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☐☐

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023

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)

 

 

United States of America

87-4396534

(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

15 Beach Street

Quincy, Massachusetts

02170

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (617) 471-0750

 

Securities registered pursuant to Section 12(b) of the Act:

Title of each class Trading Symbol(s) Name of each exchange on which registered

Stock, Par Value $0.01 Common Per Share CFSB The Nasdaq Stock Market, LLC

 

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

Accelerated filer

Non-accelerated filer

Smaller reporting company

 

 

 

 

Emerging growth company

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No

As of November 12, 2023, the registrant had 6,632,642 shares of common stock, $0.01 par value per share, outstanding.

 

 

 

 


 

Table of Contents

 

 

 

Page

 

 

 

PART I.

FINANCIAL INFORMATION

 

 

 

 

Item 1.

Financial Statements (Unaudited)

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Net Income

4

 

Consolidated Statements of Comprehensive Income

5

 

Consolidated Statements of Changes in Stockholders' Equity

6

 

Consolidated Statements of Cash Flows

7

 

Notes to Unaudited Consolidated Financial Statements

8

Item 2.

Management’s Discussion and Analysis of Financial Condition and Results of Operations

42

Item 3.

Quantitative and Qualitative Disclosures About Market Risk

52

Item 4.

Controls and Procedures

53

 

 

 

PART II.

OTHER INFORMATION

54

 

 

 

Item 1.

Legal Proceedings

54

Item 1A.

Risk Factors

54

Item 2.

Unregistered Sales of Equity Securities and Use of Proceeds

54

Item 3.

Defaults Upon Senior Securities

54

Item 4.

Mine Safety Disclosures

54

Item 5.

Other Information

54

Item 6.

Exhibits

55

Signatures

56

 

 

2


 

Item 1. Financial Statements.

CFSB Bancorp, Inc. and Subsidiary

Consolidated Balance Sheets (Unaudited)

(In thousands, except per share data)

 

 

 

September 30,

 

 

June 30,

 

 

 

2023

 

 

2023

 

Assets:

 

 

 

 

 

 

Cash and due from banks

 

$

1,394

 

 

$

1,486

 

Short-term investments

 

 

4,724

 

 

 

5,375

 

Total cash and cash equivalents

 

 

6,118

 

 

 

6,861

 

Securities available for sale, at fair value

 

 

139

 

 

 

146

 

Securities held to maturity, at amortized cost, net of allowance for credit loss,
     fair value of $
128,726 at September 30, 2023 and $132,273 at June 30, 2023

 

 

147,537

 

 

 

147,902

 

Federal Home Loan Bank stock, at cost

 

 

405

 

 

 

381

 

Loans, net of allowance for credit losses of $1,649 at September 30, 2023 and
     $
1,747 at June 30, 2023

 

 

174,080

 

 

 

175,911

 

Premises and equipment, net

 

 

3,354

 

 

 

3,413

 

Accrued interest receivable

 

 

1,395

 

 

 

1,363

 

Bank-owned life insurance

 

 

10,468

 

 

 

10,402

 

Deferred tax asset

 

 

1,132

 

 

 

1,079

 

Operating lease right of use asset

 

 

930

 

 

 

953

 

Other assets

 

 

663

 

 

 

596

 

Total assets

 

$

346,221

 

 

$

349,007

 

 

 

 

 

 

 

 

Liabilities and Stockholders' Equity:

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

Non-interest bearing

 

$

30,918

 

 

$

32,760

 

Interest-bearing

 

 

229,755

 

 

 

230,616

 

Total deposits

 

 

260,673

 

 

 

263,376

 

Short-term borrowings

 

 

3,250

 

 

 

3,675

 

Mortgagors' escrow accounts

 

 

1,626

 

 

 

1,596

 

Operating lease liability

 

 

941

 

 

 

962

 

Accrued expenses and other liabilities

 

 

3,834

 

 

 

3,509

 

Total liabilities

 

 

270,324

 

 

 

273,118

 

Stockholders' Equity

 

 

 

 

 

 

Preferred Stock, $.01 par value, 10,000,000 shares authorized as
     of September 30, 2023 and June 30, 2023,
none outstanding

 

$

-

 

 

$

-

 

Common Stock, $.01 par value, 90,000,000 shares authorized as
     of September 30, 2023 and June 30, 2023,
6,632,642 issued
     and outstanding as of September 30, 2023 and
6,632,642 issued
     and outstanding as of June 30, 2023

 

 

65

 

 

 

65

 

Additional paid-in capital

 

 

27,896

 

 

 

27,814

 

Retained earnings

 

 

50,316

 

 

 

50,416

 

Accumulated other comprehensive loss

 

 

(3

)

 

 

(3

)

Unearned compensation - ESOP, 237,754 and 240,310 shares unallocated
     at September 30, 2023 and June 30, 2023, respectively

 

 

(2,377

)

 

 

(2,403

)

Total stockholders' equity

 

 

75,897

 

 

 

75,889

 

Total liabilities and stockholders' equity

 

$

346,221

 

 

$

349,007

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

3


 

CFSB Bancorp, Inc. and Subsidiary

Consolidated Statements of Net Income (Unaudited)

(In thousands, except per share data)

 

 

 

For the Three Months Ended

 

 

 

September 30,

 

 

September 30,

 

 

 

2023

 

 

2022

 

Interest and dividend income:

 

 

 

 

 

 

Interest and fees on loans

 

$

1,722

 

 

$

1,619

 

Interest and dividends on debt securities:

 

 

 

 

 

 

Taxable

 

 

868

 

 

 

751

 

Tax-exempt

 

 

97

 

 

 

108

 

Interest on short-term investments and certificates of deposit

 

 

45

 

 

 

127

 

Total interest and dividend income

 

 

2,732

 

 

 

2,605

 

 

 

 

 

 

 

 

Interest expense:

 

 

 

 

 

 

Deposits

 

 

876

 

 

 

242

 

Borrowings

 

 

50

 

 

 

-

 

Total interest expense

 

 

926

 

 

 

242

 

 

 

 

 

 

 

Net interest income

 

 

1,806

 

 

 

2,363

 

Provision for (reversal of) credit losses

 

 

(166

)

 

 

-

 

Net interest income after provision for (reversal of) credit losses

 

 

1,972

 

 

 

2,363

 

 

 

 

 

 

 

Non-interest income:

 

 

 

 

 

 

Customer service fees

 

 

40

 

 

 

37

 

Income on bank-owned life insurance

 

 

66

 

 

 

64

 

Other income

 

 

54

 

 

 

99

 

Total non-interest income

 

 

160

 

 

 

200

 

 

 

 

 

 

 

 

Non-interest expenses:

 

 

 

 

 

 

Salaries and employee benefits

 

 

1,144

 

 

 

1,018

 

Occupancy and equipment

 

 

254

 

 

 

243

 

Advertising

 

 

38

 

 

 

39

 

Data processing

 

 

89

 

 

 

94

 

Deposit insurance

 

 

33

 

 

 

21

 

Other general and administrative

 

 

358

 

 

 

333

 

Total non-interest expenses

 

 

1,916

 

 

 

1,748

 

 

 

 

 

 

 

 

Income before income taxes

 

 

216

 

 

 

815

 

Provision for income taxes

 

 

93

 

 

 

170

 

Net income

 

$

123

 

 

$

645

 

 

 

 

 

 

 

Net income per share:

 

 

 

 

 

 

Basic

 

$

0.02

 

 

$

0.10

 

Diluted

 

$

0.02

 

 

$

0.10

 

 

 

 

 

 

 

 

Weighted average shares outstanding:

 

 

 

 

 

 

Basic

 

 

6,282,203

 

 

 

6,271,977

 

Diluted

 

 

6,282,203

 

 

 

6,271,977

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

4


 

CFSB Bancorp, Inc. and Subsidiary

Consolidated Statements of Comprehensive Income (Unaudited)

(In thousands)

 

 

For the Three Months Ended

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Net income

 

$

123

 

 

$

645

 

Other comprehensive loss:

 

 

 

 

 

 

Change in unrealized holding losses

 

 

-

 

 

 

(1

)

Net change in unrealized losses

 

 

-

 

 

 

(1

)

Tax effect

 

 

-

 

 

 

-

 

Net-of-tax amount

 

 

-

 

 

 

(1

)

Comprehensive income

 

$

123

 

 

$

644

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

5


 

CFSB Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes in Stockholders' Equity (Unaudited)

(Dollars in thousands)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Accumulated

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Additional

 

 

 

 

 

Other

 

 

Unearned

 

 

 

 

 

 

Common Stock

 

 

Paid-in

 

 

Retained

 

 

Comprehensive

 

 

Compensation

 

 

 

 

 

 

Shares

 

 

Amount

 

 

Capital

 

 

Earnings

 

 

Loss

 

 

ESOP

 

 

Total

 

Balance at June 30, 2023

 

 

6,632,642

 

 

$

65

 

 

$

27,814

 

 

$

50,416

 

 

$

(3

)

 

$

(2,403

)

 

$

75,889

 

Cumulative effect accounting adjustment(1)

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(223

)

 

 

-

 

 

 

-

 

 

 

(223

)

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

123

 

 

 

-

 

 

 

-

 

 

 

123

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

Stock-based compensation

 

 

-

 

 

 

-

 

 

 

90

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

90

 

ESOP shares committed to be released

 

 

-

 

 

 

-

 

 

 

(8

)

 

 

-

 

 

 

-

 

 

 

26

 

 

 

18

 

Balance at September 30, 2023

 

 

6,632,642

 

 

$

65

 

 

$

27,896

 

 

$

50,316

 

 

$

(3

)

 

$

(2,377

)

 

$

75,897

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance at June 30, 2022

 

 

6,521,642

 

 

$

65

 

 

$

27,720

 

 

$

48,970

 

 

$

-

 

 

$

(2,505

)

 

$

74,250

 

Net income

 

 

-

 

 

 

-

 

 

 

-

 

 

 

645

 

 

 

-

 

 

 

-

 

 

 

645

 

Other comprehensive loss

 

 

-

 

 

 

-

 

 

 

-

 

 

 

-

 

 

 

(1

)

 

 

-

 

 

 

(1

)

ESOP shares committed to be released

 

 

-

 

 

 

-

 

 

 

(2

)

 

 

-

 

 

 

-

 

 

 

25

 

 

 

23

 

Balance at September 30, 2022

 

 

6,521,642

 

 

$

65

 

 

$

27,718

 

 

$

49,615

 

 

$

(1

)

 

$

(2,480

)

 

$

74,917

 

(1) Represents adjustment needed to reflect the cumulative impact on retained earnings pursuant to the Company's adoption of Accounting Standards Update 2016-13. The adjustment presented includes $12,000 ($9,000, net of tax) attributable to the change in accounting methodology for estimating the allowance for credit losses related to loans, $276,000 ($198,000, net of tax) attributable to the change in accounting methodology for estimating the allowance for credit losses related to securities held to maturity and $23,000 ($16,000, net of tax) related to the reserve for off-balance sheet exposures resulting from the Company's adoption of the standard. Amount shown in the table above is presented net of tax.

The accompanying notes are an integral part of these unaudited consolidated financial statements.

6


 

CFSB Bancorp, Inc. and Subsidiary

Consolidated Statements of Changes of Cash Flows (Unaudited)

(In thousands)

 

 

 

 

 

 

September 30,

 

 

 

2023

 

 

2022

 

Cash flows from operating activities:

 

 

 

 

 

 

Net income

 

$

123

 

 

$

645

 

Adjustments to reconcile net income to net cash provided by (used in) operating activities:

 

 

 

 

 

 

Provision for (reversal of) credit losses

 

 

(166

)

 

 

-

 

Amortization of securities, net

 

 

96

 

 

 

116

 

Net change in deferred loan costs and fees

 

 

30

 

 

 

1

 

Increase in cash surrender value of bank-owned life insurance

 

 

(66

)

 

 

(64

)

Depreciation and amortization, net

 

 

59

 

 

 

64

 

Deferred income tax expense

 

 

-

 

 

 

(60

)

ESOP expense

 

 

18

 

 

 

23

 

Stock-based compensation

 

 

90

 

 

 

-

 

Net increase in accrued interest receivable

 

 

(32

)

 

 

(41

)

Other, net

 

 

284

 

 

 

46

 

Net cash provided by operating activities

 

 

436

 

 

 

730

 

Cash flows from investing activities:

 

 

 

 

 

 

Activity in securities available for sale:

 

 

 

 

 

 

Maturities, prepayments and calls

 

 

8

 

 

 

14

 

Activity in securities held to maturity:

 

 

 

 

 

 

Maturities, prepayments and calls

 

 

3,897

 

 

 

2,700

 

Purchases

 

 

(3,861

)

 

 

(9,718

)

Purchases of Federal Home Loan Bank of Boston stock

 

 

(24

)

 

 

-

 

Loan originations and payments, net

 

 

1,899

 

 

 

(2,652

)

Additions to premises and equipment

 

 

-

 

 

 

(40

)

Net cash provided by (used in) investing activities

 

 

1,919

 

 

 

(9,696

)

Cash flows from financing activities:

 

 

 

 

 

 

Net decrease in deposits

 

 

(2,703

)

 

 

(7,023

)

Net decrease in short-term borrowings

 

 

(425

)

 

 

-

 

Net increase in mortgagors' escrow accounts

 

 

30

 

 

 

63

 

Net cash used in financing activities

 

 

(3,098

)

 

 

(6,960

)

Net change in cash and cash equivalents

 

 

(743

)

 

 

(15,926

)

Cash and cash equivalents at beginning of period

 

 

6,861

 

 

 

31,667

 

Cash and cash equivalents at end of period

 

$

6,118

 

 

$

15,741

 

Supplemental information:

 

 

 

 

 

 

Interest paid on deposits and short-term borrowings

 

$

913

 

 

$

242

 

Income taxes paid

 

$

65

 

 

$

435

 

Adoption of ASU 2016-02

 

$

-

 

 

$

1,044

 

Adoption of ASU 2016-13

 

$

223

 

 

$

-

 

 

 

The accompanying notes are an integral part of these unaudited consolidated financial statements.

7


CFSB Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements

1.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND NATURE OF BUSINESS

Basis of presentation and consolidation

These unaudited consolidated financial statements of CFSB Bancorp, Inc. (the "Company") include the accounts of Colonial Federal Savings Bank (the “Bank”) and its wholly-owned subsidiary, Beach Street Security Corporation, which was established for the purpose of buying, holding and selling securities. All significant intercompany balances and transactions have been eliminated in consolidation.

The unaudited consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America ("GAAP") for interim financial information and pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, they do not include all of the information and disclosures required by GAAP for annual financial statements. In the opinion of management, all adjustments necessary for a fair presentation are reflected in these unaudited consolidated financial statements, and all adjustments made are of a normal recurring nature. The results of operations reported for interim periods are not necessarily indicative of the results of operations for the entire year or any subsequent interim period. These unaudited consolidated financial statements should be read in conjunction with the Company's Annual Report on Form 10-K for the year ended June 30, 2023.

Reclassification

Certain amounts in the prior period financial statements have been reclassified to conform to the current period presentation.

Business

The Bank conducts operations from its three full-service banking offices and one limited-service banking office located in Quincy, Holbrook and Weymouth, Massachusetts, all within Norfolk County. The Bank considers its primary lending market area to be Norfolk and Plymouth Counties; however, the Bank occasionally makes loans secured by properties located outside of its primary lending market. The Bank's business consists primarily of taking deposits from the general public and investing those deposits, together with funds generated from operations, in one- to four-family residential real estate loans and, to a lesser extent, multi-family real estate loans, commercial real estate loans, second mortgage loans and home equity lines of credit, consumer loans and construction loans.

Reorganization and Offering

On January 12, 2022, the Bank reorganized from a federally chartered mutual savings bank to a two-tier mutual holding company structure. As part of the reorganization, a mutual holding company (the “MHC”) was formed as a federal corporation, into which all of the current voting rights of the members of the Bank were transferred. As part of the reorganization, the Bank converted to a federal stock savings bank. A stock holding company (the “Holding Company”) was established as a federal corporation and a majority-owned subsidiary of the MHC at all times so long as the MHC remains in existence. Concurrently with the reorganization, the Holding Company offered for sale 43% of its common stock in a stock offering and contributed 2% of its common stock to a charitable foundation established as a part of the reorganization. The remainder of the Holding Company common stock is held by the MHC. The Holding Company offered shares of common stock for sale on a priority basis to depositors of the Bank and the tax qualified employee plans of the Bank. The Company sold 2,804,306 shares of common stock at $10.00 per share for gross offering proceeds of $28.0 million.

Employee Stock Ownership Plan (the "ESOP")

As part of the reorganization and stock offering, the Bank established the Colonial Federal Savings Bank Employee Stock Ownership Plan to provide eligible employees of the Bank the opportunity to own Company stock. The ESOP is a tax-qualified retirement plan for the benefit of Bank employees. The ESOP was funded through the purchase of 255,648 shares through a loan from the Company. The cost of shares issued to the ESOP, but not yet allocated to participants, is shown as a reduction of stockholders' equity. The Company records compensation expense

8


CFSB Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements

for the ESOP equal to fair market value of shares when they are committed to be released from the suspense account to participants' accounts under the plan.

 

9


CFSB Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements

Stock-based Compensation

The fair value of restricted stock and stock options is determined on the date of grant and amortized to compensation expense with a corresponding increase to additional paid-in capital over the required service period. Reductions in compensation expense associated with forfeited options are estimated at the date of grant, and this estimated forfeiture rate is adjusted based on actual forfeiture experience. The Black Scholes option-pricing model is used to determine the fair value of the stock options granted.

Earnings Per Share

The following table presents the factors used in the earnings per share calculation:

 

 

For the Three Months Ended

 

(Dollars In thousands)

 

September 30, 2023

 

 

September 30, 2022

 

Net income

 

$

123

 

 

$

645

 

 

 

 

 

 

 

 

Weighted average number of common shares outstanding

 

 

6,632,642

 

 

 

6,521,642

 

Less: Average unallocated ESOP shares

 

 

(239,439

)

 

 

(249,665

)

Less: Average non-vested restricted shares

 

 

(111,000

)

 

 

-

 

Weighted average number of common shares outstanding used to calculate basic earnings per common share