CSB BANCORP, INC. REPORTS THIRD QUARTER EARNINGS

Third Quarter Highlights

Quarter Ended

September 30, 2022

Quarter Ended

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

%

Millersburg, Ohio - October 25, 2022 - 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 2022decreased 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.

Contact Information:

Paula J. Meiler, SVP & CFO

330.763.2873

paula.meiler@csb1.com

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

%

0.80

%

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

2.60

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

$

35.80

$

35.62

Period-end common share market value

39.00

38.00

39.60

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

1.40

NPAs/loans and other real estate

0.11

0.12

0.21

0.20

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

8.20

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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Disclaimer

CSB Bancorp Inc. published this content on 25 October 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 25 October 2022 18:06:54 UTC.