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: MARCH 31, 1998
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 Outstanding at May 7, 1998:
2,637,272 common shares
<PAGE>
FORM 10-Q
QUARTER ENDED MARCH 31, 1998
Table of Contents
Part I - Financial Information
ITEM I - FINANCIAL STATEMENTS Page
Consolidated Balance Sheets 3
Consolidated Statements of Income 4
Consolidated Statements of Comprehensive Income 5
Condensed Consolidated Statements of Changes in
Shareholders' Equity 6
Condensed Consolidated Statements of Cash Flows 7
Notes to the Consolidated Financial Statements 8
ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15
ITEM III - QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK 17
Part II - Other Information
Other Information 18
Signatures 19
<PAGE>
<TABLE>
CONSOLIDATED BALANCE SHEETS
(Unaudited)
<CAPTION>
March 31, December 31,
1998 1997
<S> <C> <C>
ASSETS
Cash and noninterest-bearing deposits with banks $ 7,426,549 $ 8,090,785
Interest-bearing deposits with banks 284,916 31,257
Federal funds sold 4,071,000 6,213,000
----------- -----------
Total cash and cash equivalents 11,782,465 14,335,042
Time deposits with other institutions 3,000,000 3,000,000
Securities available for sale, at fair value 26,057,543 28,042,412
Securities held to maturity (Fair values of
$55,985,215 in 1998 and $59,773,637 in 1997) 54,717,360 58,385,434
Loans
Total loans 184,602,850 179,676,242
Allowance for loan losses 2,430,083 2,349,039
----------- -----------
Net loans 182,172,767 177,327,203
Premises and equipment, net 3,996,669 3,601,254
Accrued interest receivable and other assets 3,870,345 3,750,570
----------- -----------
Total assets $285,597,149 $288,441,915
=========== ===========
LIABILITIES
Deposits
Noninterest-bearing $ 21,166,011 $ 24,678,146
Interest-bearing 217,248,760 216,525,123
----------- -----------
Total deposits 238,414,771 241,203,269
Securities sold under repurchase agreements 6,275,762 7,290,759
Federal Home Loan Bank borrowings 11,035,641 11,686,863
Accrued interest payable and other liabilities 1,328,258 986,544
----------- -----------
Total liabilities 257,054,432 261,167,435
SHAREHOLDERS' EQUITY
Common stock, $6.25 par value: 3,000,000 shares
authorized; 1998 - 1,321,870 shares issued;
1997 - 1,314,591 shares issued 8,261,685 8,216,191
Additional paid-in capital 5,501,021 5,135,899
Retained earnings 14,760,179 13,907,908
Treasury stock at cost: 1998 - 3,233 shares; 1997 -
3200 shares (58,032) (56,000)
Unrealized gain on securities available for sale 77,864 70,482
---------- ----------
Total shareholders' equity 28,542,717 27,274,480
---------- ----------
Total liabilities and shareholders' equity $285,597,149 $288,441,915
=========== ===========
</TABLE>
See notes to the consolidated financial statements.
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Interest income
Loans, including fees $4,394,908 $4,034,410
Taxable securities 746,704 607,346
Nontaxable securities 455,504 277,690
Other 104,206 311,748
--------- ---------
Total interest income 5,701,322 5,231,194
Interest expense
Deposits 2,561,473 2,277,228
Other 244,219 239,028
--------- ---------
Total interest expense 2,805,692 2,516,256
--------- ----------
Net interest income 2,895,630 2,714,938
Provision for loan losses 97,650 101,688
--------- ---------
Net interest income after
provision for loan losses 2,797,980 2,613,250
Other income
Service charges on deposit accounts 181,379 171,664
Gain on sale of loans -- 220,200
Other income 136,500 85,905
-------- ---------
Total other income 317,879 477,769
Other expenses
Salaries and employee benefits 804,375 736,842
Occupancy expense 75,299 83,742
Equipment expense 114,190 107,923
State franchise tax 95,200 82,359
Other expenses 495,960 481,872
-------- --------
Total other expenses 1,585,024 1,492,738
Income before income taxes 1,530,835 1,598,281
Provision for income taxes 415,086 423,700
--------- ---------
Net income $1,115,749 $1,174,581
========= ==========
Basic and diluted earnings per
common share (See Note 1) $ 0.42 $ 0.45
========= ==========
</TABLE>
See notes to the consolidated financial statements.
<PAGE>
CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME
(Unaudited)
Three Months Ended
March 31,
1998 1997
Net income $1,115,749 $1,174,581
Other comprehensive income,
net of tax:
Unrealized gains (losses) arising
during period 7,382 (84,393)
--------- ---------
Comprehensive income $1,123,131 $1,090,188
========= =========
See notes to the consolidated financial statements.
CONDENSED CONSOLIDATED STATEMENTS OF CHANGES
IN SHAREHOLDERS' EQUITY
(Unaudited)
Three Months Ended
March 31,
1998 1997
Balance at beginning of period $27,274,480 $23,426,480
Net income 1,115,749 1,174,581
Common stock issued under the dividend
reinvestment program and 401(k) plan 408,584 222,972
Cash dividends ($.10 per share in 1998;
$.085 per share in 1997) See Note 1 (263,478) (220,904)
Change in unrealized gain/loss on
securities available for sale 7,382 (84,393)
----------- ----------
Balance at end of period $28,542,717 $24,518,736
=========== ==========
See notes to the consolidated financial statements.
<PAGE>
<TABLE>
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
1998 1997
<S> <C> <C>
Net cash from operating activities $ 1,553,223 $ 922,761
Cash flows from investing activities
Securities available for sale
Proceeds from maturities 5,000,000 2,000,000
Purchases (2,963,189) (15,958,800)
Securities held to maturity
Proceeds from maturities, calls and
repayments 3,879,734 3,406,150
Purchases (203,268) (11,765,424)
Net change in loans (5,024,155) (7,382,259)
Loan sale proceeds -- 10,766,167
Premises and equipment expenditures, net (485,312) (183,239)
--------- ----------
Net cash from investing activities 203,810 (19,117,405)
--------- ----------
Cash flows from financing activities
Net change in deposits (2,788,498) 9,822,324
Net change in securities sold under
repurchase agreements (1,014,997) (370,537)
Advances on FHLB borrowings -- 976,777
Principal reductions on FHLB borrowings (651,222) --
Shares issued for 401(k) plan 326,084 162,903
Cash dividends paid (180,977) (160,835)
---------- ----------
Net cash from financing activities (4,309,610) 10,430,632
---------- ---------
Net change in cash and cash equivalents (2,552,577) (7,764,012)
Beginning cash and cash equivalents 14,335,042 30,317,756
---------- -----------
Ending cash and cash equivalents $11,782,465 $22,553,744
========== ===========
Supplemental disclosures
Interest paid $ 2,793,939 $ 2,492,764
Income taxes paid -- 50,866
</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. and its wholly-owned subsidiary, The Commercial
and Savings Bank (together referred to as the "Company"). 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 March 31, 1998, and its
results of operations and cash flows for the periods presented. The
accompanying consolidated financial statements do not contain all
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, 1997,
contains consolidated financial statements and related notes which
should be read in conjunction with the accompanying consolidated
financial statements.
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.
To prepare financial statements in conformity with generally
accepted accounting principles, management makes estimates and
assumptions based on available information. These estimates and
assumptions affect amounts reported in the financial statements and
the disclosures provided, and future results could differ. The
allowance for loan losses, realization of deferred tax assets, fair
value of certain securities and determination and carrying value of
impaired loans are particularly subject to change.
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 or at the fair value of collateral if repayment is expected
solely from the collateral. Loans are evaluated for impairment when
payments are delayed, typically 90 days or more, or when the
internal grading system indicates a doubtful classification.
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
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 other consumer loans less than
$100,000. Commercial loans and mortgage loans secured by other
properties are evaluated individually for impairment.
The Company records income tax expense based on the amount of tax
due on its tax return plus deferred taxes computed based on the
expected future tax consequences of temporary differences between
the carrying amounts and tax bases of assets and liabilities, using
enacted tax rates.
SFAS No. 128, "Earnings Per Share," became effective for the company
in 1997. SFAS 128 requires dual presentation of basic and diluted
earnings per share ("EPS") for entities with complex capital
structures. All prior EPS data has been restated to conform to the
new method. Basic EPS is based on net income divided by the
weighted average number of shares outstanding during the period.
Diluted EPS shows the dilutive effect of additional common shares
issuable under stock options. The weighted average number of shares
outstanding for basic EPS was 2,625,892 in 1998 and 2,592,652 in
1997. The weighted average number of shares outstanding for diluted
EPS, which includes the effect of stock options granted using the
treasury stock method, was 2,626,723 in 1998 and 2,593,332 in 1997.
There was no per share dilution as a result of the stock options in
1997.
On April 30, 1998, a two-for-one stock split in the form of a 100%
stock dividend was distributed to shareholders of record as of March
31, 1998. All per share data was restated to reflect the stock
split.
SFAS No. 129, "Disclosures of Information about Capital Structure,"
consolidated existing accounting guidance relating to disclosure
about a company's capital structure. Public companies generally
have always been required to make disclosures now required by SFAS
129 and, therefore, SFAS 129 did not impact the Company's
disclosures.
SFAS No. 130, "Reporting Comprehensive Income," establishes
standards for reporting and display of comprehensive income and its
components (revenues, expenses, gains and losses) in a full set of
general-purpose financial statements. SFAS 130 is effective for the
Company in
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
1998. Reclassification of financial statements for earlier periods
provided for comparative purposes is required.
SFAS No. 131, "Disclosures about Segments of an Enterprise and
Related Information," changes the way public business enterprises
report information about operating segments in annual financial
statements and requires those enterprises report selected
information about reportable segments in interim financial reports
issued to shareholders. It also establishes standards for related
disclosures about products and services, geographic areas and major
customers. SFAS 131 becomes effective for the Company in 1998.
NOTE 2 - SECURITIES
<PAGE>
<TABLE>
The amortized cost and fair values of securities are as follows:
<CAPTION>
March 31, 1998
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale
Debt securities
U.S. Treasury securities $12,024,891 $ 76,358 $ -- $12,101,249
Obligations of U.S. government
corporations and agencies 11,949,377 45,906 4,289 11,990,994
---------- --------- ------- ----------
Total debt securities available
for sale 23,974,268 122,264 4,289 24,092,243
Other securities 1,965,300 -- -- 1,965,300
---------- --------- ------- ----------
Total securities available
for sale $25,939,568 $ 122,264 $ 4,289 $26,057,543
========== ========= ======= ==========
Held to maturity
U.S. Treasury securities $12,126,129 $ 128,151 $ -- $12,254,280
Obligations of U.S. government
corporations and agencies 6,988,995 15,380 2,500 7,001,875
Obligations of states and
political subdivisions 35,602,236 1,141,435 14,611 36,729,060
---------- --------- ------- ----------
Total debt securities
held to maturity $54,717,360 $1,284,966 $ 17,111 $55,985,215
========== ========= ======= ==========
</TABLE>
<PAGE>
<TABLE>
NOTE 2 - SECURITIES (Continued)
<CAPTION>
December 31, 1997
Gross Gross
Amortized Unrealized Unrealized Fair
Cost Gains Losses Value
<S> <C> <C> <C> <C>
Available for sale
Debt securities
U.S. Treasury securities $16,021,859 $ 72,864 $ (349) $16,094,374
Obligations of U.S. government
corporations and agencies 9,978,862 40,872 (6,596) 10,013,138
---------- -------- --------- -----------
Total debt securities available
for sale 26,000,721 113,736 (6,945) 26,107,512
Other securities 1,934,900 1,934,900
---------- --------- --------- -----------
Total securities available
for sale $27,935,621 $ 113,736 $ (6,945) $28,042,412
========== ========= ========= ===========
Held to maturity
U.S. Treasury securities $15,121,855 $ 130,739 $ (1,095) $15,251,499
Obligations of U.S. government
corporations and agencies 7,540,006 11,870 (6,343) 7,545,533
Obligations of states and
political subdivisions 35,723,573 1,262,675 (9,643) 36,976,605
---------- --------- --------- ----------
Total securities held to
maturity $58,385,434 $1,405,284 $ (17,081) $59,773,637
========== ========= ========= ===========
</TABLE>
<PAGE>
There were no sales of investment securities during the first three
months of 1998 or 1997.
The amortized cost and fair values of debt securities at March 31,
1998, by contractual maturity, are shown below.
Available-for-sale Held-to-maturity
securities securities
Amortized Fair Amortized Fair
Cost Value Cost Value
Due in one year
or less $10,962,354 $10,982,013 $10,026,538 $10,075,989
Due from one to
five years 13,011,914 13,110,230 14,733,315 14,982,358
Due from five to
ten years -- -- 14,550,000 15,083,783
Due after ten years -- -- 15,407,507 15,843,085
--------- ---------- ---------- -----------
$23,974,268 $24,092,243 $54,717,360 $55,985,215
========== =========== =========== ===========
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES
Loans consisted of the following:
March 31, 1998 December 31, 1997
Commercial $ 82,580,641 $ 80,260,550
Commercial real estate 31,155,404 30,407,670
Residential real estate 50,346,442 49,049,948
Installment and credit card 16,691,953 16,450,211
Construction 3,828,410 3,507,863
----------- -----------
Total loans $184,602,850 $179,676,242
=========== ============
During the first three months of 1997, the Company received
$10,776,167 in proceeds from mortgage loan sales. A gain of
$220,200 was recognized on this sale.
Activity in the allowance for loan losses for the three months ended
March 31, 1998 and 1997 is as follows:
1998 1997
Beginning balance $2,349,039 $2,120,845
Provision for loan losses 97,650 101,688
Charge-offs (23,267) (47,473)
Recoveries 6,661 16,262
--------- ---------
Balance - March 31 $2,430,083 $2,191,322
========= =========
Impaired loans at March 31, 1998 and December 31, 1997 is as
follows:
March 31, December 31,
1998 1997
Loans with no allowance for loan losses
allocated $ -- $ --
Loans with allowance for loan losses
allocated 1,800,609 1,384,000
Amount of allowance allocated 556,000 437,000
NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued)
Impaired loans for the three months ended March 31, 1998 and 1997,
is as follows:
1998 1997
Average of impaired loans 1,592,000 1,034,000
Interest income recognized during
impairment 18,000 18,000
Cash basis interest income recognized 18,000 13,000
NOTE 4 - FEDERAL HOME LOAN BANK BORROWINGS
The Company borrows from the Federal Home Loan Bank (FHLB) to fund
certain fixed-rate residential real estate loans. At March 31,
1998, the Company had 189 outstanding borrowings from the FHLB.
These borrowings carry fixed interest rates ranging from 5.60% to
7.15% and maturities of 10, 15, and 20 years. 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. FHLB borrowings are collateralized by the Company's FHLB
stock and a blanket pledge on $16.6 million of qualifying mortgage
loans at March 31, 1998.
NOTE 5 - COMMITMENTS, OFF-BALANCE SHEET RISK, AND CONTINGENCIES
The Company is a party to financial instruments with off-balance
sheet risk in the normal course of business to meet customer
financing needs. These financial instruments include commitments to
make or purchase loans, undisbursed lines of credit, undisbursed
credit card balances and letters of credit. The Company's exposure
to credit loss in case of nonperformance by the other party to the
financial instrument is represented by the contractual amount of
those instruments. The Company follows the same credit policy to
make such commitments as it uses for those loans recorded on the
balance sheet.
At March 31, 1998 and December 31, 1997, commitments to make loans,
primarily in the form of undisbursed portions of approved lines of
credit, amounted to approximately $27.8 million and $29.0 million,
substantially all of which carried adjustable rates of interest.
Commitments under outstanding standby letters of credit amounted to
$981,000 at March 31, 1998 and $820,000 at December 31, 1997. 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.
NOTE 5 - COMMITMENTS, OFF-BALANCE SHEET RISK, AND CONTINGENCIES
(Continued)
The Company sold $10.8 million in residential mortgage loans during
1997. The Company has agreed to repurchase individual loans if they
become delinquent by greater than ninety days. A recourse
obligation has been established by management based on past loan
loss experience, and other factors. This liability is not material.
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, 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 March 31, 1998,
compared to December 31, 1997, and the consolidated results of
operations for the quarterly period ending March 31, 1998 compared
to the same period in 1997. 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 Company 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 Company is not aware of any
current recommendations by regulatory authorities that would have
such effect if implemented.
FINANCIAL CONDITION
Total assets were $285.6 million at March 31, 1998, compared to
$288.4 million at December 31, 1997, representing a decrease of $2.8
million or 1.0%. Total securities decreased approximately $5.7
million during the quarter as a result of reduction in total
deposits and in securities sold under repurchase agreements. 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 March 31, 1998,
approximately 27.0% of the securities portfolio matures within one
year.
Total loans increased $4.9 million, or 2.7%, to $184.6 million.
Commercial loans increased $2.3 million, or 2.9%, primarily as a
result of demand for such loans in the local market area.
Residential real estate loans increased $1.3 million, or 2.6%.
As a percentage of loans, the allowance for loan losses was 1.32% at
March 31, 1998 and 1.31% at December 31, 1997. Loans past due more
than 90 days and loans placed on nonaccrual status, were
approximately $1.4 million, or 0.73% of total loans at March 31,
1998, compared to $1.2 million, or 0.69% of loans at December 31,
1997. These credits are considered in management's analysis of the
allowance for loan losses.
Premises and equipment increased $395,000, or 11.0%, during the
first quarter of 1998. This was primarily due to the completion of
the Shreve office, which opened in March, 1998. Additional
investment was made in the design and plan of the new operations
center, which should be completed in 1999.
At March 31, 1998, the ratio of net loans to deposits was 76.4%,
compared to 73.5% at the end of 1997 as total deposits decreased
approximately $2.8 million, or 1.2%, during the first three months
on 1998. Historically, the Company has experienced a decline in
overall deposit balances during the first quarter of the year.
Total shareholders' equity was increased in part by year-to-date net
income of $1.1 million, less $263,000 of cash dividends declared.
The cash dividend represents 23.6% of net income for the first
quarter of 1998. Also contributing to capital was the dividend
reinvestment program and the purchase of stock by the Company's
401(k) retirement plan. As a result of these programs, equity
increased approximately $409,000 during the first quarter of 1998.
The Company and its subsidiary meet all regulatory capital
requirements at March 31, 1998. The Company's ratio of total
capital to risk-weighted assets was 16.98% at March 31, 1998, while
Tier 1 risk-based capital ratio was 15.73%. 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
9.97% at March 31, 1998, which exceeds the regulatory minimum of 3%
to 5%.
RESULTS OF OPERATIONS
Net income for the quarter ending March 31, 1998 was $1.1 million,
or $.42 per share, as compared to $1.2 million, or $.45 per share
earned during the same period last year (restated for the April,
1998 stock split), a decrease of $59,000, or 5.0%. The primary
factors contributing to this decrease was a decrease in other
income, and an increase in other expense, which were partially
offset by an increase in net interest income.
Net interest income for the quarter ended March 31, 1998 was $2.9
million, a 6.7% increase from the first quarter of 1997. Interest
and fees on loans increased $360,000, or 8.9%, which resulted
primarily from a higher average of net loans balance during the
current quarter as compared to the previous year. Also, as deposit
funds were invested in securities, interest on securities increased
$317,000, which was partially offset by a $208,000 decrease in other
interest income.
Interest expense increased $289,000, to $2.8 million for the quarter
ended March 31, 1998, compared to $2.5 million for the quarter ended
March 31, 1997. This increase was the result of increased volumes
on interest-bearing accounts and slightly higher rates.
The provision for loan losses was $98,000 during the first quarter
of 1998, which was near the $102,000 provision in the first quarter
of 1997. This provision was 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 decreased approximately $160,000 primarily as a result
of the gain on the sale of loans during the 1997 period.
Other expenses increased $92,000, or 6.2%, for the three months
ended March 31, 1998, compared to the same period in 1997.
Management continues to monitor the Company's efficiency ratio by
controlling increases in other operating costs. Salaries and
employee benefits increased by $68,000 or 9.2%, and state franchise
taxes increased $13,000 or 15.6% as a result of earnings retention
in 1997. Ohio's state franchise tax for financial institutions is
based on the level of capital at the previous year-end. The
provision for income taxes of $415,000 during the first quarter of
1998 reflected an effective rate of 27.1%, as compared to 26.5%, for
the first quarter of 1997.
YEAR 2000 ISSUE
Many computer programs use only two digits to identify a year in the
date field and were apparently designed and developed without
considering the impact of the upcoming change in the century. Such
programs could erroneously read entries for the Year 2000 as the
Year 1900. This could result in major systems failures and
miscalculations. Rapid and accurate data processing is essential to
the operations of the financial institutions, such as the Company.
The Company has formed a Year 2000 committee to assess the extent to
which it and its outside vendors may be adversely affected by the
Year 2000 problems. Management has determined that most programs
are or will be capable of identifying the turn of the century. The
issue is closely monitored by management and full compliance is
expected by the end of 1998. While the Company does not anticipate
that any Year 2000 computer problems or expenses required to correct
such problems will materially affect its financial condition or
results of operations, no assurance can be given in this regard.
ITEM 3 QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK
There have been no material changes in the quantitative and
qualitative disclosures about market risks as of March 31, 1998 from
that presented in the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1997.
FORM 10-Q
Quarter ended March 31, 1998
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings:
There are no matters required to be reported under this item.
Item 2 - Changes in Securities:
There are no matters required to be reported under this item.
Item 3 - Defaults Upon Senior Securities:
There are no matters required to be reported under this item.
Item 4 - Submission of Matters to a Vote of Security Holders:
There are no matters required to be reported under this item.
Item 5 - Other Information:
There are no matters required to be reported under this item.
Item 6 - Exhibits and Reports on Form 8-K:
(a) Exhibits:
Exhibit
Number Description of Document
11 Statement Regarding Computation of Per Share Earnings
(reference is hereby made to Consolidated Statements of Income on
page 4 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: May 12, 1998 /s/ Douglas D. Akins
(Signature)
Douglas D. Akins
President
Chief Executive Officer
Date: May 12, 1998 /s/ A. Lee Miller
(Signature)
A. Lee Miller
Senior Vice President
Chief Financial Officer
<PAGE>
Index to Exhibits
Exhibit Sequential
Number Description of Document Page
11 Statement Regarding Computation
of Per Share Earnings (reference
is hereby made to Consolidated
Statements of Income on page 4
hereof.) 21
27 Financial Data Schedule 22
CSB BANCORP, INC.
EXHIBIT 11
STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS
Three Months Ended
March 31,
1998 1997
Net income $1,115,749 $1,174,581
========= =========
Average basic shares outstanding 2,625,892 2,592,652
Add: Effect of stock options 831 680
--------- ---------
Average diluted shares
outstanding 2,626,723 2,593,332
========= =========
Basic and diluted earnings
per common share $ 0.42 $ 0.45
========= =========
<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>
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