Page 1 of 64 pages
Exhibit Index on
page 18
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark one)
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
or the transition period from to
Commission File No. 0-21714
CSB BANCORP, INC.
(Name of registrant in its charter)
OHIO 34-1687530
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
6 West Jackson Street
Millersburg, Ohio 44654
(Address of principal executive offices) (Zip code)
(330) 674-9015
(Registrant's telephone number)
Securities registered under Section 12(b) of the Exchange Act:
Title of each class Name of each exchange on which registered
None
Securities registered under Section 12(g) of the Exchange Act:
Common Shares, $6.25 par value
(Title of class)
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 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. Yes X No
Indicate by check mark if disclosure of delinquent filers in
response to item 405 of Regulation S-K is not contained herein and
will not be contained, to the best of registrant's knowledge, in
definitive proxy or information statements incorporated by reference
in Part III of this Form 10-K or any amendment to this Form 10-K.
X
At March 13, 1997, the aggregate market value of the voting stock
held by nonaffiliates of the registrant, based on a share price of
$39.83 per share (such price being the average of the bid and asked
prices on such date) was $44,214,000.
At March 13, 1997, there were issued and outstanding 1,299,434 of
the registrant's Common Shares.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of Registrant's 1996 Annual Report to Shareholders (Parts
I and II)Portions of Registrant's Definitive Proxy Statement for the
April 9, 1997 Annual Meeting of Shareholders (Part III)
PART I
ITEM 1 - DESCRIPTION OF BUSINESS
General
CSB Bancorp, Inc. (the "Company") was incorporated under the laws of
the State of Ohio on June 28, 1991 at the direction of management of
The Commercial & Savings Bank (the "Bank") for the purpose of
becoming a bank holding company by acquiring all of the outstanding
shares of the Bank. The Company did acquire all such shares of the
Bank pursuant to an interim bank merger, which transaction was
consummated on January 31, 1992. The Bank is a commercial bank
chartered under the laws of the State of Ohio and was organized in
1879. The Bank is the wholly-owned subsidiary of the Company and
its only significant asset.
The Bank provides customary retail and commercial banking services
to its customers, including checking and savings accounts, time
deposits, IRAs, safe deposit facilities, personal loans, commercial
loans, real estate mortgage loans, installment loans, night
depository facilities and trust services. The Bank is a member of
the Federal Reserve System, is insured by the Federal Deposit
Insurance Corporation and is regulated by the Ohio Division of
Financial Institutions.
The Company, through the Bank, grants residential real estate,
commercial real estate, consumer and commercial loans to customers
located primarily in Holmes County and portions of surrounding
counties in Ohio. The general economic conditions in the Company's
market area have been very sound. Unemployment statistics have
generally been among the lowest in the state of Ohio and real estate
values have been stable to rising.
Certain risks are involved in granting loans, primarily related to
the borrowers' ability and willingness to repay the debt. Before
the Bank extends a new loan to a customer, these risks are assessed
through a review of the borrower's past and current credit history,
the collateral being used to secure the transaction in the event the
customer does not repay the debt, the borrower's character and other
factors. Once the decision has been made to extend the credit, the
Bank's independent loan review function monitors these factors
throughout the life of the loan. All credit relationships of
$500,000 or more are reviewed quarterly. Relationships of $250,000
to $499,999 are reviewed semi-annually and a sample of ten
relationships of $100,000 to $249,999 is reviewed quarterly. In
addition, any loan identified as a problem credit by management or
during the loan review is assigned to the Bank's "watch loan list,"
and is subject to ongoing review by the loan review function to
ensure that appropriate action is taken when deterioration has
occurred.
Commercial loans are primarily variable rate and include operating
lines of credit and term loans made to small businesses primarily on
the basis of their ability to repay the loan from the cash flow of
the business. Such loans are typically secured by business assets
such as equipment and inventory, and occasionally by the business
owner's principal residence. When the borrower is not an
individual, the Bank generally obtains the personal guarantee of the
business owner. As compared to consumer lending, which includes
single family residence, personal installment loans and automobile
loans, commercial lending entails significant additional risks.
These loans typically involve larger loan balances and are generally
dependent on the cash flow of the business, and thus may be subject
to a greater extent to adverse conditions in the general economy or
in a specific industry. Management reviews the borrower's cash
flows when deciding whether to grant the credit to evaluate whether
estimated future cash flows will be adequate to service principal
and interest of the new obligation in addition to existing
obligations.
Commercial real estate loans are primarily secured by borrower-occupied business
real estate and are also dependent on the ability
of the related business to generate adequate cash flow to service
the debt. Such loans primarily carry adjustable interest rates.
Commercial real estate loans are generally originated with a loan-to-value ratio
of 75% or less. Management performs much the same
analysis when deciding whether to grant a commercial real estate
loan as when deciding whether to grant a commercial loan.
Residential real estate loans carry primarily adjustable rates,
although fixed rate loans originated in 1995 and 1996 totaled $10.7
million at December 31, 1996, and are secured by the borrower's
residence. Such loans are made on the basis of the borrower's
ability to make repayment from employment and other income.
Management assesses the borrower's ability to repay the debt through
review of credit history and ratings, verification of employment and
other income, review of debt-to-income ratios and other measures of
repayment ability. The Bank generally makes these loans in amounts
of 90% or less of the value of the collateral. An appraisal is
obtained from a qualified real estate appraiser for substantially
all loans secured by real estate. Construction loans are secured by
residential and business real estate that generally will be occupied
by the borrower upon completion. While not contractually required
to do so, the Bank usually makes the permanent loan at the end of
the construction phase. Construction loans also are made in amounts
of 90% or less of the value of the collateral.
Installment loans to individuals include loans secured by
automobiles and other consumer assets, including second mortgages on
personal residences. Consumer loans for the purchase of new
automobiles generally do not exceed 80% of the purchase price of the
car. Loans for used cars generally do not exceed the average
wholesale or trade-in value as stipulated in a recent auto industry
used car price guide. Credit card and overdraft protection loans
are unsecured personal lines of credit to individuals of
demonstrated good credit character with reasonably assured sources
of income and satisfactory credit histories. Consumer loans
generally involve more risk than residential mortgage loans because
of the type and nature of collateral and, in certain types of
consumer loans, the absence of collateral. Since these loans are
generally repaid from ordinary income of the individual or family
unit, the repayment may be adversely affected by job loss, divorce,
ill health or by general decline in economic conditions. The Bank
assesses the borrower's ability to make repayment through a review
of credit history, credit ratings, debt-to-income ratios and other
measures of repayment ability. <PAGE>
Employees
At December 31, 1996, the Bank employed 108 employees, 93 of which
were employed on a full-time basis. The Company has no separate
employees not also employed by the Bank.
Competition
The Bank operates in a highly competitive industry due to the Ohio
law permitting statewide branching by banks, savings and loan
associations and credit unions. Ohio law also permits nationwide
interstate banking on a reciprocal basis. In its primary market
area of Holmes and surrounding counties, the Bank competes for new
deposit dollars and loans with several other commercial banks, both
large regional banks and smaller community banks, as well as savings
and loan associations, credit unions, finance companies, insurance
companies, brokerage firms and investment companies. The ability to
generate earnings is impacted in part by competitive pricing on
loans and deposits and by the changes in the rates on various U.S.
Treasury and State and political subdivision issues which comprise
a significant portion of the Bank's investment portfolio and which
rates are used as indices on several loan products. The Bank
believes that its presence in the Holmes County area, as the
financial institution with the largest local asset base, provides
the Bank with a competitive advantage due to its large asset base
and ability to make loans and provide services to the local
community.
Supervision and Regulation
The Bank is subject to supervision, regulation and periodic
examination by the State of Ohio Superintendent of Financial
Institutions and the Federal Reserve Board. Because its deposits
are insured by the Federal Deposit Insurance Corporation, the Bank
also is subject to certain regulations of that federal agency. The
earnings of the Bank are affected by state and federal laws and
regulations and by policies of various regulatory authorities.
These policies include, for example, statutory maximum lending
rates, requirements on the maintenance of reserves against deposits,
domestic monetary policies of the Board of Governors of the Federal
Reserve System, United States fiscal policy, international currency
regulations and monetary policies, certain restrictions on banks'
relationships with many phases of the securities business and
capital adequacy and liquidity restraints.
Statistical Disclosures
The following schedules present, for the periods indicated, certain
financial and statistical information of the Company as required
under the Securities and Exchange Commission's Industry Guide 3, or
a specific reference as to the location of the required disclosures
in the Company's 1996 Annual Report to Shareholders (the "Annual
Report").
I. Distribution of Assets, Liabilities and Stockholders' Equity;
Interest Rates and Interest Differential
A&B. Average Balance Sheet and Related Analysis of Net Interest
Earnings
The information set forth under the heading "Average Balances, Rates
and Yields" on page 4 of the CSB Bancorp Inc. 1996 Annual Report to
Shareholders (the "Annual Report") is incorporated herein by
reference.
C. Interest Differential
The information set forth under the heading "Rate/Volume Analysis of
Changes in Income and Expense" on page 5 of the Annual Report is
incorporated herein by reference.
II. SECURITIES PORTFOLIO
A. The following is a schedule of the carrying value of securities
at December 31, 1996, 1995 and 1994.
(In thousands of dollars) 1996 1995 1994
Securities available for sale
(at fair value)
U.S. Treasury securities $11,073 $11,104 $13,782
U.S. Government corporations
and agencies 1,996 6,010
Other securities 1,821 888 270
------ ------ -------
$14,890 $18,002 $14,052
======= ====== =======
Securities held to maturity
(at amortized cost)
U.S. Treasury securities $11,031 $10,047 $14,155
U.S. Government corporations
and agencies 7,011 8,024 3,948
Obligations of states and
political subdivisions 19,440 17,069 14,722
Mortgage-backed securities 11 1,499 2,011
------ ------ ------
$37,493 $36,639 $34,836
====== ======= ======
B. The following is a schedule of maturities for each category of
debt securities and the related weighted average yield of such
securities as of December 31, 1996:
<PAGE>
<TABLE>
<CAPTION>
(In thousands of dollars)
Maturing
------------------------------------------------------------
After One After Five
One Year Year Through Years Through After
or Less Five Years Ten Years Ten Years
Amount Yield Amount Yield Amount Yield Amount Yield
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Available for sale
U.S. Treasury $ 6,015 6.23% $ 5,058 6.09%
U.S. Government
corporations
and agencies 1,996 6.04
------ ---- ------ ----
Total $ 6,015 6.23% $ 7,054 6.08%
====== ==== ====== ====
Held to maturity
U.S. Treasury $ 2,999 6.35% $ 7,929 6.43% $ 103 7.70%
U.S. Government
corporations
and agencies 5,001 5.54 2,010 6.05
Obligations of
states and
political
subdivisions 2,145 10.27 4,103 8.92 13,192 7.57
Mortgage-backed
securities $11 4.71%
------ ----- ----- ---- ------ ------ ---- ----
Total $10,145 6.78% $14,042 7.10% $13,295 7.57% $11 4.71%
====== ===== ====== ==== ====== ===== === ====
</TABLE>
<PAGE>
The weighted average yields are calculated using amortized cost of
the investments and are based on coupon rates for securities
purchased at par value and on effective interest rates considering
amortization or accretion if the securities were purchased at a
premium or discount. The weighted average yield on tax exempt
obligations is presented on a taxable equivalent basis based on the
Company's marginal federal income tax rate of 34%. Other securities
consist of Federal Reserve Bank and Federal Home Loan Bank stock
that bear no stated maturity or yield and are not included in this
analysis.
C. Excluding holdings of U.S. Treasury securities and other
agencies and corporations of the U.S. Government, there were no
investments in securities of any one issuer which exceeded 10% of
the Company's consolidated shareholders' equity at December 31,
1996.
III. LOAN PORTFOLIO
A. Types of Loans - Total loans on the balance sheet are comprised
of the following classifications at December 31:
<PAGE>
<TABLE>
<CAPTION>
(In thousands of dollars) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Commercial $ 73,404 $ 67,836 $ 59,068 $ 57,254 $ 51,352
Commercial real estate 22,991 22,858 22,700 21,272 16,262
Residential real estate 49,255 43,995 39,167 31,465 32,892
Construction 2,761 2,477 2,802 2,523 5,229
Installment and credit card 16,730 15,453 13,507 12,398 13,222
------- ------- ------- ------- -------
Total loans $165,141 $152,619 $137,244 $124,912 $118,957
======= ======= ======= ======= =======
</TABLE>
<PAGE>
B. Maturities and Sensitivities of Loans to Changes in Interest
Rates - The following is a schedule of maturities of loans based on
contract terms and assuming no amortization or prepayments,
excluding real estate mortgage and installment loans, as of December
31, 1996:
Maturing
One Year One Through After Five
(In thousands of dollars) or Less Five Years Years Total
Commercial $24,558 $15,807 $33,039 $73,404
Commercial real estate 165 344 22,482 22,991
Construction 2,761 2,761
------ ------ ------ ------
Total $27,484 $16,151 $55,521 $99,156
====== ====== ====== ======
The following is a schedule of fixed rate and variable rate
commercial, commercial real estate and real estate construction
loans due after one year from December 31, 1996.
Fixed Variable
(In thousands of dollars) Rate Rate
Total commercial, commercial
real estate and
construction loans due after
one year $15,327 $56,345
======= =======
C. Risk Elements
1. Nonaccrual, Past Due and Restructured Loans - The following
schedule summarizes nonaccrual, past due and restructured loans.
<PAGE>
<TABLE>
<CAPTION>
December 31
(In thousands of dollars) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
(a)Loans accounted for on a
nonaccrual basis $174 $228 $ 611 $302 $ 958
(b) Accruing loans which are
contractually past due
90 days or more as to
interest or principal
payments 73 343 590 394 304
(c) Loans which are "troubled
debt restructurings" as
defined in Statement of
Financial Accounting
standards No. 15
exclusive of loans in
(a) or (b) above): -0- -0- -0- -0- -0-
----- ----- ------ ---- ------
Totals $747 $571 $1,201 $696 $1,262
===== ===== ====== ==== ======
</TABLE>
<PAGE>
The policy for placing loans on nonaccrual status is to cease
accruing interest on loans when management believes that the
collection of interest is doubtful, when commercial loans are past
due as to principal and interest ninety days or more, or when
mortgage and consumer loans are past due as to principal and
interest 120 days or more, except that in certain circumstances
interest accruals are continued on loans deemed by management to be
fully collectible. In such cases, the loans are individually
evaluated in order to determine whether to continue income
recognition after ninety days beyond the due dates. When loans are
placed on nonaccrual, any accrued interest is charged against
interest income.
(d) Impaired Loans - Information regarding impaired loans at
December 31, 1996 and 1995 is as follows:
1996 1995
Balance of impaired loans at December 31 $961,000 $228,000
Less portion for which no allowance
for loan loss is allocated 0 0
-------- --------
Portion of impaired loan
balance for which
an allowance for loan losses is allocated $961,000 $228,000
======== ========
Portion of allowance for loan losses
allocated to the impaired loan balance
at December 31 $336,000 $ 40,000
======== ========
Impaired loans are comprised of commercial and commercial real
estate loans and are carried at the present value of expected cash
flows discounted at the loan's effective interest rate or at the
fair value of the collateral if the loan is collateral dependent.
A portion of the allowance for loan losses is allocated to impaired
loans.
Smaller-balance homogeneous 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 less than
$100,000. Such loans are included in the nonaccrual and past due
disclosures in (a) and (b) above, but not in the impaired loan
totals. 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. Impaired loans, or portions thereof, are charged off
when deemed uncollectible.
2. Potential Problem Loans - At December 31, 1996, no loans were
identified which management has serious doubts about the borrowers'
ability to comply with present loan repayment terms and which are
not included in item III.C.1. above.
3. Foreign Outstandings - There were no foreign outstandings during
any period presented.
4. Loan Concentrations - As of December 31, 1996, there are no
concentrations of loans greater than 10% of total loans which are
not otherwise disclosed as a category of loans in Item III.A. above.
D. Other Interest-Bearing Assets - As of December 31, 1996, there
are no other interest-bearing assets that would be required to be
disclosed under Item III.C.1. or 2. if such assets were loans.
IV. SUMMARY OF LOAN LOSS EXPERIENCE
A. The following schedule presents an analysis of the allowance for
loan losses, average loan data and related ratios for the years
ended December 31:
<PAGE>
<TABLE>
<CAPTION>
(In thousands of dollars) 1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
LOANS
Loans outstanding at
end of period $165,141 $152,619 $137,244 $124,912 $118,957
======== ======= ======= ======= =======
Average loans
outstanding during
period $157,274 $146,816 $131,440 $121,332 $114,294
======== ======= ======= ======= ========
ALLOWANCE FOR LOAN
LOSSES
Balance at beginning of
period $ 1,830 $ 1,558 $ 1,312 $ 1,203 $ 938
Loans charged off:
Commercial (11) (59) (4) (196) (305)
Commercial real
estate (0) (113) (34) (0) (56)
Residential real
estate (0) (0) (0) (5) (12)
Installment and credit
card (125) (121) (74) (164) (166)
-------- ------- ------- ------ ---------
Total loans
charged off (136) (293) (112) (365) (539)
-------- ------- ------- ------ ----------
Recoveries of loans
previously charged off:
Commercial 2 12 9 6 68
Commercial real
estate 0 0 0 0 0
Residential real
estate 0 0 7 7 7
Installment 25 38 42 71 21
------- -------- ------- ------ --------
Total loan
recoveries 27 50 58 84 96
------- -------- ------- ------ --------
Net loans charged off (109) (243) (54) (281) (443)
Provision charged to
operating expense 400 515 300 390 708
------- -------- ------- ------- -------
Balance at end of period $ 2,121 $ 1,830 $ 1,558 $ 1,312 $ 1,203
======= ========= ======= ======= ========
Ratio of net charge-offs to
average loans outstanding
for period .07% .17% .04% .23% .39%
/TABLE
<PAGE>
The allowance for loan losses balance and the provision charged to
expense are determined by management based upon periodic reviews of
the loan portfolio, past loan loss experience, economic conditions
and various other circumstances which are subject to change over
time. In making this judgment, management reviews selected large
loans as well as impaired loans, other delinquent, nonaccrual and
problem loans and loans to industries experiencing economic
difficulties. The collectibility of these loans is evaluated after
considering the current operating results and financial position of
the borrower, the estimated market value of the collateral,
guarantees and the Company's collateral position versus other
creditors. Judgments, which are necessarily subjective, as to the
probability of loss and the amount of such loss are formed on these
loans, as well as other loans in the aggregate.
B. The following schedule is a breakdown of the allowance for loan
losses allocated by type of loan and related ratios.
While management's periodic analysis of the adequacy of the
allowance for loan losses may allocate portions of the allowance for
specific problem loan situations, the entire allowance is available
for any loan charge-offs that occur.
<PAGE>
<TABLE>
<CAPTION>
Allocation of the Allowance for Loan Losses
(In thousands of dollars) Percentage of Percentage of Percentage of
Loans in Each Loans in Each Loans in Each
Allowance Category to Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans Amount Total Loans
December 31, 1996 December 31, 1995 December 31, 1994
<S> <C> <C> <C> <C> <C> <C>
Commercial $ 634 44.45% $ 497 44.45% $ 710 43.04%
Commercial real estate 425 13.92 551 14.98 148 16.54
Residential real estate 109 29.83 14 28.83 118 28.54
Construction 0 1.67 0 1.62 0 2.04
Installment and
credit card 139 10.13 219 10.12 175 9.84
Unallocated 814 415 407
------ ------ ------ ------ ----- ------
Total $ 2,121 100.00% $1,830 100.00% $1,558 100.00%
====== ====== ====== ====== ===== =======
</TABLE>
<TABLE>
<CAPTION>
Percentage of Percentage of
Loans in Each Loans in Each
Allowance Category to Allowance Category to
Amount Total Loans Amount Total Loans
December 31, 1993 December 31, 1992
<S> <C> <C> <C> <C>
Commercial $ 266 45.84% $ 384 43.16%
Commercial real estate 257 17.03 194 13.67
Residential real estate 102 25.19 47 27.65
Construction 0 2.02 0 4.41
Installment and
credit card 149 9.92 110 11.11
Unallocated 538 468
----- ------ ----- ------
Total $1,312 100.00% $1,203 100.00%
===== ====== ====== ======
</TABLE>
V. DEPOSITS
The following is a schedule of average deposit amounts and average
rates paid on each category for the periods indicated:
Average Average
Amounts Outstanding Rate Paid
Year ended December 31 Year ended December 31
1996 1995 1994 1996 1995 1994
(In thousands of
dollars)
Noninterest-bearing
demand $ 20,140 $ 19,122 $ 16,983 N/A N/A N/A
Interest-bearing
demand deposits 35,625 36,396 40,919 2.05% 2.18% 2.19%
Savings deposits 27,564 26,819 29,328 3.03 3.03 2.78
Time deposits 116,280 109,582 82,563 5.72 5.80 4.64
-------- ------- -------
Total deposits $199,609 $191,919 $169,792
======== ======= =======
The following is a schedule of maturities of time certificates of
deposit in amounts of $100,000 or more as of December 31, 1996:
Three months or less $ 2,535
Over three through six months 7,000
Over six through twelve months 10,529
Over twelve months 4,611
-------
Total $24,675
======
VI. RETURN ON EQUITY AND ASSETS
1996 1995 1994
Return on average assets 1.65% 1.69% 1.30%
Return on average
shareholders' equity 17.47 19.17 15.10
Dividend payout ratio 27.67 23.13 26.04
Average shareholders'
equity to average assets 9.47 8.80 8.63
VII. SHORT-TERM BORROWINGS
This item is not required for the Company because the average
outstanding balance of short-term borrowings for the years ending
December 31, 1996, 1995 and 1994 were less than 30 percent of
shareholders' equity at December 31, 1996, 1995 and 1994,
respectively.
ITEM 2 - PROPERTIES
The Bank owns and operates its main office at Six West Jackson
Street, Millersburg, Ohio 44654. The Bank also operates seven
branches and two other properties which are owned or leased as noted
below:
1. The Berlin Branch, 4585 S. R. 39, Suite B, Berlin, Ohio 44610
(leased)
2. The South Clay Branch, 91 S. Clay Street, Millersburg, Ohio
44654 (owned)
3. The Winesburg Branch, 2225 U.S. 62, Winesburg, Ohio 44590
(owned)
4. The Clinton Commons Branch, 2101 Glen Drive, Millersburg, Ohio
44654 (leased)
5. The Walnut Creek Branch, 4980 Old Pump Street, Walnut Creek,
Ohio 44687 (owned)
6. The Charm Office, Corner of S.R. 557 and C.R. 70, Charm, Ohio
44617 (leased)
7. The Sugarcreek Office, 127 S. Broadway, Sugarcreek, Ohio 44681
(owned)
8. The Operations Center, 52 South Clay Street, Millersburg, Ohio
44654 (leased)
9. 51 North Clay Street, Millersburg, Ohio 44654 (owned; planned to
be developed for operations center)
The Bank considers its physical properties to be in good operating
condition and suitable for the purposes for which they are being
used. All of the properties owned by the Bank are unencumbered by
any mortgage or security interest and are, in management's opinion,
adequately insured.
ITEM 3 - LEGAL PROCEEDINGS
There is no pending litigation, other than routine litigation
incidental to the business of the Company and the Bank, or of a
material nature involving or naming the Company or the Bank as a
defendant. Further, there are not material legal proceedings in
which any director, executive officer, principal shareholder or
affiliate of the Company is a party or has a material interest which
is adverse to the Company or the Bank. None of the routine
litigation in which the Company or the Bank are involved is expected
to have a material adverse impact upon the financial position or
results of operations of the Company or the Bank.
ITEM 4 - SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On October 2, 1996, the Company's security holders approved the
increase in the number of authorized shares of common stock from
1,000,000 to 3,000,000 shares. The following votes have not been
adjusted to reflect the two-for-one stock split paid in the form of
a 100% dividend:
Votes for 503,985
Votes against 8,580
Withheld 1,659
PART II
ITEM 5 - MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The information contained in the section captioned "Common Stock" on
page 15 of the Annual Report is incorporated herein by reference.
ITEM 6 - SELECTED FINANCIAL DATA
The information contained in the section captioned "Five-Year
Selected Consolidated Financial Data" on pages 16 and 17 of the
Annual Report is incorporated herein by reference.
ITEM 7 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATION
The information contained in the section captioned "Management's
Discussion and Analysis of Financial Condition and Results of
Operations" on pages 1 through 17, inclusive, of the Annual Report
is incorporated herein by reference.
ITEM 8 - FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The information contained in the consolidated financial statements
and related notes and the report of independent auditors thereon, on
pages 18 through 40, inclusive, of the Annual Report, is
incorporated herein by reference.
ITEM 9 - CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
No changes in or disagreements with the independent accountants on
accounting and financial disclosure have occurred.
PART III
ITEM 10 - DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS; COMPLIANCE WITH SECTION 16(a) OF THE EXCHANGE ACT.
The information contained in the section captioned "ELECTION OF
DIRECTORS" on pages 4 through 8 of the Company's proxy statement for
the Company's 1996 Annual Meeting of Shareholders filed with the
Securities and Exchange Commission on or about March 18, 1997 (the
"Proxy Statement") and the information in the paragraph beginning on
page 3 and ending on page 4 of the Proxy Statement is incorporated
herein by reference.
ITEM 11 - EXECUTIVE COMPENSATION
The information contained in the section captioned "EXECUTIVE
COMPENSATION" on page 9 of the Proxy Statement is incorporated
herein by reference.
ITEM 12 - SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
The information contained in the section captioned "Security
Ownership of Certain Beneficial Owners and Management" on pages 2
through 3 of the Proxy Statement is incorporated herein by
reference.
ITEM 13 - CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information contained in the section captioned "CERTAIN
TRANSACTIONS" on page 11 of the Proxy Statement is incorporated
herein by reference.
PART IV
ITEM 14 - EXHIBITS AND REPORTS ON FORM 8-K
Exhibit
Number Description of Document
3.1 Amended Articles of Incorporation of CSB Bancorp, Inc.
(incorporated by reference to Registrant's 1994 Form 10-
KSB)
3.2 Code of Regulations of CSB Bancorp, Inc. (incorporated by
reference to Registrant's Form 10-SB)
4 Form of Certificate of Common Shares of CSB Bancorp, Inc.
(incorporated by reference to Registrant's Form 10-SB)
10 Leases for the Clinton Commons, Berlin and Charm Branch
Offices of The Commercial and Savings Bank (incorporated by
reference to Registrant's Form 10-SB)
11 Statement Regarding Computation of Per Share Earnings
13 CSB Bancorp, Inc. 1996 Annual Report to Shareholders
21 Subsidiary of CSB Bancorp, Inc.
23 Consent of Crowe, Chizek and Company LLP
24 Powers of Attorney
27 Financial Data Schedule
No reports on Form 8-K were filed during the last quarter of the
period covered by this report.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
By: /s/DOUGLAS D. AKINS
Douglas D. Akins, President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf
of the registrant and in the capacities and on March 28, 1997.
Signatures Title
DOUGLAS D. AKINS* President (Principal Executive Officer)
Douglas D. Akins*
PAMELA S. BASINGER* Financial Officer and Principal
Pamela S. Basinger* Accounting Officer
DAVID W. KAUFMAN* Director
David W. Kaufman*
J. THOMAS LANG* Director
J. Thomas Lang*
VIVIAN A. McCLELLAND* Director
Vivian A. McClelland*
H. RICHARD MAXWELL* Director
H. Richard Maxwell*
DANIEL J. MILLER* Director
Daniel J. Miller*
SAMUEL P. RIGGLE, JR.* Director
Samuel P. Riggle, Jr.*
DAVID C. SPRANG* Director
David C. Sprang*
SAMUEL M. STEIMEL* Director
Samuel M. Steimel*
*By: /s/DOUGLAS D. AKINS
Douglas D. Akins
as attorney-in-fact and on his own behalf as Principal Executive
Officer<PAGE>
INDEX TO EXHIBITS
Exhibit Sequential
Number Description of Document Page
3.1 Amended Articles of Incorporation
of CSB Bancorp, Inc. (incorporated
by reference to Registrant's 1994
Form 10-KSB). N/A
3.2 Code of Regulations of CSB
Bancorp, Inc. (incorporated by
reference to Registrant's Form 10-SB). N/A
4 Form of Certificate of Common
Shares of CSB Bancorp, Inc.
(incorporated by reference to
Registrant's Form 10-SB). N/A
10 Leases for the Clinton Commons,
Berlin and Charm Branch Offices
of The Commercial and Savings
Bank (incorporated by reference
to Registrant's Form 10-SB). N/A
11 Statement Regarding Computation
of Per Share Earnings 19
13 CSB Bancorp, Inc. 1996 Annual
Report to Shareholders 20
21 Subsidiary of CSB Bancorp, Inc. 60
23 Consent of Crowe, Chizek and Company LLP 61
24 Powers of Attorney 62
27 Financial Data Schedule 63
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Years ended December 31,
1996 1995(1) 1994(1)
Average shares outstanding 1,288,522 1,279,002 1,276,800
========== ========= =========
Net income $3,859,466 $3,592,252 $2,455,376
========== ========= ==========
Earnings per common share $ 3.00 $ 2.81 $ 1.92
========== ========= ==========
(1) Restated to reflect the October 1996 two-for-one stock split
paid in the form of a 100% stock dividend.
EXHIBIT 13
CSB BANCORP, INC. 1996 ANNUAL REPORT
TO SHAREHOLDERS
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
INTRODUCTION
CSB Bancorp, Inc. (the "Company") was incorporated under the laws of
the State of Ohio in 1991 to become a one-bank holding company for
its wholly-owned subsidiary, The Commercial and Savings Bank (the
"Bank"). The Bank is chartered under the laws of the State of Ohio
and was organized in 1879. The Bank is a member of the Federal
Reserve System, is insured by the Federal Deposit Insurance
Corporation and is regulated by the Ohio Division of Financial
Institutions and the Federal Reserve Bank.
The Company, through the Bank, provides customary retail and
commercial banking services to its customers, including checking and
savings accounts, time deposits, safe deposit facilities, personal
loans, commercial loans, real estate mortgage loans, installment
loans, IRAs, night depository facilities and trust services. Its
customers are located primarily in Holmes County and portions of
surrounding counties in Ohio. The general economic conditions in
the Company's market area have been very sound. Unemployment
statistics have generally been among the lowest in the state of Ohio
and the area has experienced stable to rising real estate values.
The following discussion is presented to aid in understanding the
Company's consolidated financial condition and results of
operations, and should be read in conjunction with the audited
consolidated financial statements and related notes. Forward-looking statements
contained in this discussion involve risks and
uncertainties and are subject to change based on various important
factors. Actual results could differ from those expressed or
implied. Management is aware of no market or institutional trends,
events or uncertainties that are expected to have a material effect
on liquidity, capital resources or operations except as discussed
herein. There are no current recommendations by regulatory
authorities which would have such effect if implemented.
RESULTS OF OPERATIONS
Net income increased $267,000 in 1996 to $3,859,000. Earnings per
share was $3.00 and $2.81 per share for the year ended December 31,
1996 and 1995. Net interest income was the driving component for
the increase in net income. Performance ratios decreased somewhat
as a result of increased liquidity and growing capital through
earnings retention. Return on average assets was 1.65% in 1996 as
compared to 1.69% in 1995 and return on average shareholder's equity
dropped to 17.47% in 1996, from 19.17% during 1995.
Net income for 1995 was $3,592,000 or $2.81 per share, as compared
to $2,455,000 or $1.92 per share for 1994. This equated to a return
on average assets of 1.69% in 1995 and 1.30% in 1994, while the
return on average shareholders' equity for the same periods was
19.17% and 15.10%, respectively.
Net Interest Income
Net interest income is the largest component of the Company's net
income, and consists of the difference between income generated on
interest-earning assets and interest expense incurred on interest-bearing
liabilities. Net interest income is primarily affected by
volumes, interest rates and composition of interest-earning assets
and interest-bearing liabilities.
Net interest income for 1996 was $10,652,000, increasing $381,000
from $10,271,000 in 1995. Contributing to the increase was a
$675,000, or 4.5% increase in interest and fees on loans, which is
mostly attributable to the 7.1% growth in average loans, as the
yield on loans decreased during 1996. In the first half of 1995,
the base lending rate for commercial loans experienced sharp
increases. However, as prime rate dropped during the latter months
of 1995 and early 1996, so did the yield of the commercial loan
portfolio. Prime rate stabilized through the remainder of 1996.
Greater liquidity in the form of higher federal funds sold and
interest-bearing demand and time deposit balances also provided a
volume-based increase in interest income with other interest income
increasing $411,000 to $758,000 in 1996 compared to $347,000 in
1995. Liquid assets usually carry less credit and interest rate
risk, and, therefore, provide lower yields than securities or loans.
The growth in the demand deposit balances can be attributed to the
Bank's matched mortgage advances agreement with the Federal Home
Loan Bank of Cincinnati (FHLB) which is discussed in detail below.
The Bank maintains balances with the FHLB which pays interest on the
idle funds. Interest income on securities added $89,000 to the
increase in net interest income as the held to maturity security
portfolio experienced a shift from mortgage-backed securities to
higher taxable-equivalent yielding obligations of states and
political subdivisions.
The Company's interest expense on deposits increased $246,000 to
$8,213,000 in 1996, compared to $7,968,000 in 1995. Average time
deposits grew $6,698,000 or 6.1% in 1996 as the Company offered a
promotional rate on one-year certificates. However, deposit
interest rates remained relatively stable during 1996 as the overall
cost of funds increased to 4.64% in 1996, compared to 4.61% in 1995.
Late in 1995, the Company began to originate fixed rate mortgage
loans through a matched funds program with the FHLB. Advances with
maturities similar to the loans establish a fixed interest rate
spread of approximately 200 basis points for the estimated duration
of the loans. New loans originated under this program, which were
held for sale at December 31, 1996, totaled approximately
$10,100,000 during 1996, accounting for the increase in other
borrowed funds interest expense of $548,000 in 1996.
Net interest income increased $2,219,000, or 27.6%, from $8,052,000
in 1994 to $10,271,000 in 1995. The primary component of this
change was a $3,706,000 increase in loan interest income. The
increase in loan interest income consisted of a $2,275,000 increase
due to rising interest rates and $1,431,000 due to increased volume
in the loan portfolio. The increase in interest income was
partially offset by a $2,432,000 increase in interest expense,
primarily in certificates of deposit. Substantial growth was
experienced in certificates of deposit, with average balances
increasing $27 million or 32.7% over 1994 levels. Average interest-bearing
demand and savings deposits fell $7.0 million, or 10.0%, in
1995 as compared to 1994. The decrease was primarily a result of
customers shifting funds into higher yielding, slightly longer-term
certificates of deposits.
The following tables provide detailed analysis of changes in average
balances, yields, and net interest income identifying that portion
of the changes due to change in average volume versus that portion
due to change in average rates.
<PAGE>
<TABLE>
AVERAGE BALANCES, RATES AND YIELDS
<CAPTION>
(Dollars in thousands) 1996 1995 1994
Average Average Average
Balance(1)Interest Rate(2) Balance(1) Interest Rate(2) Balance(1) Interest Rate(2)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Interest-Bearing Assets
Interest-bearing demand deposits $ 5,274 $ 258 4.89% $ 127 $ 3 2.71%
Federal funds sold 9,194 481 5.23 5,872 344 5.85 $ 1,774 $ 81 4.60%
Time deposits with banks 337 19 5.75
Securities:
Taxable 31,759 1,932 6.08 33,785 1,943 5.75 29,588 1,318 4.45
Tax exempt 18,370 1,030 5.61 15,913 930 5.85 15,032 875 5.82
Loans (3) 157,274 15,760 10.02 146,816 15,085 10.27 131,440 11,379 8.66
------- ------ ----- ------- ------ ----- ------- ------ ----
Total interest-earning assets 222,208 19,480 8.77% 202,513 18,305 9.04% 177,834 13,653 7.68%
Noninterest-Bearing Assets
Cash and due from banks 7,334 6,839 6,951
Bank premises and
equipment, net 3,057 2,852 2,977
Other assets 2,730 2,510 2,080
Allowance for loan losses (1,976) (1,707) (1,408)
------- ------- -------
Total assets $233,353 $213,007 $188,434
======= ======== ========
Interest-Bearing Liabilities
Demand deposits $ 35,625 731 2.05% $ 36,396 795 2.18% $ 40,919 896 2.19%
Savings deposits 27,564 836 3.03 26,819 812 3.03 29,327 816 2.78
Time deposits 116,280 6,646 5.72 109,582 6,361 5.80 82,563 3,831 4.64
Other borrowed funds 10,632 615 5.78 1,563 66 4.24 1,777 58 3.30
------- ----- ---- -------- ----- ---- ------- ----- ----
Total interest-bearing
liabilities 190,101 8,828 4.64% 174,360 8,034 4.61% 154,586 5,601 3.62%
----- ----- -----
Noninterest-Bearing Liabilities
Demand deposits 20,140 19,122 16,983
Other liabilities 1,017 782 602
Shareholders' Equity 22,095 18,743 16,263
------- ------- -------
Total liabilities and equity $233,353 $213,007 $188,434
======= ======= =======
Net Interest Income $10,652 $10,271 $ 8,052
====== ====== ======
Net Interest Income as a Percent
of Interest-Bearing Assets 4.79% 5.07% 4.53%
==== ==== ====
<FN>
(1) Average balances have been computed on an average
daily basis. (2) Average rates have been computed based
on the amortized cost of the corresponding assets or liability.
(3) Average loan balances include nonaccruing loans.
</FN>
</TABLE>
<TABLE>
RATE/VOLUME ANALYSIS OF CHANGES IN INCOME AND EXPENSE (1)
<CAPTION>
(Dollars in thousands) 1996 v. 1995 1995 v. 1994
Change in Change in
Income/ Volume Rate Income/ Volume Rate
Expense Effect Effect Expense Effect Effect
<S> <C> <C> <C> <C> <C> <C>
Interest Income
Interest-bearing demand
deposits $ 254,259 $ 249,303 $ 4,956 $ 3,446 $ 3,446
Federal funds sold 137,736 169,489 (31,753) 262,016 234,435 $ 27,581
Time deposits with banks 19,375 19,375
Securities:
Taxable (10,320) (204,021) 193,701 624,658 204,747 419,911
Tax exempt 99,294 135,223 (35,929) 55,598 51,106 4,492
Loans 674,859 1,025,198 (350,339) 3,705,874 1,431,248 2,274,626
--------- --------- -------- --------- --------- ---------
Total interest income 1,175,203 1,394,567 (219,364) 4,651,592 1,924,982 2,726,610
--------- --------- -------- --------- --------- ---------
Interest Expense
Demand deposits (64,101) (16,801) (47,300) (101,412) (97,389) (4,023)
Savings deposits 24,677 24,677 (4,432) (73,641) 69,209
Time deposits 285,288 390,463 (105,175) 2,530,455 1,434,555 1,095,900
Other borrowed funds 548,329 546,620 1,709 7,743 (8,760) 16,503
--------- --------- -------- --------- --------- ---------
Total interest expense 794,193 944,959 (150,766) 2,432,354 1,254,765 1,177,589
--------- --------- -------- --------- --------- ---------
Net Interest Income $ 381,010 $ 449,608 $ (68,598) $2,219,238 $ 670,217 $1,549,021
========= ========= ======== ========= ========= =========
<FN>
(1) Changes attributable to both volume and rate which cannot
be segregated have been allocated based on the absolute value
of the change due to volume and the change due to rate.
</FN>
</TABLE>
<PAGE>
The following table reconciles net interest income as shown in the
financial statements to taxable equivalent net interest income:
1996 1995 1994
Net interest income $10,652,102 $10,271,092 $8,051,854
Taxable equivalent
adjustment (1) 464,252 422,562 417,433
---------- ---------- ---------
Net interest income
- fully taxable
equivalent $11,116,354 $10,693,654 $8,469,287
Net interest yield 4.79% 5.07% 4.53%
Taxable equivalent
adjustment (1) .21 .21 .23
----------- ---------- ---------
Net interest yield -
fully taxable equivalent 5.00% 5.28% 4.76%
========== ========== =========
(1) Taxable equivalent adjustments have been computed assuming a
34% tax rate.
Provision for Loan Losses
As the loan portfolio grows, management continues to provide for
losses inherent in the portfolio. The provision for loan losses
decreased to $400,000 in 1996 after increasing to $515,000 in 1995
from $300,000 in 1994. See "Financial Condition - Allowance for
Loan Losses."
Other Income
Total other income increased $226,000 to $1,227,000 in 1996. Most
of the increase is attributed to a $116,000 gain on the sale of
other real estate owned by the Bank. Fees generated by the growing
trust department increased to $63,000 in 1996 from $17,000 in 1995,
its first year of operation. Deposit portfolio growth caused the
remaining increase of other income through service charges on
deposit accounts. During 1996 and 1995, approximately $22,000 and
$20,000 of security gains were realized on the settlement of bonds
issued by the Washington Public Power Supply System (WPPSS). The
Company wrote these bonds down to their estimated market values in
the 1980's when the issuer defaulted on certain obligations.
Management believes no additional amounts will be recovered from the
WPPSS issues in the future. Additionally, losses of $10,000 were
realized on the call of agency securities during 1996 and
prepayments of mortgage-backed securities.
Total other income increased to $1,002,000 in 1995 compared to
$830,000 in 1994, for an increase of 20.7%. The increase was
primarily due to a $49,000 increase in service charges on deposit
accounts related to non-sufficient funds and returned check charges,
and a $39,000 loss on sale of other real estate owned in 1994. The
WPPSS settlement discussed above provided additional increase in
other income. Other security gains of approximately $4,000 and
$6,000 were realized in 1995 and 1994, respectively, as a result of
certain securities being called by issuers. There were no security
sales during the three year period ended December 31, 1996.<PAGE>
Other Expenses
Noninterest expense increased $298,000 during 1996 and $416,000 in
1995. Management emphasized cost controls in 1996 and maintained
noninterest expense at 2.58% of average assets, down from 2.69% in
1995 and 2.82% in 1994. The largest component of noninterest
expense is salaries and employee benefits, which increased $189,000
or 6.7% in 1996, equivalent to the 6.7% increase in 1995 compared to
1994. The increases were from normal salary adjustments and the
addition of staff members to service the Company's growing customer
base. Equipment expense increased $66,000 during 1996 and $22,000
in 1995, primarily as a result of additional depreciation on
additions related to renovation of one of the Bank's branches during
late 1995 and early 1996. The Bank's state franchise tax, which is
based on a percentage of shareholders' equity, continues to increase
as equity grows through earnings retention.
Other noninterest expense increased $172,000 during 1996 and
$362,000 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. In August, 1995, the FDIC announced
the reduction of deposit insurance premiums to be paid by members of
the Bank Insurance Fund (the BIF). As a result, the Bank's premiums
for deposits insured by BIF decreased to a minimum of $.04 per $100
of deposits, effective June 1, 1995, down from $.23 previously. As
a result of this decrease in BIF premiums, the Bank's deposit
insurance expense decreased $157,000, or 42.8%, from $366,000 in
1994 to $209,000 in 1995. Effective January 1, 1996, the Bank's rate
was further reduced to the statutory minimum of $500 per quarter,
resulting in annual premiums of $2,000 in 1996. Management
anticipates higher FDIC premiums in the future as assessments are
expected to return to normal rates in 1997.
Income Taxes
The provision for income taxes increased to $1,600,000 in 1996, from
$1,444,000 in 1995 and $821,000 in 1994, primarily from the increase
in income before income taxes. The Company's effective tax rate
remained relatively stable at 29.3% in 1996, increasing from 28.7%
in 1995 and 25.1% in 1994. The increase in 1995 resulted from the
amount of nontaxable interest income becoming a smaller percentage
of income before income taxes in 1995 as compared to 1994.
FINANCIAL CONDITION
Total assets of the Company were $254,135,000 at December 31, 1996
compared to $233,210,000 at December 31, 1995, representing an
increase of 9.0%. This growth was primarily in loans, which were
funded by FHLB advances and increases in the Company's deposits from
its local customer base. Some growth was also experienced in cash
and cash equivalents and securities. The changes in the
consolidated balance sheets and the factors which caused those
changes are discussed below.
Securities
Total securities decreased $2,257,000, or 4.1% from $54,641,000 at
year-end 1995 to $52,384,000 at year-end 1996. Funds from the
maturities of U.S. Treasury securities classified as available for
sale were used to purchase $3,000,000 of interest-bearing time
deposits maturing in 1998. During 1996, the Company invested
prepayments from U.S. Government agency mortgage-backed securities
into higher-yielding (on a taxable equivalent basis) nontaxable
obligations of states and political subdivisions. Otherwise, 1996
maturities were reinvested into similar security types. The
distribution of the securities portfolio at year-end 1996 consisted
of U.S. Treasury securities comprising 42.2% of the portfolio, U.S.
government corporations and agencies representing 17.2% and
obligations of state and political subdivisions at 37.1%. The
principal balances of the Company's mortgage-backed portfolio paid
down to $12,000 at December 31, 1996. In compliance with FHLB
requirements and to increase its borrowing capacity, the Bank
increased its holdings of FHLB stock to $1,552,000 by purchasing
approximately $872,000 of stock during 1996.
Since one of the primary functions of the securities portfolio is to
provide a source of liquidity, it is structured such that maturities
and cash flows satisfy the Company's liquidity needs and
asset/liability management requirements. At December 31, 1996,
30.9% of the portfolio matures within one year. The Company's
holdings of structured notes is limited to $1 million of "multi-step
bonds," the interest rate of which periodically increases to
predetermined levels throughout the life of the security unless
called by the issuer.
Securities classified as held to maturity under Statement of
Financial Accounting Standards (SFAS) No. 115 are carried at
amortized cost, and include securities that management has the
positive intent and the ability to hold to maturity. Securities
classified as available for sale include those which may be sold
prior to maturity for liquidity, asset/liability management or other
reasons. The Company classifies all equity securities as available
for sale.
Loans
Total loans of $165,141,000 were recorded as of December 31, 1996 as
compared to $152,619,000 at year-end 1995, representing an increase
of 8.2%.
While the mix of loans within this portfolio remained relatively
stable, the Company experienced increases of $5,568,000, or 8.2%, in
commercial loans, $5,260,000, or 12.0%, in residential real estate
loans and $1,276,000, or 8.3%, in installment and credit card loans.
As of December 31, 1996 agriculture production loans and loans
secured by farmland totaled approximately $11.0 million and are
included in the commercial, commercial real estate and residential
real estate categories. Credit card loans, which are primarily
unsecured, totaled $1.1 million, or 0.7% of loans at year-end 1996.
In late 1995, the Company began to originate fixed rate mortgage
loans utilizing a match funding program using FHLB advances of
similar maturity. At December 31, 1996, the balance of loans
originated under this program totaled approximately $10,675,000 and
were held for sale, the fair values of which exceeded the carrying
values. Management anticipates continued lending of mortgage loans
under this program as customer demand for fixed rate loans is
strong. The majority of the remainder of the Company's residential
real estate loan portfolio consists of loans that reprice every 6
months based on a short-term Treasury bill index.
Demand for commercial business loans, as well as both commercial and
residential real estate loans was strong in 1995 and continued
through 1996. Though growth in 1996 was somewhat slower than in
1995, management is seeking loan growth through alternative programs
for customers, such as accounts receivable financing. Management
believes the Company's local service area will experience continued
economic strength and a continued need for this type of lending into
1997.
Allowance and Provision for Loan Losses
The allowance for loan losses is maintained at a level considered
adequate to cover loan losses that are currently anticipated based
on past loss experience, general economic conditions, changes in mix
and size of the loan portfolio, information about specific borrower
situations, and other factors and estimates which are subject to
change over time. Management periodically reviews selected large
loans, delinquent and other problem loans, and selected other loans.
The collectibility of these loans is evaluated by considering the
current financial position and performance of the borrower, the
estimated market value of the collateral, the Company's collateral
position in relationship to other creditors, guarantees and other
potential sources of repayment. Management forms judgments, which
are subjective, as to the probability of loss and the amount of loss
on these loans as well as other loans in the aggregate.
The allowance for loan losses totaled $2,121,000 or 1.28% of total
loans at December 31, 1996, up from $1,830,000 or 1.20% of total
loans at December 31, 1995. Net charge-offs for 1996 totaled
$109,000, down from $242,000 in 1995, and compared to $55,000 in
1994. As with all loans that have been charged-off, management is
continuing collection efforts and future recoveries may occur. The
provision for loan losses decreased from $515,000 in 1995 to
$400,000 in 1996. This provision was primarily the result of growth
within the loan portfolio, particularly in the commercial loan area,
which carries a higher inherent risk compared to mortgage loans.
The reduction in provision reflects the decrease in loan losses in
1996. The increase in the provision from $300,000 in 1994 to
$515,000 in 1995 resulted primarily from loan growth, in addition to
increased net charge-offs in 1995.
Nonperforming loans consist of loans past due 90 days or more which
totaled approximately $747,000 or .45%, of total loans at December
31, 1996, as compared to $571,000 or .37%, of total loans at
December 31, 1995. The allowance for loan losses as a percentage of
nonperforming loans was 283.9% and 320.4% at year-end 1996 and 1995,
respectively. Given the Company's collateral position, management
anticipates little loss related to the nonperforming loans.
In addition to nonperforming loans, management regularly identifies
and monitors, through its credit officers and its loan review
function, loans for which it has concerns about the borrowers'
future ability to meet repayment terms. Loans on management's
"watch list" that are not included in the nonperforming loans
discussed above totaled $8,819,000 at December 31, 1996, compared to
$9,545,000 at December 31, 1995. These loans are considered in
management's analysis of the allowance for loan losses and include
substantially all loans that were adversely classified for
regulatory purposes.
Premises and Equipment
Net premises and equipment decreased to $2,563,000 at year-end 1996
from $2,669,000 at year-end 1995. Net fixed asset expenditures of
$322,000 to renovate a branch office was offset by $428,000 in
depreciation expense.
At December 31, 1996, the Company has contracted to purchase a tract
of land with the intent to construct another branch office in Wayne
County in late 1997. The Company also acquired $120,000 of land in
1995 to build an operation center in 1998. Beyond these land
purchases, no commitments have been entered into relative to these
projects.
Deposits
The Company's deposits are obtained from individuals and businesses
located in its market area. Total deposits increased 3.4% to
$213,340,000 at December 31, 1996, compared to $206,255,000 at
December 31, 1995. Noninterest-bearing balances decreased to
$21,392,000 at December 31, 1996, as compared to $24,167,000 at
December 31, 1995 as customers shifted funds from lower yielding
accounts into higher yielding certificates of deposit. Interest-bearing demand
and savings deposits decreased $698,000, or 1.1% at
December 31, 1996, compared to 1995. The largest growth occurred in
certificates of deposits under $100,000, which increased $6,185,000
to $102,149,000 at year-end 1996, compared to $95,964,000 at year-end 1995.
CAPITAL RESOURCES
Total shareholders' equity increased from $20,343,000 at December
31, 1995 to $23,426,000 at December 31, 1996. Contributing to this
increase was net income of $3,859,000, offset by $1,064,000 of
dividends paid to shareholders. Also contributing to the increase
was the implementation of a dividend reinvestment program in 1995,
whereby shareholders may elect to purchase additional shares of the
Company's stock in lieu of receiving their dividends in cash. As a
result of this program, shareholders' equity increased $279,000
during 1996. The Company also established a plan whereby
participants in the Company's 401(k) profit sharing plan may elect
for the plan to purchase and hold shares of the Company's common
stock in their accounts. As a result of this plan, equity increased
$49,000 during 1996. In October 1996, the Company declared a two-for-one stock
split paid in the form of a 100% stock dividend.
Accordingly, the transaction was capitalized at the par value of the
Company's stock and resulted in a shift of capital of $4,043,000
from retained earnings to common stock.
Banking regulations have established minimum capital ratios for
banks and bank holding companies. As a result, the Company and its
subsidiary bank must meet a risk-based capital requirement, which
defines two tiers of capital and compares each to the Company's
"risk-weighted assets". The Company's assets and certain off-balance sheet
items, such as loan commitments, are each assigned a
risk factor so that assets with potentially higher credit risk will
require more capital support than assets with lower risk. These
regulations require the Company to have a minimum total risk-based
capital ratio of 8%, at least half of which must be Tier 1 capital.
The Company's Tier 1 capital is its shareholders' equity before any
unrealized gain or loss on securities available for sale, while
total risk-based capital includes Tier 1 capital and a limited
amount of the allowance for loan losses. In addition, a bank or
bank holding company's leverage ratio (which for the Company equals
its shareholders' equity before any unrealized gain or loss on
securities available for sale divided by average assets) must be
maintained at a minimum of 3% to 5%. The Company's actual and
required capital amounts are disclosed in Note 12 to the
consolidated financial statements.
Dividends paid by the Company's bank subsidiary are the primary
source of funds available to the Company for payment of dividends to
shareholders and for other working capital needs. The payment of
dividends by the Bank to the Company is subject to restrictions by
its regulatory authorities, which generally limit dividends to the
current and prior two years retained earnings, as defined by
regulation. In addition, dividend payments may not reduce
regulatory capital levels below the minimum regulatory guidelines
discussed above. At December 31, 1996, approximately $8.2 million
is available for payment of dividends by the Bank to the Company
under the most restrictive of these guidelines.
LIQUIDITY
Liquidity refers to the Company's ability to generate sufficient
cash to fund current loan demand, meet deposit withdrawals, pay
operating expenses and meet other obligations. The Company's
primary sources of liquidity are cash and cash equivalents, which
totaled $30,318,000 at December 31, 1996, an increase of $8,268,000
from year-end 1995. Net income, securities available for sale and
repayments and maturities of securities held to maturity and loans
also serve as forms of liquidity. Cash and cash equivalents, time
deposits with banks and securities maturing within one year
represent 19.5% of total assets at December 31, 1996 as compared to
15.7% at year-end 1995. Other sources of liquidity which the
Company could use to help to ensure that funds are available when
needed include, but are not limited to, the purchase of federal
funds, advances from the FHLB, adjustments of interest rates to
attract deposits and borrowing at the Federal Reserve discount
window. Management believes that its sources of liquidity are
adequate to meet the needs of the Company.
As summarized in the consolidated statements of cash flows, the most
significant investing activity for the Company is net loan
originations as management continues to seek strong loan growth.
Purchases of securities and time deposits with banks were made with
funds received from securities maturing throughout the year. In
1996, the Company's primary financing activity was borrowing from
the FHLB to fund fixed rate first mortgage loans. Deposit growth
accounted for cash infusions of $7.1 million in 1996, $20.6 million
in 1995 and $17.8 million in 1994.
Cash and cash equivalents increased from $14.7 million at year-end
1994 to $22.0 million at year-end 1995, primarily because of
December 31, 1995 falling on a weekend, causing an accumulation of
public funds and checks drawn on other banks which were not
collectible until the following week. Approximately $6 million of
deposits received near year-end 1995 were related to cyclical short-term
balances in public funds.
ASSET/LIABILITY MANAGEMENT
Asset/liability management is the process of managing the Company's
exposure to changes in interest rates. The primary measure of
interest rate risk exposure is the Company's "gap," or the
difference between interest rate sensitive assets and liabilities
that mature or reprice within a certain period of time. A financial
institution with a positive interest rate sensitivity gap for a
given period has an amount of interest-earning assets maturing or
otherwise repricing within the period which exceeds the amount of
interest-bearing liabilities maturing or otherwise repricing within
the same period. Accordingly, in a rising interest rate
environment, financial institutions with positive interest rate
sensitivity gaps generally will experience greater increases in the
yield on their assets than in the cost of their liabilities, as the
Company experienced in 1994 and early 1995. Conversely, in an
environment of falling interest rates, the yield on assets of
institutions with positive interest rate sensitivity gaps generally
will decrease more rapidly than the costs of their funds. Changes
in interest rates generally will have the opposite effect on
financial institutions with negative interest rate sensitivity gaps.
Management monitors its gap position on a monthly basis with the
goal to make slightly more money in a rising interest rate
environment in order to maintain earnings at an acceptable level
when additional funding of the Company's loan loss reserve may be
necessary. At December 31, 1996, the percentage of rate sensitive
assets to liabilities repricing within one year was 92.4%, compared
to 91.9% and 112.1% at December 31, 1995 and 1994. This shift was
related to the strong increase in fixed rate loans originated with
funds from fixed rate FHLB advances. The borrowings reduce the
Company's exposure to repricing liabilities by lengthening the
maturities of the fixed rate funds as compared to certificates of
deposit, whose maturities are less than five years. Though nearly
all fixed rate loans originated with FHLB advances are held for sale
at December 31, 1996, management intends to use fixed rate
borrowings in the future to mitigate the volatility of liability
repricing. Management's goal is to continue to increase the
Company's asset sensitivity to slightly above 100% of liabilities
repricing in less than one year. While the interest rate
environment of recent years has proven beneficial to the Company,
decreases in market rates of interest have generally adversely
affected the net income of the Company.
The table below provides a measure of the Company's interest rate
sensitivity at December 31, 1996. The amount of assets and
liabilities shown which reprice or mature in a period were
determined based on the contractual terms of the asset or liability.
Demand deposits and savings accounts reprice at management's
discretion and such accounts are therefore included in the amount
repricing within three months. This table may not reflect the
actual impact on the Company of changes in interest rates because
the repricing of various categories of rate sensitive assets and
liabilities are subject to other factors, such as competition,
customer performance, and management influence.<PAGE>
<TABLE>
INTEREST RATE SENSITIVITY ANALYSIS
<CAPTION>
Within Three to 1 to 5 Over
(In Thousands of Dollars) 3 Months 12 Months Years 5 Years Total
<S> <C> <C> <C> <C> <C>
Rate Sensitive Assets (RSA)
Interest-bearing demand
deposits $ 5,670 $ 5,670
Time deposits with banks $ 3,000 3,000
Federal funds sold 17,000 17,000
Debt securities 5,402 $ 10,759 21,097 $13,304 50,562
Loans 60,309 60,115 13,518 31,199 165,141
------ ------- ------ ------ -------
Total RSA 88,381 70,874 37,615 44,503 241,373
------ ------- ------ ------ -------
Rate Sensitive Liabilities
(RSL)
Demand deposits 36,317 36,317
Savings 28,807 28,807
Certificates of deposit
In excess of $100,000 2,535 17,529 4,611 24,675
Other 17,605 63,305 21,239 102,149
Repurchase agreements 4,738 4,738
FHLB advances 369 1,102 4,785 5,486 11,742
------ ------- ------ ----- -------
Total RSL 90,371 81,936 30,635 5,486 208,428
------ ------- ------ ----- -------
Rate Sensitivity Gap $(1,990) $(11,062) $ 6,980 $39,017 $ 32,945
====== ======= ====== ====== =======
Cumulative Rate Sensitivity
Gap $(1,990) $(13,052) $(6,072) $32,945 $ 32,945
====== ======= ====== ====== =======
RSA/RSL 97.80% 86.50% 122.78% 811.21%
====== ======= ====== ======
Cumulative Rate Sensitivity
Gap to total RSA (.82)% (5.41)% (2.52)% 13.65%
====== ======= ====== ======
</TABLE>
<PAGE>
FAIR VALUE OF FINANCIAL INSTRUMENTS
The Company disclosed the estimated fair value of its financial
instruments at December 31, 1996 and 1995 in Note 14 to the
consolidated financial statements. The fair value of the Company's
financial instruments experienced modest changes in 1996 due to the
relatively stable interest rate environment. The estimated fair
value of loans increased to 100.6% of the carrying value at December
31, 1996 from being equal to book value at December 31, 1995. As
bond prices fell during the uptick in interest rates in late 1996,
the fair value of securities held to maturity decreased from 102.0%
of carrying value at year-end 1995 to 101.3% at year-end 1996. The
estimated fair value of time deposits increased slightly from 100.4%
of carrying value at December 31, 1995 to 100.9% at December 31,
1996.
ACCOUNTING STANDARDS
Recent pronouncements by the Financial Accounting Standards Board
(FASB) may have an impact on financial statements issued in
subsequent periods. Set forth below is a summary of such
pronouncements.
Effective January 1, 1996, SFAS No. 122, "Accounting for Mortgage
Servicing Rights," became effective for the Company. This statement
requires companies that sell or securitize mortgage loans to
allocate the total cost of the mortgage loans to mortgage servicing
rights and to loans (without the mortgage servicing rights) based on
their fair values. Costs allocated to mortgage servicing rights
will be recorded as a separate asset and will be amortized in
proportion to, and over the period of, estimated net servicing
income. SFAS No. 122 did not impact the Company's financial
condition or results of operations in 1996 as no loans were sold and
no servicing rights purchased during 1996.
SFAS No. 125, "Accounting for Transfers and Servicing of Financial
Assets and Extinguishment of Liabilities," revises accounting
treatment for transfers of financial assets, such as loans and
securities, and for distinguishing between sales and secured
borrowings. It is effective for some transactions in 1997 and
others in 1998. This Statement is not expected to materially effect
the Company's financial statements.
IMPACT OF INFLATION AND CHANGING PRICES
The financial statements and related data presented herein have been
prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and
results of operations primarily in terms of historical dollars
without considering changes in the relative purchasing power of
money over time due to inflation. Unlike most industrial companies,
virtually all of the assets and liabilities of the Company are
monetary in nature. As a result, interest rates have a more
significant impact on a financial institution's performance than the
effects of general levels of inflation. Interest rates do not
necessarily move in the same direction or in the same magnitude as
the prices of goods and services. The liquidity, maturity structure
and quality of the Company's assets and liabilities are critical to
the maintenance of acceptable performance levels.
COMMON STOCK
The common shares of the Company are not traded on an established
market. In October 1994, the Company entered into an agreement with
The Ohio Company and McDonald & Company to be active market makers
for the Company's stock. These quotations reflect inter-dealer
prices, without mark-up, mark-down or commission and may not
represent actual transactions.
The table below represents the range of high and low prices paid for
transactions known to the Company. Management does not have
knowledge of the prices paid on all transactions, all of which were
private. Because of the lack of an established market, these prices
may not reflect the prices at which the stock would trade in an
active market. All of the prices below have been restated to
reflect the October 1996 two-for-one stock split paid in the form of
a 100% stock dividend. The chart also specifies the cash dividends
paid by the Company to its shareholders during 1995 and 1996. While
management expects to maintain its policy of paying regular cash
dividends in the future, no assurances can be given that dividends
will be declared, or if declared, what the amount of any such
dividends will be. Additional information concerning the payment of
dividends is included in Note 12 of the consolidated financial
statements.
<TABLE>
<CAPTION>
Cash
Dividends
Quarter Ended High Low Declared
- -------------- ----- --- ---------
<S> <C> <C> <C>
March 31, 1995 $ 31.75 $ 30.82 $ 127,680
June 30, 1995 31.75 30.82 127,783
September 30, 1995 31.75 30.82 127,991
December 31, 1995 31.75 30.82 448,502
March 31, 1996 32.25 30.82 160,679
June 30, 1996 33.25 30.82 160,920
September 30, 1996 33.25 31.57 161,149
December 31, 1996 42.50 31.57 580,841
</TABLE>
As of December 31, 1996, CSB Bancorp, Inc. had approximately 761
shareholders and 1,295,172 outstanding shares of common stock.
TRANSFER AGENT
CSB Bancorp, Inc. acts as its own transfer agent for its common
stock.
ANNUAL AND OTHER REPORTS; SHAREHOLDER AND GENERAL INQUIRIES
CSB Bancorp, Inc. is required to file an annual report on Form 10-K
for its fiscal year ended December 31, 1996 with the Securities and
Exchange Commission. Copies of the Form 10-K annual report and the
Company's quarterly reports may be obtained without charge by
contacting:
Pamela S. Basinger
CSB Bancorp, Inc.
6 West Jackson Street
Millersburg, Ohio 44654
(330) 674-9015<PAGE>
<TABLE>
FIVE-YEAR SELECTED CONSOLIDATED FINANCIAL DATA
The following table sets forth certain selected consolidated
financial information of CSB Bancorp, Inc.
<CAPTION>
1996 1995 1994 1993 1992
----- ---- ---- ---- ----
(in thousands of dollars, except shares, per share data and ratios)
<S> <C> <C> <C> <C> <C>
Statements of earnings:
Total interest income $ 19,480 $ 18,305 $ 13,654 $ 12,066 $ 12,582
Total interest expense 8,828 8,034 5,602 5,173 6,500
------- ------- ------ ------ ------
Net interest income 10,652 10,271 8,052 6,893 6,082
Provisions for loan losses 400 515 300 390 708
------- ------- ------ ------ ------
Net interest income after
Provision for loan losses 10,252 9,756 7,752 6,503 5,374
Security gains 12 24 6 40 87
Other income 1,216 978 824 870 893
------- ------ ------ ------ ------
Total noninterest income 1,228 1,002 830 910 980
Total noninterest expenses 6,021 5,722 5,306 5,101 4,855
------- ------ ------ ------ ------
Earnings before federal
income taxes 5,459 5,036 3,276 2,312 1,499
Federal income tax expense (1) 1,600 1,444 821 435 239
------- ------ ------ ------ ------
Net earnings $ 3,859 $ 3,592 $ 2,455 $ 1,877 $ 1,260
======= ====== ====== ====== ======
Per share of common stock (2)
Net earnings $ 3.00 $ 2.81 $ 1.92 $ 1.47 $ .98
Dividends .83 .65 .50 .44 .36
Book value 18.09 15.83 13.38 12.09 11.07
Average common shares
outstanding (2) 1,288,522 1,279,002 1,276,800 1,278,132 1,280,000
Year-end balances:
Loans, net $ 163,020 $ 150,789 $ 135,686 $ 123,600$ 117,754
Securities 52,384 54,641 48,888 46,316 35,954
Total assets 254,135 233,210 204,407 184,316 167,731
Deposits 213,340 206,255 185,680 167,902 152,460
Borrowings 16,480 5,913 930 526 626
Shareholders' equity 23,426 20,343 17,078 15,432 14,171
Average balances:
Loans, net $ 155,298 $ 145,109 $ 130,032 $ 120,144 $ 113,337
Securities 50,129 49,698 44,620 37,865 38,351
Total assets 233,353 213,077 188,434 171,910 163,310
Deposits 199,609 191,919 169,792 155,479 147,480
Borrowings 10,632 1,563 1,777 1,232 1,239
Shareholders' equity 22,095 18,743 16,263 14,999 13,969
</TABLE>
<TABLE>
<CAPTION>
Year ended December 31,
-------------------------------------------------------------------
1996 1995 1994 1993 1992
----- ---- ---- ---- ----
(in thousands of dollars, except shares, per share data and ratios)
<S> <C> <C> <C> <C> <C>
Selected ratios:
Net yield on average interest-
bearing assets 4.79% 5.07% 4.53% 4.26% 3.95%
Return on average total assets 1.65 1.69 1.30 1.09 .77
Return on average shareholders'
equity 17.47 19.17 15.10 12.51 9.02
Average shareholders' equity
as a percent of average total
assets 9.47 8.80 8.63 8.73 8.55
Net loan charge-offs as a percent
of average loans .07 .16 .04 .23 .39
Allowance for possible loan losses
as a percent of loans at year-end 1.28 1.20 1.13 1.05 1.01
Shareholders' equity as a percent
of total year-end assets 9.21 8.72 8.35 8.37 8.45
</TABLE>
<PAGE>
Notes to five-year selected consolidated financial data:
(1) Year ended December 31, 1993 includes benefit from
cumulative effect at January 1, 1993 of change in method of
accounting for income taxes of $90 or $.28 per share.
(2) Restated for 1996 stock split paid in the form of a 100%
stock dividend.
FINANCIAL STATEMENTS
REPORT OF INDEPENDENT AUDITORS
Shareholders and Board of Directors
CSB Bancorp, Inc.
Millersburg, Ohio
We have audited the accompanying consolidated balance sheets of CSB
Bancorp, Inc. as of December 31, 1996 and 1995, and the related
consolidated statements of income, changes in shareholders' equity
and cash flows for each of the three years in the period ended
December 31, 1996. These financial statements are the
responsibility of the Company's management. Our responsibility is
to express an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the consolidated
financial position of CSB Bancorp, Inc. as of December 31, 1996 and
1995, and the consolidated results of its operations and cash flows
for each of the three years in the period ended December 31, 1996,
in conformity with generally accepted accounting principles.
/S/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
January 10, 1997
<PAGE>
<TABLE>
CSB BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
December 31, 1996 and 1995
<CAPTION>
1996 1995
---- ----
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits with banks (Note 1) $ 7,647,790 $ 11,449,174
Interest-bearing demand deposits with banks 5,669,966 2,000,523
Federal funds sold 17,000,000 8,600,000
---------- ----------
Cash and cash equivalents 30,317,756 22,049,697
Time deposits with other institutions 3,000,000
Securities available for sale, at fair value (Note 2) 14,890,413 18,001,888
Securities held to maturity (Estimated fair values of
$37,970,342 in 1996 and $37,377,956 in 1995) (Note 2) 37,493,467 36,638,817
Loans
Total loans (Note 3) 165,141,298 152,619,369
Allowance for loan losses (Note 4) 2,120,845 1,830,250
----------- -----------
Net loans 163,020,453 150,789,119
Premises and equipment, net (Note 5) 2,563,216 2,669,430
Accrued interest receivable and other assets 2,849,875 3,061,292
------------- ------------
Total assets $ 254,135,180 $ 233,210,243
============= ============
LIABILITIES
Deposits
Noninterest-bearing $ 21,391,610 $ 24,166,742
Interest-bearing (Note 6) 191,947,974 182,088,751
----------- -----------
Total deposits 213,339,584 206,255,493
Securities sold under repurchase agreements (Note 7) 4,738,173 3,962,933
Federal Home Loan Bank borrowings (Note 7) 11,741,515 1,950,196
Accrued interest payable and other liabilities 889,428 698,858
----------- -----------
Total liabilities 230,708,700 212,867,480
Commitments and contingencies (Note 10)
SHAREHOLDERS' EQUITY (Note 12)
Common stock, $6.25 par value; 1996 - 3,000,000 shares
authorized, 1,298,372 shares issued; 1995 - 1,000,000 shares
authorized, 644,278 issued 8,114,826 4,026,738
Additional paid-in capital 4,520,502 4,236,952
Retained earnings 10,818,500 12,065,770
Treasury stock at cost, 1996 - 3,200 shares; 1995 - 1,600 shares (56,000) (56,000)
Unrealized gain on securities available for sale 28,652 69,303
---------------- ----------------
Total shareholders' equity 23,426,480 20,342,763
---------------- ----------------
Total liabilities and shareholders' equity $ 254,135,180 $ 233,210,243
================= ================
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Interest income
Loans, including fees $15,759,724 $15,084,865 $11,378,991
Taxable securities 1,932,408 1,942,729 1,318,071
Nontaxable securities 1,029,655 930,362 874,764
Other 758,384 347,012 81,550
---------- ----------- -----------
Total interest income 19,480,171 18,304,968 13,653,376
Interest expense
Deposits 8,213,452 7,967,587 5,542,976
Other 614,617 66,289 58,546
---------- ----------- -----------
Total interest expense 8,828,069 8,033,876 5,601,522
---------- ----------- -----------
Net interest income 10,652,102 10,271,092 8,051,854
Provision for loan losses (Note 4) 400,000 514,709 300,000
---------- ----------- -----------
Net interest income after provision for
loan losses 10,252,102 9,756,383 7,751,854
---------- ----------- -----------
Other income
Service charges on deposit accounts 627,635 573,130 524,494
Merchant fees 155,311 175,855 159,370
Other income 316,762 229,328 178,926
Security gains 11,949 23,743 6,260
Gain (loss) on sale of other real
estate owned 116,090 (38,804)
---------- ----------- -----------
Total other income 1,227,747 1,002,056 830,246
Other expenses
Salaries and employee benefits
(Note 9) 2,999,258 2,810,218 2,634,428
Occupancy expense 346,936 354,946 362,833
Equipment expense 469,828 403,916 382,145
Stationery, supplies and printing 193,565 150,747 154,793
Federal deposit insurance premiums 2,000 209,311 366,110
State franchise tax 299,675 255,430 230,540
Other expenses 1,709,121 1,537,412 1,174,982
---------- --------- ---------
Total other expenses 6,020,383 5,721,980 5,305,831
---------- --------- ---------
Income before income taxes 5,459,466 5,036,459 3,276,269
Provision for income taxes (Note 8) 1,600,000 1,444,207 820,893
---------- --------- ----------
Net income $ 3,859,466 $ 3,592,252 $ 2,455,376
=========== ========== ==========
Earnings per common share (Note 1) $ 3.00 $ 2.81 $ 1.92
=========== ========== ==========
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
Unrealized
Gain/(Loss) on
Additional Securities Total
Common Paid-in Retained Treasury Available Shareholders'
Stock Capital Earnings Stock For Sale Equity
<S> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1994 $4,000,000 $4,000,000 $ 7,488,498 $(56,000) $ 2,164 $15,434,662
Net income 2,455,376 2,455,376
Cash dividends
declared ($.50 per share) (638,400) (638,400)
Change in unrealized
loss on securities
available for sale (174,084) (174,084)
--------- --------- ---------- ------- -------- ----------
Balance, December 31,
1994 4,000,000 4,000,000 9,305,474 (56,000) (171,920) 17,077,554
Net income 3,592,252 3,592,252
Common stock issued:
Under dividend re-
investment program 22,457 199,016 221,473
Under 401(k) plan 4,281 37,936 42,217
Cash dividends declared
($.65 per share) (831,956) (831,956)
Change in unrealized
loss on securities
available for sale 241,223 241,223
---------- --------- ---------- -------- ------- --------
Balance, December 31,
1995 4,026,738 4,236,952 12,065,770 (56,000) 69,303 20,342,763
Net income 3,859,466 3,859,466
Common stock issued:
Under dividend re-
investment program 39,038 240,069 279,107
Under 401(k) plan 5,903 43,481 49,384
Cash dividends declared
($.83 per share) (1,063,589) (1,063,589)
Stock split (100% stock
dividend) 4,043,147 (4,043,147)
Change in unrealized
gain on securities
available for sale (40,651) (40,651)
--------- --------- ----------- -------- -------- -----------
Balance, December 31,
1996 $8,114,826 $4,520,502 $10,818,500 $(56,000) $ 28,652 $23,426,480
========= ========= ========== ======= ======= ===========
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from operating activities
Net income $ 3,859,466 $ 3,592,252 $ 2,455,376
Adjustments to reconcile net income
to net cash from operating activities
Security amortization, net of accretion 36,105 98,851 264,186
Depreciation 428,307 331,927 320,481
Loss (gain) on sale of other
real estate owned (116,090) 38,804
Investment security gains (11,949) (23,743) (6,260)
Provision for loan losses 400,000 514,709 300,000
Deferred income taxes (72,705) (48,921) (179,200)
Changes in
Net deferred loan fees 28,199 (62,141) 172,232
Income taxes payable 203,705 (159,327) 127,168
Accrued interest receivable (41,128) (348,909) (244,908)
Accrued interest payable 11,006 123,781 68,613
Other assets and liabilities 133,551 (16,904) 11,644
----------- ---------- ----------
Net cash from operating activities 4,858,467 4,001,575 3,328,136
----------- ---------- ----------
Cash flows from investing activities
Purchase of time deposits
with financial institutions (3,000,000)
Securities available for sale
Proceeds from maturities 10,000,000 7,000,000 4,000,000
Purchases (7,917,347)(10,607,058) (7,000,156)
Securities held to maturity
Proceeds from maturities
and repayments 9,100,731 11,178,470 12,395,353
Purchases (8,949,808)(13,057,229)(12,486,164)
Loan sale proceeds 306,802
Loan originations, net of payments (12,659,533)(15,862,449)(12,558,412)
Property and equipment expenditures (322,093) (587,624) (145,075)
Proceeds from sale of other real estate 242,090 138,000
----------- ----------- -----------
Net cash used in investing activities (13,505,960) 21,629,088) 15,656,454)
----------- ----------- -----------
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (Continued)
Years ended December 31, 1996, 1995 and 1994
<CAPTION>
1996 1995 1994
<S> <C> <C> <C>
Cash flows from financing activities
Net increase in deposits 7,084,091 20,575,357 17,778,578
Net increase in securities sold under
repurchase agreements 775,240 3,033,426 403,308
Advances on FHLB borrowings 10,072,667 1,950,196
Principal reductions on FHLB borrowings (281,348)
Shares issued for 401(k) plan 49,384 42,217
Cash dividends paid (784,482) (610,483) (638,400)
----------- ----------- -----------
Net cash from financing activities 16,915,552 24,990,713 17,543,486
----------- ----------- -----------
Net change in cash and cash equivalents 8,268,059 7,363,200 5,215,168
Cash and cash equivalents at beginning
of year 22,049,697 14,686,497 9,471,329
----------- ----------- -----------
Cash and cash equivalents at end of year $30,317,756 $22,049,697 $14,686,497
=========== =========== ===========
Significant noncash transactions
Transfer from fixed assets to other
real estate $ 430,000
Transfer securities to available for sale 11,146,000
Transfer securities to held to maturity $ 1,000,000
Cash paid during the year for:
Interest 8,817,000 $ 7,658,000 5,533,000
Income taxes 1,469,000 1,575,000 871,000
<PAGE>
CSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1996 and 1995
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of the accounting policies adopted by CSB
Bancorp, Inc. which have a significant effect on the financial
statements.
Consolidation Policy and Nature of Operations: The consolidated
financial statements include the accounts of CSB Bancorp, Inc. (the
"Company") and its wholly owned subsidiary, The Commercial and
Savings Bank (the "Bank"). All significant intercompany
transactions and balances have been eliminated.
The Company is engaged in the business of commercial and retail
banking and trust services, with operations conducted through its
main office and seven branches located in Millersburg, Ohio and
nearby communities. These communities are the source of
substantially all deposit, loan, and trust activities. The majority
of the Company's income is derived from commercial and retail
lending activities and investments in securities.
Use of Estimates: In preparing financial statements, management
must make estimates and assumptions. These estimates and
assumptions affect the amounts reported for assets, liabilities,
revenues and expenses as well as affecting the disclosures provided.
Areas involving the use of management's estimates and assumptions
primarily include the allowance for loan losses, the realization of
deferred tax assets, fair value of certain securities and the
determination and carrying value of impaired loans. Future results
could differ from current estimates.
Cash Reserves: The Bank was required to have $1,888,000 and
$1,940,000 on deposit with the Federal Reserve Bank or as cash on
hand at December 31, 1996 and 1995. These reserves do not earn
interest.
Securities: Held-to-maturity securities are those which the Company
has the positive intent and ability to hold to maturity and are
reported at amortized cost. Available for sale securities are those
which the Company may sell if needed for liquidity, asset-liability
management, or other reasons even if there is not a present
intention of such a sale. Equity securities that have a readily
determinable fair value are also classified as available for sale.
Available-for-sale securities are reported at fair value, with
unrealized gains or losses included as a separate component of
shareholders' equity, net of tax.
Realized gains and losses on sales of investment securities are
computed on the basis of the specific identification of the security
sold. Interest income includes amortization of purchase premiums
and discounts using the interest method.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Loans: Loans are reported at the principal balance outstanding, net
of deferred loan fees and costs. Interest income is reported on the
interest method and includes amortization of net deferred loan fees
and costs over the loan term. Loans held for sale are reported at
the lower of cost or market value in the aggregate.
Interest income is not reported when full loan repayment is in
doubt, typically when payments are past due over 90 days. Payments
received on such loans are reported as principal reductions.
Allowance for Loan Losses: The allowance for loan losses is a
valuation allowance, increased by the provision for loan losses and
decreased by charge-offs less recoveries. Management estimates the
allowance required based on past loan loss experience, known and
inherent risks in the portfolio, information about specific borrower
situations and estimated collateral values, economic conditions and
other factors. Allocations of the allowance may be made for
specific loans, but the entire allowance is available for any loan
that, in management's judgment, should be charged-off.
Loan impairment is reported when full payment under the loan terms
is not expected. If a loan is impaired, a portion of the allowance
is allocated so that the loan is reported, net, at the present value
of estimated future cash flows using the loan's existing interest
rate. Loans are evaluated for impairment when payments are delayed,
typically 90 days or more, or when the internal grading system
indicates a doubtful classification.
Smaller balance homogeneous 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 less than
$100,000. Commercial loans and Mortgage loans secured by other
properties are evaluated individually for impairment.
Premises and Equipment: Premises and equipment are stated at cost
less accumulated depreciation. These assets are reviewed for
impairment when events indicate their carrying amounts may not be
recoverable. Depreciation is computed on a straight-line basis over
the estimated useful life of the asset. Maintenance and repairs are
expensed and major improvements are capitalized.
Other Real Estate: Real estate owned, other than that used in the
normal course of business, is included in other assets at fair value
less estimated costs to sell. Any reduction from the carrying value
of the related loan to fair value at the time of acquisition is
accounted for as a loan loss. Any subsequent reduction in fair
value is charged to expense. Other real estate owned included on
the balance sheets was $301,000 and $427,000 at December 31, 1996
and 1995.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Income Taxes: The Company records income tax expense based upon the
amount of tax due on its tax return plus deferred taxes computed
based upon the expected future tax consequences of temporary
differences between the carrying amounts and tax bases of assets and
liabilities, using enacted tax rates.
Statement of Cash Flows: For purposes of the statement of cash
flows, cash and due from banks, interest-bearing demand deposits and
federal funds sold are included in cash and cash equivalents. Net
cash flows are reported for customer loan and deposit transactions,
and deposits with other financial institutions. Cash dividends paid
are reported net of shares issued under the dividend reinvestment
plan.
Earnings Per Share: The weighted average number of shares used in
computing earnings per share was 1,288,522 for 1996, 1,279,002 for
1995 and 1,276,800 for 1994. All per share data has been restated
to reflect a stock split effected in the form of a 100% stock
dividend on October 2, 1996.
Financial Statement Presentation: Certain items in the 1995 and
1994 financial statements have been reclassified to correspond with
the 1996 presentation.
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains, gross unrealized losses
and estimated fair values of securities at December 31, 1996 and
1995 are as follows:
</TABLE>
<TABLE>
<CAPTION>
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 $11,025,400 $47,599 $ (186) $11,072,813
Obligations of U.S.
government corporations
and agencies 2,000,000 (4,000) 1,996,000
----------- ------- ------- -----------
Total debt securities
available for sale 13,025,400 47,599 (4,186) 13,068,813
Other securities 1,821,600 -- -- 1,821,600
----------- ------- ------ -----------
Total securities
available for sale $14,847,000 $47,599 $(4,186) $14,890,413
=========== ======= ======= ===========
</TABLE>
NOTE 2 - SECURITIES (Continued)
<TABLE>
<CAPTION> 1996
Gross Gross Estimated
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Held to maturity
U.S. Treasury securities $11,030,882 $116,799 $ (9,947) $11,137,734
Obligations of U.S.
government corporations
and agencies 7,011,135 4,413 (6,361) 7,009,187
Obligations of state and
political
subdivisions 19,440,275 499,363 (127,342) 19,812,296
Mortgage-backed securities 11,175 (50) 11,125
----------- -------- --------- -----------
Total securities
held to maturity $37,493,467 $620,575 $(143,700) $37,970,342
=========== ======== ========= ===========
</TABLE>
<TABLE>
<CAPTION>
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 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
Obligations of U.S.
government corporations
and agencies 8,024,229 29,087 (3,566) 8,049,750
Obligations of state 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 securities
held to maturity $36,638,817 $847,647 $(108,508) $37,377,956
=========== ======== ========= ===========
</TABLE>
<PAGE>
NOTE 2 - SECURITIES (Continued)
The amortized cost and estimated fair value of debt securities at
December 31, 1996, by contractual maturity, are shown below.
Expected maturities may differ from contractual maturities because
issuers may have the right to call or prepay obligations.
Estimated
Amortized Fair
Cost Value
Available for sale
Debt securities:
Due in one year or less $ 5,985,597 $ 6,014,687
Due after one through five years 7,039,803 7,054,126
----------- -----------
Total debt securities available
for sale $13,025,400 $13,068,813
=========== ===========
Held to maturity
Debt securities:
Due in one year or less $10,145,894 $10,187,198
Due after one year through
five years 14,043,004 14,303,990
Due after five years through
ten years 11,678,348 11,839,994
Due after ten years 1,615,046 1,628,035
Mortgage-backed securities 11,175 11,125
----------- -----------
Total debt securities held
to maturity $37,493,467 $37,970,342
=========== ===========
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 securities were sold during any period presented. Securities
called or settled by the issuer resulted in gains of $11,949,
$23,743 and $6,260 in 1996, 1995 and 1994.
Securities with a carrying value of approximately $19,565,000 and
$24,435,000 were pledged as of December 31, 1996 and 1995 to secure
public deposits, as well as other deposits and borrowings as
required or permitted by law.
NOTE 3 - LOANS
Loans as presented on the balance sheet are comprised of the
following classifications at December 31:
1996 1995
Commercial $ 73,404,483 $ 67,835,818
Commercial real estate 22,991,254 22,857,621
Residential real estate 49,254,612 43,994,813
Installment and credit card 16,730,089 15,453,681
Construction 2,760,860 2,477,436
------------ ------------
Total loans $165,141,298 $152,619,369
============= ============
At December 31, 1996, approximately $11,000,000 of fixed rate
residential real estate loans were held for sale, the fair values of
which exceed the carrying values.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of the activity in the allowance for loan losses is as
follows:
1996 1995 1994
Balance - January 1 $1,830,250 $1,557,547 $1,312,050
Provision for loan losses 400,000 514,709 300,000
Loans charged off (136,524) (292,086) (112,411)
Recoveries 27,119 50,080 57,908
---------- ---------- ----------
Balance - December 31 $2,120,845 $1,830,250 $1,557,547
========== ========== ==========
NOTE 4 - ALLOWANCE FOR LOAN LOSSES (Continued)
Information regarding impaired loans at December 31, 1996 and 1995
is as follows:
1996 1995
Balance of impaired loans
at December 31 $961,000 $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 $961,000 $228,000
======== ========
Portion of allowance for loan losses
allocated to the impaired loan balance
at December 31 $336,000 $ 40,000
======== ========
Information regarding impaired loans is as follows for the years
ended December 31, 1996 and 1995:
1996 1995
Average investment in impaired loans
during the year $406,000 $338,000
Interest income recognized on impaired
loans including interest income
recognized on cash basis during the year 84,000 None
Interest income recognized on impaired
loans on cash basis during the year 56,000 None
NOTE 5 - PREMISES AND EQUIPMENT
Premises and equipment, at cost, and accumulated depreciation are as
follows at December 31:
1996 1995
Land and improvements $ 483,465 $ 482,465
Buildings and improvements 2,511,504 2,571,735
Furniture and equipment 2,543,595 2,176,608
Leasehold improvements 79,979 79,979
---------- ----------
Total 5,618,543 5,310,787
Accumulated depreciation 3,055,327 2,641,357
---------- ----------
Premises and equipment, net $2,563,216 $2,669,430
========== ==========
NOTE 5 - PREMISES AND EQUIPMENT (Continued)
The Bank leases certain office locations. Total rental expense
under these leases was $89,324 in 1996, $92,035 in 1995 and $92,231
in 1994. Future minimum lease payments are as follows.
1997 $ 71,879
1998 53,775
1999 36,175
2000 27,375
2001 6,845
--------
Total minimum payments $196,049
========
The original term of two leases expire during 1997. Management
intends to renew the leases for another five-year period. The
annual payments have not been negotiated as of December 31, 1996 and
are not included in the table above.
NOTE 6 - INTEREST-BEARING DEPOSITS
Interest-bearing deposits are as follows at December 31:
1996 1995
Demand $ 36,317,260 $ 39,045,660
Statement and passbook savings 28,806,699 26,776,356
Certificates of deposit:
In excess of $100,000 24,675,449 20,302,481
Other 102,148,566 95,964,254
------------ ------------
Total $191,947,974 $182,088,751
============ ============
Maturities of certificates of deposit are as follows at December 31,
1996:
1997 $100,974,337
1998 9,302,481
1999 7,971,646
2000 5,871,726
2001 2,703,825
------------
Total $126,824,015
============
NOTE 7 - BORROWINGS
The Company borrows from the Federal Home Loan Bank (FHLB) to fund
fixed-rate residential real estate loans. These borrowings carry
fixed interest rates ranging from 5.65% to 7.15% at year-end 1996
and 5.80% to 6.35% at year-end 1995 and 10-, 15- or 20-year
maturities. The Company 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. Future required
principal payments, including curtailments, are as follows:
1997 $ 1,469,485
1998 1,416,488
1999 1,259,229
2000 1,118,328
2001 992,116
Thereafter 5,485,869
-----------
$11,741,515
===========
At December 31, 1996, the FHLB borrowings are collateralized by the
Company's FHLB stock and $17,612,000 of qualifying mortgage loans.
Securities sold under agreements to repurchase generally mature
within three months from the transaction date. Physical control is
maintained for all securities sold under repurchase agreements.
Information concerning securities sold under agreements to
repurchase is summarized as follows:
1996 1995
Average month-end balance
during the year $2,832,589 $1,451,600
Average interest rate during
the year 3.75% 4.33%
Maximum month-end balance
during the year $4,738,173 $3,962,933
NOTE 8 - INCOME TAXES
The provision for income taxes consists of the following:
1996 1995 1994
Current $1,672,705 $1,493,128 $1,000,093
Deferred (72,705) (48,921) (179,200)
---------- ---------- ----------
Total income
tax provision $1,600,000 $1,444,207 $ 820,893
========== ========== ==========
NOTE 8 - INCOME TAXES (Continued)
The differences between the financial statement provision and
amounts computed by applying the statutory federal income tax rate
of 34% to income before income taxes are as follows:
1996 1995 1994
Income taxes computed at the
statutory federal tax rate $1,856,218 $1,712,396 $1,113,931
Add (subtract) tax effect of
Tax exempt interest income (348,771) (314,190) (300,113)
Nondeductible interest expense 43,677 35,299 24,607
Other 48,876 10,702 (17,532)
---------- ---------- ----------
Total income tax provision $1,600,000 $1,444,207 $820,893
The tax effects of principal temporary differences and the resulting
deferred tax assets and liabilities that comprise the net deferred
tax asset included in other assets on the balance sheet are as
follows at December 31:
1996 1995 1994
Allowance for loan losses $568,365 $469,563 $376,844
Deferred loan fees 114,578 184,740 262,622
Unrealized loss on securities
available for sale 88,565
Other 75,152 47,471 8,332
-------- -------- --------
Deferred tax asset 758,095 701,774 736,363
-------- -------- --------
Accretion (36,383) (35,232) (17,787)
Depreciation (34,382) (73,167) (87,257)
Unrealized gain on securities
available
for sale (14,760) (35,702)
Other (22,950) (1,700)
-------- -------- --------
Deferred tax liability (108,475) (145,801) (105,044)
-------- -------- --------
Net deferred tax asset $649,620 $555,973 $631,319
======== ======== ========
The Company has sufficient taxes paid in and available for recovery
to warrant recording the full deferred tax asset without a valuation
allowance.
NOTE 9 - EMPLOYEE BENEFITS
The Company maintains a contributory profit sharing plan covering
substantially all of its employees who meet certain age and service
requirements. Under the plan, the Company contributes 3% of each
eligible participant's compensation during the year, plus matching
participant contributions up to 2% of each participant's
compensation during the year. Both of these contributions are
dependent upon the availability of sufficient net income from
current or prior years. Additional contributions may be made as
approved by the Board of Directors. Expense under this plan for
1996, 1995 and 1994 was $104,000, $93,000 and $92,000.
NOTE 10 - COMMITMENTS, CONTINGENCIES AND OFF-BALANCE SHEET RISK
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. These financial instruments include commitments to make
or purchase loans, undisbursed lines of credit, undisbursed credit
card balances and letters of credit. The Bank's exposure to credit
loss in the event of nonperformance by the other party to the
financial instrument is represented by the contractual amount of
those instruments. The Bank follows the same credit policy to make
such commitments as it uses for those loans recorded on the balance
sheet.
As of December 31, 1996 and 1995, commitments to make loans,
primarily in the form of undisbursed portions of approved lines of
credit, amounted to approximately $28,596,000 and $19,402,000,
substantially all of which carried adjustable rates of interest.
Commitments under outstanding standby letters of credit amounted to
$1,515,000 at December 31, 1996 and $979,000 at December 31, 1995.
Since many commitments to make loans expire without being used, the
amount does not necessarily represent future cash commitments.
Collateral obtained relating to these commitments is determined
using management's credit evaluation of the borrower and may include
real estate, vehicles, business assets, deposits and other items.
Occasionally, various contingent liabilities arise that are not
recorded in the financial statements, including claims and legal
actions arising in the ordinary course of business. In the opinion
of management, after consultation with legal counsel, the ultimate
disposition of these matters is not expected to have a material
affect on financial condition or results of operations.
NOTE 11 - RELATED PARTY TRANSACTIONS
In the ordinary course of business, loans are granted to executive
officers, directors, and their related business interests. The
following is an analysis of activity of related party loans, for
loans aggregating $60,000 or more to any one related party, for the
year ended December 31, 1996:
Balance at January 1, 1996 $1,418,071
New loans and advances 237,171
Repayments (552,364)
Other changes (56,108)
----------
Balance at December 31, 1996 $1,046,770
==========
Other changes represent loans applicable to one reporting period
that are excludable from the other reporting period.
NOTE 12 - REGULATORY MATTERS
The Company and Bank are subject to regulatory capital requirements
administered by federal banking agencies. Capital adequacy
guidelines and prompt corrective action regulations involve
quantitative measures of assets, liabilities and certain off-balance-sheet
items calculated under regulatory accounting
practices. Capital amounts and classifications are also subject to
qualitative judgments by regulators about components, risk
weightings and other factors and the regulators can lower
classifications in certain cases. Failure to meet various capital
requirements can initiate regulatory action that could have a direct
material effect on the financial statements.
The prompt corrective action regulations provide five
classifications, including well capitalized, adequately capitalized,
undercapitalized, significantly undercapitalized and critically
undercapitalized, although these terms are not used to represent
overall financial condition. If adequately capitalized, regulatory
approval is required to accept brokered deposits. If
undercapitalized, capital distributions are limited, as is asset
growth and expansion and plans for capital restoration are required.
The minimum requirements are:
Capital to Risk-
Weighted Assets Tier 1 Capital
Total Tier 1 to Average Assets
Well capitalized 10% 6% 5%
Adequately capitalized 8% 4% 4%
Undercapitalized 6% 3% 3%
NOTE 12 - REGULATORY MATTERS (Continued)
The Company and the Bank met the requirements of well capitalized
institutions as defined above, at December 31, 1996 and 1995. The
classification as well capitalized is made periodically by the
banking regulators and is subject to change over time. Management
does not believe any conditions or events have occurred since the
latest notification by the regulators that would have changed this
classification. The Bank's actual capital and the required amount
of capital for capital adequacy purposes and to be considered well
capitalized at December 31, 1996 was:
<TABLE>
<CAPTION>
Minimum
Required To Be
Minimum Required Well Capitalized
For Capital Under Prompt Corrective
Actual Adequacy Purposes Action Regulations
Amount Ratio Amount Ratio Amount Ratio
<S> <C> <C> <C> <C> <C> <C>
Total capital (to risk-weighted assets)
Consolidated $25,335 16.37% $12,382 8.0% $15,476 10.0%
Bank $24,835 16.05% $12,382 8.0% $15,476 10.0%
Tier 1 capital (to risk-weighted assets)
Consolidated $23,397 15.12% $6,190 4.0% $9,285 6.0%
Bank $22,897 14.79% $6,190 4.0% $9,285 6.0%
Tier 1 capital (to average assets)
Consolidated $23,397 9.21% $10,162 4.0% $12,702 5.0%
Bank $22,897 9.01% $10,162 4.0% $12,702 5.0%
</TABLE>
<PAGE>
The Company's primary source of funds with which to pay dividends is
dividends received from the Bank. The payment of dividends by the
Bank to the Company is subject to restrictions by its regulatory
agency. These restrictions generally limit dividends to the current
and prior two years retained earnings as defined by the regulations.
In addition, dividends may not reduce capital levels below the
minimum regulatory requirements disclosed above. Under the most
restrictive of these requirements, the Company estimates that
retained earnings available for payment of dividends by the Bank to
the Company approximates $8,182,000 at December 31, 1996.
<PAGE>
<TABLE>
NOTE 13 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
<CAPTION>
As of December 31
1996 1995
<S> <C> <C>
Condensed Balance Sheets
Assets
Cash deposited with subsidiary $ 499,528 $ 247,419
Investment in subsidiary 22,926,032 20,083,367
Organization costs 920 11,977
----------- -----------
Total assets $23,426,480 $20,342,763
=========== ===========
Equity
Common stock $ 8,114,826 $ 4,026,738
Paid-in capital 4,520,502 4,236,952
Retained earnings 10,818,500 12,065,770
Treasury stock (56,000) (56,000)
Unrealized gain on securities available
for sale 28,652 69,303
----------- -----------
Total liabilities and equity $23,426,480 $20,342,763
=========== ===========
</TABLE>
NOTE 13 - PARENT COMPANY ONLY CONDENSED FINANCIAL INFORMATION
(Continued)
<TABLE>
<CAPTION>
For the year ended December 31,
1996 1995 1994
<S> <C> <C> <C>
Condensed Statements of Income
Dividends from subsidiary $1,063,595 $ 831,957 $ 663,640
Operating expenses (116,347) (80,313) (58,638)
Income before taxes and equity in
undistributed earnings of subsidiary 947,248 751,644 605,002
Income tax benefit 28,902 27,143 19,107
Equity in undistributed earnings of
subsidiary 2,883,316 2,813,465 1,831,267
---------- ---------- ----------
Net income $3,859,466 $3,592,252 $2,455,376
========== ========== ==========
Condensed Statements of Cash Flows
Cash flows from operating activities
Net income $3,859,466 $3,592,252 $2,455,376
Adjustments to reconcile net
income to
cash provided by operations
Equity in undistributed income of
subsidiary (2,883,316) (2,813,465) (1,831,267)
Change in other assets 11,057 30,164 12,980
---------- ---------- ----------
Net cash provided by operating
activities 987,207 808,951 637,089
---------- ---------- ----------
Cash flows from financing activities
Shares issued for 401(k) plan 49,384 42,217
Cash dividends paid (784,482) (610,483) (638,400)
-------- -------- --------
Net cash used in financing activities (735,098) (568,266) (638,400)
-------- -------- --------
Net change in cash 252,109 240,685 (1,311)
Beginning of year cash 247,419 6,734 8,045
-------- -------- --------
End of year cash $499,528 $247,419 $ 6,734
======== ======== ========
</TABLE>
NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS
The carrying amount and estimated fair values of financial
instruments are as follows at December 31, 1996 and 1995:
<TABLE>
<CAPTION>
December 31, 1996 December 31, 1995
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
<S> <C> <C> <C> <C>
Assets
Cash and equivalents $ 30,317,756 $ 30,318,000 $ 22,049,697 $ 22,050,000
Time deposits with other
institutions 3,000,000 3,000,000
Securities available for sale 14,890,413 14,890,000 18,001,888 18,002,000
Securities held to maturity 37,493,467 37,970,000 36,638,817 37,378,000
Loans, net of allowance
for loan losses 163,020,453 164,025,000 150,789,119 150,810,000
Accrued interest receivable 1,843,649 1,844,000 1,802,521 1,803,000
Liabilities
Demand and savings deposits $(86,515,569) $(86,516,000) $(89,988,758) $(89,989,000)
Time deposits (126,824,015) (128,001,000) (116,266,735) (116,723,000)
Repurchase agreements (4,738,173) (4,738,000) (3,962,933) (3,963,000)
FHLB borrowings (11,741,515) (11,988,000) (1,950,196) (1,955,000)
Accrued interest payable (423,463) (423,000) (412,457) (412,000)<PAGE>
For purposes of the above disclosures of estimated fair value, the
following assumptions were used. The estimated fair value for cash
and cash equivalents is considered to approximate cost. The
estimated fair value of securities is based on quoted market values
for the individual securities or for equivalent securities.
Carrying value is considered to approximate fair value for loans
that contractually reprice at intervals of six months or less, for
short-term borrowings, for demand and savings deposits and accrued
interest. The fair values of fixed rate loans, loans that reprice
less frequently than each six months, and time deposits have been
approximated by a discount rate value technique utilizing estimated
market interest rates. The fair value of unrecorded commitments is
not material.
While these estimates of fair value are based on management's
judgment of the most appropriate factors, there is no assurance that
were the Company to have disposed of such items, the estimated fair
values would necessarily have been achieved at these dates, since
market values may differ depending on various circumstances. The
estimated fair values at December 31, 1996 and 1995 should not
necessarily be considered to apply at subsequent dates.
NOTE 14 - FAIR VALUES OF FINANCIAL INSTRUMENTS (Continued)
Other assets and liabilities may have value but are not included in
the above disclosures, such as property and equipment. Also,
nonfinancial instruments typically not recognized in these financial
statements nevertheless may have value, but are not included in the
above disclosures. These include, among other items, the estimated
earnings power of core deposit accounts, the earnings potential of
loan servicing rights, the value of a trained work force, customer
goodwill, and similar items.
</TABLE>
EXHIBIT 21
SUBSIDIARY OF CSB BANCORP, INC.
The Commercial and Savings Bank, Millersburg, Ohio, an Ohio charter
commercial bank.
EXHIBIT 23
CONSENT OF CROWE, CHIZEK AND COMPANY LLP
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the
prospectuses constituting part of the registration statements on
Form S-3 for the CSB Bancorp, Inc. Share Owner Dividend Reinvestment
Plan and on Form S-8 for The Commercial & Savings Bank of
Millersburg Profit Sharing and 401(k) Savings Retirement Plan and
Trust of our report dated January 10, 1997 on the consolidated
balance sheets of CSB Bancorp, Inc. as of December 31, 1996 and 1995
and the related consolidated statements of income, changes in
shareholders' equity and cash flows for each of the three years in
the period ended December 31, 1996, which report is incorporated by
reference in this Form 10-K.
/S/ Crowe, Chizek and Company LLP
Crowe, Chizek and Company LLP
Columbus, Ohio
March 25, 1997
EXHIBIT 24
POWERS OF ATTORNEY
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director and Officer of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins her attorney in fact, for her and in her name,
place and stead and in her office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorney full power and authority to do and perform each and
every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully to all intents and purposes as she
might or could do if personally present at the doing thereof, hereby
ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
26th day of March, 1997.
/s/ Pamela S. Basinger
Pamela S. Basinger
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins his attorney in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorneys full power and authority to do and perform each
and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes
as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of March, 1997.
/s/ David W. Kaufman
David W. Kaufman
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins his attorney in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorneys full power and authority to do and perform each
and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes
as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
28th day of March, 1997.
/s/ J. Thomas Lang
J. Thomas Lang
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director and Officer of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins her attorney in fact, for her and in her name,
place and stead and in her office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorney full power and authority to do and perform each and
every act and thing whatsoever requisite and necessary to be done in
and about the premises as fully to all intents and purposes as she
might or could do if personally present at the doing thereof, hereby
ratifying and confirming all that said attorney may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this
26th day of March, 1997.
/s/ Vivian A. McClelland
Vivian A. McClelland
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins his attorney in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorneys full power and authority to do and perform each
and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes
as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of March, 1997.
/s/ H. Richard Maxwell
H. Richard Maxwell
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins his attorney in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorneys full power and authority to do and perform each
and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes
as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of March, 1997.
/s/ Daniel J. Miller
Daniel J. Miller
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins his attorney in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorneys full power and authority to do and perform each
and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes
as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of March, 1997.
/s/ Samuel P. Riggle, Jr.
Samuel P. Riggle, Jr.
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins his attorney in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorneys full power and authority to do and perform each
and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes
as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of March, 1997.
/s/ David C. Sprang
David C. Sprang
POWER OF ATTORNEY
WHEREAS, CSB BANCORP, INC., an Ohio corporation (the "Company"),
proposes to file with the Securities and Exchange Commission,
pursuant to the provisions of the Securities and Exchange Act of
1934, as amended, and the rules and regulations thereunder, an
Annual Report to Shareholders on Form 10-K ("Form 10-K"), with
respect to the Company's 1996 fiscal year; and
WHEREAS, the undersigned is a Director of the Company;
NOW, THEREFORE, the undersigned hereby constitutes and appoints
Douglas D. Akins his attorney in fact, for him and in his name,
place and stead and in his office and capacity with the Company, to
execute and file such Form 10-K and exhibits, and thereafter to
execute and file any amended Form 10-K, hereby giving and granting
to said attorneys full power and authority to do and perform each
and every act and thing whatsoever requisite and necessary to be
done in and about the premises as fully to all intents and purposes
as he might or could do if personally present at the doing thereof,
hereby ratifying and confirming all that said attorneys may or shall
lawfully do or cause to be done by virtue hereof.
This authority hereby granted is limited to the execution and
delivery of such Form 10-K or amendment thereto, unless earlier
revoked by me or expressly extended by me in writing, shall remain
in force and effective only until such Form 10-K or any amendment
thereto is filed.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this
26th day of March, 1997.
/s/ Samuel M. Steimel
Samuel M. Steimel
<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 ANNUAL REPORT ON FORM 10-K AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 7,648
<INT-BEARING-DEPOSITS> 8,670
<FED-FUNDS-SOLD> 17,000
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 14,890
<INVESTMENTS-CARRYING> 37,493
<INVESTMENTS-MARKET> 37,970
<LOANS> 165,141
<ALLOWANCE> 2,121
<TOTAL-ASSETS> 254,135
<DEPOSITS> 213,340
<SHORT-TERM> 4,738
<LIABILITIES-OTHER> 889
<LONG-TERM> 11,741
0
0
<COMMON> 8,115
<OTHER-SE> 15,312
<TOTAL-LIABILITIES-AND-EQUITY> 254,135
<INTEREST-LOAN> 15,760
<INTEREST-INVEST> 2,962
<INTEREST-OTHER> 758
<INTEREST-TOTAL> 19,480
<INTEREST-DEPOSIT> 8,213
<INTEREST-EXPENSE> 8,828
<INTEREST-INCOME-NET> 10,652
<LOAN-LOSSES> 400
<SECURITIES-GAINS> 12
<EXPENSE-OTHER> 6,020
<INCOME-PRETAX> 5,459
<INCOME-PRE-EXTRAORDINARY> 3,859
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,859
<EPS-PRIMARY> 3.00
<EPS-DILUTED> 3.00
<YIELD-ACTUAL> 4.79
<LOANS-NON> 174
<LOANS-PAST> 573
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 1,830
<CHARGE-OFFS> 136
<RECOVERIES> 27
<ALLOWANCE-CLOSE> 2,121
<ALLOWANCE-DOMESTIC> 1,307
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 814
</TABLE>
