CFSB BANCORP, INC. ANNOUNCES FISCAL FIRST QUARTER 2025 FINANCIAL RESULTS

QUINCY, Mass., Oct. 29, 2024 /PRNewswire/ -- CFSB Bancorp, Inc. (the "Company") (NASDAQ Capital Market: CFSB), the holding company for Colonial Federal Savings Bank (the "Bank"), announced a net loss of $6,000, or $0.00 per basic and diluted share, for the three months ended September 30, 2024 compared to net income of $123,000, or $0.02 per basic and diluted share, for the three months ended September 30, 2023 and net income of $160,000, or $0.03 per basic and diluted share, for the three months ended June 30, 2024.

Michael E. McFarland, President and Chief Executive Officer, states "Returns on equity and assets in the first quarter of 2025 were significantly lower than our long-term performance, reflecting the ongoing challenges from the increase in short-term interest rates over the last twenty-four months and a historically long and deep inversion of the yield curve. We have seen the beginning of rate reductions from the Federal Reserve and look forward to a flat yield curve. As assets continue to reprice the challenges on competitive deposit rates should start to diminish as the market adjusts."

First Quarter Operating Results
Net interest income, on a fully tax-equivalent basis, decreased by $169,000, or 9.2%, to $1.7 million for the three months ended September 30, 2024, from $1.8 million for the three months ended September 30, 2023. The net interest margin decreased by 30 basis points to 1.92% for the three months ended September 30, 2024, from 2.22%, for the three months ended September 30, 2023. Interest income increased $481,000, or 17.4%, due to a $134,000 increase in interest and dividends on securities, a $285,000 increase in interest on cash and short-term investments and a $62,000 increase in interest and fees on loans. These changes reflect an overall increased yield on interest-earning assets of 39 basis points, due to the higher rate environment as well as an increase in the average balance of cash and short-term investments of $23.0 million, partially offset by a decrease in the average balance of loans of $5.2 million and a decrease in the average balance of securities of $1.7 million. Interest expense increased $650,000, or 70.2%, due to an increase of $581,000 in interest expense on interest-bearing deposits, and a $69,000 increase in interest expense on FHLB advances. The increase in interest expense on interest-bearing deposits reflected a 92 basis point increase in the average cost, primarily due to the higher interest rate environment and an increased percentage of higher costing certificates of deposit in the portfolio, and an $8.9 million increase in the average balance of interest-bearing deposits. The increase in interest expense on FHLB advances was due to a $6.8 million, or 189.8%, increase in the average balance of FHLB advances for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, offset by a 100 basis point decrease in the average cost of FHLB advances as newer advances were borrowed at lower rates.

Net interest income, on a fully tax-equivalent basis, increased by $20,000, or 1.2%, to $1.7 million for the three months ended September 30, 2024, from $1.6 million for the three months ended June 30, 2024. The net interest margin decreased by one basis point to 1.92% for the three months ended September 30, 2024, from 1.93% for the three months ended June 30, 2024. The decline was primarily due to an eight basis point increase in the average rate for certificates of deposit and a $3.8 million increase in the average balance of certificates of deposit, offset by a five basis point increase in the average yield on interest-earning assets and a $4.8 million increase in the average balance of interest-earning assets. The interest earned on loans increased $21,000 for the three months ended September 30, 2024, compared to the three months ended June 30, 2024, due to a six basis point increase in the yield offset by a $703,000 decrease in the average balance. The interest earned on securities increased $20,000 for the three months ended September 30, 2024, compared to the three months ended June 30, 2024, due to an eight basis point increase in the average yield offset by a $1.1 million decrease in the average balance. The interest earned on cash and short-term investments increased $48,000, to $330,000 for the three months ended September 30, 2024 from $282,000 for the three months ended June 30, 2024, due to a 66 basis point decrease in the average yield offset by a $6.6 million increase in the average balance. The increase in interest earned on interest-earning assets was also due to higher average cash balances as well as higher yields.

The Company recorded reversals of the provision for credit losses of $71,000, $166,000, and $32,000 for the three months ended September 30, 2024, September 30, 2023, and June 30, 2024, respectively. The $15,000 reversal for credit losses for securities held to maturity was primarily due to improvements in economic conditions and lower balances at September 30, 2024. The $8,000 reversal for credit losses for off-balance sheet exposures was primarily due to a decrease of $842,000 in unfunded commitments at September 30, 2024. The $48,000 reversal for credit losses for loans was primarily due to improvements in economic conditions, lower loan balances and continued strong asset quality at September 30, 2024. The allowance for credit losses on loans as a percentage of total loans was 0.89%, 0.94%, and 0.90% at September 30, 2024, September 30, 2023, and June 30, 2024, respectively.

Non-interest income increased $10,000, or 6.3%, to $170,000 for the three months ended September 30, 2024, from $160,000 for the three months ended September 30, 2023, primarily due to an increase of $6,000 in other income and an increase of $3,000 in income on bank-owned life insurance.

Non-interest income increased $4,000, or 2.4%, to $170,000 for the three months ended September 30, 2024, from $166,000 for the three months ended June 30, 2024, due to an increase of $4,000 in customer service fees and an increase of $3,000 in income on bank-owned life insurance, offset by a decrease of $3,000 in other income.

Non-interest expense decreased $45,000, or 2.3%, to $1.9 million for the three months ended September 30, 2024, compared to the three months ended September 30, 2023. The decrease was primarily due to a decrease in salaries and employee benefits of $48,000, offset by an increase in data processing costs of $5,000. The decrease in salaries and employee benefit expense was primarily due to a reduction in head count.

Non-interest expense increased $106,000, or 6.0%, to $1.9 million for the three months ended September 30, 2024, from $1.8 million for the three months ended June 30, 2024. The increase was due to an increase in salaries and employee benefits of $66,000, primarily due to the increased cost of the pension plan, an increase in occupancy and equipment expense of $26,000, due to an increase in service contracts expense, and an increase of $12,000 in data processing costs.

The Company recorded an income tax expense of $19,000 for the three months ended September 30, 2024, compared to income tax expense of $93,000 for the three months ended September 30, 2023 and an income tax benefit of $106,000 for the three months ended June 30, 2024. The decrease in income tax expense for the three months ended September 30, 2024, compared to the three months ended September 30, 2023, was due to a decrease in income before income taxes. Income tax expense for the three months ended September 30, 2024 was greater than pre-tax income of $13,000 because of a $46,000 increase to the valuation allowance on the charitable contribution carryover. The increase in income tax expense for the three months ended September 30, 2024, compared to the three months ended June 30, 2024, was due to an income tax benefit related to the recognition of a post-retirement benefit and adjustments to the net deferred tax asset during the three months ended June 30, 2024.

Balance Sheet
Assets: At September 30, 2024, total assets increased $18.3 million, or 5.3%, to $364.5 million at September 30, 2024, from $346.2 million at September 30, 2023. The increase resulted primarily from increases in cash and cash equivalents of $24.5 million, offset by a decrease in total loans of $6.2 million. The increase in cash and cash equivalents was due to net paydowns of loans of $6.2 million, increases in deposits of $11.0 million and increases in FHLB advances of $7.1 million. At September 30, 2024, total assets amounted to $364.5 million, compared to $363.4 million at June 30, 2024, an increase of $1.1 million, or 0.3%. The increase resulted primarily from increases in cash and cash equivalents of $3.7 million, offset by a decrease in total loans of $2.5 million. The increase in cash and cash equivalents was due to the decrease in loans of $2.5 million, increases in deposits of $829,000 and increases in mortgagors' escrow accounts of $65,000.

Asset Quality: At September 30, 2024, there were four one- to four-family loans totaling $1.4 million rated substandard with a provision for credit loss of $10,000. There were no loans rated special mention, doubtful or loss and no non-performing or delinquent loans at September 30, 2024. There were $1,000 in charge-offs of deposit overdrafts for the three months ended September 30, 2024. At September 30, 2023, we had four one- to four-family loans totaling $1.4 million rated as special mention. There were no loans categorized as substandard, doubtful or loss and no non-performing loans at September 30, 2023. There were no charge-offs for the three months ended September 30, 2023. At June 30, 2024, there were four one- to four-family loans totaling $1.4 million rated substandard with a provision for credit loss of $10,000. There were no loans rated special mention, doubtful or loss and no non-performing or delinquent loans at June 30, 2024. There were no charge-offs for the three months ended June 30, 2024.

Liabilities: Deposits increased by $11.0 million, or 4.2%, to $271.7 million at September 30, 2024 compared to $260.7 million at September 30, 2023. The increase was due to an increase of $20.6 million in higher-yielding term certificates of deposit, offset by decreases of $5.7 million in regular accounts, $2.5 million in money market accounts, and $1.7 million in interest-bearing NOW and demand accounts. Deposits increased by $829,000, or 0.3%, to $271.7 million at September 30, 2024 compared to $270.8 million at June 30, 2024. The increase was due to increases of $1.9 million in higher-yielding term certificates, $938,000 interest-bearing NOW and demand accounts, $467,000 in regular accounts and $431,000 in money market accounts, offset by a decrease of $2.9 million in non-interest-bearing NOW and demand accounts. The change in composition and the increase in certificates of deposit was a result of the Bank offering certificate of deposit promotions as customers seek accounts with higher interest rates.

Stockholders' Equity. Total stockholders' equity increased $138,000, to $76.0 million at September 30, 2024, from $75.9 million at September 30, 2023. The increase was primarily due to the changes in unearned ESOP compensation of $102,000 and stock-based compensation of $324,000, offset by the purchase of company stock of $195,000 and the net loss for the twelve months ended September 30, 2024 of $96,000. Total stockholders' equity decreased $15,000, to $76.0 million at September 30, 2024, compared to June 30, 2024. The decrease was primarily due to the changes in unearned ESOP compensation of $26,000 and stock-based compensation of $90,000, offset by the purchase of company stock of $117,000 and the net loss for the three months ended September 30, 2024 of $6,000.

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, 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, and 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.

CFSB Bancorp, Inc. and Subsidiary
Consolidated Balance Sheets (Unaudited)
(In thousands, except per share data)
														% Change
		September 30,				June 30,				September 30,				Sep 2024 vs.				Sep 2024 vs.
		2024				2024				2023				Jun 2024				Sep 2023
Assets:
Cash and due from banks		$	1,157			$	1,339			$	1,394				(13.6)	%			(17.0)	%
Short-term investments			29,510				25,620				4,724				15.2	%			524.7	%
Total cash and cash equivalents			30,667				26,959				6,118				13.8	%			401.3	%
Securities available for sale, at fair value			108				113				139				(4.4)	%			(22.3)	%
Securities held to maturity, at amortized cost, net of allowance for credit losses			146,853				146,994				147,537				(0.1)	%			(0.5)	%
Loans:
1-4 family			135,834				138,005				137,743				(1.6)	%			(1.4)	%
Multifamily			11,961				12,066				12,883				(0.9)	%			(7.2)	%
Second mortgages and home equity lines of credit			3,232				3,372				3,129				(4.2)	%			3.3	%
Commercial			16,829				16,833				20,110				(0.0)	%			(16.3)	%
Total mortgage loans on real estate			167,856				170,276				173,865				(1.4)	%			(3.5)	%
Consumer			71				65				65				9.2	%			9.2	%
Home improvement			1,981				2,037				2,180				(2.7)	%			(9.1)	%
Total loans			169,908				172,378				176,110				(1.4)	%			(3.5)	%
Allowance for credit losses			(1,504)				(1,553)				(1,649)				(3.2)	%			(8.8)	%
Net deferred loan costs and fees, and purchase premiums			(381)				(387)				(381)				(1.6)	%			0.0	%
Loans, net			168,023				170,438				174,080				(1.4)	%			(3.5)	%
Federal Home Loan Bank of Boston stock, at cost			704				704				405				0.0	%			73.8	%
Premises and equipment, net			3,186				3,246				3,354				(1.8)	%			(5.0)	%
Accrued interest receivable			1,354				1,398				1,395				(3.1)	%			(2.9)	%
Bank-owned life insurance			10,739				10,670				10,468				0.6	%			2.6	%
Deferred tax asset			1,243				1,245				1,132				(0.2)	%			9.8	%
Operating lease right of use asset			836				860				930				(2.8)	%			(10.1)	%
Other assets			773				812				663				(4.8)	%			16.6	%
Total assets		$	364,486			$	363,439			$	346,221				0.3	%			5.3	%
Liabilities and Stockholders' Equity:
Deposits:
Non-interest-bearing NOW and demand		$	31,190			$	34,124			$	30,918				(8.6)	%			0.9	%
Interest-bearing NOW and demand			29,200				28,262				30,902				3.3	%			(5.5)	%
Regular and other			54,659				54,192				60,389				0.9	%			(9.5)	%
Money market accounts			22,387				21,956				24,877				2.0	%			(10.0)	%
Term certificates			134,234				132,307				113,587				1.5	%			18.2	%
Total deposits			271,670				270,841				260,673				0.3	%			4.2	%
Federal Home Loan Bank of Boston advances			10,350				10,350				3,250				0.0	%			218.5	%
Mortgagors' escrow accounts			1,590				1,525				1,626				4.3	%			(2.2)	%
Operating lease liability			855				877				941				(2.5)	%			(9.1)	%
Accrued expenses and other liabilities			3,986				3,796				3,834				5.0	%			4.0	%
Total liabilities			288,451				287,389				270,324				0.4	%			6.7	%
Stockholders' Equity:
Common stock			65				65				65				0.0	%			0.0	%
Additional paid-in capital			28,220				28,139				27,896				0.3	%			1.2	%
Treasury stock			(195)				(78)				-				150.0	%			100.0	%
Retained earnings			50,220				50,226				50,316				(0.0)	%			(0.2)	%
Accumulated other comprehensive loss, net of tax			-				(1)				(3)				(100.0)	%			(100.0)	%
Unearned compensation - ESOP			(2,275)				(2,301)				(2,377)				(1.1)	%			(4.3)	%
Total stockholders' equity			76,035				76,050				75,897				(0.0)	%			0.2	%
Total liabilities and stockholders' equity		$	364,486			$	363,439			$	346,221				0.3	%			5.3	%

 

CFSB Bancorp, Inc. and Subsidiary
Consolidated Statements of Net (Loss) Income (Unaudited)
(In thousands, except per share data)
		For the Three Months Ended
		September 30,				June 30,				September 30,
		2024				2024				2023
Interest and dividend income:
Interest and fees on loans		$	1,784			$	1,763			$	1,722
Interest and dividends on debt securities:
Taxable			1,028				999				868
Tax-exempt			77				84				97
Interest on short-term investments and certificates of deposit			330				282				45
Total interest and dividend income			3,219				3,128				2,732
Interest expense:
Deposits			1,457				1,389				876
Borrowings			119				118				50
Total interest expense			1,576				1,507				926
Net interest income			1,643				1,621				1,806
Reversal of credit losses for securities held to maturity			(15)				(29)				(43)
Reversal of credit losses for off-balance sheet exposures			(8)				5				(13)
Reversal of credit losses for loans			(48)				(8)				(110)
Net interest income after reversal of credit losses			1,714				1,653				1,972
Non-interest income:
Customer service fees			41				37				40
Income on bank-owned life insurance			69				66				66
Other income			60				63				54
Total non-interest income			170				166				160
Non-interest expenses:
Salaries and employee benefits			1,096				1,030				1,144
Occupancy and equipment			251				225				254
Advertising			36				34				38
Data processing			94				82				89
Deposit insurance			34				34				33
Other general and administrative			360				360				358
Total non-interest expenses			1,871				1,765				1,916
Income before income taxes			13				54				216
Provision (benefit) for income taxes			19				(106)				93
Net (loss) income		$	(6)			$	160			$	123
Net (loss) income per share:
Basic		$	0.00			$	0.03			$	0.02
Diluted		$	0.00			$	0.03			$	0.02
Weighted average shares outstanding:
Basic			6,294,603				6,307,261				6,282,203
Diluted			6,294,603				6,307,261				6,282,203

 

CFSB Bancorp, Inc. and Subsidiary
Average Balances and Yields, Fully Tax-Equivalent Basis (Unaudited)
(Dollars in thousands)
	Average Balance and Yields
	Three Months Ended
	September 30, 2024												June 30, 2024												September 30, 2023
	Average				Interest				Average				Average				Interest				Average				Average				Interest				Average
	Outstanding				Earned/				Yield/				Outstanding				Earned/				Yield/				Outstanding				Earned/				Yield/
(Dollars in thousands)	Balance				Paid				Rate				Balance				Paid				Rate				Balance				Paid				Rate
Interest-earning assets:
Loans	$	171,488			$	1,784				4.16	%		$	172,191			$	1,763				4.10	%		$	176,668			$	1,722				3.90	%
Securities (1)		147,649				1,125				3.05	%			148,748				1,105				2.97	%			149,259				991				2.66	%
Cash and short-term investments		26,873				330				4.91	%			20,266				282				5.57	%			3,852				45				4.67	%
Total interest-earning assets		346,010				3,239				3.74	%			341,205				3,150				3.69	%			329,779				2,758				3.35	%
Non-interest-earning assets		17,170												17,059												16,655
Total assets	$	363,180											$	358,264											$	346,434
Interest-bearing liabilities:
Interest-bearing demand deposits	$	29,753			$	4				0.05	%		$	29,463			$	4				0.05	%		$	29,912			$	4				0.05	%
Savings deposits		54,004				14				0.10	%			55,173				14				0.10	%			62,446				16				0.10	%
Money market deposits		22,365				14				0.25	%			22,332				13				0.23	%			26,271				17				0.26	%
Certificates of deposit		133,142				1,425				4.28	%			129,340				1,358				4.20	%			111,812				839				3.00	%
Total interest-bearing deposits		239,264				1,457				2.44	%			236,308				1,389				2.35	%			230,441				876				1.52	%
FHLB advances		10,350				119				4.60	%			10,350				118				4.56	%			3,571				50				5.60	%
Total interest-bearing liabilities		249,614				1,576				2.53	%			246,658				1,507				2.44	%			234,012				926				1.58	%
Non-interest-bearing liabilities:
Non-interest-bearing demand deposits		31,748												29,790												30,971
Other non-interest-bearing liabilities		5,809												6,011												5,740
Total liabilities		287,171												282,459												270,723
Total stockholders' equity		76,009												75,805												75,711
Total liabilities and stockholders' equity	$	363,180											$	358,264											$	346,434
Net interest income					$	1,663											$	1,643											$	1,832
Net interest rate spread(2)										1.21	%											1.25	%											1.77	%
Net interest-earning assets(3)	$	96,396											$	94,547											$	95,767
Net interest margin(4)										1.92	%											1.93	%											2.22	%
Cost of deposits(5)										2.15	%											2.09	%											1.34	%
Cost of funds(6)										2.24	%											2.18	%											1.40	%
Ratio of interest-earning assets to interest-bearing liabilities		138.62	%											138.33	%											140.92	%

(1) Includes tax equivalent adjustments for municipal securities, based on a statutory tax rate of 21%, of $20,000, $22,000, and $26,000 for the three months ended September 30, 2024, June 30, 2024, and September 30, 2023, respectively.
(2) Net interest rate spread represents the difference between the weighted average yield earned on interest-earning assets and the weighted average rate paid on interest-bearing liabilities.
(3) Net interest-earning assets represent total interest-earning assets less total interest-bearing liabilities.
(4) Net interest margin represents net interest income divided by average total interest-earning assets.
(5) Cost of deposits represents the total interest paid on deposits, divided by total interest-bearing deposits plus total non-interest-bearing deposits.
(6) Cost of funds represents the total interest paid on liabilities, divided by total interest-bearing liabilities plus total non-interest-bearing deposits.

 

CFSB Bancorp, Inc. and Subsidiary
Reconciliation of Fully Tax-Equivalent Income
(Unaudited) (In thousands)
		For the Three Months Ended
		September 30, 2024				June 30, 2024				September 30, 2023
Securities interest income (no tax adjustment)		$	1,105			$	1,083			$	965
Tax-equivalent adjustment			20				22				26
Securities (tax-equivalent basis)		$	1,125			$	1,105			$	991
Net interest income (no tax adjustment)		$	1,643			$	1,621			$	1,806
Tax-equivalent adjustment			20				22				26
Net interest income (tax-equivalent adjustment)		$	1,663			$	1,643			$	1,832

 

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