CFSB Bancorp(CFSB) - 2023 Q3 - Quarterly Report

PART I. FINANCIAL INFORMATION This section presents the unaudited consolidated financial statements and management's discussion and analysis for CFSB Bancorp, Inc. Item 1. Financial Statements (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 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) 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 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 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] - The company is evaluating the potentially material impact of ASU 2016-13 (CECL model), effective for fiscal years beginning after December 15, 2022[69] 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 Management discusses the company's financial condition and operating results, highlighting asset shifts, improved net income, and strong capital position. Comparison of Financial Condition 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] - Net loans increased by $4.3 million, or 2.5%, driven by a 39.4% increase in commercial real estate loans[143] - 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] Comparison of Operating Results 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] - 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] - No provision for loan losses was recorded in the first nine months of fiscal 2023, reflecting continued strong asset quality[158] Management of Market Risk 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 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] - 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] Item 3. Quantitative and Qualitative Disclosures About Market Risk 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] Item 4. Controls and Procedures 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] - 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] PART II. OTHER INFORMATION This section covers legal proceedings, risk factors, and a list of exhibits filed with the quarterly report. Item 1. Legal Proceedings 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] Item 1A. Risk Factors 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] Item 6. Exhibits 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][205]