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


YORKTOWN HEIGHTS, N.Y., Oct. 29, 2020 (GLOBE NEWSWIRE) -- PCSB Financial Corporation (the “Company”) (NASDAQ: PCSB), parent of PCSB Bank (the "Bank"), today announced net income of $2.7 million, or $0.18 per diluted share, for the three months ended September 30, 2020 compared to $3.0 million, or $0.19 per diluted share, for the three months ended June 30, 2020 and $2.8 million, or $0.18 per diluted share, for the three months ended September 30, 2019.

On a non-GAAP basis, which excludes certain nonrecurring items, the Company recorded adjusted net income of $2.7 million, or $0.17 per diluted share, for the three months ended September 30, 2020 compared to adjusted net income of $2.9 million, or $0.19 per diluted share, for the three months ended June 30, 2020 and $2.4 million, or $0.15 per diluted share, for the three months ended September 30, 2019. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

On October 21, 2020, the Board of Directors declared a regular quarterly cash dividend of $0.04 per share. The dividend is payable on or about November 27, 2020 to stockholders of record as of the close of business on November 13, 2020.

First Quarter Highlights

  • Earnings before income taxes and provision for loan losses of $3.5 million for the quarter decreased $556,000 or 13.6% from the linked quarter and $429,000 or 10.8% from the same quarter last year.
  • Net interest income of $11.6 million for the current quarter increased $118,000 or 1.0% from the linked quarter but decreased $421,000 or 3.5% from the same quarter last year.
  • The net interest margin was 2.69% for the quarter, a decrease from 2.72% in the linked quarter and 3.03% for the same quarter last year.
  • Cost of interest-bearing deposits was 0.80% for the quarter, a decrease from 0.97% in the linked quarter and 1.20% for the same quarter last year.
  • The efficiency ratio was 70.68% for the quarter compared to 68.85% for the prior year quarter. The adjusted efficiency ratio (non-GAAP) was 71.28% for the quarter compared to 71.80% for the prior year quarter. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.
  • Average loans receivable, excluding SBA Paycheck Protection Program (“PPP”) loans, of $1.25 billion for the current quarter, an increase of 6.2% compared to the same quarter last year.
  • Average deposits of $1.39 billion for the current quarter, an increase of 12.6% compared to the same quarter last year.
  • Non-performing loans decreased $1.3 million year-over-year to $2.1 million, equating to 0.17% of total net loans receivable as of September 30, 2020.

President’s Comments

“While we navigate through these unprecedented times there continue to be many challenges facing the country and the banking industry as a whole,” said Joseph D. Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation. “Although the economy appears to be improving it remains in an uncertain position due to the prolonged pandemic. We continue to take actions to protect the health and well-being of our employees and assistance to our customers in addressing their financial needs. Our credit team has worked closely with those customers coming off payment deferrals and on a very positive note, we have currently seen almost 90% of them back to making their full monthly payments. This leaves less than 2% of the loan portfolio still in deferral status as of September 30, 2020. However, because these are still uncertain times we will continue to carefully monitor those high-risk industry sectors mostly affected by the pandemic. Additionally, our team will be assisting those small businesses as they begin the SBA’s loan application forgiveness process.”

“Meanwhile, we have seen strong deposit growth over the last two quarters. Our unparalleled customer service has allowed us to accelerate the growth in our customer base despite these uncertain economic times, by increasing the depth of our existing customer relationships, as well as increasing penetration into our local markets. Expanding the use of electronic and mobile banking products has enhanced the customer experience and will position us for more efficient operations going forward.”

“As to our first quarter’s results, adjusted net income of $2.7 million, which excludes certain nonrecurring items, shows a slight decrease ($260,000) from the previous quarter which included an additional $685,000 in swap income; however, it increased 10% compared to the year-ago period. I am pleased that in this stressed economic environment core earnings, when you exclude swap income, increased considerably and remains strong. During the September quarter we announced that our Board of Directors approved our third share repurchase program. We believe that our stable financial performance, high level of capital and strong asset quality affords us the opportunity to purchase the Company’s stock at discounted levels, creating additional value for our shareholders.”

“While the ultimate impact of the pandemic is difficult to predict, management believes the Company is well-positioned to weather this crisis and continue to deliver long-term growth and profitability for our shareholders.”

COVID-19 Response and Impact

In response to the COVID-19 pandemic, the Company has been active in providing assistance to our customers, as well as assessing the risks and potential impact on the Company’s financial position, including credit quality, earnings and capital. The following is a summary of these actions through September 30, 2020:

Loan Payment Deferrals

The COVID-19 pandemic has created extensive disruptions to the local economy and our customers. Throughout the pandemic and as of September 30, 2020, the Company has granted loan payment deferrals for 331 consumer and commercial loans whose borrowers have demonstrated financial hardship caused by COVID-19 with loan balances totaling $223.4 million. The table below summarizes the deferrals granted and their status for loans outstanding as of September 30, 2020 (dollar amounts in thousands):

         Remain on deferral as of 9/30/20  No longer on deferral as of 9/30/2020 
  Number of loans Recorded Investment  Number of loans Recorded Investment % of Total Amount Granted Deferral  Number of loans Recorded Investment % of Total Amount Granted Deferral % of Loans 30 Days or More Past Due 
Consumer  109 $31,235   17 $6,614  21.2%  92 $24,621  78.8% 0.8%
Commercial  210  180,758   11  15,140  8.4   199  165,618  91.6 0.3 
Total  319 $211,993   28 $21,754  10.3%  291 $190,239  89.7% 0.4%
                               

Of the loans still on deferral as of September 30, 2020, $17.4 million are scheduled to resume payments prior to October 31, 2020, with the remainder scheduled to resume payments prior to January 31, 2021. As we continue to assess the borrowers’ financial condition and individual circumstances in the coming weeks and months, additional payment deferrals may be granted.

Risk Assessment and Financial Impact

Capital

The Company’s capital position is strong. At September 30, 2020, all of the Bank’s regulatory capital ratios significantly exceeded well-capitalized standards. Specifically, the Bank’s Tier 1 Leverage Ratio was 12.41% as of September 30, 2020, which represents approximately 2 ½ times the well-capitalized regulatory standard of 5%. Additionally, as of September 30, 2020, PCSB Financial Corporation (parent of PCSB Bank) has $37.3 million of additional funds that could be contributed to the Bank as capital, which would result in a proforma Tier 1 Leverage ratio of 14.48%.

Credit Risk

The Company has taken actions to identify, assess and address its COVID-19-related credit exposure. Many factors are unknown, including the ultimate impacts of the government fiscal and monetary stimulus and relief measures, payment deferral programs, as well as the medium and long-term impacts COVID-19 may have on our consumer and commercial borrowers, particularly if negative trends in COVID-19 cases should result in additional business shutdowns. The following table provides, as of September 30, 2020, the Company’s commercial and construction loan exposures to those industries the Company believes to be the most directly and significantly impacted by the pandemic:

Industry Sector:Total balance outstanding as of
September 30, 2020 (1)
(amounts in thousands)
 % of total loans receivable % secured by real estate collateral % granted payment deferral (4) % remaining on deferral as of 9/30 (4) Loan-to-Value % (5) 
Retail (2)$135,353  11.0% 98.2% 32.9% -% 50.8%
Mixed-use with retail component 103,531  8.4  100.0  21.5  -  53.0 
Hotels and accommodation services (3) 32,259  2.6  100.0  31.5  23.7  59.8 
Food service (incl. restaurants) 26,376  2.1  96.3  65.1  22.9  54.3 
Arts, entertainment and recreation 10,008  0.8  97.9  29.8  -  56.8 
Total$307,527  24.9% 98.8% 31.6% 4.5% 53.0%
                   
(1)   Excludes PPP loans.
(2)   Includes $74.3 million of loans supported by properties with credit-rated or anchored tenants.
(3)   Includes one construction relationship with an outstanding balance of $4.8 million.
(4)   Percentage of total balance outstanding. All loans remaining on deferral as of September 30, 2020 are secured by real estate, with a weighted average loan-to-value ratio of 54.3% as of September 30, 2020.
(5)   Generally based on collateral values upon origination.
 

As of September 30, 2020, the Company had no exposure to leveraged lending, shared national credits, energy exploration or credit cards.

Income Statement Summary

Net interest income was $11.6 million for the quarter ended September 30, 2020, an increase of $118,000, or 1.0%, compared to the quarter ended June 30, 2020, and a decrease of $421,000, or 3.5%, compared to the quarter ended September 30, 2019. The decrease in net interest income compared to the prior year period is primarily the result of a 34 basis point decrease in net interest margin, partially offset by an increase in average interest-earning assets of $138.8 million, or 8.7%. The increase in net interest income compared to the prior quarter is primarily the result of an increase in average interest-earning assets of $42.3 million, partially offset by a 3 basis point decrease in net interest margin.

The net interest margin was 2.69% for the current quarter reflecting decreases of 3 basis points compared to 2.72% in the prior quarter and 34 basis points compared to 3.03% in the prior year quarter. Despite continued asset growth, along with a decrease in funding costs, margin compression has resulted from significant decreases in market interest rates over the past year, stemming from decreases in the Fed Funds rate in mid-March, which has disproportionately reduced asset yields. The reduction in funding costs has continued in the current quarter, however, the significant increase in cash and cash equivalents, driven by the significant increase in deposits experienced in the prior quarter, has resulted in a less profitable asset mix.

The yield on interest-earning assets for the current quarter was 3.36%, a 16 basis point decrease from the prior quarter and a 68 basis point decrease from the prior year quarter. Despite significant loan portfolio growth, decreases in market interest rates driven most significantly by Fed Funds rate cuts in mid-March, the origination of lower yielding PPP loans, as well as the significant increases in liquidity over the last quarter has decreased asset yields.

The cost of interest-bearing deposits was 0.80% for the current quarter, a decrease of 17 basis points from 0.97% in the prior quarter and 40 basis points from 1.20% in the prior year quarter. In response to the significant decrease in market interest rates in mid-March, deposit rate reductions were implemented, the effects of which have been realized in the last two quarters. At September 30, 2020, the weighted average cost of interest-bearing deposits was 0.66%. The cost of interest-bearing liabilities was 0.89% for the current quarter, a decrease of 16 basis points from 1.05% in the prior quarter and 43 basis points from 1.32% in the prior year quarter. Over the remainder of the current fiscal year, the Company has $77.5 million of wholesale funding maturing, including FHLB advances and brokered time deposits, with a weighted average cost of 2.29%.

The provision for loan losses was $109,000 for the three months ended September 30, 2020 compared to $335,000 for the same quarter in 2019. Charge-offs, net of recoveries, were $76,000 for the three months ended September 30, 2020 compared to $17,000 for the three months ended June 30, 2020 and $6,000 for the three months ended September 30, 2019. Non-performing loans as a percent of total loans receivable was 0.17% as of September 30, 2020, an increase from 0.14% as of June 30, 2020 and a decrease from 0.29% as of September 30, 2019.

Noninterest income of $594,000 for the three months ended September 30, 2020 decreased $583,000 compared to the linked quarter and $171,000 compared to the prior year period. The decrease compared to the linked quarter was primarily due to a $685,000 decrease in swap income, partially offset by a $95,000 increase in fees and service charges. The decrease compared to the prior year period was primarily due to decreases of $80,000 in fees and service charges, $41,000 in swap income and $47,000 in gains on the sale of foreclosed real estate. The reduction in fees and service charge income compared to the prior year quarter was due to the combined effects of reduced customer transaction activity since the start of the COVID-19 pandemic and 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 these regulations on or about March 20, 2020, with approximately $175,000 in fees waived or lost in the linked quarter. The Company reinstituted these fees on July 15, 2020, resulting in the increased fees compared to the linked quarter, however, we expect to continue to be subject to some level of reduced customer activity and waivers based on customer-specific circumstances.

Noninterest expense of $8.6 million for the three months ended September 30, 2020 increased $91,000 compared to the linked quarter and decreased $163,000 compared to the same period in 2019. The increase compared to the linked quarter was primarily due to increases of $108,000 in salaries and benefits, $74,000 in communication and data processing and $72,000 in all other non-interest expenses, partially offset by a $163,000 decrease in professional fees. The decrease compared to the prior year quarter was caused primarily by decreases of $256,000 in retirement costs and $65,000 in all other expenses, partially offset by increases in FDIC insurance premiums of $113,000 and communications and data processing fees of $45,000. The Bank applied small bank assessment credits of $98,000 which fully offset its FDIC assessment for the prior year quarter. All available credits were applied as of June 30, 2020.

The effective income tax rate was 20.7% for the three months ended September 30, 2020, as compared to 22.3% for the three months ended September 30, 2019. The Company expects an effective tax rate of approximately 22.0% for the year ending June 30, 2021.

Balance Sheet Summary

Total assets were unchanged at $1.79 billion at September 30, 2020. However, the mix of assets changed due to a decrease of $33.0 million in net loans receivable, partially offset by increases of $26.4 million in cash and cash equivalents and $5.3 million in total investment securities. The $33.0 million decrease in net loans receivable was the result of decreases in commercial mortgages of $12.9 million, residential mortgages of $10.4 million and commercial loans of $8.7 million, which included a decrease in PPP loans of $13.9 million. The increase in cash and cash equivalents is a result of an increase in deposits and reduced loan originations experienced during the quarter due to reduced economic activity resulting from the COVID-19 pandemic.

Total liabilities were unchanged at $1.52 billion at September 30, 2020. However, the mix of liabilities changed due to a $3.8 million increase in deposits which was largely offset by a $3.7 million decrease in escrow accounts. Following a $93.7 million or 7.3% increase in deposits in the linked quarter, the Company continued to see deposit inflows in the current quarter, the result of numerous economic trends associated with COVID-19, including reduced consumer and commercial spending, and various forms of government stimulus.

Total shareholders’ equity decreased $34,000 to $273.7 million at September 30, 2020. This decrease was primarily due to the repurchase of $3.4 million of common stock and $630,000 of cash dividends declared and paid, partially offset by net income of $2.7 million and $1.1 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period.

At September 30, 2020, the Company’s book value per share and tangible book value per share were $16.45 and $16.07, respectively, compared to $16.20 and $15.82, respectively, at June 30, 2020. 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 September 30, 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)

  September 30,  June 30, 
  2020  2020 
ASSETS        
Cash and due from banks $161,387  $135,045 
Federal funds sold  1,352   1,257 
Cash and cash equivalents  162,739   136,302 
Held to maturity debt securities, at amortized cost (fair value of $293,810 and $281,497, respectively)  287,370   275,772 
Available for sale debt securities, at fair value  31,139   37,426 
Total investment securities  318,509   313,198 
Loans receivable, net of allowance for loan losses of $8,672 and $8,639, respectively  1,227,913   1,260,947 
Accrued interest receivable  6,729   6,880 
FHLB stock  6,307   6,308 
Premises and equipment, net  20,195   20,853 
Deferred tax asset, net  3,400   3,129 
Bank-owned life insurance  25,151   25,019 
Goodwill  6,106   6,106 
Other intangible assets  209   229 
Other assets  13,817   12,958 
Total assets $1,791,075  $1,791,929 
LIABILITIES AND SHAREHOLDERS' EQUITY        
Interest-bearing deposits $1,193,168  $1,181,357 
Non interest-bearing deposits  183,844   191,898 
Total deposits  1,377,012   1,373,255 
Mortgage escrow funds  6,420   10,123 
Advances from Federal Home Loan Bank  106,056   106,089 
Other liabilities  27,908   28,749 
Total liabilities  1,517,396   1,518,216 
Commitments and contingencies  -   - 
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2020 and June 30, 2020, respectively)  -   - 
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 shares issued as of September 30, 2020 and June 30, 2020, and 16,634,237 and 16,898,137 shares outstanding as of September 30, 2020 and June 30, 2020, respectively)  187   187 
Additional paid in capital  187,026   186,200 
Retained earnings  143,386   141,288 
Unearned compensation - ESOP  (10,901)  (11,145)
Accumulated other comprehensive loss, net of income taxes  (6,216)  (6,403)
Treasury stock, at cost (2,078,058 and 1,814,158 shares as of September 30, 2020 and June 30, 2020, respectively)  (39,803)  (36,414)
Total shareholders' equity  273,679   273,713 
Total liabilities and shareholders' equity $1,791,075  $1,791,929 
         

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

  Three Months Ended 
  September 30, 
  2020  2019 
Interest and dividend income        
Loans receivable $12,547  $13,036 
Investment securities  1,856   2,692 
Federal funds and other  125   298 
Total interest and dividend income  14,528   16,026 
Interest expense        
Deposits and escrow interest  2,432   3,301 
FHLB advances  519   727 
Total interest expense  2,951   4,028 
Net interest income  11,577   11,998 
Provision for loan losses  109   335 
Net interest income after provision for loan losses  11,468   11,663 
Noninterest income        
Fees and service charges  322   402 
Swap income  129   170 
Bank-owned life insurance  132   137 
Other  11   56 
Total noninterest income  594   765 
Noninterest expense        
Salaries and employee benefits  5,607   5,764 
Occupancy and equipment  1,318   1,315 
Communications and data processing  576   531 
Professional fees  400   404 
Postage, printing, stationery and supplies  139   140 
Advertising  100   100 
Amortization of intangible assets  20   24 
FDIC assessment  113   - 
Other operating expenses  351   509 
Total noninterest expense  8,624   8,787 
Net income before income tax expense  3,438   3,641 
Income tax expense  710   812 
Net income $2,728  $2,829 
Earnings per common share:        
Basic $0.18  $0.18 
Diluted $0.18  $0.18 
Weighted average common shares outstanding:        
Basic  15,302,838   15,979,762 
Diluted  15,302,949   16,082,276 
         

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

 Three Months Ended 
 September 30, 2020  June 30, 2020  September 30, 2019 
 Average Balance  Interest / Dividends  Average Rate  Average Balance  Interest / Dividends  Average Rate  Average Balance  Interest / Dividends  Average Rate 
Assets:                                   
Loans receivable$1,252,595  $12,547   4.00% $1,263,600  $12,808   4.06% $1,142,025  $13,036   4.56%
Investment securities 315,292   1,856   2.35   304,383   1,896   2.49   399,190   2,692   2.70 
Other interest-earning assets 158,038   125   0.31   115,652   117   0.41   45,914   298   2.58 
Total interest-earning assets 1,725,925   14,528   3.36   1,683,635   14,821   3.52   1,587,129   16,026   4.04 
Non-interest-earning assets 71,926           70,120           70,266         
Total assets$1,797,851          $1,753,755          $1,657,395         
                                    
Liabilities and equity:                                   
NOW accounts$149,466   89   0.24  $140,954   79   0.23  $119,852   57   0.19 
Money market accounts 250,297   238   0.38   218,023   289   0.53   149,880   463   1.23 
Savings accounts and escrow 360,091   202   0.22   343,472   192   0.22   362,569   232   0.25 
Time deposits 443,487   1,903   1.70   470,279   2,288   1.95   459,348   2,549   2.20 
Total interest-bearing deposits 1,203,341   2,432   0.80   1,172,728   2,848   0.97   1,091,649   3,301   1.20 
FHLB advances 106,067   519   1.94   106,099   514   1.94   121,855   727   2.37 
Total interest-bearing liabilities 1,309,408   2,951   0.89   1,278,827   3,362   1.05   1,213,504   4,028   1.32 
Non-interest-bearing deposits 184,085           176,146           140,627         
Other non-interest-bearing liabilities 28,958           23,505           21,211         
Total liabilities 1,522,451           1,478,478           1,375,342         
Total shareholders' equity 275,400           275,277           282,053         
Total liabilities and shareholders' equity$1,797,851          $1,753,755          $1,657,395         
                                    
Net interest income    $11,577          $11,459          $11,998     
Interest rate spread (1)         2.47           2.47           2.72 
Net interest margin (2)         2.69           2.72           3.03 
Average interest-earning assets to interest-bearing liabilities 131.81%          131.65%          130.79%        
                                    
(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
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Condensed Balance Sheets            
Cash and cash equivalents$162,739 $136,302 $84,912 $62,835 $37,797
Total investment securities 318,509  313,198  309,618  327,835  379,007
Loans receivable, net 1,227,913  1,260,947  1,220,682  1,183,740  1,163,254
Other assets 81,914  81,482  80,663  74,757  78,550
Total assets$1,791,075 $1,791,929 $1,695,875 $1,649,167 $1,658,608
               
Total deposits and escrow$1,383,432 $1,383,378 $1,287,510 $1,261,663 $1,241,458
Advances from Federal Home Loan Bank 106,056  106,089  106,121  86,153  111,185
Other liabilities 27,908  28,749  29,827  21,512  24,443
Total liabilities 1,517,396  1,518,216  1,423,458  1,369,328  1,377,086
Total shareholders' equity 273,679  273,713  272,417  279,839  281,522
Total liabilities and shareholders' equity$1,791,075 $1,791,929 $1,695,875 $1,649,167 $1,658,608
               


 Quarter Ended
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
Condensed Income Statements            
Interest income$14,528 $14,821 $15,334 $15,729 $16,026
Interest expense 2,951  3,362  3,809  4,032  4,028
Net interest income 11,577  11,459  11,525  11,697  11,998
Provision for loan losses 109  309  2,008  412  335
Noninterest income 594  1,177  580  547  765
Noninterest expense 8,624  8,533  8,520  8,794  8,787
Income before income tax expense 3,438  3,794  1,577  3,038  3,641
Income tax expense 710  834  360  685  812
Net income$2,728 $2,960 $1,217 $2,353 $2,829
               
Earnings per share:              
Basic$0.18 $0.19 $0.08 $0.15 $0.18
Diluted$0.18 $0.19 $0.08 $0.14 $0.18
               

PCSB Financial Corporation and Subsidiaries
Selected Financial Data (unaudited)

 Quarter Ended 
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
Performance Ratios (1):             
Return on average assets 0.61% 0.68% 0.29% 0.57% 0.68%
Return on average equity 3.96% 4.30% 1.77% 3.35% 4.01%
Interest rate spread 2.47% 2.47% 2.60% 2.63% 2.72%
Net interest margin 2.69% 2.72% 2.89% 2.93% 3.03%
Efficiency ratio 70.86% 67.53% 70.38% 71.82% 68.85%
Adjusted efficiency ratio (2) 71.28% 67.74% 70.87% 72.55% 71.80%
                
Noninterest income to average assets 0.13% 0.27% 0.14% 0.13% 0.18%
Noninterest expense to average assets 1.92% 1.95% 2.06% 2.11% 2.12%
                
Average interest-earning assets to average interest-bearing liabilities 131.81% 131.65% 129.78% 130.45% 130.79%
Average equity to average assets 15.32% 15.70% 16.60% 16.89% 17.02%
Dividend payout ratio (3) 23.09% 21.25% 52.01% 27.62% 23.29%
                

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 
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
Loans to deposits 89.17% 91.82% 95.40% 94.58% 94.27%
                
Share Data:               
Shares outstanding 16,634,237  16,898,137  16,898,137  17,372,308  17,624,239 
Book value per common share$16.45 $16.20 $16.12 $16.11 $15.97 
Tangible book value per common share (4)$16.07 $15.82 $15.74 $15.74 $15.61 
                
Asset Quality Ratios:               
Non-performing loans receivable$2,083 $1,795 $1,802 $1,618 $3,425 
Non-performing assets$2,083 $1,795 $1,802 $1,897 $4,281 
Allowance for loan losses as a percent of total loans receivable 0.70% 0.68% 0.68% 0.52% 0.51%
Allowance for loan losses as a percent of non-performing loans receivable 416.32% 481.28% 463.15% 384.18% 174.98%
Non-performing loans as a percent of total loans receivable, net 0.17% 0.14% 0.15% 0.14% 0.29%
Non-performing assets as a percent of total assets 0.12% 0.10% 0.11% 0.12% 0.26%
                
Net charge-offs (recoveries)$76 $17 $(122)$189 $6 
Net charge-offs (recoveries) to average outstanding loans during the period (1) 0.02% 0.01% (0.04%) 0.06% 0.00%
                
Capital Ratios (5):               
Tier 1 capital (to adjusted total assets) 12.41% 12.51% 13.19% 13.00% 12.89%
Common equity Tier 1 capital (to risk-weighted assets) 17.56% 16.98% 16.80% 17.24% 17.16%
Tier 1 capital (to risk-weighted assets) 17.56% 16.98% 16.80% 17.24% 17.16%
Total capital (to risk-weighted assets) 18.24% 17.65% 17.44% 17.74% 17.64%
                
(1) Performance ratios for quarter ended periods 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. 
(5) Represents Bank ratios. 
  

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

 As of 
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
Mortgage loans:               
Residential mortgages$245,008 $255,382 $266,684 $262,441 $264,251 
Commercial mortgage 794,248  807,106  775,378  741,171  726,315 
Construction 11,512  11,053  24,929  22,787  18,830 
Net deferred loan origination costs 666  739  925  1,054  1,202 
Total mortgage loans 1,051,434  1,074,280  1,067,916  1,027,453  1,010,598 
Commercial and consumer loans:               
Commercial loans (1) 155,569  164,257  128,869  129,809  125,926 
Home equity credit lines 29,249  29,838  30,994  31,460  31,503 
Consumer and overdrafts 308  481  444  436  437 
Net deferred loan origination costs 25  730  805  798  783 
Total commercial and consumer loans 185,151  195,306  161,112  162,503  158,649 
Total loans receivable 1,236,585  1,269,586  1,229,028  1,189,956  1,169,247 
Allowance for loan losses (8,672) (8,639) (8,346) (6,216) (5,993)
Loans receivable, net$1,227,913 $1,260,947 $1,220,682 $1,183,740 $1,163,254 
                
(1) Includes PPP loans of $35.7 million and $49.6 million of as of September 30, 2020 and June 30, 2020, respectively, and none at all other dates. 
  


 As of 
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
Demand deposits$183,844 $191,898 $145,844 $140,218 $141,567 
NOW accounts 148,176  151,797  128,103  126,346  124,062 
Money market accounts 253,176  239,942  192,779  162,208  151,652 
Savings 349,805  343,352  330,310  354,078  350,250 
Time deposits 442,011  446,266  482,550  468,764  466,374 
Total deposits$1,377,012 $1,373,255 $1,279,586 $1,251,614 $1,233,905 
                

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 
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
Computation of Adjusted Net Income and Adjusted Earnings Per Share 
Net income applicable to common stock (GAAP)$2,728 $2,960 $1,217 $2,353 $2,829 
                
Adjustments (1):               
Prepayment income on loans receivable and investment securities (58) (30) (4) (95) (371)
Gain on sale of foreclosed real estate -  -  (31) -  (37)
Gain on sale of investment securities -  -  (29) -  - 
Adjusted net income (Non-GAAP)$2,670 $2,930 $1,153 $2,258 $2,421 
                
Average number of common shares outstanding:       
Basic 15,302,838  15,334,098  15,437,173  15,837,762  15,979,762 
Diluted 15,302,949  15,334,098  15,447,217  15,909,855  16,082,276 
Earnings per share (GAAP):               
Basic$0.18 $0.19 $0.08 $0.15 $0.18 
Diluted$0.18 $0.19 $0.08 $0.14 $0.18 
Adjusted earnings per common share (Non-GAAP):       
Basic$0.17 $0.19 $0.07 $0.14 $0.15 
Diluted$0.17 $0.19 $0.07 $0.14 $0.15 
                
(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 
 September 30,
2020
 June 30,
2020
 September 30,
2019
 
Computation of Adjusted Yield on Assets and Adjusted Net Interest Margin         
          
Average interest-earning assets$1,725,925 $1,683,635 $1,587,129 
          
Interest and dividend income (GAAP)$14,528 $14,821 $16,026 
Less: Prepayment income on loans receivable and investment securities (73) (39) (477)
Adjusted interest and dividend income (Non-GAAP)$14,455 $14,782 $15,549 
          
Yield on interest-earning assets (GAAP) 3.36% 3.52% 4.04%
Adjusted yield on interest-earning assets (Non-GAAP) 3.35% 3.51% 3.92%
          
Net interest income (GAAP)$11,577 $11,459 $11,998 
Less: Prepayment income on loans receivable and investment securities (73) (39) (477)
Adjusted net interest income (Non-GAAP)$11,504 $11,420 $11,521 
          
Net interest margin (GAAP) 2.69% 2.72% 3.03%
Adjusted net interest margin (Non-GAAP) 2.67% 2.71% 2.90%
          

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

 Quarter Ended 
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
Computation of Efficiency Ratio    
Noninterest expense (GAAP)$8,624 $8,533 $8,520 $8,794 $8,787 
                
Net interest income (GAAP)$11,577 $11,459 $11,525 $11,697 $11,998 
Noninterest income (GAAP) 594  1,177  580  547  765 
Total (GAAP) 12,171  12,636  12,105  12,244  12,763 
Adjustments:               
Prepayment income on loans receivable and investment securities (73) (39) (5) (123) (477)
Gain on sale of foreclosed real estate -  -  (40) -  (47)
Gain on sale of investment securities -  -  (38) -  - 
Adjusted total (Non-GAAP)$12,098 $12,597 $12,022 $12,121 $12,239 
                
Efficiency ratio (GAAP) 70.86% 67.53% 70.38% 71.82% 68.85%
Adjusted efficiency ratio (Non-GAAP) 71.28% 67.74% 70.87% 72.55% 71.80%
                

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 
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 September 30,
2019
 
Computation of Tangible Book Value per Common Share    
Total shareholders' equity (GAAP)$273,679 $273,713 $272,417 $279,839 $281,522 
Adjustments:               
Goodwill (6,106) (6,106) (6,106) (6,106) (6,106)
Other intangible assets (209) (229) (250) (274) (298)
Tangible common shareholders' equity (Non-GAAP)$267,364 $267,378 $266,061 $273,459 $275,118 
                
Common shares outstanding 16,634,237  16,898,137  16,898,137  17,372,308  17,624,239 
                
Book value per share (GAAP)$16.45 $16.20 $16.12 $16.11 $15.97 
Adjustments:               
Effects of intangible assets (0.38) (0.38) (0.38) (0.37) (0.36)
                
Tangible book value per common share (Non-GAAP)$16.07 $15.82 $15.74 $15.74 $15.61