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CSB Bancorp, Inc. Reports Third Quarter Earnings

CSB Bancorp, Inc. (OTC Pink: CSBB):

Third Quarter Highlights

 

 

Quarter Ended

 

 

 

Quarter Ended

 

September 30, 2022

September 30, 2021

Diluted earnings per share

 

$

1.35

 

 

 

$

1.06

 

Net Income

 

$

3,650,000

 

 

 

$

2,901,000

 

Return on average common equity

 

 

15.24

%

 

 

��

11.79

%

Return on average assets

 

 

1.25

%

 

 

 

1.03

%

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced third quarter 2022 net income of $3,650,000, or $1.35 per basic and diluted share, as compared to $2,901,000, or $1.06 per basic and diluted share, for the same period in 2021. Income before federal income tax amounted to $4,540,000, an increase of 26% over the same quarter in the prior year. For the nine month period ended September 30, 2022, net income totaled $9,560,000 compared to $8,531,000 for the same period last year, an increase of 12%.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 15.24% and 1.25%, respectively, compared with 11.79% and 1.03% for the third quarter of 2021. For the nine month period ended September 30, 2022, ROE and ROA equated to 13.41% and 1.12%, as compared to 11.91% and 1.03% for the comparable period in 2021.

Eddie Steiner, President, and CEO stated, “Sustained high inflation has become public enemy number one in the national and global economy. Surveys show business confidence is at its lowest level since 2009, while consumer confidence has dropped to forty year lows. The Federal Reserve has accelerated its aggressive rate hike cycle with three increases of ¾% between June 15 and September 21. Another two similar hikes are expected by the end of the year, driving U.S. Prime rate to somewhere around 7.75%. Residential mortgage activity has slowed nationally and locally to half its year ago pace. Home construction in our market is still relatively strong although increased building costs are curtailing some construction and design decisions. Business loan demand is uneven, with significant construction and equipment projects continuing while at the same time many businesses are trying to conserve cash until pricing pressures and supply chain issues abate and the economic outlook stabilizes. U.S. layoff announcements are becoming more frequent, particularly at large companies and early stage development firms. Various sources of liquidity and capital funding appear to have entered a tightening phase. The probability of a recession within the next year has become more likely.”

Net interest income and noninterest income totaled $10.2 million during the quarter, an increase of $1.1 million, or 13%, from the prior year third quarter. Net interest income increased $1.2 million, or 17%, in the third quarter of 2022 compared to the same period in 2021.

Interest income on securities and overnight funds rose $1.6 million during third quarter 2022, as compared to third quarter 2021, primarily due to volume and rate increases in securities, and rate increases in overnight funds. Loan interest income including fees decreased $217 thousand, or 3%, during third quarter 2022 as compared to the same quarter in 2021. Loan yields for third quarter 2022 averaged 4.46%, a decrease of 56 basis points (“bps”) from the 2021 third quarter average of 5.02%. Average Paycheck Protection Program loans (“PPP”) declined $25 million from the prior year quarter. PPP loan interest and fees contributed 2 bps to the third quarter 2022 loan yield while contributing approximately 71 bps to the prior year’s third quarter. PPP loan fees recognized as interest income declined $883 thousand in third quarter 2022 compared to third quarter 2021.

The tax equivalent net interest margin was 3.12% compared to 2.87% for the linked second quarter 2022 and 2.77% for third quarter 2021.

With continuing improvement in credit quality and a small third quarter charge-off, a $250 thousand negative provision for loan losses was recognized for the quarter ended September 30, 2022, as compared to $210 thousand negative provision for the prior year third quarter. 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% during third quarter 2022, compared to third quarter of 2021. The decrease was primarily the result of a $221 thousand, or 82%, decline in gain on sale of mortgages to the secondary market, as mortgage rates rose, refinancing of mortgages slowed, and home purchases were limited by a lack of housing inventory for sale. Offsetting increases were recognized in service charges on deposit accounts, debit and credit card fee income, and earnings from bank owned life insurance values.

Noninterest expense increased 4% from third quarter 2021. Salary and employee benefit costs decreased $29 thousand, or 1%, compared to the prior year quarter, primarily resulting from decreases in compensation and benefits from fewer FTEs, partially offset by reduced credits from loan originations recognized in 2021. Professional and directors’ fees increased $375 thousand, primarily reflecting a consulting fee to renegotiate the core data processing software contract. Software expense increased $79 thousand related to additional software purchases. Telephone expense decreased $47 thousand compared to the prior year quarter due to a renegotiation of data lines. FDIC insurance expense decreased $37 thousand from the prior year quarter. The Company’s third quarter efficiency ratio decreased to 57.9% from 62.5%.

Federal income tax expense totaled $890 thousand in third quarter 2022, as compared to $689 thousand tax expense for the same quarter in 2021. The effective tax rate approximated 19% in both periods.

Average total assets during the quarter rose to $1.16 billion, an increase of $44 million, or 4%, above the same quarter of the prior year. Average securities balances of $398 million increased $164 million, or 70%, as compared to third quarter 2021, while average loan balances of $595 million increased $50 million, or 9%, from the prior year third quarter.

Average commercial loan balances for the quarter, including commercial real estate, increased $35 million, or 10%, from prior year levels. Excluding a $25 million decrease in average PPP loan balances, commercial loans increased $60 million year over year as construction loans were drawn and borrowers used term loans to fund equipment and other purchases. Average residential mortgage balances increased $9 million, or 7%, above the prior year’s quarter while home equity lines of credit increased $5 million from the prior year’s quarter with new originations and line draws. Average consumer credit balances decreased $1 million, or 5%, versus the same quarter of the prior year. Organic loan demand is being held somewhat in check by conservation of liquidity while borrowers try to outwait the peak of higher interest rates and any slowdown to come.

Nonperforming assets decreased from $1.3 million on September 30, 2021, to $685 thousand, or 0.11%, of total loans plus other real estate on September 30, 2022. Delinquent loan balances as of September 30, 2022, decreased to 0.26% of total loans as compared to 0.30% on September 30, 2021.

Net loan charge-offs recognized during third quarter 2022 were $10 thousand, or 0.01% annualized, compared to third quarter 2021 net loan charge-offs of $20 thousand. The allowance for loan losses amounted to 1.15% of total loans on September 30, 2022, as compared to 1.40% on September 30, 2021.

Average deposit balances grew on a quarter over prior year quarter comparison by $50 million, or 5%. For the third quarter 2022, the average cost of deposits amounted to 0.22%, as compared to 0.18% for the third quarter 2021. We expect the average cost of deposits to continue rising in the next several quarters. During third quarter 2022, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $37 million and savings accounts of $32 million, while interest-bearing demand accounts decreased $10 million and time deposits decreased $9 million. The average balance of securities sold under repurchase agreement during the third quarter of 2022 decreased by $4 million, or 4%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $92 million at September 30, 2022, reflecting a decrease of $5.3 million, or 5.5%, relative to year-end 2021. The decrease in equity was due to a $12 million decrease in accumulated other comprehensive income related to the unrealized losses in available for sale securities and the payment of $2.6 million in dividends, partially offset by $9.6 million in net income. The average equity to assets ratio amounted to 8.20% on September 30, 2022, and 8.75% on September 30, 2021. The Company declared a quarterly dividend of $0.33 per share on August 3, 2022, payable September 20, 2022, producing an annualized yield of 3.4% based on the September 30, 2022, closing price of $39.00.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $1.2 billion as of September 30, 2022. 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 share and per share data)

2022

2022

2022

2021

2021

2022

2021

EARNINGS 3rd Qtr

2nd Qtr

1st Qtr

4th Qtr

3rd Qtr

9 months

9 months

Net interest income FTE (a)

$

8,596

 

$

7,666

 

$

6,902

 

$

6,752

 

$

7,364

 

$

23,164

 

$

20,919

 

Provision (recovery) for loan losses

 

(250

)

 

(345

)

 

(300

)

 

-

 

(210

)

 

(895

)

 

(655

)

 

Other income

 

1,675

 

1,782

 

1,642

 

1,836

 

1,768

 

5,099

 

5,489

 

Other expenses

 

5,945

 

5,774

 

5,468

 

5,709

 

5,713

 

17,187

 

16,384

 

FTE adjustment (a)

 

36

 

36

 

37

 

39

 

39

 

109

 

115

 

Net income

 

3,650

 

3,209

 

2,701

 

2,306

 

2,901

 

9,560

 

8,531

 

Diluted earnings per share

 

1.35

 

1.18

 

0.99

 

0.85

 

1.06

 

3.52

 

3.12

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (ROA), annualized

 

1.25

%

1.13

%

0.96

%

0.8

%

1.03

%

1.12

%

1.03

%

Return on average common equity (ROE), annualized

 

15.24

 

13.73

 

11.26

 

9.41

 

11.79

 

13.41

 

11.91

 

Net interest margin FTE (a)

 

3.12

 

2.87

 

2.6

 

2.48

 

2.77

 

2.86

 

2.68

 

Efficiency ratio

 

57.87

 

61.13

 

64.01

 

66.41

 

62.49

 

60.82

 

61.96

 

Number of full-time equivalent employees

 

172

 

171

 

172

 

171

 

178

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARKET DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value/common share

$

33.97

 

$

34.46

 

$

34.93

 

$

35.8

 

$

35.62

 

 

 

 

 

Period-end common share market value

 

39

 

38

 

39.6

 

37.75

 

39.25

 

 

 

 

 

Market as a % of book

 

114.81

%

110.27

%

113.37

%

105.45

%

110.19

%

 

 

 

 

Price-to-earnings ratio

 

8.92

 

9.31

 

10.15

 

9.51

 

9.62

 

 

 

 

 

Average basic common shares

 

2,712,686

 

2,718,024

 

2,718,024

 

2,720,633

 

2,729,410

 

2,716,225

 

2,737,336

 

Average diluted common shares

 

2,712,686

 

2,718,024

 

2,718,024

 

2,720,633

 

2,729,410

 

2,716,225

 

2,737,336

 

Period end common shares outstanding

 

2,707,576

 

2,718,024

 

2,718,024

 

2,718,024

 

2,725,524

 

 

 

 

 

Common stock market capitalization

$

105,595

 

$

103,285

 

$

107,634

 

$

102,605

 

$

106,977

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSET QUALITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross charge-offs

$

29

 

$

11

 

$

31

 

$

66

 

$

39

 

$

71

 

$

64

 

Net charge-offs (recoveries)

 

10

 

(308

)

 

13

 

27

 

20

 

(285

)

 

(26

)

 

Allowance for loan losses

 

7,008

 

7,268

 

7,305

 

7,618

 

7,645

 

 

 

 

 

Nonperforming assets (NPAs)

 

685

 

690

 

1,181

 

1,088

 

1,320

 

 

 

 

 

Net charge-off (recovery) / average loans ratio

 

0.01

%

(0.21

)

%

0.01

%

0.02

%

0.01

%

(0.07

)

%

(0.01

)

%

Allowance for loan losses / period-end loans

 

1.15

 

1.25

 

1.29

 

1.39

 

1.4

 

 

 

 

 

NPAs/loans and other real estate

 

0.11

 

0.12

 

0.21

 

0.2

 

0.24

 

 

 

 

 

Allowance for loan losses/nonperforming loans

 

1,022.02

 

1,053.53

 

618.54

 

699.86

 

579.07

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPITAL & LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period-end tangible equity to assets

 

7.54

%

7.93

%

7.98

%

8.13

%

8.34

%

 

 

 

 

Average equity to assets

 

8.2

 

8.25

 

8.54

 

8.54

 

8.75

 

 

 

 

 

Average equity to loans

 

15.98

 

16.31

 

17.35

 

17.86

 

17.89

 

 

 

 

 

Average loans to deposits

 

58.15

 

57.65

 

56.42

 

54.62

 

56.09

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE BALANCES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

$

1,159,523

 

$

1,136,318

 

$

1,138,598

 

$

1,138,690

 

$

1,115,814

 

$

1,144,890

 

$

1,102,707

 

Earning assets

 

1,094,197

 

1,072,376

 

1,078,269

 

1,079,002

 

1,056,424

 

1,081,673

 

1,045,128

 

Loans

 

594,820

 

574,824

 

560,440

 

544,389

 

545,420

 

576,821

 

568,726

 

Deposits

 

1,022,851

 

997,108

 

993,411

 

996,646

 

972,409

 

1,004,565

 

959,696

 

Shareholders' equity

 

95,043

 

93,750

 

97,242

 

97,241

 

97,584

 

95,337

 

95,776

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ENDING BALANCES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

$

1,161,830

 

$

1,126,778

 

$

1,135,003

 

$

1,144,239

 

$

1,111,696

 

 

 

 

 

Earning assets

 

1,096,302

 

1,064,770

 

1,073,565

 

1,084,744

 

1,054,141

 

 

 

 

 

Loans

 

609,971

 

582,185

 

567,375

 

549,154

 

546,095

 

 

 

 

 

Deposits

 

1,029,274

 

993,113

 

994,939

 

1,002,747

 

968,629

 

 

 

 

 

Shareholders' equity

 

91,981

 

93,662

 

94,928

 

97,315

 

97,089

 

 

 

 

 

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 30,

 

 

September 30,

 

(Dollars in thousands, except share and per share data)

2022

 

 

2021

 

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

Cash and due from banks

$

20,859

 

 

$

17,929

 

Interest-earning deposits in other banks

 

86,657

 

 

 

265,692

 

Total cash and cash equivalents

 

107,516

 

 

 

283,621

 

Securities

 

 

 

 

 

 

 

Available-for-sale, at fair-value

 

143,433

 

 

 

185,454

 

Held-to-maturity

 

252,362

 

 

 

51,317

 

Equity securities

 

249

 

 

 

107

 

Restricted stock, at cost

 

3,430

 

 

 

4,614

 

Total securities

 

399,474

 

 

 

241,492

 

 

 

 

 

 

 

 

 

Loans held for sale

 

200

 

 

 

862

 

Loans

 

609,971

 

 

 

546,095

 

Less allowance for loan losses

 

7,008

 

 

 

7,645

 

Net loans

 

602,963

 

 

 

538,450

 

 

 

 

 

 

 

 

 

Premises and equipment, net

 

13,455

 

 

 

13,713

 

Goodwill and core deposit intangible

 

4,728

 

 

 

4,739

 

Bank owned life insurance

 

24,539

 

 

 

23,873

 

Accrued interest receivable and other assets

 

8,955

 

 

 

4,946

 

TOTAL ASSETS

$

1,161,830

 

 

$

1,111,696

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Liabilities

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing

$

338,043

 

 

$

304,345

 

Interest-bearing

 

691,231

 

 

 

664,284

 

Total deposits

 

1,029,274

 

 

 

968,629

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

34,199

 

 

 

38,130

 

Other borrowings

 

2,528

 

 

 

3,489

 

Accrued interest payable and other liabilities

 

3,848

 

 

 

4,359

 

Total liabilities

 

1,069,849

 

 

 

1,014,607

 

Shareholders' equity

 

 

 

 

 

 

 

Common stock, $6.25 par value. Authorized

 

 

 

 

 

 

 

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

 

 

 

 

 

 

 

in 2022 and 2021

 

18,629

 

 

 

18,629

 

Additional paid-in capital

 

9,815

 

 

 

9,815

 

Retained earnings

 

83,696

 

 

 

75,252

 

Treasury stock at cost - 273,026 shares in 2022

 

 

 

 

 

 

 

and 255,078 shares in 2021

 

(6,107

)

 

 

(5,424

)

Accumulated other comprehensive loss

 

(14,052

)

 

 

(1,183

)

Total shareholders' equity

 

91,981

 

 

 

97,089

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

1,161,830

 

 

$

1,111,696

 

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

 

 

Quarter ended

 

 

Nine months ended

(Unaudited)

 

September 30,

 

 

September 30,

(Dollars in thousands, except share and per share data)

 

2022

 

 

 

2021

 

 

 

2022

 

 

 

2021

 

Interest and dividend income:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans, including fees

$

6,680

 

 

$

6,897

 

 

$

18,489

 

 

$

19,993

 

Taxable securities

 

1,780

 

 

 

677

 

 

 

4,721

 

 

 

1,840

 

Nontaxable securities

 

110

 

 

 

117

 

 

 

328

 

 

 

339

 

Other

 

586

 

 

 

114

 

 

 

863

 

 

 

228

 

Total interest and dividend income

 

9,156

 

 

 

7,805

 

 

 

24,401

 

 

 

22,400

 

Interest expense:

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

559

 

 

 

450

 

 

 

1,252

 

 

 

1,496

 

Other

 

37

 

 

 

30

 

 

 

94

 

 

 

100

 

Total interest expense

 

596

 

 

 

480

 

 

 

1,346

 

 

 

1,596

 

Net interest income

 

8,560

 

 

 

7,325

 

 

 

23,055

 

 

 

20,804

 

Provision (recovery) for loan losses

 

(250

)

 

 

(210

)

 

 

(895

)

 

 

(655

)

Net interest income, after provision

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

for (recovery of) loan losses

 

8,810

 

 

 

7,535

 

 

 

23,950

 

 

 

21,459

 

Noninterest income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Service charges on deposits accounts

 

321

 

 

 

250

 

 

 

875

 

 

 

676

 

Trust services

 

216

 

 

 

252

 

 

 

733

 

 

 

798

 

Debit card interchange fees

 

530

 

 

 

515

 

 

 

1,568

 

 

 

1,512

 

Earnings on bank owned life insurance

 

170

 

 

 

163

 

 

 

504

 

 

 

457

 

Gain on sale of loans

 

49

 

 

 

270

 

 

 

314

 

 

 

1,174

 

Market value change in equity securities

 

(2

)

 

 

8

 

 

 

2

 

 

 

20

 

Other

 

391

 

 

 

310

 

 

 

1,103

 

 

 

852

 

Total noninterest income

 

1,675

 

 

 

1,768

 

 

 

5,099

 

 

 

5,489

 

Noninterest expenses

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

3,199

 

 

 

3,228

 

 

 

9,766

 

 

 

9,301

 

Occupancy expense

 

272

 

 

 

270

 

 

 

820

 

 

 

771

 

Equipment expense

 

193

 

 

 

170

 

 

 

604

 

 

 

519

 

Professional and director fees

 

555

 

 

 

180

 

 

 

1,161

 

 

 

831

 

Software expense

 

397

 

 

 

318

 

 

 

1,056

 

 

 

954

 

Marketing and public relations

 

141

 

 

 

147

 

 

 

362

 

 

 

324

 

Debit card expense

 

201

 

 

 

181

 

 

 

550

 

 

 

524

 

Other expenses

 

987

 

 

 

1,219

 

 

 

2,868

 

 

 

3,160

 

Total noninterest expenses

 

5,945

 

 

 

5,713

 

 

 

17,187

 

 

 

16,384

 

Income before income tax

 

4,540

 

 

 

3,590

 

 

 

11,862

 

 

 

10,564

 

Federal income tax provision

 

890

 

 

 

689

 

 

 

2,302

 

 

 

2,033

 

Net income

$

3,650

 

 

$

2,901

 

 

$

9,560

 

 

$

8,531

 

Net income per share:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Basic and diluted

$

1.35

 

 

$

1.06

 

 

$

3.52

 

 

$

3.12

 

 

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