Business Wire | Oct 21, 2020 04:00PM EDT

CSB Bancorp, Inc. Reports Third Quarter Earnings

Oct. 21, 2020

MILLERSBURG, Ohio--(BUSINESS WIRE)--Oct. 21, 2020--CSB Bancorp, Inc. (OTC Pink: CSBB):

Third Quarter Highlights

Quarter Ended September Quarter Ended 30, 2020 September 30, 2019

Diluted earnings per $ 1.02 $ 0.98 share

Net Income $ 2,800,000 $ 2,695,000

Return on average 12.19 % 12.89 %common equity

Return on average 1.14 % 1.38 %assets

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 bank's 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 Company's 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 Company's 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 year's quarter while home equity lines of credit decreased $4 million over the prior year's 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 SBA's 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 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 2020 2020 2020 2019 2019 2020 2019 per share data)

EARNINGS 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 9 months 9 months

Net interest $ 7,077 $ 7,048 $ 6,953 $ 7,168 $ 7,228 $ 21,078 $ 21,388 income FTE (a)

Provision for loan 377 717 178 285 285 1,272 855 losses

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 1.02 0.95 0.91 0.95 0.98 2.88 2.85 per share



PERFORMANCE RATIOS

Return on average 1.14 % 1.15 % 1.23 % 1.27 % 1.38 % 1.17 % 1.39 %assets (ROA)

Return on averagecommon equity 12.19 11.72 11.47 12.13 12.89 11.80 13.00 (ROE)

Net interest 3.04 3.29 3.67 3.73 3.95 3.31 4.06 margin FTE (a)

Efficiency ratio 56.32 54.05 60.08 58.74 57.52 56.76 57.75

Number offull-time 169 169 172 171 175 equivalentemployees



MARKET DATA

Book value/common $ 33.49 $ 32.81 $ 31.95 $ 31.17 $ 30.49 share

Period-end common 30.00 32.00 35.00 40.97 38.67 share mkt value

Market as a % of 89.58 % 97.53 % 109.55 % 131.44 % 126.83 % book

Price-to-earnings 7.83 8.44 9.26 10.78 10.28 ratio

Cash dividends/ $ 0.28 $ 0.28 $ 0.28 $ 0.28 $ 0.28 $ 0.84 $ 0.80 common share

Common stockdividend payout 27.45 % 29.47 % 30.77 % 29.47 % 28.57 % 29.17 % 28.07 %ratio

Average basic 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,278 common shares

Average diluted 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,278 common shares

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

Common shares 0 0 0 0 0 repurchased

Common stockmarket $ 82,271 $ 87,755 $ 95,982 $ 112,354 $ 106,047 capitalization



ASSET QUALITY

Gross charge-offs $ 28 $ 17 $ 86 $ 59 $ 75 $ 131 $ 199

Net charge-offs (143 ) 3 74 44 46 (66 ) (14 ) (recoveries)

Allowance for loan 8,355 7,835 7,120 7,017 6,776 losses

Nonperforming 4,102 4,481 4,468 4,659 4,518 assets (NPAs)

Net charge-off(recovery) / (0.09 ) % 0.00 % 0.05 % 0.03 % 0.03 % (0.01 ) % 0.00 %average loansratio

Allowance for loanlosses/period-end 1.33 1.23 1.28 1.27 1.20 loans

NPAs/loans and 0.65 0.70 0.80 0.84 0.80 other real estate

Allowance for loanlosses/ 203.71 178.78 162.97 154.55 153.35 nonperformingloans



CAPITAL & LIQUIDITY

Period-endtangible equity to 8.86 % 8.90 % 10.28 % 9.91 % 10.07 % assets

Average equity to 9.33 9.79 10.72 10.43 10.72 assets

Average equity to 14.39 14.38 15.55 15.29 14.95 loans

Average loans to 76.22 80.95 82.61 81.62 86.18 deposits



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' 91,409 89,404 87,090 84,777 82,948 89,308 80,459 equity



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' 91,853 89,967 87,629 85,476 83,614 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) September September 30, 30,

(Dollars in thousands, except per share 2020 2019 data)

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 4,985 4,691 assets

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 4,059 3,536 liabilities

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, 2020 2019 2020 2019 except per share data)

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 7,714 8,262 23,262 24,351 dividend income

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 377 285 1,272 855 losses

Net interest income after provision

for loan losses 6,664 6,903 19,697 20,415

Noninterest income

Service charges on 252 333 753 938 deposits accounts

Trust services 236 234 662 670

Debit card interchange 433 377 1,209 1,093 fees

Gain on sale of loans 567 132 1,189 287

Market value change in (1 ) 5 (10 ) 8 equity securities

Other 375 359 1,043 981

Total noninterest 1,862 1,440 4,846 3,977 income



Noninterest expenses

Salaries and employee 2,959 2,993 8,603 8,750 benefits

Occupancy expense 246 209 711 618

Equipment expense 172 128 505 408

Professional and 232 316 843 963 director fees

Software expense 269 225 755 674

Marketing and public 96 149 289 405 relations

Debit card expense 165 142 451 401

Other expenses 911 837 2,609 2,471

Total noninterest 5,050 4,999 14,766 14,690 expenses

Income before income 3,476 3,344 9,777 9,702 tax

Federal income tax 676 649 1,888 1,881 provision

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/

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