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

YORKTOWN HEIGHTS, N.Y., April 26, 2018 (GLOBE NEWSWIRE) -- PCSB Financial Corporation (the “Company”) (NASDAQ:PCSB), parent of PCSB Bank (the "Bank"), today announced net income of $2.2 million, or $0.13 per basic and diluted share, for the three months ended March 31, 2018 compared to $2,000, or $0.00 per basic and diluted share, for the quarter ended December 31, 2017 and $1.9 million for the three months ended March 31, 2017. For the nine months ended March 31, 2018, net income was $3.9 million, or $0.23 per basic and diluted share, compared to $5.0 million for the nine months ended March 31, 2017. Results for the nine months ended March 31, 2018 include a $1.6 million tax re-measurement charge associated with federal tax law changes enacted in the second quarter.

The following nonrecurring items were recorded in the periods indicated:

  • In connection with the passage of the Tax Cuts and Jobs Act, the Company recorded a $1.6 million charge to income tax expense for the nine months ended March 31, 2018, including a $182,000 benefit recorded in the current quarter, primarily reflecting a write-down of our deferred tax assets resulting from a decrease in the corporate income tax rate from 34% to 21%.
  • A $173,000 pre-tax gain on sale of securities recorded during the nine months ended March 31, 2018.
  • A $919,000 pre-tax curtailment of the Bank’s defined benefit plan resulting in a reduction to the salaries and benefits component of noninterest expense recorded in the three and nine months ended March 31, 2017.
  • A $1.6 million settlement on an acquired loan included in other noninterest income in the nine months ended March 31, 2017.
  • A $521,000 lease write-down expense in the nine months ended March 31, 2017.

On a non-GAAP basis, which excludes the nonrecurring items discussed above, the Company recorded net income of $2.0 million and $5.4 million for the three and nine months ended March 31, 2018, or $0.12 and $0.32 per diluted share, respectively. This compares to non-GAAP net income of $1.3 and $3.7 million for the three and nine months ended March 31, 2017. Reconciliations of GAAP to non-GAAP measures begin on page 12.

Effective April 20, 2017, PCSB Bank completed its mutual-to-stock conversion and the Company completed its related initial public offering. Accordingly, financial results for dates and periods prior to April 20, 2017 are for the Bank only.

President’s Comments
Commenting on the Company's results, Joseph D. Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation, said, "I am proud of the Company's accomplishment as we bring to a close our one-year anniversary as a public company. Some of these accomplishments include a $77.1 million (9.5%) increase in net loans from June 30, 2017, along with a 15.0% increase in net interest income leading to continued earnings growth and operating efficiency. Additionally, we continue to reduce problem assets as the Bank's non-performing asset to total assets declined to 0.50% at March 31, 2018 from 0.91% at June 30, 2017. These results continue to follow our strategy to leverage our capital in a safe and disciplined way in order to maximize stockholder value. We also continue to be focused on capital management and I am pleased to announce our first quarterly cash dividend of $0.03 per share."

Income Statement Summary
Net interest income increased $1.2 million, or 13.2%, to $10.1 million for the three months ended March 31, 2018, compared to the same period in 2017 and decreased $43,000 from the previous quarter.  The increase in net interest income compared to the prior year is a result of a $172.6 million increase in average net interest earning assets and a 3 basis point increase in the net interest margin. The increase in net interest earning assets is due to the Company deploying the capital raised in the initial public offering into loans receivable and investments. The net interest margin was 2.99% for the three months ended March 31, 2018, increasing from 2.96% for the three months ended March 31, 2017 and down slightly from 3.00% for the three months ended December 31, 2017.

The provision for loan losses decreased $181,000 to $54,000 for the three months March 31, 2018 compared to the same period in 2017 due to increases in specific reserves on impaired loans in the prior year period.  The provision for loan losses decreased $146,000 compared to prior quarter due primarily to recoveries realized in the current quarter.  Recoveries, net of charge-offs, were $99,000 for the three months ended March 31, 2018, compared to charge-offs net of recoveries, of $997,000 for the three months ended December 31, 2017 and $33,000 for the three months ended March 31, 2017.  Loans classified as substandard and doubtful decreased $1.0 million or 5.2% to $19.6 million at March 31, 2018 from $20.6 million at December 31, 2017 and decreased $5.6 million or 22.2% from $25.1 million at June 30, 2017. Non-performing loans were 0.80% of gross loans as of March 31, 2018, down from 0.97% as of December 31, 2017 and 1.48% as of June 30, 2017.

Noninterest income decreased $114,000 to $512,000 for the three months ended March 31, 2018 compared to the same period in 2017, primarily due to higher loan-related fees earned in the prior year period, and decreased $180,000 from the three months ended December 31, 2017, due primarily to higher loan-related fees and nonrecurring rental income on the settlement of a nonperforming asset earned in the prior quarter.

Noninterest expense increased $1.3 million to $7.8 million for the three months ended March 31, 2018 compared to the same period in 2017 and decreased $292,000 from the three months ended December 31, 2017. The $1.3 million increase was caused primarily by increases in salaries and employee benefits, primarily reflecting a $919,000 curtailment gain recognized in the prior year period related to the defined benefit pension plan, $192,000 of net increases in other retirement expenses, including ESOP expense which commenced in April 2017, and a $181,000 increase in salaries expense due primarily to increased staffing. Additionally, salaries and employee benefits expense increased $2.2 million to $14.4 million for the nine months ended March 31, 2018 compared to the prior year, primarily due to a $1.8 million increase in ESOP expense and a $598,000 increase due to additional headcount, partially offset by a $73,000 net decrease in defined benefit pension and other retirement plan costs. Occupancy expense and other operating expenses were unchanged compared to the prior year quarter as increases in Director and Officer insurance expense and other professional fees associated with being a public company were offset by lower FDIC assessments and expenses on foreclosed real estate. The $292,000 decrease in noninterest expense from the three months ended December 31, 2017 was primarily due to a loss recorded on a receivable in the three months ended December 31, 2017 as well as lower advertising costs.

Income tax expense decreased $287,000 or 32.7% to $591,000 for the three months ended March 31, 2018 compared to the same period in 2017 due to a $182,000 tax benefit from the adjustment of the re-measurement charge associated with the recent tax reform and the related reduction of the corporate income tax rate from 34% to 21%. The effective income tax rate was 21.4% (27.9% excluding the effects of the current quarter re-measurement charge) for the three months ended March 31, 2018 as compared to 31.7% for the three months ended March 31, 2017. Income tax expense decreased $2.0 million compared to the three months ended December 31, 2017 due primarily to the $1.8 million deferred tax re-measurement charge recorded in the prior quarter.

Balance Sheet Summary
Total assets increased $30.5 million to $1.46 billion at March 31, 2018 from $1.43 billion at June 30, 2017.  This increase was primarily due to an increase of $77.1 million in net loans receivable, partially offset by decreases of $24.0 million and $21.8 million in cash and cash equivalents and total investment securities, respectively. The $77.1 million increase in net loans included increases of $47.2 million in commercial mortgage loans, $36.1 million in residential mortgage loans, and $2.6 million in commercial loans, partially offset by decreases of $6.3 million in construction loans and $3.7 million in home equity lines of credit. Loan growth was funded by decreases in cash and cash equivalents and investment securities, as well as increased FHLB advances.

Total liabilities increased $25.7 million to $1.17 billion at March 31, 2018 from $1.15 billion at June 30, 2017.  This increase was primarily due to a $26.3 million increase in advances from FHLB. 

Total shareholders’ equity increased $4.9 million to $284.7 million at March 31, 2018 from $279.8 million at June 30, 2017.  This increase was primarily due to net income of $3.9 million and a $1.7 million reduction in unearned ESOP shares for plan shares earned during the period, partially offset by other comprehensive losses of $861,000 due largely to increased unrealized losses in the available for sale investment securities portfolio driven by increased market interest rates.  At March 31, 2018, the Company’s book value per share and tangible book value per share were $15.67 and $15.31, respectively, compared to $15.41 and $15.04, respectively, at June 30, 2017.  For reconciliations of book value per share (GAAP measure) to tangible book value per share (non-GAAP measure), see page 14. At March 31, 2018, the Bank was considered “well capitalized” under applicable regulatory guidelines.

Dividend
The Board of Directors has declared a regular quarterly cash dividend of $0.03 per share. The dividend is payable on or about May 25, 2018 to stockholders of record on May 11, 2018.

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 stock savings 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,  
    2018     2017  
ASSETS                
Cash and due from banks   $ 35,307     $ 59,115  
Federal funds sold     1,198       1,371  
Cash and cash equivalents     36,505       60,486  
Investment Securities:                
Held to maturity investment securities, at amortized cost
  (fair value of $357,761 and $383,588, respectively)
    366,362       383,551  
Available for sale securities, at fair value     107,321       111,889  
Total investment securities     473,683       495,440  
Loans receivable, net of allowance for loan losses of $4,624 and $5,150, respectively     886,718       809,648  
Accrued interest receivable     4,458       3,693  
Federal Home Loan Bank stock     4,112       3,132  
Premises and equipment, net     12,522       12,959  
Deferred tax asset, net     2,832       4,770  
Foreclosed real estate     142       977  
Bank-owned life insurance     23,609       23,179  
Goodwill     6,106       6,106  
Other intangible assets     463       559  
Other assets     5,819       5,509  
Total assets   $ 1,456,969     $ 1,426,458  
LIABILITIES AND SHAREHOLDERS' EQUITY                
Interest bearing deposits   $ 960,666     $ 952,109  
Non-interest bearing deposits     127,319       136,352  
Total deposits     1,087,985       1,088,461  
Mortgage escrow funds     7,596       8,084  
Advances from Federal Home Loan Bank     68,872       42,598  
Other liabilities     7,856       7,469  
Total liabilities     1,172,309       1,146,612  
Commitments and contingencies     -       -  
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2018 and June 30, 2017, respectively)     -       -  
Common stock ($0.01 par value, 200,000,000 shares authorized, 18,165,110 shares issued and outstanding as of March 31, 2018 and June 30, 2017, respectively)     182       182  
Additional paid in capital     178,795       177,993  
Retained earnings     126,200       121,148  
Unallocated common stock of Employee Stock Ownership Plan ("ESOP")     (13,324 )     (14,262 )
Accumulated other comprehensive loss, net of income taxes     (7,193 )     (5,215 )
Total shareholders' equity     284,660       279,846  
Total liabilities and shareholders' equity   $ 1,456,969     $ 1,426,458  
                 

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,  
    2018     2017     2018     2017  
Interest and dividend income                                
Loans receivable   $ 9,103     $ 8,493     $ 27,092     $ 25,256  
Investment securities     2,368       1,633       6,882       4,643  
Federal funds and other     177       150       628       336  
Total interest and dividend income     11,648       10,276       34,602       30,235  
Interest expense                                
Deposits     1,380       1,263       3,954       3,839  
FHLB advances     125       55       443       136  
Total interest expense     1,505       1,318       4,397       3,975  
Net interest income     10,143       8,958       30,205       26,260  
Provision for loan losses     54       235       389       823  
Net interest income after provision for loan losses     10,089       8,723       29,816       25,437  
Noninterest income                                
Fees and service charges     241       353       810       955  
Gains on sales of securities, net     -       -       173       -  
Bank-owned life insurance     136       146       430       474  
Settlement on acquired loan     -       -       -       1,615  
Other     135       127       505       393  
Total noninterest income     512       626       1,918       3,437  
Noninterest expense                                
Salaries and employee benefits     4,755       3,495       14,391       12,189  
Occupancy and equipment     1,326       1,362       3,904       4,497  
Professional fees     465       273       1,257       858  
Advertising     112       135       456       364  
Postage, printing, stationary and supplies     161       140       435       404  
FDIC assessment     93       160       235       481  
Amortization of intangible assets     32       36       97       109  
Other operating expenses     889       979       3,077       2,670  
Total noninterest expense     7,833       6,580       23,852       21,572  
Net income before income tax expense     2,768       2,769       7,882       7,302  
Income tax expense     591       878       3,947       2,283  
Net income   $ 2,177     $ 1,891     $ 3,935     $ 5,019  
                                 
Earnings per common share:                                
Basic   $ 0.13     n/a     $ 0.23     n/a  
Diluted   $ 0.13     n/a     $ 0.23     n/a  
                                 
Weighted average common share - basic and diluted     16,820,726     n/a       16,789,131     n/a  
                             

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

  Three months ended March 31,  
  2018     2017  
  Average Balance     Interest / Dividends     Average Rate     Average Balance     Interest / Dividends     Average Rate  
                                               
Assets:                                              
Loans receivable $ 843,557     $ 9,103       4.32 %   $ 773,022     $ 8,493       4.40 %
Investment securities   471,932       2,368       2.01       379,364       1,633       1.72  
Other interest-earning assets   42,860       177       1.68       59,915       150       1.02  
Total interest-earning assets   1,358,349       11,648       3.44       1,212,301       10,276       3.39  
Non-interest-earning assets   56,874                       61,354                  
Total assets $ 1,415,223                     $ 1,273,655                  
                                               
Liabilities and equity:                                              
NOW accounts $ 113,178       49       0.18     $ 139,306       54       0.17  
Money market accounts   42,448       50       0.48       31,689       21       0.26  
Savings accounts and escrow   496,574       297       0.24       523,045       315       0.24  
Time deposits   314,815       984       1.27       311,092       873       1.14  
Total interest-bearing deposits   967,015       1,380       0.58       1,005,132       1,263       0.52  
Federal Home Loan Bank advances   27,444       125       1.84       15,920       55       1.38  
Total interest-bearing liabilities   994,459       1,505       0.62       1,021,052       1,318       0.52  
Non-interest-bearing deposits   129,905                       125,774                  
Other non-interest-bearing liabilities   6,719                       12,617                  
Total liabilities   1,131,083                       1,159,443                  
Total shareholders' equity   284,140                       114,212                  
Total liabilities and shareholders' equity $ 1,415,223                     $ 1,273,655                  
                                               
                                               
Net interest income         $ 10,143                     $ 8,958          
Interest rate spread (1)                   2.82                       2.87  
Net interest margin (2)                   2.99                       2.96  
Average interest-earning assets to interest-bearing liabilities   136.59 %                     118.73 %                
                                               
(1) Net interest rate spread represents the difference between the average yield on average interest-earning assets and the average cost of average interest-bearing liabilities.  
(2) Net interest margin represents annualized net interest income divided by average interest-earning assets.  
   

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

  Nine months ended March 31,  
  2018     2017  
  Average Balance     Interest / Dividends     Average Rate     Average Balance     Interest / Dividends     Average Rate  
                                               
Assets:                                              
Loans receivable $ 828,138     $ 27,092       4.36 %   $ 770,567     $ 25,256       4.37 %
Investment securities   477,199       6,882       1.92       372,358       4,643       1.66  
Other interest-earning assets   55,502       628       1.51       59,838       336       0.75  
Total interest-earning assets   1,360,839       34,602       3.39       1,202,763       30,235       3.35  
Non-interest-earning assets   57,927                       58,405                  
Total assets $ 1,418,766                     $ 1,261,168                  
                                               
Liabilities and equity:                                              
NOW accounts $ 113,365       146       0.17     $ 118,304       142       0.16  
Money market accounts   33,854       93       0.37       31,658       63       0.26  
Savings accounts and escrow   508,259       930       0.24       526,735       970       0.25  
Time deposits   306,527       2,785       1.21       318,214       2,664       1.12  
Total interest-bearing deposits   962,005       3,954       0.55       994,911       3,839       0.52  
Federal Home Loan Bank advances   34,712       443       1.70       12,583       136       1.43  
Total interest-bearing liabilities   996,717       4,397       0.59       1,007,494       3,975       0.52  
Non-interest-bearing deposits   131,629                       126,559                  
Other non-interest-bearing liabilities   7,590                       14,468                  
Total liabilities   1,135,936                       1,148,521                  
Total shareholders' equity   282,830                       112,647                  
Total liabilities and shareholders' equity $ 1,418,766                     $ 1,261,168                  
                                               
                                               
Net interest income         $ 30,205                     $ 26,260          
Interest rate spread (1)                   2.80                       2.83  
Net interest margin (2)                   2.96                       2.91  
Average interest-earning assets to interest-bearing liabilities   136.53 %                     119.38 %                
   
(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,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
 
                               
Condensed Balance Sheets                              
Cash and cash equivalents $ 36,505   $ 77,106   $ 34,733   $ 60,486   $ 178,409  
Total investment securities   473,683     470,360     475,823     495,440     391,359  
Loans receivable, net   886,718     838,120     839,963     809,648     776,756  
Other assets   60,063     57,682     61,187     60,884     60,797  
Total assets $ 1,456,969   $ 1,443,268   $ 1,411,706   $ 1,426,458   $ 1,407,321  
                               
Total deposits and escrow $ 1,095,581   $ 1,122,558   $ 1,086,662   $ 1,096,545   $ 1,121,201  
Advances from Federal Home Loan Bank   68,872     30,720     35,750     42,598     24,446  
Other liabilities   7,856     7,579     7,209     7,469     144,404  
Total liabilities   1,172,309     1,160,857     1,129,621     1,146,612     1,290,051  
Total shareholders' equity   284,660     282,411     282,085     279,846     117,270  
Total liabilities and shareholders' equity $ 1,456,969   $ 1,443,268   $ 1,411,706   $ 1,426,458   $ 1,407,321  
                               


  Quarter Ended     Nine Months Ended  
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
    March 31,
2018
  March 31,
2017
 
Condensed Income Statements                                            
Interest income $ 11,648   $ 11,657   $ 11,297   $ 10,723   $ 10,276     $ 34,602   $ 30,235  
Interest expense   1,505     1,471     1,421     1,318     1,318       4,397     3,975  
Net interest income   10,143     10,186     9,876     9,405     8,958       30,205     26,260  
Provision for loan losses   54     200     135     -     235       389     823  
Noninterest income   512     692     714     647     626       1,918     3,437  
Noninterest expense   7,833     8,125     7,894     12,859     6,580       23,852     21,572  
Income before income tax expense (benefit)   2,768     2,553     2,561     (2,807 )   2,769       7,882     7,302  
Income tax expense (benefit)   591     2,551     805     (1,017 )   878       3,947     2,283  
Net income (loss) $ 2,177   $ 2   $ 1,756   $ (1,790 ) $ 1,891     $ 3,935   $ 5,019  
                                             
Earnings per share:                                            
Basic $ 0.13   $ 0.00   $ 0.10   n/a   n/a     $ 0.23   n/a  
Diluted $ 0.13   $ 0.00   $ 0.10   n/a   n/a     $ 0.23   n/a  
                                       

PCSB Financial Corporation and Subsidiaries
Selected Financial Data (unaudited)

  Quarter Ended     Nine Months Ended  
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
    March 31,
2018
  March 31,
2017
 
Performance Ratios (1):                                            
Return on average assets   0.62 %   0.00 %   0.49 %   (0.50 %)   0.59 %     0.37 %   0.53 %
Return on average equity   3.06 %   0.00 %   2.44 %   (2.69 %)   6.62 %     1.86 %   5.94 %
Interest rate spread   2.82 %   2.85 %   2.74 %   2.69 %   2.87 %     2.80 %   2.83 %
Net interest margin   2.99 %   3.00 %   2.89 %   2.81 %   2.96 %     2.96 %   2.91 %
Adjusted Efficiency ratio (2)   73.51 %   74.69 %   75.78 %   78.18 %   78.24 %     74.65 %   78.24 %
                                             
Noninterest income to average assets   0.14 %   0.20 %   0.20 %   0.18 %   0.20 %     0.18 %   0.36 %
Noninterest expense to average assets   2.21 %   2.30 %   2.20 %   3.60 %   2.07 %     2.24 %   2.28 %
                                             
Average interest-earning assets to average interest-bearing liabilities   136.59 %   136.51 %   136.50 %   130.71 %   118.73 %     136.53 %   119.38 %
Equity to assets (3)   20.08 %   20.00 %   20.10 %   18.65 %   8.97 %     19.93 %   8.93 %
                                             

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

  As of  
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
 
                               
Loans to deposits   81.50 %   75.21 %   77.65 %   74.38 %   69.70 %
                               
Share Data:                              
Shares outstanding   18,165,110     18,165,110     18,165,110     18,165,110   n/a  
Book value per common share $ 15.67   $ 15.55   $ 15.53   $ 15.41   n/a  
Tangible book value per common share (4) $ 15.31   $ 15.18   $ 15.16   $ 15.04   n/a  
                               
Asset Quality Ratios:                              
Non-performing assets $ 7,307   $ 8,191   $ 12,354   $ 13,049   $ 13,363  
Allowance for loan losses as a percent of total gross loans   0.52 %   0.53 %   0.62 %   0.63 %   0.62 %
Allowance for loan losses as a percent of non-performing loans   64.54 %   54.58 %   48.53 %   42.66 %   41.58 %
Non-performing loans as a percent of total loans   0.80 %   0.97 %   1.35 %   1.48 %   1.49 %
Non-performing assets as a percent of total assets   0.50 %   0.57 %   0.88 %   0.91 %   0.95 %
                               
Net charge-offs (recoveries) $ (99 ) $ 997   $ 17   $ (320 ) $ 33  
Net charge-offs (recoveries) to average outstanding loans during the period   (0.05 %)   0.48 %   0.01 %   (0.16 %)   0.02 %
                               
Capital Ratios (5):                              
Tier 1 capital (to adjusted total assets)   13.97 %   13.84 %   13.52 %   13.65 %   9.13 %
Common equity Tier 1 capital (to risk-weighted assets)   21.16 %   21.64 %   21.13 %   21.69 %   13.99 %
Tier 1 capital (to risk-weighted assets)   21.16 %   21.64 %   21.13 %   21.69 %   13.99 %
Total capital (to risk-weighted assets)   21.65 %   22.13 %   21.71 %   22.27 %   14.57 %
                               
(1) Performance ratios are annualized.  
(2) Adjusted efficiency ratio is a non-GAAP measure and is defined as noninterest expense, less certain nonrecurring items, divided by our 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.  
(3) Represents average shareholders' equity divided by average total assets.  
(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.  
(5) Represents Bank ratios.  
   

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

  As of  
  March 31,   December 31,   September 30,   June 30,   March 31,  
  2018   2017   2017   2017   2017  
Mortgage loans:                              
Residential mortgages $ 253,847   $ 213,716   $ 215,551   $ 217,778   $ 219,797  
Commercial mortgage   484,810     481,169     469,983     437,651     394,738  
Construction   16,098     16,379     23,104     22,404     28,518  
Net deferred loan origination costs   1,203     210     384     397     472  
    755,958     711,474     709,022     678,230     643,525  
Commercial and consumer loans:                              
Commercial loans   35,897     31,276     31,407     33,297     35,420  
Other loans secured   47,770     46,056     48,460     46,802     46,874  
Home equity credit lines   38,220     40,158     42,044     41,927     40,323  
Consumer and installment loans   12,773     12,860     13,526     13,765     14,659  
Net deferred loan origination costs   724     767     772     777     785  
    135,384     131,117     136,209     136,568     138,061  
Total loans receivable   891,342     842,591     845,231     814,798     781,586  
Allowance for loan loss   (4,624 )   (4,471 )   (5,268 )   (5,150 )   (4,830 )
Loans receivable, net $ 886,718   $ 838,120   $ 839,963   $ 809,648   $ 776,756  
                               


  As of  
  March 31,   December 31,   September 30,   June 30,   March 31,  
  2018   2017   2017   2017   2017  
                               
Demand deposits $ 127,319   $ 150,830   $ 133,461   $ 136,361   $ 135,568  
Now accounts   114,899     118,462     110,646     115,527     112,746  
Money market accounts   40,374     31,021     28,590     29,097     31,895  
Savings   482,968     502,469     504,291     512,697     526,347  
Time deposits   322,425     311,547     304,719     294,779     307,913  
Total deposits $ 1,087,985   $ 1,114,329   $ 1,081,707   $ 1,088,461   $ 1,114,469  
                               

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

    Three Months Ended     Nine Months Ended  
    March 31,     March 31,  
    2018     2017     2018     2017  
Computation of Adjusted Net Income and Earnings Per Share                                
Net income   $ 2,177     $ 1,891     $ 3,935     $ 5,019  
Adjustments:                                
Deferred tax re-measurement (benefit) charge     (182 )     -       1,570       -  
Defined benefit pension plan curtailment (1)     -       (607 )     -       (607 )
Write-down of operating lease obligation (1)     -       -       -       344  
Settlement on acquired loan (1)     -       -       -       (1,066 )
Gain on sale of securities (1)     -       -       (114 )     -  
Adjusted net income   $ 1,995     $ 1,284     $ 5,391     $ 3,690  
                                 
Average number of common shares outstanding used to calculate basic earnings per common share     16,820,726     n/a       16,789,131     n/a  
                                 
Adjusted earnings per common share (basic and diluted):   $ 0.12     n/a     $ 0.32     n/a  
                                 
Computation of Adjusted Effective Tax Rate                                
Net income before income tax expense   $ 2,768     $ 2,769     $ 7,882     $ 7,302  
                                 
Income tax expense     591       878       3,947       2,283  
Adjustments:                                
Deferred tax re-measurement benefit (charge)     182       -       (1,570 )     -  
Adjusted income tax expense   $ 773     $ 878     $ 2,377     $ 2,283  
                                 
Effective tax rate     21.4 %     31.7 %     50.1 %     31.3 %
Adjusted effective tax rate     27.9 %     31.7 %     30.2 %     31.3 %
                                 
(1) Amounts net of tax.                                
                                 

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

  Quarter Ended     Nine Months Ended  
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
    March 31,
2018
  March 31,
2017
 
Computation of Efficiency Ratio                                            
Noninterest expense $ 7,833   $ 8,125   $ 7,894   $ 12,859   $ 6,580     $ 23,852   $ 21,572  
Adjustments:                                            
PCSB Community Foundation contribution   -     -     -     (5,000 )   -       -     -  
Defined benefit pension plan curtailment   -     -     -     -     919       -     919  
Write-down of operating lease obligation   -     -     -     -     -       -     (521 )
Adjusted noninterest expense $ 7,833   $ 8,125   $ 7,894   $ 7,859   $ 7,499     $ 23,852   $ 21,970  
                                             
Net interest income $ 10,143   $ 10,186   $ 9,876   $ 9,405   $ 8,958     $ 30,205   $ 26,260  
Noninterest income   512     692     714     647     626       1,918     3,437  
Total revenue   10,655     10,878     10,590     10,052     9,584       32,123     29,697  
Adjustments:                                            
Settlement on acquired loan   -     -     -     -     -       -     (1,615 )
Gain on sale of securities   -     -     (173 )   -     -       (173 )   -  
Adjusted operating revenue $ 10,655   $ 10,878   $ 10,417   $ 10,052   $ 9,584     $ 31,950   $ 28,082  
                                             
Efficiency ratio   73.51 %   74.69 %   74.54 %   127.92 %   68.66 %     74.25 %   72.64 %
Adjusted efficiency ratio   73.51 %   74.69 %   75.78 %   78.18 %   78.24 %     74.65 %   78.24 %
                                             

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

  As of  
  March 31,
2018
  December 31,
2017
  September 30,
2017
  June 30,
2017
  March 31,
2017
 
Computation of Tangible Book Value per Common Share                              
Total shareholders' equity $ 284,660   $ 282,411   $ 282,085   $ 279,846   $ 117,270  
Adjustments:                              
Preferred stock   -     -     -     -     -  
Common shareholders' equity   284,660     282,411     282,085     279,846     117,270  
Adjustments:                              
Goodwill   (6,106 )   (6,106 )   (6,106 )   (6,106 )   (6,106 )
Other intangible assets   (463 )   (495 )   (527 )   (559 )   (593 )
Tangible common shareholders' equity $ 278,091   $ 275,810   $ 275,452   $ 273,181   $ 110,571  
                               
Common shares outstanding   18,165,110     18,165,110     18,165,110     18,165,110   n/a  
                               
Book value per share $ 15.67   $ 15.55   $ 15.53   $ 15.41   n/a  
Adjustments:                              
Effects of intangible assets   (0.36 )   (0.37 )   (0.37 )   (0.37 ) n/a  
                               
Tangible book value per common share $ 15.31   $ 15.18   $ 15.16   $ 15.04   n/a  
                             

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