CFSB Bancorp(CFSB) - 2023 Q1 - Quarterly Report

PART I. FINANCIAL INFORMATION Financial Statements (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 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 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 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 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] Consolidated Statements of Cash Flows 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 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] - 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] - 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] Management's Discussion and Analysis of Financial Condition and Results of Operations 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) 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] - 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] - 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] Comparison of Operating Results (For the Three Months Ended September 30, 2022 and 2021) 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] - 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] - 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] 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 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 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] - 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] - The Bank exceeded all regulatory capital requirements as of September 30, 2022[117] Quantitative and Qualitative Disclosures About Market Risk 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] Controls and Procedures 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] - 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] PART II. OTHER INFORMATION Legal Proceedings 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] Risk Factors 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] Unregistered Sales of Equity Securities and Use of Proceeds No unregistered sales of equity securities occurred during the reporting period - None[131] Defaults Upon Senior Securities This item is not applicable to the company for the reporting period - Not applicable[133] Mine Safety Disclosures This item is not applicable to the company's operations - Not applicable[135] Other Information There is no additional information to report for this item - None[137] Exhibits 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]