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

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

YORKTOWN HEIGHTS, N.Y., April 25, 2019 (GLOBE NEWSWIRE) -- PCSB Financial Corporation (the “Company”) (PCSB), parent of PCSB Bank (the "Bank"), today announced net income of $2.0 million, or $0.12 per basic and diluted share, for the three months ended March 31, 2019 compared to $2.3 million, or $0.14 per basic and diluted share, for the three months ended December 31, 2018 and $2.2 million, or $0.13 per basic and diluted share, for the three months ended March 31, 2018.

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

In conjunction with grants under the stockholder-approved 2018 Equity Incentive Plan, the Company recorded $829,000, or $631,000 net of taxes, of stock-based compensation expense in the current quarter, compared to $482,000, or $364,000 net of taxes in the prior quarter. No such expense was recorded in the prior year period. This additional expense reduced diluted earnings per share by $0.04 in the current quarter, $0.02 in the prior quarter, and had no impact in the prior year quarter.

President’s Comments
Commenting on the Company’s results, Joseph Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation, said, “I am pleased to report continued progress in our second year as a public company. Year-to-date non-GAAP net income improved by 20.6% over the year ago period, supported by a nearly 10% increase in the average balance of loans for the same period. Asset quality remains strong as the ratio of non-performing assets to total assets decreased to 0.23% at March 31, 2019 from 0.27% at December 31, 2018, and decreased by more than half from 0.50% a year ago. During the third fiscal quarter, we also completed our first share repurchase program as part of our capital management program. As we continue to move forward in our third year as public company, we hope to build on these results as we strive to create value for our shareholders. I am also pleased to announce that our Board of Directors declared a quarterly cash dividend of $0.04 per share, representing a 33% increase over last quarter’s dividend.”

Income Statement Summary
Net interest income increased $594,000, or 5.9%, to $10.7 million for the three months ended March 31, 2019, compared to the same period in 2018 and was unchanged from the previous quarter. The increase in net interest income compared to the prior year is primarily a result of a $99.6 million, or 7.3%, increase in average interest earning assets, partially offset by a five basis point decrease in the net interest margin. The increase in average interest earning assets is primarily due to a $70.1 million increase in average loans. The net interest margin was 2.94% for the three months ended March 31, 2019, a decrease of five basis points compared to 2.99% in the prior year quarter. Despite continued asset growth and a higher yielding asset mix, the margin has been impacted by rising funding costs due to higher short-term interest rates along with competitive pricing. The cost of interest-bearing deposits was 1.04% for the three months ended March 31, 2019 compared to 0.58% for the three months ended March 31, 2018, an increase of 46 basis points. The Company has experienced a shift in deposit mix as customers in lower costing saving products moved to higher rate money market and time deposits. Net interest income was unchanged compared to the prior quarter as balance sheet growth was offset by a six basis point decrease in net interest margin, driven by higher market interest rates on deposits.

The provision for loan losses was $7,000 for the three months ended March 31, 2019 compared to $6,000 in the prior quarter and $54,000 for the same period in 2018. Charge-offs, net of recoveries, were $5,000 for the three months ended March 31, 2019 compared to $22,000 for the three months ended December 31, 2018 and recoveries, net of charge-offs, of $99,000 for the three months ended March 31, 2018.  Loans classified as substandard or doubtful decreased $1.2 million, or 11.3%, to $9.0 million at March 31, 2019 from $10.2 million at December 31, 2018 and decreased $10.6 million, or 53.9%, from $19.6 million at March 31, 2018. Non-performing loans as a percent of total loans receivable was 0.30% as of March 31, 2019, a decrease from 0.39% as of December 31, 2018 and 0.80% as of March 31, 2018.

Noninterest income increased $67,000 to $579,000 for the three months ended March 31, 2019 compared to the same period in 2018, primarily due to increased deposit fees and loan processing fees. Noninterest income decreased $341,000 from the three months ended December 31, 2018, primarily due to a $76,000 decrease in swap income, as well as nonrecurring gains recognized in the prior quarter totaling $239,000 related to the sales of bank premises, securities, and REO.

Noninterest expense increased $865,000 to $8.7 million for the three months ended March 31, 2019 compared to the same period in 2018 and increased $118,000 compared to the three months ended December 31, 2018. The $865,000 increase from the prior year period was caused primarily by a $957,000 increase in salaries and employee benefits, partially offset by a $92,000 decrease in all other noninterest expenses. The increase in salaries and employee benefits was primarily due to $829,000 of stock-based compensation expense recorded in the current quarter, as well as a $110,000 increase in salaries as a result of additional staffing. The $118,000 increase in noninterest expense from the three months ended December 31, 2018 was primarily due to a $313,000 increase in salaries and benefits expense driven primarily by $347,000 increase in stock-based compensation as it was a partial expense in the prior quarter, partially offset by a $90,000 loss on a receivable recorded in the prior quarter, and a net decrease of $105,000 in all other noninterest expenses.

The effective income tax rate was 23.9% for the three months ended March 31, 2019, as compared to 24.5% for the three months ended December 31, 2018. The effective tax rate, adjusted for the one-time effects of the Tax Cuts and Jobs Act, was 27.9% for the three months ended March 31, 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 $43.6 million to $1.52 billion at March 31, 2019 from $1.48 billion at June 30, 2018.  This increase was primarily due to increases of $33.3 million in loans receivable and $25.0 million in cash and cash equivalents, partially offset by a decrease of $18.6 million in total investment securities. The increase in cash and cash equivalents is primarily due to increases in deposits and FHLB advances. The $33.3 million increase in loans was the result of $127.7 million of originations and loan purchases, partially offset by $94.4 million of net amortization and repayments on the remaining portfolio.

Total liabilities increased $52.8 million to $1.25 billion at March 31, 2019 from $1.19 billion at June 30, 2018.  This increase was primarily due to increases of $44.7 million in total deposits and $7.4 million in FHLB advances.

Total shareholders’ equity decreased $9.2 million to $278.3 million at March 31, 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 $1.5 million of cash dividends paid, partially offset by net income of $6.6 million, $2.8 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period, as well as other comprehensive income of $1.2 million, primarily due to the decrease in net unrealized losses on investment securities. During the current quarter, the Company completed its first stock repurchase plan, under which 908,256 shares of common stock were repurchased at an average cost of $20.15 per share.

At March 31, 2019, the Company’s book value per share and tangible book value per share were $15.63 and $15.27, 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 March 31, 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 May 31, 2019 to stockholders of record on May 17, 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)

    March 31,     June 30,  
    2019     2018  
ASSETS                
Cash and due from banks   $ 85,875     $ 60,684  
Federal funds sold     1,230       1,461  
Cash and cash equivalents     87,105       62,145  
Held to maturity debt securities, at amortized cost (fair value of $351,184 and $343,188, respectively)     354,000       353,183  
Available for sale debt securities, at fair value     86,014       105,472  
Total investment securities     440,014       458,655  
Loans receivable, net of allowance for loan losses of $4,945 and $4,904, respectively     935,680       902,336  
Accrued interest receivable     5,037       4,358  
Federal Home Loan Bank stock     2,384       2,050  
Premises and equipment, net     11,497       11,598  
Deferred tax asset, net     2,372       2,622  
Foreclosed real estate     653       460  
Bank-owned life insurance     24,157       23,747  
Goodwill     6,106       6,106  
Other intangible assets     348       433  
Other assets     8,405       5,677  
Total assets   $ 1,523,758     $ 1,480,187  
LIABILITIES AND SHAREHOLDERS' EQUITY                
Interest bearing deposits   $ 1,064,294     $ 1,025,574  
Non-interest bearing deposits     137,899       131,883  
Total deposits     1,202,193       1,157,457  
Mortgage escrow funds     7,675       8,803  
Advances from Federal Home Loan Bank     26,248       18,841  
Other liabilities     9,326       7,527  
Total liabilities     1,245,442       1,192,628  
Commitments and contingencies     -       -  
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2019 and June 30, 2018, respectively)     -       -  
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 March 31, 2019 and June 30, 2018, respectively)     187       182  
Additional paid in capital     181,066       179,045  
Retained earnings     133,483       128,365  
Unearned compensation - ESOP     (12,364 )     (13,083 )
Accumulated other comprehensive loss, net of income taxes     (5,751 )     (6,950 )
Treasury stock, at cost (908,256 shares as of March 31, 2019 and no shares as of June 30, 2018)     (18,305 )     -  
Total shareholders' equity     278,316       287,559  
Total liabilities and shareholders' equity   $ 1,523,758     $ 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   Nine Months Ended
  March 31,   March 31,
  2019   2018   2019   2018
Interest and dividend income                      
Loans receivable $ 10,413   $ 9,103   $ 30,632   $ 27,092
Investment securities   2,619     2,368     7,413     6,882
Federal funds and other   614     177     1,450     628
Total interest and dividend income   13,646     11,648     39,495     34,602
Interest expense                      
Deposits   2,741     1,380     7,172     3,954
FHLB advances   168     125     378     443
Total interest expense   2,909     1,505     7,550     4,397
Net interest income   10,737     10,143     31,945     30,205
Provision for loan losses   7     54     71     389
Net interest income after provision for loan losses   10,730     10,089     31,874     29,816
Noninterest income                      
Fees and service charges   436     352     1,311     1,145
Bank-owned life insurance   131     136     410     430
Gains on sales of securities, net   -     -     55     173
Other   12     24     364     170
Total noninterest income   579     512     2,140     1,918
Noninterest expense                      
Salaries and employee benefits   5,757     4,800     16,341     14,530
Occupancy and equipment   1,340     1,326     3,865     3,904
Communications and data processing   476     477     1,430     1,447
Professional fees   396     465     1,182     1,257
Postage, printing, stationary and supplies   138     161     454     435
FDIC assessment   105     93     322     235
Advertising   131     112     349     456
Amortization of intangible assets   29     32     85     97
Other operating expenses   326     367     1,258     1,491
Total noninterest expense   8,698     7,833     25,286     23,852
Net income before income tax expense   2,611     2,768     8,728     7,882
Income tax expense   625     591     2,089     3,947
Net income $ 1,986   $ 2,177   $ 6,639   $ 3,935
Earnings per common share:                      
Basic $ 0.12   $ 0.13   $ 0.40   $ 0.23
Diluted $ 0.12   $ 0.13   $ 0.40   $ 0.23
Weighted average common shares:                      
Basic   16,204,393     16,820,726     16,645,287     16,789,131
Diluted   16,261,755     16,820,726     16,659,746     16,789,131
                       
                       
                       


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

                                           
  Three Months Ended March 31,  
  2019     2018  
  Average Balance     Interest / Dividends   Average Rate     Average Balance     Interest / Dividends   Average Rate  
Assets:                                          
Loans receivable $ 913,634     $ 10,413     4.57 %   $ 843,557     $ 9,103     4.32 %
Investment securities   445,604       2,619     2.35       471,932       2,368     2.01  
Other interest-earning assets   98,717       614     2.52       42,860       177     1.68  
Total interest-earning assets   1,457,955       13,646     3.75       1,358,349       11,648     3.44  
Non-interest-earning assets   58,541                     56,874                
Total assets $ 1,516,496                   $ 1,415,223                
                                           
Liabilities and equity:                                          
NOW accounts $ 116,781       52     0.18     $ 113,178       49     0.18  
Money market accounts   126,438       368     1.18       42,448       50     0.48  
Savings accounts and escrow   392,537       239     0.24       496,574       297     0.24  
Time deposits   428,643       2,082     1.97       314,815       984     1.27  
Total interest-bearing deposits   1,064,399       2,741     1.04       967,015       1,380     0.58  
Federal Home Loan Bank advances   26,259       168     2.61       27,444       125     1.84  
Total interest-bearing liabilities   1,090,658       2,909     1.08       994,459       1,505     0.62  
Non-interest-bearing deposits   133,671                     129,905                
Other non-interest-bearing liabilities   11,242                     6,719                
Total liabilities   1,235,571                     1,131,083                
Total shareholders' equity   280,925                     284,140                
Total liabilities and shareholders' equity $ 1,516,496                   $ 1,415,223                
                                           
                                           
Net interest income         $ 10,737                   $ 10,143        
Interest rate spread (1)                 2.67                     2.82  
Net interest margin (2)                 2.94                     2.99  
Average interest-earning assets to interest-bearing liabilities   133.68 %                   136.59 %              
                                           
(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)

                                               
  Nine Months Ended March 31,  
  2019     2018  
  Average Balance     Interest / Dividends     Average Rate     Average Balance     Interest / Dividends     Average Rate  
Assets:                                              
Loans receivable $ 908,674     $ 30,632       4.49 %   $ 828,138     $ 27,092       4.36 %
Investment securities   446,398       7,413       2.21       477,199       6,882       1.92  
Other interest-earning assets   83,938       1,450       2.30       55,502       628       1.51  
Total interest-earning assets   1,439,010       39,495       3.66       1,360,839       34,602       3.39  
Non-interest-earning assets   55,334                       57,927                  
Total assets $ 1,494,344                     $ 1,418,766                  
                                               
Liabilities and equity:                                              
NOW accounts $ 117,522       157       0.18     $ 113,365       146       0.17  
Money market accounts   95,407       788       1.10       33,854       93       0.37  
Savings accounts and escrow   423,922       780       0.25       508,259       930       0.24  
Time deposits   408,210       5,447       1.78       306,527       2,785       1.21  
Total interest-bearing deposits   1,045,061       7,172       0.91       962,005       3,954       0.55  
Federal Home Loan Bank advances   22,395       378       2.25       34,712       443       1.70  
Total interest-bearing liabilities   1,067,456       7,550       0.94       996,717       4,397       0.59  
Non-interest-bearing deposits   131,507                       131,629                  
Other non-interest-bearing liabilities   8,344                       7,590                  
Total liabilities   1,207,307                       1,135,936                  
Total shareholders' equity   287,037                       282,830                  
Total liabilities and shareholders' equity $ 1,494,344                     $ 1,418,766                  
                                               
                                               
Net interest income         $ 31,945                     $ 30,205          
Interest rate spread (1)                   2.72                       2.80  
Net interest margin (2)                   2.96                       2.96  
Average interest-earning assets to interest-bearing liabilities   134.81 %                     136.53 %                
   
(1) Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.  
(2) Net interest margin represents annualized net interest income divided by average interest-earning assets.  
   
   
   

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

                             
  As of
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
Condensed Balance Sheets                        
Cash and cash equivalents $ 87,105   $ 143,119   $ 68,323   $ 62,145   $ 36,505
Total investment securities   440,014     452,463     441,748     458,655     473,651
Loans receivable, net   935,680     904,377     905,093     902,336     886,718
Other assets   60,959     57,356     59,331     57,051     60,095
Total assets $ 1,523,758   $ 1,557,315   $ 1,474,495   $ 1,480,187   $ 1,456,969
                             
Total deposits and escrow $ 1,209,868   $ 1,234,409   $ 1,158,102   $ 1,166,260   $ 1,095,581
Advances from Federal Home Loan Bank   26,248     26,279     18,810     18,841     68,872
Other liabilities   9,326     7,845     7,706     7,527     7,856
Total liabilities   1,245,442     1,268,533     1,184,618     1,192,628     1,172,309
Total shareholders' equity   278,316     288,782     289,877     287,559     284,660
Total liabilities and shareholders' equity $ 1,523,758   $ 1,557,315   $ 1,474,495   $ 1,480,187   $ 1,456,969
                             
                             
                             


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  Quarter Ended   Nine Months Ended
  March 31,
2019
  December 31,
2018
  September 30,
2018
  June 30,
2018
  March 31,
2018
  March 31,
2019
  March 31,
2018
Condensed Income Statements                                    
Interest income $ 13,646   $ 13,240   $ 12,609   $ 13,358   $ 11,648   $ 39,495   $ 34,602
Interest expense   2,909     2,496     2,145     1,926     1,505     7,550     4,397
Net interest income   10,737     10,744     10,464     11,432     10,143     31,945     30,205
Provision for loan losses   7     6     58     25     54     71     389
Noninterest income   579     920     641     601     512     2,140     1,918
Noninterest expense   8,698     8,580     8,008     8,264     7,833     25,286     23,852
Income before income tax expense   2,611     3,078     3,039     3,744     2,768     8,728     7,882
Income tax expense   625     754     710     1,075     591     2,089     3,947
Net income $ 1,986   $