Business Wire | Jul 21, 2021 08:30AM EDT

CSB Bancorp, Inc. Reports Second Quarter Earnings

Jul. 21, 2021

MILLERSBURG, Ohio--(BUSINESS WIRE)--Jul. 21, 2021--CSB Bancorp, Inc. (OTC Pink: CSBB):

Second Quarter Highlights

Quarter Ended Quarter Ended June 30, 2021 June 30, 2020

Diluted earnings per share $ 1.00 $ 0.95

Net Income $ 2,745,000 $ 2,606,000

Return on average common equity 11.62 % 11.72 %

Return on average assets 0.97 % 1.15 %

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced second quarter 2021 net income of $2,745,000, or $1.00 per basic and diluted share, as compared to $2,606,000, or $0.95 per basic and diluted share, for the same period in 2020. Income before federal income tax amounted to $3,399,000, an increase of 5% over the same quarter in the prior year. For the six-month period ended June 30, 2021, net income totaled $5,630,000 compared to $5,089,000 for the same period last year, an increase of 11%.

Annualized returns on average common equity ("ROE") and average assets ("ROA") for the quarter were 11.62% and 0.97%, respectively, compared with 11.72% and 1.15% for the second quarter of 2020.

Eddie Steiner, President and CEO stated, "The extraordinary levels of liquidity injected by government and Federal Reserve actions over the past fifteen months remain a key driver of current business and household financial activities, along with very low interest rates supporting borrowers. National and local economies continue to mend from the pandemic's crippling impact. Consumers and businesses are beginning to reduce savings and increase spending and investment patterns. While job creation has strengthened, shortages of workers and material supplies in various industries is limiting the pace of recovery and expansion. The prevailing economic outlook favors sustained economic expansion into 2022. However, the pace of economic improvement may be uneven and will vary within economic sectors and regions due to a range of factors including COVID-19 patterns, worker shortages and skills gaps, supply chain disruptions affecting both production and sales of goods, price increases for goods and services, and adjustments to taper fiscal and monetary stimulus."

Net interest income and noninterest income totaled $8.3 million during the quarter, a decrease of $339 thousand from the prior-year second quarter. Net interest income decreased $541 thousand, or 8%, in the second quarter of 2021 compared to the same period in 2020.

Loan interest income including fees decreased $874 thousand, or 12%, during second quarter 2021 as compared to the same quarter in 2020. The decrease was mainly due to the average total loan balances declining $57 million below the year ago quarter with average Paycheck Protection Program loans ("PPP") declining $19 million over the prior year quarter. Loan yields for second quarter 2021 averaged 4.43%, a decrease of 17 basis points from the 2020 second quarter average of 4.60%, contributing $264 thousand to the decline in loan interest income.

The net interest margin was 2.43% compared to 3.29% for second quarter 2020. As discussed above loans reflected both a volume and yield decline, partially offset by liability rate decreases and volume increases within the securities account. Liquidity continues to play a factor as the growth of average overnight funds exceeds the growth of average noninterest bearing deposits by $107 million on a quarter over prior year quarter. The tax equivalency effect on the margin dropped to 0.01% from 0.02% in the comparable second quarters.

With the decrease in outstanding loan balances, continuing improvement in credit quality, and ongoing government stimulus programs for businesses and individuals, a reversal of $475 thousand was recognized to the provision for loan losses for the second quarter ended June 30, 2021 as compared to $717 thousand loss provision for the prior year quarter when the effect of COVID on future credit losses was not discernable. COVID factors have not significantly affected our loan portfolio quality to date, and local businesses are beginning or restarting construction projects previously sidelined by a significant degree of COVID-related uncertainty.

Noninterest income increased 12%, compared to second quarter of 2020, fueled by increases in debit and credit card fee income, brokerage and trust income, earnings from bank owned life insurance values and increases in service charges on deposit accounts. These increases were partially offset by a slowing of gain on sale of mortgages to the secondary market.

Noninterest expense increased 14% from second quarter 2020. Salary and employee benefit costs increased $368 thousand, or 14%, compared to the prior year quarter, primarily resulting from reduced FAS 91 credits to salary expense with the decrease in the number of commercial loans booked due to the ending of the PPP loan program and increases in base compensation and volume-based commissions. FDIC insurance expense increased $108 thousand as the prior year quarter reflected the use of Small Bank Assessment Credits. Software expense increased by $77 thousand reflecting investment in new platforms. Professional and directors' fees increased $74 thousand, or 26% primarily reflecting increases in employee search fees, legal and collection costs, audit fees, and third-party contract negotiation fees. Marketing and public relations increased by $33 thousand, or 51%, reflecting a return to normalized levels after the pandemic-related curtailment of activities in 2020. The Company's second quarter efficiency ratio increased to 64.4% compared to 54.1%.

Federal income tax expense totaled $654 thousand in second quarter 2021, as compared to $621 thousand tax expense for the same quarter in 2020. The effective tax rate approximated 19% in both periods.

Average total assets during the quarter rose to $1.13 billion, an increase of $218 million, or 24%, above the same quarter of the prior year. Liquidity increased as the Company's average interest-bearing balances with banks increased $174 million, to $292 million, as compared to the second quarter in 2020. Average loan balances of $565 million decreased $57 million, or 9%, from the prior year second quarter while average securities balances of $217 million increased $96 million, or 79%, as compared to second quarter 2020.

Average commercial loan balances for the quarter, including commercial real estate, decreased $50 million, or 12%, from prior year levels. Excluding a $19 million decrease in average PPP loan balances, commercial loans decreased $31 million year over year as borrowers reduced outstanding commercial balances and delayed further borrowings, partially through use of stimulus monies. Average residential mortgage balances increased $5 million, or 4%, over the prior year's quarter while home equity lines of credit decreased $9 million over the prior year's quarter as balances were paid down or refinanced into low-rate term mortgages. Average consumer credit balances decreased $2 million, or 10%, versus the same quarter of the prior year. Increased organic loan demand continues to be dependent on the pace at which excess liquidity is absorbed by businesses and households.

Nonperforming assets decreased $1.7 million from June 30, 2020, to $2.8 million, or 0.50%, of total loans plus other real estate on June 30, 2021. Delinquent loan balances as of June 30, 2021, decreased to 0.57% of total loans as compared to 0.73% on June 30, 2020.

Net loan recoveries recognized during second quarter 2021 were $12 thousand, or 0.01% annualized, compared to second quarter 2020 net loan losses of $3 thousand. The allowance for loan losses amounted to 1.43% of total loans on June 30, 2021, as compared to 1.23% on June 30, 2020.

Average deposit balances grew on a quarter over prior year quarter comparison by $220 million, or 29%. For the second quarter 2021, the average cost of deposits amounted to 0.21%, as compared to 0.35% for the second quarter 2020. During the second quarter 2021, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $67 million and interest-bearing demand and savings accounts of $155 million, while time deposits decreased $2 million. The average balance of securities sold under repurchase agreement during the second quarter of 2021 decreased by $2 million, or 5%, compared to the average for the same period in the prior year.

Shareholders' equity totaled $96.0 million on June 30, 2021, with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 8.38% on June 30, 2021, and 9.79% on June 30, 2020. The Company declared a second quarter dividend of $0.30 per share, producing an annualized yield of 3.2% based on the March 31, 2021 closing price of $38.00.

Cares Act and related events

A third major stimulus bill was signed into law on March 11, 2021, adding additional emergency relief to the March 2020 Cares Act and to the Consolidated Appropriations Act, 2021. The American Rescue Plan Act of 2021 also expanded eligibility and added an additional $7 billion in funds to the SBA's PPP emergency relief programs.

CSB facilitated and funded $129 million of these government assistance loans in 2020 and 2021. As of June 30, 2021, $90 million has been received from the SBA in forgiveness, and the Company expects almost all PPP loans in the portfolio will ultimately be granted borrower forgiveness under the guidelines of the SBA program.

During 2020, the Company 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. All loans granted relief during 2020 have entered repayment. One consumer and one commercial loan were granted loan modifications under the relief programs during the quarter ended June 30, 2021.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $1.1 billion as of June 30, 2021. 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 Company's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company's 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 inthousands, except 2021 2021 2020 2020 2020 2021 2020 per share data)

EARNINGS 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 6 months 6 months

Net interest $ 6,509 $ 7,046 $ 7,223 $ 7,077 $ 7,048 $ 13,555 $ 14,001 income FTE (a)

Provision (credit) (475 ) 30 378 377 717 (445 ) 895 for loan losses

Other income 1,843 1,878 2,089 1,862 1,641 3,721 2,984

Other expenses 5,390 5,281 5,576 5,050 4,709 10,671 9,716

FTE adjustment (a) 38 38 39 36 36 76 73

Net income 2,745 2,885 2,679 2,800 2,606 5,630 5,089

Diluted earnings 1.00 1.05 0.97 1.02 0.95 2.05 1.86 per share



PERFORMANCE RATIOS

Return on averageassets (ROA), 0.97 % 1.10 % 1.05 % 1.14 % 1.15 % 1.04 % 1.19 %annualized

Return on averagecommon equity 11.62 12.33 11.45 12.19 11.72 11.97 11.60 (ROE), annualized

Net interest 2.43 2.85 2.97 3.04 3.29 2.63 3.47 margin FTE (a)

Efficiency ratio 64.40 59.14 59.75 56.32 54.05 61.68 58.00

Number offull-time 174 170 171 169 169 equivalentemployees



MARKET DATA

Book value/common $ 35.11 $ 33.94 $ 34.23 $ 33.49 $ 32.81 share

Period-end common 38.00 37.50 35.00 30.00 32.00 share mkt value

Market as a % of 108.23 % 110.49 % 102.25 % 89.58 % 97.53 % book

Price-to-earnings 9.41 9.40 9.09 7.83 8.44 ratio

Cash dividends/ $ 0.30 $ 0.30 $ 0.29 $ 0.28 $ 0.28 $ 0.60 $ 0.56 common share

Common stockdividend payout 30.00 % 28.57 % 29.90 % 27.45 % 29.47 % 29.27 % 30.11 %ratio

Average basic 2,740,390 2,742,350 2,742,350 2,742,350 2,742,350 2,741,365 2,742,350 common shares

Average diluted 2,740,390 2,742,350 2,742,350 2,742,350 2,742,350 2,741,365 2,742,350 common shares

Period end common 2,734,244 2,742,350 2,742,350 2,742,350 2,742,350 shares outstanding

Common stockmarket $ 103,901 $ 102,838 $ 95,982 $ 82,271 $ 87,755 capitalization



ASSET QUALITY

Gross charge-offs $ 20 $ 5 $ 511 $ 28 $ 17 $ 25 $ 103

Net charge-offs (12 ) (34 ) 459 (143 ) 3 (46 ) 77 (recoveries)

Allowance for loan 7,875 8,338 8,274 8,355 7,835 losses

Nonperforming 2,786 3,089 4,497 4,102 4,481 assets (NPAs)

Net charge-off(recovery) / (0.01 ) (0.02 )% 0.29 % (0.09 ) 0.00 % (0.02 ) 0.03 %average loans % % %ratio

Allowance for loanlosses / 1.43 1.43 1.36 1.33 1.23 period-end loans

NPAs/loans and 0.50 0.53 0.74 0.65 0.70 other real estate

Allowance for loanlosses/ 282.61 269.92 183.99 203.71 178.78 nonperformingloans



CAPITAL & LIQUIDITY

Period-endtangible equity to 8.12 % 7.99 % 8.68 % 8.86 % 8.90 % assets

Average equity to 8.38 8.95 9.13 9.33 9.79 assets

Average equity to 16.78 15.92 15.02 14.39 14.38 loans

Average loans to 57.18 64.95 70.81 76.22 80.95 deposits



AVERAGE BALANCES

Assets $ 1,131,251 $ 1,060,485 $ 1,018,770 $ 979,806 $ 912,875 $ 1,096,078 $ 862,629

Earning assets 1,073,865 1,004,521 966,304 926,377 860,838 1,039,386 811,229

Loans 564,998 596,319 619,455 635,124 621,710 580,572 590,926

Deposits 988,017 918,063 874,820 833,288 767,988 953,233 723,039

Shareholders' 94,786 94,929 93,042 91,409 89,404 94,857 88,247 equity



ENDING BALANCES

Assets $ 1,128,922 $ 1,110,157 $ 1,031,632 $ 987,978 $ 965,179

Earning assets 1,072,286 1,043,016 977,092 936,323 913,813

Loans 552,030 582,714 609,159 628,084 636,799

Deposits 986,668 968,569 891,562 840,656 815,961

Shareholders' 96,012 93,085 93,859 91,853 89,967 equity

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) June 30, June 30,

(Dollars in thousands, except per share data) 2021 2020

ASSETS

Cash and cash equivalents

Cash and due from banks $ 17,308 $ 17,259

Interest-earning deposits in other banks 295,036 156,566

Total cash and cash equivalents 312,344 173,825

Securities

Available-for-sale, at fair-value 194,164 103,202

Held-to-maturity 24,878 10,871

Equity securities 99 83

Restricted stock, at cost 4,614 4,614

Total securities 223,755 118,770



Loans held for sale 1,465 1,678

Loans 552,030 636,799

Less allowance for loan losses 7,875 7,835

Net loans 544,155 628,964



Premises and equipment, net 13,431 12,593

Goodwill and core deposit intangible 4,750 4,802

Bank owned life insurance 23,710 19,153

Accrued interest receivable and other assets 5,312 5,394

TOTAL ASSETS $ 1,128,922 $ 965,179



LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Deposits:

Noninterest-bearing $ 302,688 $ 254,868

Interest-bearing 683,980 561,093

Total deposits 986,668 815,961



Short-term borrowings 38,475 43,865

Other borrowings 3,570 9,865

Accrued interest payable and other liabilities 4,197 5,521

Total liabilities 1,032,910 875,212

Shareholders' equity

Common stock, $6.25 par value. Authorized9,000,000 shares; issued 2,980,602 shares in 18,629 18,629 2021 and 2020

Additional paid-in capital 9,815 9,815

Retained earnings 73,196 65,293

Treasury stock at cost - 246,358 shares in 2021 (5,093 ) (4,780 )and 238,252 shares in 2020

Accumulated other comprehensive (loss) income (535 ) 1,010

Total shareholders' equity 96,012 89,967

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,128,922 $ 965,179

CSB BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME

Quarter ended

Six months ended

(Unaudited)

June 30,

June 30,

(Dollars in thousands, except per share data)

2021

2020

2021

2020

Interest and dividend income:

Loans, including fees

$

6,231

$

7,105

$

13,096

$

13,955

Taxable securities

604

481

1,163

1,090

Nontaxable securities

111

114

222

233

Other

68

31

114

270

Total interest and dividend income

7,014

7,731

14,595

15,548

Interest expense:

Deposits

508

673

1,046

1,504

Other

35

46

70

116

Total interest expense

543

719

1,116

1,620

Net interest income

6,471

7,012

13,479

13,928

Provision (credit) for loan losses

(475

)

717

(445

)

895

Net interest income after provision (credit) for loan losses

6,946

6,295

13,924

13,033

Noninterest income

Service charges on deposits accounts

219

211

426

501

Trust services

264

196

546

427

Debit card interchange fees

526

400

997

776

Gain on sale of loans

417

508

904

622

Market value change in equity securities

(1

)

4

12

(9

)

Other

418

322

836

667

Total noninterest income

1,843

1,641

3,721

2,984

Noninterest expenses

Salaries and employee benefits

3,044

2,676

6,073

5,644

Occupancy expense

247

244

501

464

Equipment expense

172

198

349

333

Professional and director fees

356

282

651

611

Software expense

336

259

636

485

Marketing and public relations

98

65

177

193

Debit card expense

172

146

343

286

Other expenses

965

839

1,941

1,700

Total noninterest expenses

5,390

4,709

10,671

9,716

Income before income tax

3,399

3,227

6,974

6,301

Federal income tax provision

654

621

1,344

1,212

Net income

$

2,745

$

2,606

$

5,630

$

5,089

Net income per share:

Basic and diluted

$

1.00

$

0.95

$

2.05

$

1.86

View source version on businesswire.com: https://www.businesswire.com/news/home/20210721005207/en/

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