CCSB Financial : 2021 Annual Report - CCSB Financial Corp.

CCSB

Financial Corp

ANNUAL REPORT

The Bank originated 200 loans for $61.7 million during fiscal year 2021

Dear Stockholder:

On August 10, 1821, Missouri became the 24th state admitted into the United States, becoming the first state entirely west of the Mississippi River to be admitted to the Union. A few months later, on January 2, 1822, Clay County was organized, being named for then U.S. Representative, Henry Clay, from Kentucky. These bicentennials are significant to note, as we head to a significant anniversary of our own, the 100th anniversary of our subsidiary bank, Clay County Savings Bank.

Perhaps it could have been a scene out of Frank Capra's "It's A Wonderful Life", but on March 15, 1922, a group of local businessmen (James Costello, S.D. Church, H.R. Banks, Frances Hale, Frank Hamilton, R.W. Rand, E.H. Norton, James Simrall and Claude Donovan) met at a hotel, now known as the Franklin Apartments, off the Liberty Square for the purpose of discussing the formation of a new savings and loan association. Six days later, Clay County Building and Loan Association was formed for the mutual benefit of depositors and borrowers and opened for business.

It took approximately 9 years for the then building and loan to reach its first million in assets. In contrast, this past year has seen perhaps the most significant growth in the history of the bank, now a subsidiary of CCSB Financial Corp. In this past fiscal year:

∙ Total assets reached $150
					Growth Trends
million for the first time and
remained above $150 million
in 4 of the last 7 months of the	TOTAL ASSETS				17.9%
		15.2%
fiscal year. Total assets for the				DEPOSITS						21.3%
							18.5%
Company increased $23.0
million, or 17.9%, from $128.5				LOANS	3.0%		15.7%
million as of September 30,	0.0%	5.0%	10.0%	15.0%		20.0%	25.0%
2020, to $151.6 million as of
					Loans		Deposits		Total Assets
September 30, 2021.				FY 2021		15.7%		21.3%			17.9%
∙ Deposits increased $24.2				FY 2020		3.0%		18.5%			15.2%
million, or 21.3%, from $113.5
million as of September 30, 2020, to $137.7 million as of September 30, 2021.

∙ Loans increased $11.9 million, or 15.7%, from $75,957,000 as of September 30, 2020, to a record $87,884,000 as of

September 30, 2021. Inclusive of undisbursed funds in construction and development loans, loans topped $100 million for the first time, which is an increase of $17.5 million, or 21.1%, from $83,158,000 as of September 30, 2020, to $100,697,000 as of September 30, 2021

Our growth was consistent with what was being experienced in general in the banking industry despite a global pandemic and economic uncertainty. The banking industry also saw a compression of net interest spreads due to the historically low interest rates. Record loan activity and a realignment of the investment portfolio toward the end of the fiscal year has helped to offset the impact of the latter.

Our focus has been, and continues to be, to provide shareholder value through a combination of growth in the price per share of common stock and through dividends. The Company's stock activity continued favorable trends from the prior year. The Company's stock traded at a price per share above net book value per share throughout the fiscal year, with an average trade price of $17.00 per share in fiscal year 2021, compared to an average trade price $16.22 per share in fiscal year 2020. The Company's stock closed at $16.58 per share or 107% of net book value at September 30, 2021, which ranks favorably amongst

CCSB Financial Corp.

2021 Annual Report

[ 1 ]

The Bank has not had a

nonperforming loan over 90

days past due or on nonaccrual since February 2018 and has not had any other real estate owned or repossessed asset since July 2016

publicly traded bank holding companies in the Midwest with total assets less than $250 million. The stock price also reached an all-time high in February 2021 at $19.50 per share. The Company now has paid a $0.10 per share dividend for 9 consecutive quarters. Based on the closing stock price at September 30, 2021, that is an annualized yield of 2.41%.

Asset growth has leveraged our capital position more than desired. Net income was also lower than the preceding fiscal year. Earnings before income taxes was not significantly lower, $472,566 for the fiscal year ended September 30, 2021, compared to $478,442 for the fiscal year ended September 30, 2020; however, in the fiscal year ended September 30, 2020, the Company benefitted from a tax credit as a result of the elimination of the valuation allowance on its deferred tax asset. As a result, net income after taxes was $374,181, or $0.50 per share, compared to net income after taxes of approximately $622,442, or $0.84 per share, for the fiscal year ended September 30, 2020. Despite the early compression of the spread between the yield on interest-earning assets and the cost of interest-bearing liabilities, net interest income increased $100,561 from the prior fiscal year. While noninterest expense increased only 2.3% this past year, the cost to have contested annual meetings and corporate legal expenses continue to have a significant impact on the Company's operating results (see the table below which compares legal and annual meeting expense the last two fiscal years to the average expense in the prior three years, excluding legal fees related to bank-related business).

										A dissident shareholder group has filed lawsuits
		Avg Prior	9/30/2020	9/30/2021	challenging the outcome of the results of both the
		3 Years
Legal Fees (Corporate Only)	5,650		116,302		55,149		2020 and 2021 annual election of directors and the
Annual Meeting Expense		8,346			8,200			35,700		Company continues to defend lawsuits filed by the
Total	13,996		124,502		90,849		same group for statements made in a supplemental

proxy letter sent to shareholders prior to the 2020 election. The suits are being defended by counsel hired by the Company's insurance carriers on behalf of the Company. The Company and the Board stand firm that claims in the lawsuits are without merit; however, the litigation has been time consuming for management and has resulted in expense attributed to these actions of over $90,000 in fiscal year 2021 and $124,000 in fiscal year 2020. The combined total for the two fiscal years is nearly $0.30 per share for every stockholder.

We abide by some basic principles - a commitment to our community, a commitment to our customers, a commitment to our employees and a commitment to our shareholders. It is also important to point out, despite the growth, global pandemic and economic uncertainty, Asset Quality remains as strong as ever as evidenced by the fact that the Company had no nonperforming loans, no loans past due over 90 days or on nonaccrual, no charge-offs and no repossessed assets during the fiscal year. In April 2021, our subsidiary bank once again

made the Kansas City Business Journal's list of strongest small banks ($250 million or less in assets) in the area as an honorable mention.

On behalf of the Board of Directors, thank you; and we appreciate your continued support.

President &

Chief Executive Officer

CCSB Financial Corp.

2021 Annual Report

[ 2 ]

COMPANY PROFILE

CCSB Financial Corp. (the "Company") is the parent company of Clay County Savings Bank (the "Bank"), a state-chartered bank. Common shares of the Company's stock trade on the OTC Bulletin Board. The Company was formed in September 2002 to acquire the stock (through a mutual to stock conversion) of Clay County Savings Bank, a former mutual savings and loan association and previously known as Clay County Savings and Loan Association. In May 2015, the Bank converted to a state charter. The Bank was founded in 1922 as a state-chartered mutual savings and loan association with the name Clay County Building and Loan Association. Deposits of the Bank are insured by the Federal Deposit Insurance Corporation (the "FDIC"). The Company is regulated by the Federal Reserve Bank and the Bank is regulated by the FDIC and the Division of Finance for the State of Missouri.

The Bank primarily serves communities located in Clay and Platte Counties that are amongst the 15 counties in the metropolitan statistical area of Kansas City, Missouri. In addition to the main office in Liberty, it has branch offices in Kansas City north and Kearney.

The Bank offers a variety of financial products and services to meet the needs of the communities it serves. The Bank was established primarily to serve the home financing needs of the public and now serves the expanded credit needs of area residents and businesses in its market area as a community bank, but with a focus on real estate lending.

The Bank's principal business consists of attracting retail deposits from the general public in the areas surrounding its branches and investing those deposits, together with funds generated from operations and borrowings, primarily in one- to four- family residential mortgage loans, construction loans, multi-family and commercial real estate loans, mortgage-related securities and various other securities. The Bank also invests in commercial business loans and consumer and other loans, including home equity and automobile loans. The Bank's revenues are derived principally from the interest on mortgage, commercial and consumer loans, securities, loan origination and servicing fees, and service charges and fees collected on deposit accounts. The primary sources of funds are deposits, borrowings, and principal and interest payments on loans and securities.

SYMBOL (OTC Pink Sheets)

CCFC

DIRECTORS & OFFICERS

Directors (CCSB Financial Corp.)	Directors (Clay County Savings Bank)
David H. Feess, Chairman	Mario Usera, Chairman
President & CEO - Liberty Hospital	President & CEO of Bank
Mario Usera	Deborah A. Jones
President & CEO of Company	Executive Vice President & Secretary of Company
Deborah A. Jones	Debra S. Coltman
Executive Vice President & Secretary of Company	Retired - Former Bank Executive
Debra S. Coltman	Robert F. Durden
Retired - Former Bank Executive	Furniture Manufacturer Representative and Realtor
Robert F. Durden	David H. Feess
Furniture Manufacturer Representative and Realtor	President & CEO - Liberty Hospital
Louis D. Freeman	Louis D. Freeman
Owner - Freeman Custom Homes	Owner - Freeman Custom Homes
George A. McKinley	Mark E. Kelly
Retired - Former Owner of a Heavy Equipment Construction Company	Attorney

-------------

Additional Officers

Craig A. Fischer	Jacqueline E. Murtha	Cristina Johnson	Pamela L. Crow
Senior Vice President & Treasurer	Vice President (Bank Only)	Vice President (Bank Only)	Vice President (Bank Only)

CCSB Financial Corp.

2021 Annual Report

[ 3 ]

Independent Auditor's Report

Audit Committee, Board of

Directors and Stockholders

CCSB Financial Corp.

Liberty Missouri

We have audited the accompanying consolidated financial statements of CCSB Financial Corp. (the "Company") and its subsidiary, which comprise the consolidated balance sheets as of September 30, 2021 and 2020, and the related consolidated statements of income and comprehensive income, stockholders' equity and cash flows for the years then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Company's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

CCSB Financial Corp.

2021 Annual Report

[ 4 ]