Community Savings Bancorp, Inc. files 10-Q

Community Savings Bancorp, Inc. files 10-Q in a filing on May 15 accessible here.

Total Assets. Total assets increased $2.1 million, or 4.2%, to $52.1 million at March 31, 2019 from $50.0 million at June 30, 2018. The increase was due primarily to an increase in net loans of $4.3 million, partially offset by a $1.4 million decrease in investment securities available-for-sale and a decrease in interest-earning time deposits in other institutions of $1.0 million.

Cash and Cash Equivalents. Cash and cash equivalents increased $144,000, or 3.4%, to $4.4 million at March 31, 2019 from $4.3 million at June 30, 2018. The increase in cash and cash equivalents was due primarily to a $1.2 million increase in deposits, an increase of $1.5 million in FHLB advances, a $1.4 million decrease in investment securities available for sale, and a $1 million decrease in interest-earning time deposits in other institutions, partially offset by a $4.3 million increase in net loans.

Investment Securities available-for-sale. Investment securities available-for-sale decreased $1.4 million, or 20.1%, to $5.3 million at March 31, 2019 from $6.7 million at June 30, 2018. The decrease in investment securities available-for-sale was primarily due to principal repayments on mortgage-backed securities totaling $874,000 and the maturity of municipal bond in the amount of $550,000.

Net Loans. Net loans increased $4.3 million, or 13.6%, to $35.9 million at March 31, 2019 from $31.6 million at June 30, 2018. The increase in net loans was due primarily to an increase of $5.1 million, or 179.3%, in consumer and other loans to $8.0 million at March 31, 2019 from $2.9 million at June 30, 2018, partially offset by a decrease of $659,000, or 34.2%, in commercial and multi-family loans and a decrease of $140,000, or 7.1%, in home equity lines of credit. Loans originated during the nine months ended March 31, 2019 totaled $8.9 million, of which $6.7 million were consumer and other loans and $2.1 million were one- to four family residential loans. The substantial increase in consumer loans was due to an increase in auto loans, most of which were generated from applications taken at car dealerships as part of our indirect auto lending program. This program was implemented beginning in June of 2018.

Deposits. Deposits increased $1.2 million, or 3.1%, to $41.6 million at March 31, 2019 from $40.4 million at June 30, 2018. The increase resulted primarily from a $1.6 million, or 7.2%, increase in savings and money market accounts, partially offset by a decrease in demand deposits of $218,000, or 2.1%, and a decrease in time deposits of $181,000, or 2.3%.

Bank Owned Life Insurance. Cash surrender value of Bank Owned Life Insurance increased $18,000, or 2.3%, to $787,000 at March 31, 2019 from $769,000 at June 30, 2018.

FHLB Advances. FHLB advances increased $1.5 million, or 150.0%, to $2.5 million at March 31, 2019 from $1.0 million at June 30, 2018, as we utilized certain FHLB advances to partially fund the increase in consumer and other loans.

Shareholders’ Equity. Shareholders’ equity decreased $611,000, or 7.4%, to $7.7 million at March 31, 2019 from $8.3 million at June 30, 2018. The decrease was due primarily to a net loss of $123,000 during the nine months ended March 31, 2019 and a $593,000 stock buyback, partially offset by an increase in accumulated other comprehensive income of $106,000 during the period.

Interest Income. Interest income increased $60,000, or 13.4%, to $507,000 for the three months ended March 31, 2019 from $447,000 for the three months ended March 31, 2018. The increase resulted primarily from a $51,000 increase in loan interest income. The average balance of loans receivable increased $3.5 million, or 10.6%, to $36.0 million during the three months ended March 31, 2019 from $32.6 million during the three months ended March 31, 2018, while the average yield on loans increased 14 basis points to 4.58% during the three months ended March 31, 2019 from 4.44% during the year earlier period, reflecting higher market interest rates. The average balance of investment securities decreased $1.8 million, or 25.0%, to $5.4 million during the three months ended March 31, 2019 from $7.2 million during the three months ended March 31, 2018, which was partially offset by an increase in the average yield on investment securities of 26 basis points to 2.48% for the 2019 period from 2.22% for the 2018 period.

Interest Expense. Interest expense increased $12,000, or 29.3%, to $53,000 for the three months ended March 31, 2019 from $41,000 for the three months ended March 31, 2018. Interest expense on deposits increased $3,000, or 9.7%, to $34,000 for the three months ended March 31, 2019 from $31,000 for the three months ended March 31, 2018. The average cost of deposits was 0.38% for the three months ended March 31, 2019 and 2018, respectively. There was an increase in average total deposits of $2.7 million, or 8.2%, to $35.4 million for the three months ended March 31, 2019, compared to $32.7 million for the three months ended March 31, 2018. Interest expense on borrowings increased $9,000, or 90.0%, to $19,000 for the three months ended March 31, 2019 from $10,000 for the three months ended March 31, 2018. The average balance of FHLB advances increased $1.5 million to $2.5 million for the three months ended March 31, 2019 from $1.0 million for the three months ended March 31, 2018, while the average cost of these advances decreased 99 basis points to 3.01% from 4.00% period-to-period.

Net Interest Income. Net interest income increased $47,000, or 11.6%, to $453,000 for the three months ended March 31, 2019 from $406,000 for the three months ended March 31, 2018. Our net interest rate spread increased to 3.43% for the three months ended March 31, 2019 from 3.15% for the three months ended March 31, 2018, and our net interest margin increased to 3.57% for the three months ended March 31, 2019 from 3.30% for the comparable three-month period in 2018.

Provision for Loan Losses. Based on our analysis of the factors described in ‘Critical Accounting Policies – Allowance for Loan Losses,’ we did not record a provision for loan losses for either of the three months ended March 31, 2019 or 2018. The allowance for loan losses was $239,000, or 0.66%, of total loans at March 31, 2019, compared to $253,000, or 0.78%, of total loans at March 31, 2018. Total nonperforming loans were $629,000 at March 31, 2019, compared to $397,000 at March 31, 2018. Classified (substandard, doubtful and loss) loans were $928,000 at March 31, 2019, compared to $862,000 at March 31, 2018, and total loans past due greater than 30 days were $164,000 and $275,000 at March 31, 2019 and 2018, respectively. The Bank had $14,000 in charge offs during the three months ended March 31, 2019 and no net charge-offs during the three months ended March 31, 2018. As a percentage of nonperforming loans, the allowance for loan losses was 38.0% at March 31, 2019 compared to 64.2% at March 31, 2018.

Noninterest Income. Noninterest income increased $12,000, or 16.7%, to $84,000 for the three months ended March 31, 2019 from $72,000 for the three months ended March 31, 2018. The increase was due primarily to an increase of $16,000 in service charges and fees, and decrease of $4,000 in other operating income in the period ended March 31, 2019.

Noninterest Expense. Noninterest expense decreased $15,000, or 2.4%, to $608,000 for the three months ended March 31, 2019 compared to $623,000 for the three months ended March 31, 2018. Other expense increased $32,000, or 57.1%, due to a $42,000 increase in loan expense directly related to our indirect auto lending program. The indirect lending program is a program where auto loan applications are completed at car dealerships. This program was implemented beginning in June of 2018. Loan expense was partly offset by a $13,000 decrease in data processing costs. Salaries and benefits increased $22,000, or 10.9%. Professional services decreased $52,000, or 40.6%, primarily because of higher accounting costs during the 2018 period, and lower public filing costs in the 2019 period.

Interest Income. Interest income increased $128,000, or 9.7%, to $1.5 million for the nine months ended March 31, 2019 from $1.3 million for the nine months ended March 31, 2018. The increase resulted primarily from a $117,000 increase in interest on loans receivable and a $35,000 increase in other interest earning assets, offset by a $23,000 decrease in interest on investment securities. The increase in interest income on loans was due to an increase in the average balance of loans receivable of $2.0 million, or 6.1%, to $34.5 million during the nine months ended March 31, 2019 from $32.5 million during the nine months ended March 31, 2018, and an increase in the average yield on loans, which increased 20 basis points to 4.62% during the nine months ended March 31, 2019 from 4.42% during the year earlier period, reflecting higher market interest rates. The increase in interest on other interest earning assets was due to an 83 basis point increase in average yield to 2.75% for the nine months ended March 31, 2019, partially offset by a $916,000, or 10.7%, decrease in the average balance to $7.7 million. The average balance of investment securities decreased $1.9 million, or 24.1%, to $6.0 million during the nine months ended March 31, 2019 from $7.9 million during the nine months ended March 31, 2018, and the average yield on investment securities increased 15 basis points to 2.24% for the 2019 period from 2.09% for the 2018 period.

Interest Expense. Interest expense increased $6,000, or 4.6%, to $137,000 for the nine months ended March 31, 2019 from $131,000 for the nine months ended March 31, 2018. Interest expense on deposits remained unchanged at $95,000 for the nine months ended March 31, 2019 and 2018. Interest expense on borrowings increased $6,000 to $42,000 for the nine months ended March 31, 2019 from $36,000 for the nine months ended March 31, 2018. The average balance of FHLB advances increased $347,000 to $1.8 million for the nine months ended March 31, 2019 from $1.4 million for the nine months ended March 31, 2018, while the average cost of these advances decreased 24 basis points to 3.18% from 3.42% period-to-period.

Net Interest Income. Net interest income increased $123,000, or 10.3%, to $1.3 million for the nine months ended March 31, 2019 from $1.2 million for the nine months ended March 31, 2018. Our net interest rate spread increased to 3.51% for the nine months ended March 31, 2019 from 3.10% for the nine months ended March 31, 2018, and our net interest margin increased to 3.65% for the nine months ended March 31, 2019 from 3.25% for the comparable nine-month period in 2018.

Provision for Loan Losses. The Company did not record a provision for loan losses for either of the nine months ended March 31, 2019 or 2018. The allowance for loan losses was $239,000, or 0.66% of total loans, at March 31, 2019, compared to $253,000, or 0.79% of total loans, at March 31, 2018. Total nonperforming loans were $629,000 at March 31, 2019, compared to $397,000 at March 31, 2018. Classified (substandard, doubtful and loss) loans were $928,000 at March 31, 2019, compared to $862,000 at March 31, 2018, and total loans past due greater than 30 days were $164,000 and $275,000 at March 31, 2019 and 2018, respectively. The Bank had $14,000 in charge offs during the nine months ended March 31, 2019 and no net charge-offs during the nine months ended March 31, 2018. As a percentage of nonperforming loans, the allowance for loan losses was 38.0% at March 31, 2019 compared to 64.2% at March 31, 2018.

Noninterest Income. Noninterest income increased $75,000, or 35.9%, to $284,000 for the nine months ended March 31, 2019 from $209,000 for the nine months ended March 31, 2018. Service charges and fees increased $53,000, or 27.6%, for the nine months ended March 31, 2019, compared to the 2018 period. Income from the increase in cash surrender value of bank owned life insurance increased $5,000 and other operating income increased $6,000 in the nine months ended March 31, 2019, compared to the 2018 period. Also, there was a nonrecurring gain on the sale of foreclosed assets of $11,000 realized during the 2019 period.

Noninterest Expense. Noninterest expense increased $3,000, or 0.2%, to $1.8 million for the nine months ended March 31, 2019 compared to $1.8 million for the nine months ended March 31, 2018. Other expenses increased by $67,000, or 49.3%, primarily due to increased loan expense associated with our indirect auto lending program., The indirect lending program is a program where auto loan applications are completed at car dealerships. This program was implemented beginning in June of 2018. Salaries and benefits increased by $24,000, or 3.8%, and financial institution taxes increased $8,000, or 18.2%, primarily due to the increase in capital as a result of the initial stock offering. Professional services decreased $100,000, 30.8%, to $225,000 for the nine months ended March 31, 2019 from $325,000 for the nine months ended March 31, 2018, primarily because of higher accounting costs during the 2018 period, and lower public filing costs in the 2019 period.

ITEM 2. Unregistered Sales of Equity Securities and Use of Proceeds (a) There were no sales of unregistered securities during the period covered by this report. (b) Not applicable. (c) On November 15, 2018, the Board of Directors authorized a stock repurchase program pursuant to which the Company may repurchase 45,000 shares, or approximately 10.2%, of its outstanding common stock as of September 30, 2018. The following table presents for the periods indicated a summary of the purchases made by or on behalf of the company of shares of its common stock.

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