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Section 1: 10-Q (10-Q - 03312019)

pcsb-10q_20190331.htm

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from _____ to _____

Commission File Number: 001-38065

 

PCSB Financial Corporation

(Exact Name of Registrant as Specified in its Charter)

 

 

Maryland

81-4710738

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

2651 Strang Blvd, Suite 100

Yorktown Heights, NY

10598

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (914) 248-7272

N/A

(Former name, former address and former fiscal year, if changed since last report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

 

  

Accelerated filer

 

 

 

 

 

 

Non-accelerated filer

 

 

  

Small reporting company

 

 

 

 

 

 

 

 

 

  

  

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for completing with any or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.    

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes      No  

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Stock, $0.01 par value per share

 

PCSB

 

The NASDAQ Stock Market, LLC

 

17,804,039 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of May 10, 2019.

 

 


Table of Contents

 

 

 

Page

PART I.

FINANCIAL INFORMATION

 

Item 1.

Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Operations

4

 

Consolidated Statements of Comprehensive Income

5

 

Consolidated Statements of Changes in Shareholders’ Equity

6

 

Consolidated Statements of Cash Flows

8

 

Notes to Unaudited Consolidated Financial Statements

10

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

36

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

47

Item 4.

Controls and Procedures

47

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

47

Item 1A.

Risk Factors

47

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

47

Item 3.

Defaults Upon Senior Securities

48

Item 4.

Mine Safety Disclosures

48

Item 5.

Other Information

48

Item 6.

Exhibits

48

Signatures

49

 

 

 

2


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

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

 

Total 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)

 

 

-

 

 

 

-

 

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

 

 

See accompanying notes to the consolidated financial statements (unaudited)

3


PCSB Financial Corporation and Subsidiaries

Consolidated Statements of Operations (unaudited)

(amounts in thousands, except share and per share data)

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended 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

 

Gain on sale 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

 

Communicating 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

 

 

See accompanying notes to the consolidated financial statements (unaudited)

4


PCSB Financial Corporation and Subsidiaries

Consolidated Statements of Comprehensive Income (unaudited)

(amounts in thousands)

 

 

 

Three Months Ended March 31,

 

 

Nine Months Ended March 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

1,986

 

 

$

2,177

 

 

$

6,639

 

 

$

3,935

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Unrealized gains (losses) on available for sale debt securities:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains/losses before reclassification adjustment

 

 

757

 

 

 

(705

)

 

 

1,110

 

 

 

(1,635

)

Reclassification adjustment for gains realized in net income

 

 

-

 

 

 

-

 

 

 

(55

)

 

 

(139

)

Net change in unrealized gains/losses

 

 

757

 

 

 

(705

)

 

 

1,055

 

 

 

(1,774

)

Tax effect

 

 

(160

)

 

 

149

 

 

 

(222

)

 

 

512

 

Net of tax

 

 

597

 

 

 

(556

)

 

 

833

 

 

 

(1,262

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Defined benefit pension plan:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) arising during the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Reclassification adjustment for amortization of prior service cost and net gain included in net periodic pension cost

 

 

145

 

 

 

182

 

 

 

435

 

 

 

544

 

Tax effect

 

 

(30

)

 

 

(39

)

 

 

(91

)

 

 

(162

)

Net of tax

 

 

115

 

 

 

143

 

 

 

344

 

 

 

382

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental retirement plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Reclassification adjustment for amortization of prior service cost and net gain included in net periodic pension cost

 

 

9

 

 

 

10

 

 

 

27

 

 

 

26

 

Tax effect

 

 

(1

)

 

 

(3

)

 

 

(5

)

 

 

(7

)

Net of tax

 

 

8

 

 

 

7

 

 

 

22

 

 

 

19

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income (loss)

 

 

720

 

 

 

(406

)

 

 

1,199

 

 

 

(861

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

2,706

 

 

$

1,771

 

 

$

7,838

 

 

$

3,074

 

 

See accompanying notes to the consolidated financial statements (unaudited)

 

 

5


PCSB Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

(amounts in thousands, except share data)

 

 

Number of Shares

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Retained Earnings

 

 

Unallocated Common Stock of ESOP

 

 

Treasury

Stock, at cost

 

 

Accumulated Other Comprehensive Loss

 

 

Total

Equity

 

Balance at July 1, 2018

 

18,165,110

 

 

$

182

 

 

$

179,045

 

 

$

128,365

 

 

$

(13,083

)

 

$

-

 

 

$

(6,950

)

 

$

287,559

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

2,329

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,329

 

Other comprehensive income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1

 

 

 

1

 

Common stock dividends declared ($0.03 per share)

 

-

 

 

 

-

 

 

 

-

 

 

 

(505

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(505

)

ESOP shares committed to be released (24,419 shares)

 

-

 

 

 

-

 

 

 

249

 

 

 

-

 

 

 

244

 

 

 

-

 

 

 

-

 

 

 

493

 

Balance at September 30, 2018

 

18,165,110

 

 

 

182

 

 

 

179,294

 

 

 

130,189

 

 

 

(12,839

)

 

 

-

 

 

 

(6,949

)

 

 

289,877

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

2,324

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,324

 

Other comprehensive income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

478

 

 

 

478

 

Common stock dividends declared ($0.03 per share)

 

-

 

 

 

-

 

 

 

-

 

 

 

(520

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(520

)

Repurchase of common stock

 

(222,070

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,336

)

 

 

-

 

 

 

(4,336

)

Restricted stock awards granted

 

547,185

 

 

 

5

 

 

 

(5

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

-

 

 

 

-

 

 

 

482

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

482

 

ESOP shares committed to be released (24,419 shares)

 

-

 

 

 

-

 

 

 

232

 

 

 

-

 

 

 

245

 

 

 

-

 

 

 

-

 

 

 

477

 

Balance at December 31, 2018

 

18,490,225

 

 

 

187

 

 

 

180,003

 

 

 

131,993

 

 

 

(12,594

)

 

 

(4,336

)

 

 

(6,471

)

 

 

288,782

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

1,986

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,986

 

Other comprehensive income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

720

 

 

 

720

 

Common stock dividends declared ($0.03 per share)

 

-

 

 

 

-

 

 

 

-

 

 

 

(496

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(496

)

Repurchase of common stock

 

(686,186

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(13,969

)

 

 

-

 

 

 

(13,969

)

Stock-based compensation

 

-

 

 

 

-

 

 

 

829

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

829

 

ESOP shares committed to be released (23,092 shares)

 

-

 

 

 

-

 

 

 

234

 

 

 

-

 

 

 

230

 

 

 

-

 

 

 

-

 

 

 

464

 

Balance at March 31, 2019

 

17,804,039

 

 

$

187

 

 

$

181,066

 

 

$

133,483

 

 

$

(12,364

)

 

$

(18,305

)

 

$

(5,751

)

 

$

278,316

 

 

See accompanying notes to the consolidated financial statements (unaudited)

 

6


PCSB Financial Corporation and Subsidiaries

Consolidated Statements of Changes in Shareholders’ Equity (unaudited)

(amounts in thousands, except share data)

 

 

Number of Shares

 

 

Common Stock

 

 

Additional Paid-in Capital

 

 

Retained Earnings

 

 

Unallocated Common Stock of ESOP

 

 

Treasury

Stock, at cost

 

 

Accumulated Other Comprehensive Loss

 

 

Total

Equity

 

Balance at July 1, 2017

 

18,165,110

 

 

$

182

 

 

$

177,993

 

 

$

121,148

 

 

$

(14,262

)

 

$

-

 

 

$

(5,215

)

 

$

279,846

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

1,756

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,756

 

Other comprehensive loss

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(107

)

 

 

(107

)

Issuance of common stock (1)

 

-

 

 

 

-

 

 

 

(17

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(17

)

ESOP shares committed to be released (34,953 shares)

 

-

 

 

 

-

 

 

 

258

 

 

 

-

 

 

 

349

 

 

 

-

 

 

 

-

 

 

 

607

 

Balance at September 30, 2017

 

18,165,110

 

 

 

182

 

 

 

178,234

 

 

 

122,904

 

 

 

(13,913

)

 

 

-

 

 

 

(5,322

)

 

 

282,085

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2

 

Other comprehensive loss

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(348

)

 

 

(348

)

ESOP shares committed to be released (34,953 shares)

 

-

 

 

 

-

 

 

 

322

 

 

 

-

 

 

 

350

 

 

 

-

 

 

 

-

 

 

 

672

 

Balance at December 31, 2017

 

18,165,110

 

 

 

182