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

Company Release - 4/30/2020 8:30 AM ET

YORKTOWN HEIGHTS, New York, April 30, 2020 (GLOBE NEWSWIRE) -- PCSB Financial Corporation (the “Company”) (NASDAQ: PCSB), parent of PCSB Bank (the "Bank"), today announced net income of $1.2 million, or $0.08 per diluted share, for the three months ended March 31, 2020 compared to $2.4 million, or $0.14 per diluted share, for the three months ended December 31, 2019 and $2.0 million, or $0.12 per diluted share, for the three months ended March 31, 2019. Net income for the nine months ended March 31, 2020 was $6.4 million, or $0.40 per diluted share, compared to $6.6 million, or $0.40 per diluted share, for the same period last year. Provision for loan losses for the three and nine months ended March 31, 2020 includes $1.7 million, or $0.09 per diluted share, net of tax, related to reserves established as a result of the economic impacts of the COVID-19 pandemic.

On a non-GAAP basis, which excludes certain nonrecurring items, the Company recorded adjusted net income of $1.2 million, or $0.07 per diluted share, for the three months ended March 31, 2020 as compared to adjusted net income of $2.3 million, or $0.14 per diluted share, for the three months ended December 31, 2019 and $2.0 million, or $0.12 per diluted share, for the three months ended March 31, 2019. Adjusted net income for the nine months ended March 31, 2020 was $5.8 million, or $0.37 per diluted share, compared to $6.4 million, or $0.38 per diluted share, for the same period last year. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

The Board of Directors declared a regular quarterly cash dividend of $0.04 per share. The dividend is payable on or about May 29, 2020 to stockholders of record as of the close of business on May 15, 2020.

Third Quarter 2020 Highlights

  • Absent the extraordinary COVID-19-related provision for loan losses, net income would have been $2.5 million, or $0.17 per diluted share, compared to $2.0 million, or $0.12 per diluted share, in the prior year quarter.
  • Net interest income was $11.5 million, an increase of $788,000, or 7.3%, compared to the same quarter last year. Fiscal year-to-date net interest income was $35.2 million, a 10.3% increase from the prior year period.
  • The net interest margin was 2.89% for the quarter, a decrease from 2.94% for the same quarter last year.
  • The efficiency ratio was 70.38% for the quarter, compared to 76.86% for the same quarter last year.
  • Total loans receivable of $1.22 billion, representing year-to-date growth of $127.6 million, or 11.7%, and year-over-year growth of $285.0 million, or 30.5%.
  • Non-performing loans increased $184,000 during the quarter to $1.8 million, equating to 0.15% of gross loans receivable.
  • Loan to deposit ratio was 95.40%, an increase from 77.83% as of the same quarter last year.
  • The Company repurchased 474,171 shares of common stock during the quarter at a total cost of $9.5 million, or an average cost of $20.07 per share.

President’s Comments

“I want to first express how extremely proud I am of the tireless effort our employees made in working with customers to provide them with resources to address their financial needs during this time of uncertainty,” said Joseph D. Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation. “The COVID-19 related pandemic is presenting our country and our industry with unprecedented challenges in dealing with this crisis. Our challenge, as a community bank, is to assist and support our customers, local communities and shareholders in dealing with the financial impact this crisis will have caused.  Some of the actions taken by the Bank have included loan payment deferrals, loan modifications, lending through the Small Business Administration’s Payroll Protection Program (“PPP Loans”), fee waivers and donations to non-profit organizations at the center of this crisis through our PCSB Community Foundation. The full effect of the economic shutdown is not yet known and it remains to be seen how effective the federal lending programs, loan payment deferrals and stimulus checks will be to offset the expected negative impact on credit quality and growth moving forward. We enter this crisis from a strong capital and liquidity position as we begin to assess the credit impact of the current economic shutdown. There will be more clarity to come in the months that follow; however, we believe that our $1.7 million addition to our loan loss reserves is a prudent first step in recognizing the potential credit risk resulting from the current economic downturn.”

COVID-19 Response

In response to the COVID-19 pandemic, the Company has been active in providing assistance to our employees, customers and communities, as well as assessing the risks and potential impact on the Company’s financial position, including liquidity, credit quality, earnings and capital. The following is a summary of these actions through April 28, 2020:

Support for our Employees and Branch Locations

  • No furloughs; all employees at 100% pay
  • Administrative employees with ability to work from home; stagger essential front-line employee schedules.
  • Reduced branch hours and use of lobbies, use of drive-thru capabilities, promote use of personal protective equipment by employees and customers.

Support for Individual and Business Customers

  • Waive or reduce certain fees, including overdraft fees, ATM fees, late charges and early CD withdrawal penalties.
  • Moratorium on foreclosures and certain credit bureau reporting.
  • Consumer loan payment deferrals granted for 97 loans totaling $27.0 million, representing approximately 9.1% of the residential mortgage and home equity line of credit portfolios.
  • Commercial loan payment deferrals granted for 172 loans totaling $125.1 million, representing approximately 13.5% of the commercial mortgage, commercial loan and construction portfolios.
  • Processed $46.4 million in PPP loans to over 240 small business employing over 3,900 employees across our local communities.

Support for Our Communities

  • Through the PCSB Community Foundation, since the beginning of the year we have donated over $150,000 to a number of local organizations providing essential services to our community.


Risk Assessment and Financial Impact

Liquidity

Management believes the Company’s liquidity is strong. At March 31, 2020, cash and cash equivalents totaled $84.9 million and securities available for sale totaled $46.0 million. Additionally, the Company had remaining borrowing capacity of $270.6 million, including $127.1 million from the Federal Home Loan Bank of New York, $118.5 million from the Federal Reserve Bank of New York discount window, as well as $25.0 million in other lines of credit. The Company did not experience significant draws on working capital lines of credit or home equity lines of credit during the quarter. Unused lines of credit totaled $98.6 million (43% usage rate) as of March 31, 2020, compared to $105.5 million (41% usage rate) as of December 31, 2019.

Capital

The Company’s capital position is also strong. At March 31, 2020, all of the Bank’s regulatory capital ratios significantly exceeded well-capitalized standards. Specifically, the Bank’s Tier 1 Leverage Ratio was 13.2% as of March 31, 2020, which represents 2 ½ times the well-capitalized regulatory standard of 5.0%. Additionally, as of March 31, 2020, PCSB Financial Corporation (parent of PCSB Bank) has $41.1 million of additional funds that could be contributed to the Bank as capital, which would result in a proforma Tier 1 Leverage ratio of 15.7%.

Credit Risk

The Company has taken actions to identify, assess and address its COVID-19 related credit exposure. Many factors are unknown, including the length of the resulting economic shutdown imposed by New York State and other neighboring states, the impacts of the government fiscal and monetary relief measures, including payment deferral programs, as well as the long-term impacts COVID-19 may have on our consumer and commercial borrowers. The Company has begun to assess its credit exposures based on asset class and borrower type. The following table provides the Company’s commercial and construction exposures to those industries believed to be the most directly and significantly impacted by the pandemic:

Industry Sector:Total Balance Outstanding as of
March 31, 2020
(amounts in thousands)
 % of Total Loans
Receivable
 % Secured by Real
Estate Collateral
 
Retail (1)$126,976  10.3% 97.8%
Mixed-use with retail component 119,444  9.7  98.7 
Hotels and accommodation services (2) 39,569  3.2  100.0 
Food service (incl. restaurants) 22,364  1.8  95.3 
Arts, entertainment and recreation 10,371  0.8  97.4 


(1)Includes $42.5 million of loans supported by properties with credit-rated or anchored tenants.
(2)Includes one construction relationship with an outstanding balance of $4.5 million.

As of March 31, 2020, the Company has no exposure to leveraged lending, shared national credits or energy exploration.


Income Statement Summary

Net interest income was $11.5 million for the quarter ended March 31, 2020, a decrease of $172,000, or 1.5%, compared to the quarter ended December 31, 2019, and an increase of $788,000, or 7.3%, compared to the quarter ended March 31, 2019. The increase in net interest income compared to the prior year is primarily the result of an increase in average interest earning assets, as the Company experienced significant growth in average loans receivable compared to the same quarter last year. However, the effect of the growth was partially offset by a decrease in net interest margin. Net interest income declined compared to the quarter ended December 31, 2019 as a result of margin compression.

The net interest margin was 2.89% for the current quarter reflecting decreases of 4 basis points compared to 2.93% in the prior quarter and 5 basis points compared to 2.94% in the prior year quarter. Despite continued asset growth and a more profitable asset mix, along with a decrease in funding costs, margin compression has resulted from significant decreases in market interest rates over the past quarter disproportionately affecting asset yields.

The yield on interest-earning assets for the current quarter was 3.86%, an 8 basis point decrease from the prior quarter driven by lower market rates, and an 11 basis point increase from the prior year quarter, as a higher yielding asset mix more than offset the downward pressures on market interest rates.

The cost of interest-bearing deposits was 1.18% for the current quarter, a decrease of 2 basis points from the prior quarter and an increase of 14 basis points from 1.04% for the prior year quarter. The Company has experienced a shift in deposit mix over the past several quarters as customers in generally lower rate savings products moved to generally higher rate money market and time deposits, however the pace of this shift has slowed in recent quarters. In response to the decrease in market interest rates late in the current quarter, deposit rate reductions were implemented, the effects of which are expected be fully realized in future quarters. As of March 31, 2020, the Company had $192.8 million of money market accounts with a weighted average cost of 0.55% compared to 1.03% as of December 31, 2019. Additionally, as of the end of the quarter, time deposits maturing in the next three and twelve months totaled $104.9 million and $277.9 million, with weighted average costs of 2.21% and 2.00%, respectively. These deposits, should they remain with the Company in their current products and re-price to our current offer rates, would be expected to carry an estimated weighted average cost of 1.02% and 0.99%, respectively.

The provision for loan losses was $2.0 million for the three months ended March 31, 2020 compared to $412,000 in the prior quarter and $7,000 for the same quarter in 2019. The current quarter provision includes a $1.7 million increase in qualitative reserves as the Company begins to assess the economic impacts the COVID-19 pandemic has had on our local economy and loan portfolio. Recoveries, net of charge-offs, were $122,000 for the three months ended March 31, 2020 compared to net charge-offs of $189,000 for the three months ended December 31, 2019 and $5,000 for the three months ended March 31, 2019.  Loans classified as substandard or doubtful totaled $5.0 million, an increase of $27,000, or 0.5%, from December 31, 2019 and a decrease of $4.0 million, or 45.0%, from $9.0 million at March 31, 2019. Non-performing loans as a percent of total loans receivable was 0.15% as of March 31, 2020, a slight increase from 0.14% as of December 31, 2019 and a decrease from 0.30% as of March 31, 2019.

Noninterest income of $580,000 for the three months ended March 31, 2020 increased $33,000 compared to the three months ended December 31, 2019, as increases of $38,000 in gains on sale of securities and $40,000 in gains on sale of foreclosed real estate were partially offset by a $36,000 decrease in fees and service charges. The reduction in fee and service charge income was primarily due to our waiver of certain overdraft fees, ATM usage fees, wire and CD early withdrawal fees in response to COVID-19, as required by emergency regulations promulgated by the New York State Department of Financial Services. The Company began waiving such fees in accordance with this guidance on or about March 20, 2020, with approximately $22,000 in fees waived in the current quarter. Noninterest income for the current year to date period was largely unchanged compared to the prior year to date period, as increases of $38,000 in gains on sale of securities and $40,000 in gains on sale of foreclosed real estate were mostly offset by a $70,000 decrease in fees and service charges.

Noninterest expense of $8.5 million for the three months ended March 31, 2020 decreased $274,000 compared to the three months ended December 31, 2019 and decreased $178,000 compared to the same period in 2019. The $274,000 decrease from the prior quarter was caused primarily by decreases of $107,000 in salaries and benefits, $109,000 in other post-retirement benefit costs, as well as $58,000 in all other expenses. The $178,000 decrease from the prior year period was caused primarily by decreases of $232,000 decrease in other post-retirement benefit costs, $105,000 in FDIC assessment costs and $44,000 in all other expenses, partially offset by a $203,000 increase in salaries and benefits expense. During the current quarter, the Bank applied small bank assessment credits of $108,000 which fully offset its FDIC assessment for the current quarter. The remaining credits available are approximately $22,000.

The effective income tax rate was 22.8% for the three months ended March 31, 2020, as compared to 22.5% for the three months ended December 31, 2019 and 23.9% for the three months ended March 31, 2019.

Balance Sheet Summary

Total assets increased $58.3 million to $1.70 billion at March 31, 2020 from $1.64 billion at June 30, 2019.  This increase was primarily due to increases of $127.6 million, or 11.7%, in net loans receivable, $24.9 million in cash and cash equivalents and $11.1 million in premises and equipment, partially offset by a decrease of $108.2 million in total investment securities. The $127.6 million increase in loans was the result of $172.4 million of originations and $47.9 million of loan purchases, partially offset by $92.7 million of net amortization, repayments and other loan activity. Commercial mortgages increased $124.0 million, or 19.0%, and construction loans increased $11.7 million, or 88.4%, while commercial loans, residential mortgages and home equity lines of credit all had immaterial changes.

Total liabilities increased $67.2 million to $1.42 billion at March 31, 2020 from $1.36 billion at June 30, 2019.  This increase was primarily due to a $53.8 million, or 4.4%, increase in deposits and escrow accounts and a $19.9 million increase in other liabilities, primarily as a result of recording a $12.0 million lease liability (a related lease asset was also recorded as part of premises and equipment) associated with the adoption of new lease accounting standards, partially offset by a $5.1 million decrease in FHLB advances.

Total shareholders’ equity decreased $8.9 million to $272.4 million at March 31, 2020 from $281.3 million at June 30, 2019. This decrease was primarily due to the repurchase of $18.1 million (905,902 shares) of common stock and $1.9 million of cash dividends declared and paid, partially offset by net income of $6.4 million, as well as $3.9 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period. During the quarter, the Company completed its second stock repurchase plan. To date, no additional repurchase plans have been authorized.

At March 31, 2020, the Company’s book value per share and tangible book value per share were $16.12 and $15.74, respectively, compared to $15.80 and $15.44, respectively, at June 30, 2019. 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 March 31, 2020, the Bank was considered “well capitalized” under applicable regulatory guidelines.


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 that 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 duration, extent and severity of the recent COVID-19 pandemic, including its impact on our business and operations, including the impact of lost fee revenue and operating expenses, as well as its effect on our customers and issuers of securities, including their ability to make timely payments on obligations, service providers and on economies and markets more generally, 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 and per share data)

  March 31,  June 30, 
  2020  2019 
ASSETS        
Cash and due from banks $83,665  $58,756 
Federal funds sold  1,247   1,273 
Cash and cash equivalents  84,912   60,029 
Held to maturity debt securities, at amortized cost
  (fair value of $266,704 and $346,243, respectively)
  263,626   345,545 
Available for sale debt securities, at fair value  45,992   72,228 
Total investment securities  309,618   417,773 
Loans receivable, net of allowance for loan losses of $8,346 and $5,664, respectively  1,220,682   1,093,121 
Accrued interest receivable  5,384   4,797 
FHLB stock  6,026   6,255 
Premises and equipment, net  21,437   11,802 
Deferred tax asset, net  2,421   2,478 
Foreclosed real estate     1,158 
Bank-owned life insurance  24,890   24,291 
Goodwill  6,106   6,106 
Other intangible assets  250   323 
Other assets  14,149   9,446 
Total assets $1,695,875  $1,637,579 
LIABILITIES AND SHAREHOLDERS' EQUITY        
Interest bearing deposits $1,133,742  $1,084,442 
Non-interest bearing deposits  145,844   141,379 
Total deposits  1,279,586   1,225,821 
Mortgage escrow funds  7,924   9,355 
Advances from Federal Home Loan Bank  106,121   111,216 
Other liabilities  29,827   9,880 
Total liabilities  1,423,458   1,356,272 
Commitments and contingencies  -   - 
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2020 and June 30, 2019, respectively)  -   - 
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 shares issued as of March 31, 2020 and June 30, 2019, and 16,898,137 and 17,804,039 shares outstanding as of March 31, 2020 and June 30, 2019, respectively)  187   187 
Additional paid in capital  185,301   182,129 
Retained earnings  138,957   134,500 
Unearned compensation - ESOP  (11,384)  (12,114)
Accumulated other comprehensive loss, net of income taxes  (4,230)  (5,090)
Treasury stock, at cost (1,814,158 and 908,256 shares as of March 31, 2020 and June 30, 2019, respectively)  (36,414)  (18,305)
Total shareholders' equity  272,417   281,307 
Total liabilities and shareholders' equity $1,695,875  $1,637,579 



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

  Three Months Ended  Nine Months Ended 
  March 31,  March 31, 
  2020  2019  2020  2019 
Interest and dividend income                
Loans receivable $13,114  $10,413  $39,299  $30,632 
Investment securities  2,003   2,619   6,974   7,413 
Federal funds and other  217   614   816   1,450 
Total interest and dividend income  15,334   13,646   47,089   39,495 
Interest expense                
Deposits and escrow interest  3,268   2,741   9,927   7,172 
FHLB advances  541   168   1,942   378 
Total interest expense  3,809   2,909   11,869   7,550 
Net interest income  11,525   10,737   35,220   31,945 
Provision for loan losses  2,008   7   2,755   71 
Net interest income after provision for loan losses  9,517   10,730   32,465   31,874 
Noninterest income                
Fees and service charges  366   436   1,170   1,311 
Bank-owned life insurance  128   131   399   410 
Swap income  -   -   170   146 
Gains on sales of securities, net  38   -   38   55 
Other  48   12   115   218 
Total noninterest income  580   579   1,892   2,140 
Noninterest expense                
Salaries and employee benefits  5,782   5,579   17,435   15,907 
Occupancy and equipment  1,311   1,340   3,959   3,865 
Communications and data processing  521   476   1,559   1,430 
Professional fees  393   396   1,176   1,182 
Postage, printing, stationery and supplies  140   138   439   454 
FDIC assessment  -   105   -   322 
Advertising  100   131   300   349 
Amortization of intangible assets  24   29   73   85 
Other operating expenses  249   504   1,160   1,692 
Total noninterest expense  8,520   8,698   26,101   25,286 
Net income before income tax expense  1,577   2,611   8,256   8,728 
Income tax expense  360   625   1,857   2,089 
Net income $1,217  $1,986  $6,399  $6,639 
Earnings per common share:                
Basic $0.08  $0.12  $0.41  $0.40 
Diluted $0.08  $0.12  $0.40  $0.40 
Weighted average common shares outstanding:                
Basic  15,437,173   16,204,393   15,752,709   16,645,287 
Diluted  15,447,217   16,261,755   15,814,322   16,659,746 



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

 Three Months Ended 
 March 31, 2020  December 31, 2019  March 31, 2019 
 Average
Balance
  Interest / Dividends  Average Rate  Average
Balance
  Interest / Dividends  Average Rate  Average
Balance
  Interest /
Dividends
  Average
Rate
 
Assets:                                   
Loans receivable$1,209,920  $13,114   4.34% $1,178,253  $13,149   4.46% $913,634  $10,413   4.57%
Investment securities 323,942   2,003   2.47   358,760   2,279   2.54   445,604   2,619   2.35 
Other interest-earning assets 56,242   217   1.56   59,678   301   2.00   99,473   614   2.50 
Total interest-earning assets 1,590,104   15,334   3.86   1,596,691   15,729   3.94   1,458,711   13,646   3.75 
Non-interest-earning assets 67,889           68,793           61,382         
Total assets$1,657,993          $1,665,484          $1,520,093         
                                    
Liabilities and equity:                                   
NOW accounts$125,103   66   0.21  $122,455   67   0.22  $116,781   52   0.18 
Money market accounts 179,230   423   0.96   161,075   472   1.16   127,509   368   1.17 
Savings accounts and escrow 342,254   209   0.25   355,295   234   0.26   392,537   239   0.25 
Time deposits 480,233   2,570   2.17   467,486   2,585   2.19   428,643   2,082   1.97 
Total interest-bearing deposits 1,126,820   3,268   1.18   1,106,311   3,358   1.20   1,065,470   2,741   1.04 
FHLB advances 98,364   541   2.23   117,712   674   2.27   26,259   168   2.61 
Total interest-bearing liabilities 1,225,184   3,809   1.26   1,224,023   4,032   1.31   1,091,729   2,909   1.08 
Non-interest-bearing deposits 137,930           138,346           136,196         
Other non-interest-bearing liabilities 19,706           21,827           11,243         
Total liabilities 1,382,820           1,384,196           1,239,168         
Total shareholders' equity 275,173           281,288           280,925         
Total liabilities and shareholders' equity$1,657,993          $1,665,484          $1,520,093         
                                    
Net interest income    $11,525          $11,697          $10,737     
Interest rate spread (1)         2.60           2.63           2.67 
Net interest margin (2)         2.89           2.93           2.94 
Average interest-earning assets to interest-bearing liabilities 129.78%          130.45%          133.61%        
                                    
(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)
(dollar amounts in thousands)

 Nine Months Ended March 31, 
 2020  2019 
 Average
Balance
  Interest /
Dividends
  Average
Rate
  Average
Balance
  Interest /
Dividends
  Average
Rate
 
Assets:                       
Loans receivable$1,176,733  $39,299   4.45% $908,674  $30,632   4.49%
Investment securities 360,631   6,974   2.58   446,398   7,413   2.21 
Other interest-earning assets 53,944   816   2.01   84,408   1,450   2.29 
Total interest-earning assets 1,591,308   47,089   3.95   1,439,480   39,495   3.66 
Non-interest-earning assets 68,983           57,256         
Total assets$1,660,291          $1,496,736         
                        
Liabilities and equity:                       
NOW accounts$122,470   191   0.21  $117,522   157   0.18 
Money market accounts 163,395   1,358   1.11   96,421   788   1.09 
Savings accounts and escrow 353,373   674   0.25   423,922   780   0.25 
Time deposits 469,022   7,704   2.19   408,210   5,447   1.78 
Total interest-bearing deposits 1,108,260   9,927   1.19   1,046,075   7,172   0.91 
FHLB advances 112,644   1,942   2.30   22,395   378   2.25 
Total interest-bearing liabilities 1,220,904   11,869   1.30   1,068,470   7,550   0.94 
Non-interest-bearing deposits 138,968           132,884         
Other non-interest-bearing liabilities 20,914           8,345         
Total liabilities 1,380,786           1,209,699         
Total shareholders' equity 279,505           287,037         
Total liabilities and shareholders' equity$1,660,291          $1,496,736         
                        
Net interest income    $35,220          $31,945     
Interest rate spread (1)         2.65           2.72 
Net interest margin (2)         2.95           2.96 
Average interest-earning assets to interest-bearing liabilities 130.34%          134.72%        
                        
(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 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 
Condensed Balance Sheets               
Cash and cash equivalents$84,912 $62,835 $37,797 $60,029 $87,105 
Total investment securities 309,618  327,835  379,007  417,773  440,014 
Loans receivable, net 1,220,682  1,183,740  1,163,254  1,093,121  935,680 
Other assets 80,663  74,757  78,550  66,656  60,959 
Total assets$1,695,875 $1,649,167 $1,658,608 $1,637,579 $1,523,758 
                
Total deposits and escrow$1,287,510 $1,261,663 $1,241,458 $1,235,176 $1,209,868 
Advances from Federal Home Loan Bank 106,121  86,153  111,185  111,216  26,248 
Other liabilities 29,827  21,512  24,443  9,880  9,326 
Total liabilities 1,423,458  1,369,328  1,377,086  1,356,272  1,245,442 
Total shareholders' equity 272,417  279,839  281,522  281,307  278,316 
Total liabilities and shareholders' equity$1,695,875 $1,649,167 $1,658,608 $1,637,579 $1,523,758 


 Quarter Ended Nine Months Ended 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 March 31,
2020
 March 31,
2019
 
Condensed Income Statements                     
Interest income$15,334 $15,729 $16,026 $13,952 $13,646 $47,089 $39,495 
Interest expense 3,809  4,032  4,028  3,193  2,909  11,869  7,550 
Net interest income 11,525  11,697  11,998  10,759  10,737  35,220  31,945 
Provision for loan losses 2,008  412  335  737  7  2,755  71 
Noninterest income 580  547  765  962  579  1,892  2,140 
Noninterest expense 8,520  8,794  8,787  8,708  8,698  26,101  25,286 
Income before income tax expense 1,577  3,038  3,641  2,276  2,611  8,256  8,728 
Income tax expense 360  685  812  597  625  1,857  2,089 
Net income$1,217 $2,353 $2,829 $1,679 $1,986 $6,399 $6,639 
                      
Earnings per share:                     
Basic$0.08 $0.15 $0.18 $0.10 $0.12 $0.41 $0.40 
Diluted$0.08 $0.14 $0.18 $0.10 $0.12 $0.40 $0.40 



PCSB Financial Corporation and Subsidiaries
Selected Financial Data (unaudited)

 Quarter Ended Nine Months Ended 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 March 31,
2020
 March 31,
2019
 
Performance Ratios (1):                     
Return on average assets 0.29% 0.57% 0.68% 0.44% 0.52% 0.51% 0.59%
Return on average equity 1.77% 3.35% 4.01% 2.40% 2.83% 3.05% 3.08%
Interest rate spread 2.60% 2.63% 2.72% 2.65% 2.67% 2.65% 2.72%
Net interest margin 2.89% 2.93% 3.03% 2.94% 2.94% 2.95% 2.96%
Adjusted efficiency ratio (2) 70.87% 72.55% 71.80% 74.55% 77.04% 71.74% 74.90%
                      
Noninterest income to average assets 0.14% 0.13% 0.18% 0.25% 0.15% 0.15% 0.19%
Noninterest expense to average assets 2.06% 2.11% 2.12% 2.29% 2.29% 2.10% 2.25%
                      
Average interest-earning assets to average interest-bearing liabilities 129.78% 130.45% 130.79% 132.96% 133.61% 130.34% 134.72%
Average equity to average assets 16.60% 16.89% 17.02% 18.40% 18.48% 16.83% 19.18%
Dividend payout ratio (3) 52.01% 27.62% 23.29% 39.43% 24.97% 30.35% 22.91%



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 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 
Loans to deposits 95.40% 94.58% 94.27% 89.17% 77.83%
                
Share Data:               
Shares outstanding 16,898,137  17,372,308  17,624,239  17,804,039  17,804,039 
Book value per common share$16.12 $16.11 $15.97 $15.80 $15.63 
Tangible book value per common share (4)$15.74 $15.74 $15.61 $15.44 $15.27 
                
Asset Quality Ratios:               
Non-performing loans receivable$1,802 $1,618 $3,425 $2,727 $2,847 
Non-performing assets$1,802 $1,897 $4,281 $3,885 $3,500 
Allowance for loan losses as a percent of total loans receivable 0.68% 0.52% 0.51% 0.52% 0.53%
Total valuation adjustment as a percent of total gross loans receivable (5) 0.74% 0.59% 0.60% 0.62% 0.66%
Allowance for loan losses as a percent of non-performing loans receivable 463.15% 384.18% 174.98% 207.70% 173.67%
Non-performing loans as a percent of total loans receivable, net 0.15% 0.14% 0.29% 0.25% 0.30%
Non-performing assets as a percent of total assets 0.11% 0.12% 0.26% 0.24% 0.23%
                
Net (recoveries) charge-offs$(122)$189 $6 $18 $5 
Net (recoveries) charge-offs to average outstanding loans during the period (1) (0.04%) 0.06% 0.00% 0.01% 0.00%
                
Capital Ratios (6):               
Tier 1 capital (to adjusted total assets) 13.19% 13.00% 12.89% 13.81% 13.71%
Common equity Tier 1 capital (to risk-weighted assets) 16.80% 17.24% 17.16% 17.96% 20.47%
Tier 1 capital (to risk-weighted assets) 16.80% 17.24% 17.16% 17.96% 20.47%
Total capital (to risk-weighted assets) 17.44% 17.74% 17.64% 18.45% 20.96%
                
(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. Current period capital ratios are preliminary and subject to finalization of the FDIC Call Report.



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

 As of 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 
Mortgage loans:               
Residential mortgages$266,684 $262,441 $264,251 $265,167 $261,970 
Commercial mortgage 775,378  741,171  726,315  651,396  499,284 
Construction 24,929  22,787  18,830  13,231  16,302 
Net deferred loan origination costs 925  1,054  1,202  1,031  843 
Total mortgage loans 1,067,916  1,027,453  1,010,598  930,825  778,399 
Commercial and consumer loans:               
Commercial loans 128,869  129,809  125,926  133,614  126,514 
Home equity credit lines 30,994  31,460  31,503  33,204  34,525 
Consumer and overdrafts 444  436  437  365  459 
Net deferred loan origination costs 805  798  783  777  728 
Total commercial and consumer loans 161,112  162,503  158,649  167,960  162,226 
Total loans receivable 1,229,028  1,189,956  1,169,247  1,098,785  940,625 
Allowance for loan losses (8,346) (6,216) (5,993) (5,664) (4,945)
Loans receivable, net$1,220,682 $1,183,740 $1,163,254 $1,093,121 $935,680 


 As of 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 
Demand deposits$145,844 $140,218 $141,567 $141,379 $137,899 
NOW accounts 128,103  126,346  124,062  123,069  120,353 
Money market accounts 192,779  162,208  151,652  148,134  137,197 
Savings 330,310  354,078  350,250  357,844  379,550 
Time deposits 482,550  468,764  466,374  455,395  427,194 
Total deposits$1,279,586 $1,251,614 $1,233,905 $1,225,821 $1,202,193 



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 Nine Months Ended 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 March 31,
2020
 March 31,
2019
 
Computation of Adjusted Net Income and Adjusted Earnings Per Share       
Net income applicable to common stock (GAAP)$1,217 $2,353 $2,829 $1,679 $1,986 $6,399 $6,639 
                      
Adjustments (1):                     
Losses on other receivables -  -  -  -  -  -  68 
Prepayment income on loans receivable and investment securities (4) (95) (371) (25) (20) (470) (160)
Gain on sale of foreclosed real estate (31) -  (37) -  -  (68) (18)
Gain on sale of investment securities (29) -  -  (5) -  (29) (42)
Gain on sale of bank premises -  -  -  -  -  -  (118)
Adjusted net income (Non-GAAP)$1,153 $2,258 $2,421 $1,649 $1,966 $5,832 $6,369 
                      
Average number of common shares outstanding:             
Basic 15,437,173  15,837,762  15,979,762  16,033,505  16,204,393  15,752,709  16,645,287 
Diluted 15,447,217  15,909,855  16,082,276  16,099,846  16,261,755  15,814,322  16,659,746 
Earnings per share (GAAP):                     
Basic$0.08 $0.15 $0.18 $0.10 $0.12 $0.41 $0.40 
Diluted$0.08 $0.14 $0.18 $0.10 $0.12 $0.40 $0.40 
Adjusted earnings per common share (Non-GAAP):             
Basic$0.07 $0.14 $0.15 $0.10 $0.12 $0.37 $0.38 
Diluted$0.07 $0.14 $0.15 $0.10 $0.12 $0.37 $0.38 
                      
(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  Nine Months Ended 
 March 31,
2020
 December 31,
2019
 March 31,
2019
  March 31,
2020
 March 31,
2019
 
Computation of Adjusted Yield on Assets and Adjusted Net Interest Margin                
                 
Average interest-earning assets$1,590,104 $1,596,691 $1,458,711  $1,591,308 $1,439,480 
                 
Interest and dividend income (GAAP)$15,334 $15,729 $13,646  $47,089 $39,495 
Less: Prepayment income on loans receivable and investment securities (5) (123) (26)  (605) (210)
Adjusted interest and dividend income (Non-GAAP)$15,329 $15,606 $13,620  $46,484 $39,285 
                 
Yield on interest-earning assets (GAAP) 3.86% 3.94% 3.74%  3.95% 3.66%
Adjusted yield on interest-earning assets (Non-GAAP) 3.86% 3.91% 3.73%  3.89% 3.64%
                 
Net interest income (GAAP)$11,525 $11,697 $10,737  $35,220 $31,945 
Less: Prepayment income on loans receivable and investment securities (5) (123) (26)  (605) (210)
Adjusted net interest income (Non-GAAP)$11,520 $11,574 $10,711  $34,615 $31,735 
                 
Net interest margin (GAAP) 2.90% 2.93% 2.94%  2.95% 2.96%
Adjusted net interest margin (Non-GAAP) 2.90% 2.90% 2.94%  2.90% 2.94%
                 



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 Nine Months Ended 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 March 31,
2020
 March 31,
2019
 
Computation of Efficiency Ratio          
Noninterest expense (GAAP)$8,520 $8,794 $8,787 $8,708 $8,698 $26,101 $25,286 
Adjustments:                     
Losses on other receivables -  -  -  -  -  -  (90)
Adjusted noninterest expense (non-GAAP)$8,520 $8,794 $8,787 $8,708 $8,698 $26,101 $25,196 
                      
Net interest income$11,525 $11,697 $11,998 $10,759 $10,737 $35,220 $31,945 
Noninterest income 580  547  765  962  579  1,892  2,140 
Total (GAAP) 12,105  12,244  12,763  11,721  11,316  37,112  34,085 
Adjustments:                     
Prepayment income on loans receivable and investment securities (5) (123) (477) (34) (26) (605) (210)
Gain on sale of foreclosed real estate (40) -  (47) -  -  (87) (24)
Gain on sale of investment securities (38) -  -  (7) -  (38) (55)
Gain on sale of bank premises -  -  -  -  -  -  (155)
Adjusted total (Non-GAAP)$12,022 $12,121 $12,239 $11,680 $11,290 $36,382 $33,641 
                      
Efficiency ratio (GAAP) 70.38% 71.82% 68.85% 74.29% 76.86% 70.33% 74.19%
Adjusted efficiency ratio (Non-GAAP) 70.87% 72.55% 71.80% 74.55% 77.04% 71.74% 74.90%



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 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 
Computation of Tangible Book Value per Common Share    
Total shareholders' equity (GAAP)$272,417 $279,839 $281,522 $281,307 $278,316 
Adjustments:               
Preferred stock -  -  -  -  - 
Common shareholders' equity 272,417  279,839  281,522  281,307  278,316 
Adjustments:               
Goodwill (6,106) (6,106) (6,106) (6,106) (6,106)
Other intangible assets (250) (274) (298) (323) (348)
Tangible common shareholders' equity (Non-GAAP)$266,061 $273,459 $275,118 $274,878 $271,862 
                
Common shares outstanding 16,898,137  17,372,308  17,624,239  17,804,039  17,804,039 
                
Book value per share (GAAP)$16.12 $16.11 $15.97 $15.80 $15.63 
Adjustments:               
Effects of intangible assets (0.38) (0.37) (0.36) (0.36) (0.36)
                
Tangible book value per common share (Non-GAAP)$15.74 $15.74 $15.61 $15.44 $15.27 


  

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 
 March 31,
2020
 December 31,
2019
 September 30,
2019
 June 30,
2019
 March 31,
2019
 
Computation of valuation adjustment          
Allowance for loan losses (GAAP)$8,346 $6,216 $5,993 $5,664 $4,945 
Add: Purchase accounting discounts on acquired loans 693  837  983  1,180  1,262 
Total valuation adjustments (Non-GAAP)$9,039 $7,053 $6,976 $6,844 $6,207 
                
Total gross loans$1,229,028 $1,189,956 $1,169,247 $1,098,785 $940,625 
Allowance for loan losses as a percent of total gross loans (GAAP) 0.68% 0.52% 0.51% 0.52% 0.53%
Total valuation adjustments as a percent of total gross loans (Non-GAAP) 0.74% 0.59% 0.60% 0.62% 0.66%

PCSB_Fin_Corp_Logo@4x.png

Source: PCSB Financial Corporation