UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 1996
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
Commission file number: 0-21714
CSB Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Ohio 34-1687530
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification Number)
6 W. Jackson Street, P.O. Box 232, Millersburg, Ohio 44654
(Address of principal executive offices)
(330) 674-9015
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.
X Yes No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
Common stock, $6.25 par value Outstanding at November 4, 1996
1,290,608 common shares
FORM 10-Q
QUARTER ENDED SEPTEMBER 30, 1996
Part I -- Financial Information
ITEM 1 -- FINANCIAL STATEMENTS Page
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Condensed Consolidated Statements of
Changes in Shareholders' Equity 6
Condensed Consolidated Statements
of Cash Flows 7
Notes to Consolidated Financial
Statements 8
ITEM 2 -- MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS 14
Part II -- Other Information
Other Information 19
Signatures 20
<PAGE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
<S> <C> <C>
ASSETS
Cash and noninterest-bearing
deposits with banks $ 7,675,205 $ 11,449,174
Interest-bearing deposits with banks 7,425,013 2,000,523
Federal funds sold 7,700,000 8,600,000
----------- -----------
Total cash and cash equivalents 22,800,218 22,049,697
Investment securities available
for sale, at
fair value (Note 2) 14,782,500 18,001,888
Investment securities held to
maturity (Estimated
fair values of $34,683,467
in 1996 and $37,377,956
in 1995 (Note 2) 34,407,853 36,638,817
Total loans (Note 3) 161,101,993 152,619,369
Allowance for loan losses (Note 4) 2,068,720 1,830,250
----------- ------------
Net loans 159,033,273 150,789,119
Premises and equipment, net 2,619,333 2,669,430
Accrued interest receivable
and other assets 3,163,771 3,061,292
----------- ------------
Total assets $236,806,948 $233,210,243
============ ============
LIABILITIES
Deposits
Noninterest-bearing deposits $ 20,051,409 $ 24,166,742
Interest-bearing deposits 179,789,217 182,088,751
----------- -----------
Total deposits 199,840,626 206,255,493
Securities sold under agreements
to repurchase 2,838,584 3,962,933
Federal Home Loan Bank
borrowings (Note 5) 10,412,657 1,950,196
Accrued interest payable
and other liabilities 835,862 698,858
----------- -----------
Total liabilities 213,927,729 212,867,480
----------- -----------
SHAREHOLDERS' EQUITY
Common stock ($6.25 par value;
1,000,000 shares authorized;
646,904 and 644,278 shares issued
in 1996 and 1995, respectively) 4,043,152 4,026,738
Additional paid-in capital 4,384,844 4,236,952
Retained earnings 14,508,489 12,065,770
Treasury stock at cost:
1,600 shares (56,000) (56,000)
Unrealized gain/(loss) on
investment securities
available for sale (1,266) 69,303
---------- ----------
Total shareholders' equity 22,879,219 20,342,763
---------- ----------
Total liabilities and
shareholders' equity $236,806,948 $233,210,243
=========== ============
</TABLE>
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $3,900,343 $3,884,752 $11,696,904 $11,097,402
Interest on investment
securities
Taxable 458,649 505,923 1,466,865 1,404,112
Nontaxable 252,924 229,619 750,632 672,455
Other interest income 202,470 100,158 465,765 213,649
--------- --------- ---------- ----------
Total interest income 4,814,386 4,720,452 14,380,166 13,387,618
--------- --------- ---------- ----------
Interest expense
Interest on deposits 1,977,398 2,118,295 6,074,682 5,802,994
Other interest expense 181,044 13,475 403,747 35,672
--------- --------- --------- ---------
Total interest expense 2,158,442 2,131,770 6,478,429 5,838,666
Net interest income 2,655,944 2,588,682 7,901,737 7,548,952
Provision for loan losses
(Note 4) 100,000 214,709 300,000 414,709
--------- --------- --------- ---------
Net interest income after
provision for loan losses 2,555,944 2,373,973 7,601,737 7,134,243
--------- --------- --------- ---------
Other income
Service charges on
deposit accounts 155,493 150,903 457,955 426,810
Other operating income 134,201 134,309 361,090 292,607
Gain on sale of OREO 116,090 116,090
Investment security losses (1,520) (1,313) (9,283) (1,313)
--------- --------- --------- --------
Total other income 404,264 283,899 925,582 718,104
--------- --------- --------- --------
Other expense
Salaries and employee benefits 753,598 649,570 2,224,553 2,072,404
Occupancy expense 80,708 84,184 267,003 264,986
Equipment expense 125,913 97,154 344,090 284,315
Deposit insurance premiums 186 (9,520) 1,186 190,593
State franchise tax 78,630 64,492 220,380 191,126
Other operating expense 483,891 415,684 1,372,110 1,181,998
---------- --------- --------- ---------
Total other expense 1,522,926 1,301,564 4,429,322 4,185,422
----------- --------- --------- ---------
</TABLE>
CONSOLIDATED STATEMENTS
OF INCOME (Continued)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Income before federal
income taxes 1,437,282 1,356,308 4,098,267 3,666,925
Provision for income taxes 365,000 355,500 1,172,800 1,046,800
--------- --------- --------- ---------
Net income $1,072,282 $1,000,808 $2,925,467 $2,620,125
========= ========= ========= =========
Earnings per common share
(Note 1) $ 0.83 $ 0.78 $ 2.27 $ 2.05
========= ========= ========= =========
Weighted average shares
outstanding (Note 1) 1,289,130 1,279,182 1,287,440 1,278,110
========= ========= ========= =========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Balance at beginning
of period $21,898,808 $18,745,632 $20,342,763 $17,077,554
Net income 1,072,282 1,000,808 2,925,467 2,620,125
Common stock issued under
the dividend reinvestment
program 42,945 34,314 126,234 100,638
Common stock issued under
the 401(k) plan 17,550 30,648 38,072 30,648
Dividends declared ($.125 and
$.375 per share in 1996:
$.10 and $.30 per share
in 1995) (161,149) (127,991) (482,748) (383,454)
Change in unrealized gain/
(loss) on investment
securities
available for sale 8,783 (15,433) (70,569) 222,467
----------- ----------- ----------- -----------
Balance at end of period $22,879,219 $19,667,978 $22,879,219 $19,667,978
=========== =========== =========== ===========
</TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1996 1995
<S> <C> <C>
Net cash from operating activities $ 3,384,212 $ 2,996,604
Investing activities
Investment securities available for sale
Proceeds from maturities 7,000,000 5,000,000
Purchases (4,854,828) (6,590,065)
Investment securities held to maturity
Proceeds from maturities, calls and
repayments 7,805,766 8,091,954
Purchases (4,607,588) (8,454,252)
Net increase in loans (8,553,942) (13,943,693)
Loan sale proceeds 306,802
Purchase of premises and equipment, net (267,992) (190,778)
Proceeds from sale of other real estate 240,090
---------- -----------
Net cash used by investing activities (3,238,494) (15,780,032)
---------- -----------
Financing activities
Net increase (decrease) in deposits (6,414,867) 13,644,660
Net increase (decrease) in repurchase
agreements and federal funds purchased (1,124,349) 750,266
FHLB borrowings 8,628,494
Principal payments on FHLB borrowings (166,033)
Shares issued for 401(k) plan 38,072
Cash dividends paid (356,514) (252,167)
---------- ----------
Net cash from financing activities 604,803 14,142,759
---------- ----------
Change in cash and cash equivalents 750,521 1,359,331
Cash and cash equivalents at beginning
of period 22,049,697 14,686,497
---------- -----------
Cash and cash equivalents at end of period $22,800,218 $ 16,045,828
========== ===========
Supplemental disclosures
Cash paid for income taxes $ 1,064,000 $ 1,135,000
Cash paid for interest 6,518,529 5,741,685
</TABLE>
<PAGE>
NOTE 1 -- SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
accounts of CSB Bancorp, Inc. ( "the Company" or "CSB") and its
wholly owned subsidiary, The Commercial and Savings Bank (the
"Bank"). All material intercompany accounts and transactions have
been eliminated in consolidation.
These interim financial statements are prepared without audit and
reflect all adjustments of a normal recurring nature that, in the
opinion of management, are necessary to present fairly the
consolidated financial position of CSB at September 30, 1996, and
its results of operations and cash flows for the periods presented.
The accompanying consolidated financial statements do not purport to
contain all the necessary financial disclosures required by
generally accepted accounting principles that might otherwise be
necessary in the circumstances. The Annual Report for CSB for the
year ended December 31, 1995, contains consolidated financial
statements and related notes that should be read in conjunction with
the accompanying consolidated financial statements. The results of
operations for the interim periods reported herein are not
necessarily indicative of operations to be expected for the entire
year.
Accounting Pronouncements: Statement of Financial Accounting
Standards (SFAS) No. 122, "Accounting for Mortgage Servicing
Rights", requires companies that engage in mortgage banking
activities to recognize as separate assets rights to service
mortgage loans for others. This statement was adopted by the
Company on January 1, 1996. Since no loans were sold and no
servicing rights were purchased during the first two quarters of
1996, the adoption of this pronouncement did not impact the
Company's net income for the period.
Income Taxes: The provision for income taxes is based upon the
effective income tax rate expected to be applicable for the entire
year.
Earnings and Dividends per Share: All per share amounts have been
adjusted to reflect a two-for-one stock split effected in the form
of a 100% stock dividend on October 2, 1996 to shareholders of
record August 16, 1996.
NOTE 2 -- INVESTMENT SECURITIES
The amortized cost, gross unrealized gains and losses and estimated
fair values of the investment securities, as presented in the
consolidated balance sheet at September 30, 1996 and December 31,
1995 are as follows:
<PAGE>
<TABLE>
<CAPTION>
September 30, 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale
Debt securities
U.S. Treasury securities $10,980,604 $ 33,160 $ (11,577) $11,002,187
U.S. Government
agencies 2,004,517 796 (24,300) 1,981,013
----------- ------- --------- ----------
Total debt securities 12,985,121 33,956 (35,877) 12,983,200
Other securities 1,799,300 1,799,300
----------- ------- --------- ----------
Total investment
securities available
for sale $14,784,421 $ 33,956 $ (35,877) $14,782,500
Held to maturity
U.S. Treasury securities $ 8,030,467 $ 83,824 $ (1,229) $ 8,113,062
U.S. Government agencies 7,013,222 (40,384) 6,972,838
Obligations of state and
political subdivisions 19,028,480 393,973 (158,220) 19,264,233
Mortgage-backed securities 335,684 (2,350) 333,334
----------- ------- ---------- ----------
Total debt securities
held to maturity $34,407,853 $477,797 $(202,183) $34,683,467
=========== ======= ========= ==========
</TABLE>
<PAGE>
NOTE 2 -- INVESTMENT SECURITIES (Continued)
<TABLE>
<CAPTION>
December 31, 1995
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale
Debt Securities
U.S. Treasury securities $11,005,578 $108,609 $ (10,437) $11,103,750
Obligations of U.S.
government corporations
and agencies 6,003,206 8,064 (1,232) 6,010,038
---------- ------- -------- ----------
Total debt securities
available for sale 17,008,784 116,673 (11,669) 17,113,788
Other securities 888,100 888,100
---------- ------- -------- ----------
Total investment
securities available $17,896,884 $116,673 (11,669) $18,001,888
for sale ========== ======= ======== ==========
Held to maturity
U.S. Treasury securities $10,046,860 $223,210 $ (1,927) $10,268,143
Obligation of U.S.
government corporations
and agencies 8,024,229 29,087 (3,566) 8,049,750
Obligations of states and
political subdivisions 17,069,361 595,350 (86,483) 17,578,228
Mortgage-backed securities 1,498,367 (16,532) 1,481,835
----------- -------- --------- ----------
Total debt securities
held to maturity $36,638,817 $847,647 $(108,508) $37,377,956
=========== ======== ========= ==========
</TABLE>
<PAGE>
One agency security of $1,000,000 was transferred from the
available-for-sale category to held-to-maturity during the first
quarter of 1996. The transfer into held-to-maturity occurred at the
fair value of the security on the date of the transfer, which
approximated amortized cost.
No investment securities were sold during the first nine months of
1996 or 1995. Losses on calls of securities held to maturity were
$9,283 and $1,313 during the nine months ended September 30, 1996
and 1995, respectively.
NOTE 2 -- INVESTMENT SECURITIES (Continued)
The amortized cost and estimated fair values of investments in debt
securities at September 30, 1996, by contractual maturity, are shown
below. Actual maturities may differ from contractual maturities
because certain borrowers may have the right to call or prepay the
debt obligations prior to their contractual maturities.
Estimated
Amortized Fair
Cost Value
Available for sale
Debt securities
Due in one year or less $ 7,009,531 $ 7,025,938
Due in one to five years 5,975,590 5,957,262
---------- ----------
Total debt securities available
for sale $12,985,121 $12,983,200
=========== ==========
Held to maturity
Debt securities:
Due in one year or less $ 8,111,269 $ 8,136,243
Due in one to five years 13,254,934 13,462,072
Due in five to ten years 9,452,383 9,506,598
Due after ten years 3,253,584 3,245,221
Mortgage-backed securities 335,683 333,333
---------- ----------
Total debt securities held
to maturity $34,407,853 $34,683,467
========== ==========
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the
following classifications:
September 30, 1996 December 31, 1995
Commercial $ 72,667,606 $ 67,835,818
Commercial real estate 21,801,383 22,857,621
Residential real estate 48,103,493 43,994,813
Installment and credit card 16,574,403 15,453,681
Construction 1,955,108 2,477,436
----------- -----------
Total loans $161,101,993 $152,619,369
=========== ===========
NOTE 4 -- ALLOWANCE FOR LOAN LOSSES
A summary of activity in the allowance for loan losses for the nine
months ended September 30, 1996 and 1995 is as follows:
1996 1995
Balance - January 1 $1,830,250 $1,557,547
Loans charged off (82,248) (222,850)
Recoveries 20,718 40,594
Provision for loan losses 300,000 414,709
---------- ---------
Balance - September 30 $2,068,720 $1,790,000
Information regarding impaired loans at September 30, 1996 and
December 31, 1995 is as follows:
September 30, December 31,
1996 1995
Balance of impaired loans $181,000 $228,000
Less portion for which no
allowance for loan
losses is allocated 0 0
-------- --------
Portion of impaired loan balance
for which an allowance for credit
losses is allocated $181,000 $228,000
========= =======
Portion of allowance for loan
losses allocated to the
impaired loan balance $ 95,000 $ 40,000
========= =======
Information regarding impaired loans is as follows for the nine
months ended September 30, 1996 and 1995:
1996 1995
Average investment in impaired loans $264,000 $367,000
Interest income recognized on
impaired loans including interest
income recognized on cash basis None None
Interest income recognized on impaired
loans on cash basis None None
NOTE 5 - FEDERAL HOME LOAN BANK BORROWINGS
At September 30, 1996, the Bank had 152 outstanding borrowings from
the Federal Home Loan Bank (FHLB) which were used to fund fixed-rate
loans. These borrowings carry fixed interest rates ranging from
5.60% to 7.15% and maturities of 10, 15, and 20 years. The Bank
matches each borrowing against a fixed rate mortgage loan with a
similar maturity. Monthly principal and interest payments are due
on the borrowings. In addition, a principal curtailment of 10% of
the outstanding principal balance is due on the anniversary date of
each borrowing.
FHLB borrowings are collateralized by FHLB stock and a blanket
pledge on approximately $15,700,000 of qualifying mortgage loans at
September 30, 1996.
NOTE 6 -- CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS
WITH OFF-BALANCE SHEET RISK
The Bank grants residential, consumer, and commercial loans to
customers located primarily in Holmes and surrounding counties in
Ohio. Most loans are secured by specific items of collateral
including business assets, consumer assets and residences.
The Bank is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet financing needs of its
customers. The contract amounts of these instruments are not
included in the consolidated financial statements. At September 30,
1996 and December 31, 1995, the contract amount of these
instruments, which primarily include commitments to extend credit
and standby letters of credit, totaled approximately $29,694,000 and
$20,381,000, respectively, all of which carry adjustable rates of
interest. Since many commitments to make loans expire without being
used, the amount does not represent future cash commitments.
The exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to make
loans and lines and letters of credit is represented by the
contractual amount of those instruments. CSB follows the same
credit policy to make such commitments as is followed for those
loans recorded in the financial statements. In management's
opinion, these commitments represent normal banking transactions and
no material losses are expected to result therefrom. Collateral
obtained upon exercise of the commitments is determined using
management's credit evaluations of the borrower and may include real
estate and/or business or consumer assets.
INTRODUCTION
The following discussion focuses on the consolidated financial
condition of CSB Bancorp, Inc. (the "Company" or "CSB") at September
30, 1996, compared to December 31, 1995, and the consolidated
results of operations for the quarterly period ending September 30,
1996 compared to the same period in 1995. The purpose of this
discussion is to provide the reader with a more thorough
understanding of the consolidated financial statements. This
discussion should be read in conjunction with the interim
consolidated financial statements and related footnotes.
The registrant is not aware of any trends, events or uncertainties
that will have or are reasonably likely to have a material effect on
the liquidity, capital resources or operations except as discussed
herein. Also, the Registrant is not aware of any current
recommendations by regulatory authorities which would have such
effect if implemented. The Company cautions that any forward
looking statements contained in this report, in a report
incorporated by reference to this report or made by management of
the Company involve risks and uncertainties and are subject to
change based on various important factors. Actual results could
differ materially from those expressed or implied.
FINANCIAL CONDITION
Total assets increased to $236,807,000 at September 30, 1996,
compared to $233,210,000 at December 31, 1995. This increase of
$3.6 million, or approximately 1.5% is discussed below.
The Company's cash and cash equivalents increased $750,000, from
$22,050,000 at December 31, 1995 to $22,800,000 at September 30,
1996. Frequent changes in this component of assets are not uncommon
and are primarily determined by the timing and volume of clearing
items.
Total investment securities decreased $5.5 million from $54,641,000
at December 31, 1995 to $49,190,000 at September 30, 1996. Proceeds
from maturities of securities were replaced with new securities or
used to fund loan demand. During the first nine months of 1996, the
Company purchased additional stock of the Federal Home Loan Bank of
Cincinnati to increase its borrowing capacity to fund residential
loan demand. The Company's mortgage-backed securities portfolio is
comprised of two U.S. Government agency issued REMICs (Real Estate
Mortgage Investment Conduits). Early repayment of these REMICs
would not have a significant impact on the Company's earnings as
unamortized premiums are insignificant. The Company's investment in
structured notes is limited to $1 million in "multistep bonds", the
interest rate of which periodically increases to predetermined
levels throughout the life of the security, unless called by the
issuer. Securities called by the issuer resulted in losses of
$9,000 in the first nine months of 1996.
At September 30, 1996, the ratio of gross loans to deposits was
80.6%, as compared to 74.0% at the end of 1995. The increase in
this ratio resulted from continued loan demand within the local
market area, a $6.4 million decrease in total deposits during the
period and use of borrowings to fund a portion of the loan growth.
Management desires to keep the loan-to-deposit ratio between
approximately 75 and 80%.
Commercial loans increased $4.8 million or 7.1% from $67,836,000 at
December 31, 1995, to $72,668,000 at September 30, 1996 as
commercial demand remained strong within the local service area.
Commercial real estate loans decreased $1.1 million or 4.6%, while
residential real estate loans increased approximately $4.1 million
or 9.3% at September 30, 1996, compared to December 31, 1995. This
increase was mostly comprised of fixed-rate loans secured by one- to
four-family dwellings originated in the Company's market area.
Late in 1995, the Company began to originate fixed rate mortgage
loans through a matched funds program with the Federal Home Loan
Bank. Advances with maturities similar to the loans establish a
fixed interest rate spread for the estimated duration of the loans.
New loans originated under this program totaled approximately $8.6
million in the first nine months of 1996, accounting for the
increase in FHLB advances to $10.4 million at September 30, 1996.
Management expects to continue this type of lending at least during
the remainder of the year.
Installment and credit card loans increased $1.1 million from
$15,454,000 at December 31, 1995 to $16,574,000 at September 30,
1996. This increase resulted from management's intention to
increase this portion of the portfolio through additional
advertising and promotion with local auto dealerships. Construction
loans are down from $2,477,000 at December 31, 1995 to $1,955,000 at
September 30, 1996. This is due to the fact that as homes are
finished, they are typically transferred from construction loans
into permanent real estate mortgage loans and have not been replaced
by new construction originations.
As a percentage of loans, the allowance for loan losses was 1.28% at
September 30, 1996 and 1.20% at December 31, 1995. Loans past due
more than 90 days, plus loans placed on nonaccrual status were
approximately $425,000 or .26% of outstanding balances as of
September 30, 1996, compared to $571,000 or .37% of total loans at
December 31, 1995. The relative stability of this ratio is the
result of generally stable economic conditions. These nonperforming
and impaired loans, have been considered in management's analysis of
the allowance for loan losses. The allowance for loan losses was
487% of nonperforming loans at September 30, 1996, compared to 320%
at December 31, 1995.
Total deposits decreased $6.4 million to $199,841,000 at September
30, 1996, compared to $206,255,000 at December 31, 1995.
Noninterest-bearing balances were down approximately $4.1 million.
Interest-bearing deposit balances were down approximately $2.3
million. This decrease was primarily a result of the outflow in
early 1996 of approximately $6 million of deposits received near
year-end 1995. Management anticipates deposit growth during the
balance of 1996 as a new promotion on one-year certificates of
deposit was implemented in August 1996.
Total shareholders' equity of $22,879,000 at September 30, 1996 was
12.5% greater than the balance of $20,343,000 on December 31, 1995.
Contributing to this increase was year-to-date net income of
$2,925,000 less $483,000 of dividends declared. The dividends
represent 16.5% of net income for the nine months ended September
30, 1996, compared to 14.6% for the same period in 1995. Also
contributing to the equity increase was the dividend reinvestment
program, whereby shareholders may elect to purchase additional
shares of the Company's stock in lieu of receiving their cash
dividends, and the purchase of stock by the Company's 401(k)
retirement plan. As a result of these programs, equity increased
$164,000 through September 30, 1996.
The Company and its subsidiary meet all regulatory requirements.
Its ratio of total capital to risk-weighted assets was 17.16% at
September 30, 1996, while its Tier I risk-based capital ratio was
15.91% Regulatory minimums call for a total risk-based capital
ratio of 8%, at least half of which must be Tier I capital. The
Company's leverage ratio of 9.66% at September 30, 1996 exceeded the
regulatory minimum of 3% to 5%.
RESULTS OF OPERATIONS
Net income for the nine months ending September 30, 1996 was
$2,925,000 or 11.6% greater than the $2,620,000 earned during the
same period last year. Earnings per share, adjusted to reflect a
two-for-one stock split effected in the form of a 100% stock
dividend, was $2.27 through September 30, 1996, compared to $2.05
per share for the nine months ended September 30, 1995. Net income
of $1,072,000, or $.83 per share, for the third quarter of 1996 was
7.1% higher than net income for the third quarter of 1995, which was
$1,001,000 or $.78 per common share.
Net interest income for the nine months ending September 30, 1996
was $7,902,000, up $353,000 or 4.67% from $7,549,000 in the same
period of 1995. The main factor affecting this increase was an
increase in interest and fees on loans of $600,000, or 5.4%, which
resulted from increased loan volumes and a higher rate environment
during 1996 compared to the same time period in 1995. In addition,
interest on federal funds sold and interest-bearing deposits with
banks increased $252,000, or 118.00% for the nine months of 1996,
compared to 1995. This increase resulted primarily from the
Company's deposit balances at the Federal Home Loan Bank. Interest
expense increased $639,000, or 10.9% to $6,478,000 at September 30,
1996, compared to $5,839,000 for the same period of 1995. This
increase was the result of the higher rate environment on
interest-bearing deposits and an increase in other interest expense
from $36,000 through September 30, 1995, to $404,000 on September
30, 1996. The primary component of this increase was interest
expense resulting from new borrowings in 1996 from the FHLB. CSB's
borrowings from the FHLB are for a specific time period at a
specific rate, and were used to fund fixed rate, 1-to-4 family
residential real estate loans as previously discussed.
These same trends were noted in the third quarter of 1996 as net
interest income increased 2.60%, from $2,589,000 in the third
quarter of 1995 to $2,656,000 in 1996. This resulted from increased
loan volumes and a rising rate environment throughout 1996, which
benefits the Company since its interest-earning assets reprice
quicker than do its interest-bearing liabilities. While the level
of net interest income for the remainder of the year depends on
future interest rate environment that cannot be predicted with
certainty, management expects quarterly net interest income to
remain relatively stable during the remainder of the year.
The provision for loan losses was $100,000 and $300,000 for the
quarter and nine months ending September 30, 1996, respectively,
compared to $215,000 and $415,000 in 1995. While indications of
loan portfolio quality remain relatively stable, management recorded
these provisions due to growth in the loan origination volumes,
primarily in the commercial portfolio.
Total other income increased $120,000 or 42.4% in the third quarter
of 1996, and $208,000 or 28.9% for the first nine months of 1996,
compared to the same periods of 1995. These increases resulted
primarily from a $116,000 gain on the sale of a portion of the real
estate in Wooster, Ohio owned by the Company.
Total other expense increased $221,000, or 17.0% in the third
quarter of 1996, and $244,000, or 5.8% for the first nine months of
1996 compared to the same periods in 1995. Salaries and employee
benefits increased $104,000 16.0% for the quarter and $152,000 or
7.3% for the nine months ended September 30, 1996 compared to 1995
as a result of additional staff and mid-year salary adjustments for
certain staff. Other operating expense increased $68,000 for the
quarter and $190,000 for the nine months ended September 30, 1996 as
compared to the same periods in 1995. This resulted from a number
of small increases, including employee education, data processing
supplies, automated teller machine and various other expenses. The
increases were partially offset by a decrease in Federal Deposit
Insurance Corporation (FDIC) premiums as the Bank's rate for deposit
insurance was reduced to the statutory minimum of $2,000 for the
year. During most of the first nine months of 1995, such premiums
were $.23 per $100 of deposits.
The provision for income taxes was $365,000 for the third quarter of
1996, for an effective tax rate of 25.4%, and $1,173,000 through
September 30, 1996, which reflected an effective rate of 28.6%.
These rates are slightly lower than the 26.2% and 28.5% effective
rates for the same periods in 1995. The Company has continued to
purchase selected nontaxable securities in late 1995 and 1996 when
the taxable equivalent yield compares favorably to taxable
securities, considering maturity and credit risk.
FORM 10-QSB
Quarter ended September 30, 1996
PART II -- OTHER INFORMATION
Item 1 -- Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 -- Changes in Securities:
There are no matters required to be reported under this item.
Item 3 -- Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 -- Submission of Matters to a Vote of Security Holders:
There are no matters required to be reported under this item.
Item 5 -- Other Information:
There are no matters required to be reported under this item.
Item 6 -- Exhibits and Reports on Form 8-K:
(a) Exhibit 11, Statement re: computation of per share earnings.
(Reference is hereby made to Consolidated Statements of Income on
page 5, hereof.)
(b) Exhibit 27, Financial Data Schedule
(c) No reports on Form 8-K filed during the quarter for which this
report is filed.
SIGNATURES
In accordance with the requirements of the Securities Exchange Act
of 1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.
CSB BANCORP, INC.
(Registrant)
Date: November 13, 1996 /s/ Douglas D. Akins
(Signature)
Douglas D. Akins
President and Chief Executive
Officer
Date: November 13, 1996 /s/ Pamela S. Basinger
(Signature)
Pamela S. Basiner
Financial Officer
Index to Exhibits
Exhibit 11, Statement re: computation of per share earnings.
(Reference is hereby made to Consolidated Statements of Income on
page 5, hereof.)
Exhibit 27, Financial Data Schedule
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFROMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS
PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY
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