[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section provides the unaudited consolidated financial statements and related disclosures for CFSB Bancorp, Inc. [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements.) This section presents the unaudited consolidated financial statements for CFSB Bancorp, Inc. as of March 31, 2024, and for the three and nine-month periods then ended, including balance sheets, income statements, comprehensive income, equity changes, and cash flows, reflecting the adoption of the CECL accounting standard. [Consolidated Balance Sheets](index=4&type=section&id=Consolidated%20Balance%20Sheets) This subsection details the company's financial position, showing assets, liabilities, and equity as of March 31, 2024, and June 30, 2023. Consolidated Balance Sheet Highlights (in millions) | Account | March 31, 2024 | June 30, 2023 | Change (%) | | :--- | :--- | :--- | :--- | | **Total Assets** | **$358.06** | **$349.01** | **+2.6%** | | Cash and cash equivalents | $21.66 | $6.86 | +215.5% | | Loans, net | $170.89 | $175.91 | -2.8% | | Securities held to maturity | $146.46 | $147.90 | -1.0% | | **Total Liabilities** | **$282.20** | **$273.12** | **+3.3%** | | Total deposits | $265.64 | $263.38 | +0.8% | | FHLB advances | $10.35 | $3.68 | +181.6% | | **Total Stockholders' Equity** | **$75.86** | **$75.89** | **-0.04%** | - The balance sheet shows significant growth in cash and cash equivalents, funded by an increase in FHLB advances and a slight rise in deposits, while the loan portfolio contracted[25](index=25&type=chunk)[231](index=231&type=chunk) [Consolidated Statements of Net Income (Loss)](index=6&type=section&id=Consolidated%20Statements%20of%20Net%20Income%20(Loss)) This subsection presents the company's profitability for the three and nine-month periods ended March 31, 2024, and 2023. Key Income Statement Data (in millions, except per share data) | Metric | Three Months Ended March 31, 2024 | Three Months Ended March 31, 2023 | Nine Months Ended March 31, 2024 | Nine Months Ended March 31, 2023 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $1.64 | $2.16 | $5.08 | $6.86 | | Provision for (reversal of) credit losses | $(0.02) | $0.00 | $(0.29) | $0.00 | | **Net Income (Loss)** | **$(0.04)** | **$0.36** | **$(0.13)** | **$1.34** | | **Basic EPS** | **$(0.01)** | **$0.06** | **$(0.02)** | **$0.21** | | **Diluted EPS** | **$(0.01)** | **$0.06** | **$(0.02)** | **$0.21** | - The company experienced a significant decline in profitability, reporting a net loss for both the three and nine-month periods ended March 31, 2024, primarily due to a sharp decrease in net interest income as interest expenses rose faster than interest income[27](index=27&type=chunk)[204](index=204&type=chunk)[239](index=239&type=chunk) [Consolidated Statements of Comprehensive Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income%20(Loss)) This subsection outlines the company's comprehensive income, including net income and other comprehensive income, for the specified periods. Comprehensive Income (Loss) (in millions) | Period | Net Income (Loss) | Other Comprehensive Income (Loss) | Comprehensive Income (Loss) | | :--- | :--- | :--- | :--- | | **Three Months Ended March 31, 2024** | $(0.04) | $0.00 | $(0.04) | | **Three Months Ended March 31, 2023** | $0.36 | $0.00 | $0.36 | | **Nine Months Ended March 31, 2024** | $(0.13) | $0.00 | $(0.13) | | **Nine Months Ended March 31, 2023** | $1.34 | $(0.00) | $1.34 | [Consolidated Statements of Changes in Stockholders' Equity](index=9&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) This subsection details the changes in the company's stockholders' equity over the reporting period. - Total stockholders' equity decreased slightly from **$75.89 million** at June 30, 2023, to **$75.86 million** at March 31, 2024[63](index=63&type=chunk) - The decrease was primarily driven by a net loss of **$127 thousand** and a **$223 thousand** cumulative effect adjustment to retained earnings from the adoption of ASU 2016-13 (CECL), offset by stock-based compensation expense[63](index=63&type=chunk)[32](index=32&type=chunk) [Consolidated Statements of Cash Flows](index=11&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) This subsection summarizes the cash inflows and outflows from operating, investing, and financing activities for the nine months ended March 31. Cash Flow Summary for the Nine Months Ended March 31 (in millions) | Cash Flow Category | 2024 | 2023 | | :--- | :--- | :--- | | Net cash provided by operating activities | $0.10 | $1.44 | | Net cash provided by (used in) investing activities | $5.84 | $(10.70) | | Net cash provided by (used in) financing activities | $8.87 | $(17.06) | | **Net change in cash and cash equivalents** | **$14.80** | **$(26.33)** | - The company's cash position significantly improved, with cash and cash equivalents increasing by **$14.8 million**, driven by net cash inflows from financing activities and investing activities, which offset a sharp decline in cash from operations[16](index=16&type=chunk) [Notes to Unaudited Consolidated Financial Statements](index=13&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This subsection provides additional information and explanations regarding the unaudited consolidated financial statements. - The company adopted ASU 2016-13 (CECL) on July 1, 2023, which replaced the incurred loss methodology with an expected loss model for financial instruments, resulting in a cumulative-effect adjustment that decreased retained earnings by **$223 thousand**[45](index=45&type=chunk)[90](index=90&type=chunk)[117](index=117&type=chunk) - The company's primary business is taking deposits from the public and investing them in one- to four-family residential real estate loans within Norfolk and Plymouth Counties, Massachusetts[67](index=67&type=chunk) - As of March 31, 2024, the Bank exceeded all regulatory capital requirements and was categorized as "well capitalized"[150](index=150&type=chunk)[175](index=175&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=53&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial performance, highlighting a net loss for the nine months ended March 31, 2024, compared to significant net income in the prior year, primarily due to a 25.9% decrease in net interest income from rising interest expenses. [Comparison of Financial Condition at March 31, 2024 and June 30, 2023](index=55&type=section&id=Comparison%20of%20Financial%20Condition%20at%20March%2031%2C%202024%20and%20June%2030%2C%202023) This subsection analyzes the changes in the company's balance sheet between March 31, 2024, and June 30, 2023. - Total assets increased by **$9.1 million** (2.6%) to **$358.1 million**, primarily due to a **$14.8 million** increase in cash and cash equivalents[231](index=231&type=chunk) - Net loans decreased by **$5.0 million** (2.8%) as borrower principal payments exceeded new originations in the higher interest rate environment[231](index=231&type=chunk) - Deposits grew by **$2.2 million**, with a notable shift from savings and money market accounts into higher-yielding certificates of deposit[231](index=231&type=chunk) - FHLB borrowings increased by **$6.7 million** (181.1%) as part of a leverage strategy to increase liquidity and income[231](index=231&type=chunk) [Comparison of Operating Results for the Three Months Ended March 31, 2024 and 2023](index=55&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20March%2031%2C%202024%20and%202023) This subsection compares the company's operating results for the three-month periods ended March 31, 2024, and 2023. - The company reported a net loss of **$40 thousand** for the quarter, a significant downturn from a net income of **$355 thousand** in the prior-year quarter[261](index=261&type=chunk) - Net interest income fell by **23.9%** to **$1.6 million**, as the net interest margin compressed by **63 basis points** to **1.96%**[204](index=204&type=chunk) - Total interest expense surged by **155.2%** to **$1.4 million**, driven by higher rates on deposits and a significant increase in the average balance of FHLB advances[204](index=204&type=chunk) [Comparison of Operating Results for the Nine Months Ended March 31, 2024 and 2023](index=61&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Nine%20Months%20Ended%20March%2031%2C%202024%20and%202023) This subsection compares the company's operating results for the nine-month periods ended March 31, 2024, and 2023. - For the nine-month period, the company reported a net loss of **$127 thousand**, compared to net income of **$1.3 million** in the prior year[239](index=239&type=chunk) - Net interest income decreased by **$1.8 million** (25.9%) due to a **102 basis point** contraction in the net interest rate spread[269](index=269&type=chunk) - A reversal of credit losses of **$290 thousand** was recorded, reflecting improved economic forecasts, lower loan balances, and continued strong asset quality[241](index=241&type=chunk) - Non-interest expense increased by **3.4%** to **$5.9 million**, primarily due to higher salaries, employee benefits, and stock-based compensation[243](index=243&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=69&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) This section outlines the company's management of market risk, with a primary focus on interest rate risk, using simulation models to analyze the sensitivity of Net Interest Income (NII) and Economic Value of Equity (EVE) to interest rate changes, indicating liability sensitivity. [Net Interest Income Analysis](index=66&type=section&id=Net%20Interest%20Income%20Analysis) This subsection analyzes the estimated impact of interest rate changes on the company's Net Interest Income over a one-year period. Estimated Impact on Net Interest Income (NII) over 1 Year | Change in Interest Rates (bps) | Estimated Change in NII (%) | | :--- | :--- | | +400 | -22.2% | | +300 | -16.8% | | +200 | -11.4% | | +100 | -5.8% | | -100 | +1.5% | [Economic Value of Equity Analysis](index=67&type=section&id=Economic%20Value%20of%20Equity%20Analysis) This subsection analyzes the estimated impact of interest rate changes on the company's Economic Value of Equity. Estimated Impact on Economic Value of Equity (EVE) | Change in Interest Rates (bps) | Estimated Change in EVE (%) | | :--- | :--- | | +400 | -39.2% | | +300 | -30.1% | | +200 | -20.4% | | +100 | -10.2% | | -100 | +8.4% | | -200 | +15.6% | [Item 4. Controls and Procedures](index=70&type=section&id=Item%204.%20Controls%20and%20Procedures) Management, including the CEO and Principal Financial Officer, evaluated the company's disclosure controls and procedures and concluded they were effective as of March 31, 2024, with no material changes to internal control over financial reporting during the quarter. - Based on an evaluation as of March 31, 2024, the company's Chief Executive Officer and Treasurer and Chief Operating Officer concluded that disclosure controls and procedures are effective[302](index=302&type=chunk) - There were no material changes to the company's internal control over financial reporting during the quarter[303](index=303&type=chunk) [PART II. OTHER INFORMATION](index=71&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section contains additional information not covered in the financial statements, including legal proceedings, risk factors, equity sales, and exhibits. [Item 1. Legal Proceedings](index=71&type=section&id=Item%201.%20Legal%20Proceedings) The company states that it is not involved in any material legal proceedings outside of the ordinary course of business. - The company is not involved in any pending legal proceedings that would have a material effect on its financial condition or results of operations[305](index=305&type=chunk) [Item 1A. Risk Factors](index=71&type=section&id=Item%201A.%20Risk%20Factors.) As a smaller reporting company, CFSB Bancorp, Inc. is not required to provide this information in its Form 10-Q. - The company is a smaller reporting company and is not required to provide risk factor disclosures in this report[306](index=306&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=71&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) The company announced the adoption of a stock repurchase plan on April 5, 2024. - On April 5, 2024, the company adopted a plan to repurchase up to **152,287 shares** of its common stock, representing approximately **5%** of its then-outstanding shares (excluding those held by the MHC)[307](index=307&type=chunk) [Item 5. Other Information](index=71&type=section&id=Item%205.%20Other%20Information.) No directors or executive officers adopted or terminated any Rule 10b5-1 trading plans during the quarter. - During the three months ended March 31, 2024, none of the company's directors or executive officers adopted or terminated any Rule 10b5-1 trading arrangement[309](index=309&type=chunk) [Item 6. Exhibits](index=72&type=section&id=Item%206.%20Exhibits.) This section lists the exhibits filed with the Form 10-Q, including corporate governance documents and certifications required by the Sarbanes-Oxley Act. - The report includes certifications from the Chief Executive Officer and Chief Financial Officer pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[291](index=291&type=chunk)[310](index=310&type=chunk) - Financial statements and notes formatted in XBRL are also furnished as part of the filing[291](index=291&type=chunk)

[Financial Results Summary](index=1&type=section&id=Financial%20Results%20Summary) Summarizes CFSB Bancorp, Inc.'s financial performance, detailing net income and earnings per share for the quarter and nine-month periods [Overview of Financial Performance](index=1&type=section&id=Overview%20of%20Financial%20Performance) CFSB Bancorp, Inc. reported a net loss of $40,000 for Q3 FY2024 and a $127,000 net loss for the nine months ended March 31, 2024, reflecting a decline from prior year's profitability Net Income (Loss) and Basic & Diluted EPS | Period | Net Income (Loss) | Basic & Diluted EPS | | :--- | :--- | :--- | | **Q3 2024 (ended Mar 31, 2024)** | ($40,000) | ($0.01) | | **Q2 2024 (ended Dec 31, 2023)** | ($210,000) | ($0.03) | | **Q3 2023 (ended Mar 31, 2023)** | $355,000 | $0.06 | | **Nine Months 2024 (ended Mar 31, 2024)** | ($127,000) | ($0.02) | | **Nine Months 2023 (ended Mar 31, 2023)** | $1,300,000 | $0.21 | - The CEO noted that liabilities are repricing faster than assets, which has challenged lending operations, with a potential realignment of the yield curve anticipated to provide future assistance[8](index=8&type=chunk) [Operating Results](index=1&type=section&id=Operating%20Results) Analyzes the company's operational performance, focusing on key drivers of net income and loss for both the third quarter and year-to-date periods [Third Quarter Operating Results (ended March 31, 2024)](index=1&type=section&id=Third%20Quarter%20Operating%20Results%20%28ended%20March%2031%2C%202024%29) The company's third-quarter performance was primarily impacted by a significant year-over-year decrease in net interest income due to margin compression from rising deposit costs, partially offset by a reversal of the provision for credit losses, modest non-interest income growth, and controlled expenses [Net Interest Income](index=1&type=section&id=Net%20Interest%20Income) Net interest income decreased by 23.6% year-over-year to $1.7 million, with the net interest margin contracting by 63 basis points to 1.96%, driven by faster repricing of liabilities Net Interest Income and Margin | Metric | Q3 2024 (ended Mar 31, 2024) | Q3 2023 (ended Mar 31, 2023) | Change | | :--- | :--- | :--- | :--- | | Net Interest Income (tax-equivalent) | $1.7 million | $2.2 million | -23.6% | | Net Interest Margin | 1.96% | 2.59% | -63 bps | - Compared to the prior quarter (Q2 2024), net interest income was stable at **$1.7 million**, though the net interest margin slightly decreased by **six basis points** from 2.02%[27](index=27&type=chunk) [Provision for Credit Losses](index=1&type=section&id=Provision%20for%20Credit%20Losses) The company recorded a $20,000 reversal of the provision for credit losses for the quarter, attributed to improved forecasted economic conditions, lower loan balances, and sustained strong asset quality - A reversal of the provision for credit losses of **$20,000** was recorded in Q3 2024, compared to a reversal of **$104,000** in Q2 2024 and no provision in Q3 2023[3](index=3&type=chunk) - The allowance for credit losses as a percentage of total loans decreased to **0.90%** at March 31, 2024, down from **0.93%** at December 31, 2023, and **0.98%** at March 31, 2023[3](index=3&type=chunk) [Non-Interest Income and Expense](index=3&type=section&id=Non-Interest%20Income%20and%20Expense) Non-interest income increased by 12.8% year-over-year to $167,000, driven by higher customer service fees, while non-interest expense remained relatively flat, increasing by just 0.4% to $1.9 million Non-Interest Income and Expense | Item | Q3 2024 (ended Mar 31, 2024) | Q3 2023 (ended Mar 31, 2023) | Change | | :--- | :--- | :--- | :--- | | Non-Interest Income | $167,000 | $148,000 | +12.8% | | Non-Interest Expense | $1.9 million | $1.9 million | +0.4% | - Compared to the previous quarter, non-interest expense decreased by **$201,000 (9.5%)**, primarily due to lower salaries and employee benefits from a reduced headcount[29](index=29&type=chunk) [Income Tax](index=3&type=section&id=Income%20Tax) An income tax benefit of $42,000 was recorded for the quarter, a significant shift from the $47,000 provision in the prior-year quarter, primarily due to decreased income before taxes - The company recorded an income tax benefit of **$42,000** in Q3 2024, compared to a provision of **$16,000** in Q2 2024 and a provision of **$47,000** in Q3 2023[5](index=5&type=chunk) [Year-to-Date Operating Results (Nine months ended March 31, 2024)](index=3&type=section&id=Year-to-Date%20Operating%20Results%20%28Nine%20months%20ended%20March%2031%2C%202024%29) For the first nine months of fiscal 2024, the company experienced a significant decline in profitability, swinging to a net loss from a net income in the prior year, primarily driven by a 25.7% decrease in net interest income due to higher interest expenses [Net Interest Income (YTD)](index=3&type=section&id=Net%20Interest%20Income%20%28YTD%29) Net interest income for the nine-month period decreased by 25.7% to $5.2 million, with the net interest margin compressing by 65 basis points to 2.06%, as the cost of interest-bearing liabilities outpaced asset yields Net Interest Income and Margin (YTD) | Metric | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Net Interest Income (tax-equivalent) | $5.2 million | $6.9 million | -25.7% | | Net Interest Margin | 2.06% | 2.71% | -65 bps | [Provision for Credit Losses (YTD)](index=3&type=section&id=Provision%20for%20Credit%20Losses%20%28YTD%29) A reversal of the provision for credit losses of $290,000 was recorded for the nine months ended March 31, 2024, attributed to improved economic forecasts, lower loan balances, and strong asset quality - The company recognized a reversal of the provision for credit losses of **$290,000** for the nine-month period[6](index=6&type=chunk) [Non-Interest Income and Expense (YTD)](index=3&type=section&id=Non-Interest%20Income%20and%20Expense%20%28YTD%29) For the nine-month period, non-interest income was nearly flat at $499,000, while non-interest expenses rose by 3.4% to $5.9 million, primarily due to increased salaries and benefits Non-Interest Income and Expense (YTD) | Item | Nine Months 2024 | Nine Months 2023 | Change | | :--- | :--- | :--- | :--- | | Non-Interest Income | $499,000 | $500,000 | -0.2% | | Non-Interest Expense | $5.9 million | $5.7 million | +3.4% | [Income Tax (YTD)](index=3&type=section&id=Income%20Tax%20%28YTD%29) Income tax expense for the nine-month period decreased substantially to $67,000 from $282,000 in the prior year, reflecting the significant drop in pre-tax income - Income tax expense decreased by **$215,000** year-over-year due to lower income before taxes[32](index=32&type=chunk) [Balance Sheet and Financial Condition](index=3&type=section&id=Balance%20Sheet%20and%20Financial%20Condition) Examines the company's financial position, including asset growth, loan portfolio changes, deposit trends, and equity movements [Balance Sheet Overview](index=3&type=section&id=Balance%20Sheet%20Overview) As of March 31, 2024, total assets grew to $358.1 million, a 2.6% increase, driven by higher cash and FHLBB advances funded by deposits, partially offset by a decrease in the net loan portfolio Balance Sheet Summary | Balance Sheet Item | March 31, 2024 | June 30, 2023 | Change | | :--- | :--- | :--- | :--- | | Total Assets | $358.1 million | $349.0 million | +2.6% | | Cash and cash equivalents | $21.7 million | $6.9 million | +215.5% | | Net Loans | $170.9 million | $175.9 million | -2.8% | | Total Deposits | $265.6 million | $263.4 million | +0.9% | | FHLBB Advances | $10.4 million | $3.7 million | +182.4% | [Asset Quality](index=5&type=section&id=Asset%20Quality) The company's asset quality remained strong as of March 31, 2024, with no non-performing loans and the allowance for credit losses at 0.90% of total loans - At March 31, 2024, there were four current loans rated substandard but no loans rated special mention, doubtful, or loss, reflecting continued strong asset quality[14](index=14&type=chunk) - The allowance for credit losses as a percentage of total loans was **0.90%** at March 31, 2024[3](index=3&type=chunk) [Stockholders' Equity](index=5&type=section&id=Stockholders%27%20Equity) Total stockholders' equity experienced a slight decrease of $27,000 to $75.9 million at March 31, 2024, primarily due to the net loss and CECL adoption, partially offset by stock-based compensation - Total stockholders' equity decreased by **$27,000** to **$75.9 million** at March 31, 2024, from June 30, 2023[14](index=14&type=chunk) - Key factors for the decrease included the net loss of **$127,000** and the adoption of ASU 2016-13 (net of taxes) of **$223,000**, offset by stock-based compensation of **$269,000**[14](index=14&type=chunk) [Financial Statements and Supplementary Data](index=7&type=section&id=Financial%20Statements%20and%20Supplementary%20Data) Presents the company's unaudited consolidated financial statements and key supplementary data for detailed financial analysis [Consolidated Balance Sheets](index=7&type=section&id=Consolidated%20Balance%20Sheets) This statement provides a detailed, unaudited snapshot of the company's financial position, outlining assets, liabilities, and stockholders' equity as of March 31, 2024, and June 30, 2023 - The Consolidated Balance Sheets are presented in the report, showing detailed line items for assets, liabilities, and equity[19](index=19&type=chunk)[38](index=38&type=chunk) [Consolidated Statements of Net Income (Loss)](index=8&type=section&id=Consolidated%20Statements%20of%20Net%20Income%20%28Loss%29) This statement details the company's revenues and expenses, leading to the net income or loss for the three and nine-month periods ended March 31, 2024, with comparative data for prior periods - The Consolidated Statements of Net Income (Loss) are presented, detailing performance for the three and nine months ended March 31, 2024 and 2023[20](index=20&type=chunk)[40](index=40&type=chunk) [Average Balances and Yields](index=9&type=section&id=Average%20Balances%20and%20Yields) This supplementary table provides a detailed analysis of average asset and liability balances, interest earned and paid, and the corresponding average yields and rates, crucial for understanding net interest income - The report includes detailed tables on average balances, interest earned/paid, and average yields/rates on a fully tax-equivalent basis for both the three-month and nine-month periods[22](index=22&type=chunk)[43](index=43&type=chunk) [Selected Financial Highlights](index=12&type=section&id=Selected%20Financial%20Highlights) This section presents key performance, capital, and asset quality ratios, offering a concise overview of the company's financial health and operational efficiency for the reported periods - The report provides a table of selected financial highlights, including performance ratios (ROA, ROE), capital ratios (Tier 1, Total Capital), and asset quality ratios[45](index=45&type=chunk) [Other Information](index=6&type=section&id=Other%20Information) Provides background information on CFSB Bancorp, Inc. and important disclaimers regarding forward-looking statements [About CFSB Bancorp, Inc.](index=6&type=section&id=About%20CFSB%20Bancorp%2C%20Inc.) CFSB Bancorp, Inc. serves as the federal mid-tier holding company for Colonial Federal Savings Bank, established in 1889, serving customers on the south shore of Massachusetts - CFSB Bancorp, Inc. is the holding company for Colonial Federal Savings Bank, which has operated in Massachusetts since 1889[16](index=16&type=chunk) [Forward-Looking Statements](index=6&type=section&id=Forward-Looking%20Statements) The press release includes forward-looking statements based on current beliefs and expectations, subject to significant business, economic, and competitive uncertainties, with no obligation to update - This press release contains forward-looking statements that are subject to risks and uncertainties, including competitive pressures, interest rate changes, and general economic conditions[17](index=17&type=chunk)

QUINCY, Mass., April 5, 2024 /PRNewswire/ -- CFSB Bancorp, Inc. (the "Company") (Nasdaq: CFSB), the holding company for Colonial Federal Savings Bank, announced it has adopted a program to repurchase up to 152,287 shares of its common stock, which is approximately 5% of its outstanding common stock (excluding shares held by 15 Beach, MHC). This is the Company's first stock repurchase program since completing its mutual holding company reorganization and related stock offering in January 2022. Repurchases ar ...

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for CFSB Bancorp, Inc. as of December 31, 2023, along with detailed notes on accounting policies and presentation [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets increased to **$359,025 thousand** at December 31, 2023, driven by higher cash and FHLB advances, while deposits slightly decreased and equity remained stable Consolidated Balance Sheet Highlights (in thousands) | Account | Dec 31, 2023 | June 30, 2023 | | :--- | :--- | :--- | | **Assets** | | | | Total cash and cash equivalents | $15,724 | $6,861 | | Loans, net | $174,974 | $175,911 | | Securities held to maturity, net | $149,117 | $147,902 | | **Total Assets** | **$359,025** | **$349,007** | | **Liabilities & Equity** | | | | Total deposits | $257,940 | $263,376 | | Federal Home Loan Bank advances | $19,100 | $3,675 | | **Total Liabilities** | **$283,230** | **$273,118** | | **Total Stockholders' Equity** | **$75,795** | **$75,889** | [Consolidated Statements of Net Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Net%20Income%20(Loss)) The company reported a net loss of **$210 thousand** for the three months ended December 31, 2023, primarily due to increased interest expense outpacing interest income growth Net Income (Loss) Summary (in thousands, except per share data) | Metric | Three Months Ended Dec 31, 2023 | Three Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $1,639 | $2,341 | $3,445 | $4,704 | | Provision for (reversal of) credit losses | ($104) | $0 | ($270) | $0 | | **Net Income (Loss)** | **($210)** | **$341** | **($87)** | **$986** | | Basic EPS | ($0.03) | $0.05 | ($0.01) | $0.16 | | Diluted EPS | ($0.03) | $0.05 | ($0.01) | $0.16 | [Consolidated Statements of Changes in Stockholders' Equity](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders'%20Equity) Stockholders' equity slightly decreased to **$75,795 thousand** at December 31, 2023, primarily due to a net loss and a CECL accounting adjustment, partially offset by compensation - The adoption of ASU 2016-13 resulted in a cumulative adjustment that reduced retained earnings by **$223 thousand**, net of tax. This adjustment included provisions for credit losses on loans, securities, and off-balance sheet exposures[78](index=78&type=chunk)[87](index=87&type=chunk) Changes in Stockholders' Equity (in thousands) | Description | Six Months Ended Dec 31, 2023 | | :--- | :--- | | Balance at June 30, 2023 | $75,889 | | Cumulative effect accounting adjustment | ($223) | | Net income (loss) | ($87) | | Other comprehensive income | $2 | | Stock-based compensation | $179 | | ESOP shares committed to be released | $35 | | **Balance at December 31, 2023** | **$75,795** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Cash and cash equivalents increased by **$8,863 thousand** for the six months ended December 31, 2023, primarily due to financing activities offsetting investing and operating cash uses Cash Flow Summary (in thousands) | Activity | Six Months Ended Dec 31, 2023 | Six Months Ended Dec 31, 2022 | | :--- | :--- | :--- | | Net cash (used in) provided by operating activities | ($64) | $897 | | Net cash used in investing activities | ($1,110) | ($10,502) | | Net cash provided by (used in) financing activities | $10,037 | ($11,488) | | **Net change in cash and cash equivalents** | **$8,863** | **($21,093)** | | Cash and cash equivalents at beginning of period | $6,861 | $31,667 | | **Cash and cash equivalents at end of period** | **$15,724** | **$10,574** | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) This section details accounting policies and financial data, covering CECL adoption, portfolio breakdowns, borrowings, regulatory capital, and fair value measurements - On July 1, 2023, the Company adopted ASU 2016-13 (CECL), requiring estimation of credit losses over financial asset life, resulting in a net decrease to retained earnings of **$223 thousand** as of adoption[106](index=106&type=chunk)[132](index=132&type=chunk)[152](index=152&type=chunk) - The Bank's primary business involves taking deposits in Norfolk County, Massachusetts, and investing them in one- to four-family residential real estate loans[90](index=90&type=chunk) - Management identifies the allowance for credit losses and deferred income taxes as material estimates highly susceptible to near-term change[44](index=44&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=41&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the company's financial condition and results, focusing on the net loss, changes in assets and liabilities, and components of net interest income and market risk - The company reported a net loss of **$210 thousand** for the three months ended December 31, 2023, a **161.6% decrease** from net income in the prior year period[223](index=223&type=chunk) - Net interest income decreased by **30.0%** for the quarter, as the increase in average rate paid on interest-bearing liabilities significantly outpaced the yield on interest-earning assets[224](index=224&type=chunk) - Total assets increased by **$10,000 thousand (2.9%)** to **$359,000 thousand** at December 31, 2023, primarily due to increased cash and FHLB borrowings for a leverage strategy[312](index=312&type=chunk) - The company adopted the CECL methodology (ASU 2016-13) on July 1, 2023, altering the allowance for credit losses estimation process[237](index=237&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=55&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, CFSB Bancorp, Inc. is exempt from providing detailed quantitative and qualitative market risk disclosures - The company is a smaller reporting company under Rule 12b-2 of the Exchange Act and is not required to provide this item's information[271](index=271&type=chunk) [Item 4. Controls and Procedures](index=56&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of December 31, 2023, with no material changes to internal control over financial reporting - Management concluded that the company's disclosure controls and procedures were **effective** as of the end of the reporting period[282](index=282&type=chunk) - No material changes occurred in internal control over financial reporting during the quarter[274](index=274&type=chunk) [PART II. OTHER INFORMATION](index=57&type=section&id=PART%20II.%20OTHER%20INFORMATION) [Item 1. Legal Proceedings](index=57&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material pending legal proceedings beyond routine matters in the ordinary course of business - The company reports no material pending legal proceedings outside of the ordinary course of business[284](index=284&type=chunk)[290](index=290&type=chunk) [Item 1A. Risk Factors](index=57&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, CFSB Bancorp, Inc. is not required to provide risk factor disclosures in its Form 10-Q - As a smaller reporting company, the registrant is not required to provide information for this item[285](index=285&type=chunk) [Item 6. Exhibits](index=58&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the Form 10-Q, including CEO and CFO certifications and XBRL interactive data files - Exhibits filed include CEO and CFO certifications under Sections 302 and 906 of the Sarbanes-Oxley Act, and XBRL data files[204](index=204&type=chunk)

PART I. FINANCIAL INFORMATION [Item 1. Financial Statements](index=3&type=section&id=Item%201.%20Financial%20Statements) The report presents the unaudited consolidated financial statements for the period ending September 30, 2023 Consolidated Balance Sheet Highlights | Indicator | September 30, 2023 (In thousands) | June 30, 2023 (In thousands) | | :--- | :--- | :--- | | **Total Assets** | **$346,221** | **$349,007** | | Total Loans, net | $174,080 | $175,911 | | Total Securities | $147,676 | $148,048 | | **Total Liabilities** | **$270,324** | **$273,118** | | Total Deposits | $260,673 | $263,376 | | **Total Stockholders' Equity** | **$75,897** | **$75,889** | Consolidated Statements of Net Income Highlights | Indicator | Three Months Ended Sep 30, 2023 (In thousands) | Three Months Ended Sep 30, 2022 (In thousands) | | :--- | :--- | :--- | | Net Interest Income | $1,806 | $2,363 | | Provision for (reversal of) credit losses | $(166) | $0 | | Non-interest Income | $160 | $200 | | Non-interest Expenses | $1,916 | $1,748 | | **Net Income** | **$123** | **$645** | | **Diluted EPS** | **$0.02** | **$0.10** | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes detail the basis of presentation, the adoption of the CECL accounting standard, and breakdowns of key financial statement items - The company adopted ASU 2016-13 (CECL) on July 1, 2023, resulting in a **cumulative net decrease to retained earnings of $223,000**[255](index=255&type=chunk)[256](index=256&type=chunk)[264](index=264&type=chunk) - The Bank's business primarily consists of taking deposits and investing in one- to four-family residential real estate loans[237](index=237&type=chunk) Loan Portfolio Composition | Loan Category | Balance at Sep 30, 2023 (In thousands) | | :--- | :--- | | 1-4 family residential | $137,743 | | Multifamily | $12,883 | | Commercial | $20,110 | | Second mortgages and home equity lines | $3,129 | | Consumer and Home improvement | $2,245 | | **Total Loans** | **$176,110** | Bank Regulatory Capital Ratios | Capital Ratio (Bank) | Actual at Sep 30, 2023 | Minimum to be Well Capitalized | | :--- | :--- | :--- | | Total capital (to risk weighted assets) | 33.3% | 10.0% | | Common equity Tier 1 capital (to risk weighted assets) | 32.3% | 6.5% | | Tier 1 capital (to risk weighted assets) | 32.3% | 8.0% | | Tier 1 capital (to adjusted total assets) | 18.3% | 5.0% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management analyzes the significant decline in quarterly net income, driven by lower net interest income and higher operating expenses - Net income for the three months ended September 30, 2023, was $123,000, an **80.9% decrease** from $645,000 in the same period of 2022[216](index=216&type=chunk) - Net interest income **decreased by 23.6%** year-over-year as interest expense outpaced interest income growth, and the **net interest margin compressed to 2.22%**[217](index=217&type=chunk) - Total assets **decreased by 0.8% to $346.2 million** at September 30, 2023, from June 30, 2023, due to declines in cash, securities, and loans[169](index=169&type=chunk) [Comparison of Financial Condition at September 30, 2023 and June 30, 2023](index=45&type=section&id=Comparison%20of%20Financial%20Condition%20at%20September%2030%2C%202023%20and%20June%2030%2C%202023) Total assets and liabilities both decreased slightly, driven by declines in loans and deposits respectively Key Balance Sheet Changes | Balance Sheet Item | Change from June 30, 2023 | Reason for Change | | :--- | :--- | :--- | | Total Assets | -0.8% | Decreases in cash, securities, and loans | | Net Loans | -1.0% | Decrease in one-to four-family residential loans due to prepayments exceeding originations | | Deposits | -1.0% | Decreases in savings and money market accounts as management did not increase rates | | Borrowings | -11.6% | Reduction of deposit outflows during the quarter | [Comparison of Operating Results for the Three Months Ended September 30, 2023 and 2022](index=45&type=section&id=Comparison%20of%20Operating%20Results%20for%20the%20Three%20Months%20Ended%20September%2030%2C%202023%20and%202022) Quarterly net income declined significantly year-over-year due to a sharp rise in interest expense that compressed the net interest margin - Net interest margin **decreased by 54 basis points to 2.22%** from 2.76% in the prior year, as the increase in rates paid on liabilities outpaced the increase in yields on assets[217](index=217&type=chunk) - A **reversal of credit losses of $166,000** was recorded due to improvements in forecasted economic conditions, compared to no provision in the prior year[217](index=217&type=chunk) - Non-interest expense **increased by $168,000 (9.6%)**, driven by a $126,000 rise in salaries and employee benefits from merit increases, higher headcount, and stock-based compensation[219](index=219&type=chunk) [Management of Market Risk](index=50&type=section&id=Management%20of%20Market%20Risk) The company actively manages interest rate risk through its Asset/Liability Committee but does not utilize hedging instruments - The company **does not engage in hedging activities**, such as futures, options, or interest rate swaps, to manage its interest rate risk[2](index=2&type=chunk) Net Interest Income (NII) Sensitivity Analysis | Change in Interest Rates (bps) | Estimated Change in Net Interest Income (Year 1) | | :--- | :--- | | +400 | (29.2%) | | +200 | (14.8%) | | Level | - | | -200 | +7.2% | | -400 | +11.7% | Economic Value of Equity (EVE) Sensitivity Analysis | Change in Interest Rates (bps) | Estimated Change in Economic Value of Equity (EVE) | | :--- | :--- | | +400 | (43.3%) | | +200 | (22.7%) | | Level | - | | -200 | +19.7% | | -400 | +33.8% | [Liquidity and Capital Resources](index=52&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position and exceeds all regulatory capital requirements - Primary sources of liquidity are deposits, principal and interest payments on loans and securities, and proceeds from maturing securities[9](index=9&type=chunk) - At September 30, 2023, the company had **borrowing capacity of $61.2 million** from the FHLB of Boston, with only $3.3 million outstanding[9](index=9&type=chunk) - The Bank **exceeded all of its regulatory capital requirements** as of September 30, 2023[9](index=9&type=chunk) [Item 3. Quantitative and Qualitative Disclosures about Market Risk](index=53&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20about%20Market%20Risk) As a smaller reporting company, the company is exempt from providing these disclosures - As a **smaller reporting company** defined by Rule 12b-2 of the Exchange Act, the company is not required to provide the information required under this item[14](index=14&type=chunk) [Item 4. Controls and Procedures](index=54&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes to internal controls - The Chief Executive Officer and Treasurer and Chief Operating Officer concluded that the Company's **disclosure controls and procedures were operating in an effective manner** as of September 30, 2023[17](index=17&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that materially affected, or are reasonably likely to materially affect, these controls[18](index=18&type=chunk) PART II—OTHER INFORMATION [Item 1. Legal Proceedings](index=55&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings outside the ordinary course of business - The company is **not involved in any pending legal proceedings**, other than routine matters, that would be material to its financial condition or results of operations[21](index=21&type=chunk) [Item 1A. Risk Factors](index=55&type=section&id=Item%201A.%20Risk%20Factors) The company is exempt from providing risk factor disclosures as a smaller reporting company - The company is a **smaller reporting company** and is not required to provide the information under this item[22](index=22&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds](index=55&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the reporting period - None[24](index=24&type=chunk)[207](index=207&type=chunk) [Item 3. Defaults upon Senior Securities](index=55&type=section&id=Item%203.%20Defaults%20upon%20Senior%20Securities) This item is not applicable - Not applicable[26](index=26&type=chunk) [Item 4. Mine Safety Disclosures](index=55&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable - Not applicable[28](index=28&type=chunk) [Item 5. Other Information](index=55&type=section&id=Item%205.%20Other%20Information) No other information was reported for the period [Item 6. Exhibits](index=56&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including Sarbanes-Oxley certifications and XBRL data - Exhibits filed include **CEO and CFO certifications under Sarbanes-Oxley** Sections 302 and 906[32](index=32&type=chunk) - The filing includes financial statements and notes **formatted in XBRL** (Extensible Business Reporting Language)[32](index=32&type=chunk)

PART I [Item 1. Business](index=3&type=section&id=Item%201.%20Business) CFSB Bancorp, Inc. is the holding company for Colonial Federal Savings Bank, a federal savings bank operating in Norfolk County, Massachusetts, primarily focused on residential real estate loans and subject to extensive regulation [Company Overview](index=4&type=section&id=Company%20Overview) CFSB Bancorp, Inc. was formed in January 2022 following a mutual holding company reorganization, with its common stock beginning to trade on Nasdaq on January 13, 2022[80](index=80&type=chunk)[53](index=53&type=chunk) Key Financials as of June 30, 2023 (in millions) | Metric | Amount | | :--- | :--- | | Total Assets | $349.0 | | Total Deposits | $263.4 | | Total Equity | $75.9 | The company operates three full-service and one limited-service banking office in Norfolk County, Massachusetts, which it considers its primary lending market area along with Plymouth County[59](index=59&type=chunk) The company faces significant competition, holding a **0.79% market share** of total deposits in Norfolk County as of June 30, 2022, ranking 23rd out of 41 banks[86](index=86&type=chunk) [Lending Activities](index=6&type=section&id=Lending%20Activities) The company's principal lending activity is one- to four-family residential real estate loans, which constituted **78.7% of the total loan portfolio** at June 30, 2023. The company plans to increase its focus on originating multi-family and commercial real estate loans[87](index=87&type=chunk)[91](index=91&type=chunk) Loan Portfolio Composition (in thousands) | Loan Type | Amount (June 30, 2023) | % of Total | | :--- | :--- | :--- | | 1-4 Family Residential | $140,109 | 78.71% | | Multi-family | $12,638 | 7.10% | | Commercial Real Estate | $20,323 | 11.42% | | Second Mortgages & HELOC | $2,699 | 1.52% | | Consumer Loans | $2,240 | 1.25% | | **Total Loans** | **$178,009** | **100.00%** | The company's loans-to-one-borrower limit was approximately **$9.8 million** as of June 30, 2023, and it had no borrowers exceeding this limit. The largest single borrower relationship was **$7.4 million**[95](index=95&type=chunk) As of June 30, 2023, the company had **no non-performing loans**, no loans past due more than 30 days, and no real estate owned (REO)[71](index=71&type=chunk)[97](index=97&type=chunk)[122](index=122&type=chunk) The allowance for loan losses remained stable at **$1.7 million** at both June 30, 2023 and June 30, 2022, representing **0.98%** and **1.00%** of total loans outstanding, respectively. No provision for loan losses was recorded in the year ended June 30, 2023[102](index=102&type=chunk)[126](index=126&type=chunk) [Investment Activities](index=18&type=section&id=Investment%20Activities) The company's investment policy authorizes investments in various types of investment-grade securities, including U.S. Treasury obligations, government-sponsored enterprise securities, corporate debt, and municipal obligations[105](index=105&type=chunk) Investment Portfolio Summary as of June 30, 2023 (in thousands) | Security Type | Amortized Cost | Fair Value | | :--- | :--- | :--- | | **Available for Sale** | | | | Mortgage-backed securities | $147 | $142 | | Collateralized mortgage obligations | $4 | $4 | | **Total Available for Sale** | **$151** | **$146** | | **Held to Maturity** | | | | Debt obligations (Gov't sponsored) | $996 | $962 | | Mortgage-backed securities | $46,619 | $43,119 | | Municipal bonds | $43,865 | $37,445 | | Corporate bonds | $56,421 | $50,746 | | **Total Held to Maturity** | **$147,902** | **$132,273** | [Sources of Funds](index=20&type=section&id=Sources%20of%20Funds) Deposits are the primary source of funds. At June 30, 2023, core deposits (all deposits other than certificates of deposit) were **$152.7 million**, representing **58.0% of total deposits**[108](index=108&type=chunk) Total Deposits by Type (in thousands) | Deposit Type | June 30, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Non-certificate accounts | $152,717 | $186,947 | | Certificate accounts | $110,659 | $100,128 | | **Total Deposits** | **$263,376** | **$287,075** | The company utilizes advances from the Federal Home Loan Bank of Boston (FHLB) to supplement funding. As of June 30, 2023, there were **$3.7 million** in outstanding short-term FHLB advances, with an additional borrowing capacity of **$63.5 million**[111](index=111&type=chunk) [Human Capital Resources](index=22&type=section&id=Human%20Capital%20Resources) As of June 30, 2023, the company had **29 full-time employees**, none of whom are represented by a labor union[112](index=112&type=chunk) The company offers a total rewards package including competitive pay, healthcare benefits, a 401(k) plan with matching contributions, and an Employee Stock Ownership Plan (ESOP)[44](index=44&type=chunk) [Supervision and Regulation](index=22&type=section&id=Supervision%20and%20Regulation) The Bank is primarily regulated by the Office of the Comptroller of the Currency (OCC) and the FDIC. The holding companies, CFSB Bancorp and 15 Beach, MHC, are regulated by the Federal Reserve Board[46](index=46&type=chunk)[14](index=14&type=chunk) The Bank must meet minimum capital standards, including a common equity Tier 1 ratio of **4.5%**, Tier 1 ratio of **6.0%**, and total capital ratio of **8.0%**. At June 30, 2023, the Bank exceeded all applicable requirements and was considered "well capitalized"[26](index=26&type=chunk)[32](index=32&type=chunk)[115](index=115&type=chunk) As a federal savings bank, the Bank must satisfy the qualified thrift lender (QTL) test, requiring at least **65%** of its portfolio assets to be in qualified thrift investments. The Bank was in compliance with the QTL test at June 30, 2023[115](index=115&type=chunk) The Dodd-Frank Act extended the "source of strength" doctrine, requiring savings and loan holding companies like CFSB Bancorp to serve as a source of financial and managerial strength to their subsidiary institutions[3](index=3&type=chunk) [Item 1A. Risk Factors](index=31&type=section&id=Item%201A.%20Risk%20Factors) The company's primary risks stem from its heavy concentration in real estate lending within a specific geographic market, making it vulnerable to local economic downturns. It faces interest rate risk due to a mismatch in the maturities of its assets and liabilities. Intense competition from larger institutions, reliance on technology and third-party vendors, and the costs of regulatory compliance also pose significant challenges. Furthermore, as a mutual holding company, public stockholders have limited voting control - **Lending Risk:** A significant portion of the loan portfolio (**98.8%** at June 30, 2023) is secured by real estate, primarily in Norfolk and Plymouth Counties, Massachusetts, concentrating risk in the local real estate market[256](index=256&type=chunk) - **Interest Rate Risk:** The company's profitability is sensitive to interest rate fluctuations. In a rising rate environment, funding costs may increase faster than asset yields. An instantaneous **100 basis point increase** in rates is estimated to decrease the Economic Value of Equity (EVE) by **10.4%**[308](index=308&type=chunk)[309](index=309&type=chunk) - **Competition Risk:** The company faces intense competition from larger financial institutions that have greater resources, economies of scale, and broader product offerings[280](index=280&type=chunk)[310](index=310&type=chunk) - **Regulatory and Compliance Risk:** The company is subject to extensive regulation, and changes in laws or accounting standards, such as the implementation of CECL, could adversely affect operations and increase costs[313](index=313&type=chunk)[481](index=481&type=chunk) - **Operational Risk:** The business relies heavily on technology and third-party vendors, exposing it to risks of system failure, interruption, or cybersecurity breaches[288](index=288&type=chunk)[289](index=289&type=chunk) - **Ownership Structure Risk:** Public stockholders own a minority of the company's common stock, with the mutual holding company, 15 Beach, MHC, owning a majority. This limits public stockholders' ability to influence voting matters, including potential mergers or conversions[295](index=295&type=chunk) [Item 1B. Unresolved Staff Comments](index=42&type=section&id=Item%201B.%20Unresolved%20Staff%20Comments) The company reports no unresolved staff comments from the SEC - There are no unresolved staff comments[298](index=298&type=chunk)[361](index=361&type=chunk) [Item 2. Properties](index=42&type=section&id=Item%202.%20Properties) The company operates from its main office in Quincy, Massachusetts, two additional branches in Holbrook and Weymouth, and a limited-service branch in a senior housing facility in Quincy. The net book value of its real properties was $3.4 million as of June 30, 2023 - The company conducts operations from a main office and three branch offices, all located in Norfolk County, Massachusetts[331](index=331&type=chunk) - As of June 30, 2023, the net book value of the company's real properties, including land and buildings, was **$3.4 million**[331](index=331&type=chunk) [Item 3. Legal Proceedings](index=42&type=section&id=Item%203.%20Legal%20Proceedings) The company is not a party to any legal proceedings that are expected to have a material adverse effect on its business - The company is not presently a party to any material legal proceedings[299](index=299&type=chunk)[362](index=362&type=chunk) [Item 4. Mine Safety Disclosures](index=42&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company - Not applicable[300](index=300&type=chunk)[332](index=332&type=chunk) PART II [Item 5. Market for Registrant's Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities](index=43&type=section&id=Item%205.%20Market%20for%20Registrant%27s%20Common%20Equity%2C%20Related%20Stockholder%20Matters%20and%20Issuer%20Purchases%20of%20Equity%20Securities) The company's common stock trades on the Nasdaq Stock Market under the symbol "CFSB." As of September 18, 2023, there were 208 stockholders of record. The company has never paid dividends and does not anticipate doing so in the foreseeable future. There were no share repurchases during the quarter ended June 30, 2023 - The company's common stock began trading on The Nasdaq Stock Market under the symbol "CFSB" on January 13, 2022[517](index=517&type=chunk) - As of September 18, 2023, there were **208 stockholders of record**[302](index=302&type=chunk) - The company has never declared or paid cash dividends and does not plan to do so in the foreseeable future, intending to retain earnings for business operations and expansion[334](index=334&type=chunk) - There were no sales of unregistered securities or repurchases of common stock during the quarter ended June 30, 2023[303](index=303&type=chunk) [Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=43&type=section&id=Item%207.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) For the fiscal year ended June 30, 2023, net income increased significantly to $1.4 million from $442,000 in the prior year, primarily due to a one-time charitable foundation funding in 2022 and higher interest income in 2023. Total assets decreased by 4.7% to $349.0 million, driven by a reduction in cash, while net loans grew by 1.9%. Total deposits decreased by 8.3% to $263.4 million. Net interest income grew by 6.7% to $8.8 million, and the net interest margin improved to 2.61%. The company's strategy remains focused on prudent loan growth, increasing core deposits, and managing credit risk Comparison of Financial Condition (in millions) | Account | June 30, 2023 | June 30, 2022 | % Change | | :--- | :--- | :--- | :--- | | Total Assets | $349.0 | $366.2 | (4.7%) | | Net Loans | $175.9 | $172.6 | 1.9% | | Deposits | $263.4 | $287.1 | (8.3%) | | Total Stockholders' Equity | $75.9 | $74.3 | 2.2% | Comparison of Operating Results (in thousands) | Account | Year Ended June 30, 2023 | Year Ended June 30, 2022 | % Change | | :--- | :--- | :--- | :--- | | Net Interest Income | $8,752 | $8,204 | 6.7% | | Provision for Loan Losses | $0 | $26 | (100.0%) | | Non-interest Income | $664 | $695 | (4.5%) | | Non-interest Expense | $7,669 | $8,483 | (9.6%) | | **Net Income** | **$1,446** | **$442** | **227.1%** | The significant increase in net income for FY 2023 was primarily due to a **$1.6 million contribution** to a charitable foundation in FY 2022, which did not recur, and a **15.8% increase** in interest and dividend income in FY 2023[345](index=345&type=chunk)[350](index=350&type=chunk) The company's business strategy focuses on growing the balance sheet, particularly through residential, multi-family, and commercial real estate lending, while increasing core deposits and maintaining strong asset quality[371](index=371&type=chunk) [Item 7A. Quantitative and Qualitative Disclosures About Market Risk](index=54&type=section&id=Item%207A.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate risk. Disclosures regarding this risk are included in Item 7, under the section "Management of Market Risk" - Information regarding market risk is detailed in Item 7 under the heading "Management's Discussion and Analysis of Financial Conditions and Results of Operations—Management of Market Risk"[416](index=416&type=chunk) [Item 8. Financial Statements and Supplementary Data](index=51&type=section&id=Item%208.%20Financial%20Statements%20and%20Supplementary%20Data) This section includes the Report of Independent Registered Public Accounting Firm, the consolidated financial statements (Balance Sheets, Statements of Operations, Comprehensive Income, Stockholders' Equity, and Cash Flows) for the years ended June 30, 2023 and 2022, and the accompanying Notes to Consolidated Financial Statements [Report of Independent Registered Public Accounting Firm](index=57&type=section&id=Report%20of%20Independent%20Registered%20Public%20Accounting%20Firm) Wolf & Company, P.C. issued an unqualified opinion on the consolidated financial statements, stating they present fairly, in all material respects, the financial position and results of operations in conformity with U.S. GAAP[419](index=419&type=chunk) The audit was conducted in accordance with the standards of the Public Company Accounting Oversight Board (PCAOB). The firm has served as the company's auditor since 2004[393](index=393&type=chunk)[394](index=394&type=chunk) [Notes to Consolidated Financial Statements](index=63&type=section&id=Notes%20to%20Consolidated%20Financial%20Statements) The company adopted ASU 2016-13 (CECL) on July 1, 2023, which will change the methodology for estimating credit losses from an incurred loss model to a lifetime expected loss model[451](index=451&type=chunk) Regulatory Capital Ratios as of June 30, 2023 | Ratio | Actual Ratio | Minimum Requirement | Well Capitalized Minimum | | :--- | :--- | :--- | :--- | | Total capital (to risk weighted assets) | 32.9% | 8.0% | 10.0% | | Tier 1 capital (to risk weighted assets) | 32.0% | 6.0% | 8.0% | | Common equity Tier 1 capital (to risk weighted assets) | 32.0% | 4.5% | 6.5% | | Tier 1 capital (to adjusted total assets) | 18.2% | 4.0% | 5.0% | The Employee Stock Ownership Plan (ESOP) held **255,648 shares**, of which **240,310** were unallocated as of June 30, 2023. The ESOP loan balance was **$2.5 million**[161](index=161&type=chunk)[528](index=528&type=chunk) Under the 2023 Equity Incentive Plan, the company granted **273,000 stock options** and **111,000 restricted stock awards** during the year ended June 30, 2023[168](index=168&type=chunk)[169](index=169&type=chunk) [Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure](index=49&type=section&id=Item%209.%20Changes%20in%20and%20Disagreements%20With%20Accountants%20on%20Accounting%20and%20Financial%20Disclosure) The company reports no changes in or disagreements with its accountants on accounting and financial disclosure - None[175](index=175&type=chunk) [Item 9A. Controls and Procedures](index=49&type=section&id=Item%209A.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of June 30, 2023. Management also concluded that the internal control over financial reporting was effective. There were no material changes to internal controls during the period - Based on an evaluation as of June 30, 2023, the CEO and COO concluded that the company's disclosure controls and procedures are effective[207](index=207&type=chunk) - Management's annual report on internal control over financial reporting concluded that such controls were effective as of June 30, 2023[177](index=177&type=chunk)[545](index=545&type=chunk) - There were no changes in internal control over financial reporting during the period that materially affected, or are reasonably likely to materially affect, such controls[178](index=178&type=chunk)[208](index=208&type=chunk) [Item 9B. Other Information](index=49&type=section&id=Item%209B.%20Other%20Information) The company reports no other information for this item - None[226](index=226&type=chunk) PART III [Item 10. Directors, Executive Officers and Corporate Governance](index=50&type=section&id=Item%2010.%20Directors%2C%20Executive%20Officers%20and%20Corporate%20Governance) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information regarding directors, executive officers, and corporate governance is incorporated by reference from the company's 2023 Proxy Statement[181](index=181&type=chunk) [Item 11. Executive Compensation](index=50&type=section&id=Item%2011.%20Executive%20Compensation) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information regarding executive compensation is incorporated by reference from the company's 2023 Proxy Statement[211](index=211&type=chunk) [Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters](index=50&type=section&id=Item%2012.%20Security%20Ownership%20of%20Certain%20Beneficial%20Owners%20and%20Management%20and%20Related%20Stockholder%20Matters) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information regarding security ownership is incorporated by reference from the company's 2023 Proxy Statement[549](index=549&type=chunk) [Item 13. Certain Relationships and Related Transactions, and Director Independence](index=50&type=section&id=Item%2013.%20Certain%20Relationships%20and%20Related%20Transactions%2C%20and%20Director%20Independence) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information regarding certain relationships, related transactions, and director independence is incorporated by reference from the company's 2023 Proxy Statement[223](index=223&type=chunk) [Item 14. Principal Accounting Fees and Services](index=51&type=section&id=Item%2014.%20Principal%20Accounting%20Fees%20and%20Services) Information required by this item is incorporated by reference from the company's definitive Proxy Statement for the 2023 Annual Meeting of Stockholders - Information regarding principal accounting fees and services is incorporated by reference from the company's 2023 Proxy Statement[224](index=224&type=chunk) PART IV [Item 15. Exhibits and Financial Statement Schedules](index=52&type=section&id=Item%2015.%20Exhibits%20and%20Financial%20Statement%20Schedules) This section lists the financial statements, financial statement schedules, and exhibits filed as part of the Annual Report on Form 10-K - This item includes the consolidated financial statements and a list of exhibits filed with the report, such as the company's charter, bylaws, material contracts, and various certifications[186](index=186&type=chunk)[553](index=553&type=chunk) [Item 16. Form 10-K Summary](index=53&type=section&id=Item%2016.%20Form%2010-K%20Summary) The company indicates there is no Form 10-K summary provided - None[226](index=226&type=chunk)

[PART I. FINANCIAL INFORMATION](index=3&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This section presents the unaudited consolidated financial statements and management's discussion and analysis for CFSB Bancorp, Inc. [Item 1. Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents the unaudited consolidated financial statements for CFSB Bancorp, Inc. as of March 31, 2023, including balance sheets, income statements, and cash flows. [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) As of March 31, 2023, total assets decreased to $351.7 million, primarily due to reduced cash, while stockholders' equity modestly increased. Consolidated Balance Sheet Summary (in thousands) | Account | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Total cash and cash equivalents | $5,342 | $31,667 | | Loans, net | $176,943 | $172,593 | | Securities (AFS & HTM) | $151,139 | $145,438 | | **Total Assets** | **$351,676** | **$366,183** | | Total deposits | $270,006 | $287,075 | | **Total Liabilities** | **$276,002** | **$291,933** | | **Total Stockholders' Equity** | **$75,674** | **$74,250** | [Consolidated Statements of Net Income (Loss)](index=4&type=section&id=Consolidated%20Statements%20of%20Net%20Income%20(Loss)) The company reported a net income of $355,000 for the three months ended March 31, 2023, a significant improvement from a net loss in the prior year. Net Income (Loss) Summary (in thousands, except per share data) | Metric | Three Months Ended March 31, 2023 | Three Months Ended March 31, 2022 | Nine Months Ended March 31, 2023 | Nine Months Ended March 31, 2022 | | :--- | :--- | :--- | :--- | :--- | | Net Interest Income | $2,155 | $2,051 | $6,859 | $6,045 | | Provision for loan losses | $0 | $1 | $0 | $26 | | Non-interest Income | $148 | $153 | $500 | $529 | | Non-interest Expenses | $1,901 | $3,227 | $5,736 | $6,734 | | **Net Income (Loss)** | **$355** | **($828)** | **$1,341** | **($122)** | | **Diluted EPS** | **$0.06** | **($0.15)** | **$0.21** | **N/A** | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) For the nine months ended March 31, 2023, net cash decreased by $26.3 million, primarily due to investing and financing activities. Cash Flow Summary for the Nine Months Ended March 31 (in thousands) | Cash Flow Category | 2023 | 2022 | | :--- | :--- | :--- | | Net cash provided by operating activities | $1,437 | $1,127 | | Net cash used in investing activities | ($10,704) | ($26,976) | | Net cash (used in) provided by financing activities | ($17,058) | $22,436 | | **Net change in cash and cash equivalents** | **($26,325)** | **($3,413)** | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) These notes provide detailed information on accounting policies, financial statement items, regulatory capital, and the company's well-capitalized status. - The company's business primarily involves taking deposits and investing in one- to four-family residential real estate loans in specific Massachusetts counties[59](index=59&type=chunk) - The company is evaluating the potentially material impact of ASU 2016-13 (CECL model), effective for fiscal years beginning after December 15, 2022[69](index=69&type=chunk) Loan Portfolio Composition (in thousands) | Loan Category | March 31, 2023 | June 30, 2022 | | :--- | :--- | :--- | | Residential 1-4 family | $140,164 | $141,073 | | Commercial | $20,576 | $14,761 | | Multifamily | $12,638 | $14,310 | | Other | $4,871 | $4,561 | | **Total Loans** | **$179,056** | **$174,689** | Regulatory Capital Ratios | Ratio | March 31, 2023 | Minimum Requirement | To Be Well Capitalized | | :--- | :--- | :--- | :--- | | Total capital (to risk weighted assets) | 32.6% | 8.0% | 10.0% | | Tier 1 capital (to risk weighted assets) | 31.7% | 6.0% | 8.0% | | Tier 1 capital (to adjusted total assets) | 17.9% | 4.0% | 5.0% | [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=34&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the company's financial condition and operating results, highlighting asset shifts, improved net income, and strong capital position. [Comparison of Financial Condition](index=37&type=section&id=Comparison%20of%20Financial%20Condition) Total assets decreased by 4.0% to $351.7 million, driven by a significant reduction in cash used to fund higher-yielding securities and loans. - Total assets decreased by **$14.5 million**, or **4.0%**, primarily from a **$26.4 million** decrease in cash and cash equivalents[142](index=142&type=chunk) - Net loans increased by **$4.3 million**, or **2.5%**, driven by a **39.4%** increase in commercial real estate loans[143](index=143&type=chunk) - Deposits decreased by **$17.1 million**, or **6.0%**, as funds shifted from lower-yielding accounts to higher-yielding term certificates following promotional offers[143](index=143&type=chunk) [Comparison of Operating Results](index=37&type=section&id=Comparison%20of%20Operating%20Results) Operating results improved significantly year-over-year, with net income turning positive due to increased net interest income and the absence of a prior-year charitable contribution. - For the three months ended March 31, 2023, net income increased by **$1.2 million** year-over-year, primarily due to a **$1.6 million** charitable contribution made in the prior-year period[144](index=144&type=chunk) - For the nine months ended March 31, 2023, net interest income increased by **$814,000 (13.5%)** to **$6.9 million**, and the net interest margin increased by **22 basis points** to **2.71%**[164](index=164&type=chunk) - No provision for loan losses was recorded in the first nine months of fiscal 2023, reflecting continued strong asset quality[158](index=158&type=chunk) [Management of Market Risk](index=46&type=section&id=Management%20of%20Market%20Risk) The company's primary market risk is interest rate risk, with NII and EVE sensitivity analyzed through simulation models. Net Interest Income Sensitivity Analysis (Year 1) | Change in Interest Rates (bps) | Change from Level | | :--- | :--- | | +400 | (18.7%) | | +200 | (9.6%) | | +100 | (5.3%) | | Level | - | | -100 | (0.4%) | | -200 | (1.4%) | Economic Value of Equity (EVE) Sensitivity Analysis | Change in Interest Rates (bps) | Change in EVE (Percent) | | :--- | :--- | | +400 | (41.3%) | | +200 | (21.5%) | | +100 | (10.8%) | | Level | - | | -100 | 8.8% | | -200 | 16.9% | [Liquidity and Capital Resources](index=48&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity through deposits and portfolio cash flows, exceeding all regulatory capital requirements. - Primary sources of funds are deposits, loan and security payments, and maturities, with access to FHLB and Federal Reserve Bank borrowing facilities[180](index=180&type=chunk) - At March 31, 2023, the company had the ability to borrow **$61.2 million** from the FHLB and **$14.9 million** in available lines of credit, with no amounts drawn[180](index=180&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=49&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, the registrant is not required to provide the information for this item. - As a smaller reporting company defined by Rule 12b-2 of the Exchange Act, the registrant is not required to provide the information under this item[185](index=185&type=chunk) [Item 4. Controls and Procedures](index=50&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that the company's disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal controls. - Based on an evaluation as of March 31, 2023, the CEO and COO concluded that the company's disclosure controls and procedures are operating in an effective manner[188](index=188&type=chunk) - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[189](index=189&type=chunk) [PART II. OTHER INFORMATION](index=51&type=section&id=PART%20II.%20OTHER%20INFORMATION) This section covers legal proceedings, risk factors, and a list of exhibits filed with the quarterly report. [Item 1. Legal Proceedings](index=51&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material pending legal proceedings outside of the ordinary course of business. - The company is not involved in any pending legal proceedings that would be material to its financial condition or results of operations[192](index=192&type=chunk) [Item 1A. Risk Factors](index=51&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, the registrant is not required to provide risk factor disclosures in its Form 10-Q. - The company is a smaller reporting company and is not required to provide the information under this item[193](index=193&type=chunk) [Item 6. Exhibits](index=52&type=section&id=Item%206.%20Exhibits) This section lists the exhibits filed with the quarterly report, including CEO/CFO certifications and XBRL financial data. - The exhibits filed include certifications from the CEO and CFO pursuant to Sections 302 and 906 of the Sarbanes-Oxley Act of 2002[199](index=199&type=chunk)[205](index=205&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section presents CFSB Bancorp, Inc.'s unaudited consolidated financial statements, including balance sheets, income statements, and cash flows, with detailed accounting policy notes [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets decreased to **$356.8 million** by December 2022, driven by reduced cash, while equity increased to **$75.3 million** | Account | Dec 31, 2022 ($ in thousands) | June 30, 2022 ($ in thousands) | | :--- | :--- | :--- | | **Total Assets** | **$356,833** | **$366,183** | | Cash and cash equivalents | $10,574 | $31,667 | | Loans, net | $178,569 | $172,593 | | Securities held to maturity | $149,473 | $145,239 | | **Total Liabilities** | **$281,554** | **$291,933** | | Total deposits | $275,462 | $287,075 | | **Total Stockholders' Equity** | **$75,279** | **$74,250** | [Consolidated Statements of Net Income](index=4&type=section&id=Consolidated%20Statements%20of%20Net%20Income) Net income increased to **$341,000** for the quarter and **$986,000** for six months, driven by higher net interest income | Metric ($ in thousands) | Three Months Ended Dec 31, 2022 | Three Months Ended Dec 31, 2021 | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Total interest and dividend income | $2,681 | $2,268 | $5,286 | $4,529 | | Net interest income | $2,341 | $2,011 | $4,704 | $3,994 | | **Net income** | **$341** | **$234** | **$986** | **$706** | | Basic and diluted EPS | $0.05 | N/A | $0.16 | N/A | [Consolidated Statements of Cash Flows](index=8&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) Net cash and equivalents decreased by **$21.1 million** due to cash used in investing and financing activities, despite positive operating cash flow | Cash Flow Activity ($ in thousands) | Six Months Ended Dec 31, 2022 | Six Months Ended Dec 31, 2021 | | :--- | :--- | :--- | | Net cash provided by (used in) operating activities | $897 | $(30) | | Net cash used in investing activities | $(10,502) | $(15,189) | | Net cash (used in) provided by financing activities | $(11,488) | $22,374 | | **Net change in cash and cash equivalents** | **$(21,093)** | **$7,155** | [Notes to Unaudited Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) Notes detail accounting policies, loan portfolio composition (primarily residential real estate), regulatory capital, and employee benefit plans - The Bank primarily focuses on **one- to four-family residential real estate loans**, aiming to grow its balance sheet through originations and increased multi-family/commercial loans[24](index=24&type=chunk) Loan Portfolio Composition | Loan Type ($ in thousands) | Dec 31, 2022 | June 30, 2022 | | :--- | :--- | :--- | | 1-4 family residential | $140,898 | $141,073 | | Commercial real estate | $21,077 | $14,761 | | Multifamily | $13,239 | $14,310 | | **Total loans** | **$180,699** | **$174,689** | Regulatory Capital Ratios | Capital Ratios (as of Dec 31, 2022) | Actual Ratio | Minimum to be Well Capitalized | | :--- | :--- | :--- | | Total capital (to risk weighted assets) | 32.6% | 10.0% | | Common equity Tier 1 capital | 31.7% | 6.5% | | Tier 1 capital (to risk weighted assets) | 31.7% | 8.0% | [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=30&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses financial performance, focusing on net interest income, changes in financial condition, operating results, asset quality, and market risk management [Comparison of Financial Condition (at Dec 31, 2022 and June 30, 2022)](index=33&type=section&id=Comparison%20of%20Financial%20Condition) Total assets decreased by **$9.4 million** due to cash deployment into loans and securities, while equity increased by **$1.0 million** - The company strategically deployed excess cash into **higher-yielding loans and securities**, significantly decreasing cash and cash equivalents[108](index=108&type=chunk) - Net loans increased by **$6.0 million (3.5%)**, driven by a **42.8% rise in commercial real estate loans**, diversifying the portfolio[108](index=108&type=chunk) - Deposits decreased by **$11.6 million (4.0%)**, mainly in savings and money market accounts, as management opted against raising interest rates[108](index=108&type=chunk) [Comparison of Operating Results](index=33&type=section&id=Comparison%20of%20Operating%20Results) Net income increased **45.7%** for the quarter and **39.7%** for six months, driven by higher net interest income and expanded net interest margin Three Months Ended December 31, 2022 | Metric ($ in thousands) | Three Months Ended Dec 31, 2022 | Change (YoY) | | :--- | :--- | :--- | | Net Income | $341,000 | +45.7% | | Net Interest Income | $2.3 million | +16.4% | | Net Interest Margin | 2.77% | +27 bps | Six Months Ended December 31, 2022 | Metric ($ in thousands) | Six Months Ended Dec 31, 2022 | Change (YoY) | | :--- | :--- | :--- | | Net Income | $986,000 | +39.7% | | Net Interest Income | $4.7 million | +17.8% | | Net Interest Margin | 2.76% | +26 bps | - No provision for loan losses was recorded, reflecting **strong asset quality** with an allowance for loan losses at **0.97% of total loans**[110](index=110&type=chunk) [Management of Market Risk](index=42&type=section&id=Management%20of%20Market%20Risk) Primary market risk is interest rate risk, with a **+200 bps** shock projected to decrease NII by **8.7%** and EVE by **22.4%** Estimated Change in Net Interest Income | Interest Rate Change (bps) | Estimated Change in Net Interest Income (Year 1) | | :--- | :--- | | +200 | (8.7%) | | +100 | (4.7%) | | -100 | (0.5%) | | -200 | (1.9%) | Estimated Change in Economic Value of Equity (EVE) | Interest Rate Change (bps) | Estimated Change in Economic Value of Equity (EVE) | | :--- | :--- | | +200 | (22.4%) | | +100 | (11.2%) | | -100 | +9.5% | | -200 | +18.2% | [Liquidity and Capital Resources](index=44&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains strong liquidity from deposits and loan payments, with **$66.8 million** FHLB access and exceeding all regulatory capital requirements - Primary sources of funds include **deposits**, **loan and security payments**, and access to **Federal Home Loan Bank of Boston advances**[143](index=143&type=chunk) - As of December 31, 2022, the company could borrow **$66.8 million** from FHLB of Boston, with no outstanding advances[143](index=143&type=chunk) - The Bank **exceeded all regulatory capital requirements** as of December 31, 2022[143](index=143&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=45&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, CFSB Bancorp, Inc. is not required to provide market risk disclosures under this item - The company, as a smaller reporting entity, is **not required to provide quantitative and qualitative market risk disclosures**[148](index=148&type=chunk) [Controls and Procedures](index=46&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded disclosure controls and procedures were effective, with no material changes in internal control over financial reporting - The CEO and COO concluded that the company's **disclosure controls and procedures were effective** as of the period end[151](index=151&type=chunk) - No material changes occurred in the company's **internal control over financial reporting** during the quarter[152](index=152&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=47&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings outside the ordinary course of business - The company reports **no pending legal proceedings** materially affecting its financial condition or results[155](index=155&type=chunk) [Risk Factors](index=47&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, CFSB Bancorp, Inc. is not required to provide risk factor disclosures under this item - The company, as a smaller reporting entity, is **not required to provide risk factor disclosures**[156](index=156&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=47&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) There were no unregistered sales of equity securities during the reporting period - No unregistered sales of equity securities occurred during the period[158](index=158&type=chunk) [Exhibits](index=48&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with Form 10-Q, including corporate governance documents, officer certifications, and XBRL data files - Exhibits filed include the **Charter**, **Bylaws**, **CEO/CFO certifications**, and **XBRL interactive data files**[167](index=167&type=chunk)

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=3&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) The unaudited statements show total assets of $360.9 million, quarterly net income of $645,000, and stockholders' equity of $74.9 million [Consolidated Balance Sheets](index=3&type=section&id=Consolidated%20Balance%20Sheets) Total assets slightly decreased to $360.9 million, while stockholders' equity increased to $74.9 million as of September 30, 2022 Consolidated Balance Sheet Summary (in thousands) | Account | September 30, 2022 (Unaudited) | June 30, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Total cash and cash equivalents | $15,741 | $31,667 | | Securities held to maturity, at amortized cost | $152,141 | $145,239 | | Loans, net | $175,245 | $172,593 | | **Total assets** | **$360,942** | **$366,183** | | **Liabilities & Equity** | | | | Total deposits | $280,052 | $287,075 | | **Total liabilities** | **$286,025** | **$291,933** | | **Total stockholders' equity** | **$74,917** | **$74,250** | | **Total liabilities and stockholders' equity** | **$360,942** | **$366,183** | [Consolidated Statements of Net Income](index=4&type=section&id=Consolidated%20Statements%20of%20Net%20Income) Quarterly net income rose to $645,000, driven by a year-over-year increase in net interest income to $2.36 million Consolidated Statements of Net Income (in thousands, except per share data) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Total interest and dividend income | $2,605 | $2,261 | | Total interest expense | $242 | $278 | | **Net interest income** | **$2,363** | **$1,983** | | Provision for loan losses | - | $15 | | Total non-interest income | $200 | $242 | | Total non-interest expense | $1,748 | $1,638 | | Income before income taxes | $815 | $572 | | **Net income** | **$645** | **$472** | | **Earnings per share (Basic and diluted)** | **$0.10** | **N/A** | [Consolidated Statements of Comprehensive Income](index=5&type=section&id=Consolidated%20Statements%20of%20Comprehensive%20Income) Comprehensive income for the quarter was $644,000, slightly below net income due to a minor unrealized loss on securities Consolidated Statements of Comprehensive Income (in thousands) | Metric | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net income | $645 | $472 | | Other comprehensive income (loss), net of tax | ($1) | ($10) | | **Comprehensive income** | **$644** | **$462** | [Consolidated Statements of Changes in Stockholders' Equity and Retained Earnings](index=6&type=section&id=Consolidated%20Statements%20of%20Changes%20in%20Stockholders%27%20Equity%20and%20Retained%20Earnings) Total stockholders' equity increased to $74.92 million, primarily driven by the quarterly comprehensive income of $644,000 - Stockholders' equity rose to **$74.9 million** at September 30, 2022, mainly due to comprehensive income of **$644,000** and ESOP-related adjustments[18](index=18&type=chunk) [Consolidated Statements of Cash Flows](index=7&type=section&id=Consolidated%20Statements%20of%20Cash%20Flows) A net decrease in cash of $15.9 million resulted from investing and financing activities outpacing cash from operations Consolidated Statements of Cash Flows Summary (in thousands) | Cash Flow Activity | Three Months Ended Sep 30, 2022 | Three Months Ended Sep 30, 2021 | | :--- | :--- | :--- | | Net cash provided by operating activities | $730 | $407 | | Net cash used in investing activities | ($9,696) | ($479) | | Net cash used in financing activities | ($6,960) | ($2,899) | | **Net change in cash and cash equivalents** | **($15,926)** | **($2,971)** | [Notes to Unaudited Consolidated Financial Statements](index=8&type=section&id=Notes%20to%20Unaudited%20Consolidated%20Financial%20Statements) The notes detail accounting policies, business operations, and the impact of new accounting standards like ASU 2016-02 - The Bank's primary business consists of taking deposits from the public and investing them mainly in one- to four-family residential real estate loans[24](index=24&type=chunk) - On January 12, 2022, the Bank reorganized into a two-tier mutual holding company structure and sold **43% of its common stock** in an offering, raising gross proceeds of **$28.0 million**[25](index=25&type=chunk) - The company is evaluating the impact of ASU 2016-13 (CECL), which requires measuring expected credit losses and will be effective for fiscal years beginning after December 15, 2022; the impact may be material[31](index=31&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=23&type=section&id=Item%202.%20Management%27s%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Net income increased 36.7% year-over-year, driven by higher net interest income, while total assets saw a slight decrease [Comparison of Financial Condition (September 30, 2022 vs. June 30, 2022)](index=26&type=section&id=Comparison%20of%20Financial%20Condition) Total assets decreased by 1.4% to $360.9 million as cash was redeployed into securities and loans - Total assets decreased by **1.4% to $360.9 million**, as cash was used to purchase securities and fund loan growth[94](index=94&type=chunk) - Net loans increased by **1.5% to $175.2 million**, led by growth in one-to-four family residential and commercial real estate loans[94](index=94&type=chunk) - Deposits decreased by **2.4% to $280.1 million**, reflecting management's decision not to raise interest rates amid excess liquidity and customer choices in a rising rate environment[94](index=94&type=chunk) [Comparison of Operating Results (For the Three Months Ended September 30, 2022 and 2021)](index=26&type=section&id=Comparison%20of%20Operating%20Results) Net income grew 36.7% to $645,000 year-over-year, propelled by a 25 basis point expansion in the net interest rate spread - Net income rose **36.7% to $645,000**, primarily due to a **19.2% increase** in net interest income[95](index=95&type=chunk) - Net interest margin increased by **26 basis points to 2.72%** year-over-year, as the yield on interest-earning assets rose while the cost of interest-bearing liabilities fell[97](index=97&type=chunk) - No provision for loan losses was recorded for the quarter ended September 30, 2022, reflecting continued strong asset quality; the allowance for loan losses was **0.99% of total loans**[97](index=97&type=chunk) Non-Interest Income (in thousands) | Category | Q3 2022 | Q3 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Customer service fees | $37 | $30 | $7 | 23.3% | | Income on bank-owned life insurance | $64 | $60 | $4 | 6.7% | | Gain on sale of security | - | $48 | ($48) | (100.0%) | | **Total non-interest income** | **$200** | **$242** | **($42)** | **(17.4%)** | Non-Interest Expense (in thousands) | Category | Q3 2022 | Q3 2021 | Change | % Change | | :--- | :--- | :--- | :--- | :--- | | Salaries and employee benefits | $1,018 | $967 | $51 | 5.3% | | Occupancy and equipment | $243 | $210 | $33 | 15.7% | | **Total non-interest expense** | **$1,748** | **$1,638** | **$110** | **6.7%** | [Management of Market Risk](index=31&type=section&id=Management%20of%20Market%20Risk) The company manages interest rate risk, with models showing a potential 6.8% NII decrease from a +200 bps rate shock Net Interest Income Sensitivity Analysis (as of Sep 30, 2022) | Rate Change (bps) | Year 1 Change from Level | | :--- | :--- | | +400 | (13.4%) | | +200 | (6.8%) | | +100 | (3.4%) | | Level | - | | -100 | (0.9%) | | -200 | (2.8%) | Economic Value of Equity (EVE) Sensitivity Analysis (as of Sep 30, 2022) | Rate Change (bps) | Decrease in EVE (%) | | :--- | :--- | | +400 | (40.5%) | | +300 | (31.2%) | | +200 | (21.2%) | | +100 | (10.6%) | | Level | - | | -100 | 8.7% (Increase) | | -200 | 16.6% (Increase) | [Liquidity and Capital Resources](index=32&type=section&id=Liquidity%20and%20Capital%20Resources) The company maintains a strong liquidity position and exceeds all regulatory capital requirements, remaining 'well capitalized' - Primary sources of funds are deposits, loan and security payments, and available borrowings from the Federal Home Loan Bank of Boston[116](index=116&type=chunk) - At September 30, 2022, the Bank had the ability to borrow **$66.7 million** in FHLB advances and had an undrawn **$2.4 million** line of credit[116](index=116&type=chunk) - The Bank **exceeded all regulatory capital requirements** as of September 30, 2022[117](index=117&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=34&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) As a smaller reporting company, this disclosure is not required - The company is a smaller reporting company and is not required to provide quantitative and qualitative disclosures about market risk[122](index=122&type=chunk) [Controls and Procedures](index=34&type=section&id=Item%204.%20Controls%20and%20Procedures) Management concluded that disclosure controls and procedures were effective with no material changes in internal controls - Based on an evaluation as of September 30, 2022, the CEO and COO concluded that the company's **disclosure controls and procedures are effective**[125](index=125&type=chunk) - There were **no changes in internal control over financial reporting** during the quarter that materially affected, or are reasonably likely to materially affect, internal controls[126](index=126&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=35&type=section&id=Item%201.%20Legal%20Proceedings) The company is not involved in any material legal proceedings outside the ordinary course of business - As of September 30, 2022, the company was **not involved in any legal proceedings** that would be material to its financial condition or results of operations[128](index=128&type=chunk) [Risk Factors](index=35&type=section&id=Item%201A.%20Risk%20Factors) As a smaller reporting company, this disclosure is not required - The company is a smaller reporting company and is **not required to provide risk factor disclosures**[129](index=129&type=chunk) [Unregistered Sales of Equity Securities and Use of Proceeds](index=35&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds) No unregistered sales of equity securities occurred during the reporting period - None[131](index=131&type=chunk) [Defaults Upon Senior Securities](index=35&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities) This item is not applicable to the company for the reporting period - Not applicable[133](index=133&type=chunk) [Mine Safety Disclosures](index=35&type=section&id=Item%204.%20Mine%20Safety%20Disclosures) This item is not applicable to the company's operations - Not applicable[135](index=135&type=chunk) [Other Information](index=35&type=section&id=Item%205.%20Other%20Information) There is no additional information to report for this item - None[137](index=137&type=chunk) [Exhibits](index=36&type=section&id=Item%206.%20Exhibits) This section lists all exhibits filed with the report, including CEO/CFO certifications and XBRL data files - Exhibits filed include CEO and CFO certifications pursuant to Sarbanes-Oxley Act Sections 302 and 906, and XBRL data files[140](index=140&type=chunk)

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 Emerging growth company ☒ FORM 10-K (Mark One) ☒ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended June 30, 2022 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______________ to _______________ Commission File Number: 001-41220 CFSB Bancorp, Inc. (Exact Name of Registrant as Specified in its Charter) ...