CSB Bancorp, Inc. Reports Third Quarter Earnings

CSB Bancorp, Inc. (OTC Pink: CSBB):

Third Quarter Highlights

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced third quarter 2024 net income of $3,145,000, or $1.18 per basic and diluted share, as compared to $3,481,000, or $1.30 per basic and diluted share, for the same period in 2023. For the nine-month period ended September 30, 2024 net income totaled $7,693,000 compared to $11,059,000 for the same period last year, a decrease of 30%.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 11.14% and 1.05%, respectively, compared with 13.63% and 1.19% for the third quarter of 2023. For the nine-month period ended September 30, 2024 ROE and ROA were 9.30% and 0.88% as compared to 14.85% and 1.28% for the comparable period in 2023.

Eddie Steiner, President and CEO stated, “Local economic conditions remain stable with continued low unemployment. Loan demand has been steady, with signs of increasing borrower appetite as interest rates decline. Total revenue is 2% above the prior year’s nine months and net revenue before provision for credit loss and taxes is 1% ahead on a year to date basis. Margins and efficiency are holding very close to prior year levels, even with higher rates paid on deposits and moderate inflation within operating costs. Overall quality within the loan portfolio remains acceptable, and shareholders’ equity and book value per share have increased 7% year to date.”

Pre-Provision Net Revenue (“PPNR”) (a non-GAAP measure) totaled $4.60 million during the quarter, an increase of $93 thousand, or 2%, from the prior year’s third quarter. Net interest income increased $377 thousand, or 4%, noninterest income increased $104 thousand, or 6%, and noninterest expense rose $388 thousand, or 6%, in the third quarter of 2024 compared to the same period in 2023.

Provision for credit loss expense for the quarter increased $523 thousand from third quarter 2023 and $4.5 million for the comparable nine-month period. As previously identified, while continuing to pursue liquidation of a commercial lending relationship originally totaling $6.4 million, the credit was charged down in third quarter 2024 by the previously held specific reserve of $4.1 million. The court appointed receiver has obtained auction values of the premises and equipment in possession and the bank continues to move through the court system to schedule liquidation of the assets or sale of company.

The allowance for expected credit losses on loans amounted to $7.2 million, or 1.00% of total loans, on September 30, 2024, as compared to $6.7 million or 0.98% of total loans on September 30, 2023. The allowance for credit losses on off-balance sheet commitments on September 30, 2024 was $532 thousand, as compared to a September 30, 2023 balance of $492 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.

Loan interest income including fees increased $1.4 million, or 15%, during third quarter 2024 as compared to the same quarter in 2023. The increase was almost evenly divided between volume and rate increases with a $48 million increase in average loan volume and a 41bp increase in quarter over prior quarter yield. Securities interest income decreased $142 thousand, or 7%, during the third quarter 2024 compared to the same quarter 2023 as the Company continues to deploy cash flow from investments into loan originations. Loan yields for third quarter 2024 averaged 5.80%, an increase of 41 basis points from the 2023 third quarter average of 5.39%, while overnight funds and securities yields for third quarter 2024 averaged 5.41% and 2.17%, respectively, compared to 5.45% and 2.11% in the third quarter 2023.

Interest expense rose $1.1 million, or 38%, during third quarter 2024 as compared to third quarter 2023. The increase follows a period of rapid interest rate increases spurred by the Federal Reserve during March 2022 through July 2023, followed by competitive pressures from banks and others to secure adequate funding. The cost to fund gross earning assets for the third quarter 2024 was 1.40% as compared to 1.04% for the third quarter of 2023.

The fully-taxable equivalent (“FTE”) (a non-GAAP measure) net interest margin was 3.26% compared to 3.21% for the third quarter 2023. Compared to the 2023 third quarter, FTE net interest income increased $377 thousand, or 4%, reflecting increasing interest income with a $31 million increase in average earning assets as well as a 42 bp increase in the yield on assets. The higher interest rate environment coupled with the continued mix shift into loans from securities primarily drove the increase in earnings from assets, which was partially offset by higher average interest-bearing liabilities and a 48 bp higher cost of funds. Tax equivalency effect on net interest margin was 0.01% in third quarter 2024 and 2023.

Noninterest income increased $104 thousand, or 6%, compared to third quarter of 2023. The increase was primarily the result of a $59 thousand increase in gain on sale of mortgage loans to the secondary market, a $28 thousand increase in the unrealized gain or loss on equity securities, a $24 thousand increase in earnings on bank owned life insurance, and a $15 thousand increase in trust and brokerage fees. Offsetting decreases were recognized in service charges related to deposit overdraft fees and credit card fees.

Noninterest expense increased $388 thousand, or 6%, from third quarter 2023. Salary and employee benefit costs increased $227 thousand, or 7%, compared to the prior year quarter with increases in base salary, insurance, and social security taxes. Marketing and public relation costs increased $38 thousand, or 31%, with increases in community related activities. Professional and directors’ fees increased $25 thousand, or 7%, state financial institutions tax increased $24 thousand, or 13%, due to the increase in capital. Debit card expenses increased $7 thousand, or 4%, primarily with increases in processing. Software expense increased $13 thousand, or 3%. Equipment expense increased $25 thousand, or 13%, with increasing costs of maintenance contracts and repairs. The Company’s third quarter efficiency ratio increased to 58.2% compared to 57.0% in the prior year.

Federal income tax expense was $756 thousand in the 2024 third quarter compared to $850 thousand in the 2023 third quarter. The effective tax rates for the 2024 and 2023 third quarters were 19% and 20%, respectively.

Average earning assets for the 2024 third quarter increased $31 million, or 3%, from the year-ago quarter, primarily reflecting a $48 million, or 7%, increase in average loans, a $36 million, or 10%, decrease in average securities, and a $19 million, or 50%, increase 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 $36 million, or 8%, 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 $10 million, or 6%, above the prior year’s quarter as borrowers have been favoring adjustable-rate mortgages during this period of higher interest rates. The bank does not sell adjustable-rate mortgages to the secondary market. Home equity lines of credit increased $3 million from the prior year’s quarter as balances were drawn for expenses and to maintain the low interest rate on the first mortgage. Average consumer credit balances decreased $839 thousand, or 5%, versus the same quarter of the prior year. Commercial loan demand softened to somewhat muted levels during third quarter, with households and businesses alike preferring to limit borrowing until the election provides some clarity as to tax rates and inflation.

Nonperforming assets were $3.4 million, or 0.47%, of total loans on September 30, 2024, compared to $260 thousand, or 0.04% of total loans, a year ago. The identified commercial relationship mentioned above accounts for $2.8 million of the $3.4 million total nonperforming loans at September 30, 2024. Delinquent loan balances as of September 30, 2024, increased to 0.59% of total loans as compared to 0.23% on September 30, 2023. Net loan charge-offs recognized during third quarter 2024 were $4 million, or 2.2% of average loans annualized, compared to third quarter 2023 net loan recoveries of $119 thousand.

Average deposit balances increased on a quarter over prior year quarter comparison by $28 million, or 3%. For the third quarter 2024, the average cost of deposits amounted to 1.48%, as compared to 1.08% for the third quarter 2023. Third quarter 2024 increases in average deposit balances over the prior year quarter included money market accounts of $28 million and time deposits of $62 million. Noninterest-bearing accounts decreased $22 million from the prior year’s third quarter while savings and interest-bearing demand accounts declined $40 million. The average balance of short-term borrowings, which are customer repurchase agreements, decreased during the third quarter of 2024 by $9 million, or 28%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $115 million on September 30, 2024, with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 9.43% for the quarter ended September 30, 2024, and 8.72% for the quarter ended September 30, 2023. The Company declared a third quarter dividend of $0.40 per share, producing an annualized yield of 4.2% based on September 30, 2024 closing price of $38.50.

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, 2024. 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. A loan production office was opened in Medina, Ohio on March 20, 2024.

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. See the non-GAAP disclosures at the end of this release for a reconciliation of GAAP and non-GAAP measures.

View source version on businesswire.com: https://www.businesswire.com/news/home/20241022551047/en/