The Company recorded reversals of the provision for credit losses of $20,000 and $104,000 for the three months ended March 31, 2024 and December 31, 2023, respectively. The reversals of the provision for credit losses were recorded due to improved forecasted economic conditions, lower loan balances and continued strong asset quality. The Company did not record a provision for loan losses during the three months ended March 31, 2023. The allowance for credit losses as a percentage of total loans was 0.90%, 0.93% and 0.98% at March 31, 2024, December 31, 2023 and March 31, 2023, respectively.

Non-interest income decreased $5,000, or 2.9%, to $167,000 for the three months ended March 31, 2024, from $172,000 for the three months ended December 31, 2023, primarily due to a decrease of $8,000 in other income, offset by an increase of $4,000 in customer service fees.

Non-interest income increased $19,000, or 12.8%, to $167,000 for the three months ended March 31, 2024, from $148,000 for the three months ended March 31, 2023, primarily due to an increase in customer service fees of $4,000, or 10.8%, and an increase in other income of $12,000, or 25.5%.

Non-interest expense decreased $201,000, or 9.5%, to $1.9 million for the three months ended March 31, 2024, from $2.1 million for the three months ended December 31, 2023. The decrease was due to a decrease in salaries and employee benefits of $150,000, or 11.8%, due to a reduced headcount and a decrease in other general and administrative expenses of $59,000, or 13.7%, primarily due to decreases in printing, legal and annual meeting expenses.

Non-interest expense increased $7,000, or 0.4%, to $1.9 million for the three months ended March 31, 2024, from the three months ended March 31, 2023. The increase was primarily due to an increase in salaries and employee benefits of $14,000, or 1.3%, an increase in data processing expense of $13,000, or 15.5%, and an increase in deposit insurance of $13,000, or 65.0%, offset by decreases in advertising expense of $6,000, or 15.8%, and other general and administrative expenses of $27,000, or 6.8%, primarily due to decreases in printing, legal and annual meeting expenses, offset by costs associated with director's stock-based compensation.

The Company recorded an income tax benefit of $42,000 for the three months ended March 31, 2024, compared to a provision for income taxes of $16,000 for the three months ended December 31, 2023 and $47,000 for the three months ended March 31, 2023. The decrease in income tax expense for the three months ended March 31, 2024, compared to the three months ended December 31, 2023 was due to the absence of adjustments to deferred taxes and the valuation allowance of deferred taxes.  The decrease in income tax expense for the three months ended March 31, 2024, compared to the three months ended March 31, 2023, was due to a decrease in income before income taxes.

Year-to-Date Operating Results
Net interest income decreased, on a fully tax-equivalent basis, by $1.8 million, or 25.7%, to $5.2 million for the nine months ended March 31, 2024, from $6.9 million for the nine months ended March 31, 2023, due to a $2.3 million increase in interest expense due to an increase in the interest on certificates of deposit of $2.1 million and the increase in interest on FHLB Advances of $332,000 from the prior year. The Company recognized a 132 basis point increase in the cost of interest-bearing liabilities, due to higher interest rates and a greater percentage of interest-bearing liabilities in higher-costing certificates of deposit and borrowings. The increase in interest expense was offset by an increase in interest income of $556,000 due to higher average yields on loans, securities and cash and short-term investments. A 25 basis point increase in the average yield on loans, offset by a decrease in the average balance of loans of $1.9 million, or 1.09%, contributed to a $281,000 increase in loan income. A 29 basis point increase in the average yield on securities, offset by a decrease in the average balance of securities of $1.0 million, or 0.7%, contributed to a $308,000 increase in securities income. The interest earned on cash and short-term investments decreased $33,000 from the prior year, due to a $5.7 million decrease in the average balance of cash and short-term investments offset by a 166 basis point increase in the average yield. The net interest margin decreased 65 basis points for the nine months ended March 31, 2024, to 2.06%, from 2.71% in the prior year period.

The Company recognized a reversal of the provision for credit losses of $290,000 for the nine months ended March 31, 2024, compared to no provision for loan losses in the prior year period. The reversal of the provision for credit losses for the nine months ended March 31, 2024  was recorded due to improved forecasted economic conditions, lower loan balances and continued strong asset quality.

Non-interest income decreased $1,000, or 0.2%, to $499,000 for the nine months ended March 31, 2024, from $500,000 for the nine months ended March 31, 2023. The decrease was primarily due to a decrease of $19,000 in safe deposit box fees as we now recognize fees over the rental period, offset by increases in customer service fees of $8,000 and income on bank-owned life insurance of $10,000.

Non-interest expenses increased $197,000, or 3.4%, to $5.9 million for the nine months ended March 31, 2024, from $5.7 million for the nine months ended March 31, 2023. Salaries and benefits increased $157,000, or 4.7%, to $3.5 million, due to annual increases to salaries and health insurance of employees and employee stock-based compensation expense, deposit insurance increased $36,000, data processing costs increased $25,000 and other general and administrative expenses increased $25,000, offset by a $42,000 decrease in advertising costs.

Income tax expense decreased $215,000 to $67,000 for the nine months ended March 31, 2024, compared to income tax expense of $282,000 for the nine months ended March 31, 2023, due to the decrease in income before income taxes, partially offset by an increase in the deferred tax valuation allowance.

Balance Sheet
Assets: At March 31, 2024, total assets amounted to $358.1 million, compared to $349.0 million at June 30, 2023, an increase of $9.1 million, or 2.6%, due to a $14.8 million increase in cash and cash equivalents, a $346,000 increase in prepaid items and a $323,000 increase in FHLB of Boston (FHLBB) stock, offset by a $5.0 million decrease in net loans and a $1.4 million decrease in securities. The increase in cash and cash equivalents was due to increases in deposits and FHLBB advances, and decreases in loans was a result of borrower principal payments exceeding new origination, due to the higher interest rate environment.

Asset Quality: At March 31, 2024, there were four current loans rated substandard with a provision for credit loss of $1,000 and no loans rated special mention, doubtful or loss. The reversal of the provision for credit losses for the three and nine months ended March 31, 2024 reflected continued strong asset quality

Liabilities: Deposits increased by $2.3 million, or 0.9%, during the nine months ended March 31, 2024, due to increases in higher-yielding term certificates. FHLBB advances were $10.4 million at March 31, 2024 compared to $3.7 million at June 30, 2023, as we implemented a leverage strategy that increased liquidity and interest income.

Stockholders' Equity. Total stockholders' equity decreased $27,000, to $75.9 million at March 31, 2024, from June 30, 2023. The decrease was primarily due to the net loss of $127,000 and the effect of the adoption of ASU 2016-13, net of taxes, of $223,000, offset by the change in unearned ESOP compensation of $77,000, and stock-based compensation of $269,000, for the nine months ended March 31, 2024.

On July 1, 2023, the Company adopted ASU 2016-13, which replaced the incurred loss methodology with an expected loss methodology that is referred to as the current expected credit loss ("CECL") methodology. The measurement of expected credit losses under the CECL methodology is applicable to financial assets measured at amortized cost, including loans receivable and securities held to maturity. In addition, ASC 326 made changes to the accounting for securities available for sale. It also applies to off-balance sheet credit exposures not accounted for as insurance, such as loan commitments, standby letters of credit, financial guarantees, and other similar instruments. The following table illustrates the impact of ASC 326:

 

About CFSB Bancorp, Inc.
CFSB Bancorp, Inc. is the federal mid-tier holding company of Colonial Federal Savings Bank and is the majority-owned subsidiary of 15 Beach, MHC. Colonial Federal Savings Bank is a federally chartered stock savings bank that has served the banking needs of its customers on the south shore of Massachusetts since 1889. It operates from three full-service offices and one limited-service office in Quincy, Holbrook and Weymouth, Massachusetts.

Forward Looking Statements
This press release contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as "estimate," "project," "believe," "intend," "anticipate," "assume," "plan," "seek," "expect," "will," "may," "should," "indicate," "would," "contemplate," "continue," "target" and words of similar meaning. These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. Certain factors that could cause actual results to differ materially from expected results include increased competitive pressures, demand for loan products, deposit flows, changes in the interest rate environment, the effects of inflation, potential recessionary conditions, general economic conditions or conditions within the securities markets, monetary and fiscal policies of the U.S. Government, including policies of the U.S. Treasury and the Board of Governors of the FRB, changes in the quality, size and composition of our loan and securities portfolios, changes in liquidity, including the size and composition of our deposit portfolio, including the percentage of uninsured deposits in the portfolio; changes in asset quality, prepayment speeds, charge-offs and/or credit loss provisions, our ability to access cost-effective funding; changes in demand for our products and services, legislative, accounting, tax and regulatory changes, the current or anticipated impact of military conflict, terrorism or other geopolitical events, a failure in or breach of our operational or security systems or infrastructure, including cyberattacks that could adversely affect the Company's financial condition and results of operations and the business in which the Company and the Bank are engaged, the failure to maintain current technologies and the failure to retain or attract employees.

You should not place undue reliance on forward-looking statements. CFSB Bancorp, Inc. undertakes no obligation to revise these forward-looking statements or to reflect events or circumstances after the date of this press release.

 

 

 

 

 

 

 

 

 

 

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SOURCE CFSB Bancorp, Inc.