CFSB Bancorp(CFSB) - 2025 Q4 - Annual Report

Interest Rate Impact - An instantaneous 100 basis point increase in interest rates is estimated to result in a 10.3% decrease in Economic Value of Equity (EVE) and a 7.1% decrease in net interest income[206]. Competition and Market Environment - The company faces intense competition from various financial institutions, which may limit growth and profitability, particularly if it has to raise interest rates on deposits or lower loan rates[207]. - The financial services industry is becoming more competitive due to legislative, regulatory, and technological changes, as well as continued consolidation among financial institutions[208]. - The company’s asset size may hinder its ability to compete effectively, limiting its capacity to invest in marketing and technology[209]. Regulatory and Compliance Risks - Regulatory compliance costs are increasing, and changes in laws may adversely affect operations and costs[211]. - The Federal Reserve Board may require capital resources to support the bank, which could strain the company's financial resources[214]. - Legal and regulatory proceedings may result in substantial costs and adversely affect the company's financial condition and operations[234]. Economic and Trade Risks - Changes in trade policies and tariffs could negatively impact local businesses, leading to lower revenues and potential loan delinquencies[215]. - Climate change concerns could lead to increased costs and reduced demand for products and services, impacting financial performance[235]. Operational Risks - The company relies heavily on technology, exposing it to operational risks including data breaches and system failures[225]. - Third-party vendors are critical to operations, and any issues with these vendors could adversely affect the company's financial condition and results of operations[227]. - The company is susceptible to risks from fraudulent activities, which could lead to financial losses or increased costs[228]. - Internal controls and insurance coverage are in place to mitigate risks, but failures could adversely affect financial condition and results of operations[230]. Financial Reporting and Management Estimates - Changes in accounting standards may impact reported earnings and require retroactive application of new guidance[232]. - Management's estimates and assumptions, particularly regarding credit loss allowances, are subject to significant risk and uncertainty[233]. Shareholder and Stock Market Considerations - The common stock is not heavily traded, leading to potential volatility in stock price due to various market factors[240]. - Federal regulations restrict the ability of public stockholders to exercise voting control, as a majority of shares are held by 15 Beach, MHC[238]. - Provisions in the company's charter make it difficult for potential acquirers to gain control without board approval, which could affect stock market price[247]. Earnings Retention - The company intends to retain future earnings for business use and does not expect to pay cash dividends in the foreseeable future[241].