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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