QUINCY, Mass., Jan. 29, 2025 /PRNewswire/ -- CFSB Bancorp, Inc. (the "Company") (NASDAQ Capital Market: CFSB), the holding company for Colonial Federal Savings Bank (the "Bank"), today announced a net loss of $162,000, or $0.03 per basic and diluted share, for the three months ended December 31, 2024, a net loss of $6,000, or $0.00 per basic and diluted share, for the three months ended September 30, 2024, and a net loss of $210,000, or $0.03 per basic and diluted share, for the three months ended December 31, 2023.

For the six months ended December 31, 2024, the Company recorded a net loss of $168,000, or $0.03 per basic and diluted share, compared to a net loss of $87,000, or $0.01 per basic and diluted share, for the six months ended December 31, 2023.

Michael E. McFarland, President and Chief Executive Officer, states "Returns on interest-earning assets continue to show improvement while the cost of deposits have peaked and short-term instruments should continue to decline. We continue to focus on loan growth and expense reductions. As our assets continue to reprice higher and our liabilities, including both deposits and wholesale funding, reprice lower, conditions have become more favorable. While this market environment has been extraordinarily challenging we continue to be optimistic." 

Second Quarter Operating Results

Net interest income, on a fully tax-equivalent basis, increased by $45,000, or 2.7%, to $1.7 million for the three months ended December 31, 2024, from $1.7 million for the three months ended September 30, 2024. The net interest margin increased by six basis points to 1.98% for the three months ended December 31, 2024, from 1.92%, for the three months ended September 30, 2024. Interest income increased $43,000, or 1.3%, due to a $50,000 increase in interest and dividends on securities, a $12,000 increase in interest on cash and short-term investments, offset by a decrease of $19,000 in interest and fees on loans. Interest expense decreased $2,000, or 0.1%, to $1.6 million for the three months ended December 31, 2024, from $1.6 million for the three months ended September 30, 2024. The increase in net interest income was due to higher average yields on interest-earning assets as assets with lower rates are replaced with interest-earning assets with higher rates.

Net interest income, on a fully tax-equivalent basis, increased by $44,000, or 2.6%, to $1.7 million for the three months ended December 31, 2024, from $1.7 million for the three months ended December 31, 2023. The net interest margin decreased by four basis points to 1.98% for the three months ended December 31, 2024, from 2.02%, for the three months ended December 31, 2023. Interest income increased $453,000, or 16.0%, due to a $153,000 increase in interest and dividends on securities, a $293,000 increase in interest on cash and short-term investments and a $7,000 increase in interest and fees on loans. Interest expense increased $409,000, or 35.1%, to $1.6 million for the three months ended December 31, 2024, from $1.2 million for the three months ended December 31, 2023.  The increase in net interest income was due to higher average yields on interest-earning assets as assets earning lower yields are replaced with interest-earning assets earning higher yields.

The Company recorded reversals of the provision for credit losses of $79,000, $71,000 and $104,000, for the three months ended December 31, 2024, September 30, 2024 and December 31, 2023, respectively. The $15,000 reversal for credit losses for securities held to maturity was primarily due to improvements in economic conditions for the three months ended December 31, 2024. The $33,000 provision for credit losses for off-balance sheet exposures was primarily due to an increase of $2.9 million in unfunded commitments at December 31, 2024. The $97,000 reversal for credit losses for loans was primarily due to improvements in economic conditions, lower loan balances and continued strong asset quality for the three months ended December 31, 2024. The allowance for credit losses on loans as a percentage of total loans was 0.83%, 0.89%, and 0.93%, at December 31, 2024, September 30, 2024, and December 31, 2023, respectively.

Non-interest income decreased $5,000, or 2.9%, to $165,000 for the three months ended December 31, 2024, from $170,000 for the three months ended September 30, 2024, due to a decrease of $5,000 in customer service fees.

Non-interest income decreased $7,000, or 4.1%, to $165,000 for the three months ended December 31, 2024, from $172,000 for the three months ended December 31, 2023, primarily due to a decrease of $8,000 in other income.

Non-interest expense increased $173,000, or 9.2%, to $2.0 million for the three months ended December 31, 2024, from $1.9 million for the three months ended September 30, 2024. The increase was primarily due to a $177,000 increase in salaries and employee benefit expense due to normal employee merit salary and benefit increases, offset by a reduction in pension costs of $60,000 and a $48,000 increase in other general and administrative expenses due to an increase in annual meeting expense of $29,000, an increase in directors compensation of $7,000 and an increase in legal expense of $5,000.

Non-interest expense decreased $65,000, or 3.0%, to $2.0 million for the three months ended December 31, 2024, from $2.1 million for the three months ended December 31, 2023. The decrease was primarily due to a $49,000 decrease in salaries and employee benefit expense, primarily due to a reduction in pension costs of $68,000, offset by an increase in health insurance expense of $8,000 and an increase in salaries expense of $10,000, and a $24,000 decrease in other general and administrative expenses, primarily due to a decrease in printing expense of $7,000, a decrease in audit expense of $6,000 and a decrease in insurance expense of $8,000.

The Company recorded a provision for income tax of $51,000 for the three months ended December 31, 2024, compared to a provision for income taxes of $19,000 for the three months ended September 30, 2024. The increase of $32,000 in the provision for income taxes for the three months ended December 31, 2024 was due to the increase in the deferred tax valuation allowance on the charitable contribution carryover.

The Company recorded a provision for income tax of $51,000 for the three months ended December 31, 2024, compared to a provision for income taxes of $16,000 for the three months ended December 31, 2023. The increase of $35,000 in the provision for income taxes for the three months ended December 31, 2024 was due to the increase in the deferred tax valuation allowance on the charitable contribution carryover.

Year-to-Date Operating Results

Net interest income, on a fully tax-equivalent basis, decreased by $124,000, or 3.5%, to $3.4 million for the six months ended December 31, 2024, from $3.5 million for the six months ended December 31, 2023. The net interest margin decreased by 17 basis points to 1.95% for the six months ended December 31, 2024, from 2.12% for the six months ended December 31, 2023. Interest income increased $935,000, or 16.7%, due to a $578,000 increase in interest on cash and short-term investments, a $288,000 increase in interest and dividends on securities, and a $69,000 increase in interest and fees on loans. These changes reflect an overall increased yield on interest-earning assets of 39 basis points as interest-earning assets earning lower yields are replaced with interest-earning assets earning higher yields. The increase in interest income benefited from an increase in the average balance of cash and short-term investments of $22.7 million, partially offset by a decrease in the average balance of loans of $6.2 million and a decrease in the average balance of securities of $1.1 million. Interest expense increased $1.1 million, or 50.6%, due to an increase of $984,000 in interest expense on interest-bearing deposits, and a $75,000 increase in interest expense on Federal Home Loan Bank ("FHLB") advances. The increase in interest expense on interest-bearing deposits reflected a 74 basis point increase in the average cost, primarily due to the higher interest rate environment and an increased percentage of higher cost certificates of deposit in the portfolio. The increase in interest expense on FHLB advances was due to a $4.4 million, or 74.0%, increase in the average balance of FHLB advances for the six months ended December 31, 2024, offset by a 90 basis point decrease in the average cost of FHLB advances as newer advances were borrowed at lower rates.

The Company recorded a reversal of the provision for credit losses of $150,000 for the six months ended December 31, 2024, compared to a reversal of the provision for credit losses of $270,000 for the six months ended December 31, 2023. The $25,000 provision of credit losses for off-balance sheet exposures was primarily due to an increase of $2.0 million in unfunded commitments at December 31, 2024. The $145,000 reversal of the provision for credit losses for loans recorded for the six months ended December 31, 2024, reflected continued strong asset quality, improvements in forecasted economic conditions and lower loan balances. The $30,000 reversal of the provision for credit losses on securities held to maturity for the six months ended December 31, 2024 was primarily due to improvements in economic conditions.

Non-interest income increased $3,000, or 0.9%, to $335,000 for the six months ended December 31, 2024 from $332,000 for the six months ended December 31, 2023.

Non-interest expense decreased $110,000, or 2.7%, to $3.9 million for the six months ended December 31, 2024 from $4.0 million for the six months ended December 31, 2023. The decrease was due to a $97,000 decrease in salaries and employee benefit expense primarily due to a reduction in pension costs and a $22,000 decrease in other general and administrative expense, partially offset by a $12,000 increase to data processing fees.

The Company recorded a provision for income taxes of $70,000 for the six months ended December 31, 2024, a $39,000, or 35.8%, decrease from the provision for income taxes of $109,000 for the six months ended December 31, 2023. The decrease in the provision for income taxes for the six months ended December 31, 2024 was due to the decrease in income before income taxes, offset by an increase in the deferred tax valuation allowance on the charitable contribution carryover. The deferred tax related to the charitable contribution carryover was reduced by a 100% valuation allowance because management believes that it is more likely than not that the benefit of these deferred tax assets will not be realized. The ultimate realization of these deferred tax assets is dependent upon the generation of future taxable income. The valuation allowance for these net deferred tax assets may be adjusted in the future if estimates of taxable income during the carryforward period are increased.

Balance Sheet

Assets: At December 31, 2024, total assets amounted to $362.8 million, compared to $363.4 million at June 30, 2024, a decrease of $681,000, or 0.2%. The decrease resulted primarily from decreases in cash and cash equivalents of $1.8 million, a decrease in total loans of $3.2 million, offset by an increase in securities held to maturity of $923,000. The decrease in cash and cash equivalents was primarily due to increases in securities held to maturity of $923,000, decreases in deposits of $483,000, offset by decreases in loans of $3.2 million.

Asset Quality: At December 31, 2024, there were five one- to four-family loans totaling $1.6 million rated substandard with a provision for credit loss of $11,000. Four of these loans were rated substandard due to the borrowers' inability to show sufficient rent receipts to support the debt service coverage and one loan rated substandard and on non-accrual due to non-payment. There were no loans rated special mention, doubtful or loss at December 31, 2024. There were no charge-offs or recoveries during the six months ending December 31, 2024.

Liabilities: At December 31, 2024, total liabilities amounted to $287.1 million, compared to $287.4 million at June 30, 2024, a decrease of $302,000 or 0.5%. Deposits decreased by $483,000, or 0.2%, to $270.4 million at December 31, 2024 compared to $270.8 million at June 30, 2024. The decrease was primarily due to a a decrease of $5.3 million in non-interest-bearing NOW and demand accounts and a decrease of $2.1 million in regular accounts, offset by an increase of $6.8 million in higher-yielding term certificates of deposit. 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 decreased $379,000, to $75.7 million at December 31, 2024, from $76.1 million at June 30, 2024. The decrease was primarily due to the changes in unearned ESOP compensation of $51,000 and stock-based compensation of $180,000, offset by the purchase of Company stock of $426,000 and the net loss for the six months ended December 31, 2024 of $168,000.

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 (including potential recessionary 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 imposition of tariffs or other domestic or international governmental policies impacting the value of the products of our borrowers,  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.