,986 $2,232 $2,329 $2,218 $8,221 $7,647 
                      
Average number of common shares outstanding:             
Basic 16,033,505  16,204,393  16,852,718  16,869,100  16,844,747  16,492,760  16,802,894 
Diluted 16,099,846  16,261,755  16,868,464  16,869,100  16,844,747  16,527,117  16,802,894 
GAAP Earnings per share:                     
Basic$0.10 $0.12 $0.14 $0.14 $0.16 $0.50 $0.39 
Diluted$0.10 $0.12 $0.14 $0.14 $0.16 $0.50 $0.39 
Adjusted earnings per common share:             
Basic$0.10 $0.12 $0.13 $0.14 $0.13 $0.50 $0.46 
Diluted$0.10 $0.12 $0.13 $0.14 $0.13 $0.50 $0.46 
                      
(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 Year Ended 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 June 30,
2019
 June 30,
2018
 
Computation of Efficiency Ratio          
Noninterest expense$8,708 $8,698 $8,580 $8,008 $8,264 $33,994 $32,116 
Adjustments:                     
Losses on other receivables -  -  (90) -  (370) (90) (570)
Adjusted noninterest expense$8,708 $8,698 $8,490 $8,008 $7,894 $33,904 $31,546 
                      
Net interest income$10,759 $10,737 $10,744 $10,464 $11,432 $42,704 $41,637 
Noninterest income 962  579  920  641  601  3,102  2,519 
Total revenue 11,721  11,316  11,664  11,105  12,033  45,806  44,156 
Adjustments:                     
Nonaccrual loan interest earned -  -  -  -  (879) -  (1,021)
Gain on sale of securities (7) -  (55) -  (63) (62) (236)
Gain on sale of bank premises -  -  (155) -  -  (155) - 
Adjusted operating revenue$11,714 $11,316 $11,454 $11,105 $11,091 $45,589 $42,899 
                      
Efficiency ratio (GAAP) 74.29% 76.86% 73.56% 72.11% 68.68% 74.21% 72.73%
Adjusted efficiency ratio (Non-GAAP) 74.34% 76.86% 74.12% 72.11% 71.17% 74.37% 73.54%



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 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 
Computation of Tangible Book Value per Common Share    
Total shareholders' equity$281,307 $278,316 $288,782 $289,877 $287,559 
Adjustments:               
Preferred stock -  -  -  -  - 
Common shareholders' equity 281,307  278,316  288,782  289,877  287,559 
Adjustments:               
Goodwill (6,106) (6,106) (6,106) (6,106) (6,106)
Other intangible assets (323) (348) (376) (405) (433)
Tangible common shareholders' equity$274,878 $271,862 $282,300 $283,366 $281,020 
                
Common shares outstanding 17,804,039  17,804,039  18,490,225  18,165,110  18,165,110 
                
Book value per share (GAAP)$15.80 $15.63 $15.62 $15.96 $15.83 
Adjustments:               
Effects of intangible assets (0.36) (0.36) (0.35) (0.36) (0.36)
                
Tangible book value per common share (Non-GAAP)$15.44 $15.27 $15.27 $15.60 $15.47 


   
 Quarter Ended 
 June 30,
2019
 March 31,
2019
 December 31,
2018
 September 30,
2018
 June 30,
2018
 
Computation of valuation adjustment          
Allowance for loan losses$5,664 $4,945 $4,943 $4,959 $4,904 
Add: Purchase accounting discounts on acquired loans 1,180  1,262  1,349  1,442  1,538 
Total valuation adjustments$6,844 $6,207 $6,292 $6,401 $6,442 
Total gross loans$1,098,785 $940,625 $909,320 $910,052 $907,240 
Total valuation adjustments as a percent of total gross loans 0.62% 0.66% 0.69% 0.70% 0.71%


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

  Three Months Ended  Year Ended 
  June 30,  June 30, 
  2019  2018  2019  2018 
Computation of Adjusted Effective Tax Rate                
Net income before income tax expense $2,276  $3,744  $11,004  $11,626 
                 
Income tax expense  597   1,075   2,686   5,022 
Adjustments:                
Deferred tax re-measurement charge  -   -   -   (1,570)
Adjusted income tax expense $597  $1,075  $2,686  $3,452 
                 
Effective tax rate (GAAP)  26.2%  28.7%  24.4%  43.2%
Adjusted effective tax rate (Non-GAAP)  26.2%  28.7%  24.4%  29.7%

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Source: PCSB Financial Corporation