Business Wire | Jan 26, 2022 04:05PM EST

CSB Bancorp, Inc. Reports Fourth Quarter Earnings

Jan. 26, 2022

MILLERSBURG, Ohio--(BUSINESS WIRE)--Jan. 26, 2022--CSB Bancorp, Inc. (OTC Pink: CSBB):

Fourth Quarter Highlights

Quarter Ended Quarter Ended December 31, 2021 December 31, 2020

Diluted earnings per share $ 0.85 $ 0.97

Net Income $ 2,306,000 $ 2,679,000

Return on average common equity 9.41 % 11.45 %

Return on average assets 0.80 % 1.05 %

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced fourth quarter 2021 net income of $2,306,000, or $0.85 per basic and diluted share, as compared to $2,679,000, or $0.97 per basic and diluted share, for the same period in 2020. Income before federal income tax amounted to $2,840,000, a decrease of 14% over the same quarter in the prior year. For the year ended December 31, 2021 net income totaled $10,837,000 compared to $10,568,000 for the same period last year, an increase of 3%.

Annualized returns on average common equity ("ROE") and average assets ("ROA") for the quarter were 9.41% and 0.80%, respectively, compared with 11.45% and 1.05% for the fourth quarter of 2020.

Eddie Steiner, President and CEO stated, "Residential mortgage applications declined during the quarter, as many homeowners have refinanced to lower rates, housing stock remains in tight supply, mortgage rates have increased modestly, and the holiday season and COVID levels impeded some activity. Business loan demand shows signs of strengthening, although still held somewhat in check by significant borrower liquidity, supply chain disruptions, labor shortages, and inflation uncertainties. Deposit growth has remained strong, with our balances increasing 3.5% during fourth quarter to finish the year above one billion dollars. We are also grateful to report our tenth consecutive year of record net income."

Net interest income and noninterest income totaled $8.5 million during the quarter, a decrease of $724 thousand from the prior-year fourth quarter. Net interest income decreased $471 thousand, or 7%, in the fourth quarter of 2021 compared to the same period in 2020.

Loan interest income, including fees, decreased $1.1 million, or 15%, during fourth quarter 2021 as compared to the same quarter in 2020. The decrease was mainly due to average total loan balances declining $75 million below the year ago quarter, including average Paycheck Protection Program loans ("PPP") declining $73 million from the prior year quarter. Loan yields for fourth quarter 2021 averaged 4.47%, a decrease of 16 basis points from the 2020 fourth quarter average of 4.63%, The loan yield decrease partially resulted from PPP loan forgiveness resulting in $394 thousand less in PPP fees recognized in fourth quarter 2021 compared to fourth quarter 2020.

The net interest margin was 2.48% compared to 2.85% for fourth quarter 2020. As discussed above, both loan volume and rate declined, partially offset with volume increases within the securities account, and rate decreases on liabilities. Liquidity continues to play a factor on the margin as the growth of average overnight funds rose $72 million on a quarter over prior year quarter comparison. The tax equivalency effect on the margin was 0.01% in fourth quarter 2021 compared to 0.02% in fourth quarter 2020.

With the decrease in outstanding loan balances and continuing improvement in credit quality, there was no provision for loan losses for the quarter ended December 31, 2021 as compared to $378 thousand loss provision for the prior year fourth 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 12%, compared to fourth quarter of 2020. The decrease was primarily the result of a $487 thousand, or 64%, 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 debit and credit card fee income, earnings from bank owned life insurance values, and brokerage and trust income.

Noninterest expense increased 2% from fourth quarter 2020. Salary and employee benefit costs increased $194 thousand, or 6%, compared to the prior year quarter, primarily resulting from increases in compensation and workman's compensation as the 2020 credits expired. A recovery was recognized on the provision for unfunded loan commitments of $107 thousand compared to the prior year quarter primarily as commercial loan construction commitments funded in the fourth quarter decreasing the senior/assisted living sector unfunded exposure at December 31, 2021. Marketing and public relations increased by $137 thousand, or 26%, reflecting a return to normalized levels after the pandemic-related curtailment of activities in 2020. Software expense increased by $42 thousand reflecting investment in new platforms. FDIC insurance expense increased $20 thousand above the prior year quarter due to the increase in asset size. Professional and directors' fees decreased $88 thousand, or 20% primarily reflecting a decline in collection legal fees. The Company's fourth quarter efficiency ratio increased to 66.4% compared to 59.8%.

Federal income tax expense totaled $534 thousand in fourth quarter 2021, as compared to $640 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 $1.14 billion, an increase of $120 million, or 12%, above the same quarter of the prior year. Liquidity increased as the Company's average interest-bearing balances with banks increased $72 million, to $266 million, as compared to the fourth quarter in 2020. Average loan balances of $544 million decreased $75 million, or 12%, from the prior year fourth quarter while average securities balances of $234 million increased $116 million, or 76%, as compared to fourth quarter 2020.

Average commercial loan balances for the quarter, including commercial real estate, decreased $64 million, or 15%, from prior year levels. Excluding a $73 million decrease in average PPP loan balances, commercial loans increased $9 million year over year as construction loans were drawn and borrowers used term loans to fund equipment and other purchases. Average residential mortgage balances decreased $3 million, or 3%, below the prior year's quarter while home equity lines of credit decreased $6 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 9%, 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 $3.4 million from December 31, 2020 to $1.1 million, or 0.20%, of total loans plus other real estate on December 31, 2021, primarily the result of payoffs of $2.1 million. Delinquent loan balances as of December 31, 2021 decreased to 0.27% of total loans as compared to 0.88% on December 31, 2020.

Net loan charge-offs recognized during fourth quarter 2021 were $27 thousand, or 0.02% annualized, compared to fourth quarter 2020 net loan losses of $459 thousand. The allowance for loan losses amounted to 1.39% of total loans on December 31, 2021 as compared to 1.36% on December 31, 2020.

Average deposit balances grew on a quarter over prior year quarter comparison by $122 million, or 14%. For the fourth quarter 2021, the average cost of deposits amounted to 0.15%, as compared to 0.27% for the fourth quarter 2020. During the fourth quarter 2021, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $62 million and interest-bearing demand and savings accounts of $61 million, while time deposits decreased $1 million. The average balance of securities sold under repurchase agreement during the fourth quarter of 2021 decreased by $4 million, or 9%, compared to the average for the same period in the prior year.

Shareholders' equity totaled $97.3 million on December 31, 2021 with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 8.54% on December 31, 2021 and 9.13% on December 31, 2020. The Company declared a fourth quarter dividend of $0.31 per share, producing an annualized yield of 3.3% based on the December 31, 2021 closing price of $37.75.

Cares Act and related events

CSB facilitated and funded $129 million of SBA emergency PPP loans in 2020 and 2021. As of December 31, 2021, $125 million has been received from the SBA in forgiveness. and approximately $181 thousand remains in unearned fees at December 31, 2021. All loans modified to businesses and consumers to deal with the uncertainty of the economy during 2020 and 2021 have entered repayment.

During fourth quarter 2021, the available for sale investment securities were reviewed for price volatility with $78.3 million book value securities transferred from available for sale to held to maturity at $76.3 million market value to protect additional declines to tangible book value with the projected increases in market interest rates in 2022 and 2023.

Following the rise in market interest rates during the first weeks of January 2022, approximately $60 million in investment securities were purchased and added to the investment portfolio, reducing overnight cash. Purchased investments included mortgage-backed instruments and short-term corporate and US treasury notes.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $1.1 billion as of December 31, 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

The Private Securities Litigation Reform Act of 1995 contains safe harbor provisions regarding forward-looking statements. 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 2021 2020 2021 2020per share data)

EARNINGS 4th Qtr 3rd Qtr 2nd Qtr 1st Qtr 4th Qtr 12 months 12 months

Net interest income $ 6,752 $ 7,364 $ 6,509 $ 7,046 $ 7,223 $ 27,671 $ 28,301 FTE (a)

Provision for(recovery of) loan - (210 ) (475 ) 30 378 (655 ) 1,650 losses

Other income 1,836 1,768 1,843 1,878 2,089 7,325 6,935

Other expenses 5,709 5,713 5,390 5,281 5,576 22,093 20,342

FTE adjustment (a) 39 39 38 38 39 154 148

Net income 2,306 2,901 2,745 2,885 2,679 10,837 10,568

Diluted earnings 0.85 1.06 1.00 1.05 0.97 3.97 3.85 per share



PERFORMANCE RATIOS

Return on averageassets (ROA), 0.80 % 1.03 % 0.97 % 1.10 % 1.05 % 0.97 % 1.13 %annualized

Return on averagecommon equity 9.41 11.79 11.62 12.33 11.45 11.27 11.71 (ROE), annualized

Net interest margin 2.48 2.77 2.43 2.85 2.97 2.63 3.22 FTE (a)

Efficiency ratio 66.41 62.49 64.40 59.14 59.75 63.05 57.55

Number of full-timeequivalent 171 178 174 170 171 employees



MARKET DATA

Book value/common $ 35.80 $ 35.62 $ 35.11 $ 33.94 $ 34.23 share

Period-end common 37.75 39.25 38.00 37.50 35.00 share mkt value

Market as a % of 105.45 % 110.19 % 108.23 % 110.49 % 102.25 % book

Price-to-earnings 9.51 9.62 9.41 9.40 9.09 ratio

Cash dividends/ $ 0.31 $ 0.31 $ 0.30 $ 0.30 $ 0.29 $ 1.22 $ 1.13 common share

Common stockdividend payout 36.47 % 29.25 % 30.00 % 28.57 % 29.90 % 30.73 % 29.35 %ratio

Average basic 2,720,633 2,729,410 2,740,390 2,742,350 2,742,350 2,733,126 2,742,350 common shares

Average diluted 2,720,633 2,729,410 2,740,390 2,742,350 2,742,350 2,733,126 2,742,350 common shares

Period end common 2,718,024 2,725,524 2,734,244 2,742,350 2,742,350 shares outstanding

Common stock market $ 102,605 $ 106,977 $ 103,901 $ 102,838 $ 95,982 capitalization



ASSET QUALITY

Gross charge-offs $ 66 $ 39 $ 20 $ 5 $ 511 $ 130 $ 642

Net charge-offs 27 20 (12 ) (34 ) 459 1 393 (recoveries)

Allowance for loan 7,618 7,645 7,875 8,338 8,274 losses

Nonperforming 1,088 1,320 2,786 3,089 4,497 assets (NPAs)

Net charge-off ) )(recovery) / 0.02 % 0.01 % (0.01 % (0.02 % 0.29 % 0.00 % 0.06 %average loans ratio

Allowance for loanlosses / period-end 1.39 1.40 1.43 1.43 1.36 loans

NPAs/loans and 0.20 0.24 0.50 0.53 0.74 other real estate

Allowance for loanlosses/ 699.86 579.07 282.61 269.92 183.99 nonperforming loans



CAPITAL & LIQUIDITY

Period-end tangible 8.13 % 8.34 % 8.12 % 7.99 % 8.68 % equity to assets

Average equity to 8.54 8.75 8.38 8.95 9.13 assets

Average equity to 17.86 17.89 16.78 15.92 15.02 loans

Average loans to 54.62 56.09 57.18 64.95 70.81 deposits



AVERAGE BALANCES

Assets $ 1,138,690 $ 1,115,814 $ 1,131,251 $ 1,060,485 $ 1,018,770 $ 1,111,808 $ 931,330

Earning assets 1,079,002 1,056,424 1,073,865 1,004,521 966,304 1,053,666 879,153

Loans 544,389 545,420 564,998 596,319 619,455 562,592 609,207

Deposits 996,646 972,409 988,017 918,063 874,820 969,009 788,904

Shareholders' 97,241 97,584 94,786 94,929 93,042 96,145 90,247 equity



ENDING BALANCES

Assets $ 1,144,239 $ 1,111,696 $ 1,128,922 $ 1,110,157 $ 1,031,632

Earning assets 1,084,744 1,054,141 1,072,286 1,043,016 977,092

Loans 549,154 546,095 552,030 582,714 609,159

Deposits 1,002,747 968,629 986,668 968,569 891,562

Shareholders' 97,315 97,089 96,012 93,085 93,859 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) December 31, December 31,

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

ASSETS

Cash and cash equivalents

Cash and due from banks $ 19,543 $ 19,281

Interest-earning deposits in other banks 224,114 162,371

Total cash and cash equivalents 243,657 181,652

Securities

Available-for-sale, at fair-value 131,708 190,438

Held-to-maturity 174,808 9,045

Equity securities 115 87

Restricted stock, at cost 4,614 4,614

Total securities 311,245 204,184



Loans held for sale 231 1,378

Loans 549,154 609,159

Less allowance for loan losses 7,618 8,274

Net loans 541,536 600,885



Premises and equipment, net 13,866 12,633

Goodwill and core deposit intangible 4,728 4,772

Bank owned life insurance 24,035 21,416

Accrued interest receivable and other assets 4,941 4,712

TOTAL ASSETS $ 1,144,239 $ 1,031,632



LIABILITIES AND SHAREHOLDERS' EQUITY

Liabilities

Deposits:

Noninterest-bearing $ 334,346 $ 272,051

Interest-bearing 668,401 619,511

Total deposits 1,002,747 891,562



Short-term borrowings 36,530 37,215

Other borrowings 3,407 4,664

Accrued interest payable and other liabilities 4,240 4,332

Total liabilities 1,046,924 937,773

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 76,715 69,209

Treasury stock at cost - 262,578 shares in 2021 (5,719 ) (4,780 )and 238,252 shares in 2020

Accumulated other comprehensive (loss) income (2,125 ) 986

Total shareholders' equity 97,315 93,859

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,144,239 $ 1,031,632

CSB BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME

Quarter ended Twelve months ended

(Unaudited) December 31, December 31,

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

Interest and dividend income:

Loans, including fees $ 6,131 $ 7,209 $ 26,124 $ 28,354

Taxable securities 773 421 2,613 1,882

Nontaxable securities 116 121 455 464

Other 109 53 337 366

Total interest and dividend 7,129 7,804 29,529 31,066 income

Interest expense:

Deposits 388 584 1,884 2,723

Other 28 36 128 190

Total interest expense 416 620 2,012 2,913

Net interest income 6,713 7,184 27,517 28,153

Provision for (recovery of) - 378 (655 ) 1,650 loan losses

Net interest income, afterprovision for (recovery of) 6,713 6,806 28,172 26,503 loan losses

Noninterest income

Service charges on deposits 263 250 939 1,003 accounts

Trust services 261 234 1,059 896

Debit card interchange fees 538 453 2,050 1,661

Gain on sale of loans 275 762 1,449 1,951

Market value change in equity 8 5 28 (4 )securities

Other 491 385 1,800 1,428

Total noninterest income 1,836 2,089 7,325 6,935



Noninterest expenses

Salaries and employee benefits 3,298 3,104 12,599 11,707

Occupancy expense 262 242 1,033 953

Equipment expense 195 151 714 657

Professional and director fees 353 441 1,184 1,284

Software expense 388 346 1,342 1,101

Marketing and public relations 137 109 461 398

Debit card expense 186 171 710 621

Other expenses 890 1,012 4,050 3,621

Total noninterest expenses 5,709 5,576 22,093 20,342

Income before income tax 2,840 3,319 13,404 13,096

Federal income tax provision 534 640 2,567 2,528

Net income $ 2,306 $ 2,679 $ 10,837 $ 10,568

Net income per share:

Basic and diluted $ 0.85 $ 0.97 $ 3.97 $ 3.85

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