CSB Bancorp, Inc. Reports Second Quarter Earnings

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

Second Quarter Highlights

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced second quarter 2019 net income of $2,586,000, or $.94 per basic and diluted share, as compared to $2,324,000, or $.85 per basic and diluted share, for the same period in 2018. Income before federal income tax amounted to $3,199,000, an increase of 11% over the same quarter in the prior year. For the six month period ended June 30, 2019 net income totaled $5,126,000 compared to $4,488,000 for the same period last year, an increase of 14%.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 12.91% and 1.39%, respectively, compared with 12.94% and 1.30% for the second quarter of 2018.

Eddie Steiner, President and CEO stated, “We are pleased to report solid mid-year earnings with increases over the prior year. Business loan growth has been at a slower pace for most of 2019, particularly with lower usage needs for operating lines of credit, while home and consumer lending demand has increased as fixed rates on mortgage loans drifted lower and home construction season moved into full swing.”

Net interest income and noninterest income, on a fully-taxable equivalent basis, totaled $8.4 million during the quarter, a 7% increase from the prior-year second quarter. Net interest income increased $419 thousand, or 6%, in the second quarter of 2019 compared to the same period in 2018.

Loan interest income including fees increased $670 thousand during second quarter 2019 as compared to the same quarter in 2018, an increase of 10%. Average total loan balances during the current quarter were $13 million higher than the year ago quarter, an increase of 2%. Loan yields for second quarter 2019 averaged 5.26%, an increase of 37 basis points from the 2018 second quarter average of 4.89%.

The net interest margin was 4.08% compared to 3.98% for second quarter 2018. The tax equivalency effect on the margin dropped to 0.02% from 0.03% a result of the reduction in tax exempt loans and securities in 2019.

Noninterest income increased 12%, compared to second quarter of 2018, driven by growth in debit card fee income, increases in bank owned life insurance values, gain on sale of loans, and service charges on deposit accounts.

Noninterest expense increased 6% from second quarter 2018. Salary and employee benefit costs increased $197 thousand, or 7%, compared to the prior year quarter, as a result of higher wage and 401k retirement expenses. Professional and director’s fees increased by $69 thousand, or 29%, reflecting higher technology investment to further improve network infrastructure in support of company growth. Marketing and public relations increased by $20 thousand, or 17%, reflecting timing of certain electronic and billboard promotional efforts and the opening of a new banking center. The Company’s second quarter efficiency ratio was 58.0% as compared to 58.4% for the same quarter in the prior year.

Federal income tax expense totaled $613 thousand in second quarter 2019, as compared to $553 thousand tax expense for the same quarter in 2018. The effective tax rate was 19% in both periods.

Average total assets during the quarter amounted to $746 million, an increase of $30 million, or 4%, above the same quarter of the prior year. Average loan balances of $548 million increased $13 million, or 2%, from the prior year second quarter while average securities balances of $111 million decreased $8 million, or 7%, as compared to second quarter 2018.

Average commercial loan balances for the quarter, including commercial real estate, decreased $1 million, or less than 1%, from prior year levels. Average residential mortgage balances including home equity lines of credit increased $12 million, or 7%, over the prior year’s quarter. Average consumer credit balances increased $2 million, or 12%, versus the same quarter of the prior year.

Nonperforming assets increased $156 thousand from June 30, 2018 to $4.6 million, or 0.83%, of total loans plus other real estate at June 30, 2019. The increase in nonperforming assets reflects the second quarter 2019 impairment of a commercial facility in liquidation, partially offset by various commercial loans exiting through liquidation. At June 30, 2019, approximately $1.0 million of the non-performing loan total is guaranteed by either USDA or the SBA. Delinquent loan balances as of June 30, 2019 declined to 1.03% of total loans as compared to 1.06% at June 30, 2018.

Net loan losses recognized during second quarter 2019 were $35 thousand, or 0.03% annualized, compared to second quarter 2018 net loan losses of $39 thousand. The allowance for loan losses amounted to 1.19% of total loans at June 30, 2019 as compared to 1.11% at June 30, 2018.

Average deposit balances grew on a year over year comparison by $28 million, or 5%, partially on the strength of customer response to higher rates paid on insured deposits. For the second quarter 2019, the average cost of deposits amounted to 0.60%, as compared to 0.38% for the second quarter 2018. During the second quarter 2019, increases in average deposit balances over the prior year quarter included non-interest bearing demand accounts of $7 million and interest-bearing transaction accounts of $14 million, and time deposits of $7 million. The average balance of securities sold under repurchase agreement during the second quarter of 2019 decreased by $5 million, or 12%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $81.0 million on June 30, 2019 with 2.7 million common shares outstanding. The tangible equity to assets ratio amounted to 10.3% on June 30, 2019 and 9.4% on June 30, 2018. The Company declared a second quarter dividend of $0.26 per share, a $.02 per share increase over second quarter 2018, producing an annualized yield of 2.6% based on the June 30, 2019 closing price of $40.45.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $750 million as of June 30, 2019. 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 fifteen 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.

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