CSB Bancorp, Inc. Reports Second Quarter Earnings

Rhea-AI Summary

CSB Bancorp reported a net income of $2,745,000 ($1.00 per share) for Q2 2021, a rise from $2,606,000 ($0.95 per share) in Q2 2020. Total net income for the first half of 2021 is $5,630,000, an 11% increase year-over-year. However, net interest income fell 8% to $8.3 million, primarily due to a 12% decrease in loan interest income. Average total assets rose 24% to $1.13 billion, yet the efficiency ratio worsened to 64.4%. A dividend of $0.30 per share was declared, yielding 3.2%.

Positive

• Net income increased by 5% year-over-year for Q2 2021.
• Dividend declared at $0.30 per share, yielding 3.2%.

Negative

• Net interest income decreased by 8% year-over-year, totaling $8.3 million.
• Loan interest income dropped by 12% due to a decline in average loan balances.
• Efficiency ratio worsened to 64.4% compared to 54.1% in Q2 2020.

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

Second Quarter Highlights

		Quarter Ended June 30, 2021					Quarter Ended June 30, 2020
Diluted earnings per share		$	1.00				$	0.95
Net Income		$	2,745,000				$	2,606,000
Return on average common equity			11.62	%				11.72	%
Return on average assets			0.97	%				1.15	%

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced second quarter 2021 net income of $2,745,000, or $1.00 per basic and diluted share, as compared to $2,606,000, or $0.95 per basic and diluted share, for the same period in 2020. Income before federal income tax amounted to $3,399,000, an increase of 5% over the same quarter in the prior year. For the six-month period ended June 30, 2021, net income totaled $5,630,000 compared to $5,089,000 for the same period last year, an increase of 11%.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 11.62% and 0.97%, respectively, compared with 11.72% and 1.15% for the second quarter of 2020.

Eddie Steiner, President and CEO stated, “The extraordinary levels of liquidity injected by government and Federal Reserve actions over the past fifteen months remain a key driver of current business and household financial activities, along with very low interest rates supporting borrowers. National and local economies continue to mend from the pandemic’s crippling impact. Consumers and businesses are beginning to reduce savings and increase spending and investment patterns. While job creation has strengthened, shortages of workers and material supplies in various industries is limiting the pace of recovery and expansion. The prevailing economic outlook favors sustained economic expansion into 2022. However, the pace of economic improvement may be uneven and will vary within economic sectors and regions due to a range of factors including COVID-19 patterns, worker shortages and skills gaps, supply chain disruptions affecting both production and sales of goods, price increases for goods and services, and adjustments to taper fiscal and monetary stimulus.”

Net interest income and noninterest income totaled $8.3 million during the quarter, a decrease of $339 thousand from the prior-year second quarter. Net interest income decreased $541 thousand, or 8%, in the second quarter of 2021 compared to the same period in 2020.

Loan interest income including fees decreased $874 thousand, or 12%, during second quarter 2021 as compared to the same quarter in 2020. The decrease was mainly due to the average total loan balances declining $57 million below the year ago quarter with average Paycheck Protection Program loans (“PPP”) declining $19 million over the prior year quarter. Loan yields for second quarter 2021 averaged 4.43%, a decrease of 17 basis points from the 2020 second quarter average of 4.60%, contributing $264 thousand to the decline in loan interest income.

The net interest margin was 2.43% compared to 3.29% for second quarter 2020. As discussed above loans reflected both a volume and yield decline, partially offset by liability rate decreases and volume increases within the securities account. Liquidity continues to play a factor as the growth of average overnight funds exceeds the growth of average noninterest bearing deposits by $107 million on a quarter over prior year quarter. The tax equivalency effect on the margin dropped to 0.01% from 0.02% in the comparable second quarters.

With the decrease in outstanding loan balances, continuing improvement in credit quality, and ongoing government stimulus programs for businesses and individuals, a reversal of $475 thousand was recognized to the provision for loan losses for the second quarter ended June 30, 2021 as compared to $717 thousand loss provision for the prior year quarter when the effect of COVID on future credit losses was not discernable. COVID factors have not significantly affected our 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 increased 12%, compared to second quarter of 2020, fueled by increases in debit and credit card fee income, brokerage and trust income, earnings from bank owned life insurance values and increases in service charges on deposit accounts. These increases were partially offset by a slowing of gain on sale of mortgages to the secondary market.

Noninterest expense increased 14% from second quarter 2020. Salary and employee benefit costs increased $368 thousand, or 14%, compared to the prior year quarter, primarily resulting from reduced FAS 91 credits to salary expense with the decrease in the number of commercial loans booked due to the ending of the PPP loan program and increases in base compensation and volume-based commissions. FDIC insurance expense increased $108 thousand as the prior year quarter reflected the use of Small Bank Assessment Credits. Software expense increased by $77 thousand reflecting investment in new platforms. Professional and directors’ fees increased $74 thousand, or 26% primarily reflecting increases in employee search fees, legal and collection costs, audit fees, and third-party contract negotiation fees. Marketing and public relations increased by $33 thousand, or 51%, reflecting a return to normalized levels after the pandemic-related curtailment of activities in 2020. The Company’s second quarter efficiency ratio increased to 64.4% compared to 54.1%.

Federal income tax expense totaled $654 thousand in second quarter 2021, as compared to $621 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 $1.13 billion, an increase of $218 million, or 24%, above the same quarter of the prior year. Liquidity increased as the Company’s average interest-bearing balances with banks increased $174 million, to $292 million, as compared to the second quarter in 2020. Average loan balances of $565 million decreased $57 million, or 9%, from the prior year second quarter while average securities balances of $217 million increased $96 million, or 79%, as compared to second quarter 2020.

Average commercial loan balances for the quarter, including commercial real estate, decreased $50 million, or 12%, from prior year levels. Excluding a $19 million decrease in average PPP loan balances, commercial loans decreased $31 million year over year as borrowers reduced outstanding commercial balances and delayed further borrowings, partially through use of stimulus monies. Average residential mortgage balances increased $5 million, or 4%, over the prior year’s quarter while home equity lines of credit decreased $9 million over the prior year’s quarter as balances were paid down or refinanced into low-rate term mortgages. Average consumer credit balances decreased $2 million, or 10%, versus the same quarter of the prior year. Increased organic loan demand continues to be dependent on the pace at which excess liquidity is absorbed by businesses and households.

Nonperforming assets decreased $1.7 million from June 30, 2020, to $2.8 million, or 0.50%, of total loans plus other real estate on June 30, 2021. Delinquent loan balances as of June 30, 2021, decreased to 0.57% of total loans as compared to 0.73% on June 30, 2020.

Net loan recoveries recognized during second quarter 2021 were $12 thousand, or 0.01% annualized, compared to second quarter 2020 net loan losses of $3 thousand. The allowance for loan losses amounted to 1.43% of total loans on June 30, 2021, as compared to 1.23% on June 30, 2020.

Average deposit balances grew on a quarter over prior year quarter comparison by $220 million, or 29%. For the second quarter 2021, the average cost of deposits amounted to 0.21%, as compared to 0.35% for the second quarter 2020. During the second quarter 2021, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $67 million and interest-bearing demand and savings accounts of $155 million, while time deposits decreased $2 million. The average balance of securities sold under repurchase agreement during the second quarter of 2021 decreased by $2 million, or 5%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $96.0 million on June 30, 2021, with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 8.38% on June 30, 2021, and 9.79% on June 30, 2020. The Company declared a second quarter dividend of $0.30 per share, producing an annualized yield of 3.2% based on the March 31, 2021 closing price of $38.00.

Cares Act and related events

A third major 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 also expanded eligibility and added an additional $7 billion in funds to the SBA’s PPP emergency relief programs.

CSB facilitated and funded $129 million of these government assistance loans in 2020 and 2021. As of June 30, 2021, $90 million has been received from the SBA in forgiveness, and the Company expects almost all PPP loans in the portfolio will ultimately be granted borrower forgiveness under the guidelines of the SBA program.

During 2020, the Company 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. All loans granted relief during 2020 have entered repayment. One consumer and one commercial loan were granted loan modifications under the relief programs during the quarter ended June 30, 2021.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $1.1 billion as of June 30, 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				2021				2020				2020				2020				2021				2020
EARNINGS		2nd Qtr				1st Qtr				4th Qtr				3rd Qtr				2nd Qtr				6 months				6 months
Net interest income FTE (a)	$		6,509		$		7,046		$		7,223		$		7,077		$		7,048		$		13,555		$		14,001
Provision (credit) for loan losses			(475	)			30				378				377				717				(445	)			895
Other income			1,843				1,878				2,089				1,862				1,641				3,721				2,984
Other expenses			5,390				5,281				5,576				5,050				4,709				10,671				9,716
FTE adjustment (a)			38				38				39				36				36				76				73
Net income			2,745				2,885				2,679				2,800				2,606				5,630				5,089
Diluted earnings per share			1.00				1.05				0.97				1.02				0.95				2.05				1.86
PERFORMANCE RATIOS
Return on average assets (ROA), annualized			0.97	%			1.10	%			1.05	%			1.14	%			1.15	%			1.04	%			1.19	%
Return on average common equity (ROE), annualized			11.62				12.33				11.45				12.19				11.72				11.97				11.60
Net interest margin FTE (a)			2.43				2.85				2.97				3.04				3.29				2.63				3.47
Efficiency ratio			64.40				59.14				59.75				56.32				54.05				61.68				58.00
Number of full-time equivalent employees			174				170				171				169				169
MARKET DATA
Book value/common share	$		35.11		$		33.94		$		34.23		$		33.49		$		32.81
Period-end common share mkt value			38.00				37.50				35.00				30.00				32.00
Market as a % of book			108.23	%			110.49	%			102.25	%			89.58	%			97.53	%
Price-to-earnings ratio			9.41				9.40				9.09				7.83				8.44
Cash dividends/common share	$		0.30		$		0.30		$		0.29		$		0.28		$		0.28		$		0.60		$		0.56
Common stock dividend payout ratio			30.00	%			28.57	%			29.90	%			27.45	%			29.47	%			29.27	%			30.11	%
Average basic common shares			2,740,390				2,742,350				2,742,350				2,742,350				2,742,350				2,741,365				2,742,350
Average diluted common shares			2,740,390				2,742,350				2,742,350				2,742,350				2,742,350				2,741,365				2,742,350
Period end common shares outstanding			2,734,244				2,742,350				2,742,350				2,742,350				2,742,350
Common stock market capitalization	$		103,901		$		102,838		$		95,982		$		82,271		$		87,755
ASSET QUALITY
Gross charge-offs	$		20		$		5		$		511		$		28		$		17		$		25		$		103
Net charge-offs (recoveries)			(12	)			(34	)			459				(143	)			3				(46	)			77
Allowance for loan losses			7,875				8,338				8,274				8,355				7,835
Nonperforming assets (NPAs)			2,786				3,089				4,497				4,102				4,481
Net charge-off (recovery) / average loans ratio			(0.01	)%			(0.02	)%			0.29	%			(0.09	)%			0.00	%			(0.02	)%			0.03	%
Allowance for loan losses / period-end loans			1.43				1.43				1.36				1.33				1.23
NPAs/loans and other real estate			0.50				0.53				0.74				0.65				0.70
Allowance for loan losses/nonperforming loans			282.61				269.92				183.99				203.71				178.78
CAPITAL & LIQUIDITY
Period-end tangible equity to assets			8.12	%			7.99	%			8.68	%			8.86	%			8.90	%
Average equity to assets			8.38				8.95				9.13				9.33				9.79
Average equity to loans			16.78				15.92				15.02				14.39				14.38
Average loans to deposits			57.18				64.95				70.81				76.22				80.95
AVERAGE BALANCES
Assets	$		1,131,251		$		1,060,485		$		1,018,770		$		979,806		$		912,875		$		1,096,078		$		862,629
Earning assets			1,073,865				1,004,521				966,304				926,377				860,838				1,039,386				811,229
Loans			564,998				596,319				619,455				635,124				621,710				580,572				590,926
Deposits			988,017				918,063				874,820				833,288				767,988				953,233				723,039
Shareholders' equity			94,786				94,929				93,042				91,409				89,404				94,857				88,247
ENDING BALANCES
Assets	$		1,128,922		$		1,110,157		$		1,031,632		$		987,978		$		965,179
Earning assets			1,072,286				1,043,016				977,092				936,323				913,813
Loans			552,030				582,714				609,159				628,084				636,799
Deposits			986,668				968,569				891,562				840,656				815,961
Shareholders' equity			96,012				93,085				93,859				91,853				89,967

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)		2021					2020
ASSETS
Cash and cash equivalents
Cash and due from banks	$		17,308			$		17,259
Interest-earning deposits in other banks			295,036					156,566
Total cash and cash equivalents			312,344					173,825
Securities
Available-for-sale, at fair-value			194,164					103,202
Held-to-maturity			24,878					10,871
Equity securities			99					83
Restricted stock, at cost			4,614					4,614
Total securities			223,755					118,770
Loans held for sale			1,465					1,678
Loans			552,030					636,799
Less allowance for loan losses			7,875					7,835
Net loans			544,155					628,964
Premises and equipment, net			13,431					12,593
Goodwill and core deposit intangible			4,750					4,802
Bank owned life insurance			23,710					19,153
Accrued interest receivable and other assets			5,312					5,394
TOTAL ASSETS	$		1,128,922			$		965,179
LIABILITIES AND SHAREHOLDERS' EQUITY
Liabilities
Deposits:
Noninterest-bearing	$		302,688			$		254,868
Interest-bearing			683,980					561,093
Total deposits			986,668					815,961
Short-term borrowings			38,475					43,865
Other borrowings			3,570					9,865
Accrued interest payable and other liabilities			4,197					5,521
Total liabilities			1,032,910					875,212
Shareholders' equity
Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares in 2021 and 2020			18,629					18,629
Additional paid-in capital			9,815					9,815
Retained earnings			73,196					65,293
Treasury stock at cost - 246,358 shares in 2021 and 238,252 shares in 2020			(5,093	)				(4,780	)
Accumulated other comprehensive (loss) income			(535	)				1,010
Total shareholders' equity			96,012					89,967
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$		1,128,922			$		965,179

CSB BANCORP, INC. CONSOLIDATED STATEMENTS OF INCOME
		Quarter ended									Six months ended
(Unaudited)		June 30,									June 30,
(Dollars in thousands, except per share data)		2021					2020				2021					2020
Interest and dividend income:
Loans, including fees	$		6,231			$		7,105		$		13,096			$		13,955
Taxable securities			604					481				1,163					1,090
Nontaxable securities			111					114				222					233
Other			68					31				114					270
Total interest and dividend income			7,014					7,731				14,595					15,548
Interest expense:
Deposits			508					673				1,046					1,504
Other			35					46				70					116
Total interest expense			543					719				1,116					1,620
Net interest income			6,471					7,012				13,479					13,928
Provision (credit) for loan losses			(475	)				717				(445	)				895
Net interest income after provision (credit) for loan losses			6,946					6,295				13,924					13,033
Noninterest income
Service charges on deposits accounts			219					211				426					501
Trust services			264					196				546					427
Debit card interchange fees			526					400				997					776
Gain on sale of loans			417					508				904					622
Market value change in equity securities			(1	)				4				12					(9	)
Other			418					322				836					667
Total noninterest income			1,843					1,641				3,721					2,984
Noninterest expenses
Salaries and employee benefits			3,044					2,676				6,073					5,644
Occupancy expense			247					244				501					464
Equipment expense			172					198				349					333
Professional and director fees			356					282				651					611
Software expense			336					259				636					485
Marketing and public relations			98					65				177					193
Debit card expense			172					146				343					286
Other expenses			965					839				1,941					1,700
Total noninterest expenses			5,390					4,709				10,671					9,716
Income before income tax			3,399					3,227				6,974					6,301
Federal income tax provision			654					621				1,344					1,212
Net income	$		2,745			$		2,606		$		5,630			$		5,089
Net income per share:
Basic and diluted	$		1.00			$		0.95		$		2.05			$		1.86

 

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FAQ

What were CSBB's earnings for Q2 2021?

CSB Bancorp reported earnings of $2,745,000 or $1.00 per share for Q2 2021.

How did CSBB's net income change compared to last year?

CSBB's net income increased by 5% compared to Q2 2020.

What is the dividend yield for CSBB in Q2 2021?

The declared dividend yield for CSBB in Q2 2021 is 3.2%.

What was the efficiency ratio for CSBB in Q2 2021?

CSBB's efficiency ratio for Q2 2021 was 64.4%.

Has CSBB seen a decline in loan interest income?

Yes, loan interest income decreased by 12% year-over-year.