CSB Bancorp, Inc. Reports First Quarter Earnings

Rhea-AI Summary

CSB Bancorp, Inc. (OTC Pink: CSBB) reported a strong financial performance for the first quarter of 2021, achieving a net income of $2,885,000, or $1.05 per share, compared to $2,483,000, or $0.91 per share in the same period of 2020. The annualized return on average common equity improved to 12.33%, while the return on average assets was 1.10%. Net interest income and noninterest income totaled $8.9 million, up $627 thousand year-over-year. While credit quality remains stable, the net interest margin declined to 2.85% from 3.67% in the prior year.

Positive

• Net income increased to $2,885,000, or $1.05 per share, reflecting strong growth.
• Annualized ROE improved to 12.33%, indicating better returns for shareholders.
• Noninterest income surged by 40%, driven by a rise in gains from real estate loan sales and increased card fee income.

Negative

• Net interest margin decreased to 2.85% from 3.67% a year ago, indicating lower profitability on loans.
• Loan yields declined by 25 basis points, reflecting a competitive lending environment.
• Average equity to assets ratio slipped to 8.95% from 10.72% in the previous year, indicating reduced financial leverage.

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

First Quarter Highlights

		Quarter Ended March 31, 2021					Quarter Ended March 31, 2020
Diluted earnings per share		$	1.05				$	0.91
Net Income		$	2,885,000				$	2,483,000
Return on average common equity			12.33	%				11.47	%
Return on average assets			1.10	%				1.23	%

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced first quarter 2021 net income of $2,885,000, or $1.05 per basic and diluted share, as compared to $2,483,000, or $0.91 per basic and diluted share, for the same period in 2020. Income before federal income tax amounted to $3,575,000, an increase of 16% over the same quarter in the prior year.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 12.33% and 1.10%, respectively, compared with 11.47% and 1.23% for the first quarter of 2020.

Eddie Steiner, President and CEO stated, “National and local economies are on the mend from the pandemic’s crippling impact, spurred by widening vaccination levels and robust fiscal and monetary support programs. The new round of Paycheck Protection Program lending that began in January is supporting many small organizations and self-employed individuals. Very low interest rates continue to drive mortgage refinancing, home purchases and construction. Businesses are regaining confidence needed to reinvest and expand as the uncertainty surrounding COVID’s remaining impact diminishes. Job creation has strengthened in recent months. While certain sectors will lag and the pace of improvement may prove uneven, the prevailing economic outlook favors sustained overall progress in healing and expansion through this year and into 2022.”

Net interest income and noninterest income totaled $8.9 million during the quarter, an increase of $627 thousand from the prior-year first quarter. Net interest income increased $92 thousand, or 1%, in the first quarter of 2021 compared to the same period in 2020.

Loan interest income including fees increased $15 thousand during first quarter 2021 as compared to the same quarter in 2020, an increase of less than 1%. Average total loan balances during the current quarter were $36 million higher than the year ago quarter, an increase of 6%. Loan yields for first quarter 2021 averaged 4.67%, a decrease of 25 basis points from the 2020 first quarter average of 4.92%.

The net interest margin was 2.85% compared to 3.67% for first quarter 2020, as yields on loans and securities have declined. The tax equivalency effect on the margin remained stable at 0.02% in the comparable first quarters.

With the continuing application of government stimulus programs for businesses and individuals, a provision for loan losses of $30 thousand was recognized for the first quarter ended March 31, 2021 as compared to $178 thousand for the prior year quarter. Credit quality within the loan portfolio has not been significantly affected by COVID factors to date. However, a significant degree of COVID-related uncertainty remains, and the eventual damage to household and business balance sheets cannot be effectively fully measured at this time.

Noninterest income increased 40%, compared to first quarter of 2020, fueled by historic growth in gain on sale of real estate loans into the secondary market, increases in debit and credit card fee income, and bank owned life insurance values. These increases were partially offset by decreases in service charges on deposit accounts as both consumers and businesses maintained increased deposit balances from government stimulus payments and loans provided by the bank within the Paycheck Protection Program (PPP).

Noninterest expense increased 5% from first quarter 2020. Salary and employee benefit costs increased $61 thousand, or 2%, compared to the prior year quarter, as a result of increases in base compensation and commissions, incentive accruals, and employers FICA expense. FDIC insurance expense increased $108 thousand as the prior year quarter reflected the use of Small Bank Assessment Credits. Software expense increased by $73 thousand reflecting investment in new platforms. Professional and directors’ fees decreased $35 thousand, or 11% primarily reflecting decreases in legal fees for loan collections. Marketing and public relations decreased by $48 thousand, or 38%, reflecting the continuing pandemic-related shut down of activities in first quarter 2021. The Company’s first quarter efficiency ratio decreased to 59.1% compared to 60.1%.

Federal income tax expense totaled $690 thousand in first quarter 2021, as compared to $591 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 $1.06 billion, an increase of $248 million, or 31%, above the same quarter of the prior year. Liquidity increased as the Company’s average interest-bearing balances with banks increased $127 million to $203 million as compared to the first quarter in 2020. Average loan balances of $596 million increased $36 million, or 6%, from the prior year first quarter while average securities balances of $205 million increased $79 million, or 63%, as compared to first quarter 2020.

Average commercial loan balances for the quarter, including commercial real estate, increased $36 million, or 10%, from prior year levels. This amount includes $64 million in average PPP loan balances. Excluding average PPP loan balances, commercial loans decreased year over year as borrowers reduced outstanding commercial line balances during the pandemic-related contraction in economic activity. Average residential mortgage balances increased $10 million, or 8%, over the prior year’s quarter while home equity lines of credit decreased $9 million over the prior year’s quarter as they were paid down or refinanced into low-rate term mortgages. Average consumer credit balances decreased $1 million, or 5%, versus the same quarter of the prior year. Increased organic loan demand will be somewhat dependent on the pace at which excess liquidity is absorbed by businesses and households.

Nonperforming assets decreased $1.4 million from March 31, 2020 to $3.1 million, or 0.53%, of total loans plus other real estate on March 31, 2021. Approximately $67 thousand of the non-performing loan total is guaranteed by either USDA or the SBA. Delinquent loan balances as of March 31, 2021 decreased to 0.57% of total loans as compared to 0.96% on March 31, 2020.

Net loan recoveries recognized during first quarter 2021 were $34 thousand, or 0.02% annualized, compared to first quarter 2020 net loan losses of $75 thousand. The allowance for loan losses amounted to 1.43% of total loans on March 31, 2021 as compared to 1.28% on March 31, 2020.

Average deposit balances grew on a quarter over prior year quarter comparison by $240 million, or 35%. For the first quarter 2021, the average cost of deposits amounted to 0.24%, as compared to 0.49% for the first quarter 2020. During the first quarter 2021, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $92 million and interest-bearing demand and savings accounts of $153 million, while time deposits decreased $4 million. The average balance of securities sold under repurchase agreement during the first quarter of 2021 increased by $1 million, or 4%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $93.1 million on March 31, 2021 with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 8.95% on March 31, 2021 and 10.72% on March 31, 2020. The Company declared a first quarter dividend of $0.30 per share, producing an annualized yield of 3.2% based on the March 31, 2021 closing price of $37.50.

Cares Act and related events

A third stimulus bill was signed into law on March 11, 2021 adding additional emergency relief to the March 2020 Cares Act and to the Consolidated Appropriations Act, 2021. The American Rescue Plan Act of 2021 expanded eligibility and added an additional $7 billion in funds to the SBA’s PPP emergency relief programs. We facilitated and funded more than 750 of these government assistance loans totaling approximately $92 million in 2020 during the first round. As of March 31, 2021, $62 million has been received from the SBA in forgiveness and we expect the majority of the PPP loan dollars will ultimately qualify for borrower forgiveness under the guidelines of the SBA program. We have underwritten an additional $33 million in PPP applications during the first quarter of 2021.

During 2020, we also extended loan modifications to qualifying commercial and consumer loan customers to deal with the uncertainty of the economy. Customers could 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 March 31, 2021, no loans granted relief during 2020 remain on modification. Three consumer loans were granted loan modifications during the quarter ended March 31, 2021.

About CSB Bancorp, Inc.

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

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)		2021				2020				2020				2020				2020
EARNINGS		1st Qtr				4th Qtr				3rd Qtr				2nd Qtr				1st Qtr
Net interest income FTE (a)	$		7,046		$		7,223		$		7,077		$		7,048		$		6,953
Provision for loan losses			30				378				377				717				178
Other income			1,878				2,089				1,862				1,641				1,343
Other expenses			5,281				5,576				5,050				4,709				5,007
FTE adjustment (a)			38				39				36				36				37
Net income			2,885				2,679				2,800				2,606				2,483
Diluted earnings per share			1.05				0.97				1.02				0.95				0.91
PERFORMANCE RATIOS
Return on average assets (ROA), annualized			1.10		%		1.05		%		1.14		%		1.15		%		1.23		%
Return on average common equity (ROE), annualized			12.33				11.45				12.19				11.72				11.47
Net interest margin FTE (a)			2.85				2.97				3.04				3.29				3.67
Efficiency ratio			59.14				59.75				56.32				54.05				60.08
Number of full-time equivalent employees			170				171				169				169				172
MARKET DATA
Book value/common share	$		33.94		$		34.23		$		33.49		$		32.81		$		31.95
Period-end common share mkt value			37.50				35.00				30.00				32.00				35.00
Market as a % of book			110.49		%		102.25		%		89.58		%		97.53		%		109.55		%
Price-to-earnings ratio			9.40				9.09				7.83				8.44				9.26
Cash dividends/common share	$		0.30		$		0.29		$		0.28		$		0.28		$		0.28
Common stock dividend payout ratio			28.57		%		29.90		%		27.45		%		29.47		%		30.77		%
Average basic common shares			2,742,350				2,742,350				2,742,350				2,742,350				2,742,350
Average diluted common shares			2,742,350				2,742,350				2,742,350				2,742,350				2,742,350
Period end common shares outstanding			2,742,350				2,742,350				2,742,350				2,742,350				2,742,350
Common stock market capitalization	$		102,838		$		95,982		$		82,271		$		87,755		$		95,982
ASSET QUALITY
Gross charge-offs	$		5		$		511		$		28		$		17		$		86
Net charge-offs (recoveries)			(34	)			459				(143	)			3				75
Allowance for loan losses			8,338				8,274				8,355				7,835				7,120
Nonperforming assets (NPAs)			3,089				4,497				4,102				4,481				4,468
Net charge-off (recovery) /average loans ratio			(0.02	)	%		0.29		%		(0.09	)	%		0.00		%		0.05		%
Allowance for loan losses/period-end loans			1.43				1.36				1.33				1.23				1.28
NPAs/loans and other real estate			0.53				0.74				0.65				0.70				0.80
Allowance for loan losses/nonperforming loans			269.92				183.99				203.71				178.78				162.97
CAPITAL & LIQUIDITY
Period-end tangible equity to assets			7.99		%		8.68		%		8.86		%		8.90		%		10.28		%
Average equity to assets			8.95				9.13				9.33				9.79				10.72
Average equity to loans			15.92				15.02				14.39				14.38				15.55
Average loans to deposits			64.95				70.81				76.22				80.95				82.61
AVERAGE BALANCES
Assets	$		1,060,485		$		1,018,770		$		979,806		$		912,875		$		812,409
Earning assets			1,004,521				966,304				926,377				860,838				761,619
Loans			596,319				619,455				635,124				621,710				560,142
Deposits			918,063				874,820				833,288				767,988				678,090
Shareholders' equity			94,929				93,042				91,409				89,404				87,090
ENDING BALANCES
Assets	$		1,110,157		$		1,031,632		$		987,978		$		965,179		$		810,041
Earning assets			1,043,016				977,092				936,323				913,813				757,769
Loans			582,714				609,159				628,084				636,799				555,320
Deposits			968,569				891,562				840,656				815,961				671,162
Shareholders' equity			93,085				93,859				91,853				89,967				87,629

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)	March 31,					March 31,
(Dollars in thousands, except per share data)	2021					2020
ASSETS
Cash and cash equivalents
Cash and due from banks	$		22,174			$		18,277
Interest-earning deposits in other banks			256,736					77,995
Total cash and cash equivalents			278,910					96,272
Securities
Available-for-sale, at fair-value			197,470					108,263
Held-to-maturity			8,270					11,242
Equity securities			100					79
Restricted stock, at cost			4,614					4,614
Total securities			210,454					124,198
Loans held for sale			1,450					256
Loans			582,714					555,320
Less allowance for loan losses			8,338					7,120
Net loans			574,376					548,200
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