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

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YORKTOWN HEIGHTS, N.Y., Aug. 02, 2018 (GLOBE NEWSWIRE) -- PCSB Financial Corporation (the "Company") (NASDAQ:PCSB), parent of PCSB Bank (the "Bank"), today announced net income of $2.7 million, or $0.16 per basic and diluted share, for the three months ended June 30, 2018 compared to $2.2 million, or $0.13 per basic and diluted share, for the three months ended March 31, 2018 and a loss of $1.8 million for the three months ended June 30, 2017. For the year ended June 30, 2018, net income was $6.6 million, or $0.39 per basic and diluted share, compared to $3.2 million for the year ended June 30, 2017.

The following nonrecurring items were recorded in the current quarter:

  • Interest income of $879,000 recorded upon the pay-off of two nonaccrual loans
  • A $370,000 loss on a receivable
  • A $63,000 gain on sale of securities

On a non-GAAP basis, which excludes certain nonrecurring items, including those discussed above, the Company recorded net income of $2.2 million and $7.6 million for the three months and year ended June 30, 2018, or $0.13 and $0.46 per diluted share, respectively. This compares to non-GAAP net income of $1.5 million and $5.2 million for the three months and year ended June 30, 2017, respectively. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

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 progress and successful achievements as we completed our first full year as a public company.  Some of these accomplishments include fourth quarter net income of $2.7 million, the highest quarterly income in the Company's history, a $92.7 million, or 11.4%, year-over-year increase in net loans and a 16.7% increase in net interest income.  Problem assets continue to decline as the ratio of non-performing assets to total assets fell by more than half to 0.44% from 0.91% a year ago.  Additionally, as the Federal Reserve increased the Fed Funds Rate by 1.75%, the Bank's average cost of funds, at 0.55%, increased minimally year-over-year.  As we head into fiscal year 2019, we hope to build on these results by continuing to grow the balance sheet with loans while maintaining high credit quality standards.  I am also pleased to announce that our Board of Directors approved our second quarterly cash dividend of $0.03 per share."

Income Statement Summary
Net interest income increased $2.0 million, or 21.6%, to $11.4 million for the three months ended June 30, 2018, compared to the same period in 2017 and increased $1.3 million or 12.7% from the previous quarter.  The increase in net interest income compared to the prior year is a result of a $44.2 million increase in average net interest earning assets and a 43-basis point increase in the net interest margin. The increase in net interest earning assets is due primarily to the deployment of the capital raised in the initial public offering into loans receivable and investments. The net interest margin was 3.23% for the three months ended June 30, 2018, an increase from 2.80% for the three months ended June 30, 2017 and 2.99% for the three months ended March 31, 2018. Included in current quarter net interest income is $879,000 of interest income recorded from the pay-off of two nonaccrual loans. Excluding this interest, net interest margin for the quarter would have been 2.98%, an increase of 18 basis points from the prior year and a decrease of 1 basis point from the prior quarter.

The provision for loan losses was $25,000 for the three months June 30, 2018 compared to no provision expense for the same period in 2017. The provision for loan losses decreased $29,000 compared to prior quarter due primarily to recoveries realized in the current quarter.  Recoveries, net of charge-offs, were $255,000 for the three months ended June 30, 2018 compared to $99,000 for the three months ended March 31, 2018 and $320,000 for the three months ended June 30, 2017.  Loans classified as substandard and doubtful decreased $4.2 million, or 21.4%, to $15.4 million at June 30, 2018 from $19.6 million at March 31, 2018 and decreased $9.7 million, or 38.8%, from $25.1 million at June 30, 2017. Non-performing loans were 0.66% of total loans receivable as of June 30, 2018, down from 0.80% as of March 31, 2018 and 1.48% as of June 30, 2017.

Noninterest income decreased $46,000 to $601,000 for the three months ended June 30, 2018 compared to the same period in 2017, due primarily to $142,000 of gains on the sale of foreclosed real estate recorded in the quarter ended June 30, 2017, partially offset by $63,000 of gains on the sale of securities recorded in the current quarter and a $45,000 increase in deposit-related fee income. Noninterest income increased $89,000 from the three months ended March 31, 2018, due primarily to $63,000 of gains on the sale of securities realized in the current quarter.

Noninterest expense decreased $4.6 million to $8.3 million for the three months ended June 30, 2018 compared to the same period in 2017 and increased $431,000 compared to the three months ended March 31, 2018. The $4.6 million decrease was caused primarily by a $5.0 million contribution expense recognized in the prior year related to the establishment of the PCSB Community Foundation, partially offset by a $370,000 loss recorded on a receivable in the current quarter. All other operating expenses were largely unchanged compared to the prior year quarter as increases in salaries and employee benefits, as well as increases in Director and Officer insurance expense and other professional fees associated with being a public company, were primarily offset by lower FDIC assessments, advertising costs and expenses on foreclosed real estate.  The $431,000 increase in noninterest expense from the three months ended March 31, 2018 was due primarily to a $370,000 loss recorded on a receivable in the current quarter.                                                                                     

Income tax expense was $1.1 million for the three months ended June 30, 2018 compared to an income tax benefit of $1.0 million for the same period in 2017. The effective income tax rate was 28.7% for the three months ended June 30, 2018 as compared to 36.2% for the three months ended June 30, 2017. Income tax expense increased $484,000 compared to the three months ended March 31, 2018 due primarily to higher net income before income tax expense, partially offset by a $182,000 deferred tax re-measurement benefit recorded in the prior quarter.

Balance Sheet Summary
Total assets increased $53.7 million to $1.48 billion at June 30, 2018 from $1.43 billion at June 30, 2017.  This increase was due primarily to an increase of $92.7 million, or 11.4%, in net loans receivable, partially offset by a decrease of $36.8 million in total investment securities. The $92.7 million increase in net loans included increases of $57.6 million in commercial mortgage loans, $32.8 million in residential mortgage loans, and $11.0 million in commercial loans, partially offset by decreases of $5.1 million in construction loans and $4.5 million in home equity lines of credit. Loan growth was funded by a decrease in investment securities as well as an increase in deposits.

Total liabilities increased $46.0 million to $1.19 billion at June 30, 2018 from $1.15 billion at June 30, 2017.  This increase was due primarily to a $69.0 million increase in deposits, partially offset by a $23.8 million decrease in advances from FHLB. 

Total shareholders' equity increased $7.8 million to $287.6 million at June 30, 2018 from $279.8 million at June 30, 2017.  This increase was due primarily to net income of $6.6 million and a $2.2 million reduction in unearned ESOP shares for plan shares earned during the period, partially offset by other comprehensive losses of $618,000 due largely to increased unrealized losses in the available for sale investment securities portfolio driven by increased market interest rates, as well as $504,000 of cash dividends paid.  At June 30, 2018, the Company's book value per share and tangible book value per share were $15.83 and $15.47, respectively, compared to $15.41 and $15.04, respectively, at June 30, 2017.  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 June 30, 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 August 31, 2018 to stockholders of record on August 17, 2018.

Equity Incentive Plan
The Company has sought and received the New York State Department of Financial Services' requisite non-objection to its proposed 2018 Equity Incentive Plan and will seek stockholder approval of the Plan at its 2018 Annual Meeting of Stockholders scheduled for October 24, 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)

           
      June 30,   June 30,
      2018   2017
ASSETS              
Cash and due from banks     $ 60,684   $ 59,115
Federal funds sold       1,461     1,371
Cash and cash equivalents       62,145     60,486
Investment Securities:              
Held to maturity investment securities, at amortized cost       353,183     383,551
(fair value of $343,188 and $383,588, respectively)  
Available for sale securities, at fair value       105,504     111,889
Total investment securities       458,687     495,440
Loans receivable, net of allowance for loan losses of $4,904 and $5,150, respectively     902,336     809,648
Accrued interest receivable       4,358     3,693
Federal Home Loan Bank stock       2,050     3,132
Premises and equipment, net       11,598     12,959
Deferred tax asset, net       2,622     4,770
Foreclosed real estate       460     977
Bank-owned life insurance       23,747     23,179
Goodwill       6,106     6,106
Other intangible assets       433     559
Other assets       5,645     5,509
Total assets     $ 1,480,187   $ 1,426,458
LIABILITIES AND SHAREHOLDERS' EQUITY              
Interest bearing deposits     $ 1,025,574   $ 952,109
Non-interest bearing deposits       131,883     136,352
Total deposits       1,157,457     1,088,461
Mortgage escrow funds       8,803     8,084
Advances from Federal Home Loan Bank       18,841     42,598
Other liabilities       7,527     7,469
Total liabilities    
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