CSB Bancorp, Inc. Reports Third Quarter Earnings
CSB Bancorp reports third quarter 2023 net income of $3,481,000, an increase of 16% compared to the same period last year. Diluted earnings per share decreased from $1.35 to $1.30. Return on average common equity and return on average assets also decreased compared to the previous year. Loan interest income increased by $2.5 million, or 37%, due to rate increases and an increase in average loan volume. Interest expense rose by $2.3 million, or 383%, following rapid interest rate increases. Noninterest income increased by $30 thousand, or 2%. Noninterest expense increased by 2%. The efficiency ratio decreased to 57.0% from 57.9% in the prior year. Average earning assets increased by less than 1%. Nonperforming assets decreased from 0.11% to 0.04% of total loans. The allowance for expected credit losses decreased from 1.15% to 0.98% of total loans. Average deposit balances declined slightly. Shareholders' equity totaled $101 million.
Positive
CSB Bancorp reports third quarter 2023 net income of $3,481,000, an increase of 16% compared to the same period last year.
Loan interest income increased by $2.5 million, or 37%, due to rate increases and an increase in average loan volume.
Nonperforming assets decreased from 0.11% to 0.04% of total loans.
Negative
Diluted earnings per share decreased from $1.35 to $1.30.
Return on average common equity and return on average assets also decreased compared to the previous year.
Interest expense rose by $2.3 million, or 383%, following rapid interest rate increases.
10/24/2023 - 02:17 PM
MILLERSBURG, Ohio --(BUSINESS WIRE)--
CSB Bancorp, Inc. (OTC Pink: CSBB):
Third Quarter Highlights
Quarter Ended
September 30, 2023
Quarter Ended
September 30, 2022
Diluted earnings per share
$
1.30
$
1.35
Net Income
$
3,481,000
$
3,650,000
Return on average common equity
13.63
%
15.24
%
Return on average assets
1.19
%
1.25
%
CSB Bancorp, Inc. (OTC Pink: CSBB) today announced third quarter 2023 net income of $3,481,000 , or $1.30 per basic and diluted share, as compared to $3,650,000 , or $1.35 per basic and diluted share, for the same period in 2022. For the nine-month period ended September 30, 2023, net income totaled $11,059,000 compared to $9,560,000 for the same period last year, an increase of 16% .
Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 13.63% and 1.19% , respectively, compared with 15.24% and 1.25% for the third quarter of 2022. For the nine-month period ended September 30, 2023, ROE and ROA were 14.85% and 1.28% as compared to 13.41% and 1.12% for the comparable period in 2022.
Eddie Steiner, President and CEO stated, “Relatively low unemployment, slowly increasing labor participation, and consumer demand for goods and services are currently propping up an economy facing potent headwinds. Eventually, the forces of tighter monetary policy, significant government debt service, and other nations’ slowing economies, disasters and afflictions will disrupt the current momentum. For now, higher interest rates are rewarding savers and curbing some discretionary borrowing. Loan demand for constructing new homes, commercial buildings, and acquisition and development financing remains relatively active in our markets.”
Pre-Provision Net Revenue (PPNR) totaled $4.5 million during the quarter, an increase of $218 thousand , or 5% , from the prior year’s third quarter. Net interest income increased $277 thousand , or 3% , in the third quarter of 2023 compared to the same period in 2022.
Loan interest income including fees increased $2.5 million , or 37% , during third quarter 2023 as compared to the same quarter in 2022. The increase was mainly due to rate increases as well as an $80 million increase in average loan volume. Securities interest income increased $122 thousand , or 6% , during the third quarter 2023 compared to the same quarter 2022 from rate increases. Loan yields for third quarter 2023 averaged 5.39% , an increase of 93 basis points from the 2022 third quarter average of 4.46% , while overnight funds and securities yields for third quarter 2023 averaged 5.45% and 2.11% , respectively, compared to 2.29% and 1.91% in the third quarter 2022.
Interest expense rose $2.3 million , or 383% , during third quarter 2023 as compared to third quarter 2022. The increase follows a period of rapid interest rate increases spurred by the Federal Reserve followed by competitive pressures from banks and others to secure adequate funding. The cost to fund gross earning assets for the third quarter 2023 was 1.04% as compared to 0.22% for the third quarter of 2022. The Federal Reserve has indicated that it intends to maintain the higher interest rate environment beyond 2023.
The fully-taxable equivalent (FTE) net interest margin was 3.21% compared to 3.12% for third quarter 2022. Compared to the 2022 third quarter, FTE net interest income increased $275 thousand , or 3% , reflecting 9 basis points of net interest margin expansion, and a $2.5 million , or less than 1% , increase in average earning assets. The higher interest rate environment drove the increase in yields coupled with loan volume growth, partially offset by the higher cost of funds. The tax equivalency effect on the margin was 0.01% in third quarter 2023 and 2022.
Noninterest income increased $30 thousand , or 2% , compared to third quarter of 2022. The increase was primarily the result of a $43 thousand , or 20% , increase in trust and brokerage fees, an $11 thousand increase in service charges on deposits, and a $9 thousand increase in cash surrender value on bank owned life insurance. Offsetting decreases were recognized in unrealized losses in equity securities, debit and credit card fees and gain on sale of mortgage loans.
Noninterest expense increased 2% from third quarter 2022. Salary and employee benefit costs increased $230 thousand , or 7% , compared to the prior year quarter, primarily resulting from the increases in base salaries, benefits, and group medical. FDIC assessment increased $38 thousand or 41% on the increase in rate in 2023. Occupancy expense increased $18 thousand , or 7% , related to building repairs. Software expense increased $11 thousand , or 3% , with the deployment of new reporting software and upgrades. Professional and directors’ fees decreased $189 thousand , or 34% primarily reflecting a consulting fee in 2022 to renegotiate the core data processing software contract. Marketing and public relations decreased by $17 thousand , or 12% , reflecting a return to normalized levels. The Company’s third quarter efficiency ratio decreased to 57.0% compared to 57.9% in the prior year.
Federal income tax expense was $850 thousand in the 2023 third quarter compared to $890 thousand in the 2022 third quarter. The effective tax rate for the 2023 and 2022 third quarter was 19.6% .
Average earning assets for the 2023 third quarter increased $2.5 million , or less than 1% , from the year-ago quarter, primarily reflecting an $80 million , or 14% , increase in average loans, a $15 million , or 4% , decrease in average securities, and a $63 million , or 62% , decrease in interest-earning deposits in other banks, held mainly at the Federal Reserve Bank.
Average commercial loan balances for the quarter, including commercial real estate, increased $58 million , or 15% , from prior year levels, as construction loans were drawn, and borrowers used term loans to fund equipment and other purchases. Average residential mortgage balances increased $24 million , or 17% , above the prior year’s quarter as borrowers have been favoring adjustable-rate mortgages during this period of higher interest rates. Home equity lines of credit decreased $3 million from the prior year’s quarter as balances were paid down due to rate increases as these loans are tied to Prime. Average consumer credit balances increased $1 million , or 9% , versus the same quarter of the prior year. Increased organic loan demand continues to be largely dependent on the pace at which excess liquidity is absorbed by businesses and households and restoration of borrower confidence.
Nonperforming assets were $260 thousand , or 0.04% , of total loans on September 30, 2023, compared to $686 thousand , or 0.11% of total loans, a year ago. Delinquent loan balances as of September 30, 2023, were stable at 0.23% of total loans as compared to 0.26% on September 30, 2022. Net loan recoveries recognized during third quarter 2023 were $119 thousand , or (0.07% ) of average loans annualized, compared to third quarter 2022 net loan losses of $10 thousand .
On January 1, 2023, CSB adopted ASU 2016-13 known as current expected credit losses or “CECL”. The allowance for expected credit losses amounted to $6.7 million , or 0.98% of total loans, on September 30, 2023, as compared to 1.15% on September 30, 2022. The allowance for credit losses on off-balance sheet commitments on September 30, 2023, was $492 thousand , as compared to a September 30, 2022, balance of $141 thousand . CSB recorded no allowance for credit losses related to AFS or HTM debt securities as there is a zero loss expectation on these securities.
Average deposit balances declined slightly on a quarter over prior year quarter comparison by $2.7 million , or less than 1% . For the third quarter 2023, the average cost of deposits amounted to 1.08% , as compared to 0.22% for the third quarter 2022. During the third quarter 2023, increases in average deposit balances over the prior year quarter included interest-bearing demand accounts of $13 million and time deposits of $54 million . Noninterest-bearing accounts decreased $39 million from the prior year’s third quarter while savings and money market accounts declined $30 million . The average balance of securities sold under repurchase agreement during the third quarter of 2023 decreased by $1 million , or 3% , compared to the average for the same period in the prior year.
Shareholders’ equity totaled $101 million on September 30, 2023, with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 8.72% for the quarter ended September 30, 2023, and 8.20% for the quarter ended September 30, 2022. The Company declared a third quarter dividend of $0.38 per share, producing an annualized yield of 4.0% based on the September 30, 2023, closing price of $37.75 .
About CSB Bancorp, Inc.
CSB is a financial holding company headquartered in Millersburg, Ohio , with approximate assets of $1.2 billion as of September 30, 2023. CSB provides a complete range of banking and other financial services to consumers and businesses through its wholly owned subsidiary, The Commercial and Savings Bank, with sixteen banking centers in Holmes , Wayne , Tuscarawas , and Stark counties and Trust offices located in Millersburg , North Canton , and Wooster, Ohio .
Forward-Looking Statement
This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets, and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.
CSB BANCORP, INC.
CONSOLIDATED FINANCIAL HIGHLIGHTS
(Unaudited)
Quarters
(Dollars in thousands, except per share data)
2023
2023
2023
2022
2022
2023
2022
EARNINGS
3rd Qtr
2nd Qtr
1st Qtr
4th Qtr
3rd Qtr
9 months
9 months
Net interest income FTE (a)
$
8,871
$
9,027
$
8,999
$
9,304
$
8,596
$
26,897
$
23,164
Provision (Recovery) of credit losses
177
140
(31
)
-
(250
)
286
(895
)
Other income
1,705
1,733
1,628
1,612
1,675
5,066
5,099
Other expenses
6,034
6,049
5,719
6,206
5,945
17,802
17,187
FTE adjustment(a)
34
33
34
36
36
101
109
Net income
3,481
3,644
3,934
3,753
3,650
11,059
9,560
Basic and Diluted earnings per share
1.30
1.36
1.46
1.39
1.35
4.12
3.52
PERFORMANCE RATIOS
Return on average assets (ROA), annualized
1.19
%
1.27
%
1.39
%
1.27
%
1.25
%
1.28
%
1.12
%
Return on average common equity (ROE), annualized
13.63
14.62
16.39
15.94
15.24
14.85
13.41
Net interest margin FTE(a)
3.21
3.33
3.37
3.33
3.12
3.30
2.86
Efficiency ratio
56.99
56.24
53.86
56.83
57.87
55.70
60.82
Number of full-time equivalent employees
178
172
170
172
172
MARKET DATA
Book value per common share
$
37.96
$
37.36
$
36.93
$
35.43
$
33.97
Period-end common share market value
37.75
38.88
38.00
38.50
39.00
Market as a % of book
99.45
%
104.07
%
102.90
%
108.66
%
114.81
%
Price-to-earnings ratio
6.85
6.99
7.06
7.84
8.92
Average basic common shares outstanding
2,675,967
2,680,526
2,692,304
2,707,576
2,712,686
2,682,872
2,716,225
Average diluted common shares outstanding
2,675,967
2,680,526
2,692,304
2,707,576
2,712,686
2,682,872
2,716,225
Period end common shares outstanding
2,671,313
2,680,325
2,680,625
2,707,576
2,707,576
Common stock market capitalization
$
100,842
$
104,211
$
101,864
$
104,242
$
105,595
ASSET QUALITY
Gross charge-offs
$
43
$
15
$
39
$
217
$
29
$
97
$
71
Net (recoveries) charge-offs
(119
)
(10
)
4
170
10
(125
)
(285
)
Allowance for credit losses
6,691
6,559
6,307
6,838
7,008
Nonperforming assets (NPAs)
260
255
218
256
685
Net charge-off (recovery) / average loans ratio
(0.07
)%
(0.01
)%
0.00
%
0.11
%
0.01
%
(0.03
)%
(0.07
)%
Allowance for credit losses / period-end loans
0.98
0.99
0.97
1.09
1.15
NPAs/loans and other real estate
0.04
0.04
0.03
0.04
0.11
Allowance for credit losses / nonperforming loans
2,576
2,577
2,893
2,667
1,022
CAPITAL & LIQUIDITY
Period-end tangible equity to assets(b)
8.39
%
8.29
%
8.28
%
7.90
%
7.54
%
Average equity to assets
8.72
8.68
8.48
7.96
8.20
Average equity to loans
15.00
15.15
15.27
15.06
15.98
Average loans to deposits
66.20
65.05
63.19
59.84
58.15
AVERAGE BALANCES
Assets
$
1,162,029
$
1,151,403
$
1,147,033
$
1,172,785
$
1,159,523
$
1,153,549
$
1,144,890
Earning assets
1,096,679
1,085,751
1,082,996
1,108,231
1,094,197
1,088,525
1,081,673
Loans
675,283
660,004
637,392
620,243
594,820
657,698
576,821
Deposits
1,020,135
1,014,631
1,008,721
1,036,559
1,022,851
1,014,537
1,004,565
Shareholders' equity
101,294
99,958
97,319
93,404
95,043
99,538
95,337
ENDING BALANCES
Assets
$
1,156,598
$
1,156,157
$
1,143,394
$
1,159,108
$
1,161,830
Earning assets
1,087,591
1,088,561
1,080,939
1,094,876
1,096,302
Loans
680,949
664,605
647,773
627,171
609,971
Deposits
1,018,075
1,021,671
1,007,507
1,023,417
1,029,274
Shareholders' equity
101,410
100,140
99,007
95,920
91,981
Notes:
(a) -
Net interest income on a fully-taxable equivalent ("FTE") basis, restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis differs from net interest income under U.S. Generally Accepted Accounting Principles, and is considered a non-GAAP measure.
(b) -
Tangible equity is a non-GAAP measure, which is shareholders' equity net of goodwill.
CSB BANCORP, INC.
CONSOLIDATED BALANCE SHEETS
(Unaudited)
September 30,
September 30,
(Dollars in thousands, except per share data)
2023
2022
ASSETS
Cash and cash equivalents
Cash and due from banks
$
20,409
$
20,859
Interest-earning deposits in other banks
29,000
86,657
Total cash and cash equivalents
49,409
107,516
Securities
Available-for-sale, at fair-value
145,330
143,433
Held-to-maturity
230,505
252,362
Equity securities
246
249
Restricted stock, at cost
1,561
3,430
Total securities
377,642
399,474
Loans held for sale
-
200
Loans
680,949
609,971
Less allowance for credit losses
6,691
7,008
Net loans
674,258
602,963
Premises and equipment, net
13,105
13,455
Goodwill
4,728
4,728
Bank owned life insurance
25,229
24,539
Accrued interest receivable and other assets
12,227
8,955
TOTAL ASSETS
$
1,156,598
$
1,161,830
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits:
Noninterest-bearing
$
300,018
$
338,043
Interest-bearing
718,057
691,231
Total deposits
1,018,075
1,029,274
Short-term borrowings
30,734
34,199
Other borrowings
1,808
2,528
Accrued interest payable and other liabilities
4,571
3,848
TOTAL LIABILITIES
1,055,188
1,069,849
SHAREHOLDERS' EQUITY
Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares in 2023 and 2022
18,629
18,629
Additional paid-in capital
9,815
9,815
Retained earnings
94,614
83,696
Treasury stock at cost - 309,289 shares in 2023 and 273,026 shares in 2022
(7,481
)
(6,107
)
Accumulated other comprehensive loss
(14,167
)
(14,052
)
TOTAL SHAREHOLDERS' EQUITY
101,410
91,981
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY
$
1,156,598
$
1,161,830
CSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
Quarter ended
Nine months ended
(Unaudited)
September 30,
September 30,
(Dollars in thousands, except per share data)
2023
2022
2023
2022
Interest and dividend income:
Loans, including fees
$
9,175
$
6,680
$
25,855
$
18,489
Taxable securities
1,910
1,780
5,867
4,721
Nontaxable securities
102
110
305
328
Other
531
586
1,520
863
Total interest and dividend income
11,718
9,156
33,547
24,401
Interest expense:
Deposits
2,772
559
6,484
1,252
Other
109
37
267
94
Total interest expense
2,881
596
6,751
1,346
Net interest income
8,837
8,560
26,796
23,055
Provision (Recovery) for credit losses
177
(250
)
286
(895
)
Net interest income, after provision (recovery) for credit losses
8,660
8,810
26,510
23,950
Noninterest income
Service charges on deposit accounts
332
321
924
875
Trust services
259
216
769
733
Debit card interchange fees
525
530
1,579
1,568
Credit card fees
166
170
535
516
Earnings on bank owned life insurance
179
170
520
504
Gain on sale of loans
47
49
106
314
Unrealized (loss) gain on equity securities
(11
)
(2
)
2
2
Other
208
221
631
587
Total noninterest income
1,705
1,675
5,066
5,099
Noninterest expenses
Salaries and employee benefits
3,429
3,199
10,112
9,766
Occupancy expense
290
272
856
820
Equipment expense
199
193
595
604
Professional and director fees
366
555
1,073
1,161
Software expense
408
397
1,228
1,056
Marketing and public relations
124
141
383
362
Debit card expense
179
201
494
550
Financial institutions tax
192
195
576
584
FDIC insurance expense
131
93
380
251
Other expenses
716
699
2,105
2,033
Total noninterest expenses
6,034
5,945
17,802
17,187
Income before income taxes
4,331
4,540
13,774
11,862
Federal income tax provision
850
890
2,715
2,302
Net income
$
3,481
$
3,650
$
11,059
$
9,560
Net income per share:
Basic and diluted
$
1.30
$
1.35
$
4.12
$
3.52
CSB BANCORP, INC.
NON-GAAP DISCLOSURES
NET INTEREST INCOME, FULLY-TAXABLE EQUIVALENT
Quarter ended
(Unaudited)
Sept 30,
(Dollars in thousands)
2023
2022
Net interest income
$
8,837
$
8,560
Taxable equivalent adjustment1
34
36
Net interest income, FTE
$
8,871
$
8,596
Net interest margin
3.20
%
3.11
%
Taxable equivalent adjustment1
0.01
0.01
Net interest margin, FTE
3.21
%
3.12
%
1
Net interest income on a fully-taxable equivalent ("FTE") basis, restates interest on tax-exempt securities and loans as if such interest were subject to federal income tax at the statutory rate. Net interest income on an FTE basis differs from net interest income under U.S. Generally Accepted Accounting Principles, and is considered a non-GAAP measure.
PRE-PROVISION NET REVENUE
Quarter ended
(Unaudited)
Sept 30,
(Dollars in thousands)
2023
2022
Pre-Provision Net Revenue (PPNR)
Net interest income
$
8,837
$
8,560
Total noninterest income
1,705
1,675
Total revenue
10,542
10,235
Less: Noninterest expense
6,034
5,945
PPNR
$
4,508
$
4,290
TANGIBLE EQUITY
(Unaudited)
Sept 30,
Sept 30,
(Dollars in thousands)
2023
2022
Total Shareholders' Equity
$
101,410
$
91,981
Less: Goodwill
4,728
4,728
Tangible Shareholders' Equity
$
96,682
$
87,253
View source version on businesswire.com: https://www.businesswire.com/news/home/20231024608535/en/
Paula J. Meiler, SVP & CFO
330.763.2873
paula.meiler@csb1.com
Source: CSB Bancorp, Inc.
What was CSB Bancorp's net income for the third quarter of 2023?
CSB Bancorp reported a net income of $3,481,000 for the third quarter of 2023, an increase of 16% compared to the same period last year.
How did loan interest income change in the third quarter of 2023?
Loan interest income increased by $2.5 million, or 37%, in the third quarter of 2023 due to rate increases and an increase in average loan volume.
What was the change in nonperforming assets?
Nonperforming assets decreased from 0.11% to 0.04% of total loans.