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Section 1: 10-Q (10-Q)

pcsb-10q_20191231.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 December 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)

 

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  

 

 

 

 

 

  17,043,648 shares of the Registrant’s common stock, par value $0.01 per share, were outstanding as of February 5, 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

49

Item 4.

Controls and Procedures

49

PART II.

OTHER INFORMATION

 

Item 1.

Legal Proceedings

49

Item 1A.

Risk Factors

49

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

49

Item 3.

Defaults Upon Senior Securities

50

Item 4.

Mine Safety Disclosures

50

Item 5.

Other Information

50

Item 6.

Exhibits

50

Signatures

51

 

 

 

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) 

 

 

December 31,

 

 

June 30,

 

 

 

2019

 

 

2019

 

ASSETS

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

61,603

 

 

$

58,756

 

Federal funds sold

 

 

1,232

 

 

 

1,273

 

Total cash and cash equivalents

 

 

62,835

 

 

 

60,029

 

Investment securities:

 

 

 

 

 

 

 

 

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

   $274,850, and $346,243, respectively)

 

 

273,381

 

 

 

345,545

 

Available for sale debt securities, at fair value

 

 

54,454

 

 

 

72,228

 

Total investment securities

 

 

327,835

 

 

 

417,773

 

Loans receivable, net of allowance for loan losses of $6,216 and

   $5,664, respectively

 

 

1,183,740

 

 

 

1,093,121

 

Accrued interest receivable

 

 

4,932

 

 

 

4,797

 

FHLB stock

 

 

5,127

 

 

 

6,255

 

Premises and equipment, net

 

 

23,438

 

 

 

11,802

 

Deferred tax asset, net

 

 

1,956

 

 

 

2,478

 

Foreclosed real estate

 

 

279

 

 

 

1,158

 

Bank-owned life insurance

 

 

24,562

 

 

 

24,291

 

Goodwill

 

 

6,106

 

 

 

6,106

 

Other intangible assets

 

 

274

 

 

 

323

 

Other assets

 

 

8,083

 

 

 

9,446

 

Total assets

 

$

1,649,167

 

 

$

1,637,579

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Interest bearing deposits

 

$

1,111,396

 

 

$

1,084,442

 

Non-interest bearing deposits

 

 

140,218

 

 

 

141,379

 

Total deposits

 

 

1,251,614

 

 

 

1,225,821

 

Mortgage escrow funds

 

 

10,049

 

 

 

9,355

 

Advances from FHLB

 

 

86,153

 

 

 

111,216

 

Other liabilities

 

 

21,512

 

 

 

9,880

 

Total liabilities

 

 

1,369,328

 

 

 

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 December 31, 2019 and June 30, 2019)

 

 

-

 

 

 

-

 

Common stock ($0.01 par value, 200,000,000 shares authorized, 18,712,295 shares issued as of December 31, 2019 and June 30, 2019, respectively, and 17,372,308 and 17,804,039 shares outstanding as of December 31, 2019 and June 30, 2019, respectively)

 

 

187

 

 

 

187

 

Additional paid in capital

 

 

184,276

 

 

 

182,129

 

Retained earnings

 

 

138,373

 

 

 

134,500

 

Unearned compensation - ESOP

 

 

(11,626

)

 

 

(12,114

)

Accumulated other comprehensive loss, net of income taxes

 

 

(4,474

)

 

 

(5,090

)

Treasury stock, at cost (1,339,987 and 908,256 shares as of December 31, 2019 and June 30, 2019, respectively)

 

 

(26,897

)

 

 

(18,305

)

Total shareholders' equity

 

 

279,839

 

 

 

281,307

 

Total liabilities and shareholders' equity

 

$

1,649,167

 

 

$

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 December 31,

 

 

Six Months Ended December 31,

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Interest and dividend income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans receivable

$

13,149

 

 

$

10,321

 

 

$

26,185

 

 

$

20,219

 

Investment securities

 

2,279

 

 

 

2,428

 

 

 

4,971

 

 

 

4,794

 

Federal funds and other

 

301

 

 

 

491

 

 

 

599

 

 

 

836

 

Total interest and dividend income

 

15,729

 

 

 

13,240

 

 

 

31,755

 

 

 

25,849

 

Interest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits and escrow interest

 

3,358

 

 

 

2,375

 

 

 

6,659

 

 

 

4,431

 

FHLB advances

 

674

 

 

 

121

 

 

 

1,401

 

 

 

210

 

Total interest expense

 

4,032

 

 

 

2,496

 

 

 

8,060

 

 

 

4,641

 

Net interest income

 

11,697

 

 

 

10,744

 

 

 

23,695

 

 

 

21,208

 

Provision for loan losses

 

412

 

 

 

6

 

 

 

747

 

 

 

64

 

Net interest income after provision for loan losses

 

11,285

 

 

 

10,738

 

 

 

22,948

 

 

 

21,144

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Fees and service charges

 

402

 

 

 

457

 

 

 

804

 

 

 

875

 

Bank-owned life insurance

 

134

 

 

 

139

 

 

 

271

 

 

 

279

 

Swap income

 

-

 

 

 

75

 

 

 

170

 

 

 

146

 

Gains on sales of securities, net

 

-

 

 

 

55

 

 

 

-

 

 

 

55

 

Other

 

11

 

 

 

194

 

 

 

67

 

 

 

206

 

Total noninterest income

 

547

 

 

 

920

 

 

 

1,312

 

 

 

1,561

 

Noninterest expense

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

5,889

 

 

 

5,306

 

 

 

11,653

 

 

 

10,328

 

Occupancy and equipment

 

1,333

 

 

 

1,284

 

 

 

2,648

 

 

 

2,525

 

Communication and data processing

 

507

 

 

 

482

 

 

 

1,038

 

 

 

954

 

Professional fees

 

379

 

 

 

417

 

 

 

783

 

 

 

786

 

Postage, printing, stationary and supplies

 

159

 

 

 

178

 

 

 

299

 

 

 

316

 

FDIC assessment

 

-

 

 

 

124

 

 

 

-

 

 

 

217

 

Advertising

 

100

 

 

 

131

 

 

 

200

 

 

 

218

 

Amortization of intangible assets

 

25

 

 

 

28

 

 

 

49

 

 

 

56

 

Other operating expenses

 

402

 

 

 

630

 

 

 

911

 

 

 

1,188

 

Total noninterest expense

 

8,794

 

 

 

8,580

 

 

 

17,581

 

 

 

16,588

 

Net income before income tax expense

 

3,038

 

 

 

3,078

 

 

 

6,679

 

 

 

6,117

 

Income tax expense

 

685

 

 

 

754

 

 

 

1,497

 

 

 

1,464

 

Net income

$

2,353

 

 

$

2,324

 

 

$

5,182

 

 

$

4,653

 

Earnings per common share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

$

0.15

 

 

$

0.14

 

 

$

0.33

 

 

$

0.28

 

Diluted

$

0.14

 

 

$

0.14

 

 

$

0.32

 

 

$

0.28

 

Weighted average common shares outstanding:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic

 

15,837,762

 

 

 

16,852,718

 

 

 

15,908,761

 

 

 

16,860,942

 

Diluted

 

15,909,855

 

 

 

16,868,464

 

 

 

15,996,251

 

 

 

16,868,815

 

 

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 December 31,

 

 

Six Months Ended December 31,

 

 

 

2019

 

 

2018

 

 

2019

 

 

2018

 

Net income

 

$

2,353

 

 

$

2,324

 

 

$

5,182

 

 

$

4,653

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other comprehensive income (loss):

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net change in unrealized gains/losses before reclassification adjustment

 

 

39

 

 

 

506

 

 

 

220

 

 

 

353

 

Reclassification adjustment for gains realized in net income

 

 

-

 

 

 

(55

)

 

 

-

 

 

 

(55

)

Net change in unrealized gains/losses

 

 

39

 

 

 

451

 

 

 

220

 

 

 

298

 

Tax effect

 

 

(7

)

 

 

(94

)

 

 

(45

)

 

 

(62

)

Net of tax

 

 

32

 

 

 

357

 

 

 

175

 

 

 

236

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

403

 

 

 

145

 

 

 

536

 

 

 

290

 

Tax effect

 

 

(83

)

 

 

(31

)

 

 

(112

)

 

 

(61

)

Net of tax

 

 

320

 

 

 

114

 

 

 

424

 

 

 

229

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

12

 

 

 

9

 

 

 

23

 

 

 

18

 

Tax effect

 

 

(4

)

 

 

(2

)

 

 

(6

)

 

 

(4

)

Net of tax

 

 

8

 

 

 

7

 

 

 

17

 

 

 

14

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total other comprehensive income

 

 

360

 

 

 

478

 

 

 

616

 

 

 

479

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Comprehensive income

 

$

2,713

 

 

$

2,802

 

 

$

5,798

 

 

$

5,132

 

 

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

 

 

 

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

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

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

)

 

 

-

 

 

 

-