CFSB Bancorp(CFSB) - 2022 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION Item 1. Financial Statements This section presents the unaudited consolidated financial statements for CFSB Bancorp, Inc. as of March 31, 2022, following its January 2022 reorganization and stock offering Consolidated Balance Sheet Highlights (Unaudited) | Account | March 31, 2022 (in thousands) | June 30, 2021 (in thousands) | | :--- | :--- | :--- | | Assets | | | | Total cash and cash equivalents | $37,265 | $40,678 | | Securities held to maturity | $134,719 | $105,114 | | Loans, net | $172,758 | $174,433 | | Total assets | $362,539 | $338,854 | | Liabilities & Equity | | | | Total deposits | $283,980 | $284,634 | | Total liabilities | $288,880 | $290,209 | | Total stockholders' equity | $73,659 | $48,645 | | Total liabilities and stockholders' equity | $362,539 | $338,854 | Consolidated Statements of Net Income (Loss) Highlights (Unaudited) | Metric (in thousands) | Three Months Ended March 31, 2022 | Three Months Ended March 31, 2021 | Nine Months Ended March 31, 2022 | Nine Months Ended March 31, 2021 | | :--- | :--- | :--- | :--- | :--- | | Net interest income | $2,051 | $1,868 | $6,045 | $5,445 | | Provision for loan losses | $1 | $15 | $26 | $45 | | Total non-interest expense | $3,227 | $1,530 | $6,775 | $4,791 | | Net income (loss) | ($828) | $401 | ($122) | $996 | - The company completed its reorganization into a mutual holding company structure and a stock offering on January 12, 2022, selling 2,804,306 shares at $10.00 per share for gross proceeds of $28.0 million[5][23] Notes to Unaudited Consolidated Financial Statements These notes detail accounting policies, securities and loan portfolios, deposit structures, regulatory capital, and employee benefit plans, including the new ESOP Securities Portfolio Breakdown (March 31, 2022) | Security Type (in thousands) | Amortized Cost | Fair Value | | :--- | :--- | :--- | | Available for sale | $226 | $231 | | Held to maturity | $134,719 | $128,089 | | Mortgage-backed securities | $40,305 | $39,164 | | Municipal bonds | $44,025 | $40,924 | | Corporate bonds | $50,380 | $47,992 | Loan Portfolio Composition (in thousands) | Loan Category | March 31, 2022 | June 30, 2021 | | :--- | :--- | :--- | | Residential 1-4 family | $140,080 | $139,687 | | Multifamily | $15,353 | $15,868 | | Commercial | $15,307 | $16,366 | | Other Loans | $2,159 | $2,111 | | Total loans | $174,854 | $176,486 | - As of March 31, 2022, the Bank was categorized as "well capitalized" under the regulatory framework, exceeding all minimum capital requirements, with total capital to risk-weighted assets at 35.0%, significantly above the 8.0% minimum requirement[56][57] - As part of the stock offering, the company established an Employee Stock Ownership Plan (ESOP), which purchased 255,648 shares funded by a $2.6 million loan from the company[65][66] Management's Discussion and Analysis of Financial Condition and Results of Operations Management discusses key factors affecting financial condition and operating results, including balance sheet changes, market risk, liquidity, and the impact of the stock offering and charitable foundation funding Comparison of Financial Condition Total assets increased by 7.0% to $362.5 million, driven by a $29.6 million rise in securities, while stockholders' equity grew 51.4% to $73.7 million from stock offering proceeds - Total assets increased by 7.0% to $362.5 million, mainly due to a 28.2% increase in securities held to maturity as the company invested excess cash[89][93] - Stockholders' equity increased by 51.4% to $73.7 million, primarily due to $26.4 million in net proceeds from the stock offering, partially offset by the ESOP stock purchase[97] Comparison of Operating Results The company reported net losses for both three and nine-month periods ending March 31, 2022, primarily due to a $1.6 million charitable foundation contribution, despite growth in net interest income - For the three months ended March 31, 2022, a $828,000 net loss was recorded, compared to a $401,000 net income in the same period of 2021, primarily due to a one-time $1.6 million contribution to a new charitable foundation[98][108] - Net interest income for the three months ended March 31, 2022, increased by 9.8% to $2.1 million, driven by an increase in the net interest margin to 2.38% from 2.34% a year prior[102] - For the nine months ended March 31, 2022, the $122,000 net loss compared to a $996,000 net income in the prior year, also driven by the charitable foundation funding, while net interest income for this period increased by 11.0% to $6.0 million[116][120] Management of Market Risk The company manages interest rate risk by analyzing Net Interest Income and Economic Value of Equity sensitivity, projecting a 2.8% NII decrease and 14.4% EVE decrease under a +200 basis point rate shock Net Interest Income Sensitivity Analysis (Year 1 Forecast) | Change in Interest Rates (bps) | Change from Level | | :--- | :--- | | +400 | -5.7% | | +200 | -2.8% | | +100 | -1.3% | | -100 | -4.5% | Economic Value of Equity (EVE) Sensitivity Analysis | Change in Interest Rates (bps) | Estimated Decrease in EVE (%) | | :--- | :--- | | +400 | (27.8%) | | +200 | (14.4%) | | +100 | (7.2%) | | -100 | 4.5% | Liquidity and Capital Resources The company maintains strong liquidity from deposits and loan payments, with $69.0 million in additional borrowing capacity and enhanced capital from the stock offering, exceeding regulatory requirements - Primary sources of liquidity are deposits, loan and security payments, and borrowing capacity from the Federal Home Loan Bank of Boston, which stood at an additional $69.0 million as of March 31, 2022[142] - The net proceeds from the recent stock offering have significantly enhanced liquidity and capital resources, positioning the company to fund future loan growth[142] Quantitative and Qualitative Disclosures about Market Risk The company is exempt from providing quantitative and qualitative market risk disclosures as it qualifies as a smaller reporting company - The company is exempt from this disclosure requirement because it qualifies as a smaller reporting company[148] Controls and Procedures Management concluded the company's disclosure controls and procedures were effective as of March 31, 2022, with no material changes to internal control over financial reporting during the quarter - Management concluded that the company's disclosure controls and procedures were effective as of the end of the period covered by the report[151] - No changes in internal control over financial reporting occurred during the quarter that materially affected, or are reasonably likely to materially affect, these controls[152] PART II. OTHER INFORMATION Legal Proceedings The company is not involved in any material pending legal proceedings beyond routine business operations - There are no material legal proceedings pending against the company[154] Risk Factors The company is exempt from providing risk factor disclosures as it qualifies as a smaller reporting company - The company is exempt from this disclosure requirement because it qualifies as a smaller reporting company[155] Unregistered Sales of Equity Securities and Use of Proceeds The company reports no unregistered sales of equity securities during the period - There were no unregistered sales of equity securities[156] Exhibits This section lists exhibits filed with the Form 10-Q, including corporate documents and CEO/CFO certifications required by 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[161]