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CSB Bancorp, Inc. Reports First Quarter Earnings

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

First Quarter Highlights

 

 

Quarter Ended

March 31, 2023

 

 

 

Quarter Ended

March 31, 2022

 

Diluted earnings per share

 

$

1.46

 

 

 

$

0.99

 

Net Income

 

$

3,934,000

 

 

 

$

2,701,000

 

Return on average common equity

 

 

16.39

%

 

 

 

11.26

%

Return on average assets

 

 

1.39

%

 

 

 

0.96

%

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced first quarter 2023 net income of $3,934,000, or $1.46 per basic and diluted share, as compared to $2,701,000, or $0.99 per basic and diluted share, for the same period in 2022. Income before federal income tax amounted to $4,905,000, an increase of 47% over the same quarter in the prior year.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 16.39% and 1.39%, respectively, compared with 11.26% and 0.96% for the first quarter of 2022.

Eddie Steiner, President and CEO stated, “The balance sheet remains strong, with adequate capital and liquidity to respond to foreseeable loan and depositor needs and to fund the Company’s ongoing projects. Net interest income has trended upward, spurred by continuing growth in loan balances and the higher rate environment. Credit quality within earning asset portfolios remains high. We anticipate some slowing of the general economy in coming quarters as higher interest rates curtail consumer and business spending, and employment levels to soften as employers calibrate operating costs to match the economic environment.”

Net interest income and noninterest income totaled $10.6 million during the quarter, an increase of $2.1 million from the prior year’s first quarter. Net interest income increased $2.1 million, or 31%, in the first quarter of 2023 compared to the same period in 2022.

Loan interest income including fees increased $2.2 million, or 38%, during first quarter 2023 as compared to the same quarter in 2022. The increase was mainly due to rate increases as well as a $77 million increase in average loan volume. Securities interest income increased $722 thousand, or 52%, during the first quarter 2023 compared to the same quarter 2022 from both rate and volume increases. Loan yields for first quarter 2023 averaged 5.07%, an increase of 88 basis points from the 2022 first quarter average of 4.19%, while security yields for first quarter 2023 averaged 2.18% compared to 1.60% in the first quarter 2022.

Interest expense rose $1.3 million, or 341%, during first quarter 2023 as compared to first quarter 2022. The increase follows a period of rapid interest rate increases spurred by the Federal Reserve followed by competitive pressures from banks and others to secure adequate funding. The cost of interest bearing liabilities for the first quarter 2023 was 0.95% as compared to 0.22% for the first quarter of 2022. Interest expense increases are anticipated to continue in 2023 but are not forecast to grow at 2022 levels.

The fully taxable equivalent (FTE) net interest margin was 3.37% compared to 2.60% for first quarter 2022. Compared to the 2022 first quarter, FTE net interest income increased $2.1 million, or 30%, reflecting 77 basis points of net interest margin expansion, and a $5 million, or less than 1%, increase in average earning assets. The higher interest rate environment drove the increase in yields coupled with loan and security volume growth, partially offset by the higher cost of funds and lower loan fees from the Paycheck Protection Program. The tax equivalency effect on the margin was 0.01% in first quarter 2023 and 0.02% in first quarter 2022.

Noninterest income decreased 1%, compared to first quarter of 2022. The decrease was primarily the result of a $115 thousand, or 98%, decline in gain on sale of mortgages to the secondary market, as higher interest rates sharply curbed fixed rate purchase and refinancing originations, along with a lack of housing inventory for sale. Offsetting increases were recognized in service charges on deposit accounts, debit card interchange fees, and credit card fee income.

Noninterest expense increased 5% from first quarter 2022. Salary and employee benefit costs increased $139 thousand, or 4%, compared to the prior year quarter, primarily resulting from increases in compensation and benefits partially offset by less FTE’s. Software expense increased $66 thousand, or 20%, with the deployment of new reporting software and upgrades. Professional and directors’ fees increased $45 thousand, or 16% primarily reflecting an increase in audit, tax and accounting fees in 2023. Marketing and public relations increased by $12 thousand, or 11%, reflecting a return to normalized levels. Telephone expense decreased $21 thousand below the prior year quarter due to a contract negotiation. The Company’s first quarter efficiency ratio decreased to 53.9% compared to 64.0%.

Federal income tax expense was $971 thousand in the 2023 first quarter compared to $638 thousand in the 2022 first quarter. The effective tax rate for the 2023 first quarter and 2022 first quarter were 19.8% and 19.1%, respectively.

Average earning assets for the 2023 first quarter increased $5 million, or less than 1%, from the year-ago quarter, primarily reflecting a $77 million, or 14%, increase in average loans, a $38 million, or 11%, increase in average securities, and a $111 million, or 70%, decrease in interest-earning deposits in other banks, held mainly at the Federal Reserve Bank.

Average commercial loan balances for the quarter, including commercial real estate, increased $49 million, or 13%, from prior year levels. Average PPP loan balances were $3 million below the prior year quarter, and less than $125 thousand in PPP balances remain as of March 31, 2023. Excluding the decrease in average PPP loan balances, commercial loans increased $52 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 $21 million, or 16%, above the prior year’s quarter as borrowers have been favoring adjustable-rate mortgages. Home equity lines of credit increased $6 million from the prior year’s quarter as balances were drawn and new loans originated. Average consumer credit balances increased $664 thousand, or 4%, versus the same quarter of the prior year. Increased organic loan demand continues to be largely dependent on the pace at which excess liquidity is absorbed by businesses and households and restoration of borrower confidence.

Nonperforming assets were $218 thousand, or 0.03%, of total loans on March 31, 2023, compared to $1.2 million, or 0.21% of total loans, a year ago. Delinquent loan balances as of March 31, 2023, were stable at 0.13% of total loans as compared to 0.24% on March 31, 2022. Net loan charge-offs recognized during first quarter 2022 were $4 thousand, or 0.0% annualized, compared to first quarter 2022 net loan losses of $13 thousand.

On January 1, 2023, CSB adopted ASU 2016-13 known as current expected credit losses or “CECL”. Following a period of extremely low historical credit losses and nonperforming assets, the initial entries to adjust the CECL loan loss allowance and the CECL allowance for unfunded commitments resulted in a net of tax entry increasing retained earnings by approximately $52 thousand. The allowance for expected credit losses amounted to 0.97% of total loans on March 31, 2023, as compared to 1.29% on March 31, 2022. The allowance for credit losses on off-balance sheet commitments on March 31, 2023 was $430 thousand, as compared to a March 31, 2022 balance of $141 thousand. CSB recorded no allowance for credit losses related to AFS or HTM debt securities as there is a zero loss expectation on these securities.

Average deposit balances grew on a quarter over prior year quarter comparison by $15 million, or 2%. For the first quarter 2023, the average cost of deposits amounted to 0.64%, as compared to 0.14% for the first quarter 2022. During the first quarter 2023, increases in average deposit balances over the prior year quarter included noninterest-bearing demand accounts of $5 million and interest-bearing demand and savings accounts of $8 million, while time deposits increased $2 million. The average balance of securities sold under repurchase agreement during the first quarter of 2023 decreased by $8 million, or 19%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $99.0 million on March 31, 2023, with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 8.48% for the quarter ended March 31, 2023, and 8.54% for the quarter ended March 31, 2022. The Company declared a first quarter dividend of $0.36 per share, producing an annualized yield of 3.8% based on the March 31, 2023 closing price of $38.00.

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, 2023. 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)

 

2023

 

 

2022

 

 

2022

 

 

2022

 

 

2022

 

EARNINGS

 

1st Qtr

 

 

4th Qtr

 

 

3rd Qtr

 

 

2nd Qtr

 

 

1st Qtr

 

Net interest income FTE (a)

$

 

8,999

 

$

 

9,304

 

$

 

8,596

 

$

 

7,666

 

$

 

6,902

 

Recovery for credit losses

 

 

(31

)

 

 

-

 

 

 

(250

)

 

 

(345

)

 

 

(300

)

Other income

 

 

1,628

 

 

 

1,612

 

 

 

1,675

 

 

 

1,782

 

 

 

1,642

 

Other expenses

 

 

5,719

 

 

 

6,206

 

 

 

5,945

 

 

 

5,774

 

 

 

5,468

 

FTE adjustment (a)

 

 

34

 

 

 

36

 

 

 

36

 

 

 

36

 

 

 

37

 

Net income

 

 

3,934

 

 

 

3,753

 

 

 

3,650

 

 

 

3,209

 

 

 

2,701

 

Basic and Diluted earnings per share

 

 

1.46

 

 

 

1.39

 

 

 

1.35

 

 

 

1.18

 

 

 

0.99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

PERFORMANCE RATIOS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Return on average assets (ROA), annualized

 

 

1.39

 

%

 

1.27

 

%

 

1.25

 

%

 

1.13

 

%

 

0.96

 

Return on average common equity (ROE), annualized

 

 

16.39

 

 

 

15.94

 

 

 

15.24

 

 

 

13.73

 

 

 

11.26

 

Net interest margin FTE (a)

 

 

3.37

 

 

 

3.33

 

 

 

3.12

 

 

 

2.87

 

 

 

2.60

 

Efficiency ratio

 

 

53.86

 

 

 

56.83

 

 

 

57.87

 

 

 

61.13

 

 

 

64.01

 

Number of full-time equivalent employees

 

 

170

 

 

 

172

 

 

 

172

 

 

 

171

 

 

 

172

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

MARKET DATA

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book value/common share

$

 

36.93

 

$

 

35.43

 

$

 

33.97

 

$

 

34.46

 

$

 

34.93

 

Period-end common share market value

 

 

38.00

 

 

 

38.50

 

 

 

39.00

 

 

 

38.00

 

 

 

39.60

 

Market as a % of book

 

 

102.90

 

%

 

108.66

 

%

 

114.81

 

%

 

110.27

 

%

 

113.37

 

Price-to-earnings ratio

 

 

7.06

 

 

 

7.84

 

 

 

8.92

 

 

 

9.31

 

 

 

10.15

 

Average basic common shares

 

 

2,692,304

 

 

 

2,707,576

 

 

 

2,712,686

 

 

 

2,718,024

 

 

 

2,718,024

 

Average diluted common shares

 

 

2,692,304

 

 

 

2,707,576

 

 

 

2,712,686

 

 

 

2,718,024

 

 

 

2,718,024

 

Period end common shares outstanding

 

 

2,680,625

 

 

 

2,707,576

 

 

 

2,707,576

 

 

 

2,718,024

 

 

 

2,718,024

 

Common stock market capitalization

$

 

101,864

 

$

 

104,242

 

$

 

105,595

 

$

 

103,285

 

$

 

107,634

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ASSET QUALITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Gross charge-offs

$

 

39

 

$

 

217

 

$

 

29

 

$

 

11

 

$

 

31

 

Net charge-offs (recoveries)

 

 

4

 

 

 

170

 

 

 

10

 

 

 

(308

)

 

 

13

 

Allowance for credit losses

 

 

6,307

 

 

 

6,838

 

 

 

7,008

 

 

 

7,268

 

 

 

7,305

 

Nonperforming assets (NPAs)

 

 

218

 

 

 

256

 

 

 

685

 

 

 

690

 

 

 

1,181

 

Net charge-off (recovery) / average loans ratio

 

 

0.00

 

%

 

0.11

 

%

 

0.01

 

%

 

(0.21

)

%

 

0.01

 

Allowance for credit losses / period-end loans

 

 

0.97

 

 

 

1.09

 

 

 

1.15

 

 

 

1.25

 

 

 

1.29

 

NPAs/loans and other real estate

 

 

0.03

 

 

 

0.04

 

 

 

0.11

 

 

 

0.12

 

 

 

0.21

 

Allowance for credit losses / nonperforming loans

 

 

2,893

 

 

 

2,667

 

 

 

1,022

 

 

 

1,054

 

 

 

619

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

CAPITAL & LIQUIDITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Period-end tangible equity to assets (b)

 

 

8.28

 

%

 

7.90

 

%

 

7.54

 

%

 

7.93

 

%

 

7.98

 

Average equity to assets

 

 

8.48

 

 

 

7.96

 

 

 

8.20

 

 

 

8.25

 

 

 

8.54

 

Average equity to loans

 

 

15.27

 

 

 

15.06

 

 

 

15.98

 

 

 

16.31

 

 

 

17.35

 

Average loans to deposits

 

 

63.19

 

 

 

59.84

 

 

 

58.15

 

 

 

57.65

 

 

 

56.42

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

AVERAGE BALANCES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

$

 

1,147,033

 

$

 

1,172,785

 

$

 

1,159,523

 

$

 

1,136,318

 

$

 

1,138,598

 

Earning assets

 

 

1,082,996

 

 

 

1,108,231

 

 

 

1,094,197

 

 

 

1,072,376

 

 

 

1,078,269

 

Loans

 

 

637,392

 

 

 

620,243

 

 

 

594,820

 

 

 

574,824

 

 

 

560,440

 

Deposits

 

 

1,008,721

 

 

 

1,036,559

 

 

 

1,022,851

 

 

 

997,108

 

 

 

993,411

 

Shareholders' equity

 

 

97,319

 

 

 

93,404

 

 

 

95,043

 

 

 

93,750

 

 

 

97,242

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

ENDING BALANCES

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets

$

 

1,143,394

 

$

 

1,159,108

 

$

 

1,161,830

 

$

 

1,126,778

 

$

 

1,135,003

 

Earning assets

 

 

1,080,939

 

 

 

1,094,876

 

 

 

1,096,302

 

 

 

1,064,770

 

 

 

1,073,565

 

Loans

 

 

647,773

 

 

 

627,171

 

 

 

609,971

 

 

 

582,185

 

 

 

567,375

 

Deposits

 

 

1,007,507

 

 

 

1,023,417

 

 

 

1,029,274

 

 

 

993,113

 

 

 

994,939

 

Shareholders' equity

 

 

99,007

 

 

 

95,920

 

 

 

91,981

 

 

 

93,662

 

 

 

94,928

 

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.

(b) - Tangible equity is a non-GAAP measure, which is shareholders' equity net of goodwill.

CSB BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

 

(Unaudited)

 

March 31,

 

 

 

March 31,

 

(Dollars in thousands, except per share data)

 

2023

 

 

 

2022

 

ASSETS

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

Cash and due from banks

$

 

16,965

 

 

$

 

18,963

 

Interest-earning deposits in other banks

 

 

38,550

 

 

 

 

111,274

 

Total cash and cash equivalents

 

 

55,515

 

 

 

 

130,237

 

Securities

 

 

 

 

 

 

 

Available-for-sale, at fair-value

 

 

149,269

 

 

 

 

143,322

 

Held-to-maturity

 

 

243,334

 

 

 

 

246,301

 

Equity securities

 

 

253

 

 

 

 

248

 

Restricted stock, at cost

 

 

1,760

 

 

 

 

4,614

 

Total securities

 

 

394,616

 

 

 

 

394,485

 

 

 

 

 

 

 

 

 

Loans held for sale

 

 

-

 

 

 

 

431

 

Loans

 

 

647,773

 

 

 

 

567,375

 

Less allowance for credit losses

 

 

6,307

 

 

 

 

7,305

 

Net loans

 

 

641,466

 

 

 

 

560,070

 

 

 

 

 

 

 

 

 

Premises and equipment, net

 

 

13,240

 

 

 

 

13,730

 

Goodwill

 

 

4,728

 

 

 

 

4,728

 

Bank owned life insurance

 

 

24,878

 

 

 

 

24,201

 

Accrued interest receivable and other assets

 

 

8,951

 

 

 

 

7,121

 

TOTAL ASSETS

$

 

1,143,394

 

 

$

 

1,135,003

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

Deposits:

 

 

 

 

 

 

 

Noninterest-bearing

$

 

329,500

 

 

$

 

335,974

 

Interest-bearing

 

 

678,007

 

 

 

 

658,965

 

Total deposits

 

 

1,007,507

 

 

 

 

994,939

 

 

 

 

 

 

 

 

 

Short-term borrowings

 

 

29,813

 

 

 

 

38,893

 

Other borrowings

 

 

2,394

 

 

 

 

3,325

 

Accrued interest payable and other liabilities

 

 

4,673

 

 

 

 

2,918

 

TOTAL LIABILITIES

 

 

1,044,387

 

 

 

 

1,040,075

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

Common stock, $6.25 par value. Authorized 9,000,000 shares;

 

 

 

 

 

 

 

issued 2,980,602 shares in 2023 and 2022

 

 

18,629

 

 

 

 

18,629

 

Additional paid-in capital

 

 

9,815

 

 

 

 

9,815

 

Retained earnings

 

 

89,524

 

 

 

 

79,416

 

Treasury stock at cost - 299,977 shares in 2023

 

 

 

 

 

 

 

and 262,578 shares in 2022

 

 

(7,126

)

 

 

 

(5,719

)

Accumulated other comprehensive loss

 

 

(11,835

)

 

 

 

(7,213

)

TOTAL SHAREHOLDERS' EQUITY

 

 

99,007

 

 

 

 

94,928

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

$

 

1,143,394

 

 

$

 

1,135,003

 

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

 

 

 

Quarter ended

 

(Unaudited)

 

March 31,

 

(Dollars in thousands, except per share data)

 

2023

 

 

 

2022

 

Interest and dividend income:

 

 

 

 

 

 

 

Loans, including fees

$

 

7,969

 

 

$

 

5,777

 

Taxable securities

 

 

2,012

 

 

 

 

1,281

 

Nontaxable securities

 

 

101

 

 

 

 

110

 

Other

 

 

545

 

 

 

 

74

 

Total interest and dividend income

 

 

10,627

 

 

 

 

7,242

 

Interest expense:

 

 

 

 

 

 

 

Deposits

 

 

1,584

 

 

 

 

349

 

Other

 

 

78

 

 

 

 

28

 

Total interest expense

 

 

1,662

 

 

 

 

377

 

Net interest income

 

 

8,965

 

 

 

 

6,865

 

Recovery of credit losses

 

 

(31

)

 

 

 

(300

)

Net interest income, after recovery

 

 

 

 

 

 

 

of credit losses

 

 

8,996

 

 

 

 

7,165

 

Noninterest income

 

 

 

 

 

 

 

Service charges on deposits accounts

 

 

292

 

 

 

 

265

 

Trust services

 

 

258

 

 

 

 

264

 

Debit card interchange fees

 

 

521

 

 

 

 

495

 

Credit card fees

 

 

177

 

 

 

 

155

 

Earnings on bank owned life insurance

 

 

169

 

 

 

 

166

 

Gain on sale of loans

 

 

3

 

 

 

 

118

 

Market value change in equity securities

 

 

9

 

 

 

 

1

 

Other

 

 

199

 

 

 

 

178

 

Total noninterest income

 

 

1,628

 

 

 

 

1,642

 

Noninterest expenses

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,294

 

 

 

 

3,155

 

Occupancy expense

 

 

282

 

 

 

 

272

 

Equipment expense

 

 

207

 

 

 

 

214

 

Professional and director fees

 

 

321

 

 

 

 

276

 

Software expense

 

 

399

 

 

 

 

333

 

Marketing and public relations

 

 

123

 

 

 

 

111

 

Debit card expense

 

 

146

 

 

 

 

164

 

Financial institutions tax

 

 

192

 

 

 

 

195

 

Other expenses

 

 

755

 

 

 

 

748

 

Total noninterest expenses

 

 

5,719

 

 

 

 

5,468

 

Income before income taxes

 

 

4,905

 

 

 

 

3,339

 

Federal income tax provision

 

 

971

 

 

 

 

638

 

Net income

$

 

3,934

 

 

$

 

2,701

 

Net income per share:

 

 

 

 

 

 

 

Basic and diluted

$

 

1.46

 

 

$

 

0.99

 

 

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