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: JUNE 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 (I.R.S. Employer
jurisdiction of incorporation Identification Number)
or organization)
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 August 7, 1996
644,346 common shares
<PAGE>
CSB BANCORP, INC.
FORM 10-Q
QUARTER ENDED JUNE 30, 1996
_______________________________________________________________
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS (Unaudited) 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 the 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>
CSB BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
_______________________________________________________________
June 30, December 31,
1996 1995
ASSETS
Cash and noninterest-bearing
deposits with banks $10,611,259 $11,449,174
Interest-bearing deposits
with banks 6,045,149 2,000,523
Federal funds sold 5,500,000 8,600,000
----------- -----------
Total cash and cash equivalents 22,156,408 22,049,697
Investment securities available
for sale, at fair value
(Note 2) 16,361,421 18,001,888
Investment securities held to
maturity (Estimated fair values
of $32,300,872 in 1996 and
$37,377,956 in 1995)
(Note 2) 32,159,271 36,638,817
Total loans (Note 3) 156,158,954 152,619,369
Allowance for loan losses
(Note 4) 1,990,864 1,830,250
----------- -----------
Net loans 154,168,090 150,789,119
Premises and equipment, net 2,683,203 2,669,430
Accrued interest receivable
and other assets 3,028,668 3,061,292
----------- -----------
Total assets $230,557,061 $233,210,243
============ ============
LIABILITIES
Deposits
Noninterest-bearing deposits $21,962,795 $24,166,742
Interest-bearing deposits 175,067,746 182,088,751
----------- -----------
Total deposits 197,030,541 206,255,493
Securities sold under agreements
to repurchase 2,386,502 3,962,933
Federal Home Loan Bank borrowings
(Note 5) 8,561,062 1,950,196
Accrued interest payable and
other liabilities 680,148 698,858
----------- -----------
Total liabilities 208,658,253 212,867,480
----------- -----------
SHAREHOLDERS' EQUITY
Common stock ($6.25 par value;
1,000,000 shares authorized;
645,946 and 644,278 shares
issued in 1996 and 1995,
respectively) 4,037,163 4,026,738
Additional paid-in capita 4,330,338 4,236,952
Retained earnings 13,597,356 12,065,770
Treasury stock at cost:
1,600 shares (56,000) (56,000)
Unrealized gain/(loss) on
investment securities available
for sale, net of tax (10,049) 69,303
----------- -----------
Total shareholders' equity 21,898,808 20,342,763
----------- -----------
Total liabilities
and shareholders'
equity $230,557,061 $233,210,243
============ ============
See notes to the consolidated financial statements.
CSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
- ---------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
------- -------
1996 1995 1996 1995
---- ---- ---- ----
Interest income
Interest and
fees on loans $3,868,580 $3,763,330 $7,796,561 $7,212,650
Interest on
investment
securities
Taxable 461,259 466,795 1,008,216 898,189
Nontaxable 252,096 223,921 497,708 442,836
Other interest
income 171,972 71,903 263,295 113,491
---------- ---------- ---------- ----------
Total
interest
income 4,753,907 4,525,949 9,565,780 8,667,166
---------- ---------- ---------- ----------
Interest expense
Interest on
deposits 1,996,777 1,978,409 4,097,284 3,684,699
Other interest
expense 137,945 13,414 222,703 22,197
---------- ---------- ---------- ----------
Total
interest
expense 2,134,722 1,991,823 4,319,987 3,706,896
---------- ---------- ---------- ----------
Net interest
income 2,619,185 2,534,126 5,245,793 4,960,270
Provision for
loan losses
(Note 4) 100,000 100,000 200,000 200,000
---------- ---------- ---------- ----------
Net interest
income after
provision for
loan losses 2,519,185 2,434,126 5,045,793 4,760,270
---------- ---------- ---------- ----------
Other income
Service charges
on deposit
accounts 153,967 143,945 302,462 275,907
Other operating
income 125,939 117,813 226,889 180,771
Investment
security
losses (6,069) (7,763)
---------- ---------- ---------- ----------
Total
other
income 273,837 261,758 521,588 456,678
---------- ---------- ---------- ----------
Other expense
Salaries and
employee
benefits 751,489 780,036 1,470,955 1,422,834
Occupancy
expense 90,138 89,169 186,295 180,802
Equipment
expense 112,657 95,103 218,177 187,161
FDIC premiums 500 102,238 1,000 200,113
State franchise
tax 76,440 64,277 141,750 126,634
Other operating
expense 459,405 402,286 888,219 788,787
---------- ---------- ---------- ----------
Total
other
expense 1,490,629 1,533,109 2,906,396 2,906,331
---------- ---------- ---------- ----------
CSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(Unaudited)
__________________________________________________________________
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
Income before
federal income
taxes 1,302,393 1,162,775 2,660,985 2,310,617
Provision for
income taxes 413,200 339,800 807,800 691,300
---------- ---------- ---------- ----------
Net income $889,193 $822,975 $1,853,185 $1,619,317
========== ========== ========== ==========
Earnings per
common share
(Note 1) $1.38 $1.29 $2.88 $2.54
========== ========== ========== ==========
Weighted
average shares
outstanding 643,756 638,400 643,293 638,400
========== ========== ========== ==========
See notes to the consolidated financial statements.
CSB BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
- -----------------------------------------------------------------
Three Months Ended Six Months Ended
June 30, June 30,
-------- --------
1996 1995 1996 1995
---- ---- ---- ----
Balance at
beginning of
period $21,173,226 $17,899,467 $20,342,763 $17,077,554
Net income 889,193 822,975 1,853,185 1,619,317
Common stock
issued under
the dividend
reinvestment
program and
401(k) plan 43,881 34,527 103,811 66,324
Cash dividends
($.25 and $.50
per share in
1996; $.20 and
$.40 per share
in 1995) (160,920) (127,783) (321,599) (255,463)
Change in
unrealized
gain/loss on
investment
securities
available for
sale (46,572) 116,446 (79,352) 237,900
----------- ----------- ----------- -----------
Balance at end
of period $21,898,808 $18,745,632 $21,898,808 $18,745,632
=========== =========== =========== ===========
See notes to the consolidated financial statements.
CSB BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
_________________________________________________________________
Six Months Ended
June 30,
1996 1995
Net cash from operating activities $2,310,067 $1,626,607
Investing activities
Investment securities available
for sale
Proceeds from maturities 4,000,000 3,000,000
Purchases (3,457,641) (4,937,036)
Investment securities held
to maturity
Proceeds from maturities, calls
and repayments 7,162,556 6,720,000
Purchases (1,718,349) (5,849,178)
Net increase in loans (3,559,544) (11,849,844)
Loan sale proceeds 306,802
Purchase of premises and
equipment, net (222,073) (90,469)
------------ ------------
Net cash from investing
activities 2,204,949 (12,699,725)
------------ -------------
Financing activities
Net change in deposits (9,224,952) 5,858,329
Net change in repurchase
agreements and federal funds
purchased (1,576,431) 375,189
FHLB borrowings 6,697,205
Principal payments on
FHLB borrowings (86,339)
Shares issued for 401(k) Plan 20,522
Cash dividends paid (238,310) (189,139)
------------ ------------
Net cash from financing
activities (4,408,305) 6,044,379
------------ ------------
Change in cash and
cash equivalents 106,711 (5,028,739)
Cash and cash equivalents at
beginning of period 22,049,697 14,686,497
Cash and cash equivalents at
end of period $22,156,408 $9,657,758
Supplemental disclosures
Cash paid for income taxes $705,000 $758,351
Cash paid for interest 4,358,840 3,627,748
See notes to the consolidated financial statements.
CSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- ----------------------------------------------------------------
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the
accounts of CSB Bancorp, Inc. ("CSB") and its wholly owned
subsidiary, The Commercial and Savings Bank (the "Bank"). All
significant intercompany transactions and balances have been
eliminated.
These interim financial statements are prepared without audit and
reflect all adjustments of a normal recurring nature which, in the
opinion of management, are necessary to present fairly the
consolidated financial position of CSB at June 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 which 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.
Allowance for Loan Losses: Allowances for losses on impaired
loans are determined by calculating the present value of estimated
future cash flows, discounted using the loan's effective interest
yield. Allowances for losses on impaired loans that are
collateral dependent are generally determined based on the
estimated fair value of the underlying collateral. A loan is
impaired when it is probable that a creditor will be unable to
collect all amounts due according to the contractual terms of the
loan agreement.
Smaller-balance homogenous loans are evaluated for impairment in
total. Such loans include residential first mortgage loans
secured by one- to four-family residences, residential
construction loans and automobile, home equity and second mortgage
loans. Commercial loans and mortgage loans secured by other
properties are evaluated individually for impairment. When
analysis of borrower operating results and financial condition
indicates that underlying cash flows of the borrower's business
are not adequate to meet its debt service requirements, the loan
is evaluated for impairment. Often this is associated with a
delay or shortfall in payments of 30 days or more. Loans are
generally moved to nonaccrual status when 90 days or more past
due. These loans are often also considered impaired. Impaired
loans, or portions thereof, are charged off when deemed
uncollectible. The nature of disclosures for impaired loans is
considered generally comparable to prior nonaccrual and
renegotiated loans and nonperforming and past due asset
disclosures.
The carrying value of impaired loans is periodically adjusted to
reflect cash payments, revised estimates of future cash flows and
increases in the present value of expected cash flows due to the
passage of time. Cash payments representing interest income are
reported as such and other cash payments are reported as
reductions in carrying value. Increases or decreases in carrying
value due to changes in estimates of future payments or the
passage of time are reported as reductions or increases in bad
debt expense.
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.
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 June 30, 1996 and December
31, 1995 are as follows:
June 30, 1996
----------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
-----------------------------------------------------------
Available for
sale
Debt securities
U.S. Treasury
securities $11,985,257 $40,927 $(22,725) $12,003,459
U.S. Government
agencies 3,009,890 1,672 (35,100) 2,976,462
----------- ---------- --------- -----------
Total debt
securities 14,995,147 42,599 (57,825) 14,979,921
Other securities 1,381,500 1,381,500
----------- ---------- --------- -----------
Total
investment
securities
available for
sale $16,376,647 $42,599 $(57,825) $16,361,421
=========== ========== ========= ===========
Held to maturity
U.S. Treasury
securities $6,051,220 $78,995 $(2,924) $6,127,291
U.S. Government
agencies 7,015,278 (64,603) 6,950,675
Obligations of
state and
political
subdivisions 18,372,272 366,728 (230,605) 18,508,395
Mortgage-backed
securities 720,501 (5,990) 714,511
---------- ---------- --------- -----------
Total debt
securities
held to
maturity $32,159,271 $445,723 $(304,122) $32,300,872
=========== ========== ========== ===========
December 31, 1995
---------------------------------------------------
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
--------------------------------------------------
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
for sale $17,896,884 $116,673 (11,669) $18,001,888
=========== ========== ========= ===========
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
=========== ========== ========== ===========
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 six months of
1996 or 1995. Losses on calls of securities held to maturity were
$7,763 during the six months ended June 30, 1996.
The amortized cost and estimated fair values of investments in
debt securities at June 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 $9,018,369 $9,044,063
Due in one to five year 5,976,778 5,935,858
----------- -----------
Total debt securities
available for sale $14,995,147 $14,979,921
=========== ===========
Held to maturity
Debt securities:
Due in one year or less $6,098,071 $6,128,491
Due in one to five years 13,452,505 13,636,827
Due in five to ten years 9,250,297 9,218,566
Due after ten years 2,637,897 2,602,477
Mortgage-backed securities 720,501 714,511
----------- -----------
Total debt securities
held to maturity $32,159,271 $32,300,872
=========== ===========
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the
following classifications:
June 30, 1996 December 31, 1995
------------- -----------------
Commercial $70,694,870 $67,835,818
Commercial real estate 20,867,442 22,857,621
Residential real estate 46,853,454 43,994,813
Installment and credit card 16,295,902 15,453,681
Construction 1,447,286 2,477,436
------------ ------------
Total loans $156,158,954 $152,619,369
============ ============
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of activity in the allowance for loan losses for the six
months ended June 30, 1996 and 1995 is as follows:
1996 1995
---- ----
Balance - January 1 $1,830,250 $1,557,547
Loans charged off (54,463) (50,265)
Recoveries 15,077 34,505
Provision for loan losses 200,000 200,000
----------- -----------
Balance - June 30 $1,990,864 $1,741,787
========== ==========
Information regarding impaired loans at June 30, 1996 and December
31, 1995 is as follows:
June 30, December 31,
1996 1995
-------- ------------
Balance of impaired loans $254,000 $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 $254,000 $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 six
months ended June 30, 1996 and 1995:
1996 1995
---- ----
Average investment in
impaired loans for
the quarter $271,000 $561,000
Interest income recognized
on impaired loans
including interest income
recognized on cash
basis during the quarter None None
Interest income recognized
on impaired loans on
cash basis during the quarter None None
<PAGE>
CSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
- -----------------------------------------------------------------
NOTE 5 - FEDERAL HOME LOAN BANK BORROWINGS
At June 30, 1996, the Bank had 125 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 $12,842,000 of qualifying mortgage loans at June 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 amount of these instruments
is not included in the consolidated financial statements. At June
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 $22,130,000
and $20,381,000, respectively. 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.
<PAGE>
CSB BANCORP, INC.
MANAGEMENT'S DISCUSSION AND ANALYSIS
- ---------------------------------------------------------------
INTRODUCTION
The following discussion focuses on the consolidated financial
condition of CSB Bancorp, Inc. (the Company) at June 30, 1996,
compared to December 31, 1995, and the consolidated results of
operations for the quarterly period ending June 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 decreased to $230,557,061 at June 30, 1996, compared
to $233,210,243 at December 31, 1995. This decrease of
$2,653,182, or approximately 1.1% is discussed below.
The Company's cash and cash equivalents increased $106,711, from
$22,049,697 at December 31, 1995 to $22,156,408 at June 30, 1996.
Frequent changes in this component of assets is not uncommon and
are primarily determined by the timing and volume of clearing
items.
Total investment securities decreased $6,120,013 from $54,640,705
at December 31, 1995 to $48,520,692 at June 30, 1996. Proceeds
from maturities of securities were replaced with new securities or
used to fund loan demand. Securities called by the issuer
resulted in a loss of $7,763 in the first six months of 1996.
During the first six 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) with total unamortized premiums of
approximately $3,000 at June 30, 1996. The risk of early
repayment of these REMICs would not have a significant impact on
the Company's earnings. 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 issuer.
At June 30, 1996, the ratio of gross loans to deposits was 79.3%,
as compared to 74.0% at the end of 1995. The increase in this
ratio resulted from continued loan demand within our local market
area and a $9.2 million decrease in total deposits during the
period. Historically, deposit balances have fallen somewhat
during the first part of the year. Management believes this is
due, in part, to the influence of the tourism and farming
industries in the Company's market area, both of which tend to
generate more cash in the summer months. Management desires to
keep the loan-to-deposit ratio between 75 and 80%.
Commercial loans increased $2,859,052 or 4.2% from $67,835,818 at
December 31, 1995, to $70,694,870 at June 30, 1996 as commercial
demand remained strong within our local service area. Commercial
real estate loans decreased $1,990,179 or 8.7%, while residential
real estate loans increased approximately $2,858,641 or 6.5% at
June 30, 1996, compared to December 31, 1995. This increase was
comprised of 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, utilizing a matched funds program using Federal Home Loan
Bank advances of similar maturities to establish a fixed interest
rate spread for the estimated duration of the loans. Loans
originated under this program totaled approximately $6.7 million
in the first six months of 1996. Management expects to continue
this type of lending during the remainder of the year, up to
approximately $10 million.
Installment and credit card loans increased $842,221 from
$15,453,681 at December 31, 1995 to $16,295,902 at June 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 $2,477,436 at December 31, 1995 to $1,447,286 at June
30, 1996. This is due to the fact that as homes are finished,
they are transferred from construction loans into regular real
estate mortgages and have not been replaced by new construction
originations.
As a percentage of loans, the allowance for loan losses was 1.27%
at June 30, 1996 and 1.20% at December 31, 1995. Loans past due
more than 90 days, plus loans placed on nonaccrual status, were
approximately $641,919 or .41% of outstanding balances as of June
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. One problem credit
represents approximately 44% of this total. This credit, as well
as other nonperforming and impaired loans, have been considered
in Management's analysis of allowance for loan losses. The
allowance for loan losses was 310% of nonperforming loans at June
30, 1996, compared to 320% at December 31, 1995.
Net premises and equipment remained relatively stable at
$2,683,203 on June 30, 1996, compared to $2,669,430 on December
31, 1995, as purchases approximated depreciation expense. Other
components of the asset side of the balance sheet also remained
relatively stable.
Total deposits decreased $9,224,952 to $197,030,541 at June 30,
1996, compared to $206,255,493 at December 31, 1995. Noninterest-bearing
balances were down approximately $2,203,947. Interest-bearing deposit
balances were down approximately $7,021,005. This
decrease was a result of a deposit promotion that the Bank ran on
one-year certificates of deposit during 1995, which was not
repeated in 1996. As a result, some customers that took advantage
of those higher 1995 promotional rates did not renew at the Bank's
rate structure in 1996. Management anticipates deposit growth
during the balance of 1996 and may consider a new deposit
promotion.
Total shareholders' equity of $21,898,808 at June 30, 1996 was
7.65% greater than the balance of $20,342,763 on December 31,
1995. Contributing to this increase was year-to-date net income
of $1,853,185 less $321,599 of cash dividends declared. The
dividend represents 17.4% of net income for the first half of
1996, compared to 15.8% for the first half of 1995. The
unrealized gain on investment securities available for sale was
$69,303 at December 31, 1995, and changed to an unrealized loss of
($10,049) at June 30, 1996. 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 $103,811 during the
first half of 1996.
The Company and its subsidiary meet all regulatory requirements.
Its ratio of total capital to risk-weighted assets was 16.84% at
June 30, 1996, while its Tier I risk-based capital ratio was
15.59%. 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 9.50% at June 30, 1996 exceeded the
regulatory minimum of 3% to 5%.
RESULTS OF OPERATIONS
Net income for the six months ending June 30, 1996 was $1,853,185
or 14.4% greater than the $1,619,317 earned during the same period
last year. Net income per share basis was $2.88 through June 30,
1996, compared to $2.54 per share for the six months ended June
30, 1995. Net income of $889,193, or $1.38 per share, for the
second quarter of 1996 was 8.0% higher than net income for the
second quarter of 1995, which was $822,975 or $1.29 per common
share.
Net interest income for the six months ending June 30, 1996 was
$5,245,793, up $285,523 or 5.76% from $4,960,270 in the same
period of 1995. The main factor affecting this increase was an
increase in interest and fees on loans of $583,911, or 8.1%, 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 taxable investment securities increased
$110,027, or 12.25% for the first half of 1996, compared to the
first half of 1995. This increase resulted primarily from more
favorable yields in 1996 than in 1995 and the Company purchasing
securities with maturities of one to two years in this higher rate
environment. Other interest income increased from $113,491 at
June 30, 1995, to $263,295 at June 30, 1996. This increase was
largely the result of greater balances in federal funds sold in a
higher rate environment. Interest expense increased $613,091, or
16.5% to $4,319,987 at June 30, 1996, compared to $3,706,896 for
the same period of 1995. This increase was the result of the
higher rate environment on interest-bearing accounts, even with
lower deposit volumes. Included in this increase was a sharp
increase in other interest expense from $22,197 through June 30,
1995, to $222,703 on June 30, 1996. The primary component of this
increase was $179,363 interest expense resulting from new
borrowings in 1996 from the Federal Home Loan Bank of Cincinnati,
Ohio (FHLB). CSB's borrowings from 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 second quarter of 1996 as net
interest income increased 3.4%, from $2,534,126 in the second
quarter of 1995 to $2,619,185 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 $200,000 for the
quarter and six months ending June 30, 1996, respectively, which
is the same for the comparable periods 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 $12,079 or 4.6% in the second quarter
of 1996, and $64,910 or 14.2% for the first half of 1996, compared
to the same periods of 1995. These increases resulted from
increased service charge income, fee income and trust services
income from the trust department established in 1995, and other
increased miscellaneous fees from a growing customer base.
Total other expense decreased $42,480, or 2.8% in the second
quarter of 1996, as compared to the second quarter of 1995 and
remained relatively unchanged for the first six months of 1996
compared to the same period in 1995. Salaries and employee
benefits, occupancy expense and equipment expense experienced
little change in both the quarter and six months ending June 30,
1996, compared to the same periods in 1995. Other operating
expense increased $57,119 for the quarter ending June 30, 1996, as
compared to June 30, 1995, and increased $99,432 for the first six
months ended June 30, 1996, as compared to the same first six
months of 1995, which resulted from a number of small increases
including employee education, data processing supplies, automated
teller machine and various other expenses. These increases were
partially offset by a decrease in Federal Deposit Insurance
Corporation (FDIC) premiums of $101,738 for the quarter and
$199,113 for the six months ended June 30, 1996. In 1996, the
Bank's rate for deposit insurance was reduced to the statutory
minimum of $500 per quarter. During most of the first six months
of 1995, such premiums were $.23 per $100 of deposits.
The provision for income tax of $413,200 for the second quarter of
1996, for an effective tax rate of 31.7%, and $807,800 during the
first half of 1996, which reflected an effective rate of 30.4%.
These rates are slightly higher than the 29.2% and 29.9% effective
rates for the same periods in 1995 as nontaxable income comprised
a smaller portion of total operating income. 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 any credit risk.
<PAGE>
CSB BANCORP, INC.
FORM 10-Q
Quarter ended June 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:
On April 10, 1996, the Company held the Annual Meeting
of Shareholders at which shareholders voted upon the election of
two (2) directors for Class I Nominees for a term expiring in
1999. The results of the voting on these matters were as follows:
Nominee Votes for Withheld
------- --------- --------
J. Thomas Lang 531,011 675
Vivian A. McClelland 530,401 1,315
On November 16, 1995, Mr. William F. Hill notified the Company
that he decided not to pursue reelection as a director. On the
same date, the Board of Directors, pursuant to the Company's
Regulations, voted to decrease the number of directors from ten to
nine.
The following are directors who were not up for election at the
meeting and whose terms of office as directors continued after the
meeting
Douglas D. Akins
David W. Kaufman
H. Richard Maxwell
Daniel J. Miller
Samuel P. Riggle, Jr.
David C. Sprang
Samuel M. Steimel
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 4, hereof.)
(b) Exhibit 27, Financial Data Schedule
(c) No reports on Form 8-K filed during the quarter for
which this report is filed.
<PAGE>
CSB BANCORP, INC.
SIGNATURES
- -----------------------------------------------------------------
Pursuant to 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: August 13, 1996 /S/Douglas D. Akins
(Signature)
Douglas D. Akins
President and Chief Executive
Officer
Date: August 13, 1996 /S/Robert D. Oswald
(Signature)
Robert D. Oswald
Senior Vice President and Cashier
CSB BANCORP, INC.
Index to Exhibits
________________________________________________________________
Exhibit 11, Statement re: computation of per share earnings.
(Reference is hereby made to Consolidated Statements of Income on
page 4, hereof.)
Exhibit 27, Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION 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
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
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0
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