UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: JUNE 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-21714
CSB Bancorp, Inc.
(Exact name of registrant as specified in its charter)
Ohio 34-1687530
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) Number)
6 W. Jackson Street, P.O. Box 232, Millersburg, Ohio 44654
(Address of principal executive offices)
(330) 674-9015
(Registrant's telephone number)
Indicate by check mark whether the registrant (1) filed all reports
required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the past 12 months (or for such shorter
period that the registrant was required to file such reports), and
(2) has been subject to such filing requirements for the past 90
days.
x Yes No
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable
date.
Common stock, $6.25 par value 1,303,041 shares outstanding at
August 8,1997.
FORM 10-Q
QUARTER ENDED JUNE 30, 1997
Part I - Financial Information
ITEM 1 - FINANCIAL STATEMENTS (Unaudited) Page
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Condensed Consolidated Statements of Changes in
Shareholders' Equity 6
Condensed Consolidated Statements of Cash Flows 7
Notes to the Consolidated Financial Statements 8
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS 14
Part II - Other Information
Other Information 18
Signatures 20
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
June 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits with banks $ 6,689,245 $ 7,647,790
Interest-bearing deposits with banks 168,277 5,669,966
Federal funds sold 5,450,000 17,000,000
----------- ------------
Total cash and cash equivalents 12,307,522 30,317,756
Time deposits with banks 3,000,000 3,000,000
Securities available for sale, at fair value 30,941,056 14,890,413
Securities held to maturity (Estimated fair values of
$53,448,149 in 1997 and $37,970,342 in 1996) 52,721,182 37,493,467
Total loans 166,800,843 165,151,298
Allowance for loan losses 2,223,924 2,120,845
----------- -----------
Net loans 164,576,919 163,020,453
Premises and equipment, net 2,798,034 2,563,216
Accrued interest receivable and other assets 3,869,360 2,849,875
----------- -----------
Total assets $270,214,073 $254,135,180
============ ===========
LIABILITIES
Deposits
Noninterest-bearing $ 21,322,910 $ 21,391,610
Interest-bearing 205,102,847 191,947,974
----------- -----------
Total 226,425,757 213,339,584
Securities sold under agreements to repurchase 5,060,044 4,738,173
Federal Home Loan Bank borrowings 12,257,758 11,741,515
Accrued interest payable and other liabilities 1,025,542 889,428
----------- -----------
Total liabilities 244,769,101 230,708,700
SHAREHOLDERS' EQUITY
Common stock ($6.25 par value; 3,000,000 shares
authorized; 1,306,241 and 1,298,372 shares
issued in 1997 and 1996, respectively) 8,164,008 8,114,826
Additional paid-in capital 4,774,086 4,520,502
Retained earnings 12,534,286 10,818,500
Treasury stock at cost: 3,200 shares (56,000) (56,000)
Unrealized gain on securities available
for sale, net of tax 28,592 28,652
---------- ----------
Total shareholders' equity 25,444,972 23,426,480
---------- ----------
Total liabilities and shareholders' equity $270,214,073 $254,135,180
=========== =============
</TABLE>
See notes to the consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $4,066,951 $3,868,580 $ 8,101,361 $7,796,561
Interest on securities
Taxable 897,670 461,259 1,505,016 1,008,216
Nontaxable 344,309 252,096 621,999 497,708
Other interest income 148,649 171,972 460,397 263,295
--------- --------- ---------- ---------
Total interest income 5,457,579 4,753,907 10,688,773 9,565,780
--------- --------- ---------- ---------
Interest expense
Interest on deposits 2,426,912 1,996,777 4,704,140 4,097,284
Other interest expense 240,058 137,945 479,086 222,703
--------- --------- ---------- ---------
Total interest expense 2,666,970 2,134,722 5,183,226 4,319,987
--------- --------- ---------- ---------
Net interest income 2,790,609 2,619,185 5,505,547 5,245,793
Provision for loan losses (Note 4) 98,736 100,000 200,424 200,000
-------- -------- ---------- ---------
Net interest income after
provision for loan losses 2,691,873 2,519,185 5,305,123 5,045,793
--------- --------- --------- ----------
Other income
Service charges on deposit
accounts 164,118 153,967 335,782 302,462
Other operating income 128,495 125,939 214,424 226,889
Gain on sale of loans 220,176
Security losses (6,069) (7,763)
--------- --------- --------- ----------
Total other income 292,613 273,837 770,382 521,588
--------- --------- --------- ----------
Other expense
Salaries and employee benefits 777,962 751,489 1,514,804 1,470,955
Occupancy expense 73,607 90,138 157,349 186,295
Equipment expense 114,026 112,657 221,949 218,177
State franchise tax 86,752 76,440 169,111 141,750
Other operating expense 488,802 459,905 970,674 889,219
--------- --------- ---------- ----------
Total other expense 1,541,149 1,490,629 3,033,887 2,906,396
--------- --------- ---------- -----------
</TABLE>
See notes to the consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income before federal income taxes $1,443,337 $1,302,393 $3,041,618 $2,660,985
Provision for income taxes 460,001 413,200 883,701 807,800
---------- --------- ---------- ---------
Net income $ 983,336 $ 889,193 $2,157,917 $1,853,185
========== ========= ========== =========
Earnings per common share $ .76 $ .69 $ 1.66 $ 1.44
========== ========= ========== =========
Weighted average shares
outstanding 1,301,402 1,287,512 1,298,845 1,286,586
========== ========== ========== =========
</TABLE>
See notes to the consolidated financial statements.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Balance at beginning of period $24,518,736 $21,173,226 $23,426,480 $20,342,763
Net income 983,336 889,193 2,157,917 1,853,185
Common stock issued under
the dividend reinvestment
program and 401(k) plan 79,794 43,881 302,766 103,811
Cash dividends ($.170 and $.340
per share in 1997; $.125 and
$.250 per share in 1996) (221,227) (160,920) (442,131) (321,599)
Change in unrealized gain/loss
on securities available for sale 84,333 (46,572) (60) (79,352)
---------- ----------- ----------- -----------
Balance at end of period $25,444,972 $21,898,808 $25,444,972 $21,898,808
=========== =========== ========== ============
</TABLE>
See notes to the consolidated financial statements.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended
June 30,
1997 1996
<S> <C> <C>
Net cash from operating activities $ 1,359,203 $ 2,310,067
Investing activities
Securities available for sale
Proceeds from maturities 3,000,000 4,000,000
Purchases (18,957,238) (3,457,641)
Securities held to maturity
Proceeds from maturities, calls and repayments 4,906,150 7,162,556
Purchases (20,118,784) (1,718,349)
Net increase in loans (12,313,578) (3,559,544)
Loan sale proceeds 10,766,167
Purchase of premises and equipment, net (437,076) (222,073)
------------ ----------
Net cash from investing activities (33,154,359) 2,204,949
------------ ----------
Financing activities
Net change in deposits 13,086,173 (9,224,952)
Net change in repurchase agreements 321,871 (1,576,431)
Change in FHLB borrowings 516,243 6,610,866
Cash dividends paid, net of dividend reinvestment (319,799) (238,310)
Shares issued for 401(k) Plan 180,434 20,522
---------- ----------
Net cash from financing activities 13,784,922 (4,408,305)
---------- ----------
Change in cash and cash equivalents (18,010,234) 106,711
Cash and cash equivalents at beginning of period 30,317,756 22,049,697
---------- ----------
Cash and cash equivalents at end of period $ 12,307,522 $22,156,408
========== ==========
Supplemental disclosures
Cash paid for income taxes $ 983,866 $ 705,000
Cash paid for interest 5,192,682 4,358,840
</TABLE>
See notes to the consolidated financial statements.<PAGE>
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include accounts
of CSB Bancorp, Inc. ("CSB") and its wholly-owned subsidiary, The
Commercial and Savings Bank (the "Bank"). All significant
intercompany transactions and balances have been eliminated.
These interim financial statements are prepared without audit and
reflect all adjustments of a normal recurring nature which, in the
opinion of management, are necessary to present fairly the
consolidated financial position of CSB at June 30, 1997, and results
of operations and cash flows for the periods presented. The
accompanying consolidated financial statements do not contain all
necessary financial disclosures required by generally accepted
accounting principles that might otherwise be necessary in the
circumstances. The Annual Report for CSB for the year ended
December 31, 1996, contains consolidated financial statements and
related notes which should be read in conjunction with the
accompanying consolidated financial statements.
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 loans
that, in management's judgement, should be charged-off.
Loan impairment is reported when full payment of principal and
interest 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.
The carrying value of impaired loans is periodically adjusted to
reflect cash payments, revised estimates of future cash flows and
increases in the present value of expected cash flows due to the
passage of time. Cash payments representing interest income are
reported as such and other cash payments are reported as reductions
in carrying value. Increases or decreases in carrying value due to
changes in estimates of future payments or the passage of time are
reported as reductions or increases in bad debt expense.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Accounting Pronouncements: Statement of Financial Accounting
Standards (SFAS) No. 125, "Accounting for Transfers and Servicing of
Financial Assets and Extinguishments of Liabilities," revises
accounting treatment for transfers of financial assets, such as
loans and securities, and for distinguishing between sales and
secured borrowings. SFAS No. 125 did not materially impact the
Company's financial statements for the second quarter of 1997.
SFAS No. 128, "Earnings Per Share," is effective for financial
statements issued after December 15, 1997 and simplifies the
calculation of earnings per share (EPS) by replacing primary EPS
with basic EPS. SFAS No. 128 will not impact the Company's EPS
calculations.
Income Taxes: The provision for income taxes is based upon the
effective income tax rate expected to be applicable for the entire
year.
NOTE 2 - SECURITIES
The amortized cost, gross unrealized gains and losses and estimated
fair values of the securities, as presented in the consolidated
balance sheet at June 30, 1997 and December 31, 1996 are as follows:
<PAGE>
<TABLE>
June 30, 1997
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 $21,010,230 $ 38,589 $ (6,381) $21,043,438
U.S. Government agencies 7,982,405 17,013 (6,900) 7,992,518
---------- ------- --------- ----------
Total debt securities 28,992,635 56,602 (13,281) 29,035,956
Other securities 1,905,100 1,905,100
---------- ------- --------- -----------
Total securities available
for sale $30,897,735 $ 56,602 $ (13,281) $30,941,056
========== ======= ========== =========
Held to maturity
U.S. Treasury securities $14,081,783 $114,984 $ (14,767) $14,182,000
U.S. Government agencies 9,557,617 20,935 (6,900) 9,571,652
Obligations of state and
political subdivisions 29,081,782 695,882 (83,167) 29,694,497
---------- -------- --------- ----------
Total debt securities
held to maturity $52,721,182 $831,801 $(104,384) $53,448,149
========== ======== ========= ==========
</TABLE>
<TABLE>
NOTE 2 - SECURITIES (Continued)
<CAPTION>
December 31, 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
U.S. Government agencies 2,000,000 (4,000) 1,996,000
---------- ------- ------- ----------
Total debt securities 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
=========== ======== ========= ==========
Held to maturity
U.S. Treasury securities $11,030,882 $116,799 $ (9,947) $11,137,734
U.S. Government 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 debt securities
held to maturity $37,493,467 $620,575 $(143,700) $37,970,342
=========== ======== ========== ============
</TABLE>
<PAGE>
One agency security of $1,000,000 was transferred from the
available-for-sale category to held-to-maturity during the first
quarter of 1996. The transfer into held-to-maturity occurred at the
fair value of the security on the date of the transfer, which
approximated amortized cost.
No securities were sold during the first six months of 1997 or 1996.
Losses on calls of securities held to maturity were $7,763 during
the six months ended June 30, 1996.
The amortized cost and estimated fair values of debt securities at
June 30, 1997, by contractual maturity, are shown below. Actual
maturities may differ from contractual maturities because certain
borrowers may have the right to call or prepay the debt obligations
prior to their contractual maturities.
NOTE 2 - SECURITIES (Continued)
Estimated
Amortized Fair
Cost Value
Available for sale
Debt securities
Due in one year or less $10,978,488 $11,000,312
Due in one to five years 18,014,147 18,035,644
---------- ----------
Total debt securities
available for sale $28,992,635 $29,035,956
========== ==========
Held to maturity
Debt securities
Due in one year or less $10,393,505 $10,424,917
Due in one to five years 18,662,114 18,910,006
Due in five to ten years 13,156,309 13,488,909
Due after ten years 10,509,254 10,624,317
---------- ----------
Total debt securities held
to maturity $52,721,182 $53,448,149
========== ==========
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the
following classifications:
June 30, 1997 December 31, 1996
Commercial $ 79,801,828 $ 73,404,483
Commercial real estate 24,339,622 22,991,254
Residential real estate 42,321,129 49,254,612
Installment and credit card 18,319,211 16,730,089
Construction 2,019,053 2,760,860
------------ -----------
Total loans $166,800,843 $165,141,298
============ ============
During the first six months of 1997, the Bank received $10,776,167
in proceeds from mortgage loan sales. A gain of $220,176 was
recognized on this sale. No loans were sold during the first six
months of 1996.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of activity in the allowance for loan losses for the six
months ended June 30, 1997 and 1996 is as follows:
1997 1996
Balance - January 1 $2,120,845 $1,830,250
Loans charged off (124,835) (54,463)
Recoveries 27,490 15,077
Provision for loan losses 200,424 200,000
--------- ---------
Balance - June 30 $2,223,924 $1,990,864
========= =========
Information regarding impaired loans at June 30, 1997 and December
31, 1996 is as follows:
June 30, December 31,
1997 1996
Balance of impaired loans $1,387,000 $961,000
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 $1,387,000 $961,000
Portion of allowance for
loan losses
allocated to the impaired
loan balance $ 522,000 $336,000
Information regarding impaired loans is as follows for the six
months ended June 30, 1997 and 1996:
1997 1996
Average investment in impaired
loans $1,174,000 $271,000
Interest income recognized on
impaired loans
including interest income
recognized on cash basis 35,849 None
Interest income recognized on
impaired loans on
cash basis 30,851 None
NOTE 5 - FEDERAL HOME LOAN BANK BORROWINGS
At June 30, 1997, the Bank had 188 outstanding borrowings from the
Federal Home Loan Bank (FHLB). These borrowings carry fixed
interest rates ranging from 5.60% to 7.15% and maturities of 10, 15,
and 20 years. Monthly principal and interest payments are due on
the borrowings. In addition, a principal curtailment of 10% of the
outstanding principal balance is due on the anniversary date of each
borrowing. FHLB borrowings are collateralized by FHLB stock and a
blanket pledge on $18,387,000 of qualifying mortgage loans at June
30, 1997.
NOTE 6 - CONCENTRATIONS OF CREDIT RISK AND FINANCIAL INSTRUMENTS
WITH OFF-BALANCE SHEET RISK
The Bank grants residential, consumer, and commercial loans to
customers located primarily in Holmes and surrounding counties in
Ohio. Most loans are secured by specific items of collateral
including business assets, consumer assets and residences.
The Bank is a party to financial instruments with off-balance sheet
risk in the normal course of business to meet financing needs of its
customers. The contract amount of these instruments is not included
in the consolidated financial statements. At June 30, 1997 and
December 31, 1996, the contract amount of these instruments, which
primarily include commitments to extend credit and standby letters
of credit, totaled approximately $36,219,000 and $30,111,000,
respectively. Since many commitments to make loans expire without
being used, the amount does not represent future cash commitments.
The exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to make
loans and lines and letters of credit is represented by the
contractual amount of those instruments. CSB follows the same
credit policy to make such commitments as is followed for those
loans recorded in the financial statements. In management's
opinion, these commitments represent normal banking transactions and
no material losses are expected to result therefrom. Collateral
obtained upon exercise of the commitments is determined using
management's credit evaluations of the borrower and may include real
estate and/or business or consumer assets.
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.
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following discussion focuses on the consolidated financial
condition of CSB Bancorp, Inc. (the Company) at June 30, 1997,
compared to December 31, 1996, and the consolidated results of
operations for the quarterly period ending June 30, 1997 compared to
the same period in 1996. The purpose of this discussion is to
provide the reader with a more thorough understanding of the
consolidated financial statements. This discussion should be read
in conjunction with the interim consolidated financial statements
and related footnotes.
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. The registrant is not aware of any trends, events or
uncertainties that will have or are reasonably likely to have a
material effect on the liquidity, capital resources or operations
except as discussed herein. Also, the registrant is not aware of
any current recommendations by regulatory authorities that would
have such effect if implemented.
FINANCIAL CONDITION
Total securities increased approximately $31.3 million during the
first half of 1997 as cash and federal funds sold resulting from
deposit growth and loan sales, as discussed below, were invested in
higher-yielding securities. Most of the securities purchased were
short-term U.S. Treasury notes classified as available for sale and
long-term obligations of state and political subdivisions classified
as held to maturity. The Bank anticipates purchasing more
securities issued by state and political subdivisions in the future
to maximize the tax benefit to the Company. Since one of the
primary functions of the securities portfolio is to provide a source
of liquidity, it is structured such that security maturities and
cash flows satisfy the Company's liquidity needs and asset-liability
management requirements. At June 30, 1997, approximately 27% of the
securities portfolio matures within one year.
Commercial loans increased $6.4 million, or 8.7%, during the first
two quarters of 1997. This increase was primarily a result of
increased loan demand in the Company's service area as the local
economy remains strong. These loans are generally variable-rate and
based on the Prime rate. Commercial loans may be unsecured or
collateralized by business or farm equipment and are generally of
higher risk than residential mortgage loans. In late 1995, the
Company began to originate fixed rate one- to four- family mortgage
loans, utilizing a matched funds program using FHLB advances of
similar maturity to establish an interest rate spread for the
estimated duration of the loans. During the first half of 1997,
management elected to sell approximately $11 million of the
fixed-rate loans. A gain of $220,000 was realized on the sale and
the funds were invested in securities. The Bank retained its
fixed-rate borrowings from the FHLB to facilitate future fixed rate
lending and mitigate volatile rate movements. Management will
continue to originate fixed-rate loans, but does not anticipate new
borrowings will be necessary in the near term to fund such
originations. At June 30, 1997, there were no loans held for sale.
Exclusive of the sale of fixed-rate loans, total loans increased
approximately $12.6 million or 7.7% during the first six months of
1997.
As a percentage of loans, the allowance for loan losses was 1.33% at
June 30, 1997 and 1.28% at December 31, 1996. Impaired loans were
approximately $1.4 million, or .84% of total loans, at June 30,
1997, compared to .58% of loans at December 31, 1996. Of the
impaired loan balance at June 30, 1997, approximately $893,000
related to one creditor whose loans were restructured in early 1997
and are current at June 30, 1997. The other impaired loans were
secured by mortgages on real estate and farm and business equipment.
These credits are considered in management's analysis of the
allowance for loan losses.
The Bank made minor investments in premises and equipment during the
first half of 1997. However, the Bank has purchased a tract of land
in Wayne County with the intent to construct another branch office
in late 1997. The Company also acquired land in 1995 to build an
operation center in 1998. The Company currently leases space for
its operations center.
At June 30, 1997, the ratio of loans to deposits was 73.7%, compared
to 77.4% at the end of 1996 as total deposits increased
approximately $13.1 million, or 6.1%, during the first six months of
1997. Historically, the Bank has experienced a decline in overall
deposit balances during the first half of the year. However, in
1997 the Bank received approximately $8.0 million of deposits as a
result of a successful bond issue for a local school district.
These funds are in a savings account that is expected to deplete
gradually over the next two years. Also, aggressive pricing of
certificates of deposit provided growth in deposit balances which
management expects to continue through the end of the year.
Total shareholders' equity was increased in part by year-to-date net
income of $2.2 million, less $442,000 of cash dividends declared.
The cash dividend represents 20.5% of net income for the first half
of 1997. Also contributing to capital was the dividend reinvestment
program (DRIP) and the purchase of stock by the Bank's 401(k)
retirement plan which increased equity approximately $303,000 during
the first half of 1997.
The Company and its subsidiary meet all regulatory capital
requirements and are considered to be "well capitalized" at June 30,
1997. The Company's ratio of total capital to risk-weighted assets
was 15.42% at June 30, 1997, while Tier 1 risk-based capital ratio
was 14.18%. Regulatory minimums call for a total risk-based capital
ratio of 8%, at least one-half of which must be Tier 1 capital. The
Company's leverage ratio was 9.68% at June 30, 1997, which exceeds
the regulatory minimum of 3% to 5%.
RESULTS OF OPERATIONS
Net income for the six months ended June 30, 1997 was $2,158,000, or
$1.66 per share, as compared to $1,853,000, or $1.44 per share
earned during the same period last year, an increase of $305,000, or
16.5%. Second quarter net income was $983,000, or $.76 per share,
in 1997, compared to $889,000, or $.69 per share for the second
quarter of 1996. The primary factors contributing to these
increases were increases in net interest income and other income.
Net interest income was $5,506,000 for the first six months of 1997,
a 4.9% increase from 1996. Interest and fees on loans increased
$304,000, or 3.9%, which resulted primarily from a higher rate
environment and somewhat from a higher volume of loans as the loan
sale was not consummated until late March 1997. Also, as deposit
funds were invested in securities and federal funds sold, interest
on securities increased $621,000 and other interest income increased
$197,000 for the first half of 1997, compared to the first half of
1996. Management anticipates using these liquid funds, primarily
from federal funds sold and maturities of short-term investments, to
fund higher yielding loans. Net interest income for the second
quarter of 1997 totaled $2,791,000, up 6.5% from $2,135,000 in 1996.
Most of this increase resulted from additional income from the
investment purchases. Income from taxable investments increased
$436,000 or 94.6% from the second quarter of 1996 to 1997, while
income from nontaxable securities increased $92,000 or 36.6% for the
same period.
Interest expense increased $863,000 for the six months ended June
30, 1997, compared to the six months ended June 30, 1996.
Approximately $607,000 of this increase was the result of increased
volumes on interest-bearing accounts and aggressive interest rates.
Other interest expense increased $154,000, resulting from new
borrowings from the FHLB during the second half of 1996. For the
second quarter of 1997 compared to the same period in 1996, interest
expense on deposits increased $430,000 or 21.5%, while interest
expense on FHLB borrowings increased $102,000. These increases were
primarily volume related, but were also affected by higher rates
being paid for the funds.
The provision for loan losses was $99,000 for the second quarter of
1997 and $200,000 during the first half of 1997, which matched the
provisions for comparable periods in 1996. These provisions were
made in recognition of continued loan origination volume, primarily
in the commercial loan portfolio which typically carries a higher
risk of loan loss.
Other income for the first half of 1997 increased approximately
$248,000, primarily as a result of the gain on the sale of loans
discussed above and increased deposit service charge income.
Noninterest income for the second quarter of 1997 was stable
compared to the same period in 1996.
Other expenses increased $51,000 or 3.1% for the three months ended
June 30, 1997 and $128,000, or 4.4%, for the six months ended June
30, 1997, compared to the same periods in 1996. Management
continues to monitor the Company's efficiency ratio by maintaining
increases in other operating costs at low levels. Salaries and
employee benefits increased by 3.5% in the second quarter and 3.0%
for the six month period, and state franchise taxes increased as a
result of 1996 earnings retention. Ohio's state franchise tax for
financial institutions is based on the level of capital at the
previous year-end. The provisions for income taxes of $460,000 for
the second quarter and $884,000 during the first half of 1997
reflected an effective rate of 31.9% and 29.0%, which matched the
comparable periods in 1996.
FORM 10-Q
Quarter ended June 30, 1997
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities:
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
On April 9, 1997, the Company held the Annual Meeting of
Shareholders at which shareholders voted upon the election of three
(3) directors for Class I Nominees for three-year terms expiring in
2000. The results of the voting on these matters were as follows:
Nominee Votes for Withheld
Daniel J. Miller 1,004,427 5,176
Samuel P. Riggle, Jr. 1,004,427 5,176
David C. Sprang 1,004,506 5,097
The following are directors who were not up for election at the
meeting and whose terms of office as directors continued after the
meeting
Douglas D. Akins
David W. Kaufman
H. Richard Maxwell
J. Thomas Lang
Vivian A. McClelland
Samuel M. Steimel
Item 5 - Other Information:
There are no matters required to be reported under this item.
FORM 10-Q
Quarter ended June 30, 1997
PART II - OTHER INFORMATION
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits
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 (reference
is hereby made to Consolidated Statements of Income on page 5
hereof.)
27 Financial Data Schedule
(b) Reports on Form 8-K: No reports on Form 8-K were filed during
the quarter for which this report is filed.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its
behalf by the undersigned, thereunto duly authorized.
CSB BANCORP, INC.
(Registrant)
Date: August 13, 1997 /s/ Douglas D. Akins
(Signature)
Douglas D. Akins
President and Chief Executive
Officer
Date: August 13, 1997 /s/ Pamela S. Basinger
(Signature)
Pamela S. Basinger
Financial Officer
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).
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 (reference is hereby made
to Consolidated Statements of Income on page
5 hereof.)
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
the schedule contains summary financial information extracted from the
consolidated balance sheet and the consolidated statement of income filed as
part of the quarterly report on form 10-q and is qualified in its entirety by
reference to such financial statements
</LEGEND>
<MULTIPLIER> 1000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> JUN-30-1997
<CASH> 6,689
<INT-BEARING-DEPOSITS> 3,168
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<INVESTMENTS-HELD-FOR-SALE> 30,941
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<LOANS> 166,801
<ALLOWANCE> 2,224
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<SHORT-TERM> 5,060
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<LONG-TERM> 12,258
0
0
<COMMON> 8,164
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<LOAN-LOSSES> 200
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<EXPENSE-OTHER> 3,034
<INCOME-PRETAX> 3,042
<INCOME-PRE-EXTRAORDINARY> 2,158
<EXTRAORDINARY> 0
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<NET-INCOME> 2,158
<EPS-PRIMARY> 1.66
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<YIELD-ACTUAL> 4.33
<LOANS-NON> 494
<LOANS-PAST> 548
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 2,121
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