SECURITY AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended December 31, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from _____________ to _____________
Commission File Number: 0-26650
CSB FINANCIAL GROUP, INC.
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(Exact name of registrant as specified in its charter)
United States 37-1336338
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(State or other jurisdiction (I.R.S. Employer ID Number)
of incorporation or organization)
200 South Poplar, Centralia, Illinois 62801
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(Address of principal executive offices) (Zip code)
Registrant's telephone number, including area code (618) 532-1918
--------------
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days.
YES X NO
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Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of the latest practicable date.
Class Shares outstanding at January 27, 2000
- ------------------------------ --------------------------------------
Common Stock, Par Value $0.01 732,299
<PAGE>
CONTENTS
PART I. FINANCIAL INFORMATION
Item I. Financial Statements
- Consolidated Balance Sheets
- Consolidated Statements of Income
- Consolidated Statements of Comprehensive Income
- Consolidated Statements of Cash Flows
- Notes to Consolidated Financial Statements
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 2. Changes in Securities
Item 3. Defaults Upon Senior Securities
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
SIGNATURES
<PAGE>
CSB FINANCIAL GROUP, INC. and SUBSIDIARY
Consolidated Balance Sheets December 31, 1999 and September 30, 1999
(in thousands, except share data)
ASSETS December 31, September 30,
1999 1999
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(Unaudited) (Audited)
Cash and cash equivalents ...................... $ 2,029 $ 871
Securities:
Available for sale .......................... 17,090 17,118
Nonmarketable equity securities ............. 216 216
Loans .......................................... 29,636 29,142
Allowance for loan losses ...................... (225) (222)
------------------------
Loans, net ....................... 29,411 28,920
Premises and equipment ......................... 673 683
Accrued interest receivable .................... 443 318
Intangible assets .............................. 524 539
Other assets ................................... 118 255
------------------------
Total assets ..................... $ 50,504 $ 48,920
========================
LIABILITIES AND STOCKHOLDERS' EQUITY December 31, September 30,
1999 1999
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(Unaudited) (Audited)
LIABILITIES:
Deposits:
Demand .................................... $ 8,766 $ 8,563
Savings ................................... 3,579 3,794
Time deposits > $100,000 .................. 2,689 2,627
Other time deposits ....................... 23,538 21,922
----------------------
Total deposits .................... 38,572 36,906
----------------------
Advances from the Federal Home Loan Bank ..... 1,400 1,400
Other liabilities ............................ 133 191
Deferred income taxes ........................ 82 145
----------------------
Total liabilities ................. 40,187 38,642
----------------------
COMMITMENTS, CONTINGENCIES AND CREDIT RISK
STOCKHOLDERS' EQUITY
Preferred stock, $0.01 par value; 100,000
shares authorized; none issued ............. - - - -
Common stock, $0.01 par value; authorized
2,000,000 shares; 1,035,000 shares issued .. 10 10
Paid-in capital .............................. 7,830 7,829
Retained earnings ............................ 6,767 6,683
Accumulated other comprehensive income ....... (113) (53)
Unearned employee stock ownership plan shares (155) (160)
Management recognition plan .................. (505) (514)
----------------------
13,834 13,795
Less cost of treasury stock, 302,701 shares .. (3,517) (3,517)
----------------------
Total stockholders' equity .............. 10,317 10,278
----------------------
Total liabilities and stockholders'
equity ................................ $ 50,504 $ 48,920
======================
See Notes to Consolidated Financial Statements.
<PAGE>
CSB Financial Group, Inc.
Consolidated Statements of Income
Three Months Ended December 31, 1999 and 1998
(Unaudited, in thousands, except per share data)
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Three Months Ended
December 31,
------------------------
1999 1998
------------------------
Interest income:
Loans and fees on loans ...................... $ 571 $ 530
Securities ................................... 273 274
---------------------
Total interest income ............. 844 804
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Interest expense:
Deposits ..................................... 390 405
Borrowings ................................... 16 - -
---------------------
406 405
---------------------
Net interest income ............... 438 399
Provision for loan losses ....................... 14 18
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Net interest income after provision
for loan losses .................. 424 381
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Noninterest income:
Service charges on deposits .................. 26 20
Gain on sale of securities ................... - - - -
Other ........................................ 8 15
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Total noninterest income .......... 34 35
---------------------
Noninterest expense:
Compensation and employee benefits ........... 169 169
Occupancy and equipment ...................... 21 24
Data processing .............................. 52 25
Audit, legal and other professional .......... 44 31
Other ........................................ 99 96
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Total noninterest expense ......... 385 345
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Income before income taxes ........ 73 71
Income taxes .................................... (11) 23
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Net income ........................ $ 84 $ 48
=====================
Earnings per share
Basic ........................................ $ 0.12 $ 0.07
=====================
Diluted ...................................... $ 0.11 $ 0.07
=====================
Weighted average shares outstanding
Basic ........................................ 722,635 717,631
=====================
Diluted ...................................... 742,340 728,809
=====================
See Notes to Consolidated Financial Statements.
<PAGE>
CSB Financial Group, Inc.
Consolidated Statements of comprehensive income
Three Months Ended December 31, 1999 and 1998
(Unaudited, in thousands, except per share data)
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Three Months Ended
December 31,
------------------------
1999 1998
------------------------
Net income ...................................... $ 84 $ 48
Change in unrealized gain on securities available
for sale, net of tax of $95 and $1 .............. (60) (2)
---------------------
Comprehensive income ............................ $ 24 $ 46
=====================
See Notes to Consolidated Financial Statements.
<PAGE>
CSB Financial Group, Inc.
Consolidated Statements of Cash Flows
Three Months Ended December 31, 1999 and 1998
(Unaudited, in thousands)
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Three Months Ended
December 31,
------------------------
1999 1998
------------------------
Cash Flows from Operating Activities:
Net income ................................... $ 84 $ 48
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Provision for loan losses ................. 14 18
Provision for depreciation ................ 12 11
Amortization of intangible assets ......... 15 16
Employee stock ownership plan compensation
expense ............................... 6 8
Management recognition plan compensation
expense ............................... 9 9
Deferred income taxes ..................... (25) (5)
Gain on sale of securities ................ - - - -
Amortization and accretion on securities .. 1 4
Change in assets and liabilities:
(Increase) in accrued interest receivable (125) (130)
(Increase) decrease in other assets ..... 137 (42)
(Decrease) in other liabilities ......... (58) (51)
----------------------
Net cash provided by (used in)
operating activities ........... 70 (114)
----------------------
Cash Flows from Investing Activities:
Securities available for sale:
Purchases ................................. (100) (1,209)
Proceeds from sales ....................... - - - -
Proceeds from maturities and paydowns ..... 29 133
Proceeds from sales of nonmarketable equity
securities ................................. - - 4
(Increase) in loans .......................... (505) (443)
Purchase of premises and equipment ........... (2) - -
----------------------
Net cash (used in) investing
activities ...................... (578) (1,515)
----------------------
Cash Flows from Financing Activities:
Increase in deposits ......................... $ 1,666 $ 1,177
----------------------
Net cash provided by financing
activities ...................... 1,666 1,177
----------------------
Increase (decrease) in cash and
cash equivalents ................ 1,158 (452)
Cash and cash equivalents at beginning of period 871 1,542
----------------------
Cash and cash equivalents at end of period ...... $ 2,029 $ 1,090
======================
Supplemental Disclosures:
Cash paid for:
Interest on deposits ...................... $ 379 $ 402
Income taxes .............................. $ - - $ - -
Change in gross unrealized gain/loss on
securities available for sale .............. $ (98) $ (3)
Change in deferred taxes on unrealized
gain/loss on securities available for sale . $ (38) $ 1
See Notes to Consolidated Financial Statements.
<PAGE>
CSB Financial Group, Inc.
Notes to CONSOLIDATED Financial Statements
(In thousands, except per share data)
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Note 1: Background Information
On October 5, 1995, CSB Financial Group, Inc. (the "Company") acquired all of
the outstanding shares of Centralia Savings Bank (the "Bank") upon the Bank's
conversion from a state chartered mutual savings bank to a state chartered
capital stock savings bank. Centralia Savings Bank is located in Masson County,
Illinois. The Company purchased 100% of the outstanding capital stock of the
Bank using 50% of the net proceeds from the Company's initial stock offering
which was completed on October 5, 1995. The Company sold 1,035,000 shares of
$0.01 par value common stock at a price of $8 per share, including 82,800 shares
purchased by the Bank's Employee Stock Ownership Plan ("ESOP"). The ESOP shares
were acquired by the Bank with proceeds from a Company loan totaling $662,400.
The gross proceeds of the offering were $8,280,000. After reducing gross
proceeds for conversion costs of $696,000, net proceeds totaled $7,584,000. The
Company's stock was traded on the NASDAQ Small Caps market under the symbol
"CSBF" until December 31, 1998, at which time the Company transferred the
quotation of its common stock to the OTC Bulletin Board under the same symbol.
The acquisition of the Bank by the Company was accounted for as a "pooling of
interests" under generally accepted accounting principles. The application of
the pooling of interests method records the assets and liabilities of the merged
entities on a historical cost basis with no goodwill or other intangible assets
being recorded.
Note 2: Basis of Presentation
The accompanying consolidated financial statements include the accounts of CSB
Financial Group, Inc., its wholly owned subsidiary, Centralia Savings Bank (the
"Bank"), and the Bank's wholly-owned subsidiary, Centralia SLA. Centralia SLA,
Inc.'s principal business activity is to provide insurance services. All
significant intercompany accounts and transactions have been eliminated in
consolidation. The accompanying consolidated financial statements are unaudited
and should be read in conjunction with the consolidated financial statements and
notes thereto included in the Bank's annual report on Form 10-KSB for the year
ended September 30, 1999. The accompanying unaudited consolidated financial
statements have been prepared in accordance with the instructions for Form
10-QSB and, therefore, do not include information or footnotes necessary for a
complete presentation of financial condition, results of operations, and cash
flows in conformity with generally accepted accounting principles. In the
opinion of management of the Company, the unaudited consolidated financial
statements reflect all adjustments necessary to present fairly the financial
position of the Company at December 31, 1999 the results of operations and cash
flows for the three months ended December 31, 1999 and 1998. All adjustments to
the financial statements were normal and recurring in nature.
Operating results for the three months ended December 31, 1999 are not
necessarily indicative of the results that may be expected for the year ending
September 30, 2000.
Note 3: Earnings Per Share
Basic earnings per share ("EPS") is computed as net income available to common
stockholders divided by the weighted average common shares outstanding and
vested shares of the Management Recognition Plan.
Diluted EPS is computed as net income available to common stockholders divided
by the weighted average common shares outstanding, common stock equivalents, and
shares awarded under the Management Recognition Plan are weighted to reflect the
portion of the period the shares were outstanding.
<PAGE>
The following reflects earnings per share calculation for basic and diluted
methods:
For the three months ending
December 31, 1999:
---------------------------------
Income Shares Per Share
Numerator Denominator Amount
---------------------------------
Basic Earnings Per Share:
Weighted average shares outstanding ....... 712,699
Management Recognition Plan shares vested . 9,936
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Income available to common shareholders ... $ 84,000 722,635
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Basic Earnings Per Share .................. 0.12
Effect of Dilutive Securities:
Management Recognition Plan shares granted,
but not vested ......................... 7,452
Stock option equivalents .................. 12,253
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Diluted EPS ............................... $ 84,000 742,340 0.11
===============================
For the three months ending
December 31, 1998:
---------------------------------
Income Shares Per Share
Numerator Denominator Amount
---------------------------------
Basic Earnings Per Share:
Weighted average shares outstanding ....... 710,800
Management Recognition Plan shares vested . 6,831
-----------
Income available to common shareholders ... $ 48,000 717,631
---------------------
Basic Earnings Per Share .................. 0.07
Effect of Dilutive Securities:
Management Recognition Plan shares granted,
but not vested ......................... 11,178
Stock option equivalents .................. - -
-----------
Diluted EPS ............................... $ 48,000 728,809 0.07
===============================
Note 4: Employee Stock Ownership Plan
In conjunction with the conversion, an ESOP was created and 82,800 shares of the
Company's stock were purchased for future allocation to employees. The purchase
was funded with a loan from the Company.
Shares are allocated to all eligible employees as the debt is repaid based on a
prorata share of total eligible compensation. Employees 21 or older with at
least 1,000 hours of service in a twelve month period are eligible to
participate. Benefits will vest over a five year period and in full after five
years of qualified service.
As shares are committed to be released from unallocated shares, the Bank
recognizes compensation expense equal to the current market price of the shares,
and the shares become outstanding for purposes of calculating earnings per
share. The Bank recognized compensation expense for the ESOP of $6 and $8 for
the three months ended December 31, 1999 and 1998, respectively.
Dividends received, if any, by the ESOP on unallocated shares will be used for
debt service.
In July 1997, the Company repurchased 41,400 shares of common stock from the
ESOP. The ESOP used the proceeds received from the repurchase to reduce
outstanding debt to the Company. The balance in unearned ESOP shares was reduced
by the cost of the shares sold to the Company. As of December 31, 1999 and
September 30, 1999, the ESOP held 19,390 and 20,021, respectively, non-committed
shares with a fair value of $200 and $195, respectively.
<PAGE>
Note 5: Stock Option Plan
At the annual stockholder's meeting on May 22, 1996, the Stock Option Plan
("SOP") was approved. The board has reserved an amount of stock equal to 103,500
shares or 10% of the common stock sold in the conversion for issuance under the
SOP. The options will be granted by a Committee, comprised of directors, to key
employees and directors based on their services. The exercise price of options
granted must be at least equal to the fair market value of the common stock on
the date the option is granted. The options granted under the plan become
exercisable at a rate of 20 percent per year commencing one year after the grant
date and 20 percent on each anniversary date for the following four years. As of
December 31, 1999, 61,750 options had been granted.
The Board adopted the 1997 Nonqualified Stock Option Plan (SOP) effective
January 9, 1997. The Board has reserved up to 103,500 shares of common stock
under the SOP. The options will be granted by a committee, comprised of
directors, to key employees and directors based on their services. The exercise
price of the option granted must be at least equal to the fair market value of
the common stock on the date the option is granted. The terms of the options and
the exercise schedule are at the discretion of the committee and option
agreements need not be identical. As of December 31, 1999, no options had been
granted.
Note 6: Management Recognition Plan
The Management Recognition Plan ("MRP") was approved with an effective date of
October 10, 1996 and amended on January 9, 1997. The MRP intends to purchase
with funds provided by the Company, whether in the open market or from the
Holding Company in the form of newly issued shares, 62,100 shares, or 6% of the
aggregate number of shares of Common Stock issued and sold in connection with
the Conversion for issuance to officers, directors, and employees of the Holding
Company. Directors, officers, and employees become vested in the shares of
common stock awarded to them under the MRP at a rate of 20% per year, commencing
one year after the grant date, and 20% on the anniversary date thereof for the
following four years. As of December 31, 1999, 17,388 shares have been awarded
and remain outstanding to officers, directors, and employees. MRP compensation
expense was $9 for the three months ended December 31, 1999 and 1998,
respectively. The Bank accounts for its MRP in accordance with Accounting
Principle Board Statement 25. Compensation expense is recognized over the
vesting period for shares awarded under the plan.
Note 7: New Accounting Standards
Accounting for Derivative Instruments and Hedging Activities Statement of
Financial Accounting Standard No. 133, "Accounting for Derivative Instruments
and Hedging Activities" (FAS 133) establishes accounting and reporting standards
for derivative instruments, including certain derivative instruments embedded in
other contracts and for hedging activities. It requires that an entity recognize
all derivatives as either assets or liabilities in the statement of financial
position and measure those instruments at fair value. The accounting for changes
in the fair value of a derivative depends on the intended use of the derivative
and the resulting designation. This Statement applies to all entities. FAS 133
is effective for all fiscal quarters of fiscal years beginning after June 15,
1999. Earlier application is encouraged. The Statement is not to be applied
retroactively to financial statements of prior periods. In June 1999, Statement
of Financial Accounting Standard No. 137 was issued to extend the effective date
by one year to all fiscal quarters of fiscal years beginning after June 15,
2000. The Company does not believe the adoption of FAS 133, as amended by FAS
137, will have a material impact on the consolidated financial statements.
Accounting for Mortgage-Backed Securities Retained after the Securitization of
Mortgage Loans Held for Sale by a Mortgage Banking Enterprise Statement of
Financial Accounting Standard No. 134, "Accounting for Mortgage-Backed
Securities Retained after the Securitization of Mortgage Loans Held for Sale by
a Mortgage Banking Enterprise" (FAS 134) changes the way mortgage banking firms
account for certain securities and other interests they retain after
securitizing mortgage loans that were held for sale. The Statement is effective
for financial statements for the first fiscal quarter beginning after December
15, 1998. The Company does not securitize mortgages and is not a Mortgage
Banking Enterprise and therefore, FAS 134 will not have an impact on the
consolidated financial statements.
<PAGE>
CSB Financial Group, Inc.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONs
( In thousands, except per share data)
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General
The principal assets of the Company are its investment in the Bank's common
stock and the net proceeds from the sale of the Company's common stock in
connection with the conversion. The Company's principal revenue source is
interest and dividends on its investments. The principal business of the Bank
consists of attracting deposits from the general public and using these funds to
originate mortgage loans secured by one- to four-family residences located
primarily in Centralia, Illinois and surrounding areas. The Bank engages in
various forms of consumer and commercial lending and invests in mortgage-backed
U.S. Government and federal agency securities, local municipal issues, and
interest-bearing deposits. The Bank's profitability depends primarily on its net
interest income, which is the difference between the interest income it earns on
its loans, mortgage-backed and investment portfolio, and its cost of funds,
which consists mainly of interest paid on deposits. Net interest income is
affected by the relative amounts of interest-earning assets, interest-bearing
liabilities, and the interest rates earned or paid on these balances.
The Bank's profitability is also affected by the level of noninterest income and
expense. Noninterest income consists primarily of late charges and other fees.
Noninterest expense consists of salaries and benefits, occupancy related
expenses, deposit insurance premiums paid to the SAIF, and other operating
expenses.
The operations of the Bank are significantly influenced by general economic
conditions, related monetary, and fiscal policies of financial institutions'
regulatory agencies. Deposit flows and the cost of funds are influenced by
interest rates on competing investments and general market rates of interest.
Lending activities are affected by the demand for financing real estate and
other types of loans, which in turn is affected by the interest rates at which
such financing may be offered and other factors affecting loan demand and the
availability of funds.
Business Strategy
The business strategy is to operate as a well capitalized, profitable and
independent community savings bank dedicated to financing home ownership and
consumer needs in its primary market area. The Bank has implemented this
strategy by: (1) closely monitoring the needs of customers and providing quality
service; (2) emphasizing consumer-oriented banking by originating construction
and permanent loans on residential and commercial real estate and consumer
loans, and by offering other financial services and products; (3) improving and
maintaining high asset quality; (4) maintaining capital in excess of regulatory
requirements; and (5) managing interest rate risk by emphasizing the origination
of loans with adjustable rates or shorter terms and investments in short-term
and liquid investments. The Bank has adopted various new business strategies
intended to increase its presence in its primary market area, thereby increasing
its lending activities and sources of income.
Merger
On January 26, 2000, the Company signed a definitive agreement with Midland
States Bancorp, Inc. Upon the effective date of the proposed merger, holders of
shares of CSB Financial Group, Inc. common stock will have the right to receive
cash in the amount of $16 per share. The merger is expected to be completed in
the second quarter of 2000.
<PAGE>
Liquidity and Capital Resources
The Bank's primary sources of funds consists of deposits, repayment and
prepayment of loans, maturities of investments and interest-bearing deposits.
Scheduled repayments of loans and mortgage-backed securities and maturities of
investment securities are predictable, influenced by general interest rates,
economic conditions, and competition. The Bank uses its liquidity resources
principally to fund existing and future loan commitments, to fund maturing
certificates of deposit and demand deposit withdrawals, to invest in other
interest-earning assets, to maintain liquidity, and to meet operating expenses.
Management believes that loan repayments and other sources of funds will be
adequate to meet the Bank's liquidity needs for the immediate future.
A portion of the Bank's liquidity consists of cash and cash equivalents, which
include investments in highly liquid, short-term deposits. The level of these
assets is dependent on the Bank's operating, investing, lending and financing
activities during any given period. At December 31, 1999 and September 30, 1999,
cash and cash equivalents totaled $2.0 million and $871, respectively. The
increase in cash and cash equivalents is due to an increase in deposit accounts,
offset somewhat by the funding of loans.
Liquidity management is both a daily and long-term function of business
management. If the Bank requires funds beyond its ability to generate them
internally, the Bank may borrow additional funds from the FHLB. At December 31,
1999, the Bank had $1.4 million of outstanding advances from the FHLB.
At December 31, 1999, the Bank had $2.2 million of outstanding commitments to
originate loans.
Regulatory Capital
Federally insured savings associations such as the Bank are required to maintain
a minimum level of regulatory capital. The Corporation and its subsidiary have
capital ratios which substantially exceed all regulatory requirements. The
Corporation's capital ratios are shown below.
December 31, September 30, Minimum
1999 1999 Requirements
--------------------------------------
Total capital to risk weighted assets ... 42.7% 43.9% 8.0%
Tier I capital to risk weighted assets .. 41.7% 42.9% 4.0%
Tier I capital to average assets ........ 20.8% 20.3% 4.0%
Financial Condition
Total assets increased $1,584 to $50,504 at December 31, 1999 from $48,920 at
September 30, 1999. The increase resulted from an increase of $494 in gross
loans and an increase of $1,158 in cash and cash equivalents.
Gross loans have increased $494 from $29,142 at September 30, 1999 to $29,636 at
December 31, 1999. The Bank continues to focus their efforts in the expansion of
the commercial loan market and continues to originate commercial loans which
meet prudent underwriting standards.
Securities decreased $28 since September 30, 1999, primarily due to a decrease
in market values on securities available for sale. The portfolio consists
primarily of U.S. Government and agency securities. All securities are held as
available for sale.
Results of Operations
Three months ended December 31, 1999 compared to three months ended December 31,
1998
Net Income - The Company's net income for the three months ended December 31,
1999 was $84 compared to $48 for the three months ended December 31, 1998. The
increase in net income resulted primarily from a increase in net interest income
and a decrease in income taxes.
Interest Income - Interest income increased for the three months ended December
31, 1999 by $40 to $844 from $804 for the three months ended December 31, 1998.
The increase is due to an increase in the average balance of interest earning
assets to approximately $47,000 during the quarter ended December 31, 1999
compared to approximately $44,000 during the quarter ended December 31, 1998.
Interest Expense - Interest expense increased for the three months ended
December 31, 1999 by $1 to $406 from $405 for the three months ended December
31, 1998. The composition of deposit portfolio has remained relatively
consistent. Management continues to price deposit products based on competition.
Net Interest Income - Net interest income for the three months ended December
31, 1999 increased by $39 to $438 from $399 for the three months ended December
31, 1998. The increase is attributable to the increase in the Company's interest
earning assets.
<PAGE>
Noninterest expense increased for the three months ended December 31, 1999 by
$40 to $385 from $345 for the three months ended December 31, 1998. The increase
was primarily the result of additional legal and professional fees incurred with
the merger with Midland States Bancorp, Inc. and additional data processing
conversion costs of $28 associated with the change in service centers.
Provision for Loan Losses - The allowance for loan losses is established through
a provision for loan losses based on management's evaluation of the risk
inherent in its loan portfolio and the general economy. Such evaluation
considers numerous factors including, general economic conditions, loan
portfolio composition, prior loss experience, the estimated fair value of the
underlying collateral and other factors that warrant recognition in providing
for an adequate loan loss allowance. During the three months ended December 31,
1999 and 1998, the provision for loan losses was $14 and $18, respectively.
Allowance for Loan Losses - The allowance for loan losses was $225 or .76% of
loans receivable at December 31, 1999, compared to $222, or .76% of loans
receivable at September 30, 1999. The level of nonperforming loans was .56% of
total loans at December 31, 1999 compared to .70% as of September 30, 1999.
Based on current reserve levels in relation to total loans receivable and
classified assets and the diligent effort put forth by management to address
problem loan situations in recent years, management believes its reserves are
currently adequate.
Net charge-offs amounted to $11 during the first three months of fiscal year
2000, compared to net charge-offs of $13 during the first three months of
fiscal year 1999.
The allowance for loan losses is established through a provision for loan losses
charged to expense. Loans are charged against the allowance for loan losses when
management believes that the collectibility of the principal is unlikely. The
allowance is an amount that management believes will be adequate to absorb
losses on existing loans that may become uncollectible, based on evaluation of
the collectibility of loans and prior loss experience. The evaluation also takes
into consideration such factors as changes in the nature and volume of the loan
portfolio, overall portfolio quality, review of specific problem loans and
current economic conditions that may affect the borrowers' ability to pay. While
management uses the best information available to make its evaluation, future
adjustments to the allowance may be necessary if there are significant changes
in economic conditions. In addition, regulatory agencies, as an integral part of
their examination process, periodically review the Bank's allowance for loan
losses, and may require the Bank to make additions to the allowance based on
their judgment about information available to them at the time of their
examinations.
Loans are considered impaired when, based on current information and events, it
is probable that the Bank will not be able to collect all amounts due. The
portion of the allowance for loan losses applicable to impaired loans has been
computed based on the present value of the estimated future cash flows of
interest and principal discounted at the loan's effective interest rate or on
the fair value of the collateral for collateral dependent loans. The entire
change in present value of expected cash flows of impaired loans or of
collateral value is reported as bad debt expense in the same manner in which
impairment initially was recognized or as a reduction in the amount of bad debt
expense that otherwise would be reported. As of December 31, 1999 and September
30, 1999, management had not identified any loans as impaired.
Nonperforming Assets
At December 31, 1999, the Bank had $183 of nonperforming assets, .36% of
total assets. On September 30, 1999, the Bank had $205 of nonperforming assets,
.42% of total assets.
Impact on Inflation and Changing Prices
The unaudited consolidated financial statements and related data presented
herein have been prepared in accordance with generally accepted accounting
principles, which require the measurement of financial position and results of
operations in terms of historical dollars without considering changes in the
relative purchasing power of money over time because of inflation. Unlike most
industrial companies, virtually all of the assets and liabilities of the Company
are monetary in nature. As a result, interest rates have a more significant
impact on the Company's performance than the effects of general levels of
inflation. Interest rates do not necessarily move in the same direction or in
the same magnitude as the prices of goods and services.
<PAGE>
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
-----------------
None.
Item 2. Changes in Securities
---------------------
None.
Item 3. Defaults Upon Senior Securities
-------------------------------
None.
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Not applicable.
Item 5. Other Information
-----------------
None.
Item 6. Exhibits and Reports on Form 8K
-------------------------------
Exhibits:
None.
Reports on Form 8K:
None.
<PAGE>
SIGNATURES
Pursuant to the requirement 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 Financial Group, Inc.
Date: February 7, 2000 /s/ K. Gary Reynolds
------------------------------ ------------------------------------
K. Gary Reynolds
Chief Executive Officer and Director
Date: February 7, 2000 /s/ Joanne Ticknor
------------------------------ ------------------------------------
Joanne Ticknor
Secretary and Treasurer
<TABLE> <S> <C>
<ARTICLE> 9
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER
31, 1999 FORM 10-QSB OF CSB FINANCIAL GROUP, INC. AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-2000
<PERIOD-END> DEC-31-1999
<CASH> 2,029
<INT-BEARING-DEPOSITS> 0
<FED-FUNDS-SOLD> 0
<TRADING-ASSETS> 0
<INVESTMENTS-HELD-FOR-SALE> 17,090
<INVESTMENTS-CARRYING> 216
<INVESTMENTS-MARKET> 216
<LOANS> 29,636
<ALLOWANCE> 225
<TOTAL-ASSETS> 50,504
<DEPOSITS> 38,572
<SHORT-TERM> 1,400
<LIABILITIES-OTHER> 215
<LONG-TERM> 0
0
0
<COMMON> 10
<OTHER-SE> 10,307
<TOTAL-LIABILITIES-AND-EQUITY> 50,504
<INTEREST-LOAN> 571
<INTEREST-INVEST> 273
<INTEREST-OTHER> 0
<INTEREST-TOTAL> 844
<INTEREST-DEPOSIT> 390
<INTEREST-EXPENSE> 406
<INTEREST-INCOME-NET> 438
<LOAN-LOSSES> 14
<SECURITIES-GAINS> 0
<EXPENSE-OTHER> 385
<INCOME-PRETAX> 73
<INCOME-PRE-EXTRAORDINARY> 84
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 84
<EPS-BASIC> .12
<EPS-DILUTED> .11
<YIELD-ACTUAL> 0
<LOANS-NON> 183
<LOANS-PAST> 0
<LOANS-TROUBLED> 0
<LOANS-PROBLEM> 0
<ALLOWANCE-OPEN> 222
<CHARGE-OFFS> 11
<RECOVERIES> 0
<ALLOWANCE-CLOSE> 225
<ALLOWANCE-DOMESTIC> 225
<ALLOWANCE-FOREIGN> 0
<ALLOWANCE-UNALLOCATED> 0
</TABLE>
