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CSB Bancorp, Inc. Reports Third Quarter Earnings

·12 min read

CSB Bancorp, Inc. (OTC Pink: CSBB):

Third Quarter Highlights

 

 

Quarter Ended September 30, 2020

 

 

 

Quarter Ended September 30, 2019

 

Diluted earnings per share

 

$

1.02

 

 

 

$

0.98

 

Net Income

 

$

2,800,000

 

 

 

$

2,695,000

 

Return on average common equity

 

 

12.19

%

 

 

 

12.89

%

Return on average assets

 

 

1.14

%

 

 

 

1.38

%

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced third quarter 2020 net income of $2,800,000, or $1.02 per basic and diluted share, as compared to $2,695,000, or $.98 per basic and diluted share, for the same period in 2019. Income before federal income tax amounted to $3,476,000, an increase of 4% over the same quarter in the prior year. For the nine-month period ended September 30, 2020 net income totaled $7,889,000 compared to $7,821,000 for the same period last year, an increase of less than 1%.

Annualized returns on average common equity ("ROE") and average assets ("ROA") for the quarter were 12.19% and 1.14%, respectively, compared with 12.89% and 1.38% for the third quarter of 2019.

Eddie Steiner, President and CEO stated, "Year to date earnings are a little ahead of last year, with key support from home mortgage loan volume and the fiscal stimulus programs that provided many households and businesses with cash flow needed to meet loan obligations and operating expenses. Yield on loan and investment portfolios continues to fall with extremely low prevailing interest rates and borrowers being cautious about new debt in light of the uncertain COVID environment. While we do not see signs of a rapid overall recovery, economic activity will expand as unemployment levels continue to improve."

Net interest income and noninterest income, on a fully taxable equivalent basis, totaled $8.9 million during the quarter, an increase of $271 thousand from the prior-year third quarter. Net interest income decreased $147 thousand, or 2%, in the third quarter of 2020 compared to the same period in 2019.

Loan interest income including fees decreased $49 thousand during third quarter 2020 as compared to the same quarter in 2019, a decrease of less than 1%. Average total loan balances during the current quarter were $80 million higher than the year ago quarter, an increase of 14%. Loan yields for third quarter 2020 averaged 4.51%, a decrease of 67 basis points from the 2019 third quarter average of 5.18%.

The net interest margin was 3.04% compared to 3.95% for third quarter 2019. The tax equivalency effect on the margin remained stable at 0.02% in the comparable third quarters.

Due to COVID-19 related risk factors, an increased provision for loan losses of $377 thousand was recognized for the third quarter ended September 30, 2020 as compared to $285 thousand for the prior year quarter. Credit quality within the loan portfolio has not been significantly affected by COVID factors to date. However, a significant degree of COVID related uncertainty remains, and the eventual damage to household and business balance sheets cannot be effectively fully measured at this time.

Noninterest income increased 29%, compared to third quarter of 2019, fueled by historic growth in gain on sale of real estate loans into the secondary market, increases in debit card fee income, and bank owned life insurance values. These increases were partially offset by decreases in service charges on deposit accounts as both consumer and business accounts maintained increased deposit balances from government stimulus payments and loans provided by the bank within the PPP.

Noninterest expense increased 1% from third quarter 2019. FDIC insurance expense increased $91 thousand as the prior year quarter reflected the use of Small Bank Assessment Credits. Professional and directors fees decreased $84 thousand, or 27%, reflecting lower audit expense due to the elimination of the internal control over financial reporting audit, and the decrease of one director. Salary and employee benefit costs decreased $34 thousand, or 1%, compared to the prior year quarter, as a result of fewer employees, decreased expense in the self-funded dental insurance plan, and deferred salary expense rising from the origination of mortgage loans held in the banks portfolio. Marketing and public relations decreased by $53 thousand, or 35%, reflecting the continuing pandemic-related shut down of activities in third quarter 2020. The Companys third quarter efficiency ratio decreased to 56.3% compared to 57.5%.

Federal income tax expense totaled $676 thousand in third quarter 2020, as compared to $649 thousand tax expense for the same quarter in 2019. The effective tax rate approximated 19% in both periods.

Average total assets during the quarter amounted to $980 million, an increase of $206 million, or 27%, above the same quarter of the prior year. Liquidity increased as the Companys average interest-bearing balances with banks increased $113 million during the quarter to $173 million as compared to the third quarter in 2019. Average loan balances of $635 million increased $80 million, or 14%, from the prior year third quarter while average securities balances of $118 million increased $8 million, or 7%, as compared to third quarter 2019.

Average commercial loan balances for the quarter, including commercial real estate, increased $80 million, or 22%, from prior year levels. This amount includes $92 million in new PPP loan average balances originated in second quarter. Excluding average PPP loan balances, commercial loans decreased year over year as borrowers reduced outstanding commercial line balances during the pandemic-related contraction in economic activity. Average residential mortgage balances increased $6 million, or 5%, over the prior years quarter while home equity lines of credit decreased $4 million over the prior years quarter as they were refinanced into low rate term mortgages. Average consumer credit balances decreased $2 million, or 9%, versus the same quarter of the prior year.

Nonperforming assets decreased $416 thousand from September 30, 2019 to $4.1 million, or 0.65%, of total loans plus other real estate on September 30, 2020. On September 30, 2020, approximately $1.1 million of the non-performing loan total is guaranteed by either USDA or the SBA. Delinquent loan balances as of September 30, 2020 decreased to 0.71% of total loans as compared to 0.96% on September 30, 2019.

Net loan recoveries recognized during third quarter 2020 were $143 thousand, or 0.09% annualized, compared to third quarter 2019 net loan charge-offs of $46 thousand. The allowance for loan losses amounted to 1.33% of total loans on September 30, 2020 as compared to 1.20% on September 30, 2019.

Average deposit balances grew on a quarter over prior year quarter comparison by $189 million, or 29%. For the third quarter 2020, the average cost of deposits amounted to 0.30%, as compared to 0.60% for the third quarter 2019. During the third quarter 2020, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $66 million and interest-bearing transaction accounts of $123 million. The average balance of securities sold under repurchase agreement during the third quarter of 2020 increased by $5 million, or 13%, compared to the average for the same period in the prior year.

Shareholders equity totaled $91.9 million on September 30, 2020 with 2.7 million common shares outstanding. The equity to assets ratio amounted to 9.3% on September 30, 2020 and 10.6% on September 30, 2019. The Company declared a third quarter dividend of $0.28, producing an annualized yield of 3.7% based on the September 30, 2020 closing price of $30.00.

Cares Act and related events

On March 27, 2020 the Cares Act, a $2.3 trillion emergency federal relief bill, was signed into law. The relief effort included SBAs PPP for qualifying businesses, and subsequent actions by Congress enlarged and extended the PPP as well as additional emergency relief programs. We have facilitated and funded more than 750 of these government assistance loans. We expect the majority of the PPP loan dollars will ultimately qualify for borrower forgiveness under the guidelines of the SBA program. We have also extended loan modifications to qualifying commercial and consumer loan customers to deal with the uncertainty of the economy. Customers could request relief from their total payment or place their obligation on interest only for a period of 3-4 months, with maturities extended on these modified loans. As of September 30, 2020, loans which have not reentered regular payment include $12 million of term commercial loans and $579 thousand of consumer loans.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $988 million as of September 30, 2020. CSB provides a complete range of banking and other financial services to consumers and businesses through its wholly owned subsidiary, The Commercial and Savings Bank, with sixteen banking centers in Holmes, Wayne, Tuscarawas, and Stark counties and Trust offices located in Millersburg, North Canton, and Wooster, Ohio.

Forward-Looking Statement

This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Companys business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Companys periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.

CSB BANCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS

(Unaudited)

 

Quarters

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands, except per share data)

 

2020

 

 

2020

 

 

2020

 

 

2019

 

 

2019

 

 

2020

 

 

2019

 

 

EARNINGS

 

3rd Qtr

 

 

2nd Qtr

 

 

1st Qtr

 

 

4th Qtr

 

 

3rd Qtr

 

 

9 months

 

 

9 months

 

 

Net interest income FTE (a)

$

 

7,077

 

$

 

7,048

 

$

 

6,953

 

$

 

7,168

 

$

 

7,228

 

$

 

21,078

 

$

 

21,388

 

 

Provision for loan losses

 

 

377

 

 

 

717

 

 

 

178

 

 

 

285

 

 

 

285

 

 

 

1,272

 

 

 

855

 

 

Other income

 

 

1,862

 

 

 

1,641

 

 

 

1,343

 

 

 

1,451

 

 

 

1,440

 

 

 

4,846

 

 

 

3,977

 

 

Other expenses

 

 

5,050

 

 

 

4,709

 

 

 

5,007

 

 

 

5,079

 

 

 

4,999

 

 

 

14,766

 

 

 

14,690

 

 

FTE adjustment (a)

 

 

36

 

 

 

36

 

 

 

37

 

 

 

39

 

 

 

40

 

 

 

109

 

 

 

118

 

 

Net income

 

 

2,800

 

 

 

2,606

 

 

 

2,483

 

 

 

2,593

 

 

 

2,695

 

 

 

7,889

 

 

 

7,821

 

 

Diluted earnings per share

 

 

1.02

 

 

 

0.95

 

 

 

0.91

 

 

 

0.95

 

 

 

0.98

 

 

 

2.88

 

 

 

2.85

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (ROA)

 

 

1.14

 

%

 

1.15

 

%

 

1.23

 

%

 

1.27

 

%

 

1.38

 

%

 

1.17

 

%

 

1.39

 

%

Return on average common equity (ROE)

 

 

12.19

 

 

 

11.72

 

 

 

11.47

 

 

 

12.13

 

 

 

12.89

 

 

 

11.80

 

 

 

13.00

 

 

Net interest margin FTE (a)

 

 

3.04

 

 

 

3.29

 

 

 

3.67

 

 

 

3.73

 

 

 

3.95

 

 

 

3.31

 

 

 

4.06

 

 

Efficiency ratio

 

 

56.32

 

 

 

54.05

 

 

 

60.08

 

 

 

58.74

 

 

 

57.52

 

 

 

56.76

 

 

 

57.75

 

 

Number of full-time equivalent employees

 

 

169

 

 

 

169

 

 

 

172

 

 

 

171

 

 

 

175

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARKET DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value/common share

$

 

33.49

 

$

 

32.81

 

$

 

31.95

 

$

 

31.17

 

$

 

30.49

 

 

 

 

 

 

 

 

 

 

Period-end common share mkt value

 

 

30.00

 

 

 

32.00

 

 

 

35.00

 

 

 

40.97

 

 

 

38.67

 

 

 

 

 

 

 

 

 

 

Market as a % of book

 

 

89.58

 

%

 

97.53

 

%

 

109.55

 

%

 

131.44

 

%

 

126.83

 

%

 

 

 

 

 

 

 

 

Price-to-earnings ratio

 

 

7.83

 

 

 

8.44

 

 

 

9.26

 

 

 

10.78

 

 

 

10.28

 

 

 

 

 

 

 

 

 

 

Cash dividends/common share

$

 

0.28

 

$

 

0.28

 

$

 

0.28

 

$

 

0.28

 

$

 

0.28

 

$

 

0.84

 

$

 

0.80

 

 

Common stock dividend payout ratio

 

 

27.45

 

%

 

29.47

 

%

 

30.77

 

%

 

29.47

 

%

 

28.57

 

%

 

29.17

 

%

 

28.07

 

%

Average basic common shares

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,278

 

 

Average diluted common shares

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,278

 

 

Period end common shares outstanding

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

2,742,350

 

 

 

 

 

 

 

 

 

 

Common shares repurchased

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

0

 

 

 

 

 

 

 

 

 

 

Common stock market capitalization

$

 

82,271

 

$

 

87,755

 

$

 

95,982

 

$

 

112,354

 

$

 

106,047

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSET QUALITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross charge-offs

$

 

28

 

$

 

17

 

$

 

86

 

$

 

59

 

$

 

75

 

$

 

131

 

$

 

199

 

 

Net charge-offs (recoveries)

 

 

(143

)

 

 

3

 

 

 

74

 

 

 

44

 

 

 

46

 

 

 

(66

)

 

 

(14

)

 

Allowance for loan losses

 

 

8,355

 

 

 

7,835

 

 

 

7,120

 

 

 

7,017

 

 

 

6,776

 

 

 

 

 

 

 

 

 

 

Nonperforming assets (NPAs)

 

 

4,102

 

 

 

4,481

 

 

 

4,468

 

 

 

4,659

 

 

 

4,518

 

 

 

 

 

 

 

 

 

 

Net charge-off (recovery) /average loans ratio

 

 

(0.09

)

%

 

0.00

 

%

 

0.05

 

%

 

0.03

 

%

 

0.03

 

%

 

(0.01

)

%

 

0.00

 

%

Allowance for loan losses/period-end loans

 

 

1.33

 

 

 

1.23

 

 

 

1.28

 

 

 

1.27

 

 

 

1.20

 

 

 

 

 

 

 

 

 

 

NPAs/loans and other real estate

 

 

0.65

 

 

 

0.70

 

 

 

0.80

 

 

 

0.84

 

 

 

0.80

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses/nonperforming loans

 

 

203.71

 

 

 

178.78

 

 

 

162.97

 

 

 

154.55

 

 

 

153.35

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPITAL & LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period-end tangible equity to assets

 

 

8.86

 

%

 

8.90

 

%

 

10.28

 

%

 

9.91

 

%

 

10.07

 

%

 

 

 

 

 

 

 

 

Average equity to assets

 

 

9.33

 

 

 

9.79

 

 

 

10.72

 

 

 

10.43

 

 

 

10.72

 

 

 

 

 

 

 

 

 

 

Average equity to loans

 

 

14.39

 

 

 

14.38

 

 

 

15.55

 

 

 

15.29

 

 

 

14.95

 

 

 

 

 

 

 

 

 

 

Average loans to deposits

 

 

76.22

 

 

 

80.95

 

 

 

82.61

 

 

 

81.62

 

 

 

86.18

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE BALANCES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

$

 

979,806

 

$

 

912,875

 

$

 

812,409

 

$

 

812,481

 

$

 

773,481

 

$

 

901,994

 

$

 

749,958

 

 

Earning assets

 

 

926,377

 

 

 

860,838

 

 

 

761,619

 

 

 

763,244

 

 

 

725,615

 

 

 

849,893

 

 

 

704,260

 

 

Loans

 

 

635,124

 

 

 

621,710

 

 

 

560,142

 

 

 

554,556

 

 

 

554,956

 

 

 

605,767

 

 

 

551,157

 

 

Deposits

 

 

833,288

 

 

767,988

678,090

679,473

643,981

760,056

621,939

Shareholders' equity

91,409

89,404

87,090

84,777

82,948

89,308

80,459

ENDING BALANCES

Assets

$

987,978

$

965,179

$

810,041

$

818,683

$

786,792

Earning assets

936,323

913,813

757,769

767,345

734,859

Loans

628,084

636,799

555,320

551,633

566,213

Deposits

840,656

815,961

671,162

683,546

658,119

Shareholders' equity

91,853

89,967

87,629

85,476

83,614

NOTES:

(a) - Net Interest income on a fully tax-equivalent ("FTE") basis restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis differs from net interest income under U.S. generally accepted accounting principles.

CSB BANCORP, INC.
CONSOLIDATED BALANCE SHEETS

(Unaudited)

September 30,

September 30,

(Dollars in thousands, except per share data)

2020

2019

ASSETS

Cash and cash equivalents

Cash and due from banks

$

18,269

$

20,696

Interest-earning deposits in other banks

179,875

58,873

Total cash and cash equivalents

198,144

79,569

Securities

Available-for-sale, at fair-value

112,279

89,572

Held-to-maturity

9,901

15,097

Equity securities

82

91

Restricted stock, at cost

4,614

4,614

Total securities

126,876

109,374

Loans held for sale

1,488

399

Loans

628,084

566,213

Less allowance for loan losses

8,355

6,776

Net loans

619,729

559,437

Premises and equipment, net

12,685

11,595

Goodwill and core deposit intangible

4,787

4,847

Bank owned life insurance

19,284

16,880

Accrued interest receivable and other assets

4,985

4,691

TOTAL ASSETS

$

987,978

$

786,792

LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Deposits:

Noninterest-bearing

$

252,891

$

192,620

Interest-bearing

587,765

465,499

Total deposits

840,656

658,119

Short-term borrowings

41,645

35,070

Other borrowings

9,765

6,453

Accrued interest payable and other liabilities

4,059

3,536

Total liabilities

896,125

703,178

Shareholders' equity

Common stock, $6.25 par value. Authorized

9,000,000 shares; issued 2,980,602 shares

in 2020 and 2019

18,629

18,629

Additional paid-in capital

9,815

9,815

Retained earnings

67,325

59,915

Treasury stock at cost - 238,252 shares in 2020

and 2019

(4,780

)

(4,780

)

Accumulated other comprehensive income

864

35

Total shareholders' equity

91,853

83,614

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

987,978

$

786,792

CSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME

Quarter ended

Nine months ended

(Unaudited)

September 30,

September 30,

(Dollars in thousands, except per share data)

2020

2019

2020

2019

Interest and dividend income:

Loans, including fees

$

7,190

$

7,239

$

21,145

$

21,496

Taxable securities

372

534

1,462

1,705

Nontaxable securities

110

133

343

401

Other

42

356

312

749

Total interest and dividend income

7,714

8,262

23,262

24,351

Interest expense:

Deposits

636

966

2,139

2,711

Other

37

108

154

370

Total interest expense

673

1,074

2,293

3,081

Net interest income

7,041

7,188

20,969

21,270

Provision for loan losses

377

285

1,272

855

Net interest income after provision

for loan losses

6,664

6,903

19,697

20,415

Noninterest income

Service charges on deposits accounts

252

333

753

938

Trust services

236

234

662

670

Debit card interchange fees

433

377

1,209

1,093

Gain on sale of loans

567

132

1,189

287

Market value change in equity securities

(1

)

5

(10

)

8

Other

375

359

1,043

981

Total noninterest income

1,862

1,440

4,846

3,977

Noninterest expenses

Salaries and employee benefits

2,959

2,993

8,603

8,750

Occupancy expense

246

209

711

618

Equipment expense

172

128

505

408

Professional and director fees

232

316

843

963

Software expense

269

225

755

674

Marketing and public relations

96

149

289

405

Debit card expense

165

142

451

401

Other expenses

911

837

2,609

2,471

Total noninterest expenses

5,050

4,999

14,766

14,690

Income before income tax

3,476

3,344

9,777

9,702

Federal income tax provision

676

649

1,888

1,881

Net income

$

2,800

$

2,695

$

7,889

$

7,821

Net income per share:

Basic

$

1.02

$

0.98

$

2.88

$

2.85

Diluted

$

1.02

$

0.98

$

2.88

$

2.85

View source version on businesswire.com: https://www.businesswire.com/news/home/20201021005787/en/

Contacts

Paula J. Meiler, SVP & CFO
330.763.2873
paula.meiler@csb1.com