UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: SEPTEMBER 30, 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 West Jackson Street, 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 1,306,951 shares outstanding at
November 4, 1997
<PAGE>
FORM 10-Q
QUARTER ENDED SEPTEMBER 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>
September 30, December 31,
1997 1996
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits with banks $ 7,920,821 $ 7,647,790
Interest-bearing deposits with banks 151,768 5,669,966
Federal funds sold 6,813,000 17,000,000
---------- ----------
Total cash and cash equivalents 14,885,589 30,317,756
Time deposits with banks 3,000,000 3,000,000
Securities available for sale, at fair value 30,059,775 14,890,413
Securities held to maturity (Estimated fair
values of $53,413,141 in 1997 and $37,970,342
in 1996) 52,441,595 37,493,467
Total loans 174,038,575 165,141,298
Allowance for loan losses 2,273,329 2,120,845
----------- -----------
Net loans 171,765,246 163,020,453
Premises and equipment, net 2,985,259 2,563,216
Accrued interest receivable and other assets 3,848,356 2,849,875
----------- -----------
Total assets $278,985,820 $254,135,180
=========== ===========
LIABILITIES
Deposits
Noninterest-bearing $ 20,803,513 $ 21,391,610
Interest-bearing 212,724,756 191,947,974
----------- -----------
Total 233,528,269 213,339,584
Securities sold under agreements to repurchase 5,793,419 4,738,173
Federal Home Loan Bank borrowings 11,940,324 11,741,515
Accrued interest payable and other liabilities 1,122,892 889,428
Total liabilities 252,384,904 230,708,700
SHAREHOLDERS' EQUITY
Common stock ($6.25 par value; 3,000,000
shares authorized;
1,310,151 and 1,298,372 shares issued in
1997 and 1996, respectively) 8,188,445 8,114,826
Additional paid-in capital 4,923,284 4,520,502
Retained earnings 13,464,733 10,818,500
Treasury stock at cost: 3,200 shares (56,000) (56,000)
Unrealized gain on securities available
for sale, net of tax 80,454 28,652
---------- -----------
Total shareholders' equity 26,600,916 23,426,480
---------- -----------
Total liabilities and shareholders' equity $278,985,820 $254,135,180
=========== ============
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Interest income
Interest and fees on loans $4,273,078 $3,900,343 $12,374,439 $11,696,904
Interest on securities
Taxable 819,573 458,649 2,324,589 1,466,865
Nontaxable 395,625 252,924 1,017,624 750,632
Other interest income 125,928 202,470 586,325 465,765
--------- --------- ---------- -----------
Total interest income 5,614,204 4,814,386 16,302,977 14,380,166
--------- --------- ---------- -----------
Interest expense
Interest on deposits 2,538,126 1,977,398 7,242,266 6,074,682
Other interest expense 243,387 181,044 722,473 403,747
--------- --------- --------- ---------
Total interest expense 2,781,513 2,158,442 7,964,739 6,478,429
--------- --------- --------- ---------
Net interest income 2,832,691 2,655,944 8,338,238 7,901,737
Provision for loan losses 99,819 100,000 300,243 300,000
--------- --------- --------- ----------
Net interest income after provision
for loan losses 2,732,872 2,555,944 8,037,995 7,601,737
Other income
Service charges on deposit
accounts 180,225 155,493 516,006 457,955
Other operating income 179,106 134,201 393,530 361,090
Gain on sale of OREO - 116,090 - 116,090
Gain on sale of loans - - 220,176 -
Security losses - (1,520) - (9,283)
--------- --------- --------- ---------
Total other income 359,331 404,264 1,129,712 925,852
--------- --------- --------- ---------
Other expense
Salaries and employee benefits 777,766 753,598 2,292,570 2,224,553
Occupancy expense 76,942 80,708 234,291 267,003
Equipment expense 121,134 125,913 343,083 344,090
Deposit insurance premiums 6,898 186 19,506 1,186
State franchise tax 87,078 78,630 256,189 220,380
Other operating expense 461,336 483,891 1,419,401 1,372,110
--------- -------- --------- ---------
Total other expense 1,531,154 1,522,926 4,565,040 4,429,322
--------- --------- --------- ---------
</TABLE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (CONTINUED)
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Income before federal income taxes 1,561,049 1,437,282 4,602,667 4,098,267
Provision for income taxes 408,700 365,000 1,292,401 1,172,800
--------- --------- --------- ---------
Net income $1,152,349 $1,072,282 $3,310,266 $2,925,467
========= ========= ========= =========
Earnings per common share $ 0.88 $ 0.83 $ 2.55 $ 2.27
=========== ======== ========== =========
Weighted average shares
outstanding 1,304,234 1,289,130 1,300,690 1,287,440
=========== ========= ========== =========
</TABLE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Balance at beginning of period $25,444,972 $21,898,808 $23,426,480 $20,342,763
Net income 1,152,349 1,072,282 3,310,266 2,925,467
Common stock issued under
the dividend reinvestment
program and 401(k) plan 173,635 60,495 476,401 164,306
Cash dividends ($0.17 and $0.51
per share in 1997; $.125 and
$.375 per share in 1996) (221,902) (161,149) (664,033) (482,748)
Change in unrealized gain/loss
on securities available for sale 51,862 8,783 51,802 (70,569)
-------- --------- --------- ---------
Balance at end of period $26,600,916 $22,879,219 $26,600,916 $22,879,219
========== ========== ========== ===========
</TABLE>
See notes to the consolidated financial statements.
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
September 30,
1997 1996
<S> <C> <C>
Net cash from operating activities $ 2,779,919 $ 3,384,212
Investing activities
Securities available for sale
Proceeds from maturities 7,000,000 7,000,000
Purchases (21,959,913) (4,854,828)
Securities held to maturity
Proceeds from maturities, calls
and repayments 9,181,211 7,805,766
Purchases (24,109,272) (4,607,588)
Net increase in loans (19,629,433) (8,553,942)
Loan sale proceeds 10,766,167
Purchase of premises and equipment, net (715,954) (267,992)
Proceeds from sale of other real estate - 240,090
----------- ----------
Net cash from investing activities (39,467,194) (3,238,494)
----------- ----------
Financing activities
Net change in deposits 20,188,685 (6,414,867)
Net change in repurchase agreements 1,055,246 (1,124,349)
Advances on FHLB borrowings 1,289,309 8,628,494
Principal payments on FHLB borrowings (1,090,500) (166,033)
Cash dividends paid, net of dividend
reinvestment (476,115) (356,514)
Shares issued for 401(k) Plan 288,483 38,072
------------ -----------
Net cash from financing activities 21,255,108 604,803
------------ -----------
Change in cash and cash equivalents (15,432,167) 750,521
Cash and cash equivalents at
beginning of period 30,317,756 22,049,697
----------- -----------
Cash and cash equivalents at end of period $ 14,885,589 $22,800,218
=========== ==========
Supplemental disclosures
Cash paid for income taxes $ 1,323,866 $ 1,064,000
Cash paid for interest 7,956,723 6,518,529
</TABLE>
See notes to the consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include accounts
of CSB Bancorp, Inc. ("CSB" or "the Company") 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 September 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 judgment, 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 any period presented.
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 September 30, 1997 and December 31, 1996 are as
follows:
<PAGE>
<TABLE>
<CAPTION>
September 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 $18,016,370 $ 77,067 - $18,093,437
U.S. Government agencies 9,986,606 47,832 $ (3,000) 10,031,438
---------- -------- ---------- ----------
Total debt securities 28,002,976 124,899 (3,000) 28,124,875
Other securities 1,934,900 - - 1,934,900
---------- -------- ---------- ----------
Total securities available
for sale $29,937,876 $ 124,899 $ (3,000) $30,059,775
========== ========= ========== ==========
Held to maturity
U.S. Treasury securities $14,091,718 $ 136,571 $ (2,883) $14,225,406
U.S. Government agencies 6,549,906 3,508 (3,081) 6,550,333
Obligations of state and
political subdivisions 31,799,971 943,573 (106,142) 32,637,402
---------- --------- --------- ----------
Total debt securities
held to maturity $52,441,595 $1,083,652 $(112,106) $53,413,141
========== ========= ========= ==========
</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 nine months of 1997 or
1996. Losses on calls of securities held to maturity were $9,283
during the nine months ended September 30, 1996.
The amortized cost and estimated fair values of debt securities at
September 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 $ 9,988,872 $10,007,680
Due in one to five years 18,014,104 18,117,195
---------- ----------
Total debt securities
available for sale $28,002,976 $28,124,875
========== ==========
Held to maturity
Debt securities
Due in one year or less $ 8,122,467 $ 8,141,105
Due in one to five years 17,835,413 18,111,900
Due in five to ten years 13,683,439 14,141,813
Due after ten years 12,800,276 13,018,323
---------- ----------
Total debt securities held to
maturity $52,441,595 $53,413,141
========== ==========
NOTE 3 - LOANS
Total loans as presented on the balance sheet are comprised of the
following classifications:
September 30, 1997 December 31, 1996
Commercial $ 78,884,306 $ 73,404,483
Commercial real estate 29,486,485 22,991,254
Residential real estate 44,922,213 49,254,612
Installment and credit card 18,286,177 16,730,089
Construction 2,459,394 2,760,860
----------- -----------
Total loans $174,038,575 $165,141,298
=========== ===========
During the first nine months of 1997, the Bank received $10,776,167
in proceeds from residential mortgage loan sales. A gain of
$220,176 was recognized on this sale. No loans were sold during the
first nine months of 1996.
NOTE 4 - ALLOWANCE FOR LOAN LOSSES
A summary of activity in the allowance for loan losses for the nine
months ended September 30, 1997 and 1996 is as follows:
1997 1996
Balance - January 1 $2,120,845 $1,830,250
Loans charged off (189,132) (82,248)
Recoveries 41,373 20,718
Provision for loan losses 300,243 300,000
--------- ---------
Balance - September 30 $2,273,329 $2,068,720
========= =========
Information regarding impaired loans at September 30, 1997 and
December 31, 1996 is as follows:
September 30, December 31,
1997 1996
Balance of impaired loans $1,384,000 $ 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 $1,384,000 $ 961,000
========= =========
Portion of allowance for
loan losses
allocated to the impaired
loan balance $ 437,000 $ 336,000
========= =========
Information regarding impaired loans is as follows for the nine
months ended September 30, 1997 and 1996:
1997 1996
Average investment in
impaired loans $1,173,000 $ 264,000
Interest income recognized
on impaired loans
including interest income
recognized on cash
basis 54,801 None
Interest income recognized
on impaired loans on
cash basis 45,899 None
NOTE 5 - FEDERAL HOME LOAN BANK BORROWINGS
At September 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 $17,910,000 of qualifying mortgage loans at
September 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 September 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 $31,474,000 and $30,111,000,
respectively. Substantially, all committments and letters of credit
carry adjustable rates of interest. Since many commitments to make
loans expire without being used, the amount does not represent
future cash commitments.
The exposure to credit loss in the event of nonperformance by the
other party to the financial instrument for commitments to make
loans and lines and letters of credit is represented by the
contractual amount of those instruments. CSB follows the same
credit policy to make such commitments as is followed for those
loans recorded in the financial statements. In management's
opinion, these commitments represent normal banking transactions and
no material losses are expected to result therefrom. Collateral
obtained upon exercise of the commitments is determined using
management's credit evaluations of the borrower and may include real
estate and/or business or consumer assets.
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
effect on financial condition or results of operations.
ITEM 2 - 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 September 30, 1997,
compared to December 31, 1996, and the consolidated results of
operations for the quarterly and nine month periods ending September
30, 1997, compared to the same periods 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 $30.1 million during the
first nine months of 1997 as cash and federal funds sold resulting
from deposit growth and loan sales, as discussed below, were
deployed into investments, and federal funds 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. Management 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 September 30, 1997, approximately 23%
of the securities portfolio matures within one year.
Commercial loans increased $5.5 million, or 7.5%, during the first
nine months 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. Commercial real estate
loans increased $6.5 million, or 28.3%, during the first nine months
of 1997. This increase was primarily due to additional variable-rate borrowings
from existing loan customers on commercial real
estate in the Company's market area. 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 nine months of 1997,
management elected to sell approximately $10.8 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
September 30, 1997, there were no loans held for sale. Exclusive of
the sale of fixed-rate loans, total loans increased approximately
$19.6 million, or 12.0%, during the first nine months of 1997.
As a percentage of loans, the allowance for loan losses was 1.31% at
September 30, 1997 and 1.28% at December 31, 1996. Impaired loans
were approximately $1.4 million, or .80% of total loans, at
September 30, 1997, compared to .58% of loans at December 31, 1996.
Of the impaired loan balance at September 30, 1997, approximately
$890,000 related to one creditor whose loans were restructured in
early 1997 and are current at September 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 has purchased a tract of land in Wayne County, on which it
is constructing another branch office, with a planned opening in
the first quarter of 1998. The Company also acquired land in 1995
to build an operation center in 1998. The Company currently leases
space for its operations center.
At September 30, 1997, the ratio of loans to deposits was 74.5%,
compared to 77.4% at the end of 1996, as total deposits increased
approximately $20.2 million, or 9.5%, during the first nine months
of 1997. 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 $3.3 million, less $664,000 of cash dividends declared.
The cash dividend represents 20.1% of net income for the first nine
months of 1997, compared to 16.5% for the same period in 1996. 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 $476,000 during the first nine
months of 1997.
The Company and its subsidiary meet all regulatory capital
requirements and are considered to be "well capitalized" at
September 30, 1997. The Company's ratio of total capital to risk-weighted
assets was 15.55% at September 30, 1997, while Tier 1 risk-based capital
ratio was 14.32%. 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 9.64% at
September 30, 1997, which exceeds the regulatory minimum of 3% to
5%.
RESULTS OF OPERATIONS
Net income for the nine months ended September 30, 1997, was $3.3
million, or $2.55 per share, as compared to $2.9 million, or $2.27
per share, earned during the same period last year, an increase of
$385,000 or 13.2%. Third quarter net income was $1.2 million, or
$.88 per share, in 1997, compared to $1.1 million, or $.83 per share
for the third quarter of 1996. The primary factors contributing to
these increases were increases in net interest income and other
income.
Net interest income was $8.3 million for the first nine months of
1997, a 5.5% increase from 1996. Interest and fees on loans
increased $678,000, or 5.8%, 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 $1.1 million and other interest
income increased $121,000 for the first nine months of 1997,
compared to the first nine months of 1996. Management anticipates
using liquid funds, primarily from federal funds sold and maturities
of short-term investments, to fund higher yielding loans. Net
interest income for the third quarter of 1997 totaled $2.8 million,
up 6.7% from $2.7 million in 1996. Most of this increase resulted
from growth in interest earning assets. Income from taxable
investments increased $361,000, or 78.7%, from the third quarter of
1996 to 1997, while income from nontaxable securities increased
$143,000, or 56.4%, for the same period.
Interest expense increased $1.5 million for the nine months ended
September 30, 1997, compared to the nine months ended September 30,
1996. Approximately $1.2 million of this increase was the result of
increased volumes on interest-bearing accounts and aggressive
interest rates. Other interest expense increased $319,000,
resulting from new borrowings from the FHLB during the second half
of 1996. For the third quarter of 1997 compared to the same period
in 1996, interest expense on deposits increased $561,000 or 28.4%,
while interest expense on borrowings increased $62,000. These
increases were primarily volume related, but were also affected by
higher rates being paid for the funds.
The provision for loan losses was $100,000 for the third quarter of
1997 and $300,000 during the first nine months 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 nine months of 1997 increased
approximately $204,000, primarily as a result of the gain on the
sale of loans discussed above and increased deposit service charge
income. Noninterest income for the third quarter of 1997 decreased
by $45,000, or 11.1%, due primarily to a $116,000 decrease in gain
on sale of OREO, which was partially offset by a $45,000 increase in
other operating income.
Other expenses increased $136,000, or 3.1%, for the nine months
ended September 30, 1997, but remained stable for the three months
ended September 30, 1997, compared to the same period 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 3.2% in the third
quarter and 3.1% for the nine 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 $409,000 for the third quarter and $1.3 million for the
first nine months of 1997 reflected an effective rate of 26.2% and
28.1%, which matched the comparable periods in 1996.
FORM 10-Q
Quarter ended September 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:
There are no matters to be reported under this item.
Item 5 - Other Information:
There are no matters required to be reported under this item.
FORM 10-Q
Quarter ended September 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: November 10, 1997 /s/ Douglas D. Akins
(Signature)
Douglas D. Akins
President
Chief Executive Officer
Date: November 10, 1997 /s/ A. Lee Miller
(Signature)
A. Lee Miller
Senior Vice President
Chief 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>
THIS 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> 9-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> SEP-30-1997
<CASH> 7,921
<INT-BEARING-DEPOSITS> 3,152
<FED-FUNDS-SOLD> 6,813
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 30,060
<INVESTMENTS-CARRYING> 52,442
<INVESTMENTS-MARKET> 53,413
<LOANS> 174,039
<ALLOWANCE> 2,273
<TOTAL-ASSETS> 278,986
<DEPOSITS> 233,528
<SHORT-TERM> 5,793
<LIABILITIES-OTHER> 1,123
<LONG-TERM> 11,940
0
0
<COMMON> 8,188
<OTHER-SE> 18,412
<TOTAL-LIABILITIES-AND-EQUITY> 278,986
<INTEREST-LOAN> 12,374
<INTEREST-INVEST> 3,342
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<INTEREST-TOTAL> 16,303
<INTEREST-DEPOSIT> 7,242
<INTEREST-EXPENSE> 7,965
<INTEREST-INCOME-NET> 8,338
<LOAN-LOSSES> 300
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 4,565
<INCOME-PRETAX> 4,603
<INCOME-PRE-EXTRAORDINARY> 4,603
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,310
<EPS-PRIMARY> 2.55
<EPS-DILUTED> 2.55
<YIELD-ACTUAL> 4.38
<LOANS-NON> 494
<LOANS-PAST> 566
<LOANS-TROUBLED> 0
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<ALLOWANCE-OPEN> 2,121
<CHARGE-OFFS> 189
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