CSB Bancorp, Inc. Reports Second Quarter Earnings

MILLERSBURG, Ohio--()--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 thousands, except per share data)

2020

 

 

2020

 

 

2019

 

 

2019

 

 

2019

 

 

2020

 

 

2019

EARNINGS

2nd Qtr

 

 

1st Qtr

 

 

4th Qtr

 

 

3rd Qtr

 

 

2nd Qtr

 

 

6 months

 

 

6 months

Net interest income FTE (a) $

7,048

$

6,953

$

7,168

$

7,228

$

7,111

$

14,001

$

14,160

Provision for loan losses

717

178

285

285

285

895

570

Other 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 (a)

36

37

39

40

40

73

78

Net income

2,606

2,483

2,593

2,695

2,586

5,089

5,126

Diluted earnings per share

0.95

0.91

0.95

0.98

0.94

1.86

1.87

 
PERFORMANCE RATIOS
Return on average assets (ROA)

1.15

%

1.23

%

1.27

%

1.38

%

1.39

%

1.19

%

1.40

%

Return on average common equity (ROE)

11.72

11.47

12.13

12.89

12.91

11.60

13.05

Net interest margin FTE (a)

3.29

3.67

3.73

3.95

4.08

3.47

4.12

Efficiency ratio

54.05

60.08

58.74

57.52

57.96

58.00

57.86

Number of full-time equivalent employees

169

172

171

175

174

 
MARKET DATA
Book value /common share $

32.81

$

31.95

$

31.17

$

30.49

$

29.70

Period-end common share mkt value

32.00

35.00

40.97

38.67

40.45

Market as a % of book

97.53

%

109.55

%

131.44

%

126.83

%

136.20

%
Price-to-earnings ratio

8.44

9.26

10.78

10.28

11.05

Cash dividends /common share $

0.28

$

0.28

$

0.28

$

0.28

$

0.26

$

0.56

$

0.52

Common stock dividend payout ratio

29.47

%

30.77

%

29.47

%

28.57

%

27.66

%

30.11

%

27.81

%

Average basic common shares

2,742,350

2,742,350

2,742,350

2,742,350

2,742,350

2,742,350

2,742,296

Average diluted common shares

2,742,350

2,742,350

2,742,350

2,742,350

2,742,350

2,742,350

2,742,296

Period end common shares outstanding

2,742,350

2,742,350

2,742,350

2,742,350

2,742,350

Common shares repurchased

-

-

-

-

-

Common stock market capitalization $

87,755

$

95,982

$

112,354

$

106,047

$

110,928

 
ASSET QUALITY
Gross charge-offs $

17

$

86

$

59

$

75

$

54

$

103

$

124

Net charge-offs (recoveries)

3

74

44

46

35

77

(60)

Allowance for loan losses

7,835

7,120

7,017

6,776

6,537

Nonperforming assets (NPAs)

4,481

4,468

4,659

4,518

4,596

Net charge-off (recovery) / average loans ratio

0.00

%

0.05

%

0.03

%

0.03

%

0.03

%

0.03

%

(0.02)

%

Allowance for loan losses / period-end loans

1.23

1.28

1.27

1.20

1.19

NPAs /loans and other real estate

0.70

0.80

0.84

0.80

0.83

Allowance for loan losses / nonperforming loans

178.78

162.97

154.55

153.35

145.36

 
CAPITAL & LIQUIDITY
Period-end tangible equity to assets

8.90

%

10.28

%

9.91

%

10.07

%

10.28

%
Average equity to assets

9.79

10.72

10.43

10.72

10.77

Average equity to loans

14.38

15.55

15.29

14.95

14.66

Average loans to deposits

80.95

82.61

81.62

86.18

88.73

 
AVERAGE BALANCES
Assets $

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' equity

89,404

87,090

84,777

82,948

80,338

88,247

79,194

 
ENDING BALANCES
Assets $

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' equity

89,967

87,629

85,476

83,614

81,458

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)

2020

 

 

 

2019

 

ASSETS
Cash and cash equivalents
Cash 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

 

Securities
Available-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' EQUITY
Liabilities
Deposits:
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' 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

65,293

 

57,988

 

Treasury stock at cost - 238,252 shares in 2020
and 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 data)

2020

 

 

2019

 

 

2020

 

 

2019

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 provision
for loan losses

6,295

6,786

13,033

13,512

Noninterest income
Service 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 securities

4

(2)

(9)

4

Other

322

345

667

621

Total noninterest income

1,641

1,313

2,984

2,537

 
Noninterest expenses
Salaries 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

 

Contacts

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

Contacts

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