Form N-CSRS - Certified Shareholder Report, Semi-Annual
02 Febbraio 2024 - 7:49PM
Edgar (US Regulatory)
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UNITED STATES |
SECURITES AND EXCHANGE COMMISSION |
Washington, D.C. 20549 |
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FORM N-CSRS |
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CERTIFIED SHAREHOLDER REPORT OF REGISTERED |
MANAGEMENT INVESTMENT COMPANIES |
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Investment Company Act File Number 811-23782 |
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California First Leasing Corporation |
(Exact name of registrant as specified in charter) |
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5000 Birch Street, Suite 500, Newport Beach, CA 92660 |
(Address of principal executive offices) |
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Glen T. Tsuma |
California First Leasing Corporation |
5000 Birch Street, Suite 500 |
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Newport Beach, CA 92660 |
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(Name and address of agent for service) |
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Registrant’s telephone number, including area code: 949-255-0500 |
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Date of fiscal year end: June 30, 2024 |
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Date of reporting period: December 31, 2023 |
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Item 1(a). Reports to Stockholders |
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California First Leasing Corporation
‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗‗ |
Semi-Annual Financial Report |
December 31, 2023 |
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California First Leasing Corporation, (OTCQX: CFNB, “CalFirstLease” or “Company”), headquartered in Newport Beach, California, is an internally managed non-diversified closed-end investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Company continues its lease business while using equity and other investments to maximize current income and generate capital appreciation. |
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An investment in the Company’s common stock involves certain risks, including the risk of loss. The shares of common stock are not deposits or obligations of, or guaranteed by any federal or other government agency. A registration statement dated July 20, 2022 (the “Registration Statement”) containing additional information about the Company has been filed with the Securities and Exchange Commission (the “SEC”). Investors should carefully consider the Company’s objectives and risks detailed in the Registration Statement that may adversely affect the Company’s shareholders’ equity and stock price and may make an investment in the Company not appropriate for all investors. |
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Statements made in this report that are not strictly historical in nature constitute “forward-looking statements.” Forward-looking statements involve management judgment and assumptions, risks and uncertainties and include, but are not limited to, beliefs regarding investments in equity securities, swings in stock prices and the potential for significant volatility in reported net earnings and net asset value, the impact of external events on business activities and the lease portfolio, estimates of expected tax rates applicable to future periods, impact of changes in interest rates and equity and fixed income markets. Such forward-looking statements involve known and unknown risks and uncertainties and factors that could cause actual results to differ materially include political, economic, competitive, market, regulatory and other risks. Consequently, if management assumptions prove to be incorrect or such risks or uncertainties materialize, the Company’s actual results could differ materially from the results forecast in the forward-looking statements. All forward-looking statements are qualified in their entirety by this cautionary statement, and the Company undertakes no obligation to revise or update this information to reflect events or circumstances arising after the date hereof (January 30, 2024).
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CONTENTS |
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Page |
Overview…………………………………………………………………………………………………... |
1 |
Selected Financial Data...………………………………………………………………………………. |
1 |
Discussion of Performance and Results of Operations…………………………………………….... |
2 |
Investment Operations………………………………………………………………………………. |
2 |
Lease Operations ……………………………………………………………………………………. |
4 |
Financial Statements |
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Statement of Investments ……………………………………………………………………………. |
5 |
Statements of Assets, Liabilities and Stockholders’ Equity………………………………………. |
7 |
Statements of Operations ……………………………………………………………………………. |
8 |
Statements of Changes in Stockholders’ Equity …………………………………………………... |
9 |
Statements of Cash Flows……………………………………………………………………………. |
10 |
Financial Highlights …………………………………………………………………………………… |
11 |
Notes to Financial Statements…………………………………………………………………………. |
12-14 |
Other Information………………………………………………………………………………………... |
15 |
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As permitted by regulations adopted by the SEC, paper copies of the Company’s annual and semiannual shareholder reports will not be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Company’s website (www.calfirstlease.com), and you will be notified each time a report is posted and provided with a website link to access the report. To elect to receive all future reports on paper free of charge, please send an email request to invest@calfirstlease.com or you may call 800-460-4640.
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California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
Overview |
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For the six months ended December 31, 2023, net earnings increased 211% to $10.54 million. This included a pretax gain on equity securities of $11.7 million compared to a gain on equity securities of $831,000 reported for the first six months of fiscal 2023. The return on the equity portfolio for the six-month period of 7.90% compared to the return on the S&P 500®TR Index of 8.01% for the same period. The Company’s overall return, based on the change in net asset value, of 6.1% for the first half of fiscal 2024 includes a 46.7% decrease in lease income that offset in part the large gain on equity securities and 14.9% increase in dividend and interest income. |
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During the first half of fiscal 2024, the Company did not declare or pay any dividends, but it completed a tender offer to repurchase 394,069 shares, or 4.1% of CalFirstLease’s common stock outstanding. The repurchase of shares below book value contributed to a 1.3% increase in net book value per share for the six months ended December 31, 2023. |
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Selected Financial Data |
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The following table sets forth selected financial data and operating information of the Company. The selected data should be read in conjunction with the Financial Statements and notes thereto and management's Discussion of Performance and Results of Operations contained herein. |
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The results discussed below represents past performance. Past performance is no guarantee of future results, and current or future performance may be lower or higher than the data included here. The Company’s periodic earnings can fluctuate widely due to including gains and losses on equity securities, including unrealized amounts, that are determined based on stock prices on the last day of a fiscal period. |
(in thousands, except per share data) |
Three Months |
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Six Months |
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Ended December 31, |
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Ended December 31, |
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2023 |
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2022 |
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2023 |
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2022 |
Dividend Income |
$ |
891 |
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$ |
854 |
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$ |
1,848 |
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$ |
1,780 |
Interest Income |
|
489 |
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|
442 |
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1,001 |
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|
700 |
Net realized gain (loss) on securities |
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- |
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(610) |
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(256) |
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|
(2,031) |
Net unrealized securities gain (loss) |
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11,591 |
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13,406 |
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12,001 |
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|
2,862 |
Investment Income |
|
12,971 |
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14,092 |
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14,593 |
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3,311 |
Finance and loan income, net |
|
247 |
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|
334 |
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|
523 |
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|
730 |
Release of reserves |
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- |
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|
100 |
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|
80 |
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|
100 |
Other lease income |
|
348 |
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1,094 |
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|
609 |
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|
1,444 |
Lease Income |
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595 |
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1,529 |
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1,213 |
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2,274 |
Investment and Lease Income |
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13,566 |
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15,621 |
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15,806 |
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|
5,585 |
Total Expenses |
|
717 |
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670 |
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1,376 |
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1,358 |
Income taxes |
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3,569 |
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3,129 |
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3,895 |
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|
842 |
Net Income |
$ |
9,280 |
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$ |
11,821 |
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$ |
10,535 |
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$ |
3,384 |
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Net Asset Value, beginning of period |
$ |
22.74 |
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$ |
19.78 |
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$ |
22.61 |
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$ |
20.60 |
Net income |
|
0.97 |
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1.16 |
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1.09 |
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|
0.33 |
Dividends paid |
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- |
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- |
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- |
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- |
Net gain on share repurchase |
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0.28 |
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0.28 |
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0.29 |
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0.29 |
Net Asset Value, end of period |
$ |
23.99 |
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$ |
21.22 |
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$ |
23.99 |
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$ |
21.22 |
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Weighted Number of shares outstanding |
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9,584 |
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10,177 |
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9,643 |
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10,230 |
Shares outstanding, end of period |
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9,309 |
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9,703 |
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9,309 |
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9,703 |
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Total return |
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CFNB, based on NAV |
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5.52% |
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7.28% |
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6.10% |
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3.01% |
S&P 500 (TR) Index |
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11.73% |
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7.38% |
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8.01% |
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2.42% |
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(1) |
Total return for the Company is an after-tax amount. The S&P 500 (TR)”), an unmanaged benchmark of large U.S. corporations, assumes reinvestment of all distributions, and includes capital gains and distributions in the return calculation but does not include a deduction for expenses or taxes. It is not possible to invest directly in an index. |
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California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
The chart above illustrates the value of $10,000 invested in the Company’s stock in comparison to the performance of the S&P 500(TR)® (“S&P 500”), an unmanaged index that covers 500 leading companies that approximate 80% of the available market capitalization. Results for the Company are an after-tax amount. The S&P index is an unmanaged benchmark that assumes reinvestment of all distributions and includes capital gains and distributions in the calculation, but does not include a deduction for expenses or taxes. It is not possible to invest directly in an index. Performance data shown represents past performance and is no guarantee of future results. |
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Discussion of Performance and Results of Operations |
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The Company’s operating results are comprised of two primary components: |
· Investment income includes current income from dividends on equity securities, realized and unrealized gains or losses in the value of the securities, and interest earned on short-term treasury securities and money market balances. |
· Lease income includes direct finance and interest income earned from leases and loans, as well as other income from sales of leased property, sales of leases and operating lease income. |
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Investment Operations |
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The Company focuses on investing in fair or under-valued public companies that we expect to generate excess cash flow that can be reinvested at attractive rates of return to continue substantial growth or be returned to shareholders via share repurchases or dividends. A high percentage of the equity portfolio generally is invested in U.S. large capitalization equities. From time to time, the Company may retain a significant amount of funds in short-term liquid investments in order to take advantage of investment or lease opportunities as they arise. The Company does not specialize in any specific industry, but may hold large positions in certain sectors that it believes offer the opportunity for long-term returns but may underperform in certain market environments. |
Allocation of Securities * |
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12/31/2023 |
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6/30/2023 |
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($ in 000's) |
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US Large Cap Equities |
$ |
132,534 |
61.1% |
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$ |
124,253 |
60.5% |
US Mid Cap Equities |
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37,323 |
17.2% |
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26,164 |
12.7% |
US Small Cap Equities |
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8,470 |
3.9% |
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6,002 |
2.9% |
Developed Markets, Non-US |
|
5,858 |
2.7% |
|
|
5,542 |
2.7% |
Income fund |
|
3,318 |
1.5% |
|
|
1,004 |
0.5% |
Emerging Market Equities |
|
632 |
0.3% |
|
|
688 |
0.3% |
Equity securities |
$ |
188,135 |
86.7% |
|
$ |
163,653 |
79.7% |
Money market funds |
|
16,482 |
7.6% |
|
|
11,928 |
5.8% |
US Treasury Bills |
|
12,343 |
5.7% |
|
|
29,746 |
14.5% |
Fixed Income securities |
|
28,825 |
13.3% |
|
|
41,674 |
20.3% |
Investment securities |
$ |
216,960 |
100.0% |
|
$ |
205,327 |
100.0% |
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* Equity securities classification based on information from Wells Fargo Advisor |
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Prices of U.S. stocks, including mid-cap value-oriented shares, took off in November and December 2023 following. signals from the Federal Reserve that disinflationary trends were sufficient to support monetary easing in 2024 and led to a decline in U.S. Treasury yields. Subsequent data on cooling inflation, better consumer sentiment, enthusiasm for artificial intelligence developments, signs of a stable U.S. economy, and better than expected corporate earnings announced in the fourth quarter provided a further boost to equity markets, with nearly all major benchmarks reporting |
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California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
double-digit returns for the December 2023 quarter. And while the performance of large capitalization technology companies dominated return data, following sluggish results for most of the year, smaller-cap stocks finally surged late in the year and outpaced large-caps on a broad-based basis. |
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The Company’s equity portfolio at December 31, 2023 consisted of common stock holdings in 39 public companies, all with readily available stock prices, compared to 37 public companies at June 30, 2023. The top 5 equity holdings account for 35% of the portfolio and 29% of net assets, while strength in 7 semiconductor related stocks increased their representation to 22.3% of net assets at December 31, 2023 from 18.2% at June 30, 2023. This is due to in most part to the strong performance of those investments. The distribution of the Company’s equity securities across four segments at December 31, 2023 and the comparative gains or losses by group is summarized below: |
(in thousands) |
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Unrealized |
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Cost Basis |
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Gains |
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(Losses) |
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Fair Value |
as of December 31, 2023 |
|
|
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|
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Commercial / Industrial |
|
$ |
88,589 |
|
$ |
34,315 |
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$ |
(1,632) |
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$ |
121,272 |
Consumer |
|
|
27,032 |
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|
1,616 |
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(5,149) |
|
|
23,499 |
Financial |
|
|
22,409 |
|
|
4,553 |
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|
(919) |
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|
26,043 |
Healthcare |
|
|
14,983 |
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|
3,035 |
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|
(697) |
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|
17,321 |
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|
$ |
153,013 |
|
$ |
43,519 |
|
$ |
(8,397) |
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$ |
188,135 |
The Company’s portfolio participated in the stock market resurgence in the December quarter. After reporting a small net gain during the September 2023 quarter, by the end of December 2023 the Company’s equity securities increased substantially and produced a 7.2% return for the quarter ended December 31, 2023 and a 7.9% return for the first six months of fiscal 2024. This compared to a 11.7% all-in return on the benchmark S&P 500®TR Index for the quarter ended December 31, 2023 and 8.01% for the six-month period. |
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The equity portfolio’s recent performance reflects holdings in technology companies benefiting from AI enthusiasm, including Alphabet (parent of Google), semiconductor related Micron Technology, Applied Materials, Qualcomm and Advanced Micro Devices, and social networking service provider Meta Platforms. Other contribution came from the recovery in the interest-sensitive financial sector, led by Goldman Sachs, and industrial based Cleveland-Cliffs and Consolidated Energy. In contrast, results were negatively impacted by the meaningful decline in the price of oil and our overweight position in energy stocks, dominated by Exxon Mobil at 8.5% of the equity portfolio at December 31, 2023. Other detractors to performance were Bristol Myers Squibb whose shares have declined 20% in the last six months, and the loss taken on the sale of Ford Motor during the first quarter. |
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During the first six months of fiscal 2024, the Company invested $20.7 million in 13 existing holdings and 3 new positions. It also sold 2 positions for $7.9 million during the first quarter, realizing a net loss of $256,342. |
Ten Largest Equity Holdings at December 31, 2023 as a percent of net assts: |
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Applied Materials |
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7.40% |
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Exxon Mobil |
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7.20% |
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Alphabet Inc. |
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6.57% |
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Cigna Corp New |
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4.12% |
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Goldman Sachs |
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4.01% |
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Qualcomm Inc |
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3.80% |
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Marvell Technology Inc |
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3.32% |
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Ovintiv Inc. |
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3.14% |
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Micron Technology Inc |
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3.11% |
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Bristol Myers Squibb |
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3.05% |
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Interest and Dividend Income |
A key component of the Company’s strategy is to generate current income through dividends in addition to the opportunity to realize investment returns from appreciation in stock values. Of the 39 stock positions held at December 31, 2023, 28 pay a dividend and account for 77% of the fair value of equity securities at December 31, 2023. In addition, with the increase in interest rates, income from money market and U.S. Treasury Bills are a more meaningful contributor to income. |
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Total dividend and interest income for the six months ending December 31, 2022 increased 15% to $2.85 million as interest income increased significantly on a 240 basis points increase in yield to 5.31% that offset a 21.2% decrease in average cash and equivalent balances. Dividend income increased 3.8% to $1.85 million on a 21.1% increase in average equity balances that reduced the average yield to 2.12% from 2.47% the prior year. |
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California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
The following table presents the Company’s average balances and yields earned on investments for the periods shown: |
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Six months ended |
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Six months ended |
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December 31, 2023 |
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December 31, 2022 |
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Average |
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Average |
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($ in thousands) |
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Balance |
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Income |
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Yield |
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Balance |
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|
Income |
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Yield |
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Bank deposits |
|
$ |
913 |
|
$ |
6 |
|
1.31% |
|
$ |
1,415 |
|
$ |
2 |
|
0.28% |
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Money market funds |
|
|
11,579 |
|
|
309 |
|
5.35% |
|
|
44,131 |
|
|
637 |
|
2.89% |
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Treasury securities |
|
|
25,756 |
|
|
686 |
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5.33% |
|
|
2,989 |
|
|
61 |
|
4.08% |
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Equity securities |
|
|
174,734 |
|
|
1,848 |
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2.12% |
|
|
144,237 |
|
|
1,780 |
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2.47% |
|
|
|
$ |
212,982 |
|
$ |
2,849 |
|
2.68% |
|
$ |
192,772 |
|
$ |
2,480 |
|
2.57% |
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Lease Operations |
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Lease bookings of $1.6 million for the first six months of fiscal 2024 were down from $6.9 million for the first six months of fiscal 2023. Lease originations in fiscal 2024 have been minimal, leaving a backlog of approved lease commitments of $3.3 million at December 31, 2023, down from $4.2 million at June 30, 2023. Transactions in process of $688,000 at December 31, 2023 are down from $729,000 at June 30, 2023. |
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Finance and loan income of $523,000 for the first six months of fiscal 2024 was down 28% due to a 27.6% decrease in average balances to $15.1 million and a 7-basis point decrease in the average yield to 6.95%. The following table presents the Company’s average lease and loan balances, income and related yields earned on an annualized basis. |
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Six months ended |
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Six months ended |
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|
|
|
December 31, 2023 |
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|
December 31, 2022 |
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Average |
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Average |
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($ in thousands) |
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Balance |
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|
Income |
|
Yield |
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|
Balance |
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|
Income |
|
Yield |
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|
|
|
|
|
|
|
|
|
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Commercial loans |
|
$ |
2,001 |
|
$ |
48 |
|
4.80% |
|
$ |
3,144 |
|
$ |
73 |
|
4.64% |
|
Net investment in leases |
|
|
13,059 |
|
|
475 |
|
7.27% |
|
|
17,658 |
|
|
657 |
|
7.44% |
|
Lease and loan assets |
|
$ |
15,060 |
|
$ |
523 |
|
6.95% |
|
$ |
20,802 |
|
$ |
730 |
|
7.02% |
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Other Lease Income – Other lease income of $689,300 for the six months ended December 31, 2023 reflected flat sales of leased property and operating lease income, but was down 55.4% in comparison to prior year period that included a $906,200 recovery. |
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Operating Expenses |
The Company’s operating expenses for the six months ended December 31, 2023 increased by 1.3% to $1.38 million compared to $1.36 million the year before. The increase in fiscal 2024 included an 8.0% increase in compensation and benefit costs offset by a 19.1% reduction in other general and administrative expenses. |
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Income Taxes |
The Company’s effective income tax rate varies between periods due to changes in the mix of pre-tax earnings and the magnitude of gains or losses from equity securities included in earnings. For the first six months ending December 31, 2023, the tax provision of $3.9 million included a provision accrued at an effective tax rate of 19.9% on pretax earnings of $2.7 million excluding the equity securities gain, and a provision accrued at 28.6% on the net equity security gain of $11.75 million. The effective tax rate reflects the benefit the Company receives from the dividends received exclusion. The equity gain for the first six months of fiscal 2024 included net realized taxable losses of $256,000 on the sale of equity securities in the period, and unrealized gains of $12.0 million. |
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The components of earnings and taxes are summarized as follows: |
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|
Six months ended Dec. 31, |
|
|
|
(dollars in thousands) |
|
|
2023 |
|
|
2022 |
|
|
|
Pretax earnings excluding securities gain |
|
$ |
2,686 |
|
$ |
3,395 |
|
|
|
Gain on securities |
|
|
11,745 |
|
|
831 |
|
|
|
Pretax earnings |
|
|
14,430 |
|
|
4,226 |
|
|
|
Income tax expense excluding securities gain |
|
|
535 |
|
|
618 |
|
|
|
Income tax expense (benefit) on securities gain |
|
|
3,360 |
|
|
224 |
|
|
|
Net tax expense |
|
|
3,895 |
|
|
842 |
|
|
|
Net earnings excluding equity gain |
|
|
2,151 |
|
|
2,777 |
|
|
|
Net equity portfolio gain |
|
|
8,385 |
|
|
607 |
|
|
|
Net earnings |
|
$ |
10,535 |
|
$ |
3,384 |
|
|
|
|
California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
STATEMENT OF INVESTMENTS - December 31, 2023 |
(Unaudited ) |
Industry-- Percent of Net Assets |
Company |
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Shares |
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Market Value |
|
|
|
|
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|
|
Common Stocks-- 84.23% |
|
|
|
|
|
|
Auto & Truck Dealerships-- 1.44% |
Lithia Mtrs Inc |
|
9,779 |
$ |
3,220,029 |
|
Auto Parts-- 1.10% |
Allison Transmission |
|
42,290 |
|
2,459,164 |
|
|
|
|
|
|
|
|
Banks - Diversified-- 4.45% |
Bank of America Corporation |
|
117,500 |
|
3,956,225 |
|
|
JP Morgan Chase & Co |
|
4,380 |
|
745,038 |
|
|
Wells Fargo & Co |
|
106,400 |
|
5,237,008 |
|
|
|
|
|
|
9,938,271 |
|
|
|
|
|
|
|
|
Capital Markets-- 4.01% |
Goldman Sachs |
|
23,200 |
|
8,949,864 |
|
|
|
|
|
|
|
|
Credit Services-- 1.59% |
Credit Acceptance Corp (1) |
|
1,220 |
|
649,931 |
|
|
PayPal Holdings Inc (1) |
|
47,100 |
|
2,892,411 |
|
|
|
|
|
|
3,542,342 |
|
|
|
|
|
|
|
|
Drug Manufacturers-- 3.05% |
Bristol Myers Squibb |
|
132,800 |
|
6,813,968 |
|
Entertainment-- 0.58% |
Netflix.com Inc. (1) |
|
2,650 |
|
1,290,232 |
|
Financial-- 0.28% |
Pimco Muni Income Fund III |
|
85,459 |
|
631,542 |
|
Footwear & Accessories-- 0.44% |
On Holding AG (1) |
|
36,200 |
|
976,314 |
|
|
|
|
|
|
|
|
Healthcare Plans-- 4.70% |
Cigna Corp New |
|
30,710 |
|
9,196,110 |
|
|
United Health Group |
|
2,489 |
|
1,310,384 |
|
|
|
|
|
|
10,506,493 |
|
|
|
|
|
|
|
|
Insurance - Diversified-- 0.54% |
Berkshire Hathaway Inc (1) |
|
3,364 |
|
1,199,804 |
|
Insurance - Reinsurance-- 0.80% |
Everest Group LTD |
|
5,040 |
|
1,782,043 |
|
|
|
|
|
|
|
|
Internet Content & Information-- 9.90% |
Alphabet Inc. (1) |
|
105,100 |
|
14,681,419 |
|
|
Match Group Inc (1) |
|
68,500 |
|
2,500,250 |
|
|
Meta Platforms Inc (1) |
|
13,907 |
|
4,922,522 |
|
|
|
|
|
|
22,104,191 |
|
|
|
|
|
|
|
|
Internet Retail-- 0.17% |
Alibaba Grp Hldg |
|
4,900 |
|
379,799 |
|
Oil & Gas E & P-- 3.14% |
Ovintiv Inc. |
|
159,925 |
|
7,023,906 |
|
Oil & Gas Equipment & Services-- 3.01% |
Schlumberger LTD |
|
129,000 |
|
6,713,160 |
|
Oil & Gas Integrated-- 7.20% |
Exxon Mobil |
|
160,800 |
|
16,076,784 |
|
Scientific & Technical Instruments-- 0.83% |
Sensata Technologies |
|
49,350 |
|
1,854,080 |
|
|
|
|
|
|
|
|
Semiconductor Equipment & Materials-- 8.32% |
Applied Materials |
|
102,000 |
|
16,531,140 |
|
|
Teradyne Incorporated |
|
19,000 |
|
2,061,880 |
|
|
|
|
|
|
18,593,020 |
|
|
|
|
|
|
|
|
Semiconductors-- 13.99% |
Advanced Micro Devices Inc. (1) |
|
37,100 |
|
5,468,911 |
|
|
Marvell Technology Inc |
|
123,000 |
|
7,418,130 |
|
|
Micron Technology Inc |
|
81,300 |
|
6,938,142 |
|
|
Qualcomm Inc |
|
58,650 |
|
8,482,550 |
|
|
Taiwan Semiconductor Co |
|
28,250 |
|
2,938,000 |
|
|
|
|
|
|
31,245,733 |
|
|
|
|
|
|
|
|
Specialty Business Services-- 2.03% |
Global Payments Inc. |
|
35,650 |
|
4,527,550 |
|
Specialty Chemicals-- 2.76% |
Dupont De Nemours |
|
53,940 |
|
4,149,604 |
|
Specialty Chemicals-- 0.90% |
Intl Flavors & Fragrance |
|
24,750 |
|
2,004,008 |
|
|
|
|
|
|
6,153,612 |
|
|
|
|
|
|
|
|
Steel-- 2.19% |
Cleveland-Cliffs Inc. (1) |
|
239,000 |
|
4,880,380 |
|
|
|
|
|
|
|
|
|
California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
|
|
|
|
|
|
|
Industry-- Percent of Net Assets |
Company |
|
Shares |
|
Market Value |
|
|
|
|
|
|
|
|
Therrmal Coal-- 0.96% |
Consol Energy Inc |
|
11,777 |
|
4,577,484 |
|
|
Verizon Communications |
|
173,750 |
|
6,550,375 |
|
|
|
|
|
|
11,127,859 |
|
|
|
|
|
|
|
|
Thermal Coal-- 0.96% |
Consol Energy Inc |
|
21,300 |
|
2,141,289 |
|
Tobacco-- 1.79% |
British American Tobacco |
|
136,700 |
|
4,003,943 |
|
|
|
|
|
|
|
|
|
Total-Equity Securities |
|
|
$ |
188,135,371 |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Short-term Investments-- 13.41% |
|
|
|
|
|
|
Bank Deposit-- 0.50% |
Liberty Bank, N.A. |
|
|
|
1,127,397 |
|
U.S. Treasuries-- 5.53% |
U.S. Treasury Bills (5.30%)* |
|
|
|
12,343,117 |
|
Money Market Mutual Funds-- 7.38% |
JP Morgan Prim MMkt (5.46%)** |
|
|
|
10,908,706 |
|
|
State Street Inst Liquid Rsrv (5.49%)** |
|
|
|
2,504,265 |
|
|
Goldman FSQ Money Market (5.37%)** |
|
|
|
3,069,361 |
|
|
|
|
|
|
|
|
|
Total Short-term Investments |
|
|
$ |
29,952,846 |
|
|
|
|
|
|
|
|
Total Equity Securities & Short-term Investments-- 97.64% |
|
|
$ |
218,088,217 |
|
|
|
|
|
|
|
|
Net Assets at December 31, 2023 |
|
|
$ |
223,349,024 |
|
(1) Non-income producing security |
|
|
|
|
|
* Weighted average yield to maturity for bills maturing from 01/23/24 to 02/13/24 |
|
|
|
|
|
** Rate is the annualized seven-day yield of the fund at period end. |
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
|
California First
Leasing Corporation
|
Semi-Annual Report
for December 31, 2023
|
STATEMENTS OF ASSETS, LIABILITIES AND STOCKHOLDERS’
EQUITY
|
(in thousands,
except share amounts)
|
|
|
|
|
|
|
|
|
|
December 31,
|
|
|
June 30,
|
|
|
|
2023
|
|
|
2023
|
|
|
|
(unaudited)
|
|
|
|
|
ASSETS
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Cash and due
from banks
|
$
|
1,128
|
|
$
|
1,391
|
|
Money-market
mutual funds
|
|
16,482
|
|
|
11,928
|
|
U.S. Treasury
bills
|
|
12,343
|
|
|
29,746
|
|
Cash and
cash equivalents
|
|
29,953
|
|
|
43,065
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
188,135
|
|
|
163,653
|
|
Property
acquired for transactions-in-process
|
|
688
|
|
|
729
|
|
Leases and
loans:
|
|
|
|
|
|
|
Net
investment in leases
|
|
11,317
|
|
|
16,994
|
|
Commercial
loans
|
|
1,942
|
|
|
2,077
|
|
Allowance for
credit losses
|
|
(121)
|
|
|
(201)
|
|
Net
investment in leases and loans
|
|
13,138
|
|
|
18,870
|
|
|
|
|
|
|
|
|
Property on
operating leases
|
|
706
|
|
|
553
|
|
Income tax
receivable
|
|
402
|
|
|
265
|
|
Other assets
|
|
262
|
|
|
303
|
|
Total Assets
|
$
|
233,284
|
|
$
|
227,438
|
|
|
|
|
|
|
|
|
LIABILITIES
AND STOCKHOLDERS’ EQUITY
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Liabilities:
|
|
|
|
|
|
|
Accounts
payable
|
$
|
79
|
|
$
|
1,679
|
|
Accrued
liabilities
|
|
559
|
|
|
592
|
|
Lease deposits
|
|
79
|
|
|
51
|
|
Deferred
income taxes, net
|
|
9,218
|
|
|
5,736
|
|
|
|
9,935
|
|
|
8,058
|
|
|
|
|
|
|
|
|
Commitments and
contingencies
|
|
-
|
|
|
-
|
|
|
|
|
|
|
|
|
Stockholders'
equity:
|
|
|
|
|
|
|
Preferred
stock; 2,500,000 shares authorized; none issued
|
|
-
|
|
|
-
|
|
Common stock;
$.01 par value; 20,000,000 shares authorized; 9,309,387 at
|
|
|
|
|
|
|
December
31, 2023 and 9,703,456 at June 30, 2023 issued and outstanding
|
|
93
|
|
|
97
|
|
Additional
paid in capital
|
|
1,625
|
|
|
1,694
|
|
Retained
earnings
|
|
221,631
|
|
|
217,589
|
|
Total Stockholders’ Equity
|
|
223,349
|
|
|
219,380
|
|
Total
Liabilities and Stockholders’ Equity
|
$
|
233,284
|
|
$
|
227,438
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
|
|
California First
Leasing Corporation
|
Semi-Annual Report
for December 31, 2023
|
STATEMENTS OF OPERATIONS
|
(in thousands, except per share amounts)
|
(Unaudited)
|
|
|
|
|
|
|
|
|
Six Months Ended
|
|
|
|
|
|
December 31,
|
|
Percent
|
|
|
2023
|
|
2022
|
|
Change
|
Investment
income
|
|
|
|
|
|
|
|
|
|
Dividend income
|
|
$
|
1,848
|
|
$
|
1,780
|
|
3.8
|
%
|
Interest income
|
|
|
1,001
|
|
|
700
|
|
43.0
|
%
|
Gain on equity
securities
|
|
|
11,745
|
|
|
831
|
|
1,313.4
|
%
|
Total
investment income
|
|
|
14,594
|
|
|
3,311
|
|
340.8
|
%
|
|
|
|
|
|
|
|
|
|
|
Lease income
|
|
|
|
|
|
|
|
|
|
Finance and
loan income
|
|
|
523
|
|
|
730
|
|
(28.4)
|
%
|
Release of
(provision for) reserves for credit losses
|
|
|
80
|
|
|
100
|
|
(20.0)
|
%
|
Operating and
sales-type leases
|
|
|
551
|
|
|
437
|
|
26.1
|
%
|
Gain on sale
of leases, loans and leased property
|
|
|
24
|
|
|
106
|
|
(77.4)
|
%
|
Other fee
income
|
|
|
34
|
|
|
901
|
|
(96.2)
|
%
|
Total
lease income
|
|
|
1,212
|
|
|
2,274
|
|
(46.7)
|
%
|
|
|
|
|
|
|
|
|
|
|
Operating
expenses
|
|
|
|
|
|
|
|
|
|
Compensation
and employee benefits
|
|
|
992
|
|
|
918
|
|
8.1
|
%
|
Director fees
|
|
|
72
|
|
|
72
|
|
0.0
|
%
|
Occupancy
|
|
|
58
|
|
|
54
|
|
7.4
|
%
|
Other general
and administrative
|
|
|
254
|
|
|
314
|
|
(19.1)
|
%
|
Total
operating expenses
|
|
|
1,376
|
|
|
1,358
|
|
1.3
|
%
|
|
|
|
|
|
|
|
|
|
|
Earnings before
income taxes
|
|
|
14,430
|
|
|
4,227
|
|
241.4
|
%
|
|
|
|
|
|
|
|
|
|
|
Income taxes
|
|
|
3,895
|
|
|
842
|
|
362.6
|
%
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
|
$
|
10,535
|
|
$
|
3,385
|
|
211.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Basic earnings
per common share
|
|
$
|
1.09
|
|
$
|
0.33
|
|
230.2
|
%
|
|
|
|
|
|
|
|
|
|
|
Weighted average
common shares outstanding
|
|
|
9,643
|
|
|
10,230
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
|
|
California First
Leasing Corporation
|
Semi-Annual Report
for December 31, 2023
|
STATEMENT OF
STOCKHOLDERS' EQUITY
|
(Unaudited, in thousands, except share amounts)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Additional
|
|
|
|
|
|
|
|
|
|
|
|
|
Paid in
|
|
Retained
|
|
|
|
|
Shares
|
|
Amount
|
|
Capital
|
|
Earnings
|
|
|
Total
|
Six months ended
December 31, 2022
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June
30, 2022
|
10,284,139
|
|
$
|
103
|
|
$
|
2,314
|
|
$
|
209,463
|
|
$
|
211,880
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
-
|
|
|
-
|
|
|
-
|
|
|
3,385
|
|
|
3,385
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
repurchased
|
(580,683)
|
|
|
(6)
|
|
|
(620)
|
|
|
(8,736)
|
|
|
(9,362)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2022
|
9,703,456
|
|
$
|
97
|
|
$
|
1,694
|
|
$
|
204,112
|
|
$
|
205,903
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
December 31, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, June
30, 2023
|
9,703,456
|
|
$
|
97
|
|
$
|
1,694
|
|
$
|
217,589
|
|
$
|
219,380
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Net earnings
|
-
|
|
|
-
|
|
|
-
|
|
|
10,535
|
|
|
10,535
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Shares
repurchased
|
(394,069)
|
|
|
(4)
|
|
|
(69)
|
|
|
(6,493)
|
|
|
(6,566)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Balance, December
31, 2023
|
9,309,387
|
|
$
|
93
|
|
$
|
1,625
|
|
$
|
221,631
|
|
$
|
223,349
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
|
|
California First
Leasing Corporation
|
Semi-Annual Report
for December 31, 2023
|
STATEMENTS OF
CASH FLOWS
|
(Unaudited, in thousands)
|
|
|
|
|
|
|
|
|
|
|
|
Six months ended
|
|
|
|
December 31,
|
|
|
|
|
2023
|
|
|
2022
|
|
|
CASH FLOWS FROM OPERATING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Net Earnings
|
|
$
|
10,535
|
|
$
|
3,385
|
|
|
Adjustments to reconcile net
earnings to cash flows
|
|
|
|
|
|
|
|
|
provided by (used for)
operating activities:
|
|
|
|
|
|
|
|
|
(Release of) provision for
credit losses
|
|
|
(80)
|
|
|
(100)
|
|
|
Depreciation and net
amortization
|
|
|
42
|
|
|
20
|
|
|
Loss (gain) on sale of
leased property and sales-type lease income
|
|
|
5
|
|
|
(37)
|
|
|
Gain on equity securities,
net
|
|
|
(11,745)
|
|
|
(831)
|
|
|
Deferred income taxes,
including income taxes payable
|
|
|
3,482
|
|
|
915
|
|
|
Increase in income taxes
receivable
|
|
|
(137)
|
|
|
(13)
|
|
|
Net (decrease) increase in
accounts payable and accrued liabilities
|
|
|
(33)
|
|
|
78
|
|
|
Other, net
|
|
|
(144)
|
|
|
(1,045)
|
|
|
Net cash provided by
operating activities
|
|
|
1,925
|
|
|
2,372
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM INVESTING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Investment in leases,
loans and transactions in process
|
|
|
(3,059)
|
|
|
(2,560)
|
|
|
Payments received on lease
receivables and loans
|
|
|
4,908
|
|
|
9,396
|
|
|
Proceeds from sales of
leased property and sales-type leases
|
|
|
215
|
|
|
862
|
|
|
Proceeds from sales and
assignments of leases
|
|
|
2,197
|
|
|
-
|
|
|
Purchase of equity
securities
|
|
|
(20,675)
|
|
|
(20,752)
|
|
|
Proceeds from sale of
equity securities
|
|
|
7,938
|
|
|
9,306
|
|
|
Net decrease (increase) in
other assets
|
|
|
5
|
|
|
(17)
|
|
|
Net cash used for investing
activities
|
|
|
(8,471)
|
|
|
(3,765)
|
|
|
|
|
|
|
|
|
|
|
|
CASH FLOWS FROM FINANCING
ACTIVITIES:
|
|
|
|
|
|
|
|
|
Payments to repurchase
common stock
|
|
|
(6,566)
|
|
|
(9,362)
|
|
|
Net cash used for financing
activities
|
|
|
(6,566)
|
|
|
(9,362)
|
|
|
|
|
|
|
|
|
|
|
|
NET CHANGE IN CASH AND CASH
EQUIVALENTS
|
|
|
(13,112)
|
|
|
(10,755)
|
|
|
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD
|
|
|
43,065
|
|
|
53,808
|
|
|
CASH AND CASH EQUIVALENTS AT
END OF PERIOD
|
|
$
|
29,953
|
|
$
|
43,053
|
|
|
|
|
|
|
|
|
|
|
|
SUPPLEMENTAL DISCLOSURES
OF CASH FLOW INFORMATION
|
|
|
|
|
|
|
|
|
Decrease in lease rentals
assigned to lenders and
|
|
|
|
|
|
|
|
|
related non-recourse
debt
|
|
$
|
-
|
|
$
|
(357)
|
|
|
Income tax paid (refunds
received), net
|
|
$
|
550
|
|
$
|
(60)
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these
financial statements.
|
|
California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
Financial Highlights |
(Unaudited) |
|
Six Months Ended December 31, |
|
|
|
2023 |
|
|
2022 |
|
Per Share Operating Performance |
|
|
|
|
|
|
Net Asset Value, beginning of period |
$ |
22.61 |
|
$ |
20.60 |
|
Net income |
|
1.09 |
|
|
0.33 |
|
Less: Dividends paid |
|
- |
|
|
- |
|
Net gain on share repurchase |
|
0.29 |
|
|
0.29 |
|
Net Asset Value, end of period |
$ |
23.99 |
|
$ |
21.22 |
|
|
|
|
|
|
|
|
Market price, end of period |
$ |
16.75 |
|
$ |
16.15 |
|
|
|
|
|
|
|
|
Return to Shareholders (1) |
|
|
|
|
|
|
Based on net book value |
|
6.10% |
|
|
3.00% |
|
Based on market price |
|
16.72% |
|
|
-7.18% |
|
|
|
|
|
|
|
|
Ratios, Supplemental Data |
|
|
|
|
|
|
Expenses per share |
$ |
0.14 |
|
$ |
0.13 |
|
Expenses plus taxes per share |
$ |
0.55 |
|
$ |
0.22 |
|
Average Book Value per share |
$ |
22.95 |
|
$ |
20.86 |
|
Expenses to Average Book Value (2) |
|
1.24% |
|
|
1.27% |
|
Net income to Average Book Value |
|
4.76% |
|
|
1.59% |
|
|
|
|
|
|
|
|
|
|
(1) |
Return on market price assumes a purchase on the first day and sale on the last day of each period reported. Dividends and distributions are assumed to be reinvested. Total return on book value uses the same methodology, using book value for the beginning and ending values, and dividend reinvestment at the closing price on the day of distribution. Returns for periods of less than one year are not annualized. |
(2) |
Expense ratio is annualized. |
|
|
The accompanying notes are an integral part of these financial statements. |
|
California First
Leasing Corporation
|
Semi-Annual Report
for December 31, 2023
|
NOTES TO FINANCIAL
STATEMENTS
|
|
Note
1 – Basis of Presentation
|
|
The accompanying unaudited
financial statements of California First Leasing Corporation, (“CFNB” or the
“Company”), have been prepared in accordance with U.S. generally accepted
accounting principles for interim financial information and do not include
all of the information and footnotes required for complete financial
statements. These financial statements should be read in conjunction with the
financial statements and notes thereto included in the Annual report on Form
N-CSR for the year ended June 30, 2023.
|
|
In the opinion of management,
the unaudited financial statements contain all adjustments, consisting only
of normal recurring adjustments, necessary for a fair statement of
investments as of December 31, 2023 and the related statements of operations,
stockholders’ equity and cash flows for the periods presented. The results of
operations for the three and six-month periods ended December 31, 2023 are not
necessarily indicative of the results of operations to be expected for the
entire fiscal year ending June 30, 2024. Certain reclassifications have been
made to the fiscal 2023 financial statements to conform to the presentation
of the fiscal 2024 financial statements.
|
|
Note
2 –Fair Value Measurement:
|
|
ASC
Topic 820: “Fair Value Measurements and Disclosures” defines fair value as
the price that would be received in an orderly transaction between market
participants in the principal or most advantageous market. ASC Topic 820
establishes a three-tiered value hierarchy that prioritizes inputs that are
observable in the market and requires the maximum use of observable inputs
and minimum use of unobservable inputs. The three levels of inputs are
defined as follows:
|
·
|
Level 1 -
Valuation is based upon unadjusted quoted prices for identical instruments
traded in active markets;
|
·
|
Level 2 -
Valuation is based upon significant observable inputs, for example quoted
prices for similar instruments in active markets, or quoted prices for
identical instruments in markets that are not active;
|
·
|
Level 3 -
Valuation is generated from model-based techniques that use inputs not
observable in the market and based on the entity’s own judgment. Level 3
valuation techniques could include the use of option pricing models,
discounted cash flow models and similar techniques that rely on assumptions that
market participants would use in pricing the asset or liability.
|
ASC 820 applies whenever other
accounting pronouncements require presentation of fair value measurements,
but does not change existing guidance as to whether or not an instrument is
carried at fair value. As such, ASC 820 does not apply to the Company’s
investment in leases.
|
|
The value of deposits with
banks and short-term treasury securities, because
of their short-term nature, approximate fair value and are classified as
Level 1. Equity securities, money market funds and the income fund are
reported utilizing Level 1 inputs by reference to the market closing or last
trade price. In the unlikely event that no trade occurred on the applicable
date, an indicative bid or the last trade most proximate to the applicable
date would be used (Level 2 input). Changes in markets, economic conditions
or the Company valuation model may require the transfer of financial
instruments from one level to another. Such transfer, if any, would be recorded
at the fair value as of the beginning of the period in which the transfer
occurred. The Company has had no transfers in fiscal 2023 and 2024.
|
|
The following table summarizes
the Company’s assets, which are measured at fair value on a recurring basis as
of December 31, 2023 and June 30, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Quoted Price in
|
|
|
|
|
Significant
|
|
|
|
|
|
Active Markets for
|
|
Significant Other
|
|
Unobservable
|
(in thousands)
|
|
|
Total
|
|
Identical Assets
|
|
Observable Inputs
|
|
Inputs
|
Description of
Assets / Liabilities
|
|
|
Fair Value
|
|
(Level 1)
|
|
(Level 2)
|
|
(Level 3)
|
|
|
|
(in thousands)
|
As of December
31, 2023
|
|
|
|
|
|
|
|
|
|
|
|
|
Equity
securities
|
|
$
|
188,135
|
|
$
|
188,135
|
|
$
|
-
|
|
$
|
-
|
Money-market
accounts
|
|
|
16,482
|
|
|
16,482
|
|
|
-
|
|
|
-
|
U.S.
Treasury bills
|
|
|
12,343
|
|
|
-
|
|
|
12,343
|
|
|
-
|
Bank
deposits
|
|
|
1,128
|
|
|
1,128
|
|
|
-
|
|
|
-
|
|
|
$
|
218,088
|
|
$
|
205,745
|
|
$
|
12,343
|
|
$
|
-
|
|
California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
|
|
|
|
|
Quoted Price in |
|
|
|
|
Significant |
|
|
|
|
|
Active Markets for |
|
Significant Other |
|
Unobservable |
(in thousands) |
|
|
Total |
|
Identical Assets |
|
Observable Inputs |
|
Inputs |
Description of Assets / Liabilities |
|
|
Fair Value |
|
(Level 1) |
|
(Level 2) |
|
(Level 3) |
|
|
|
(in thousands) |
As of June 30, 2023 |
|
|
|
|
|
|
|
|
|
|
|
|
Equity securities |
|
$ |
163,653 |
|
$ |
163,653 |
|
$ |
- |
|
$ |
- |
Money-market accounts |
|
|
11,928 |
|
|
11,928 |
|
|
- |
|
|
- |
U.S. Treasury bills |
|
|
29,746 |
|
|
- |
|
|
29,746 |
|
|
- |
Bank deposits |
|
|
1,391 |
|
|
1,391 |
|
|
- |
|
|
- |
|
|
$ |
206,718 |
|
$ |
176,972 |
|
$ |
- |
|
$ |
- |
The Company’s loans are not accounted for or carried at fair value, but in accordance with the fair value disclosure requirements of ASC 825-50, the estimated fair value of the loans as of December 31, 2023 and June 30, 2023 is calculated based on discounted cash flow analyses using interest rates currently being offered for loans with similar terms to borrowers of similar credit quality, and are classified as Level 3 in the fair value hierarchy. Loan fair values are based on an exit value and have been adjusted for credit risk. |
|
|
|
December 31, 2023 |
|
|
June 30, 2023 |
|
|
Carrying |
|
Estimated |
|
Carrying |
|
Estimated |
(in thousands) |
|
Amount |
|
Fair Value |
|
Amount |
|
Fair Value |
Commercial loans |
|
$ |
1,922 |
|
$ |
1,919 |
|
$ |
2,057 |
|
$ |
1,949 |
These fair value estimates are based on relevant market information and data however, given there are no active market or observable market transactions, Company estimates of fair values are subjective in nature, involve uncertainties and cannot be determined with precision. Changes in assumptions could significantly affect the estimated values. |
|
Note 3 – Investment Transactions and Compensation: |
|
For the six months ended December 31, 2023, purchases and sales of investments, excluding short-term investments, were $20,674,944 and $7,937,516, respectively. |
|
The aggregate remuneration paid to all officers and directors during the six months ended December 31, 2023 was $752,130 and $72,000, respectively. |
|
Note 4 – Leases: |
|
The Company's net investment in leases consists of the following: |
|
|
December 31, |
|
June 30, |
(in thousands) |
|
2023 |
|
2023 |
Minimum lease payments receivable |
|
$ |
12,337 |
|
$ |
18,386 |
Estimated residual value |
|
|
166 |
|
|
363 |
Less unearned income |
|
|
(1,186) |
|
|
(1,755) |
Net investment in leases before allowances |
|
|
11,317 |
|
|
16,994 |
Less allowance for lease losses |
|
|
(101) |
|
|
(181) |
Net investment in leases |
|
$ |
11,216 |
|
$ |
16,813 |
The minimum lease payments receivable and estimated residual value are discounted using the internal rate of return method related to each specific lease. |
|
Note 5 – Commercial Loans: |
|
Commercial loans consist of the following: |
|
|
December 31, |
|
June 30, |
(in thousands) |
|
2023 |
|
2023 |
Commercial real estate loan |
|
$ |
1,758 |
|
$ |
1,863 |
Commercial term loan participation |
|
|
189 |
|
|
223 |
Total commercial loans |
|
|
1,947 |
|
|
2,086 |
Less unearned income and discounts |
|
|
(5) |
|
|
(9) |
Less allowance for loan losses |
|
|
(20) |
|
|
(20) |
Net commercial loans |
|
$ |
1,922 |
|
$ |
2,057 |
|
California First
Leasing Corporation
|
Semi-Annual Report
for December 31, 2023
|
Note 6 – Allowance for
Credit Losses:
|
|
The allowance for credit losses
includes amounts to cover losses related to the net investment in leases, commercial
loans, and transactions-in-process. A summary of the allocation of the
allowance for credit losses and selected statistics is as follows:
|
|
|
|
Six months ended December 31
|
(dollars in thousands)
|
|
|
2023
|
|
|
2022
|
Allowance for
credit losses at beginning of period
|
|
$
|
201
|
|
$
|
361
|
Charge-off
of leases
|
|
|
-
|
|
|
-
|
Provision
for (release of) reserves for credit losses
|
|
|
(80)
|
|
|
(100)
|
Allowance for
credit losses at end of period
|
|
$
|
121
|
|
$
|
261
|
Allowance for
credit losses as percent of net
|
|
|
|
|
|
|
investment
in leases and loans before allowances
|
|
|
0.91%
|
|
|
1.22%
|
Note 7 – Credit Quality
of Financing Receivables:
|
|
The
following tables provide information related to “financing receivables” as
defined under Topic 310, Receivables. “Financing receivables”
include direct finance and sales-type leases and all commercial loans, but
does not include operating leases and transactions in process.
The portfolio is disaggregated into two segments of leases and loans and four
classes: 1) commercial leases, 2) education, government and non-profit
(“EGNP”) leases, 3) commercial and industrial loans
and 4) commercial real estate loans. Relevant risk characteristics generally
include the nature of the borrower, structure of the transaction and
collateral type. The Company classifies all credits under regulatory
models that rate as “pass”, “special mention”, “substandard”, or “doubtful”
and reflect an assessment of the ability of the credit to service the
obligation based on current financial position, historical payment
experience, and collateral adequacy, among other factors. The Company uses
the following definitions for risk ratings:
|
Pass – Credits
of the highest quality with positive primary repayment source but may have
characteristics that are of higher than average risk.
|
Special Mention
– Have a potential weakness that if left uncorrected may result in
deterioration of the repayment prospects for the lease or loan or of the
Company’s credit position at some future date.
|
Substandard –
Are inadequately protected by the paying capacity of the obligor or of the
collateral, if any. Credits have a well-defined weakness that jeopardize the
liquidation of the debt or indicate the distinct possibility that the Company
will sustain some loss if the deficiencies are not corrected.
|
Doubtful – Based on current information and events, collection of all
amounts due according to the contractual terms of the lease or loan agreement
is considered highly questionable and improbable.
|
The risk classification of
financing receivables by portfolio class is as follows:
|
|
|
|
|
|
|
|
|
|
Commercial
|
|
|
Commercial
|
|
|
Total
|
(in thousands)
|
|
|
Commercial
|
|
|
EGNP
|
|
|
& Industrial
|
|
|
Real Estate
|
|
|
Financing
|
|
|
|
Leases
|
|
|
Leases
|
|
|
Loans
|
|
|
Loans
|
|
|
Receivable
|
As of December 31, 2023:
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Pass
|
|
$
|
1,421
|
|
$
|
9,104
|
|
$
|
184
|
|
$
|
1,758
|
|
$
|
12,467
|
Special Mention
|
|
|
792
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
792
|
Substandard
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
Doubtful
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
-
|
|
|
$
|
2,213
|
|
$
|
9,104
|
|
$
|
184
|
|
$
|
1,758
|
|
$
|
13,259
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accrual of interest income
on leases and loans will be discontinued when the customer becomes ninety
days or more past due on its lease or loan payments, unless the Company
believes the investment is otherwise recoverable. Leases and loans may be
placed on non-accrual earlier if the Company has significant doubt about the
ability of the customer to meet its lease or loan obligations, as evidenced
by consistent delinquency, deterioration in financial condition or other
relevant factors. Payments received while on non-accrual are applied to
reduce the Company’s recorded value.
|
|
There were no past due credits
at December 31, 2023 or June 30, 2023, and no increase in non-performing
assets during either period.
|
|
California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
Other Information |
|
Privacy Policy |
The Company has systems in place to safeguard shareholder privacy, with access to all information limited to a need to know basis. Through our transfer agent, Computershare Trust Company, the Company has access to nonpublic shareholder information such as name, address, tax identification number and the shares held that is used to send annual reports, proxy statements, tax statements or other information required by law. This information is not shared with any non-affiliated third party except pursuant to contracts to perform transaction processing, servicing or maintaining shareholder accounts. These companies are required to protect information and use it solely for the purpose for which they received it. |
|
Proxy Voting Policies and Procedures |
The policies and procedures to determine how to vote proxies relating to the securities portfolio is available without charge by contacting investor relations at California First Leasing Corporation, 5000 Birch Street, Suite 500, Newport Beach, CA 92660; by email at invest@calfirstlease.com; or on the Securities and Exchange Commission’s website at www.sec.gov. The Company’s report on its proxy voting record for the twelve-month period ended June 30, 2023 is available without charge by email request at invest@calfirstlease.com; or is available on the SEC’s website at www.sec.gov. |
|
Quarterly Portfolio Information |
The Company files its complete schedule of investments with the SEC for the first and the third quarter of each fiscal year on Form N-PORT beginning in the third calendar quarter of 2022. The Company’s Form N-PORT filing for September 30, 2023 is available on the SEC’s website at www.sec.gov. |
|
Annual Meeting of Shareholders |
The annual meeting of shareholders of the Company was held on January 31, 2024. At the meeting, all of the directors of the Company were reelected by the following vote of the holders of Common Stock: |
|
|
Votes For |
|
% Votes Cast |
|
Votes Withheld |
|
|
|
|
|
|
|
Patrick E. Paddon |
|
6,693,849 |
|
96.04% |
|
276,283 |
Glen T. Tsuma |
|
6,693,849 |
|
96.04% |
|
276,283 |
Michael H. Lowry |
|
6,734,953 |
|
96.63% |
|
235,179 |
Harris Ravine |
|
6,743,361 |
|
96.75% |
|
226,771 |
Danilo Cacciamatta |
|
6,743,372 |
|
96.75% |
|
226,760 |
Robert W. Kelley |
|
6,745,412 |
|
96.78% |
|
224,720 |
Transfer Agent |
Computershare Inc. serves as transfer agent and registrar with respect to Shares of the Company. |
|
Independent Auditors |
Eide Bailly, LLP serves as the independent registered public accounting firm to the Company. |
|
(b) Not applicable |
|
Item 2. Code of Ethics The information required by this Item is only required in an annual report on this Form N-CSR. |
|
Item 3. Audit Committee Financial Expert |
The information required by this Item is only required in an annual report on this Form N-CSR. |
|
Item 4. Principal Accountant fees and Services |
The information required by this Item is only required in an annual report on this Form N-CSR. |
|
Item 5. Audit Committee of Listed Registrants. Not applicable insofar as the Company is not a listed issuer under the Securities Exchange Act of 1934, as amended. |
|
Item 6. Investments. |
(a) Schedule is included as a part of the report to shareholders filed under Item 1 of this Form. |
(b) Not applicable. |
|
California First Leasing Corporation |
Semi-Annual Report for December 31, 2023 |
Item 7. Disclose Proxy Voting Policies and Procedures for Closed-End Management Companies. |
The information required by this Item is only required in an annual report on this Form N-CSR. |
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Item 8. Portfolio Managers of Closed-End Management Investment Companies. |
The information required by this Item is only required in an annual report on this Form N-CSR. |
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Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable insofar as the Company’s shares are not registered pursuant to Section 12 of the Exchange Act. |
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Item 10. Submission of Matters to a Vote of Security Holders |
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There have been no changes to the procedures by which shareholders may recommend nominees to the registrant’s board of directors since such procedures were last described in the Company’s proxy statement dated December 20, 2023. |
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Item 11. Controls and Procedures. |
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a) The Principal Executive Officer and Principal Financial Officer of the Company have concluded that the Company’s Disclosure Controls and Procedures (as defined in Rule 30a-3(c) under the Act are effective as of a date within 90 days of the filing date of this report based on their evaluation of the Disclosure Controls and Procedures. |
b) There have been no changes in the Company’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during period covered by this report that has materially affected, or is reasonably likely to materially affect, the Company’s internal control over financial reporting. |
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Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable. |
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Item 13. Exhibits. |
(a) (1) The information required by this Item is only required in an annual report on this Form N-CSR. |
(2) A separate certification for each principal executive officer and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act is attached hereto. |
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SIGNATURES |
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Pursuant to the requirements of the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated. |
California First Leasing Corporation |
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By: |
/s/ Patrick E. Paddon |
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Patrick E. Paddon |
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Chairman and Chief Executive Officer |
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February 2, 2024 |
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By: |
/s/ S. Leslie Jewett |
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S. Leslie Jewett |
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Chief Financial Officer |
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February 2, 2024 |
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California First Leasing Corporation |
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Exhibit 99.CERT |
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CERTIFICATION |
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I, Patrick E. Paddon, certify that: |
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1. I have reviewed this report on Form N-CSRS of California First Leasing Corporation; |
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2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
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4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
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(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others, particularly during the period in which this report is being prepared; |
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(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
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(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. The registrant’s other certifying officer(s) and I have disclosed to the audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: |
February 2, 2024 |
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/s/ Patrick E. Paddon |
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Patrick E. Paddon |
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Chief Executive Officer |
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California First Leasing Corporation |
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CERTIFICATION |
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I, S. Leslie Jewett, certify that: |
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1. I have reviewed this report on Form N-CSRS of California First Leasing Corporation; |
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2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report; |
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3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report; |
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4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have: |
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(a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant is made known to us by others within those entities, particularly during the period in which this report is being prepared; |
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(b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles; |
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(c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and |
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(d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and |
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5. The registrant’s other certifying officer(s) and I have disclosed to the registrant’s audit committee of the registrant’s board of directors (or persons performing the equivalent functions): |
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(a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and |
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(b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting. |
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Date: |
February 2, 2024 |
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/s/ S. Leslie Jewett |
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S. Leslie Jewett |
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Chief Financial Officer |
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Grafico Azioni California First Leasing (QX) (USOTC:CFNB)
Storico
Da Mag 2024 a Giu 2024
Grafico Azioni California First Leasing (QX) (USOTC:CFNB)
Storico
Da Giu 2023 a Giu 2024
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