pcsb-8k_20200123.htm

PCSB Financial Corporation Announces Second Fiscal Quarter Financial Results and

Yorktown Heights, New York; January 23, 2020 – PCSB Financial Corporation (the “Company”) (NASDAQ: PCSB), parent of PCSB Bank (the "Bank"), today announced net income of $2.4 million, or $0.14 per diluted share, for the three months ended December 31, 2019 compared to $2.8 million, or $0.18 per diluted share, for the three months ended September 30, 2019 and $2.3 million, or $0.14 per diluted share, for the three months ended December 31, 2018. Net income for the six months ended December 31, 2019 was $5.2 million, or $0.32 per diluted share, compared to $4.7 million, or $0.28 per diluted share, for the same period last year.

On a non-GAAP basis, which excludes certain nonrecurring items, the Company recorded adjusted net income of $2.3 million, or $0.14 per diluted share for the three months ended December 31, 2019 as compared to adjusted net income of $2.4 million, or $0.15 per diluted share, for the three months ended September 30, 2019 and $2.1 million, or $0.13 per diluted share, for the three months ended December 31, 2018. Adjusted net income for the six months ended December 31, 2019 was $4.7 million, or $0.29 per diluted share, compared to $4.4 million, or $0.26 per diluted share, for the same period last year. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

The Board of Directors declared a regular quarterly cash dividend of $0.04 per share. The dividend is payable on or about February 28, 2020 to stockholders of record as of the close of business on February 14, 2020.

Commenting on the Company’s results, Joseph D. Roberto, Chairman, President and Chief Executive Officer of PCSB Financial Corporation, said, “I am pleased with the solid growth in our core business through the first six months of our third year as a public company. Loan volume remains strong, as evidenced by the $90.6 million, or 8.3%, increase in net loans over the six-month period. This growth resulted in a loan to deposit ratio of 94.58%, increasing from 89.17% at June 30, 2019. Asset quality continues to remain strong as non-performing assets as a percent of total assets was 0.12% as compared to 0.27% a year ago. Our net interest margin of 2.93% is down 6 basis points from 2.99% in the year ago period as a result of the continued low interest rate environment along with competitive loan and deposit pricing. However, we are pleased that our linked quarters’ cost of deposits has leveled off and we will look to take advantage of opportunities to reduce this cost. As we move forward, we remain focused on enhancing shareholder value through continued growth in our core business together with capital management techniques such as share repurchases and dividends.

Net interest income was $11.7 million for the quarter ended December 31, 2019, a decrease of $301,000, or 2.5%, compared to the quarter ended September 30, 2019, and an increase of $953,000, or 8.9%, compared to quarter ended December 31, 2018. The increase in net interest income compared to the prior year is primarily the result of

an increase in average net interest earning assets, as the Company has accomplished significant growth in average loans receivable compared to the same quarter last year, however the effect of the growth was partially offset by a decrease in net interest margin. Net interest income declined compared to the quarter ended September 30, 2019 as a result of margin compression, largely resulting from higher prepayment income earned in the prior quarter.

The net interest margin was 2.93% for the current quarter, decreases of 10 basis points compared to 3.03% in the prior quarter and 6 basis points compared to 2.99% in the prior year quarter. Excluding non-recurring prepayment income earned in these periods, net interest margin for the current quarter would have been 2.90%, unchanged from the prior quarter and a decrease from 2.97% in the prior year quarter. Despite continued asset growth and a shift in the asset mix, rising funding costs due to higher short-term interest rates along with competitive loan and deposit pricing has resulted in net interest margin compression.

The yield on interest-earning assets for the current quarter was 3.94%, a 10 basis point decrease from the prior quarter, however this represents a 26 basis point increase from the prior year quarter. Excluding the effects of prepayment income, the yield on interest-earning assets was 3.91% for the current quarter, a decrease of one basis point from the prior quarter as a higher yielding asset mix was more than offset by downward pressures on market interest rates.

The cost of interest-bearing deposits was 1.20% for the current quarter, unchanged from the prior quarter and an increase of 29 basis points from 0.91% for the prior year quarter. The Company has experienced a shift in the deposit mix over the past several quarters as customers in generally lower costing savings products moved to generally higher rate money market and time deposits, however the pace of this shift has slowed in recent quarters. The cost of interest-bearing liabilities was 1.31% for the current quarter, a decrease of 1 basis point from 1.32% for the prior quarter and an increase of 38 basis points from 0.93% for the prior year quarter.

The provision for loan losses was $412,000 for the three months ended December 31, 2019 compared to $335,000 in the prior quarter and $6,000 for the same quarter in 2018. Charge-offs, net of recoveries, were $189,000 for the three months ended December 31, 2019 compared to $6,000 for the three months ended September 30, 2019 and $22,000 for the three months ended December 31, 2018. Current quarter charge-offs related primarily to one commercial loan relationship. Loans classified as substandard or doubtful decreased $6.3 million, or 56.2%, to $4.9 million at December 31, 2019 from $11.3 million at September 30, 2019 and decreased $5.3 million, or 51.5%, from $10.2 million at December 31, 2018. Non-performing loans as a percent of total loans receivable was 0.14% as of December 31, 2019, a decrease from 0.29% as of September 30, 2019 and 0.39% as of December 31, 2018.

Noninterest income of $547,000 for the three months ended December 31, 2019 decreased $218,000 compared to the three months ended September 30, 2019, primarily due to a $170,000 decrease in swap income and a $47,000 decrease in gains on sale of foreclosed real estate. Noninterest income decreased $373,000 compared to the same period in 2018, primarily due to decreases of $155,000 in gains on sale of bank premises, $75,000 in swap income, $56,000 in deposit-related fees, $55,000 in gains on sales of securities and $24,000 in gains on sale of foreclosed real estate.

Noninterest expense of $8.8 million for the three months ended December 31, 2019 was largely unchanged compared to the three months ended September 30, 2019 and increased $214,000 compared to the same period in 2018. The $214,000 increase from the prior year period was caused primarily by a $583,000 increase in salaries and employee benefits, partially offset by a $124,000 decrease in FDIC assessment costs, a $90,000 loss on a receivable recorded in the prior quarter and net decreases in all other operating expenses. The increase in salaries and employee benefits was caused primarily by increases of $347,000 in stock-based compensation and $251,000 in other compensation. During the current quarter, the Bank applied small bank assessment credits of $108,000 which fully offset the Bank’s FDIC assessment for the current quarter. The remaining credits available are approximately $131,000.

The effective income tax rate was 22.5% for the three months ended December 31, 2019, as compared to 22.3% for the three months ended September 30, 2019 and 24.5% for the three months ended December 31, 2018.

Total assets increased $11.6 million to $1.65 billion at December 31, 2019 from $1.64 billion at June 30, 2019. This increase was primarily due to increases of $90.6 million, or 8.3%, in net loans receivable and $11.6 million in premises and equipment, partially offset by a decrease of $89.9 million in total investment securities. The $90.6 million increase in loans was the result of $111.6 million of originations and $44.1 million of loan purchases, partially offset by $65.1 million of net amortization and repayments. Commercial mortgages increased $89.8 million, or 13.8%, and construction loans increased $9.6 million, or 72.2%, while commercial loans, residential mortgages and home equity lines of credit all had immaterial decreases.

Total liabilities increased $13.1 million to $1.37 billion at December 31, 2019 from $1.36 billion at June 30, 2019. This increase was primarily due to a $26.5 million, or 2.1%, increase in deposits and escrow accounts and an $11.6 million increase in other liabilities, as a result of recording a $12.0 million lease liability (a related lease asset was also recorded as part of bank premises and equipment) associated with the adoption of new lease accounting standards, partially offset by a $25.1 million decrease in FHLB advances.

Total shareholders’ equity decreased $1.5 million to $279.8 million at December 31, 2019 from $281.3 million at June 30, 2019. This decrease was primarily due to the repurchase of $8.6 million (431,731 shares) of common stock and $1.3 million of cash dividends declared and paid, partially offset by net income of $5.2 million, as well as $2.6 million of stock-based compensation and reduction in unearned ESOP shares for plan shares earned during the period. As of December 31, 2019, there were 474,171 shares available to be repurchased under the current stock repurchase plan.

At December 31, 2019, the Company’s book value per share and tangible book value per share were $16.11 and $15.74, respectively, compared to $15.80 and $15.44, respectively, at June 30, 2019. 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 December 31, 2019, the Bank was considered “well capitalized” under applicable regulatory guidelines.

PCSB Financial Corporation is the bank holding company for PCSB Bank. PCSB Bank is a New York-chartered commercial bank that 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.

	December 31,			June 30,
	2019			2019

ASSETS
Cash and due from banks	$	61,603		$	58,756
Federal funds sold		1,232			1,273
Cash and cash equivalents		62,835			60,029
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 Federal Home Loan Bank		86,153			111,216
Other liabilities		21,512			9,880
Total liabilities		1,369,328			1,356,272
Commitments and contingencies		-			-
Preferred stock ($0.01 par value, 10,000,000 shares authorized, no shares issued or outstanding as of September 30, 2019 and June 30, 2019, respectively)		-			-
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, 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

	Three Months Ended				Six Months Ended
	December 31,				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
Communications 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

	Three Months Ended December 31,
	2019								2018
	Average Balance			Interest / Dividends		Average Rate			Average Balance			Interest / Dividends		Average Rate

Assets:
Loans receivable	$	1,178,253		$	13,149		4.46	%	$	909,368		$	10,321		4.53	%
Investment securities		358,760			2,279		2.54			439,919			2,428		2.21
Other interest-earning assets		59,678			301		2.00			86,527			491		2.25
Total interest-earning assets		1,596,691			15,729		3.94			1,435,814			13,240		3.68
Non-interest-earning assets		68,793								55,135
Total assets	$	1,665,484							$	1,490,949

Liabilities and equity:
NOW accounts	$	122,455			67		0.22		$	116,381			52		0.18
Money market accounts		161,075			472		1.16			100,075			280		1.11
Savings accounts and escrow		355,295			234		0.26			416,687			252		0.24
Time deposits		467,486			2,585		2.19			403,652			1,791		1.76
Total interest-bearing deposits		1,106,311			3,358		1.20			1,036,795			2,375		0.91
FHLB advances		117,712			674		2.27			22,106			121		2.15
Total interest-bearing liabilities		1,224,023			4,032		1.31			1,058,901			2,496		0.93
Non-interest-bearing deposits		138,346								134,694
Other non-interest-bearing liabilities		21,827								6,506
Total liabilities		1,384,196								1,200,101
Total shareholders' equity		281,288								290,848
Total liabilities and shareholders' equity	$	1,665,484							$	1,490,949

Net interest income				$	11,697							$	10,744
Interest rate spread⁽¹⁾							2.63								2.75
Net interest margin⁽²⁾							2.93								2.99
Average interest-earning assets to interest-bearing liabilities		130.45	%							135.59	%

⁽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.


	Six Months Ended December 31,
	2019								2018
	Average Balance			Interest / Dividends		Average Rate			Average Balance			Interest / Dividends		Average Rate

Assets:
Loans receivable	$	1,160,139		$	26,185		4.51	%	$	906,194		$	20,219		4.46	%
Investment securities		378,975			4,971		2.62			446,795			4,794		2.15
Other interest-earning assets		52,796			599		2.25			76,875			836		2.16
Total interest-earning assets		1,591,910			31,755		3.99			1,429,864			25,849		3.61
Non-interest-earning assets		69,530								55,193
Total assets	$	1,661,440							$	1,485,057

Liabilities and equity:
NOW accounts	$	121,154			124		0.20		$	117,893			105		0.18
Money market accounts		155,477			935		1.19			80,877			419		1.03
Savings accounts and escrow		358,932			466		0.26			439,615			540		0.25
Time deposits		463,417			5,134		2.20			397,994			3,367		1.68
Total interest-bearing deposits		1,098,980			6,659		1.20			1,036,379			4,431		0.85
FHLB advances		119,784			1,401		2.32			20,463			210		2.03
Total interest-bearing liabilities		1,218,764			8,060		1.32			1,056,842			4,641		0.87
Non-interest-bearing deposits		139,486								131,228
Other non-interest-bearing liabilities		21,519								6,894
Total liabilities		1,379,769								1,194,964
Total shareholders' equity		281,671								290,093
Total liabilities and shareholders' equity	$	1,661,440							$	1,485,057

Net interest income				$	23,695							$	21,208
Interest rate spread⁽¹⁾							2.67								2.74
Net interest margin ⁽²⁾							2.98								2.97
Average interest-earning assets to interest-bearing liabilities		130.62	%							135.30	%

⁽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.


	As of
	December 31, 2019		September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018
Condensed Balance Sheets
Cash and cash equivalents	$	62,835	$	37,797	$	60,029	$	87,105	$	143,119
Total investment securities		327,835		379,007		417,773		440,014		452,463
Loans receivable, net		1,183,740		1,163,254		1,093,121		935,680		904,377
Other assets		74,757		78,550		66,656		60,959		57,356
Total assets	$	1,649,167	$	1,658,608	$	1,637,579	$	1,523,758	$	1,557,315

Total deposits and escrow	$	1,261,663	$	1,241,458	$	1,235,176	$	1,209,868	$	1,234,409
Advances from Federal Home Loan Bank		86,153		111,185		111,216		26,248		26,279
Other liabilities		21,512		24,443		9,880		9,326		7,845
Total liabilities		1,369,328		1,377,086		1,356,272		1,245,442		1,268,533
Total shareholders' equity		279,839		281,522		281,307		278,316		288,782
Total liabilities and shareholders' equity	$	1,649,167	$	1,658,608	$	1,637,579	$	1,523,758	$	1,557,315

	Quarter Ended										Six Months Ended
	December 31, 2019		September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018		December 31, 2019		December 31, 2018
Condensed Income Statements
Interest income	$	15,729	$	16,026	$	13,952	$	13,646	$	13,240	$	31,755	$	25,849
Interest expense		4,032		4,028		3,193		2,909		2,496		8,060		4,641
Net interest income		11,697		11,998		10,759		10,737		10,744		23,695		21,208
Provision for loan losses		412		335		737		7		6		747		64
Noninterest income		547		765		962		579		920		1,312		1,561
Noninterest expense		8,794		8,787		8,708		8,698		8,580		17,581		16,588
Income before income tax expense		3,038		3,641		2,276		2,611		3,078		6,679		6,117
Income tax expense		685		812		597		625		754		1,497		1,464
Net income	$	2,353	$	2,829	$	1,679	$	1,986	$	2,324	$	5,182	$	4,653

Earnings per share:
Basic	$	0.15	$	0.18	$	0.10	$	0.12	$	0.14	$	0.33	$	0.28
Diluted	$	0.14	$	0.18	$	0.10	$	0.12	$	0.14	$	0.32	$	0.28

	Quarter Ended															Six Months Ended
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Performance Ratios ⁽¹⁾:
Return on average assets		0.57	%		0.68	%		0.44	%		0.52	%		0.62	%		0.62	%		0.63	%
Return on average equity		3.35	%		4.01	%		2.40	%		2.83	%		3.20	%		3.68	%		3.21	%
Interest rate spread		2.63	%		2.72	%		2.65	%		2.67	%		2.75	%		2.67	%		2.74	%
Net interest margin		2.93	%		3.03	%		2.94	%		2.94	%		2.99	%		2.98	%		2.97	%
Adjusted Efficiency ratio ⁽²⁾		72.55	%		71.80	%		74.55	%		77.04	%		74.90	%		72.17	%		73.81	%

Noninterest income to average assets		0.13	%		0.18	%		0.25	%		0.15	%		0.25	%		0.16	%		0.21	%
Noninterest expense to average assets		2.11	%		2.12	%		2.29	%		2.29	%		2.30	%		2.12	%		2.23	%

Average interest-earning assets to average interest-bearing liabilities		130.45	%		130.79	%		132.96	%		133.68	%		135.59	%		130.62	%		135.30	%
Average equity to average assets		16.89	%		17.02	%		18.40	%		18.52	%		19.51	%		16.95	%		19.53	%
Dividend payout ratio ⁽³⁾		27.62	%		23.29	%		39.43	%		24.97	%		22.42	%		25.26	%		22.03	%

	As of and for the quarter ended
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Loans to deposits		94.58	%		94.27	%		89.17	%		77.83	%		73.81	%

Share Data:
Shares outstanding		17,372,308			17,624,239			17,804,039			17,804,039			18,490,225
Book value per common share	$	16.11		$	15.97		$	15.80		$	15.63		$	15.62
Tangible book value per common share ⁽⁴⁾	$	15.74		$	15.61		$	15.44		$	15.27		$	15.27

Asset Quality Ratios:
Non-performing loans receivable	$	1,618		$	3,425		$	2,727		$	2,847		$	3,576
Non-performing assets	$	1,897		$	4,281		$	3,885		$	3,500		$	4,148
Allowance for loan losses as a percent of total loans receivable		0.52	%		0.51	%		0.52	%		0.53	%		0.54	%
Total valuation adjustment as a percent of total gross loans receivable ⁽⁵⁾		0.59	%		0.60	%		0.62	%		0.66	%		0.69	%
Allowance for loan losses as a percent of non-performing loans receivable		384.18	%		174.98	%		207.70	%		173.67	%		138.23	%
Non-performing loans as a percent of total loans receivable, net		0.14	%		0.29	%		0.25	%		0.30	%		0.39	%
Non-performing assets as a percent of total assets		0.12	%		0.26	%		0.24	%		0.23	%		0.27	%

Net charge-offs	$	189		$	6		$	18		$	5		$	22
Net charge-offs to average outstanding loans during the period ⁽¹⁾		0.06	%		0.00	%		0.01	%		0.00	%		0.01	%

Capital Ratios ⁽⁶⁾:
Tier 1 capital (to adjusted total assets)		13.00	%		12.89	%		13.81	%		13.71	%		13.78	%
Common equity Tier 1 capital (to risk-weighted assets)		17.24	%		17.16	%		17.96	%		20.47	%		20.73	%
Tier 1 capital (to risk-weighted assets)		17.24	%		17.16	%		17.96	%		20.47	%		20.73	%
Total capital (to risk-weighted assets)		17.74	%		17.64	%		18.45	%		20.96	%		21.23	%

⁽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 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. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.
⁽³⁾Dividends declared per share divided by net income per share.
⁽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. Reconciliations of GAAP to non-GAAP measures appear at the end of this release.

	As of
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Mortgage loans:
Residential mortgages	$	262,441		$	264,251		$	265,167		$	261,970		$	248,575
Commercial mortgage		741,171			726,315			651,396			499,284			499,930
Construction		22,787			18,830			13,231			16,302			16,023
Net deferred loan origination costs		1,054			1,202			1,031			843			842
Total mortgage loans		1,027,453			1,010,598			930,825			778,399			765,370
Commercial and consumer loans:
Commercial loans		129,809			125,926			133,614			126,514			107,899
Home equity credit lines		31,460			31,503			33,204			34,525			35,029
Consumer and overdrafts		436			437			365			459			321
Net deferred loan origination costs		798			783			777			728			701
Total commercial and consumer loans		162,503			158,649			167,960			162,226			143,950
Total loans receivable		1,189,956			1,169,247			1,098,785			940,625			909,320
Allowance for loan losses		(6,216	)		(5,993	)		(5,664	)		(4,945	)		(4,943	)
Loans receivable, net	$	1,183,740		$	1,163,254		$	1,093,121		$	935,680		$	904,377

	Quarter Ended															Six Months Ended
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Computation of Adjusted Net Income and Adjusted Earnings Per Share
Net income applicable to common stock (GAAP)	$	2,353		$	2,829		$	1,679		$	1,986		$	2,324		$	5,182		$	4,653

Adjustments ⁽¹⁾:
Losses on other receivables		-			-			-			-			68			-			68
Prepayment income on loans receivable and investment securities		(95	)		(371	)		(25	)		(20	)		(72	)		(466	)		(140	)
Gain on sale of foreclosed real estate		-			(37	)		-			-			(18	)		(37	)		(18	)
Gain on sale of investment securities		-			-			(5	)		-			(42	)		-			(42	)
Gain on sale of bank premises		-			-			-			-			(118	)		-			(118	)
Adjusted net income (Non-GAAP)	$	2,258		$	2,421		$	1,649		$	1,966		$	2,142		$	4,679		$	4,403

Average number of common shares outstanding:
Basic		15,837,762			15,979,762			16,033,505			16,204,393			16,852,718			15,908,761			16,860,942
Diluted		15,909,855			16,082,276			16,099,846			16,261,755			16,868,464			15,996,251			16,868,815
Earnings per share (GAAP):
Basic	$	0.15		$	0.18		$	0.10		$	0.12		$	0.14		$	0.33		$	0.28
Diluted	$	0.14		$	0.18		$	0.10		$	0.12		$	0.14		$	0.32		$	0.28
Adjusted earnings per common share (Non-GAAP):
Basic	$	0.14		$	0.15		$	0.10		$	0.12		$	0.13		$	0.29		$	0.26
Diluted	$	0.14		$	0.15		$	0.10		$	0.12		$	0.13		$	0.29		$	0.26

⁽¹⁾Amounts included in income before income tax expense are presented net of tax.

	Quarter Ended									Six months ended
	December 31, 2019			September 30, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Computation of Adjusted Yield on Assets and Adjusted Net Interest Margin

Average interest-earning assets	$	1,596,691		$	1,587,129		$	1,435,814		$	1,591,910		$	1,429,864

Interest and dividend income (GAAP)	$	15,729		$	16,026		$	13,240		$	31,755		$	25,849
Less: Prepayment income on loans receivable and investment securities		(123	)		(477	)		(95	)		(600	)		(184	)
Adjusted interest and dividend income (Non-GAAP)	$	15,606		$	15,549		$	13,145		$	31,155		$	25,665
Adjusted yield on interest-earning assets (Non-GAAP)		3.91	%		3.92	%		3.66	%		3.91	%		3.59	%

Net interest income (GAAP)	$	11,697		$	11,998		$	10,744		$	23,695		$	21,208
Less: Prepayment income on loans receivable and investment securities		(123	)		(477	)		(95	)		(600	)		(184	)
Adjusted net interest income (Non-GAAP)	$	11,574		$	11,521		$	10,649		$	23,095		$	21,024
Adjusted net interest margin (Non-GAAP)		2.90	%		2.90	%		2.97	%		2.90	%		2.94	%

	Quarter Ended															Six Months Ended
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018			December 31, 2019			December 31, 2018
Computation of Efficiency Ratio
Noninterest expense (GAAP)	$	8,794		$	8,787		$	8,708		$	8,698		$	8,580		$	17,581		$	16,588
Adjustments:
Losses on other receivables		-			-			-			-			(90	)		-			(90	)
Adjusted noninterest expense (non-GAAP)	$	8,794		$	8,787		$	8,708		$	8,698		$	8,490		$	17,581		$	16,498

Net interest income	$	11,697		$	11,998		$	10,759		$	10,737		$	10,744		$	23,695		$	21,208
Noninterest income		547			765			962			579			920			1,312			1,561
Total (GAAP)		12,244			12,763			11,721			11,316			11,664			25,007			22,769
Adjustments:
Prepayment income on loans receivable and investment securities		(123	)		(477	)		(34	)		(26	)		(95	)		(600	)		(184	)
Gain on sale of foreclosed real estate		-			(47	)		-			-			(24	)		(47	)		(24	)
Gain on sale of investment securities		-			-			(7	)		-			(55	)		-			(55	)
Gain on sale of bank premises		-			-			-			-			(155	)		-			(155	)
Adjusted total (Non-GAAP)	$	12,121		$	12,239		$	11,680		$	11,290		$	11,335		$	24,360		$	22,351

Efficiency ratio (GAAP)		71.82	%		68.85	%		74.29	%		76.86	%		73.56	%		70.30	%		72.85	%
Adjusted efficiency ratio (Non-GAAP)		72.55	%		71.80	%		74.55	%		77.04	%		74.90	%		72.17	%		73.81	%

	As of
	December 31, 2019			September 30, 2019			June 30, 2019			March 31, 2019			December 31, 2018
Computation of Tangible Book Value per Common Share
Total shareholders' equity (GAAP)	$	279,839		$	281,522		$	281,307		$	278,316		$	288,782
Adjustments:
Preferred stock		-			-			-			-			-
Common shareholders' equity		279,839			281,522			281,307			278,316			288,782
Adjustments:
Goodwill		(6,106	)		(6,106	)		(6,106	)		(6,106	)		(6,106	)
Other intangible assets		(274	)		(298	)		(323	)		(348	)		(376	)
Tangible common shareholders' equity (Non-GAAP)	$	273,459		$	275,118		$	274,878		$	271,862		$	282,300

Common shares outstanding		17,372,308			17,624,239			17,804,039			17,804,039			18,490,225

Book value per share (GAAP)	$	16.11		$	15.97		$	15.80		$	15.63		$	15.62
Adjustments:
Effects of intangible assets		(0.37	)		(0.36	)		(0.36	)		(0.36	)		(0.35	)

Tangible book value per common share (Non-GAAP)	$	15.74		$	15.61		$	15.44		$	15.27		$	15.27

Maryland	001-38065	81-4710738
(State or Other Jurisdiction of Incorporation)	(Commission File Number)	(IRS Employer Identification No.)

2651 Strang Blvd., Suite 100, Yorktown Heights, NY		10598
(Address of Principal Executive Offices)		(Zip Code)

	PCSB Financial Corporation

Date: January 23, 2020	By:	/s/ Jeffrey M. Helf
		Jeffrey M. Helf
		Senior Vice President and Chief Financial Officer

	As of
	December 31, 2019		September 30, 2019		June 30, 2019		March 31, 2019		December 31, 2018
Demand deposits	$	140,218	$	141,567	$	141,379	$	137,899	$	162,113
NOW accounts		126,346		124,062		123,069		120,353		123,251
Money market accounts		162,208		151,652		148,134		137,197		121,146
Savings		354,078		350,250		357,844		379,550		397,460
Time deposits		468,764		466,374		455,395		427,194		421,354
Total deposits	$	1,251,614	$	1,233,905	$	1,225,821	$	1,202,193	$	1,225,324