Business Wire | Oct 26, 2021 04:00PM EDT

CSB Bancorp, Inc. Reports Third Quarter Earnings

Oct. 26, 2021

MILLERSBURG, Ohio--(BUSINESS WIRE)--Oct. 26, 2021--CSB Bancorp, Inc. (OTC Pink: CSBB):

Third Quarter Highlights

Quarter Ended Quarter Ended September 30, 2021 September 30, 2020

Diluted earnings per share $ 1.06 $ 1.02

Net Income $ 2,901,000 $ 2,800,000

Return on average common equity 11.79 % 12.19 %

Return on average assets 1.03 % 1.14 %

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced third quarter 2021 net income of $2,901,000, or $1.06 per basic and diluted share, as compared to $2,800,000, or $1.02 per basic and diluted share, for the same period in 2020. Income before federal income tax amounted to $3,590,000, an increase of 3% over the same quarter in the prior year. For the nine-month period ended September 30, 2021, net income totaled $8,531,000 compared to $7,889,000 for the same period last year, an increase of 8%.

Annualized returns on average common equity ("ROE") and average assets ("ROA") for the quarter were 11.79% and 1.03%, respectively, compared with 12.19% and 1.14% for the third quarter of 2020.

Eddie Steiner, President and CEO stated, "Economic recovery from the COVID-19 pandemic continues, aided by significant levels of remaining liquidity from government stimulus. Almost 90% of the Paycheck Protection Program ("PPP") loan balances we facilitated have received SBA forgiveness, and we expect the majority of remaining balances will also be forgiven. Organic loan demand has not rebounded to pre-pandemic levels, as borrower liquidity, uncertainty about the pace of recovery, supply chain disruptions, and waning refinance advantages are all affecting borrower appetite. The Federal Reserve has signaled it may begin tapering its large-scale purchases of treasuries and mortgage-backed securities before year-end, and the potential for short-term rates beginning to rise by the end of 2022. The job market remains strong in many sectors, with worker shortages and significant worker mobility widely reported."

Net interest income and noninterest income totaled $9.1 million during the quarter, an increase of $190 thousand from the prior-year third quarter. Net interest income increased $284 thousand, or 4%, in the third quarter of 2021 compared to the same period in 2020.

Loan interest income including fees decreased $293 thousand, or 4%, during third quarter 2021 as compared to the same quarter in 2020. The decrease was mainly due to average total loan balances declining $90 million below the year ago quarter including average Paycheck Protection Program loans ("PPP") declining $66 million from the prior year quarter. Loan yields for third quarter 2021 averaged 5.02%, an increase of 51 basis points from the 2020 third quarter average of 4.51%, The loan yield increase partially resulted from interest recovery on pay-offs of nonaccrual loans during the third quarter 2021 as related loan interest of $363 thousand was recognized compared to $21 thousand during the comparable third quarter 2020. Recognition of PPP loan interest and fee income was $125 thousand greater during the third quarter 2021 as compared to the prior year quarter.

The net interest margin was 2.77% compared to 3.04% for third quarter 2020. As discussed above, loan volume declined, offset with the positive impact from loan yield, volume increases within the securities account, and cost decreases on liabilities. Liquidity continues to affect the margin as the growth of lower yielding average overnight funds rose $104 million during the quarter over prior year quarter. The tax equivalency effect on the margin was 0.02% in the comparable third quarters.

With the decrease in outstanding loan balances and continuing improvement in credit quality, a reversal of $210 thousand was recognized to the provision for loan losses for the quarter ended September 30, 2021, as compared to $377 thousand loss provision for the prior year third quarter when the effect of Covid on future credit losses was not discernable. COVID factors have not significantly affected the Bank's 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 decreased 5%, compared to third quarter of 2020. The decrease was primarily the result of a 52% decline in gain on sale of mortgages to the secondary market, as refinancing of mortgages slowed and home purchases were limited by a lack of housing inventory for sale. Offsetting increases were recognized in increases in debit and credit card fee income, earnings from bank owned life insurance values, and brokerage and trust income.

Noninterest expense increased 13% from third quarter 2020. Salary and employee benefit costs increased $269 thousand, or 9%, compared to the prior year quarter, primarily resulting from increases in base compensation and volume-based commissions. The provision for unfunded loan commitments increased $193 thousand compared to the prior year quarter primarily due to unfunded commercial loan construction commitments in the senior/assisted living sector of $5.2 million at September 30, 2021. Marketing and public relations increased by $51 thousand, or 53%, reflecting a return to normalized levels after the pandemic-related curtailment of activities in 2020. Software expense increased by $49 thousand, or 18%, reflecting investment in new platforms. FDIC insurance expense increased $39 thousand as the prior year quarter reflected the use of Small Bank Assessment Credits. Professional and directors' fees decreased $52 thousand, or 22%, primarily reflecting a recovery of legal and collection costs, as a long-standing nonperforming collateral dependent loan exited the bank. The Company's third quarter efficiency ratio increased to 62.5% compared to 56.3%.

Federal income tax expense totaled $689 thousand in third quarter 2021, as compared to $676 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 $1.12 billion, an increase of $136 million, or 14%, above the same quarter of the prior year. Liquidity increased as the Company's average interest-bearing balances with banks increased $104 million, to $277 million, as compared to the third quarter in 2020. Average loan balances of $545 million decreased $90 million, or 14%, from the prior year third quarter while average securities balances of $234 million increased $115 million, or 98%, as compared to third quarter 2020.

Average commercial loan balances for the quarter, including commercial real estate, decreased $78 million, or 18%, from prior year levels. Excluding a $66 million decrease in average PPP loan balances, commercial loans decreased $12 million year over year as borrowers reduced outstanding commercial balances and delayed further borrowings, partially through use of stimulus monies. Average residential mortgage balances decreased $1 million, or 1%, below the prior year's quarter, while home equity lines of credit decreased $7 million from 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 11%, versus the same quarter of the prior year. Increased organic loan demand continues to be largely dependent on the pace at which excess liquidity is absorbed by businesses and households and restoration of borrower confidence as pandemic uncertainty diminishes.

Nonperforming assets decreased $2.8 million from September 30, 2020 to $1.3 million, or 0.24%, of total loans plus other real estate on September 30, 2021. Delinquent loan balances as of September 30, 2021 decreased to 0.30% of total loans as compared to 0.71% on September 30, 2020.

Net loan charge-offs recognized during third quarter 2021 were $20 thousand, or 0.01% annualized, compared to third quarter 2020 net loan recoveries of $143 thousand. The allowance for loan losses amounted to 1.40% of total loans on September 30, 2021 as compared to 1.33% on September 30, 2020.

Average deposit balances grew on a quarter over prior year quarter comparison by $139 million, or 17%. For the third quarter 2021, the average cost of deposits amounted to 0.18%, as compared to 0.30% for the third quarter 2020. During the third quarter 2021, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $51 million and interest-bearing demand and savings accounts of $88 million, while time deposits decreased less than $1 million. The average balance of securities sold under repurchase agreement during the third quarter of 2021 decreased by $3 million, or 7%, compared to the average for the same period in the prior year.

Shareholders' equity totaled $97.1 million on September 30, 2021 with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 8.75% on September 30, 2021 and 9.33% on September 30, 2020. The Company declared a third quarter dividend of $0.31 per share, producing an annualized yield of 3.2% based on the September 30, 2021 closing price of $39.25.

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 September 30, 2021, $112 million has been received from the SBA in forgiveness. and approximately $620 thousand remains in unearned fees.

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 and 2021 have entered repayment.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $1.1 billion as of September 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 2021 2020 2020 2021 2020 per share data)

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

Net interest income $ 7,364 $ 6,509 $ 7,046 $ 7,223 $ 7,077 $ 20,919 $ 21,078 FTE (a)

Provision (credit) (210 ) (475 ) 30 378 377 (655 ) 1,272 for loan losses

Other income 1,768 1,843 1,878 2,089 1,862 5,489 4,846

Other expenses 5,713 5,390 5,281 5,576 5,050 16,384 14,766

FTE adjustment (a) 39 38 38 39 36 115 109

Net income 2,901 2,745 2,885 2,679 2,800 8,531 7,889

Diluted earnings 1.06 1.00 1.05 0.97 1.02 3.12 2.88 per share



PERFORMANCE RATIOS

Return on averageassets (ROA), 1.03 % 0.97 % 1.10 % 1.05 % 1.14 % 1.03 % 1.17 %annualized

Return on averagecommon equity 11.79 11.62 12.33 11.45 12.19 11.91 11.80 (ROE), annualized

Net interest margin 2.77 2.43 2.85 2.97 3.04 2.68 3.31 FTE (a)

Efficiency ratio 62.49 64.40 59.14 59.75 56.32 61.96 56.76

Number of full-timeequivalent 178 174 170 171 169 employees



MARKET DATA

Book value/common $ 35.62 $ 35.11 $ 33.94 $ 34.23 $ 33.49 share

Period-end common 39.25 38.00 37.50 35.00 30.00 share mkt value

Market as a % of 110.19 % 108.23 % 110.49 % 102.25 % 89.58 % book

Price-to-earnings 9.62 9.41 9.40 9.09 7.83 ratio

Cash dividends/ $ 0.31 $ 0.30 $ 0.30 $ 0.29 $ 0.28 $ 0.91 $ 0.84 common share

Common stockdividend payout 29.25 % 30.00 % 28.57 % 29.90 % 27.45 % 29.26 % 29.17 %ratio

Average basic 2,729,410 2,740,390 2,742,350 2,742,350 2,742,350 2,737,336 2,742,350 common shares

Average diluted 2,729,410 2,740,390 2,742,350 2,742,350 2,742,350 2,737,336 2,742,350 common shares

Period end common 2,725,524 2,734,244 2,742,350 2,742,350 2,742,350 shares outstanding

Common stock market $ 106,977 $ 103,901 $ 102,838 $ 95,982 $ 82,271 capitalization



ASSET QUALITY

Gross charge-offs $ 39 $ 20 $ 5 $ 511 $ 28 $ 64 $ 131

Net charge-offs 20 (12 ) (34 ) 459 (143 ) (26 ) (66 )(recoveries)

Allowance for loan 7,645 7,875 8,338 8,274 8,355 losses

Nonperforming 1,320 2,786 3,089 4,497 4,102 assets (NPAs)

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

Allowance for loanlosses / period-end 1.40 1.43 1.43 1.36 1.33 loans

NPAs/loans and 0.24 0.50 0.53 0.74 0.65 other real estate

Allowance for loanlosses/ 579.07 282.61 269.92 183.99 203.71 nonperforming loans



CAPITAL & LIQUIDITY

Period-end tangible 8.34 % 8.12 % 7.99 % 8.68 % 8.86 % equity to assets

Average equity to 8.75 8.38 8.95 9.13 9.33 assets

Average equity to 17.89 16.78 15.92 15.02 14.39 loans

Average loans to 56.09 57.18 64.95 70.81 76.22 deposits



AVERAGE BALANCES

Assets $ 1,115,814 $ 1,131,251 $ 1,060,485 $ 1,018,770 $ 979,806 $ 1,102,707 $ 901,994

Earning assets 1,056,424 1,073,865 1,004,521 966,304 926,377 1,045,128 849,893

Loans 545,420 564,998 596,319 619,455 635,124 568,726 605,767

Deposits 972,409 988,017 918,063 874,820 833,288 959,696 760,056

Shareholders' 97,584 94,786 94,929 93,042 91,409 95,776 89,308 equity



ENDING BALANCES

Assets $ 1,111,696 $ 1,128,922 $ 1,110,157 $ 1,031,632 $ 987,978

Earning assets 1,054,141 1,072,286 1,043,016 977,092 936,323

Loans 546,095 552,030 582,714 609,159 628,084

Deposits 968,629 986,668 968,569 891,562 840,656

Shareholders' 97,089 96,012 93,085 93,859 91,853 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 2021 2020 data)

ASSETS

Cash and cash equivalents

Cash and due from banks $ 17,929 $ 18,269

Interest-earning deposits in other banks 265,692 179,875

Total cash and cash equivalents 283,621 198,144

Securities

Available-for-sale, at fair-value 185,454 112,279

Held-to-maturity 51,317 9,901

Equity securities 107 82

Restricted stock, at cost 4,614 4,614

Total securities 241,492 126,876



Loans held for sale 862 1,488

Loans 546,095 628,084

Less allowance for loan losses 7,645 8,355

Net loans 538,450 619,729



Premises and equipment, net 13,713 12,685

Goodwill and core deposit intangible 4,739 4,787

Bank owned life insurance 23,873 19,284

Accrued interest receivable and other 4,946 4,985 assets

TOTAL ASSETS $ 1,111,696 $ 987,978



LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Deposits:

Noninterest-bearing $ 304,345 $ 252,891

Interest-bearing 664,284 587,765

Total deposits 968,629 840,656



Short-term borrowings 38,130 41,645

Other borrowings 3,489 9,765

Accrued interest payable and other 4,359 4,059 liabilities

Total liabilities 1,014,607 896,125

Shareholders' equity

Common stock, $6.25 par value. Authorized

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

in 2021 and 2020 18,629 18,629

Additional paid-in capital 9,815 9,815

Retained earnings 75,252 67,325

Treasury stock at cost - 255,078 shares in 2021

and 238,252 shares in 2020 (5,424 ) (4,780 )

Accumulated other comprehensive (loss) (1,183 ) 864 income

Total shareholders' equity 97,089 91,853

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,111,696 $ 987,978

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

Quarter ended

Nine months ended

(Unaudited)

September 30,

September 30,

September 30,

September 30,

(Dollars in thousands, except per share data)

2021

2020

2021

2020

Interest and dividend income:

Loans, including fees

$

6,897

$

7,190

$

19,993

$

21,145

Taxable securities

677

372

1,840

1,462

Nontaxable securities

117

110

339

343

Other

114

42

228

312

Total interest and dividend income

7,805

7,714

22,400

23,262

Interest expense:

Deposits

450

636

1,496

2,139

Other

30

37

100

154

Total interest expense

480

673

1,596

2,293

Net interest income

7,325

7,041

20,804

20,969

Provision (credit) for loan losses

(210

)

377

(655

)

1,272

Net interest income after provision

(credit) for loan losses

7,535

6,664

21,459

19,697

Noninterest income

Service charges on deposits accounts

250

252

676

753

Trust services

252

236

798

662

Debit card interchange fees

515

433

1,512

1,209

Gain on sale of loans

270

567

1,174

1,189

Market value change in equity securities

8

(1

)

20

(10

)

Other

473

375

1,309

1,043

Total noninterest income

1,768

1,862

5,489

4,846

Noninterest expenses

Salaries and employee benefits

3,228

2,959

9,301

8,603

Occupancy expense

270

246

771

711

Equipment expense

170

172

519

505

Professional and director fees

180

232

831

843

Software expense

318

269

954

755

Marketing and public relations

147

96

324

289

Debit card expense

181

165

524

451

Other expenses

1,219

911

3,160

2,609

Total noninterest expenses

5,713

5,050

16,384

14,766

Income before income tax

3,590

3,476

10,564

9,777

Federal income tax provision

689

676

2,033

1,888

Net income

$

2,901

$

2,800

$

8,531

$

7,889

Net income per share:

Basic and diluted

$

1.06

$

1.02

$

3.12

$

2.88

View source version on businesswire.com: https://www.businesswire.com/news/home/20211026005932/en/

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