Annual Statements Open main menu

CSB Bancorp, Inc. - Quarter Report: 2001 September (Form 10-Q)

CSB BANCORP, INC.

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549



FORM 10-Q



_X_ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934



For the quarterly period ended: SEPTEMBER 30, 2001



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 Number)

incorporation or organization)



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 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.



__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 October 30, 2001:

2,624,367 common shares



FORM 10-Q

QUARTER ENDED September 30, 2001





Table of Contents





Part I - Financial Information





ITEM 1 - FINANCIAL STATEMENTS



Consolidated Balance Sheets



Consolidated Statements of Income



Consolidated Statements of Changes in Shareholders' Equity



Condensed Consolidated Statements of Cash Flows



Note to the Consolidated Financial Statements





ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION

AND RESULTS OF OPERATIONS





ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK







Part II - Other Information



Other Information



Signatures





CSB BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)



September 30,

2001

December 31,

2000

ASSETS
Cash and noninterest-bearing deposits with banks

$ 12,409,700

$ 12,958,359
Interest-bearing deposits with banks 25,666 234,263
Federal funds sold 26,180,000 2,660,000
Total cash and cash equivalents 38,615,366 15,852,622
Securities available for sale, at fair value 35,777,285 27,189,712
Securities held to maturity (Fair values of

$61,647,705 in 2001 and $70,328,759 in 2000)



59,070,086


69,360,098
Total securities 94,847,371 96,549,810
Loans, net of allowance for loan losses of

$4,633,226 in 2001 and $7,460,370 in 2000)



171,693,134


198,357,829
Premises and equipment, net 9,287,659 9,249,920
Accrued interest receivable and other assets 5,641,403 5,202,069
Total assets $320,084,933

==========

$325,212,250

==========

LIABILITIES
Deposits
Noninterest-bearing $ 29,533,213 $ 30,336,143
Interest-bearing 236,743,567 238,246,776
Total deposits 266,276,780 268,582,919
Securities sold under repurchase agreements 13,544,575 15,583,527
Federal Home Loan Bank borrowings 6,530,967 8,464,827
Accrued interest payable and other liabilities 972,955 1,041,043
Total liabilities 287,325,277 293,672,316
SHAREHOLDERS' EQUITY
Common stock, $6.25 par value: 9,000,000 shares

authorized; 2,667,786 shares issued in 2001 and 2000



16,673,667


16,673,667
Additional paid-in capital 6,413,915 6,413,915
Retained earnings 10,644,242 9,840,016
Treasury stock at cost: 43,418 in 2001 and 43,408 in 2000 (1,338,594) (1,338,432)
Accumulated other comprehensive income (loss) 366,426 (49,232)
Total shareholders' equity 32,759,656 31,539,934
Total liabilities and shareholders' equity $320,084,933

==========

$325,212,250

==========

See accompanying note to consolidated financial statements.



CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)



Three Months Ended

September 30,

Nine Months Ended

September 30,

2001 2000 2001 2000
Interest income
Loans, including fees $ 3,920,336 $ 5,248,882 $13,026,316 $14,887,350
Taxable securities 561,035 694,041 1,666,857 2,206,671
Nontaxable securities 603,522 614,437 1,816,110 1,841,170
Other 213,287 5,588 406,416 19,643
Total interest income 5,298,180 6,562,948 16,915,699 18,954,834
Interest expense
Deposits 2,703,736 2,871,512 8,413,260 8,303,364
Other 163,297 482,353 613,891 1,162,523
Total interest expense 2,867,033 3,353,865 9,027,151 9,465,887
Net interest income 2,431,148 3,209,083 7,888,548 9,488,947
Provision for loan losses (2,525,853) 616,453 183,110 3,535,550
Net interest income after provision for loan losses



4,957,001


2,592,630


7,705,438


5,953,397
Other income
Service charges on deposit accounts

182,523


197,278


551,895


607,114
Gain on sale of loans 24,996 3,809 62,583 23,573
Trust and financial services

96,583


86,884


300,764


303,394
Other income 195,725 191,548 582,528 527,334
Total other income 499,827 479,519 1,497,770 1,460,415
Other expense
Salaries and employee benefits

1,307,852


1,196,196


3,934,737


3,411,940
Occupancy expense 157,678 136,570 481,227 410,362
Equipment expense 140,241 106,630 385,147 323,651
State franchise tax 100,372 98,072 259,443 291,800
Professional fees 307,406 117,102 1,071,521 212,618
Other expense 905,755 590,346 2,663,857 1,996,539
Total other expense 2,919,304 2,244,916 8,795,932 6,646,910
Income before income taxes

2,537,524


827,233


407,276


766,902
Provision (credit) for

income taxes



683,472


111,039


(396,950)


(314,096)
Net income $1,854,052 $ 716,194 $ 804,226 $1,080,998
Basic earnings per share $ 0.71 $ 0.27 $ 0.31 $ 0.41
Diluted earnings per share

$ 0.70


$ 0.27


$ 0.30


$ 0.41


See accompanying note to consolidated financial statements.



CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY

(Unaudited)





Three Months Ended

September 30,

Nine Months Ended

September 30,

2001 2000 2001 2000
Balance at beginning of period $30,674,847 $31,511,146 $31,539,934 $33,201,678
Net income 1,854,052 716,194 804,226 1,080,998
Other comprehensive income, net of tax



230,813


148,624


415,658


107,364
Comprehensive income 2,084,865 864,818 1,219,884 1,188,362
Cash dividends ($.15 and $.30 per share in 2000)

---


(392,591)


---


(1,183,855)
Purchase of treasury shares ( 4 and 10 shares in 2001, and 18,395 and 47,100 shares in 2000)



(56)




(54,431)




(162)




(1,507,082)
Treasury shares used for the dividend reinvestment program (reissued 3,318 and 7,136 treasury shares), net of fractional shares retired







---








108,851








---








338,690
Balance at end of period $32,759,656

=========

$32,037,793

=========

$32,759,656

=========

$32,037,793

=========



See accompanying note to the consolidated financial statements.







CSB BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)





Nine Months Ended

September 30,

2001 2000
Net cash from operating activities $ 352,817 $ 4,102,616
Cash flows from investing activities
Securities available for sale
Proceeds from maturities, calls and repayments 19,925,000 4,000,000
Purchases (27,770,000) 0
Securities held to maturity
Proceeds from maturities, calls and repayments 10,250,000 4,640,000
Purchases 0 (832,548)
Net change in loans 26,730,491 (17,161,781)
Premises and equipment expenditures, net (446,451) (521,040)
Net cash from investing activities 28,689,040 (9,875,369)
Cash flows from financing activities
Net change in deposits (2,306,139) (4,431,073)
Net change in securities sold under repurchase agreements



(2,038,952)


259,070
Net change in federal funds purchased --- 12,100,000
Principal reductions on FHLB borrowings (1,933,860) (1,056,295)
Cash dividends paid --- (845,165)
Purchase of treasury shares (162) (1,507,082)
Net cash from financing activities (6,279,113) 4,519,455
Net change in cash and cash equivalents 22,762,744 (1,253,298)
Beginning cash and cash equivalents 15,852,622 13,267,077
Ending cash and cash equivalents $38,615,366

=========

$12,013,779

=========

Supplemental disclosures
Interest paid $9,071,910 $9,438,726
Income taxes paid 0 305,000



See accompanying note to the consolidated financial statements.

CSB BANCORP, INC.

NOTE TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)





NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES



The accompanying consolidated financial statements include the accounts of CSB Bancorp, Inc. and its wholly-owned subsidiary, The Commercial and Savings Bank (together referred to as the "Company" or "CSB"). All significant intercompany transactions and balances have been eliminated in consolidation.



The consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company's financial position at September 30, 2001, and the results of operations and changes in cash flows for the periods presented have been made.



Certain information and footnote disclosures typically included in financial statements prepared in accordance with generally accepted accounting principles have been omitted. The Annual Report for CSB for the year ended December 31, 2000, contains consolidated financial statements and related footnote disclosures which should be read in conjunction with the accompanying consolidated financial statements. The results of operations for the periods ended September 30, 2001, are not necessarily indicative of the operating results for the full year or any future interim period.









CSB BANCORP, INC.

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS



ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS



The following discussion focuses on the consolidated financial condition of CSB Bancorp, Inc. (the Company) at September 30, 2001, compared to December 31, 2000, and the consolidated results of operations for the nine month and quarterly periods ending September 30, 2001 compared to the same periods in 2000. 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



Certain statements contained in this report that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms "anticipates", "plans", "expects", "believes", and similar expressions as they relate to the Company or its management are intended to identify such forward-looking statements. The Company's actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services.



The Company does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events.



FINANCIAL CONDITION



Total assets were $320.1 million at September 30, 2001, compared to $325.2 million at December 31, 2000, representing a decrease of $5.1 million or 1.6%. Federal funds sold increased $23.5 million to $26.2 million at September 30, 2001. Total securities decreased $1.7 million during the nine month period ended September 30, 2001, including a $10.3 million decrease in the held-to-maturity category and a $8.6 million increase in the available for sale category. It is presently the Company's policy to classify all new securities purchases as available-for-sale. The Company manages its securities portfolio and federal funds sold position to meet liquidity needs and asset liability management requirements.







Net loans decreased $26.7 million, or 13.4% from December 31, 2000, to $171.7 million at September 30, 2001. Commercial loans decreased $12.0 million, or 14.1%, from December 31, 2000, partially due to $737,000 being sold during the nine month period. Commercial real estate loans decreased $5.3 million, or 13.7%, primarily as a result of $5.2 million of performing and non-performing commercial real estate loans being sold during the first nine months of 2001. This sale more than offset commercial real estate construction loans which became permanent loans. Total construction loans decreased $6.9 million, or 91.7%. Installment loans decreased $4.3 million, or 24.0%. Overall, the decrease in loans is attributed to the sale of commercial real estate loans and stricter underwriting standards.



The allowance for loan losses amounted to $4.6 million, or 2.63% of total loans, at September 30, 2001, compared to $7.5 million, or 3.61% of total loans at December 31, 2000. Management prepares an analysis of the loan portfolio and the corresponding allowance for loan and lease losses on a monthly basis. This analysis considers the mix of the portfolio, internal classification of loans, delinquencies, and other factors. During the quarter ended September 30, 2001, significant progress was made in certain large loan concentrations, which substantially reduced the amount of allowance required. This progress included the paydown, and in some cases, the payoff of loan concentrations. Problem loans, including loans past due more than 90 days and certain loans placed on nonaccrual status, were approximately $3.5 million, or 2.0% of total loans at September 30, 2001, compared to $1.3 million, or 0.65% of total loans at December 31, 2000. These credits are considered in management's analysis of the allowance for loan losses.



Net premises and equipment increased $38,000, or 0.4%, during the first nine months of 2001, due primarily to the acquisition of technology equipment in the normal course of business, which more than offset depreciation.



At September 30, 2001, the ratio of total loans to deposits was 66.2%, compared to 76.6% at the end of 2000.



Total shareholders' equity at September 30, 2001 increased $1.2 million, or 3.9%, compared to December 31, 2000, due to the nine month net income of $804,000, as well as the $416,000 change in the unrealized gain (loss), net of tax, on available-for-sale securities.



The Company and its subsidiary met all minimum regulatory capital requirements at September 30, 2001.



RESULTS OF OPERATIONS



Net income for the nine months ending September 30, 2001, was $804,000, or $0.31 per share, as compared to net income of $1.1 million, or $0.41 per share during the same period last year, a decrease of $277,000 or 25.6%. For the quarter ended September 30, 2001, the Company had net income of $1.9 million, or $0.71 per share, for the reasons previously discussed.



Interest income for the nine months ended September 30, 2001 was $16.9 million, a decrease of $2.0 million, or 10.8%, over the same period last year, including interest and fees on loans decreasing $1.9 million, or 12.5%. Interest on securities decreased $565,000, or 14.0%, as short term interest rates fell and certain callable securities were called. Other interest income increased $387,000 as the average federal fund sold position was higher during the current period. Interest income for the quarter ended September 30, 2001 was $5.3 million, a decrease of $1.3 million, or 19.3%, compared to the same period in 2000. This decrease was due to the reasons previously noted.



Interest expense decreased $439,000, or 4.6% to $9.0 million for the nine months ended September 30, 2001, compared to the nine months ended September 30, 2000. Interest expense on deposits increased $110,000, or 1.3%, from the same period as last year, while interest expense on other borrowings decreased by $549,000, or 47.2%. The decrease in interest expense on other borrowings is due to the payoff of a $1.0 million FHLB advance and the reduction in other advances. Interest expense for the quarter ended September 30, 2001 was $2.9 million, a decrease of $487,000, or 14.5%, from the same period in 2000.



The provision for loan losses was $183,000 during the first nine months of 2001, a decrease of $3.4 million over the same period of 2000. The provision is determined based on management's calculation of the allowance for loan losses, which, as noted previously, includes provisions for classified loans, as well as provision for the remainder of the portfolio based on historical data, including past charge-offs. The provision for loan losses for the three months ended September 30, 2001 was $(2.5) million, compared to $616,000 for the same quarter last year. During the third quarter of 2001, significant progress was made in the resolution of non-performing loans. This resulted in a negative provision due to specific loan losses no longer being required.



Other income increased $37,000, or 2.6%, during the nine months ended September 30, 2001 as compared to the same period in 2000. Other expenses increased $2.1 million, or 32.3%, for the nine months ended September 30, 2001, compared to the same period in 2000. Salaries and employee benefits increased $523,000, or 15.3%; occupancy expense increased $71,000, or 17.3%; professional fees increased $859,000 primarily due to additional expenses relating to the Written Agreement; and other expenses increased $667,000 or 33.4%. The credit for income taxes was $397,000 during the first nine months of 2001, as compared to a credit of $314,000 for the first nine months of 2000.



Other income for the quarter ended September 30, 2001 was $500,000, an increase of $20,000 compared to the same quarter in 2000. Other expenses for the three month period increased $674,000, or 30.0%, compared to last year's period. This increase was due to reasons previously noted.



CSB BANCORP, INC.



QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK



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 September 30, 2001 from that presented in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 2000. Management performs a quarterly analysis of the Company's interest rate risk. All positions are currently within the Board-approved policy limits.







CSB BANCORP, INC.

FORM 10

Quarter ended September 30, 2001

PART II - OTHER INFORMATION



Item 1 - Legal Proceedings:

There are no matters required to be reported under this item.



Item 2 - Changes in Securities and Use of Proceeds:

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:



Our 2001 annual meeting of shareholders was held on July 25, 2001. The only matter submitted to a vote of the security holders at the meeting was the election of three directors to our board of directors, each to continue in office until the year 2004. As permitted under Ohio law, cumulative voting was used by shareholders in the election of directors at the meeting. The cumulative voting results are set forth below. There were no abstentions or broker non-votes with respect to any candidate.



Nominee For
Jeffrey A. Robb, Sr. 2,405,801.6754
Philip W. Smith, Jr. 1,042,539.1480
Samuel M. Steimel 1,556,512.0854
John R. Waltman 1,697,836.4744


The following individuals continued as directors of CSB following the annual meeting of shareholders.



C. James Bess

Ronald E. Holtman

J. Thomas Lang

Daniel J. Miller

Edward Steiner

F. Joanne Vincent

Robert K. Baker



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.)
(b) Reports on Form 8-K:
1
2
3






CSB BANCORP, INC.



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: 11/13/2001 /s/ C. James Bess

President

Chief Executive Officer

Date: 11/13/2001 /s/ A. Lee Miller

Senior Vice President

Chief Financial Officer







CSB BANCORP, INC.



Index to Exhibits



Exhibit

Number



Description of Document
Sequential

Page

11 Statement Regarding Computation of Per Share Earnings (reference is hereby made to Consolidated Statements of Income on page 4 hereof.)





15






CSB BANCORP, INC.

EXHIBIT 11



STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS





Three Months Ended

September 30,

Nine Months Ended

September 30,

2001 2000 2001 2000
Basic Earnings per Share

Net income



$1,854,052


$ 716,194


$ 804,226


$1,080,998
Weighted average

common shares



2,624,370


2,635,136


2,624,373


2,635,136
Basic Earnings

per share



$ 0.71

=======



$ 0.27

=======



$ 0.31

=======



$ 0.41

=======

Diluted Earnings per Share

Net income



$1,854,052


$ 716,194


$ 804,226


$1,080,998
Weighted average

common shares



2,624,370


2,635,136


6,624,373


2,635,136
Weighted average effect of

assumed stock options



20,000


857


15,678


2,635,993
Total 2,644,370 2,635,993 2,640,051 2,635,993
Diluted Earnings per Share $ 0.70

=======

$ 0.27

=======

$ 0.30

=======

$ 0.41

=======