Business Wire | Jul 22, 2020 08:00AM EDT

CSB Bancorp, Inc. Reports Second Quarter Earnings

Jul. 22, 2020

MILLERSBURG, Ohio--(BUSINESS WIRE)--Jul. 22, 2020--CSB Bancorp, Inc. (OTC Pink: CSBB):

Second Quarter Highlights

Quarter Ended Quarter Ended

June 30, 2020 June 30, 2019



Diluted earnings per share $0.95 $0.94

Net Income $2,606,000 $2,586,000

Return on average common equity 11.72 % 12.91 %

Return on average assets 1.15 % 1.39 %

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced second quarter 2020 net income of $2,606,000, or $.95 per basic and diluted share, as compared to $2,586,000, or $.94 per basic and diluted share, for the same period in 2019. Income before federal income tax amounted to $3,227,000, an increase of 1% over the same quarter in the prior year. For the six-month period ended June 30, 2020 net income totaled $5,089,000 compared to $5,126,000 for the same period last year, a decrease of less than 1%.

Annualized returns on average common equity ("ROE") and average assets ("ROA") for the quarter were 11.72% and 1.15%, respectively, compared with 12.91% and 1.39% for the second quarter of 2019.

Eddie Steiner, President and CEO stated, "Second quarter results were significantly impacted by direct and indirect influences of COVID-19. The Company issued over $90 million in SBA Paycheck Protection Program ("PPP") loans to help offset economic damage from the pandemic health emergency, accepted record deposit growth as businesses and households conserved expenses, and recorded all-time high home mortgage volumes fueled by significant refinance activity as mortgage rates dropped to historic lows in response to the Federal Reserve's "near zero bound" interest rate policy. While these actions resulted in lower margins and deployment of significant resources, we remain invested in responding to the significant market needs created by the dual health and financial crisis."

Net interest income and noninterest income, on a fully taxable equivalent basis, totaled $8.7 million during the quarter, an increase of $265 thousand from the prior-year second quarter. Net interest income decreased $59 thousand, or 1%, in the second quarter of 2020 compared to the same period in 2019.

Loan interest income including fees decreased $80 thousand during second quarter 2020 as compared to the same quarter in 2019, a decrease of 1%. Average total loan balances during the current quarter were $74 million higher than the year ago quarter, an increase of 13%. Loan yields for second quarter 2020 averaged 4.60%, a decrease of 66 basis points from the 2019 second quarter average of 5.26%.

The net interest margin was 3.29% compared to 4.08% for second quarter 2019. The tax equivalency effect on the margin remained stable at 0.02% in the comparable second quarters.

Due to Covid factors, an increased provision for loan losses of $717 thousand was recognized for the second quarter ended June 30, 2020 as compared to $285 thousand for the prior year quarter. The extent of credit quality degradation and resultant losses will not be discernable until emergency stimulus provided by the Federal government and agencies is exhausted, the disease runs its course through health-ordered curtailments and the related impact on employment levels, and damage to household and business balance sheets can be fully measured. Additional COVID-19 related provisions may be necessary in future quarters.

Noninterest income increased 25%, compared to second quarter of 2019, fueled by 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 decreased 4% from second quarter 2019. Salary and employee benefit costs decreased $239 thousand, or 8%, compared to the prior year quarter, as a result of the capitalization of wage expense approximating $330 thousand associated with the origination of the PPP loans. Marketing and public relations decreased by $73 thousand, or 53%, reflecting the pandemic-related shut down of activities in second quarter 2020. The Company's second quarter efficiency ratio decreased to 54.1% compared to 58.0%.

Federal income tax expense totaled $621 thousand in second quarter 2020, as compared to $613 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 $913 million, an increase of $167 million, or 22%, above the same quarter of the prior year. Liquidity increased as the Company's average interest-bearing balances with banks increased $78 million during the quarter to $118 million as compared to the second quarter in 2019. Average loan balances of $622 million increased $74 million, or 13%, from the prior year second quarter while average securities balances of $121 million increased $10 million, or 9%, as compared to second quarter 2019.

Average commercial loan balances for the quarter, including commercial real estate, increased $69 million, or 19%, from prior year levels. This amount includes $72 million in new PPP average balances in the quarter. Average residential mortgage balances including home equity lines of credit increased $6 million, or 3%, over the prior year's quarter. Average consumer credit balances decreased $908 thousand, or 5%, versus the same quarter of the prior year.

Nonperforming assets decreased $115 thousand from June 30, 2019 to $4.5 million, or 0.70%, of total loans plus other real estate at June 30, 2020. At June 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 June 30, 2020 decreased to 0.73% of total loans as compared to 1.04% at June 30, 2019.

Net loan losses recognized during second quarter 2020 were $3 thousand, or 0.00% annualized, compared to second quarter 2019 net loan losses of $35 thousand. The allowance for loan losses amounted to 1.23% of total loans at June 30, 2020 as compared to 1.19% at June 30, 2019. The allowance for loan losses as a percentage of total loans minus PPP loans was 1.44% at June 30, 2020.

Average deposit balances grew on a quarter over prior year quarter comparison by $150 million, or 24%. For the second quarter 2020, the average cost of deposits amounted to 0.35%, as compared to 0.60% for the second quarter 2019. During the second quarter 2020, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $59 million, interest-bearing transaction accounts of $89 million, and time deposits of $2 million. The average balance of securities sold under repurchase agreement during the second quarter of 2020 increased by $6 million, or 16%, compared to the average for the same period in the prior year.

Shareholders' equity totaled $90.0 million on June 30, 2020 with 2.7 million common shares outstanding. The equity to assets ratio amounted to 9.3% on June 30, 2020 and 10.9% on June 30, 2019. The Company declared a second quarter dividend of $0.28 per share, a $.02 per share increase over second quarter 2019, producing an annualized yield of 3.5% based on the June 30, 2020 closing price of $32.00.

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 and continue to offer this relief lending program within our market area. 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. A customer can 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 June 30, 2020, we have modified $63 million of term commercial loans and $4 million of consumer loans.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $965 million as of June 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 in 2020 2020 2019 2019 2019 2020 2019thousands, exceptper share data)EARNINGS 2nd Qtr 1st Qtr 4th Qtr 3rd Qtr 2nd Qtr 6 months 6 months

Net interest $ 7,048 $ 6,953 $ 7,168 $ 7,228 $ 7,111 $ 14,001 $ 14,160income FTE (a)Provision for 717 178 285 285 285 895 570loan lossesOther income 1,641 1,343 1,451 1,440 1,313 2,984 2,537

Other expenses 4,709 5,007 5,079 4,999 4,900 9,716 9,691

FTE adjustment 36 37 39 40 40 73 78(a)Net income 2,606 2,483 2,593 2,695 2,586 5,089 5,126

Diluted earnings 0.95 0.91 0.95 0.98 0.94 1.86 1.87per share PERFORMANCERATIOSReturn on average 1.15 % 1.23 % 1.27 % 1.38 % 1.39 % 1.19 % 1.40 %assets (ROA)Return on average 11.72 11.47 12.13 12.89 12.91 11.60 13.05common equity(ROE)Net interest 3.29 3.67 3.73 3.95 4.08 3.47 4.12margin FTE (a)Efficiency ratio 54.05 60.08 58.74 57.52 57.96 58.00 57.86

Number offull-time 169 172 171 175 174equivalentemployees MARKET DATABook value / $ 32.81 $ 31.95 $ 31.17 $ 30.49 $ 29.70common sharePeriod-end common 32.00 35.00 40.97 38.67 40.45share mkt valueMarket as a % of 97.53 % 109.55 % 131.44 % 126.83 % 136.20 %bookPrice-to-earnings 8.44 9.26 10.78 10.28 11.05ratioCash dividends / $ 0.28 $ 0.28 $ 0.28 $ 0.28 $ 0.26 $ 0.56 $ 0.52common shareCommon stock 29.47 30.77 29.47 28.57 27.66 30.11 27.81 %dividend payout % % % % % %ratioAverage basic 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,296common sharesAverage diluted 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350 2,742,296common sharesPeriod end common 2,742,350 2,742,350 2,742,350 2,742,350 2,742,350sharesoutstandingCommon shares - - - - -repurchasedCommon stock 87,755 95,982 112,354 106,047 110,928market $ $ $ $ $capitalization ASSET QUALITYGross charge-offs $ 17 $ 86 $ 59 $ 75 $ 54 $ 103 $ 124

Net charge-offs 3 74 44 46 35 77 (60)(recoveries)Allowance for 7,835 7,120 7,017 6,776 6,537loan lossesNonperforming 4,481 4,468 4,659 4,518 4,596assets (NPAs)Net charge-off(recovery) / 0.00 % 0.05 % 0.03 % 0.03 % 0.03 % 0.03 % (0.02) %average loansratioAllowance for 1.23 1.28 1.27 1.20 1.19loan losses /period-end loansNPAs /loans and 0.70 0.80 0.84 0.80 0.83other real estateAllowance forloan losses / 178.78 162.97 154.55 153.35 145.36nonperformingloans CAPITAL &LIQUIDITYPeriod-end 8.90 10.28 9.91 10.07 10.28tangible equity % % % % %to assetsAverage equity to 9.79 10.72 10.43 10.72 10.77assetsAverage equity to 14.38 15.55 15.29 14.95 14.66loansAverage loans to 80.95 82.61 81.62 86.18 88.73deposits AVERAGE BALANCESAssets $ 912,875 $ 812,409 $ 812,481 $ 773,481 $ 745,658 $ 862,629 $ 738,002

Earning assets 860,838 761,619 763,244 725,615 699,229 811,229 693,404

Loans 621,710 560,142 554,556 554,956 547,981 590,926 549,225

Deposits 767,988 678,090 679,473 643,981 617,558 723,039 610,736

Shareholders' 89,404 87,090 84,777 82,948 80,338 88,247 79,194equity ENDING BALANCESAssets $ 965,179 $ 810,041 $ 818,683 $ 786,792 $ 750,252

Earning assets 913,813 757,769 767,345 734,859 704,738

Loans 636,799 555,320 551,633 566,213 550,612

Deposits 815,961 671,162 683,546 658,119 623,328

Shareholders' 89,967 87,629 85,476 83,614 81,458equity

NOTES: (a) - Net Interest income on a fully tax-equivalent ("FTE") basis restatesinterest on tax-exempt securities and loans as if such interest were subject tofederal income tax at the statutory rate. Net interest income on an FTE basisdiffers from net interest income under U.S. generally accepted accountingprinciples.

CSB BANCORP, INC.CONSOLIDATED BALANCE SHEETS (Unaudited) June 30, June 30,

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

ASSETSCash and cash equivalentsCash and due from banks $ 17,259 $ 15,214

Interest-earning deposits in other banks 156,566 42,063

Total cash and cash equivalents 173,825 57,277

SecuritiesAvailable-for-sale, at fair-value 103,202 86,297

Held-to-maturity 10,871 19,657

Equity securities 83 87

Restricted stock, at cost 4,614 4,614

Total securities 118,770 110,655

Loans held for sale 1,678 409

Loans 636,799 550,612

Less allowance for loan losses 7,835 6,537

Net loans 628,964 544,075

Premises and equipment, net 12,593 11,638

Goodwill and core deposit intangible 4,802 4,863

Bank owned life insurance 19,153 16,760

Accrued interest receivable and other assets 5,394 4,575

TOTAL ASSETS $ 965,179 $ 750,252

LIABILITIES AND SHAREHOLDERS' EQUITYLiabilitiesDeposits:Noninterest-bearing $ 254,868 $ 180,766

Interest-bearing 561,093 442,562

Total deposits 815,961 623,328

Short-term borrowings 43,865 35,474

Other borrowings 9,865 6,576

Accrued interest payable and other liabilities 5,521 3,416

Total liabilities 875,212 668,794

Shareholders' equityCommon stock, $6.25 par value. Authorized9,000,000 shares; issued 2,980,602 sharesin 2020 and 2019 18,629 18,629

Additional paid-in capital 9,815 9,815

Retained earnings 65,293 57,988

Treasury stock at cost - 238,252 shares in 2020and 2019 (4,780 ) (4,780 )

Accumulated other comprehensive income (loss) 1,010 (194 )

Total shareholders' equity 89,967 81,458

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 965,179 $ 750,252

CSB BANCORP, INC.CONSOLIDATED STATEMENTS OF INCOME Quarter ended Six months ended

(Unaudited) June 30, June 30,

(Dollars in thousands, except per share 2020 2019 2020 2019data)Interest and dividend income:Loans, including fees $ 7,105 $ 7,185 $ 13,955 $ 14,257

Taxable securities 481 584 1,090 1,171

Nontaxable securities 114 134 233 268

Other 31 218 270 393

Total interest and dividend income 7,731 8,121 15,548 16,089

Interest expense:Deposits 673 921 1,504 1,746

Other 46 129 116 261

Total interest expense 719 1,050 1,620 2,007

Net interest income 7,012 7,071 13,928 14,082

Provision for loan losses 717 285 895 570

Net interest income after provisionfor loan losses 6,295 6,786 13,033 13,512

Noninterest incomeService charges on deposits accounts 211 313 501 605

Trust services 196 212 427 436

Debit card interchange fees 400 369 776 716

Gain on sale of loans 508 76 622 155

Market value change in equity 4 (2) (9) 4securitiesOther 322 345 667 621

Total noninterest income 1,641 1,313 2,984 2,537

Noninterest expensesSalaries and employee benefits 2,676 2,915 5,644 5,757

Occupancy expense 244 205 464 409

Equipment expense 198 143 333 280

Professional and director fees 282 308 611 647

Software expense 259 232 485 450

Marketing and public relations 65 139 193 256

Debit card expense 146 132 286 259

Other expenses 839 826 1,700 1,633

Total noninterest expenses 4,709 4,900 9,716 9,691

Income before income tax 3,227 3,199 6,301 6,358

Federal income tax provision 621 613 1,212 1,232

Net income $ 2,606 $ 2,586 $ 5,089 $ 5,126

Net income per share:Basic $ 0.95 $ 0.94 $ 1.86 $ 1.87

Diluted $ 0.95 $ 0.94 $ 1.86 $ 1.87

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