CSBB - CSB Bancorp Inc. Reports Third Quarter Earnings

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

Third Quarter Highlights

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced third quarter 2019 net income of $2,695,000, or $0.98 per basic and diluted share, as compared to $2,432,000, or $0.88 per basic and diluted share, for the same period in 2018. Income before federal income tax amounted to $3,344,000, an increase of 11% over the same quarter in the prior year. For the nine month period ended September 30, 2019 net income totaled $7,821,000 compared to $6,920,000 for the same period last year, an increase of 13%.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 12.89% and 1.38%, respectively, compared with 13.07% and 1.34% for the third quarter of 2018.

Eddie Steiner, President and CEO stated, “The business sector has become somewhat more cautious in outlook as uncertainties related to trade policy, slowing global economies, and continued difficulties in agriculture and traditional retail sectors weigh on forward-looking perspectives. Demand for home loans has been steady. Mortgage rates are attractive and household balance sheets remain in decent shape overall with manageable debt levels, low unemployment and increasing wages.”

Net interest income and noninterest income, on a fully-taxable equivalent basis, totaled $8.7 million during the quarter, an 8% increase from the prior-year third quarter. Net interest income increased $387 thousand, or 6%, in the third quarter of 2019 compared to the same period in 2018.

Loan interest income including fees increased $532 thousand during third quarter 2019 as compared to the same quarter in 2018, an increase of 8%. Average total loan balances during the current quarter were $17 million higher than the year ago quarter, an increase of 3%. Loan yields for third quarter 2019 averaged 5.18%, an increase of 23 basis points from the 2018 third quarter average of 4.95%.

The net interest margin was 3.95% compared to 4.00% for third 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 23%, compared to third quarter of 2018, driven by growth in gain on sale of loans, debit card fee income, increases in bank owned life insurance values, and service charges on deposit accounts.

Noninterest expense increased 8% from third quarter 2018. Salary and employee benefit costs increased $188 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 $117 thousand, or 59%, reflecting higher technology investment to further improve network infrastructure in support of company growth. Marketing and public relations increased by $25 thousand, or 20%, reflecting timing of certain electronic and billboard promotional efforts and the opening of a new banking center. The Company’s third quarter efficiency ratio was stable at 57.5% in both periods.

Federal income tax expense totaled $649 thousand in third quarter 2019, as compared to $582 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 $773 million, an increase of $53 million, or 7%, above the same quarter of the prior year. Average loan balances of $555 million increased $17 million, or 3%, from the prior year third quarter while average securities balances of $111 million decreased $7 million, or 6%, as compared to third quarter 2018.

Average commercial loan balances for the quarter, including commercial real estate, increased $3 million, or less than 1%, from prior year levels. Average residential mortgage balances including home equity lines of credit increased $12 million, or 8%, over the prior year’s quarter. Average consumer credit balances increased $2 million, or 9%, versus the same quarter of the prior year.

Nonperforming assets decreased $823 thousand from September 30, 2018 to $4.5 million, or 0.80%, of total loans plus other real estate at September 30, 2019. The decrease in nonperforming assets reflects various commercial loans exiting through liquidation. At September 30, 2019, approximately $1.2 million of the non-performing loan total is guaranteed by either USDA or the SBA. Delinquent loan balances as of September 30, 2019 declined to 0.96% of total loans as compared to 1.25% at September 30, 2018.

Net loan losses recognized during third quarter 2019 were $46 thousand, or 0.03% annualized, compared to third quarter 2018 net loan losses of $38 thousand. The allowance for loan losses amounted to 1.20% of total loans at September 30, 2019 as compared to 1.16% at September 30, 2018.

Average deposit balances grew on a quarter over prior year quarter comparison by $51 million, or 9%, partially on the strength of customer response to higher rates paid on insured deposits. For the third quarter 2019, the average cost of deposits amounted to 0.60%, as compared to 0.42% for the third quarter 2018. During the third quarter 2019, increases in average deposit balances over the prior year quarter included non-interest bearing demand accounts of $8 million, interest-bearing transaction accounts of $35 million, and time deposits of $8 million. The average balance of securities sold under repurchase agreement during the third quarter of 2019 decreased by $6 million, or 13%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $83.6 million on September 30, 2019 with 2.7 million common shares outstanding. The tangible equity to assets ratio amounted to 10.1% on September 30, 2019 and 9.8% on September 30, 2018. The Company declared a third quarter dividend of $0.28 per share, a $.04 per share increase over third quarter 2018, producing an annualized yield of 2.9% based on the September 30, 2019 closing price of $38.67.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $787 million as of September 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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