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Section 1: 10-Q (10-Q 03312020)

pcsb-10q_20200331.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, 2020

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)

 

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

 

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  

 

 

 

 

 

16,898,137 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of May 6, 2020.

 


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

38

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

51

Item 4.

Controls and Procedures

51

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

51

Item 1A.

Risk Factors

51

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

53

Item 3.

Defaults Upon Senior Securities

53

Item 4.

Mine Safety Disclosures

53

Item 5.

Other Information

53

Item 6.

Exhibits

54

Signatures

55

 

 

 

2


PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PCSB Financial Corporation and Subsidiaries

Consolidated Balance Sheets (unaudited)

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

 

 

March 31,

 

 

June 30,

 

 

 

2020

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

83,665

 

 

$

58,756

 

Federal funds sold

 

 

1,247

 

 

 

1,273

 

Total cash and cash equivalents

 

 

84,912

 

 

 

60,029

 

Investment securities:

 

 

 

 

 

 

 

 

Held to maturity debt securities, at amortized cost (fair value of

   $267,704, and $346,243, respectively)

 

 

263,626

 

 

 

345,545

 

Available for sale debt securities, at fair value

 

 

45,992

 

 

 

72,228

 

Total investment securities

 

 

309,618

 

 

 

417,773

 

Loans receivable, net of allowance for loan losses of $8,346 and

   $5,664, respectively

 

 

1,220,682

 

 

 

1,093,121

 

Accrued interest receivable

 

 

5,384

 

 

 

4,797

 

FHLB stock

 

 

6,026

 

 

 

6,255

 

Premises and equipment, net

 

 

21,437

 

 

 

11,802

 

Deferred tax asset, net

 

 

2,421

 

 

 

2,478

 

Foreclosed real estate

 

 

-

 

 

 

1,158

 

Bank-owned life insurance

 

 

24,890

 

 

 

24,291

 

Goodwill

 

 

6,106

 

 

 

6,106

 

Other intangible assets

 

 

250

 

 

 

323

 

Other assets

 

 

14,149

 

 

 

9,446

 

Total assets

 

$

1,695,875

 

 

$

1,637,579

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Interest bearing deposits

 

$

1,133,742

 

 

$

1,084,442

 

Non-interest bearing deposits

 

 

145,844

 

 

 

141,379

 

Total deposits

 

 

1,279,586

 

 

 

1,225,821

 

Mortgage escrow funds

 

 

7,924

 

 

 

9,355

 

Advances from FHLB

 

 

106,121

 

 

 

111,216

 

Other liabilities

 

 

29,827

 

 

 

9,880

 

Total liabilities

 

 

1,423,458

 

 

 

1,356,272

 

Commitments and contingencies

 

 

-

 

 

 

-

 

Shareholders' equity:

 

 

 

 

 

 

 

 

Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of March 31, 2020 and June 30, 2019)

 

 

-

 

 

 

-

 

Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 shares issued as of March 31, 2020 and June 30, 2019, respectively, and 16,898,137 and 17,804,039 shares outstanding as of March 31, 2020 and June 30, 2019, respectively)

 

 

187

 

 

 

187

 

Additional paid in capital

 

 

185,301

 

 

 

182,129

 

Retained earnings

 

 

138,957

 

 

 

134,500

 

Unearned compensation - ESOP

 

 

(11,384

)

 

 

(12,114

)

Accumulated other comprehensive loss, net of income taxes

 

 

(4,230

)

 

 

(5,090

)

Treasury stock, at cost (1,814,158 and 908,256 shares as of March 31, 2020 and June 30, 2019, respectively)

 

 

(36,414

)

 

 

(18,305

)

Total shareholders' equity

 

 

272,417

 

 

 

281,307

 

Total liabilities and shareholders' equity

 

$

1,695,875

 

 

$

1,637,579

 

 

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,

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable

$

13,114

 

 

$

10,413

 

 

$

39,299

 

 

$

30,632

 

Investment securities

 

2,003

 

 

 

2,619

 

 

 

6,974

 

 

 

7,413

 

Federal funds and other

 

217

 

 

 

614

 

 

 

816

 

 

 

1,450

 

Total interest and dividend income

 

15,334

 

 

 

13,646

 

 

 

47,089

 

 

 

39,495

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits and escrow interest

 

3,268

 

 

 

2,741

 

 

 

9,927

 

 

 

7,172

 

FHLB advances

 

541

 

 

 

168

 

 

 

1,942

 

 

 

378

 

Total interest expense

 

3,809

 

 

 

2,909

 

 

 

11,869

 

 

 

7,550

 

Net interest income

 

11,525

 

 

 

10,737

 

 

 

35,220

 

 

 

31,945

 

Provision for loan losses

 

2,008

 

 

 

7

 

 

 

2,755

 

 

 

71

 

Net interest income after provision for loan losses

 

9,517

 

 

 

10,730

 

 

 

32,465

 

 

 

31,874

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

366

 

 

 

436

 

 

 

1,170

 

 

 

1,311

 

Bank-owned life insurance

 

128

 

 

 

131

 

 

 

399

 

 

 

410

 

Swap income

 

-

 

 

 

-

 

 

 

170

 

 

 

146

 

Gains on sales of securities, net

 

38

 

 

 

-

 

 

 

38

 

 

 

55

 

Other

 

48

 

 

 

12

 

 

 

115

 

 

 

218

 

Total noninterest income

 

580

 

 

 

579

 

 

 

1,892

 

 

 

2,140

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

5,782

 

 

 

5,579

 

 

 

17,435

 

 

 

15,907

 

Occupancy and equipment

 

1,311

 

 

 

1,340

 

 

 

3,959

 

 

 

3,865

 

Communication and data processing

 

521

 

 

 

476

 

 

 

1,559

 

 

 

1,430

 

Professional fees

 

393

 

 

 

396

 

 

 

1,176

 

 

 

1,182

 

Postage, printing, stationary and supplies

 

140

 

 

 

138

 

 

 

439

 

 

 

454

 

FDIC assessment

 

-

 

 

 

105

 

 

 

-

 

 

 

322

 

Advertising

 

100

 

 

 

131

 

 

 

300

 

 

 

349

 

Amortization of intangible assets

 

24

 

 

 

29

 

 

 

73

 

 

 

85

 

Other operating expenses

 

249

 

 

 

504

 

 

 

1,160

 

 

 

1,692

 

Total noninterest expense

 

8,520

 

 

 

8,698

 

 

 

26,101

 

 

 

25,286

 

Net income before income tax expense

 

1,577

 

 

 

2,611

 

 

 

8,256

 

 

 

8,728

 

Income tax expense

 

360

 

 

 

625

 

 

 

1,857

 

 

 

2,089

 

Net income

$

1,217

 

 

$

1,986

 

 

$

6,399

 

 

$

6,639

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.08

 

 

$

0.12

 

 

$

0.41

 

 

$

0.40

 

Diluted

$

0.08

 

 

$

0.12

 

 

$

0.40

 

 

$

0.40

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

15,437,173

 

 

 

16,204,393

 

 

 

15,752,709

 

 

 

16,645,287

 

Diluted

 

15,447,217

 

 

 

16,261,755

 

 

 

15,814,322

 

 

 

16,659,746

 

 

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,

 

 

 

2020

 

 

2019

 

 

2020

 

 

2019

 

Net income

 

$

1,217

 

 

$

1,986

 

 

$

6,399

 

 

$

6,639

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains/losses before reclassification adjustment

 

 

186

 

 

 

757

 

 

 

406

 

 

 

1,110

 

Reclassification adjustment for gains realized in net income

 

 

(20

)

 

 

 

 

 

 

(20

)

 

 

(55

)

Net change in unrealized gains/losses

 

 

166

 

 

 

757

 

 

 

386

 

 

 

1,055

 

Tax effect

 

 

(35

)

 

 

(160

)

 

 

(80

)

 

 

(222

)

Net of tax

 

 

131

 

 

 

597

 

 

 

306

 

 

 

833

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

132

 

 

 

145

 

 

 

668

 

 

 

435

 

Tax effect

 

 

(27

)

 

 

(30

)

 

 

(139

)

 

 

(91

)

Net of tax

 

 

105

 

 

 

115

 

 

 

529

 

 

 

344

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Supplemental retirement plans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net gain (loss) arising during the period

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

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

 

 

11

 

 

 

9

 

 

 

34

 

 

 

27

 

Tax effect

 

 

(3

)

 

 

(1

)

 

 

(9

)

 

 

(5

)

Net of tax

 

 

8

 

 

 

8

 

 

 

25

 

 

 

22

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

244

 

 

 

720

 

 

 

860

 

 

 

1,199

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

1,461

 

 

$

2,706

 

 

$

7,259

 

 

$

7,838

 

 

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 and per share data)

 

 

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Unallocated

 

 

Treasury

 

 

Other

 

 

 

 

 

 

Number of

 

 

Common

 

 

Paid-In

 

 

Retained

 

 

Common Stock

 

 

Stock,

 

 

Comprehensive

 

 

Total

 

 

Shares

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

of ESOP

 

 

at cost

 

 

Loss

 

 

Equity

 

Balance at July 1, 2019

 

17,804,039

 

 

$

187

 

 

$

182,129

 

 

$

134,500

 

 

$

(12,114

)

 

$

(18,305

)

 

$

(5,090

)

 

$

281,307

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

2,829

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,829

 

Other comprehensive income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

256

 

 

 

256

 

Common stock dividends declared ($0.04 per share)

 

-

 

 

 

-

 

 

 

-

 

 

 

(659

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(659

)

Repurchase of common stock

 

(179,800

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(3,524

)

 

 

-

 

 

 

(3,524

)

Stock-based compensation

 

-

 

 

 

-

 

 

 

829

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

829

 

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

 

-

 

 

 

-

 

 

 

240

 

 

 

-

 

 

 

244

 

 

 

-

 

 

 

-

 

 

 

484

 

Balance at September 30, 2019

 

17,624,239

 

 

 

187

 

 

 

183,198

 

 

 

136,670

 

 

 

(11,870

)

 

 

(21,829

)

 

 

(4,834

)

 

 

281,522

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

2,353

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

2,353

 

Other comprehensive income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

360

 

 

 

360

 

Common stock dividends declared ($0.04 per share)

 

-

 

 

 

-

 

 

 

-

 

 

 

(650

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(650

)

Repurchase of common stock

 

(236,050

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(4,748

)

 

 

-

 

 

 

(4,748

)

Shares withheld related to income tax withholding

 

(15,881

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(320

)

 

 

 

 

 

 

(320

)

Stock-based compensation

 

-

 

 

 

-

 

 

 

829

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

829

 

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

 

-

 

 

 

-

 

 

 

249

 

 

 

-

 

 

 

244

 

 

 

-

 

 

 

-

 

 

 

493

 

Balance at December 31, 2019

 

17,372,308

 

 

$

187

 

 

$

184,276

 

 

$

138,373

 

 

$

(11,626

)

 

$

(26,897

)

 

$

(4,474

)

 

$

279,839

 

Net income

 

-

 

 

 

-

 

 

 

-

 

 

 

1,217

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

1,217

 

Other comprehensive income

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

244

 

 

 

244

 

Common stock dividends declared ($0.04 per share)

 

-

 

 

 

-

 

 

 

-

 

 

 

(633

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(633

)

Repurchase of common stock

 

(474,171

)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(9,517

)

 

 

-

 

 

 

(9,517

)

Stock-based compensation

 

-

 

 

 

-

 

 

 

829

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

829

 

ESOP shares committed to be released (24,154 shares)

 

-

 

 

 

-

 

 

 

196

 

 

 

-

 

 

 

242

 

 

 

-

 

 

 

-

 

 

 

438

 

Balance at March 31, 2020

 

16,898,137

 

 

$

187

 

 

$

185,301

 

 

$

138,957

 

 

$

(11,384

)

 

$

(36,414

)

 

$

(4,230

)

 

$

272,417

 

 

 

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 and per share data)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

 

Unallocated

 

 

 

 

 

 

Other

 

 

 

 

 

 

Number of

 

 

Common

 

 

Paid-In

 

 

Retained

 

 

Common Stock

 

 

Treasury Stock,

 

 

Comprehensive

 

 

Total

 

 

Shares

 

 

Stock

 

 

Capital

 

 

Earnings

 

 

of ESOP

 

 

at cost

 

 

Loss

 

 

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

 

-

 

 

 

-

 

 

 

-