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

Yorktown Heights, New York, UNITED STATES


YORKTOWN HEIGHTS, N.Y., Jan. 28, 2021 (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 December 31, 2020 compared to $2.7 million, or $0.18 per diluted share, for the three months ended September 30, 2020 and $2.4 million, or $0.14 per diluted share, for the three months ended December 31, 2019. Net income was $5.4 million, or $0.36 per diluted share, for the six months ended December 31, 2020, compared to $5.2 million, or $0.32 per diluted, for the six months ended December 31, 2019.

On a non-GAAP basis, which excludes certain nonrecurring items, the Company recorded adjusted net income of $2.6 million, or $0.17 per diluted share, for the three months ended December 31, 2020 compared to adjusted net income of $2.7 million, or $0.17 per diluted share, for the three months ended September 30, 2020 and $2.3 million, or $0.14 per diluted share, for the three months ended December 31, 2019. Adjusted net income was $5.2 million, or $0.35 per diluted share, for the six months ended December 31, 2020 compared to $4.7 million, or $0.29 per diluted share, for the six months ended December 31, 2019. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

On January 27, 2021, the Board of Directors declared a regular quarterly cash dividend of $0.04 per share. The dividend is payable on or about February 26, 2021 to stockholders of record as of the close of business on February 12, 2021.

Second Quarter Highlights

  • Earnings before income taxes of $3.5 million for the quarter increased $54,000 or 1.6% from the linked quarter and $454,000 or 14.9% from the same quarter last year.
  • Net interest income of $11.5 million for the current quarter decreased $30,000 or 0.3% from the linked quarter and decreased $150,000 or 1.3% from the same quarter last year.
  • The net interest margin was 2.70% for the quarter, an increase from 2.69% in the linked quarter but a decrease from 2.94% for the same quarter last year.
  • Cost of interest-bearing deposits was 0.71% for the quarter, a decrease from 0.80% in the linked quarter and 1.20% for the same quarter last year.
  • The efficiency ratio was 70.72% for the current quarter compared to 70.86% for the linked quarter and 71.82% for the prior year quarter.
  • Average loans receivable, excluding SBA Paycheck Protection Program (“PPP”) loans, of $1.20 billion for the current quarter, an increase of 1.6% compared to the same quarter last year.
  • Average deposits of $1.38 billion for the current quarter, an increase of 11.0% compared to the same quarter last year.
  • Non-performing loans of $1.7 million increased $50,000 year-over-year and equates to 0.13% of total net loans receivable as of December 31, 2020.

President’s Comments

Commenting on the Company’s performance, Joseph D. Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation, said, “I am pleased with the Company’s operating and financial results despite the challenges presented by the prolonged pandemic. As our quarter and six-month results indicate, we continue to provide stable core earnings and very strong asset quality. We continue to follow strong safety protocols to protect the health and well-being of our employees and customers including the technology that allows them to work and bank remotely when necessary. Meanwhile, with additional funding available for PPP loans we will continue to be a source of strength to our customers and communities in addressing their financial needs during these uncertain economic times. As we look ahead to 2021, we are optimistic that the latest stimulus package along with the progress on vaccinations will lead not only to a strong national economic recovery but opportunities for continued long-term growth and profitability for our shareholders.”

Loan Payment Deferrals

The COVID-19 pandemic has created extensive disruptions to the local economy and our customers. Through December 31, 2020, the Company has granted loan payment deferrals on 320 consumer and commercial loans whose borrowers have demonstrated financial hardship caused by COVID-19 with loan balances totaling $213.6 million. As of December 31, 2020, 26 loans totaling $31.9 million were still on deferral. Of those loans still on deferral as of December 31, 2020, $6.2 million are scheduled to resume payments prior to March 31, 2021, with the remainder scheduled to resume payments prior to January 31, 2022, however as we continue to assess our borrowers’ financial condition and individual circumstances in the coming weeks and months, additional payment deferrals may be granted.

The table below provides additional detail for those loans on deferral as of December 31, 2020 (dollar amounts in thousands):

Industry Sector:Number of loans Recorded Investment (2) % secured by real estate collateral Loan-to-Value % (3) Weighted average term of remaining deferral (in months) 
Consumer (1) 13 $5,531  100.0% 61.9% 2.7 
Commercial:               
Retail 3  11,591  100.0  53.4  12.0 
Hotels and accommodation services 2  7,648  100.0  60.3  6.0 
Food service 3  5,793  100.0  46.1  5.6 
All other commercial 5  1,370  83.3  63.8  3.7 
Total commercial 13  26,402  99.1  54.2  8.5 
Total 26 $31,933  99.3% 55.6% 7.5 

      (1)   Includes first and second lien residential mortgages of $5.2 million and $294,000, respectively.
      (2)   Includes loans classified as special mention and substandard of $2.5 million and $15.2 million, respectively.
      (3)   Generally based on collateral values upon origination.

As of December 31, 2020, the Company does not participate in leveraged lending, shared national credits or credit card lending.

Income Statement Summary

Net income for the three months ended December 31, 2020 was $2.7 million, unchanged from the linked quarter and a $341,000 increase from $2.4 million in the prior year period. The change from the prior year period is primarily due to a $305,000 decrease in provision for loan loss, a $196,000 increase in noninterest income and a $103,000 decrease in noninterest expenses, partially offset by a $150,000 decrease in net interest income and a $113,000 increase in income tax expense.

Net interest income was $11.5 million for the quarter ended December 31, 2020, decreases of $30,000, or 0.3%, compared to the linked quarter, and $150,000, or 1.3%, compared to the prior year quarter. The decrease compared to the linked quarter is primarily the result of a $11.0 million, or 0.6%, decrease in average interest-earning assets, partially offset by a 1 basis point increase in net interest margin. The decrease in net interest income compared to the prior year period is primarily the result of a 24 basis point decrease in net interest margin, partially offset by a $118.3 million, or 7.4% increase in average interest-earning assets.

The net interest margin was 2.70% for the current quarter reflecting an increase of 1 basis point compared to 2.69% in the linked quarter and a 24 basis point decrease compared to 2.94% in the prior year quarter. When compared to the prior year period, despite continued asset growth and a decrease in funding costs, margin compression has resulted from significant decreases in market interest rates over the past year and a less profitable asset mix due to an increase in cash and cash equivalents. However, in the current quarter, the reduction in funding costs more than offset the decrease in asset yields, resulting in slight net interest margin expansion.

Net interest margin, excluding the effect of PPP loans was 2.66% for the current quarter compared to 2.63% in the linked quarter and 2.94% in the prior year quarter. Net interest margin, excluding the effect of PPP loans was 2.65% for the current year to date period compared to 2.98% in the prior year period.

The Company has experienced significant excess liquidity balances beginning in the June 2020 quarter due to deposit growth stemming from the various impacts of the pandemic, including, but not limited to, government stimulus, a decrease in consumer and commercial spending, and reduced loan growth due to suppressed originations and higher prepayment rates. Excluding the effects of this excess liquidity, net interest margin is estimated to have been 2.89% and 2.86% for the current and linked quarters, respectively. Some level of excess liquidity is expected to continue for the foreseeable future and is largely dependent on future government stimulus programs.

The yield on interest-earning assets for the current quarter was 3.32%, a 5 basis point decrease from the prior quarter and a 62 basis point decrease from the prior year quarter. A $54.3 million or 4.6% increase in average loans compared to the prior year quarter was more than offset by a decrease in asset yields, a result of decreases in market interest rates, the origination of lower yielding PPP loans, and significant increases in liquidity over the last nine months. The rate of asset yield decrease has slowed in recent quarters due to a more stable yield curve and earning asset composition.

The cost of interest-bearing deposits was 0.71% for the current quarter, decreases of 9 basis points from 0.80% in the prior quarter and 49 basis points from 1.20% in the prior year quarter. In response to the significant decrease in market interest rates in March 2020, deposit rate reductions have been implemented throughout the last year, the effects of which continue to be realized. At December 31, 2020, the weighted average cost of interest-bearing deposits was 0.54%. The cost of interest-bearing liabilities was 0.81% for the current quarter, decreases of 8 basis points from 0.89% in the prior quarter and 50 basis points from 1.31% in the prior year quarter. Over the remainder of the current fiscal year, the Company has $60.0 million of wholesale funding maturing, comprised of FHLB advances and brokered time deposits, with a weighted average cost of 2.08%. Additionally, over the same period the Company has $155.2 million of non-brokered time deposits maturing with a current weighted average cost of 1.05%. If interest rates stay constant, the Company expects the cost of these deposits to be reduced significantly.

The provision for loan losses was $107,000 for the three months ended December 31, 2020 compared to $109,000 in the linked quarter and $412,000 for the prior year quarter. Charge-offs, net of recoveries, were $102,000 for the three months ended December 31, 2020 compared to $76,000 for the linked quarter and $189,000 for the prior year quarter. Non-performing loans as a percent of total loans receivable was 0.13% as of December 31, 2020, a decrease from 0.17% as of September 30, 2020 and 0.14% as of December 31, 2019.

Noninterest income of $743,000 for the three months ended December 31, 2020 increased $149,000 compared to the linked quarter and $196,000 compared to the prior year quarter. The increase compared to the linked quarter was primarily due to a $109,000 increase in swap income and a $41,000 increase in fees and service charges. The increase compared to the prior year quarter was primarily due to a $238,000 increase in swap income, partially offset by a decrease of $39,000 in fees and service charges. The reduction in fees and service charge income compared to the prior year quarter was due to the effects of reduced customer transaction activity since the start of the COVID-19 pandemic, however fee and service charge income has increased compared to the linked quarter.

Noninterest expense of $8.7 million for the three months ended December 31, 2020 increased $67,000 compared to the linked quarter and decreased $103,000 compared to the prior year quarter. The increase compared to the linked quarter was primarily due to increases of $103,000 in professional fees, $93,000 in pension costs and $88,000 in all other non-interest expenses, partially offset by a $130,000 decrease in communications and data processing and $87,000 in salaries and benefits. The decrease compared to the prior year quarter was caused primarily by decreases of $369,000 in salaries and benefits and $61,000 in communication and data processing costs, partially offset by increases of $124,000 in professional fees, $122,000 in FDIC insurance premiums and $81,000 in all other expenses. The Bank applied small bank assessment credits of $108,000 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 22.9% for the three months ended December 31, 2020, as compared to 22.5% for the prior year quarter. The Company expects an effective tax rate of approximately 21.5% for the year ending June 30, 2021.

Balance Sheet Summary

Total assets decreased $2.0 million to $1.79 billion at December 31, 2020 as compared to June 30, 2020. However, the mix of assets changed due to decreases of $23.4 million in net loans receivable and $3.0 million in total investment securities, which was mostly offset by an increase of $26.2 million in cash and cash equivalents. The $23.4 million decrease in net loans receivable was the result of decreases in residential mortgages of $17.4 million, commercial mortgages of $5.8 million, commercial loans of $3.6 million, which included a decrease in PPP loans of $13.9 million, and home equity lines of credit of $2.2 million, partially offset by an increase in construction loans of $6.5 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 increased $2.3 million to $1.52 billion at December 31, 2020 as a $4.0 million increase in deposits which was partially offset by a $1.7 million decrease in all other liabilities.

Total shareholders’ equity decreased $4.4 million to $269.3 million at December 31, 2020 as compared to June 30, 2020. This decrease was primarily due to the repurchase of $11.3 million (784,170 shares) of common stock and $1.2 million of cash dividends declared and paid, partially offset by net income of $5.4 million and $2.3 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period. As of December 31, 2020, there were 60,737 shares available to be repurchased under the current stock repurchase plan. On January 20, 2021, the stock repurchase plan was completed, in which the Company repurchased a total of 844,907 shares at an average price of $14.24 per share.

At December 31, 2020, the Company’s book value per share and tangible book value per share were $16.73 and $16.34, 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 December 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 COVID-19 pandemic, including its impact on our business and operations, the impact of lost fee revenue and increased 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)

  December 31,  June 30, 
  2020  2020 
ASSETS        
Cash and due from banks $159,000  $135,045 
Federal funds sold  3,541   1,257 
Cash and cash equivalents  162,541   136,302 
Held to maturity debt securities, at amortized cost
  (fair value of $273,858 and $281,497, respectively)
  266,949   275,772 
Available for sale debt securities, at fair value  43,282   37,426 
Total investment securities  310,231   313,198 
Loans receivable, net of allowance for loan losses of $8,677 and $8,639, respectively  1,237,550   1,260,947 
Accrued interest receivable  6,117   6,880 
FHLB stock  6,305   6,308 
Premises and equipment, net  19,524   20,853 
Deferred tax asset, net  3,665   3,129 
Bank-owned life insurance  25,280   25,019 
Goodwill  6,106   6,106 
Other intangible assets  189   229 
Other assets  12,331   12,958 
Total assets $1,789,839  $1,791,929 
LIABILITIES AND SHAREHOLDERS’ EQUITY        
Interest-bearing deposits $1,187,319  $1,181,357 
Non interest-bearing deposits  189,968   191,898 
Total deposits  1,377,287   1,373,255 
Mortgage escrow funds  10,610   10,123 
Advances from Federal Home Loan Bank  106,023   106,089 
Other liabilities  26,595   28,749 
Total liabilities  1,520,515   1,518,216 
Commitments and contingencies  -   - 
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of December 31, 2020 and June 30, 2020, respectively)  -   - 
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 shares issued as of December 31, 2020 and June 30, 2020, and 16,097,867 and 16,898,137 shares outstanding as of December 31, 2020 and June 30, 2020, respectively)  187   187 
Additional paid in capital  187,964   186,200 
Retained earnings  145,472   141,288 
Unearned compensation - ESOP  (10,657)  (11,145)
Accumulated other comprehensive loss, net of income taxes  (5,945)  (6,403)
Treasury stock, at cost (2,614,428 and 1,814,158 shares as of December 31, 2020 and June 30, 2020, respectively)  (47,697)  (36,414)
Total shareholders’ equity  269,324   273,713 
Total liabilities and shareholders’ equity $1,789,839  $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  Six Months Ended 
  December 31,  December 31, 
  2020  2019  2020  2019 
Interest and dividend income                
Loans receivable $12,182  $13,149  $24,729  $26,185 
Investment securities  1,933   2,279   3,789   4,971 
Federal funds and other  110   301   235   599 
Total interest and dividend income  14,225   15,729   28,753   31,755 
Interest expense                
Deposits and escrow interest  2,158   3,358   4,590   6,659 
FHLB advances  520   674   1,039   1,401 
Total interest expense  2,678   4,032   5,629   8,060 
Net interest income  11,547   11,697   23,124   23,695 
Provision for loan losses  107   412   216   747 
Net interest income after provision for loan losses  11,440   11,285   22,908   22,948 
Noninterest income                
Fees and service charges  363   402   685   804 
Swap income  238   -   367   170 
Bank-owned life insurance  129   134   261   271 
Other  13   11   24   67 
Total noninterest income  743   547   1,337   1,312 
Noninterest expense                
Salaries and employee benefits  5,520   5,889   11,127   11,653 
Occupancy and equipment  1,374   1,333   2,692   2,648 
Communications and data processing  446   507   1,022   1,038 
Professional fees  503   379   903   783 
Postage, printing, stationery and supplies  167   159   306   299 
Advertising  100   100   200   200 
FDIC assessment  122   -   235   - 
Amortization of intangible assets  20   25   40   49 
Other operating expenses  439   402   790   911 
Total noninterest expense  8,691   8,794   17,315   17,581 
Net income before income tax expense  3,492   3,038   6,930   6,679 
Income tax expense  798   685   1,508   1,497 
Net income $2,694  $2,353  $5,422  $5,182 
Earnings per common share:                
Basic $0.18  $0.15  $0.36  $0.33 
Diluted  0.18   0.14   0.36   0.32 
Weighted average common shares outstanding:                
Basic  14,888,528   15,837,762   15,094,982   15,908,761 
Diluted  14,899,020   15,909,855   15,094,982   15,996,251 


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

 Three Months Ended 
 December 31, 2020  September 30, 2020  December 31, 2019 
 Average Balance  Interest / Dividends  Average Rate  Average Balance  Interest / Dividends  Average Rate  Average Balance  Interest / Dividends  Average Rate 
Assets:                                   
Loans receivable$1,232,555  $12,182   3.95% $1,252,595  $12,547   4.00% $1,178,253  $13,149   4.46%
Investment securities (1) 313,812   1,933   2.51   315,292   1,856   2.40   358,760   2,279   2.55 
Other interest-earning assets 168,608   110   0.26   158,038   125   0.31   59,678   301   2.00 
Total interest-earning assets 1,714,975   14,225   3.32   1,725,925   14,528   3.37   1,596,691   15,729   3.94 
Non-interest-earning assets 70,417           71,926           68,793         
Total assets$1,785,392          $1,797,851          $1,665,484         
                                    
Liabilities and equity:                                   
NOW accounts$149,620   79   0.21  $149,466   89   0.24  $122,455   67   0.22 
Money market accounts 255,961   211   0.33   250,297   238   0.38   161,075   472   1.16 
Savings accounts and escrow 362,422   168   0.18   360,091   202   0.22   355,295   234   0.26 
Time deposits 434,446   1,700   1.55   443,487   1,903   1.70   467,486   2,585   2.19 
Total interest-bearing deposits 1,202,449   2,158   0.71   1,203,341   2,432   0.80   1,106,311   3,358   1.20 
FHLB advances 106,034   520   1.94   106,067   519   1.94   117,712   674   2.27 
Total interest-bearing liabilities 1,308,483   2,678   0.81   1,309,408   2,951   0.89   1,224,023   4,032   1.31 
Non-interest-bearing deposits 178,538           184,085           138,346         
Other non-interest-bearing liabilities 26,482           28,958           21,827         
Total liabilities 1,513,503           1,522,451           1,384,196         
Total shareholders' equity 271,889           275,400           281,288         
Total liabilities and shareholders' equity$1,785,392          $1,797,851          $1,665,484         
                                    
Net interest income    $11,547          $11,577          $11,697     
Interest rate spread - tax equivalent (2)         2.51           2.48           2.63 
Net interest margin - tax equivalent (3)         2.70           2.69           2.94 
Average interest-earning assets to interest-bearing liabilities 131.07%          131.81%          130.45%        
                                    
(1) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using a statutory federal income tax rate of 21% for all period presented. See reconciliation of non-GAAP measures at the end of this release. 
(2) 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. 
(3) Net interest margin represents tax equivalent net interest income divided by average interest-earning assets. 


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

 Six Months Ended December 31, 
 2020  2019 
 Average Balance  Interest / Dividends  Average Rate  Average Balance  Interest / Dividends  Average Rate 
Assets:                       
Loans receivable$1,242,575  $24,729   3.98% $1,160,139  $26,185   4.51%
Investment securities (1) 314,552   3,789   2.44   378,975   4,971   2.63 
Other interest-earning assets 163,323   235   0.29   52,796   599   2.25 
Total interest-earning assets 1,720,450   28,753   3.35   1,591,910   31,755   3.99 
Non-interest-earning assets 71,172           69,530         
Total assets$1,791,622          $1,661,440         
                        
Liabilities and equity:                       
NOW accounts$149,543   168   0.22  $121,154   124   0.20 
Money market accounts 253,129   449   0.35   155,477   935   1.19 
Savings accounts and escrow 361,256   370   0.20   358,932   466   0.26 
Time deposits 438,966   3,603   1.63   463,417   5,134   2.20 
Total interest-bearing deposits 1,202,894   4,590   0.76   1,098,980   6,659   1.20 
FHLB advances 106,051   1,039   1.94   119,784   1,401   2.32 
Total interest-bearing liabilities 1,308,945   5,629   0.86   1,218,764   8,060   1.32 
Non-interest-bearing deposits 181,312           139,486         
Other non-interest-bearing liabilities 27,720           21,519         
Total liabilities 1,517,977           1,379,769         
Total shareholders’ equity 273,645           281,671         
Total liabilities and shareholders’ equity$1,791,622          $1,661,440         
                        
Net interest income    $23,124          $23,695     
Interest rate spread - tax equivalent (2)         2.49           2.67 
Net interest margin - tax equivalent (3)         2.70           2.98 
Average interest-earning assets to interest-bearing liabilities 131.44%          130.62%        
                        
(1) Tax exempt interest revenue is shown on a tax equivalent basis for proper comparison using a statutory federal income tax rate of 21% for all period presented. See reconciliation of non-GAAP measures at the end of this release. 
(2) 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. 
(3) Net interest margin represents tax equivalent net interest income divided by average interest-earning assets. 


PCSB Financial Corporation and Subsidiaries
Condensed Financial Information (unaudited)
(amounts in thousands, except per share data)

 As of 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 
Condensed Balance Sheets             
Cash and cash equivalents$162,541 $162,739 $136,302 $84,912 $62,835 
Total investment securities 310,231  318,509  313,198  309,618  327,835 
Loans receivable, net 1,237,550  1,227,913  1,260,947  1,220,682  1,183,740 
Other assets 79,517  81,914  81,482  80,663  74,757 
Total assets$1,789,839 $1,791,075 $1,791,929 $1,695,875 $1,649,167 
                
Total deposits and escrow$1,387,897 $1,383,432 $1,383,378 $1,287,510 $1,261,663 
Advances from Federal Home Loan Bank 106,023  106,056  106,089  106,121  86,153 
Other liabilities 26,595  27,908  28,749  29,827  21,512 
Total liabilities 1,520,515  1,517,396  1,518,216  1,423,458  1,369,328 
Total shareholders’ equity 269,324  273,679  273,713  272,417  279,839 
Total liabilities and shareholders’ equity$1,789,839 $1,791,075 $1,791,929 $1,695,875 $1,649,167 


 Quarter Ended Six Months Ended 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
Condensed Income Statements                   
Interest income$14,225 $14,528 $14,821 $15,334 $15,729 $28,753 $31,755 
Interest expense 2,678  2,951  3,362  3,809  4,032  5,629  8,060 
Net interest income 11,547  11,577  11,459  11,525  11,697  23,124  23,695 
Provision for loan losses 107  109  309  2,008  412  216  747 
Noninterest income 743  594  1,177  580  547  1,337  1,312 
Noninterest expense 8,691  8,624  8,533  8,520  8,794  17,315  17,581 
Income before income tax expense 3,492  3,438  3,794  1,577  3,038  6,930  6,679 
Income tax expense 798  710  834  360  685  1,508  1,497 
Net income$2,694 $2,728 $2,960 $1,217 $2,353 $5,422 $5,182 
                      
Earnings per share:                     
Basic$0.18 $0.18 $0.19 $0.08 $0.15 $0.36 $0.33 
Diluted 0.18  0.18  0.19  0.08  0.14  0.36  0.32 


PCSB Financial Corporation and Subsidiaries
Selected Financial Data (unaudited)

 Quarter Ended Six Months Ended 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
Performance Ratios (1):                   
Return on average assets 0.60% 0.61% 0.68% 0.29% 0.57% 0.61% 0.62%
Return on average equity 3.96% 3.96% 4.30% 1.77% 3.35% 3.96% 3.68%
Interest rate spread 2.51% 2.48% 2.47% 2.60% 2.63% 2.49% 2.67%
Net interest margin 2.70% 2.69% 2.72% 2.89% 2.94% 2.70% 2.98%
Efficiency ratio 70.72% 70.86% 67.53% 70.38% 71.82% 70.79% 70.30%
Adjusted efficiency ratio (2) 71.74% 71.28% 67.74% 70.87% 72.55% 71.51% 72.17%
                      
Noninterest income to average assets 0.17% 0.13% 0.27% 0.14% 0.13% 0.15% 0.16%
Noninterest expense to average assets 1.95% 1.92% 1.95% 2.06% 2.11% 1.93% 2.12%
                      
Average interest-earning assets to average interest-bearing liabilities 131.07% 131.81% 131.65% 129.78% 130.45% 131.44% 130.62%
Average equity to average assets 15.23% 15.32% 15.70% 16.60% 16.89% 15.27% 16.95%
Dividend payout ratio (3) 22.57% 23.09% 21.25% 52.01% 27.62% 22.83% 25.26%


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

 As of and for the quarter ended 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 
Loans to deposits 89.85% 89.17% 91.82% 95.40% 94.58%
                
Share Data:               
Shares outstanding 16,097,867  16,634,237  16,898,137  16,898,137  17,372,308 
Book value per common share$16.73 $16.45 $16.20 $16.12 $16.11 
Tangible book value per common share (4)$16.34 $16.07 $15.82 $15.74 $15.74 
                
Asset Quality Ratios:               
Non-performing loans receivable$1,668 $2,083 $1,795 $1,802 $1,618 
Non-performing assets$1,668 $2,083 $1,795 $1,802 $1,897 
Allowance for loan losses as a percent of total loans receivable 0.70% 0.70% 0.68% 0.68% 0.52%
Allowance for loan losses as a percent of non-performing loans receivable 520.20% 416.32% 481.28% 463.15% 384.18%
Non-performing loans as a percent of total loans receivable, net 0.13% 0.17% 0.14% 0.15% 0.14%
Non-performing assets as a percent of total assets 0.09% 0.12% 0.10% 0.11% 0.12%
                
Net charge-offs (recoveries)$102 $76 $17 $(122)$189 
Net charge-offs (recoveries) to average outstanding loans during the period (1) 0.03% 0.02% 0.01% (0.04%) 0.06%
                
Capital Ratios (5):               
Tier 1 capital (to adjusted total assets) 12.66% 12.41% 12.51% 13.19% 13.00%
Common equity Tier 1 capital (to risk-weighted assets) 17.74% 17.56% 16.98% 16.80% 17.24%
Tier 1 capital (to risk-weighted assets) 17.74% 17.56% 16.98% 16.80% 17.24%
Total capital (to risk-weighted assets) 18.42% 18.24% 17.65% 17.44% 17.74%
                
(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 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 
Mortgage loans:               
Residential mortgages$237,987 $245,008 $255,382 $266,684 $262,441 
Commercial mortgage 801,348  794,248  807,106  775,378  741,171 
Construction 17,551  11,512  11,053  24,929  22,787 
Net deferred loan origination costs 600  666  739  925  1,054 
Total mortgage loans 1,057,486  1,051,434  1,074,280  1,067,916  1,027,453 
Commercial and consumer loans:               
Commercial loans (1) 160,678  155,569  164,257  128,869  129,809 
Home equity credit lines 27,653  29,249  29,838  30,994  31,460 
Consumer and overdrafts 328  308  481  444  436 
Net deferred loan origination costs 82  25  730  805  798 
Total commercial and consumer loans 188,741  185,151  195,306  161,112  162,503 
Total loans receivable 1,246,227  1,236,585  1,269,586  1,229,028  1,189,956 
Allowance for loan losses (8,677) (8,672) (8,639) (8,346) (6,216)
Loans receivable, net$1,237,550 $1,227,913 $1,260,947 $1,220,682 $1,183,740 
                
(1) Includes PPP loans of $35.7 million as of December 31, 2020 and September 30, 2020, $49.6 million as of June 30, 2020 and none at all other dates. 


 As of 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 
Demand deposits$189,968 $183,844 $191,898 $145,844 $140,218 
NOW accounts 159,919  148,176  151,797  128,103  126,346 
Money market accounts 256,132  253,176  239,942  192,779  162,208 
Savings 354,882  349,805  343,352  330,310  354,078 
Time deposits 416,386  442,011  446,266  482,550  468,764 
Total deposits$1,377,287 $1,377,012 $1,373,255 $1,279,586 $1,251,614 


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

 Quarter Ended Six Months Ended 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
Computation of Adjusted Net Income and Adjusted Earnings Per Share       
Net income applicable to common stock (GAAP)$2,694 $2,728 $2,960 $1,217 $2,353 $5,422 $5,182 
                      
Adjustments (1):                     
Prepayment income on loans receivable and investment securities (136) (58) (30) (4) (95) (195) (466)
Gain on sale of foreclosed real estate -  -  -  (31) -  -  (37)
Gain on sale of investment securities -  -  -  (29) -  -  - 
Adjusted net income (Non-GAAP)$2,558 $2,670 $2,930 $1,153 $2,258 $5,227 $4,679 
                      
Average number of common shares outstanding:             
Basic 14,888,528  15,302,838  15,334,098  15,437,173  15,837,762  15,094,982  15,908,761 
Diluted 14,899,020  15,302,949  15,334,098  15,447,217  15,909,855  15,094,982  15,996,251 
Earnings per share (GAAP):                     
Basic$0.18 $0.18 $0.19 $0.08 $0.15 $0.36 $0.33 
Diluted 0.18  0.18  0.19  0.08  0.14  0.36  0.32 
Adjusted earnings per common share (Non-GAAP):             
Basic$0.17 $0.17 $0.19 $0.07 $0.14 $0.35 $0.29 
Diluted 0.17  0.17  0.19  0.07  0.14  0.35  0.29 
                      
(1) Amounts included in income before income tax expense are presented net of tax.       


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

 Quarter Ended  Six Months Ended 
 December 31,
2020
 September 30,
2020
 December 31,
2019
  December 31,
2020
 December 31,
2019
 
Computation of tax equivalent net interest income        
Total interest income$14,225 $14,528 $15,729  $28,753 $31,755 
Total interest expense 2,678  2,951  4,032   5,629  8,060 
Net interest income (GAAP) 11,547  11,577  11,697   23,124  23,695 
Tax equivalent adjustment 35  21  6   55  12 
Net interest income - tax equivalent (Non-GAAP)$11,582 $11,598 $11,703  $23,179 $23,707 


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

 Quarter Ended Six Months Ended 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 December 31,
2020
 December 31,
2019
 
Computation of Efficiency Ratio          
Noninterest expense (GAAP)$8,691 $8,624 $8,533 $8,520 $8,794 $17,315 $17,581 
                      
Net interest income (GAAP)$11,547 $11,577 $11,459 $11,525 $11,697 $23,124 $23,695 
Noninterest income (GAAP) 743  594  1,177  580  547  1,337  1,312 
Total (GAAP) 12,290  12,171  12,636  12,105  12,244  24,461  25,007 
Adjustments:                     
Prepayment income on loans receivable and investment securities (176) (73) (39) (5) (123) (249) (600)
Gain on sale of foreclosed real estate -  -  -  (40) -  -  (47)
Gain on sale of investment securities -  -  -  (38) -  -  - 
Adjusted total (Non-GAAP)$12,114 $12,098 $12,597 $12,022 $12,121 $24,212 $24,360 
                      
Efficiency ratio (GAAP) 70.72% 70.86% 67.53% 70.38% 71.82% 70.79% 70.30%
Adjusted efficiency ratio (Non-GAAP) 71.74% 71.28% 67.74% 70.87% 72.55% 71.51% 72.17%


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

 As of 
 December 31,
2020
 September 30,
2020
 June 30,
2020
 March 31,
2020
 December 31,
2019
 
Computation of Tangible Book Value per Common Share    
Total shareholders' equity (GAAP)$269,324 $273,679 $273,713 $272,417 $279,839 
Adjustments:               
Goodwill (6,106) (6,106) (6,106) (6,106) (6,106)
Other intangible assets (189) (209) (229) (250) (274)
Tangible common shareholders' equity (Non-GAAP)$263,029 $267,364 $267,378 $266,061 $273,459 
                
Common shares outstanding 16,097,867  16,634,237  16,898,137  16,898,137  17,372,308 
                
Book value per share (GAAP)$16.73 $16.45 $16.20 $16.12 $16.11 
Adjustments:               
Effects of intangible assets (0.39) (0.38) (0.38) (0.38) (0.37)
                
Tangible book value per common share (Non-GAAP)$16.34 $16.07 $15.82 $15.74 $15.74