PCSB Financial Corp - FORM 8-K - EX-99.1

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8-K - PCSB-8-K (EARNINGS RELEASE) - PCSB Financial Corp	pcsb-8k_20180331.htm

Exhibit 99.1

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

Yorktown Heights, New York; April 26, 2018 – 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


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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.


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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


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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


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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


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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.


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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.


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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


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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	%


	9

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.


	10

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


	11

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.


	12

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	%


	13

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


	14

PCSB Financial Corp - FORM 8-K - EX-99.1 - April 26, 2018

Attached files

PCSB Financial Corp Reports