JSB Financial Inc. (the Company) (OTCPK: JFWV), the bank holding company of Jefferson Security Bank (the Bank), reported unaudited consolidated net income for the year ended December 31, 2023, of $3.0 million, representing an decrease of $826 thousand or 21.38% when compared to $3.9 million for the year ended December 31, 2022. Basic and diluted earnings per common share was $11.15 and $14.01 for the year ended December 31, 2023 and 2022, respectively. Return on average assets and return on average equity for December 31, 2023 was 0.65% and 13.28%, respectively, compared to 0.87% and 16.37%, respectively, for December 31, 2022.

For the fourth quarter ended December 31, 2023, unaudited consolidated net income was $704 thousand, representing a decrease of $637 thousand, or 47.52%, when compared to net income of $1.3 million for the fourth quarter of 2022. Basic and diluted earnings per common share was $2.68 for the fourth quarter of 2023, compared to $4.86 for the same period in 2022.

“We are pleased with our overall performance in 2023,” said President and Chief Executive Officer, Cindy Kitner. “While the banking industry experienced various challenges including multiple bank failures and general economic uncertainty, we maintained adequate liquidity, organically grew loans by 14%, increased total deposits by 3% and stabilized our net interest margin. We ended the year with strong credit quality metrics and will continue to prioritize sound underwriting and credit risk management practices. As we look at the year ahead, we believe that our focus on key strategies to increase efficiencies and enhance technologies, along with our long-standing emphasis on building relationships, will create value for our customers, communities and shareholders.”

Net Interest Income

For the year ended December 31, 2023, net interest income totaled $12.3 million, representing a decrease of $655 thousand, or 5.05%, from $13.0 million for the year ended December 31, 2022.

Total interest income increased $3.8 million, or 24.64%, to $19.0 million for the year ended 2023, compared to $15.2 million for the year ended 2022. This increase was primarily driven by organic loan growth and higher yields on loans. This change was offset by total interest expense, which increased $4.5 million due to the impact of higher costs on interest bearing deposits and a shift in the composition of the deposit portfolio. Noninterest bearing balances represented 26.44% of total deposits at December 31, 2023, compared to 31.53% of total deposits at December 31, 2022.

For the year ended December 31, 2023, the net interest margin was 2.71%, representing a decrease of 37 basis points when compared to 3.08% for the year ended December 31, 2022. The net interest margin compression was largely due to an increase in the cost of deposits resulting from higher interest rates, competition and growth in primarily higher costing deposits products, partially offset by an increase in yields on interest earning assets.

For the fourth quarter of 2023, net interest income totaled $3.1 million, representing a decline of $673 thousand, or 17.75%, from $3.8 million for the fourth quarter of 2022. The decrease when compared to the fourth quarter 2022 was largely driven by increased interest rates on most interest bearing deposit products and an increase in average time deposit balances, partially offset by higher loan yields.

Balance Sheet

As of December 31, 2023, total assets increased $39.4 million, or 8.54%, to $500.6 million compared to total assets of $461.2 million as of December 31, 2022. Loans, net of the allowance for credit losses, increased $43.7 million, or 14.35%, to $347.9 million as of December 31, 2023, compared to $304.2 million as of December 31, 2022. The growth in the loan portfolio was attributed to an increase of $34.5 million, or 14.83%, in loans secured by residential real estate and an increase of $10.6 million, or 17.06%, in loans secured by commercial real estate.

Deposits totaled $426.1 million at December 31, 2023, representing an increase of $11.3 million, or 2.72%, when compared to $414.8 million at December 31, 2022. The overall composition of deposits shifted with a decrease in noninterest bearing deposits and an increase in interest bearing deposits, specifically certificates of deposits. Borrowings increased $24.7 million to $46.1 million at December 31, 2023, from $21.4 million at December 31, 2022. The Bank borrowed $28.0 million in funds from the Federal Reserve Bank through the Bank Term Funding Program at a fixed interest rate of 4.76% and a maturity of January 15, 2025.

As of December 31, 2023, book value per share increased to $95.36 per share compared to $81.64 per share at December 31, 2022.

Asset Quality

The Bank’s asset quality continues to be strong. At December 31, 2023, there was one nonaccrual loan totaling $51 thousand, or 0.01% of total loans, representing a slight decline from one nonaccrual loan totaling $55 thousand, or 0.01% of total loans, at December 31, 2022. Past due loans still accruing interest totaled $385 thousand with no loans past due 90 days or more at December 31, 2023. This represents an increase from $17 thousand in past due loans still accruing interest and no loans past due 90 days or more at December 31, 2022. The Bank had net charge offs totaling $2 thousand for the year ended December 31, 2023, compared to net recoveries totaling $3 thousand for the year ended December 31, 2022.

Allowance for Credit Losses on Loans and Unfunded Commitments

At December 31, 2023, the allowance for credit losses on loans was $3.8 million, or 1.08% of total loans compared to $3.5 million, or 1.12% of total loans at December 31, 2022. With improving credit quality metrics and historically low charge offs, the increase in the allowance for credit losses resulted from loan growth. There were no specific reserves on individually evaluated loans. The Bank closely monitors the loan portfolio with a focus on credit quality and risk management.

The Bank’s provision for loan losses was $170 thousand for the fourth quarter of 2023 and $292 thousand for the year ended December 31, 2023, compared to $225 thousand for the fourth quarter of 2022 and $630 thousand for the year ended December 31, 2022.

The allowance for credit losses on unfunded commitments totaled $235 thousand on December 31, 2023, and the provision for credit losses on unfunded commitments totaled $32 thousand, which was included in the $292 thousand provision for credit losses.

Capital

Total shareholders’ equity was $25.0 million at December 31, 2023, representing an increase from $22.5 million at December 31, 2022. The increase in shareholders’ equity was attributed to $3.0 million in net income combined with a decrease of $1.0 million in unrealized losses on the available for sale securities portfolio. Additionally, during the fourth quarter of 2023, the Bank redeemed shares of its common stock pursuant to the to the exercise of appraisal rights under Article 13 of the West Virginia Business Corporation Act in connection with the reorganization of Jefferson Security Bank into a holding company structure. The redemption resulted in a reduction to total capital in the amount of $1.6 million.

At December 31, 2023, the Bank’s regulatory capital ratios continue to reflect its well-capitalized position. The Bank’s Tier 1 leverage, Tier 1 capital, common equity Tier 1 capital and risk-based capital ratios were 7.65%, 12.40%, 12.40% and 13.65%, respectively, at December 31, 2023. The Bank’s capital ratios declined when compared to Tier 1 leverage, Tier 1 capital, common equity Tier 1 capital and risk-based capital ratios of 8.09%, 13.61%, 13.61% and 14.84%, respectively, at December 31, 2022. The decline primarily reflects the impact to capital from the one-time redemption of Jefferson Security Bank common stock referenced above. Management maintains regular monitoring of capital planning strategies to support and maintain adequate capital levels.

Fourth Quarter Highlights Compared to Third Quarter of 2023

Net income for the fourth quarter of 2023 totaled $704 thousand, an increase of $61 thousand, or 9.49%, from net income of $643 thousand for the third quarter of 2023. During the fourth quarter, net interest income increased by $96 thousand, or 3.19%, from the third quarter of 2023. The increase in net interest income was in part driven by continued growth in loans and rising yields on earning assets. These changes were in part offset by an increase in interest expense due to the higher cost of interest bearing deposits and a continued shift in the deposit mix resulting in higher interest bearing balances. Provision for loan losses totaled $170 thousand, representing an increase of $95 thousand during the fourth quarter, when compared to provision for loan losses of $75 thousand for the third quarter of 2023. The increase in provision expense is attributed to loan growth through the fourth quarter of 2023.

When comparing December 31, 2023 to September 30, 2023, total assets increased $2.2 million, or 0.44%, loans, net of the allowance for credit losses, increased by $5.9 million, or 1.74%, and total deposits decreased by $15.1 million, or 3.42%. Book value per share increased to $96.93 per share at December 31, 2023 compared to $83.05 per share at September 30, 2023.

About JSB Financial Inc.

JSB Financial Inc. (OTC Pink: JFWV) is the holding company for Jefferson Security Bank, an independent community bank operating six banking offices located in Berkeley County and Jefferson County, West Virginia and Washington County, Maryland. Founded in 1869, Jefferson Security Bank serves individuals, businesses, municipalities and community organizations through a comprehensive suite of banking services delivered by an exceptional team who put customers first. Jefferson Security Bank has received industry recognition as a Top 200 Community Bank by American Banker magazine four years in a row. Operating for over 154 years, Jefferson Security Bank is the oldest, independent, locally owned and managed bank in West Virginia. Visit www.JSB.bank for more information.

This press release may contain forward-looking statements, as defined by federal securities laws, which may involve significant risks and uncertainties. The statements are based on estimates and assumptions made by management in conjunction with other factors deemed appropriate under the circumstances. Actual results could differ materially from current projections.

Offices:

105 East Washington Street, Shepherdstown, WV (304-876-9000)

7994 Martinsburg Pike, Shepherdstown, WV (304-876-2800)

873 East Washington Street, Suite 100, Charles Town, WV (304-725-9752)

277 Mineral Drive, Suite 1, Inwood, WV (304-229-6000)

1861 Edwin Miller Boulevard, Martinsburg, WV (304-264-0900)

103 West Main Street, Sharpsburg, MD (301-432-3900)

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