CFSB Bancorp, Inc. /MA/ [CFSB] Filings

10-Q 1 cfsb-20230930.htm 10-Q 10-Q

☐☐

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


☐	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

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.

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.

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.

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.

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.

CFSB Bancorp, Inc. and Subsidiary

Notes to Unaudited Consolidated Financial Statements

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

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.

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

CFSB Bancorp, Inc. /MA/ [CFSB] Filings
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S-1	[2021-09-09]