Income Statement Highlights

For the third quarter of 2024, net interest income totaled $4.5 million, representing an increase of $1.5 million, or 50%, from $3.0 million for the third quarter of 2023. For the first nine months of 2024, net interest income totaled $11.0 million, representing an increase of $1.8 million, or 19%, when compared to $9.2 million the same period in 2023. Excluding the interest recovery of $1.3 million, net interest income increased $247 thousand when comparing the third quarter 2024 to the same period in 2023 and increased $508 thousand when comparing the first nine months of 2024 to the same period in 2023. The increase in net interest income for the quarter ended and nine months ended 2024 was attributed to higher loan balances and yields on earning assets, partially offset by higher deposit costs related to the deposit mix and pricing.

Interest and fees on loans totaled $6.5 million and $4.1 million for the third quarter of 2024 and 2023, respectively, and $16.2 million and $11.4 million for the nine months ended September 30, 2024 and 2023, respectively. Interest and fees on loans increased with organic growth in the loan portfolio, which was primarily led by residential mortgage loan and commercial real estate loan originations. The mix of the loan portfolio shifted slightly with commercial real estate loans representing 23% of total loans as of September 30, 2024, compared to 21% as of December 31, 2023. The yield on earning assets improved when compared to the prior year due primarily to higher interest rates on new loan originations as well as repricing of variable rate loans.

Total interest expense was $3.1 million for the third quarter of 2024, representing an increase of $1.3 million when compared to $1.8 million for the third quarter 2023. For the nine months ended 2024, interest expense totaled $8.1 million, representing an increase of $3.5 million, when compared to $4.6 million for the same period in 2023. This increase was driven by higher deposit balances and costs of interest-bearing deposits as customers have migrated to higher yielding deposit products. With strong deposit growth, the level of noninterest bearing deposits remains at 24% of total deposits.

The net interest margin was 2.90% for the third quarter of 2024 compared to 2.73% the third quarter of 2023.

Noninterest income for the three and nine months ended September 30, 2024 totaled $586 thousand and $1.7 million, respectively, compared to $583 thousand and $1.7 million for the three and nine months ended September 30, 2023, respectively.

Noninterest expense for the three and nine months ended September 30, 2024 totaled $2.9 million and $8.5 million, respectively, compared to $2.8 million and $8.0 million for the three and nine months ended September 30, 2023, respectively. The increase in noninterest expense was primarily related to salaries and employee benefits from increased staffing levels and wages.

Balance Sheet Highlights

Total assets were $577.3 million as of September 30, 2024, an increase of $76.7 million, or 15.3%, from $500.6 million as of December 31, 2023. Year-over-year total assets increased $78.9 million, or 15.8%, from $498.4 million as of September 30, 2023.

Loans, net of the allowance for credit losses, were $376.7 million as of September 30, 2024, an increase of $28.8 million, or 8.3%, from $347.9 million as of December 31, 2023. Year-over-year net loans grew $34.7 million, or 10.2%, from $342.0 million as of September 30, 2023.

Investment securities, excluding restricted securities, were $114.7 million as of September 30, 2024, $118.7 million as of December 31, 2023 and $117.8 million as of September 30, 2023. Investment securities decreased during the nine months ended September 30, 2024, primarily due to principal repayments and maturities totaling $7.1 million, offset in part by a decrease in the investment portfolio’s unrealized losses on available for sale securities totaling $1.8 million.

Total deposits were $514.7 million as of September 30, 2024, an increase of $88.6 million, or 20.8%, from $426.1 million as of December 31, 2023. Year-over-year total deposits increased $73.6 million, or 16.7%, from $441.1 million as of September 30, 2023. Noninterest bearing deposits represent 24.0% of total deposits as of September 30, 2024, which is down slightly from 26.4% as of December 31, 2023 and 27.4% as of September 30, 2023. During the nine months ended September 30, 2024, noninterest bearing balances increased $11.0 million and interest-bearing balances increased $77.6 million.

At September 30, 2024, total borrowings decreased $18.1 million since December 31, 2023 and $2.9 million from September 30, 2023. Borrowings through the Federal Reserve’s Bank Term Funding Program (BTFP) totaled $28.0 million as of September 30, 2024. There were no borrowings through FHLB as of September 30, 2024. At September 30, 2024, total liquidity sources exceeded $304 million and included on and off-balance sheet liquidity through cash and cash equivalents; unpledged available for sale securities at fair value; Federal Home Loan Bank (FHLB) and Federal Reserve borrowing capacities; and unsecured correspondent bank lines of credit.

Shareholders’ equity at September 30, 2024 was $29.5 million, representing an increase of $4.6 million, or 18.3% from December 31, 2023. Book value per share of $114.65 at September 30, 2024 increased from $96.93 at December 31, 2023. Year-to-date earnings contributed $3.4 million to the increase in shareholders’ equity. Accumulated other comprehensive loss decreased $1.7 million, which was primarily related to the change in unrealized losses on available for sale securities at September 30, 2024. During the third quarter 2024 the Company declared a regular semi-annual dividend of $1.20 per share payable on September 13, 2024. This dividend was consistent with the previous semi-annual dividend and resulted in an annual dividend of $2.40 per share in 2024, representing an increase of $0.10 per share or 4.3% from $2.30 per share in 2023. Year-over-year shareholders’ equity increased $6.6 million, or 28.9%, from $22.9 million as of September 30, 2023.

All bank regulatory capital ratios remain in excess of applicable regulatory requirements for well-capitalized institutions. The Tier 1 leverage ratio declined to 7.47% from 7.65% at December 31, 2023 and 8.01% at September 30, 2023. The ratio of Common Equity Tier 1 capital and Tier 1 capital to risk weighted assets was 12.45%, 12.40% and 12.85% at September 30, 2024, December 31, 2023 and September 30, 2023, respectively. The total risk-based capital ratio was 13.70%, 13.65% and 14.09% at September 30, 2024, December 31, 2023 and September 30, 2023, respectively. The decline in regulatory capital ratios reflects the impact of continued trend of growth in total assets through the first nine months of 2024. This growth was in part related to management’s decision to increase total assets and maintain a higher level of cash and cash equivalents on the balance sheet. Management conducts regular monitoring of capital planning strategies to support and maintain adequate capital levels.

Asset Quality

As of September 30, 2024, the credit quality of the loan portfolio remained strong with nonaccrual loans totaling $47 thousand, or 0.01% of total loans, compared to $51 thousand, or 0.01% of total loans, at December 31, 2023 and $53 thousand, or 0.02% of total loans, at September 30, 2023. As of September 30, 2024, total past due loans decreased to $349 thousand, or 0.09% of total loans, compared to $385 thousand, or 0.11%, of total loans at December 31, 2023 and decreased when compared to $357 thousand, or 0.10% of total loans, as of September 30, 2023.

At September 30, 2024 and December 31, 2023, the allowance for credit losses on loans was $4.0 million, or 1.06% of total loans, and $3.8 million, or 1.08% of total loans, respectively. During its assessment of the allowance for credit losses, the Company reviews and addresses credit risk associated with all loan portfolio segments and has appropriately reserved for economic conditions with consideration of management’s prudent underwriting at loan origination and ongoing loan monitoring procedures.

The company recorded net recoveries on loans totaling $237 thousand for the three and nine months ended September 30, 2024, respectively. As a result, the company released provisioning for credit losses totaling $266 thousand and $86 thousand for the three and nine months ended September 30, 2024, respectively. This is compared to a provision expense of $75 thousand and $122 thousand for the three and nine months ended September 30, 2023, respectively. The release of provisioning in 2024 was related to the recovery of a previously charged off loan totaling $252 thousand and continued stability in the economic environment and the credit quality of the loan portfolio.

Third Quarter 2024 Compared to Second Quarter of 2024

Compared to the quarter ended June 30, 2024, net income increased $1.2 million primarily due to higher revenue and lower provision for credit losses. Excluding the notable items in the third quarter of 2024, pretax income decreased by $6 thousand, or 0.6%, compared to the same period in 2023.

Net interest income increased by $1.3 million, or 39%, from the second quarter of 2024. Excluding the notable item, net interest income increased $11 thousand, or 0.3%, compared to the quarter ended June 30, 2024. This slight increase to net interest income shows the continued improvement in both the yield and mix of earning assets, while the Company also continued to experience pricing pressures on deposits. Management is actively monitoring the interest rates and the mix of deposits and wholesale funding to control funding costs.

The Company recorded a release of provisioning for credit losses of $266 thousand for the third quarter of 2024, compared to a provision for credit losses expense of $60 thousand for the second quarter of 2024. This change was primarily driven by similar factors as the year-over-year changes stated above.

Noninterest income for the three months ended September 30, 2024 totaled $586 thousand, compared to $582 thousand for the three months ended June 30, 2024. Noninterest expense for the three months ended September 30, 2024 totaled $2.9 million, compared to $2.8 million for the three months ended June 30, 2024.

When comparing September 30, 2024 to June 30, 2024, total assets increased $35.2 million, or 6.5%, loans, net of the allowance for credit losses, increased by $2.8 million, or 0.7%, total deposits increased $46.1 million, or 9.8%, and shareholders’ equity increased $3.6, or 14.0%.

About JSB Financial Inc.

JSB Financial Inc. (OTCPink: 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 by American Banker magazine five years in a row. Most recently, as a Top 100 Community Bank in 2024 and prior as a Top 200 Community Bank for four consecutive years. Operating for over 155 years, Jefferson Security Bank is the oldest, independent, locally owned and managed bank in West Virginia. Visit www.jsb.bank for more information.

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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Contacts

Jenna Kesecker, CPA, Executive Vice President
and Chief Financial Officer
304-876-9016