0001193125-21-364968.txt : 20211222 0001193125-21-364968.hdr.sgml : 20211222 20211222160817 ACCESSION NUMBER: 0001193125-21-364968 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 66 CONFORMED PERIOD OF REPORT: 20210930 FILED AS OF DATE: 20211222 DATE AS OF CHANGE: 20211222 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CFSB Bancorp, Inc. /MA/ CENTRAL INDEX KEY: 0001879103 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTION, FEDERALLY CHARTERED [6035] IRS NUMBER: 000000000 STATE OF INCORPORATION: MA FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 333-259406 FILM NUMBER: 211513315 BUSINESS ADDRESS: STREET 1: 15 BEACH STREET CITY: QUINCY STATE: MA ZIP: 02170 BUSINESS PHONE: (617) 471-0750 MAIL ADDRESS: STREET 1: 15 BEACH STREET CITY: QUINCY STATE: MA ZIP: 02170 10-Q 1 d263004d10q.htm 10-Q 10-Q
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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, 2021
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:
333-259406
 
 
CFSB Bancorp, Inc.
(Exact Name of Registrant as Specified in its Charter)
 
 
 
United States of America
 
00-0000000
(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:
(617471-0750
 
 
Securities registered pursuant to Section 12(b) of the Act: None
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 December 20, 2021, the registrant had no shares of common stock, $0.01 par value per share, outstanding.
 
 
 

Table of Contents
 
        
Page
 
PART I.
  FINANCIAL INFORMATION      3  
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 Retained Earnings      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      20  
Item 3.
  Quantitative and Qualitative Disclosures About Market Risk      29  
Item 4.
  Controls and Procedures      29  
PART II.
  OTHER INFORMATION      31  
Item 1.
  Legal Proceedings      31  
Item 1A.
  Risk Factors      31  
Item 2.
  Unregistered Sales of Equity Securities and Use of Proceeds      31  
Item 3.
  Defaults Upon Senior Securities      31  
Item 4.
  Mine Safety Disclosures      31  
Item 5.
  Other Information      31  
Item 6.
  Exhibits      32  
     33  
 
1

EXPLANATORY NOTE
CFSB Bancorp, Inc. (the “Company,” “we” or “our”) is the proposed stock holding company for Colonial Federal Savings Bank upon the reorganization of Colonial Federal Savings Bank into the mutual holding company structure. As of September 30, 2021, the reorganization had not been completed, and the Company was in formation and had no assets or liabilities and had not conducted any business activities other than formational activities. Accordingly, the unaudited consolidated financial statements and other financial information contained in this Quarterly Report on Form
10-Q
relate solely to Colonial Federal Savings Bank and its subsidiary.
The unaudited consolidated financial statements and other financial information contained in this Quarterly Report on Form
10-Q
should be read in conjunction with the audited consolidated financial statements and related notes of Colonial Federal Savings Bank at June 30, 2021 and 2020 and for the years then ended contained in the Company’s definitive prospectus dated November 10, 2021 (the “Prospectus”), as filed with the Securities and Exchange Commission pursuant to Securities Act Rule 424(b)(3) on November 19, 2021.
 
 
2

 
Item 1. Financial Statements.
Colonial Federal Savings Bank and Subsidiary
Consolidated Balance Sheets
(In thousands)
 
 
  
September 30,

2021

(Unaudited)
 
  
 
 
 
 
 
 
 
June 30,

2021
 
Assets
 
Cash and due from banks
  $ 1,651      $ 1,708  
Short-term investments (defined in footnotes)
    36,056        38,970  
   
 
 
    
 
 
 
Total cash and cash equivalents
    37,707        40,678  
Certificates of deposit
    980        980  
Securities available for sale, at fair value
    274        2,294  
Securities held to maturity, at amortized cost
,
fair value of $111,636 at
September 30, 2021 and $107,391 at June 30, 2021
    110,178        105,114  
Federal Home Loan Bank stock, at cost
    453        453  
Loans, net of allowance for loan losses of $1,737 in September 30, 2021 and
$1,722 in June 30, 2021
    171,112        174,433  
Premises and equipment, net
    3,400        3,459  
Accrued interest receivable
    1,080        1,146  
Bank-owned life insurance
    9,945        9,250  
Deferred tax asset
    734        665  
Other assets
    838        382  
   
 
 
    
 
 
 
    $ 336,701      $ 338,854  
   
 
 
    
 
 
 
Liabilities and Retained Earnings
 
Deposits
  
  
Non-interest
bearing
  $ 30,118      $ 30,129  
Interest-bearing
    252,064        254,505  
   
 
 
    
 
 
 
Total deposits
    282,182        284,634  
Short-term borrowings
    459        918  
Mortgagors’ escrow accounts
    1,584        1,572  
Accrued expenses and other liabilities
    3,369        3,085  
   
 
 
    
 
 
 
Total liabilities
    287,594        290,209  
   
 
 
    
 
 
 
Commitments and contingencies (Note
9
)
            
Retained earnings
    49,100        48,628  
Accumulated other comprehensive income
    7        17  
   
 
 
    
 
 
 
Total retained earnings
    49,107        48,645  
   
 
 
    
 
 
 
    $ 336,701      $ 338,854  
   
 
 
    
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
3

Colonial Federal Savings Bank and Subsidiary
Consolidated Statements of Net Income (Unaudited
)
(In thousands)
 
                 
    
Three months ended
 
    
September 30,

2021
    
September 30,

2020
 
Interest and dividend income:
                 
Interest and fees on loans
   $
1,654
     $
1,851
 
Interest and dividends on debt securities:
                 
Taxable
    
465
      
439
 
Tax exempt
    
123
      
143
 
Interest on short-term investments and certificates of deposit
    
19
      
18
 
    
 
 
    
 
 
 
Total interest and dividend income
    
2,261
      
2,451
 
    
 
 
    
 
 
 
Interest expense:
                 
Deposits
    
274
      
668
 
Short-term borrowings
    
4
      
22
 
    
 
 
    
 
 
 
Total interest expense
    
278
      
690
 
    
 
 
    
 
 
 
Net interest income
    
1,983
      
1,761
 
Provision for loan losses
    
15
      
15
 
    
 
 
    
 
 
 
Net interest income, after provision for loan losses
    
1,968
      
1,746
 
    
 
 
    
 
 
 
Non-interest
income:
                 
Customer service fees
    
30
      
27
 
Income on bank-owned life insurance
    
74
      
72
 
Gain on sale of securities available for sale
    
48
       —    
Other income
    
104
      
97
 
    
 
 
    
 
 
 
Total
non-interest
income
    
256
      
196
 
    
 
 
    
 
 
 
Non-interest
expense:
                 
Salaries and employee benefits
    
997
      
919
 
Occupancy and equipment
    
210
      
192
 
Advertising
    
41
      
25
 
Data processing
    
80
      
84
 
Deposit insurance
    
22
      
21
 
Other general and administrative
    
302
      
266
 
    
 
 
    
 
 
 
Total
non-interest
expense
    
1,652
      
1,507
 
    
 
 
    
 
 
 
Income before income taxes
    
572
      
435
 
Provision for income taxes
    
100
      
55
 
    
 
 
    
 
 
 
Net income
   $
472
     $
380
 
    
 
 
    
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
4

Colonial Federal Savings Bank and Subsidiary
Consolidated Statements of Comprehensive Income (Unaudited)
(In thousands)
 
    
Three months ended
 
    
September 30,

2021
   
September 30,

2020
 
Net income
   $ 472     $ 380  
Other comprehensive income:
                
Change in unrealized holding gains (losses)
     34       (2
Reclassification adjustment for net realized gains included in income
     (48     —    
 
 
 
 
 
 
 
 
 
Net change in unrealized losses
     (14     (2
Tax effect
     4       —    
    
 
 
   
 
 
 
Net-of-tax
amount
     (10     (2
    
 
 
   
 
 
 
Comprehensive income
   $ 462     $ 378  
    
 
 
   
 
 
 
The tax effect related to net realized gain on sale of security available for sale was $14,000 for the three months ended September 30, 2021.
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
5

Colonial Federal Savings Bank and Subsidiary
Consolidated Statements of Changes in Retained Earnings (Unaudited)
(In thousands)
 
    
Retained

Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
   
Total
 
Balance at June 30, 2021
   $ 48,628      $ 17     $ 48,645  
Comprehensive income (loss)
     472        (10 )     462  
  
 
 
    
 
 
   
 
 
 
Balance at September 30, 2021
   $ 49,100      $ 7     $ 49,107  
  
 
 
    
 
 
   
 
 
 
 
    
Retained

Earnings
    
Accumulated
Other
Comprehensive
Income (Loss)
   
Total
 
Balance at June 30, 2020
   $ 47,236      $ 10     $ 47,246  
Comprehensive income (loss)
     380        (2     378  
  
 
 
    
 
 
   
 
 
 
Balance at September 30, 2020
   $ 47,616      $ 8     $ 47,624  
  
 
 
    
 
 
   
 
 
 
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
6

Colonial Federal Savings Bank and Subsidiary
Consolidated Statements of Changes of Cash Flows (Unaudited)
(In thousands)
 
    
Three Months Ended
 
    
September 30,

2021
   
September 30,

2020
 
Cash flows from operating activities:
                
Net income
   $ 472     $ 380  
Adjustments to reconcile net
income 
to net cash
provided by operating activities:
                
Provision for loan losses
     15       15  
Gain on sales of securities available for sale, net
     (48     —    
Depreciation and amortization, net
     199       168  
Net change in:
                
Cash surrender value of bank-owned life insurance
     (74     (72
Accrued interest receivable
     66       37  
Other, net
     (223     85  
    
 
 
   
 
 
 
Net cash provided by operating activities
     407       613  
    
 
 
   
 
 
 
Cash flows from investing activities:
                
Activity in securities available for sale:
                
Maturities, prepayments and calls
     23       27  
Sales
     2,031       —    
Activity in securities held to maturity:
                
Maturities, prepayments and calls
     5,061       5,873  
Purchases
     (10,259     (8,064
Loan originations and payments, net
     3,306       2,787  
Additions to premises and equipment
     (6     (58
Purchase of bank-owned life insurance
     (635     —    
    
 
 
   
 
 
 
Net cash (used in) provided by investing activities
     (479     565  
    
 
 
   
 
 
 
Cash flows from financing activities:
                
Net (decrease) increase in deposits
     (2,452     905  
Net (decrease) increase in short-term borrowings
     (459     1,149  
Repayments of long-term borrowings
     —         (2,163
Net increase in mortgagors’ escrow accounts
     12       20  
    
 
 
   
 
 
 
Net cash used in financing activities
     (2,899     (89
    
 
 
   
 
 
 
Net change in cash and cash equivalents
     (2,971     1,089  
Cash and cash equivalents at beginning of year
     40,678       38,344  
    
 
 
   
 
 
 
Cash and cash equivalents at end of year
   $ 37,707     $ 39,433  
    
 
 
   
 
 
 
Supplemental information:
                
Interest paid on deposits, short term borrowings and long-term debt
   $ 278     $ 692  
Income taxes paid
   $ 83     $ 82  
The accompanying notes are an integral part of these unaudited consolidated financial statements.
 
7

Colonial Federal Savings Bank 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 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.
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.
Business
The Bank provides a variety of financial services to individuals and small businesses through its offices in Quincy, Holbrook and Weymouth. Its primary deposit products are savings, checking and term certificate accounts, and its primary lending product are residential mortgage loans and, to a lesser extent, commercial and multi-family real estate loans.
Reorganization and Offering
On September 8, 2021, the Board of Directors of the Bank adopted the Plan of Reorganization from a Mutual Savings Bank to a Mutual Holding Company and Stock Issuance Plan (the “Plan”) whereby the Bank will reorganize from a federally chartered mutual savings bank to a
two-tier
mutual holding company structure. The mutual holding company (the “MHC”) will be a federal corporation, and all of the current ownership and voting rights of the members of the Bank will be transferred to the MHC. As part of the Plan, the Bank will convert to a federal stock savings bank (the “Stock Bank”) and a stock holding company (the “Holding Company”) will be 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 intends to offer for sale 43% of its common stock in the stock offering and contribute 2% of its common stock to a charitable foundation to be established as a part of the reorganization. The remainder of the Holding Company common stock will be held by the MHC. The Holding Company will offer shares of common stock for sale on a priority basis to depositors of the Bank and the tax qualified employee plans of the Bank, with any remaining shares to be offered for sale to the public in a community offering, a syndicated offering or a firm commitment underwriting offering or a combination thereof.
Use of estimates
In preparing consolidated financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the unaudited consolidated balance sheet and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. A material estimate that is particularly susceptible to significant change in the near term is the allowance for loan losses.
Reclassification
Certain amounts in the 2020 unaudited consolidated financial statements have been reclassified to conform to the 2021 presentation.
Recent accounting pronouncements
In February 2016, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”)
2016-02,
Leases (Topic 842). This ASU is intended to improve financial reporting about leasing transactions and the key provision impacting the Bank is the requirement for a lessee to record a
right-to-use
asset and a liability representing the obligation to make lease payments for long-term operating leases. The ASU, as amended, will be effective for fiscal years beginning after December 15, 2021. Management is currently evaluating the impact of adopting this ASU. It is expected that assets and liabilities will increase based on the estimated present value of remaining lease payments in place at the adoption date.
 
8

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
On June 16, 2016, the FASB issued ASU 2016-13, Financial Instruments-Credit Losses (Topic 326), which requires entities to measure all expected credit losses for financial assets held at the reporting date based on historical experience, current conditions, and reasonable and supportable forecasts. Entities will now use forward-looking information to better form their credit loss estimates. The ASU also requires enhanced disclosures to help financial statement users better understand significant estimates and judgments used in estimating credit losses, as well as the credit quality and underwriting standards of an entity’s portfolio. These disclosures include qualitative and quantitative requirements that provide additional information about the amounts recorded in the financial statements. This ASU, as amended, is effective for fiscal years beginning after December 15, 2022. Management is currently evaluating the impact of adopting this ASU to the unaudited consolidated financial statements, which may be material.
 
2.
RESTRICTIONS ON CASH AND AMOUNTS DUE FROM BANKS
Effective March 26, 2020, the Board of Governors of the Federal Reserve reduced reserve requirement ratios to zero percent and therefore no reserve balance was required at September 30, 2021 or June 30, 2021.
 
3.
SECURITIES
The amortized cost and fair value of securities, with gross unrealized gains and losses, follows:
 
    
September 30, 2021
 
(In thousands)
  
Amortized
 
Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Fair Value
 
Securities available for sale:
                                   
Government-sponsored enterprises:
                                   
Debt obligations
   $         $         $ —        $     
Mortgage-backed securities
     241        10        —          251  
Collateralized mortgage obligations
     23        —          —          23  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total securities available for sale
   $ 264      $ 10      $ —        $ 274  
    
 
 
    
 
 
    
 
 
    
 
 
 
Securities held to maturity:
                                   
Government-sponsored enterprises:
                                   
Debt obligations
   $ 1,000      $ 1      $ —        $ 1,001  
Mortgage-backed securities
     31,891        1,111        (97      32,905  
Collateralized mortgage obligations
     14        —          —          14  
Municipal bonds
     40,265        320        (408      40,177  
Corporate bonds
     37,008        743        (212      37,539  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total securities held to maturity
   $ 110,178      $ 2,175      $ (717    $ 111,636  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
9

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
    
June 30, 2021
 
(In thousands)
  
Amortized

Cost
    
Gross
Unrealized
Gains
    
Gross
Unrealized
Losses
    
Fair Value
 
Securities available for sale:
                                   
Government-sponsored enterprises:
                                   
Debt obligations
   $ 1,983      $ 12      $ —        $ 1,995  
Mortgage-backed securities
     260        12        —          272  
Collateralized mortgage obligations
     27        —          —          27  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total securities available for sale
   $ 2,270      $ 24      $ —        $ 2,294  
    
 
 
    
 
 
    
 
 
    
 
 
 
Securities held to maturity:
                                   
Government-sponsored enterprises:
                                   
Debt obligations
   $ 1,001      $ 12      $ —        $ 1,013  
Mortgage-backed securities
     27,680        1,229        (12      28,897  
Collateralized mortgage obligations
     17        1        —          18  
Municipal bonds
     38,360        458        (216      38,602  
Corporate bonds
     38,056        936        (131      38,861  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total securities held to maturity
   $ 105,114      $ 2,636      $ (359    $ 107,391  
    
 
 
    
 
 
    
 
 
    
 
 
 
Securities with an amortized cost of $7,979,000 and a fair value of $8,037,000 at September 30, 2021 were pledged to secure a credit line with the Federal Reserve Bank. See Note 7.
The amortized cost and fair value of debt securities, by contractual maturity, at September 30, 2021, is shown below. Expected maturities may differ from contractual maturities because issuers may have the right to call or prepay obligations with or without call or prepayment penalties.
 
    
Available for Sale
    
Held to Maturity
 
(In thousands)
  
Amortized
 
Cost
    
Fair Value
    
Amortized
 
Cost
    
Fair Value
 
Within 1 year
   $         $         $ 7,454      $ 7,623  
Over 1 year through 5 years
                         26,639        27,024  
Over 5 years through 10 years
                         20,761        21,031  
Over 10 years
                         23,419        23,039  
                           78,273        78,717  
Mortgage-backed securities
     241        251        31,891        32,905  
Collateralized mortgage obligations
     23        23        14        14  
    
 
 
    
 
 
    
 
 
    
 
 
 
     $ 264      $ 274      $ 110,178      $ 111,636  
    
 
 
    
 
 
    
 
 
    
 
 
 
Information pertaining to securities with gross unrealized losses at September 30, 2021 and June 30, 2021 aggregated by investment category and length of time that individual securities have been in a continuous loss position, follows:
 
    
Less Than Twelve Months
    
Over Twelve Months
 
(In thousands)
  
Gross
Unrealized
Losses
    
Fair Value
    
Gross
Unrealized
Losses
    
Fair Value
 
September 30, 2021
                                   
Securities held to maturity:
                                   
Mortgage-backed securities
   $ 92      $ 8,778      $ 5      $ 738  
Municipal bonds
     345        12,645        63        1,726  
Corporate bonds
     185        12,074        27        973  
    
 
 
    
 
 
    
 
 
    
 
 
 
Total temporarily impaired securities held to maturity
   $ 622      $ 33,497      $ 95      $ 3,437  
    
 
 
    
 
 
    
 
 
    
 
 
 
 
10

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
    
Less Than Twelve Months
    
Over Twelve Months
 
(In thousands)
  
Gross
Unrealized
Losses
    
Fair Value
    
Gross
Unrealized
Losses
    
Fair Value
 
June 30, 2021
                                   
Securities held to maturity:
                                   
Mortgage-backed securities
   $ 12      $ 2,598      $ —        $ —    
Municipal bonds
     216        7,839        —          —    
Corporate bonds
     131        9,249        —          —    
    
 
 
    
 
 
    
 
 
    
 
 
 
Total temporarily impaired securities held to maturity
   $ 359      $ 19,686      $ —        $ —    
    
 
 
    
 
 
    
 
 
    
 
 
 
At September 30, 2021, 31 debt securities have unrealized losses with aggregate depreciation of 1.91% from the Bank’s amortized cost basis. These unrealized losses are the result of changes in the interest rate environment and there have been no downgrades in the investment quality of these securities. The contractual terms of these securities do not permit the entities to settle the security at a price less than par value. Because the Bank does not intend to sell these securities and it is not more likely than not that the Bank will be required to sell the securities before recovery of their amortized cost bases, which may be maturity, it does not consider these securities to be other-than-temporarily impaired at September 30, 2021.
Proceeds from the sale of securities available for sale was $2,031,000 for the three months ended September 2021. There were no sales for the three months ended September 30, 2020.
 
4.
LOANS
A summary of the balances of loans follows:
 
(In thousands)
  
September 30, 2021
 
  
June 30, 2021
 
Mortgage loans on real estate:
  
     
  
     
Residential:
  
     
  
     
1-4
family
  
$
137,196
 
  
$
139,687
 
Multifamily
  
 
15,415
 
  
 
15,868
 
Second mortgages and home equity lines of credit
  
 
2,294
 
  
 
2,454
 
Commercial
  
 
16,160
 
  
 
16,366
 
 
  
 
 
 
  
 
 
 
Total mortgage loans on real estate
  
 
171,065
 
  
 
174,375
 
 
  
 
 
 
  
 
 
 
Other loans:
  
     
  
     
Consumer
  
 
103
 
  
 
139
 
Home improvement
  
 
2,035
 
  
 
1,972
 
 
  
 
 
 
  
 
 
 
Total other loans
  
 
2,138
 
  
 
2,111
 
 
  
 
 
 
  
 
 
 
Total loans
  
 
173,203
 
  
 
176,486
 
Less: Allowance for loan losses
  
 
(1,737
  
 
(1,722
Net deferred loan fees
  
 
(354
  
 
(331
 
  
 
 
 
  
 
 
 
Loans, net
  
$
171,112
 
  
$
174,433
 
 
  
 
 
 
  
 
 
 
Mortgage loans serviced for others are not included in the accompanying unaudited consolidated balance sheets. The unpaid principal balances of mortgage loans serviced for others were $495,000 at September 30, 2021 and $499,000 at June 30, 2021.
Residential loans are subject to a blanket lien securing FHLB advances. See Note 7.
 
11

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
Allowance for Loan Losses
The allowance for loan losses represents management’s estimate of losses inherent in the loan portfolio as of the statement of financial condition date and is recorded as a reduction to loans. The allowance for loan losses is increased by the provision for loan losses, and decreased by charge-offs, net of recoveries. Loans deemed to be uncollectible are charged against the allowance for loan losses, and subsequent recoveries, if any, are credited to the allowance. All, or part, of the principal balance of a loan receivable is charged off as soon as it is determined that the repayment of all, or part, of the principal balance is highly unlikely. Because all identified losses are immediately charged off, no portion of the allowance for loan losses is restricted to any individual loan or groups of loans, and the entire allowance is available to absorb any and all loan losses. In determining the allowance for loan losses, management makes significant estimates and has identified this policy as a critical accounting policy.
The allowance for loan losses is maintained at a level considered adequate to provide for losses that can be reasonably anticipated. Management performs a quarterly evaluation of the adequacy of the allowance. The allowance is based on our past loan loss experience, known and inherent risks in the portfolio, adverse situations that may affect a given borrower’s ability to repay, the estimated value of any underlying collateral, the size and composition of the loan portfolio, current economic conditions and other relevant factors. This evaluation is inherently subjective as it requires material estimates that may be susceptible to significant revision as more information becomes available.
The allowance consists of specific, general and unallocated components. The specific component relates to loans that are classified as impaired. For loans that are classified as impaired, an allowance is established when the discounted cash flows or collateral value or observable market price of the impaired loan is lower than the carrying value of that loan. Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. We do not separately identify consumer loans for impairment disclosure unless such loans are subject to a troubled debt restructuring agreement. The general component covers pools of loans by loan class not considered impaired. These pools of loans are evaluated for loss exposure based upon historical loss rates for each of these categories of loans, adjusted for qualitative factors. These qualitative risk factors include: (1) levels and trends in delinquent, classified,
non-accrual
and impaired loans, as well as loan modifications; (2) trends in the nature and volume of the portfolio and terms of loans and the existence and effect of any concentrations of credit and changes in the level of such concentrations; (3) effects of the changes in risk selection and lending policies and procedures, including underwriting standards and collection,
charge-off,
and recovery practices; (4) experience, ability, and depth of lending department management and other relevant staff; and (5) national, regional, and local economic and business conditions as well as the condition of various market segments, including the value of underlying collateral for collateral dependent loans. Each factor is assigned a value to reflect improving, stable or declining conditions based on management’s best judgment using relevant information available at the time of the evaluation. As a result of the COVID-19 pandemic, we increased certain of our qualitative loan portfolio risk factors relating to local and national economic conditions. An unallocated component of the allowance for loan losses is maintained to cover uncertainties that could affect management’s estimate of probable losses. The unallocated component of the allowance reflects the margin of imprecision inherent in the underlying assumptions used in the methodologies for estimating specific and general losses in the portfolio.
Although we believe that we use the best information available to establish the allowance for loan losses, future adjustments to the allowance may be necessary if economic conditions differ substantially from the assumptions used in making the evaluation. In addition, the Office of the Comptroller of the Currency, as an integral part of its examination process, periodically reviews our allowance for loan losses, and as a result of such reviews, we may have to adjust our allowance for loan losses. However, regulatory agencies are not directly involved in establishing the allowance for loan losses as the process is our responsibility and any increase or decrease in the allowance is the responsibility of management. A large loss could deplete the allowance and require increased provisions to replenish the allowance, which would adversely affect earnings.
 
12

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
Activity in the allowance for loan losses and allocation of the allowance to loan segments follows:
 
(In thousands)
  
Residential
Real Estate
   
Commercial
Real Estate
   
Consumer
    
Unallocated
    
Total
 
Allowance for loan losses - September 30, 2021:
            
Balance at June 30, 2021
   $ 1,262     $ 279     $ 58      $ 123      $ 1,722  
Provision (credit) for loan losses
     (37     (4     1        55        15  
Loans
charged-off
                                               
Recoveries
                                               
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Balance at September 30, 2021
   $ 1,225     $ 275     $ 59      $ 178      $ 1,737  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Allowance for loan losses - September 30, 2020:
            
Balance at June 30, 2020
   $ 1,228     $ 301     $ 48      $ 85      $ 1,662  
Provision (credit) for loan losses
     12       (4     3        4        15  
Loans
charged-off
                                               
Recoveries
                                               
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Balance at September 30, 2020
   $ 1,240     $ 297     $ 51      $ 89      $ 1,677  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
September 30, 2021
            
Allowance for loan losses for loans
individually evaluated for impairment
   $        $        $         $         $     
Allowance for loan losses for loans
collectively evaluated for impairment
     1,225       275       59        178        1,737  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Total allowance for loan losses
   $ 1,225     $ 275     $ 59      $ 178      $ 1,737  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Loans individually evaluated and deemed impaired
   $        $        $         $         $     
Loans collectively evaluated for impairment
     154,905       16,160       2,138                  173,203  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Total loans
   $ 154,905     $ 16,160     $ 2,138      $         $ 173,203  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
June 30, 2021
            
Allowance for loan losses for loans
individually evaluated for impairment
   $        $        $         $         $     
Allowance for loan losses for loans
collectively evaluated for impairment
     1,262       279       58        123        1,722  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Total allowance for loan losses
   $ 1,262     $ 279     $ 58      $ 123      $ 1,722  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Loans individually evaluated and deemed impaired
   $        $        $         $         $     
Loans collectively evaluated for impairment
     158,009       16,366       2,111                  176,486  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
Total loans
   $ 158,009     $ 16,366     $ 2,111      $         $ 176,486  
  
 
 
   
 
 
   
 
 
    
 
 
    
 
 
 
At September 30, 2021 and June 30, 2021, there were no past due loans or loans on
non-accrual.
At September 30, 2021 and June 30, 2021, there were no loans past due ninety days or more and still accruing.
There were no impaired loans at September 30, 2021 or June 30, 2021.
During the three months ended September 30, 2021 and 2020, there were no troubled debt restructurings or troubled debt restructurings that defaulted in the first twelve months after restructuring. Management performs a discounted cash flow calculation to determine the amount of impairment reserve required on each of the troubled debt restructurings. Any reserve required is recorded through the provision for loan losses.
 
13

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
Credit Quality Information
The Bank utilizes an internal loan rating system for residential real estate, commercial real estate, and construction loans as follows:
Pass: Loans in this category are considered to pose low to average risk. Passed assets are generally protected by the current net worth and paying capacity of the obligor or by the value of collateral pledged.
Special Mention: Loans in this category possess credit deficiencies or potential weaknesses deserving management’s close attention. If uncorrected, such deficiencies or weaknesses may expose the Bank to an increased risk of loss.
Substandard: Loans in this category are considered to be inadequately protected by the current net worth and paying capacity of the obligors and/or the collateral pledged. These assets have a well- defined weakness and are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.)
Doubtful: Loans in this category have all the weaknesses inherent in those classified substandard with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, highly questionable and improbable.
Loss: Loans in this category are considered uncollectible and continuance as a bankable asset is not warranted. Loans in this category are generally
charged-off.
On an annual basis, or more often if needed, the Bank formally reviews the ratings on all commercial real estate and construction loans. On a monthly basis, the Bank reviews the residential and other loan portfolios for credit quality primarily through the use of delinquency reports.
The following table presents information on the Bank’s loans by risk ratings at September 30, 2021 and June 30, 2021:
 
 
  
September 30, 2021
 
  
June 30, 2021
 
(In thousands)
  
Residential Real
Estate
 
  
Commercial
Real Estate
 
  
Residential Real
Estate
 
  
Commercial
Real Estate
 
Pass
  
$
154,905
 
  
$
14,147
 
  
$
158,009
 
  
$
14,342
 
Special mention
  
 
  
 
  
 
2,013
 
  
 
  
 
  
 
2,024
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
 
  
$
154,905
 
  
$
16,160
 
  
$
158,009
 
  
$
16,366
 
 
  
 
 
 
  
 
 
 
  
 
 
 
  
 
 
 
At September 30, 2021 and June 30, 2021, there were no loans rated substandard, doubtful or loss.    
 
5.
PREMISES AND EQUIPMENT
A su
m
mary of the cost and accumulated depreciation and amortization of premises and equipment follows:
 
(In thousands)
  
September 30, 2021
    
June 30, 2021
 
Land
   $ 1,553      $ 1,553  
Bank buildings
     1,066        1,066  
Building improvements
     926        926  
Furniture, fixtures and equipment
     1,273        1,267  
Leasehold improvements
     167        167  
    
 
 
    
 
 
 
    
 
4,985
 
  
 
4,979
 
Less accumulated depreciation and amortization
     (1,585      (1,520
    
 
 
    
 
 
 
    
$
3,400
 
  
$
3,459
 
    
 
 
    
 
 
 
Depreciation and amortization expense for the three months ended September 30, 2021 and 2020 amounted to $65,000 and $66,000, respectively.
 
14

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
6.
DEPOSITS
A summary of deposit balances, by type, is as follows:
 
(In thousands)
  
September 30,
 
2021
    
June 30,
 
2021
 
NOW and demand
   $ 60,094      $ 62,745  
Regular and other
     71,054        68,998  
Money market deposits
     41,068        41,319  
    
 
 
    
 
 
 
Total
non-certificate
accounts
     172,216        173,062  
    
 
 
    
 
 
 
Term certificates of $250,000 or more
     26,219        25,833  
Term certificates less than $250,000
     83,747        85,739  
    
 
 
    
 
 
 
Total certificate accounts
     109,966        111,572  
    
 
 
    
 
 
 
Total deposits
   $ 282,182      $ 284,634  
    
 
 
    
 
 
 
A summary of certificate accounts by maturity is as follows:
 
    
September 30, 2021
   
June 30, 2021
 
(In thousands)
  
Amount
    
Weighted
Average Rate
   
Amount
    
Weighted
Average Rate
 
Due within 1 year
   $ 75,259        0.50   $ 67,440        0.66
Over 1 year to 2 years
     25,272        1.48       33,517        1.11  
Over 2 years to 3 years
     5,361        0.98       5,208        1.86  
Over 3 years to 5 years
     4,074        0.81       5,407        0.95  
    
 
 
            
 
 
          
     $ 109,966        0.76   $ 111,572        0.86
    
 
 
            
 
 
          
 
7.
FEDERAL HOME LOAN BANK ADVANCES AND OTHER BORROWINGS
Short-term FHLB advances with an original maturity of less than one year amounted to $459,000 with a weighted average rate of 2.65% at September 30, 2021 and $918,000 with a weighted average rate of 2.75% at June 30, 2021. There were no long term FHLB advances outstanding at September 30, 2021.
The Bank has an available line of credit in the amount of $2,354,000 with the FHLB of Boston at an interest rate that adjusts daily. Borrowings under the line are limited to 2% of the Bank’s total assets. At September 30, 2021 and June 30, 2021, there were no funds advanced under the line of credit. All borrowings from the FHLB are secured by a blanket lien on qualified collateral, defined principally as first mortgage loans on
owner-occupied
1-4
family residential property
.
The Bank has an available line of credit under the Federal Reserve Bank
Borrower-in-Custody
program offered through the Discount Window. Under the terms of the credit line at September 30, 2021 and June 30, 2021, the Bank has pledged certain qualifying securities with a fair market value of $8,037,000 and $10,081,000, respectively, and the line bears a variable interest rate equal to the federal funds rate plus 0.50%. At September 30, 2021 and June 30, 2021, there was no outstanding balance under this program.
 
8.
MINIMUM REGULATORY CAPITAL REQUIREMENTS
The Bank is subject to various regulatory capital requirements administered by the federal banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Bank’s unaudited consolidated financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Bank must meet specific capital guidelines that involve quantitative measures of the Bank’s assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The Bank’s capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.
 
15

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
Federal banking regulations require minimum capital requirements for community banking institutions as set forth in the following table. Additionally, community banking institutions must maintain a capital conservation buffer of common equity Tier 1 capital, Tier 1 capital or total capital in an amount greater than 2.5% of total risk-weighted assets to avoid being subject to limitations on capital distributions and discretionary bonuses. At September 30, 2021, the Bank meets the required capital conservation buffer. Management believes that the Bank’s capital levels will remain characterized as “well capitalized.”
As of September 30, 2021, the most recent notification from the Office of the Comptroller of Currency (“OCC”) categorized the Bank as well capitalized under the regulatory framework for prompt corrective action. To be categorized as well capitalized, the Bank must maintain minimum capital ratios as set forth in the following table. There are no conditions or events since that notification that management believes have changed the Bank’s category.
The Bank’s actual capital amounts and ratios as of September 30, 2021 and June 30, 2021 are also presented in the table.
 
    
Actual
   
Minimum Capital
Requirement
   
Minimum To Be Well
Capitalized Under
Prompt Corrective
Action Provisions
 
(Dollars in thousands)
  
Amount
    
Ratio
   
Amount
    
Ratio
   
Amount
    
Ratio
 
September 30, 2021:
                                                   
Total capital (to risk weighted assets)
   $ 50,837        30.1   $ 13,504        8.0   $ 16,880        10.0
Common equity Tier 1 capital (to risk weighted assets)
     49,100        29.1       7,596        4.5       10,972        6.5  
Tier 1 capital (to risk weighted assets)
     49,100        29.1       10,128        6.0       13,504        8.0  
Tier 1 capital (to adjusted total assets)
     49,100        14.6       13,494        4.0       16,868        5.0  
June 30, 2021:
                                                   
Total capital (to risk weighted assets)
   $ 50,350        29.7   $ 13,585        8.0   $ 16,981        10.0
Common equity Tier 1 capital (to risk weighted assets)
     48,628        28.6       7,641        4.5       11,038        6.5  
Tier 1 capital (to risk weighted assets)
     48,628        28.6       10,189        6.0       13,585        8.0  
Tier 1 capital (to adjusted total assets)
     48,628        14.4       13,519        4.0       16,898        5.0  
 
9.
COMMITMENTS AND CONTINGENCIES
Loan commitments
The Bank is a party to credit-related financial instruments with
off-balance
sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments include commitments to extend credit and advance funds on
lines-of-credit.
Such commitments involve, to varying degrees, elements of credit and interest rate risk in excess of the amount recognized in the unaudited consolidated balance sheets.
The Bank’s exposure to credit loss is represented by the contractual amount of these commitments. The Bank uses the same credit policies in making commitments as it does for
on-balance
sheet instruments.
At September 30, 2021 and June 30, 2021, the following financial instruments were outstanding whose contract amounts represent credit risk:
 
(In thousands)
  
September 30, 2021
    
June 30, 2021
 
Commitments to grant loans
   $ 250      $ 1,460  
Unadvanced funds on equity lines of credit
     5,584        5,659  
Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. The commitments for construction loans and lines of credit may expire without being drawn upon. Therefore, the total commitment amounts do not necessarily represent future cash requirements.
 
16

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
The Bank evaluates each customer’s credit worthiness on a
case-by-case
basis and the commitments are collateralized by real estate.
Operating lease commitments
Pursuant to the terms of noncancelable lease agreements in effect at September 30, 2021 pertaining to premises, future minimum rent commitments for 2021 through 2026 and thereafter amounted to $64,000, $119,000, $119,000, $119,000, $119,000 and $747,000, respectively.
The cost of such rentals is not included above. Total rent expense for the three months ended September 30, 2021 and 2020 amounted to $23,000 and $23,000, respectively.
Other contingencies
Various legal claims also arise from time to time in the normal course of business which, in the opinion of management, will have no material effect on the Bank’s unaudited consolidated financial statements.
 
10.
EMPLOYEE BENEFIT PLANS
Defined benefit plan
The Bank participates in the Pentegra Defined Benefit Plan for Financial Institutions (“The Pentegra DB Plan”), a
tax-qualified
defined-benefit pension plan. The Pentegra DB Plan operates as a multi-employer plan for accounting purposes and under the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code.
Pension expense under the Pentegra DB Plan amounted to $195,000 for the three months ended September 30, 2021 and 2020. There were no contributions to the Pentegra DB Plan for the three months ended September 30, 2021 and 2020.
401(k) plan
The Bank has a savings plan which is intended to qualify under Section 401(k) of the Internal Revenue Code. The plan provides for voluntary contributions by participating employees ranging from 2% to 15% of their compensation, subject to certain limitations. The Bank matches 20% of the employee’s voluntary contributions up to 3% of their compensation. Employer 401(k) contribution expense amounted to $11,000 and $10,000 for the three months ended September 30, 2021 and 2020, respectively.
Supplemental compensation plan
The Bank has entered into a Supplemental Executive Retirement Plan (the “SERP”) with certain officers, which provides for payments upon attaining the retirement age noted in the SERP. The present value of these future payments is provided over the remaining terms of the officers’ employment and at September 30, 2021 and June 30, 2021, the accrued liability amounted to $764,000 and $748,000, respectively. SERP expense for the three months ended September 30, 2021 and 2020 amounted to $16,000 and $22,000, respectively. In connection with these SERPs, the Bank purchased life insurance policies, which had a cash surrender value of $5,596,000 and $4,922,000 at September 30, 2021 and June 30, 2021, respectively.
In addition, the Bank provides death benefits for officers and directors of the Bank under the terms of Split Dollar Agreements. The Bank has purchased life insurance contracts in connection with these agreements and the cash surrender value of the policies at September 30, 2021 and June 30, 2021 amounted to $4,349,000 and $4,328,000, respectively. For the three months ended September 30, 2021 and 2020, post-retirement expense related to these obligations amounted to $16,000 and $17,000, respectively.
 
17

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
11.
FAIR VALUE OF ASSETS AND LIABILITIES
Determination of fair value
The Bank uses fair value measurements to record fair value adjustments to certain assets. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Fair value is best determined based upon quoted market prices. However, in some instances, quoted market prices may not be available. In cases where quoted market prices are not available, fair values are based on estimates using present value or other valuation techniques, including collateral value. Those techniques are significantly affected by the assumptions used, including discount rates and estimates of future cash flows. Accordingly, the fair value estimates may not be realized in an immediate settlement of the instrument.
Fair value hierarchy
The Bank groups its assets that are measured at fair value in three levels, based on the markets in which the assets are traded and the reliability of the assumptions used to determine fair value.
Level 1 – Valuation is based on quoted prices in active exchange markets for identical assets. Valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities.
Level 2 – Valuation is based on observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets.
Level 3 – Valuation is based on unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets. Level 3 assets include financial instruments whose value is determined using pricing models, discounted cash flow methodologies, or similar techniques, as well as instruments for which the determination of fair value requires significant management judgment or estimation.
Assets and liabilities measured at fair value on a recurring basis
At September 30, 2021 and June 30, 2021, securities available for sale were measured at Level 2 with a fair value of $274,000 and $2,294,000, respectively. All fair value measurements are obtained from a third-party pricing service and are not adjusted by management. Securities measured at fair value in Level 2 are based on pricing models that consider standard input factors such as observable market data, benchmark yields, interest rate volatilities, broker/dealer quotes, credit spreads and new issue data. There are no securities measured at fair value in Levels 1 and 3.
There are no liabilities measured at fair value on a recurring basis at September 30, 2021 and June 30, 2021.
Assets and liabilities measured at fair value on a
non-recurring
basis
The Bank may also be required, from time to time, to measure certain other financial assets on a
non-recurring
basis in accordance with generally accepted accounting principles. These adjustments to fair value usually result from application of
lower-of-cost-or-market
accounting or write-downs of individual assets. There are no assets or liabilities measured at fair value on a
non-recurring
basis at September 30, 2021 or June 30, 2021.
 
18

Colonial Federal Savings Bank and Subsidiary
Notes to Unaudited Consolidated Financial Statements (Continued)
 
    
September 30, 2021
 
(In thousands)
  
Carrying

Value
    
Level 1
    
Fair Value
Level 2
    
Level 3
    
Total
 
Assets:
                                            
Cash and cash equivalents
   $ 37,707      $ 37,707      $         $         $ 37,707  
Certificates of deposits
     980                  980                  980  
Securities available for sale
     274                  274                  274  
Securities held to maturity
     110,178                  111,634                  111,634  
Federal Home Loan Bank of Boston stock
     453                            453        453  
Loans—net
     171,112                            174,138        174,138  
Accrued interest receivable
     1,080                            1,080        1,080  
Liabilities:
                                         —    
Deposits
     282,182                            282,325        282,325  
Short term borrowings
     459                            462        462  
Accrued interest payable
     3                            3        3  
 
    
June 30, 2021
 
(In thousands)
  
Carrying

Value
    
Level 1
    
Fair Value
Level 2
    
Level 3
    
Total
 
Assets:
                                            
Cash and cash equivalents
   $ 40,678      $ 40,678      $         $         $ 40,678  
Certificates of deposits
     980                  988                  988  
Securities available for sale
     2,294                  2,294                  2,294  
Securities held to maturity
     105,114                  107,391                  107,391  
Federal Home Loan Bank of Boston stock
     453                            453        453  
Loans—net
     174,433                            177,324        177,324  
Accrued interest receivable
     1,146                            1,146        1,146  
Liabilities:
                                         —    
Deposits
     284,634                            285,915        285,915  
Short term borrowings
     918                            925        925  
Accrued interest payable
     3                            3        3  
 
19

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
This discussion and analysis reflects our unaudited consolidated financial statements and other relevant statistical data, and is intended to enhance your understanding of our financial condition and results of operations. The information in this section has been derived from our unaudited consolidated financial statements and the notes thereto included elsewhere in this Quarterly Report on Form
10-Q
and the audited consolidated financial statements, which appear beginning on page F-1 of the Prospectus. You should read the information in this section in conjunction with the business and financial information regarding Colonial Federal Savings Bank provided in the Prospectus.
Overview
Our results of operations depend primarily on our net interest income and, to a lesser extent,
non-interest
income. Net interest income is the difference between the interest income we earn on our
interest-earning
assets, consisting primarily of loans, securities and other
interest-earning
assets (primarily cash and cash equivalents), and the interest we pay on our interest-bearing liabilities, consisting of deposits and borrowings. Non-interest income consists primarily of earnings on bank-owned life insurance, service charges on deposit accounts and other income. Our results of operations also are affected by our provision for loan losses and
non-interest
expense. Non-interest expense consists primarily of salaries and employee benefits, occupancy and equipment, data processing costs, advertising, FDIC deposit insurance premiums and other expenses. Our results of operations also may be affected significantly by general and local economic and competitive conditions, changes in market interest rates, government policies and actions of regulatory authorities.
Cautionary Note Regarding Forward-Looking Statements
This quarterly report contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, which can be identified by the use of words such as “estimate,” “project,” “believe,” “intend,” “anticipate,” “assume,” “plan,” “seek,” “expect,” “will,” “may,” “should,” “indicate,” “would,” “believe,” “contemplate,” “continue,” “target” and words of similar meaning. These forward-looking statements include, but are not limited to:
 
   
statements of our goals, intentions and expectations;
 
   
statements regarding our business plans, prospects, growth and operating strategies;
 
   
statements regarding the quality of our loan and investment portfolios; and
 
   
estimates of our risks and future costs and benefits.
These forward-looking statements are based on our current beliefs and expectations and are inherently subject to significant business, economic and competitive uncertainties and contingencies, many of which are beyond our control. In addition, these forward-looking statements are subject to assumptions with respect to future business strategies and decisions that are subject to change. We are under no duty to and do not take any obligation to update any forward-looking statements after the date of this report.
The following factors, among others, could cause actual results to differ materially from the anticipated results or other expectations expressed in the forward-looking statements:
 
   
conditions relating to
the COVID-19 pandemic,
including the severity and duration of the associated economic slowdown either nationally or in our market areas, that are worse than expected;
 
   
general economic conditions, either nationally or in our market areas, that are worse than expected;
 
   
changes in the level and direction of loan delinquencies and write-offs and changes in estimates of the adequacy of the allowance for loan losses;
 
   
our ability to access cost-effective funding;
 
   
fluctuations in real estate values and both residential and commercial real estate market conditions;
 
   
demand for loans and deposits in our market area;
 
   
our ability to implement and change our business strategy;
 
20

   
competition among depository and other financial institutions;
 
   
inflation and changes in the interest rate environment that reduce our margins and yields, the fair value of financial instruments or our level of loan originations, or increase the level of defaults, losses and prepayments on loans we have made and make;
 
   
adverse changes in the securities or secondary mortgage markets;
 
   
changes in laws or government regulations or policies affecting financial institutions, including changes in regulatory fees, capital requirements and insurance premiums;
 
   
changes in the quality or composition of our loan or investment portfolios;
 
   
technological changes that may be more difficult or expensive than expected;
 
   
the inability of third-party providers to perform as expected;
 
   
a failure or breach of our operational or security systems or infrastructure, including cyberattacks;
 
   
our ability to manage market risk, credit risk and operational risk;