Annual Statements Open main menu

CSB Bancorp, Inc. - Quarter Report: 2014 March (Form 10-Q)

10-Q
Table of Contents

 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

 

FORM 10-Q

 

 

 

x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2014

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

incorporation or organization)

 

(I.R.S. Employer

Identification Number)

91 North Clay, 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) 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  ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes  x    No  ¨

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):

 

Large accelerated filer   ¨    Accelerated filer   ¨
Non-accelerated filer   ¨    Smaller reporting company   x

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).    Yes  ¨    No  x

Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date.

 

Common stock, $6.25 par value

     Outstanding at May 1, 2014:   
     2,737,085 common shares   

 

 

 


Table of Contents

CSB BANCORP, INC.

FORM 10-Q

QUARTER ENDED March 31, 2014

Table of Contents

Part I – Financial Information

 

     Page  

ITEM 1 – FINANCIAL STATEMENTS (Unaudited)

  

Consolidated Balance Sheets

     3   

Consolidated Statements of Income

     4   

Consolidated Statements of Comprehensive Income

     5   

Condensed Consolidated Statements of Changes in Shareholders’ Equity

     6   

Condensed Consolidated Statements of Cash Flows

     7   

Notes to Consolidated Financial Statements

     8   

ITEM 2  – MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

     25   

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

     29   

ITEM 4 – CONTROLS AND PROCEDURES

     30   
Part II – Other Information   

ITEM 1 – Legal Proceedings

     31   

ITEM 1A – Risk Factors

     31   

ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds

     31   

ITEM 3 – Defaults upon Senior Securities

     31   

ITEM 4 – Mine Safety Disclosures

     31   

ITEM 5 – Other Information

     31   

ITEM 6 – Exhibits

     32   

Signatures

     33   

 

2


Table of Contents

CSB BANCORP, INC.

PART I – FINANCIAL INFORMATION

ITEM 1. – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

ASSETS    March 31,
2014
    December 31,
2013
 
(Dollars in thousands)             

Cash and cash equivalents

    

Cash and due from banks

   $ 18,640      $ 15,777   

Interest-earning deposits in other banks

     652        26,822   
  

 

 

   

 

 

 

Total cash and cash equivalents

     19,292        42,599   
  

 

 

   

 

 

 

Securities

    

Available-for-sale securities

     102,934        101,722   

Held-to-maturity securities (fair value of $42,988 in 2014, $42,643 in 2013)

     43,688        44,350   

Restricted stock, at cost

     4,613        5,463   
  

 

 

   

 

 

 

Total securities

     151,235        151,535   
  

 

 

   

 

 

 

Loans

     407,770        379,125   

Less allowance for loan losses

     5,065        5,085   
  

 

 

   

 

 

 

Net loans

     402,705        374,040   
  

 

 

   

 

 

 

Premises and equipment, net

     8,641        8,690   

Core deposit intangible

     727        759   

Goodwill

     4,728        4,728   

Bank-owned life insurance

     9,614        9,551   

Accrued interest receivable and other assets

     5,036        4,563   
  

 

 

   

 

 

 

TOTAL ASSETS

   $ 601,978      $ 596,465   
  

 

 

   

 

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

    

LIABILITIES

    

Deposits

    

Noninterest-bearing

   $ 114,844      $ 120,325   

Interest-bearing

     351,729        360,608   
  

 

 

   

 

 

 

Total deposits

     466,573        480,933   
  

 

 

   

 

 

 

Short-term borrowings

     61,792        48,671   

Other borrowings

     17,406        12,459   

Accrued interest payable and other liabilities

     2,328        1,991   
  

 

 

   

 

 

 

Total liabilities

     548,099        544,054   
  

 

 

   

 

 

 

SHAREHOLDERS’ EQUITY

    

Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; shares outstanding 2,736,634 in 2014 and 2013

     18,629        18,629   

Additional paid-in capital

     9,964        9,964   

Retained earnings

     31,155        30,232   

Treasury stock, at cost – 243,968 shares

     (4,958     (4,958

Accumulated other comprehensive loss

     (911     (1,456
  

 

 

   

 

 

 

Total shareholders’ equity

     53,879        52,411   
  

 

 

   

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 601,978      $ 596,465   
  

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

3


Table of Contents

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
(Dollars in thousands, except per share data)    2014      2013  

INTEREST AND DIVIDEND INCOME

     

Loans, including fees

   $ 4,429       $ 4,567   

Taxable securities

     786         582   

Nontaxable securities

     115         127   

Other

     6         24   
  

 

 

    

 

 

 

Total interest and dividend income

     5,336         5,300   
  

 

 

    

 

 

 

INTEREST EXPENSE

     

Deposits

     304         475   

Short-term borrowings

     19         16   

Other borrowings

     115         117   
  

 

 

    

 

 

 

Total interest expense

     438         608   
  

 

 

    

 

 

 

NET INTEREST INCOME

     4,898         4,692   

PROVISION FOR LOAN LOSSES

     185         210   
  

 

 

    

 

 

 

Net interest income, after provision for loan losses

     4,713         4,482   
  

 

 

    

 

 

 

NONINTEREST INCOME

     

Service charges on deposit accounts

     297         315   

Trust services

     216         214   

Debit card interchange fees

     198         178   

Gain on sale of loans, net

     24         114   

Other

     218         217   
  

 

 

    

 

 

 

Total noninterest income

     953         1,038   
  

 

 

    

 

 

 

NONINTEREST EXPENSES

     

Salaries and employee benefits

     2,019         2,050   

Occupancy expense

     266         258   

Equipment expense

     181         165   

Professional and director fees

     182         117   

Franchise tax expense

     107         147   

FDIC insurance expense

     86         88   

Software expense

     162         114   

Marketing and public relations

     108         79   

Debit card expense

     81         62   

Amortization of intangible assets

     32         34   

Net cost of operation of other real estate

     —           9   

Other

     453         436   
  

 

 

    

 

 

 

Total noninterest expenses

     3,677         3,559   
  

 

 

    

 

 

 

Income before income taxes

     1,989         1,961   

FEDERAL INCOME TAX PROVISION

     573         599   
  

 

 

    

 

 

 

NET INCOME

   $ 1,416       $ 1,362   
  

 

 

    

 

 

 

Basic and diluted net earnings per share

   $ 0.52       $ 0.50   
  

 

 

    

 

 

 

See notes to unaudited consolidated financial statements.

 

4


Table of Contents

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

     Three Months Ended
March 31,
 
(Dollars in thousands)    2014     2013  

Net income

   $ 1,416      $ 1,362   
  

 

 

   

 

 

 

Other comprehensive income (loss)

    

Unrealized gains (losses) arising during the period

     774        (745

Income tax effect

     (263     253   

Amount reclassified from accumulated other comprehensive income, held-to-maturity

     52        —     

Income tax effect

     (18     —     
  

 

 

   

 

 

 

Other comprehensive income (loss)

     545        (492
  

 

 

   

 

 

 

Total comprehensive income

   $ 1,961      $ 870   
  

 

 

   

 

 

 

See notes to unaudited consolidated financial statements.

 

5


Table of Contents

CSB BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

     Three Months Ended
March 31,
 
(Dollars in thousands, except per share data)    2014     2013  

Balance at beginning of period

   $ 52,411      $ 52,453   

Net income

     1,416        1,362   

Other comprehensive income (loss)

     545        (492

Cash dividends declared

     (493     (493
  

 

 

   

 

 

 

Balance at end of period

   $ 53,879      $ 52,830   
  

 

 

   

 

 

 

Cash dividends declared per share

   $ 0.18      $ 0.18   

See notes to unaudited consolidated financial statements

 

6


Table of Contents

CSB BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

     Three Months Ended
March 31,
 
(Dollars in thousands)    2014     2013  

NET CASH FROM OPERATING ACTIVITIES

   $ 997      $ 1,182   

CASH FLOWS FROM INVESTING ACTIVITIES

    

Securities:

    

Proceeds from repayments held-to-maturity

     700        —     

Proceeds from maturities and repayments available-for-sale

     2,026        8,128   

Purchases available-for-sale

     (2,535     (11,630

Proceeds from redemption of restricted stock

     850        —     

Loan originations, net of repayments

     (28,821     (8,745

Proceeds from sale of other real estate

     —          18   

Property, equipment, and software acquisitions

     (236     (262
  

 

 

   

 

 

 

Net cash used in investing activities

     (28,016     (12,491
  

 

 

   

 

 

 

CASH FLOWS FROM FINANCING ACTIVITIES

    

Net change in deposits

     (14,356     (17,891

Net change in short-term borrowings

     13,121        (441

Net change in other borrowings

     4,947        (61
  

 

 

   

 

 

 

Net cash (used in) provided by financing activities

     3,712        (18,393
  

 

 

   

 

 

 

NET DECREASE IN CASH AND CASH EQUIVALENTS

     (23,307     (29,702

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

     42,599        66,878   
  

 

 

   

 

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

   $ 19,292      $ 37,176   
  

 

 

   

 

 

 

SUPPLEMENTAL DISCLOSURES

    

Cash paid during the year for:

    

Interest

   $ 446      $ 635   

Income taxes

     300        230   

Noncash financing activities:

    

Dividends declared

     493        493   

See notes to unaudited consolidated financial statements.

 

7


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The condensed 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 March 31, 2014, 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 U.S. generally accepted accounting principles (“U.S. GAAP”) have been omitted. The Annual Report for CSB for the year ended December 31, 2013, 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 period ended March 31, 2014 are not necessarily indicative of the operating results for the full year or any future interim period.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

In July 2013, the FASB issued ASU 2013-11, Income Taxes (Topic 740): Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This Update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. This ASU did not have a significant impact on the Company’s financial statements.

In January 2014, the FASB issued ASU 2014-04, Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method. This ASU is not expected to have a significant impact on the Company’s financial statements.

 

8


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SECURITIES

Securities consist of the following at March 31, 2014 and December 31, 2013:

 

(Dollars in thousands)    Amortized
cost
     Gross
unrealized
gains
     Gross
unrealized
losses
     Fair value  

March 31, 2014

           

Available-for-sale securities

           

U.S. Treasury security

   $ 1,005       $ —         $ 9       $ 996   

U.S. government agencies

     25,534         9         494         25,049   

Mortgage-backed securities of government agencies

     52,429         638         291         52,776   

Other mortgage-backed securities

     216         4         —           220   

Asset-backed securities of government agencies

     2,708         13         7         2,714   

State and political subdivisions

     16,193         424         104         16,513   

Corporate bonds

     4,501         41         2         4,540   

Equity securities

     106         20         —           126   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

     102,692         1,149         907         102,934   
  

 

 

    

 

 

    

 

 

    

 

 

 

Held-to-maturity securities

           

U.S. government agencies

     19,204         2         311         18,895   

Mortgage-backed securities of government agencies

     24,484         83         474         24,093   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total held-to-maturity securities

     43,688         85         785         42,988   
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock

     4,613         —           —           4,613   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 150,993       $ 1,234       $ 1,692       $ 150,535   
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

           

Available-for-sale securities

           

U.S. Treasury security

   $ 1,005       $ —         $ 8       $ 997   

U.S. government agencies

     22,999         8         706         22,301   

Mortgage-backed securities of government agencies

     54,455         536         691         54,300   

Other mortgage-backed securities

     230         5         —           235   

Asset-backed securities of government agencies

     2,739         36         —           2,775   

State and political subdivisions

     16,219         371         143         16,447   

Corporate bonds

     4,500         44         5         4,539   

Equity securities

     106         23         1         128   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total available-for-sale securities

     102,253         1,023         1,554         101,722   
  

 

 

    

 

 

    

 

 

    

 

 

 

Held-to-maturity securities

           

U.S. government agencies

     19,186         —           828         18,358   

Mortgage-backed securities of government agencies

     25,164         —           879         24,285   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total held-to-maturity securities

     44,350         —           1,707         42,643   
  

 

 

    

 

 

    

 

 

    

 

 

 

Restricted stock

     5,463         —           —           5,463   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities

   $ 152,066       $ 1,023       $ 3,261       $ 149,828   
  

 

 

    

 

 

    

 

 

    

 

 

 

 

9


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SECURITIES (CONTINUED)

 

The amortized cost and fair value of debt securities at March 31, 2014, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

(Dollars in thousands)    Amortized
cost
     Fair value  

Available-for-sale:

     

Due in one year or less

   $ 840       $ 856   

Due after one through five years

     17,303         17,458   

Due after five through ten years

     24,907         24,695   

Due after ten years

     59,536         59,799   
  

 

 

    

 

 

 

Total debt securities available-for-sale

   $ 102,586       $ 102,808   
  

 

 

    

 

 

 

Held-to-maturity:

     

Due in one year or less

   $ —         $ —     

Due after one through five years

     —           —     

Due after five through ten years

     7,725         7,707   

Due after ten years

     35,963         35,281   
  

 

 

    

 

 

 

Total debt securities held-to-maturity

   $ 43,688       $ 42,988   
  

 

 

    

 

 

 

Securities with a carrying value of approximately $83.3 million and $87.9 million were pledged at March 31, 2014 and December 31, 2013, respectively, to secure public deposits, as well as other deposits and borrowings as required or permitted by law.

Restricted stock primarily consists of investments in Federal Home Loan Bank (FHLB) and Federal Reserve Bank stock. The Bank’s investment in FHLB stock amounted to approximately $4.1 million at March 31, 2014 and $5.0 million at December 31, 2013. The FHLB of Cincinnati mandatorily redeemed members’ stock during the first quarter of 2014. Federal Reserve Bank stock was $471 thousand at March 31, 2014 and December 31, 2013.

 

10


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 2 – SECURITIES (CONTINUED)

 

The following table presents gross unrealized losses and fair value of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at March 31, 2014 and December 31, 2013:

 

     Securities in a continuous unrealized loss position  
     Less than 12 months      12 months or more      Total  
(Dollars in thousands)    Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
     Fair
value
     Gross
unrealized
losses
     Fair
value
 

March 31, 2014

                 

Available-for-sale

                 

U.S. Treasury securities

   $ 9       $ 996       $ —         $ —         $ 9       $ 996   

U.S. Government agencies

     306         16,693         188         3,812         494         20,505   

Mortgage-backed securities of government agencies

     291         21,627         —           —           291         21,627   

Asset-backed securities of government agencies

     7         1,706         —           —           7         1,706   

State and political subdivisions

     62         2,197         42         787         104         2,984   

Corporate bonds

     2         573         —           —           2         573   

Held-to-maturity

                 

U.S. Government agencies

     301         13,179         10         2,792         311         15,971   

Mortgage-backed securities of government agencies

     474         19,775         —           —           474         19,775   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total temporarily impaired securities

   $ 1,452       $ 76,746       $ 240       $ 7,391       $ 1,692       $ 84,137   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

                 

Available-for-sale

                 

U.S. Treasury securities

   $ 8       $ 997       $ —         $ —         $ 8       $ 997   

U.S. Government agencies

     590         15,409         116         1,884         706         17,293   

Mortgage-backed securities of government agencies

     691         29,938         —           —           691         29,938   

State and political subdivisions

     122         3,522         21         233         143         3,755   

Corporate bonds

     4         1,163         1         499         5         1,662   

Equity securities

     —           —           1         1         1         1   

Held-to-maturity

                 

U.S. Government agencies

     771         14,559         57         1,799         828         16,358   

Mortgage-backed securities of government agencies

     879         20,149         —           —           879         20,149   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total temporarily impaired securities

   $ 3,065       $ 85,737       $ 196       $ 4,416       $ 3,261       $ 90,153   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

There were sixty-three (63) securities in an unrealized loss position at March 31, 2014, eleven (11) of which were in a continuous loss position for twelve months or more. At least quarterly, the Company conducts a comprehensive security-level impairment assessment. The assessments are based on the nature of the securities, the extent and duration of the securities in an unrealized loss position, the extent and duration of the loss and management’s intent to sell or if it is more likely than not that management will be required to sell a security before recovery of its amortized cost basis, which may be maturity. Management believes the Company will fully recover the cost of these securities. It does not intend to sell these securities and likely will not be required to sell them before the anticipated recovery of the remaining amortized cost basis, which may be maturity. As a result, management concluded that these securities were not other-than-temporarily impaired at March 31, 2014.

 

11


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS

Loans consist of the following:

 

(Dollars in thousands)    March 31, 2014      December 31, 2013  

Commercial

   $ 132,140       $ 117,478   

Commercial real estate

     142,229         129,828   

Residential real estate

     114,916         111,445   

Construction & land development

     11,365         13,444   

Consumer

     6,841         6,687   
  

 

 

    

 

 

 

Total loans before deferred costs

     407,491         378,882   

Deferred loan costs

     279         243   
  

 

 

    

 

 

 

Total Loans

   $ 407,770       $ 379,125   
  

 

 

    

 

 

 

Loan Origination/Risk Management

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. The Company’s management examines current and occasionally projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers, however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. At March 31, 2014 and December 31, 2013, approximately 75% and 77%, respectively of the outstanding principal balance of the Company’s commercial real estate loans were secured by owner-occupied properties.

With respect to loans to developers and builders that are secured by non-owner occupied properties, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates and financial analysis of the developers and property owners. Construction and land development loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate.

 

12


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS (CONTINUED)

 

Construction and land development loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

The Company originates consumer loans utilizing a judgmental underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by line and staff personnel. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk.

The Company maintains an independent loan review department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Loans serviced for others approximated $69.4 million and $70.2 million at March 31, 2014 and December 31, 2013, respectively.

Concentrations of Credit

Nearly all of the Company’s lending activity occurs within the state of Ohio, including the four (4) counties of Holmes, Stark, Tuscarawas and Wayne, as well as other markets. The majority of the Company’s loan portfolio consists of commercial and industrial and commercial real estate loans. As of March 31, 2014 and December 31, 2013, there were no concentrations of loans related to any single industry.

Allowance for Loan Losses

The following table details activity in the allowance for loan losses by portfolio segment for the three month periods ended March 31, 2014 and 2013. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. The increase in the provision for possible loan losses related to commercial real estate loans was affected by an increase in the historical loss rate of this loan type as well as a charge-off that occurred during the first quarter of 2014. The provision for possible loan losses related to residential real estate decreased during the first quarter of 2014 as a result of a decrease in the historical loss rate within this category.

 

13


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS (CONTINUED)

 

(Dollars in thousands)

   Commercial     Commercial
Real Estate
    Residential
Real Estate
    Construction
& Land
Development
    Consumer     Unallocated     Total  

Three months ended March 31, 2014

              

Beginning balance

   $ 1,219      $ 1,872      $ 1,205      $ 178      $ 91      $ 520      $ 5,085   

Provision for possible loan losses

     (72     517        (151     (33     (12     (64     185   

Charge-offs

     (8     (197     (4     —          (8       (217

Recoveries

     2        —          4        —          6          12   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     (6     (197     —          —          (2       (205
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 1,141      $ 2,192      $ 1,054      $ 145      $ 77      $ 456      $ 5,065   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Three months ended March 31, 2013

              

Beginning balance

   $ 933      $ 1,902      $ 1,096      $ 253      $ 76      $ 320      $ 4,580   

Provision for possible loan losses

     242        (78     177        (119     (12     —          210   

Charge-offs

     (6     —          —          —          (10       (16

Recoveries

     7        —          9        —          14          30   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Net charge-offs

     1        —          9        —          4          14   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Ending balance

   $ 1,176      $ 1,824      $ 1,282      $ 134      $ 68      $ 320      $ 4,804   
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

 

14


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS (CONTINUED)

 

The following table presents the balance in the allowance for loan losses and the ending loan balances by portfolio segment and based on the impairment method as of March 31, 2014 and December 31, 2013:

 

(Dollars in thousands)

   Commercial      Commercial
Real Estate
     Residential
Real Estate
     Construction
& Land
Development
     Consumer      Unallocated      Total  

March 31, 2014

                    

Allowance for loan losses:

                    

Ending allowance balances attributable to loans:

                    

Individually evaluated for impairment

   $ 225       $ 443       $ 209       $ —         $ —         $ —         $ 877   

Collectively evaluated for impairment

     916         1,749         845         145         77         456         4,188   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 1,141       $ 2,192       $ 1,054       $ 145       $ 77       $ 456       $ 5,065   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

                    

Loans individually evaluated for impairment

   $ 6,543       $ 3,731       $ 1,900       $ —         $ —            $ 12,174   

Loans collectively evaluated for impairment

     125,597         138,498         113,016         11,365         6,841            395,317   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

Total ending loans balance

   $ 132,140       $ 142,229       $ 114,916       $ 11,365       $ 6,841          $ 407,491   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

December 31, 2013

                    

Allowance for loan losses:

                    

Ending allowance balances attributable to loans:

                    

Individually evaluated for impairment

   $ 241       $ 331       $ 212       $ —         $ —         $ —         $ 784   

Collectively evaluated for impairment

     978         1,541         993         178         91         520         4,301   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total ending allowance balance

   $ 1,219       $ 1,872       $ 1,205       $ 178       $ 91       $ 520       $ 5,085   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Loans:

                    

Loans individually evaluated for impairment

   $ 5,576       $ 3,220       $ 1,844       $ —         $ —            $ 10,640   

Loans collectively evaluated for impairment

     111,902         126,608         109,601         13,444         6,687            368,242   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

Total ending loans balance

   $ 117,478       $ 129,828       $ 111,445       $ 13,444       $ 6,687          $ 378,882   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

       

 

 

 

 

15


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS (CONTINUED)

 

The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2014 and December 31, 2013:

 

(Dollars in thousands)

   Unpaid
Principal
Balance
     Recorded
Investment
with no
Allowance
     Recorded
Investment
with
Allowance
     Total
Recorded
Investment
     Related
Allowance
     Average
Recorded
Investment
     Interest
Income
Recognized
 

March 31, 2014

                    

Commercial

   $ 6,584       $ 65       $ 6,493       $ 6,558       $ 225       $ 6,156       $ 246   

Commercial real estate

     4,258         367         3,364         3,731         443         3,697         142   

Residential real estate

     2,067         713         1,175         1,888         209         1,477         47   

Construction & land development

     —           —           —           —           —           —           —     
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 12,909       $ 1,145       $ 11,032       $ 12,177       $ 877       $ 11,330       $ 435   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

                    

Commercial

   $ 5,595       $ 7       $ 5,580       $ 5,587       $ 241       $ 4,185       $ 182   

Commercial real estate

     3,540         563         2,658         3,221         331         3,650         163   

Residential real estate

     2,001         337         1,510         1,847         212         1,315         41   

Construction & land development

     —           —           —           —           —           21         2   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total impaired loans

   $ 11,136       $ 907       $ 9,748       $ 10,655       $ 784       $ 9,171       $ 388   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the aging of past due loans and nonaccrual loans as of March 31, 2014 and December 31, 2013 by class of loans:

 

(Dollars in thousands)

   Current      30 - 59
Days Past
Due
     60 - 89
Days Past
Due
     90 Days +
Past Due
     Non-
Accrual
     Total Past
Due and
Non-
Accrual
     Total
Loans
 

March 31, 2014

                    

Commercial

   $ 129,874       $ 35       $ 4       $ 1       $ 2,226       $ 2,266       $ 132,140   

Commercial real estate

     140,123         470         —           —           1,636         2,106         142,229   

Residential real estate

     113,351         426         63         36         1,040         1,565         114,916   

Construction & land development

     11,015         —           —           350         —           350         11,365   

Consumer

     6,720         67         52         2         —           121         6,841   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Loans

   $ 401,083       $ 998       $ 119       $ 389       $ 4,902       $ 6,408       $ 407,491   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

                    

Commercial

   $ 117,342       $ 15       $ 37       $ —         $ 84       $ 136       $ 117,478   

Commercial real estate

     128,462         111         107         40         1,108         1,366         129,828   

Residential real estate

     109,274         616         467         46         1,042         2,171         111,445   

Construction & land development

     12,494         —           —           950         —           950         13,444   

Consumer

     6,524         123         40         —           —           163         6,687   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total Loans

   $ 374,096       $ 865       $ 651       $ 1,036       $ 2,234       $ 4,786       $ 378,882   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

16


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS (CONTINUED)

 

Troubled Debt Restructurings

All troubled debt restructurings (“TDR’s) are individually evaluated for impairment and a related allowance is recorded, as needed. Loans whose terms have been modified as TDR’s totaled $8.7 million as of March 31, 2014, and $8.6 million as of December 31, 2013, with $525 thousand and $583 thousand of specific reserves allocated to those loans, respectively. At March 31, 2014, $8 million of the loans classified as TDR’s were performing in accordance with their modified terms. Of the remaining $711 thousand, all were in nonaccrual of interest status.

None of the loans that were restructured in 2012 or 2013 have subsequently defaulted in the three month periods ended March 31, 2014 and 2013. There were no loan modifications of loans that were considered troubled debt restructurings completed during the three month period ending March 31, 2013. Loan modifications that are considered TDR’s completed during the three month period ended March 31, 2014 were as follows:

 

(Dollars in thousands)

   Number of
loans
restructured
     Pre-
Modification
Recorded
Investment
     Post-
Modification
Recorded
Investment
 

For the Three Months Ended March 31, 2014

        

Residential Real Estate

     1       $ 84       $ 84   
  

 

 

    

 

 

    

 

 

 

Total Restructured Loans

     1       $ 84       $ 84   
  

 

 

    

 

 

    

 

 

 

The loan restructured during the three months ended March 31, 2014 was modified by changing the monthly payment to interest only. No principal reduction was made.

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis includes commercial loans with an outstanding balance greater than $275 thousand. This analysis is performed on an annual basis. The Company uses the following definitions for risk ratings:

Pass. Loans classified as pass (Acceptable, Low Acceptable or Pass Watch) may exhibit a wide array of characteristics but at minimum represent an acceptable risk to the Bank. Borrowers in this rating may have leveraged but acceptable balance sheet positions, satisfactory asset quality, and stable to favorable sales and earnings trends, acceptable liquidity and adequate cash flow. Loans are considered fully collectible and require an average amount of administration. While generally adhering to credit policy, these loans may exhibit occasional exceptions that do not result in undue risk to the Bank. Borrowers are generally capable of absorbing setbacks, financial and otherwise, without the threat of failure.

Special Mention. Loans classified as special mention have material weaknesses that deserve management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the loan at some future date.

 

17


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS (CONTINUED)

 

Substandard. Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than $275 thousand or are included in groups of homogeneous loans. Based on the most recent analysis performed, the risk category of loans by class is as follows as of March 31, 2014 and December 31, 2013:

 

(Dollars in thousands)

   Pass      Special
Mention
     Substandard      Doubtful      Not Rated      Total  

March 31, 2014

                 

Commercial

   $ 111,528       $ 14,422       $ 5,250       $ —         $ 940       $ 132,140   

Commercial real estate

     127,895         9,186         3,785         —           1,363         142,229   

Residential real estate

     233         —           45         —           114,638         114,916   

Construction & land development

     7,566         1,072         1,884         —           843         11,365   

Consumer

     —           —           —           —           6,841         6,841   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 247,222       $ 24,680       $ 10,964       $ —         $ 124,625       $ 407,491   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

                 

Commercial

   $ 101,195       $ 10,352       $ 5,066       $ —         $ 865       $ 117,478   

Commercial real estate

     115,265         9,076         4,041         —           1,446         129,828   

Residential real estate

     237         —           47         —           111,161         111,445   

Construction & land development

     9,470         587         1,884         —           1,503         13,444   

Consumer

     —           —           —           —           6,687         6,687   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

Total

   $ 226,167       $ 20,015       $ 11,038       $ —         $ 121,662       $ 378,882   
  

 

 

    

 

 

    

 

 

    

 

 

    

 

 

    

 

 

 

 

18


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS (CONTINUED)

 

Nonperforming loans include loans past due 90 days and greater and loans on nonaccrual of interest status. The following table presents loans that are not rated by class of loans as of March 31, 2014 and December 31, 2013.

 

(Dollars in thousands)

   Performing      Non-Performing      Total  

March 31, 2014

        

Commercial

   $ 939       $ 1       $ 940   

Commercial real estate

     1,363         —           1,363   

Residential real estate

     113,607         1,031         114,638   

Construction & land development

     843         —           843   

Consumer

     6,839         2         6,841   
  

 

 

    

 

 

    

 

 

 

Total

   $ 123,591       $ 1,034       $ 124,625   
  

 

 

    

 

 

    

 

 

 

December 31, 2013

        

Commercial

   $ 865       $ —         $ 865   

Commercial real estate

     1,446         —           1,446   

Residential real estate

     110,119         1,042         111,161   

Construction & land development

     1,503         —           1,503   

Consumer

     6,687         —           6,687   
  

 

 

    

 

 

    

 

 

 

Total

   $ 120,620       $ 1,042       $ 121,662   
  

 

 

    

 

 

    

 

 

 

NOTE 4 – FAIR VALUE MEASUREMENTS

The Company provides disclosures about assets and liabilities carried at fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. The three broad levels of the fair value hierarchy are described below:

 

Level I:    Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level II:    Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by corroborated or other means. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability.
Level III:    Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

19


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 4 – FAIR VALUE MEASUREMENTS (CONTINUED)

 

The following table presents the assets reported on the consolidated statements of financial condition at their fair value as of March 31, 2014 and December 31, 2013, by level within the fair value hierarchy. No liabilities are carried at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Equity securities and U.S. Treasury Notes are valued at the closing price reported on the active market on which the individual securities are traded. Obligations of U.S. government agencies, mortgage-backed securities, asset-backed securities, obligations of states and political subdivisions and corporate bonds are valued at observable market data for similar assets.

 

(Dollars in thousands)    Level I      Level II      Level III      Total  

March 31, 2014

           

ASSETS:

           

Securities available-for-sale:

           

U.S. Treasury securities

   $ 996       $ —         $ —         $ 996   

U.S. Government agencies

     —           25,049         —           25,049   

Mortgage-backed securities of government agencies

     —           52,996         —           52,996   

Asset-backed securities of government agencies

     —           2,714         —           2,714   

States and political subdivisions

     —           16,513         —           16,513   

Corporate bonds

     —           4,540         —           4,540   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities

     996         101,812         —           102,808   

Equity securities

     126         —           —           126   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities available-for-sale

   $ 2,118       $ 101,812       $ —         $ 102,934   
  

 

 

    

 

 

    

 

 

    

 

 

 

December 31, 2013

           

ASSETS:

           

Securities available-for-sale:

           

U.S. Treasury securities

   $ 997       $ —         $ —         $ 997   

U.S. Government agencies

     —           22,301         —           22,301   

Mortgage-backed securities of government agencies

     —           54,535         —           54,535   

Asset-backed securities of government agencies

     —           2,775         —           2,775   

States and political subdivisions

     —           16,447         —           16,447   

Corporate bonds

     —           4,539         —           4,539   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total debt securities

     997         100,597         —           101,594   

Equity securities

     128         —           —           128   
  

 

 

    

 

 

    

 

 

    

 

 

 

Total securities available-for-sale

   $ 1,125       $ 100,597       $ —         $ 101,722   
  

 

 

    

 

 

    

 

 

    

 

 

 

The following table presents the assets measured on a nonrecurring basis on the Consolidated Balance Sheets at their fair value as of March 31, 2014 and December 31, 2013, by level within the fair value hierarchy. Impaired loans and other real estate are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral that secure the impaired loans include: quoted market prices for identical assets classified as Level I inputs; and observable inputs, employed by certified appraisers, for similar assets classified as Level II inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level III inputs.

The fair value of mortgage servicing rights is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates discounted cash flow and repayment assumptions based on management’s best judgment. As a result, these rights are measured at fair value on a nonrecurring basis and are classified within Level III of the fair value hierarchy.

 

20


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 4 – FAIR VALUE MEASUREMENTS (CONTINUED)

 

(Dollars in thousands)

   Level I      Level II      Level III      Total  

March 31, 2014

           

Assets measured on a nonrecurring basis:

           

Impaired loans

   $ —         $ —         $ 11,297       $ 11,297   

Mortgage servicing rights

     —           —           228         228   

December 31, 2013

           

Impaired loans

   $ —         $ —         $ 9,856       $ 9,856   

Mortgage servicing rights

     —           —           225         225   

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level III inputs to determine fair value:

 

     Quantitative Information about Level III Fair Value Measurements
     Fair Value
Estimate
    

Valuation

Techniques

   Unobservable
Input
 

Range
(Weighted Average)

(Dollars in thousands)                     

March 31, 2014

          

Impaired loans

   $ 10,306       Discounted cash flow    Remaining term

Discount rate

  2 mos to 28 yrs/(71 months)
4.3% to 12% / (6.8%)
     991       Appraisal of collateral (1),(3)    Appraisal adjustments (2)

Liquidation expense (2)

  -20% to -25%
-10%

Mortgage servicing rights

     228       Discounted cash flow    Remaining term

Discount rate

  9 mos to 30 yrs
1.5%

December 31, 2013

          

Impaired loans

   $ 8,663       Discounted cash flow    Remaining term

Discount rate

  3 mos to 29 yrs/(62 mos)
7.1% to 12% / (7.5%)
     1,193       Appraisal of collateral (1),(3)    Appraisal adjustments (2)

Liquidation expense (2)

  -20% to -25%
-10%

Mortgage servicing rights

     225       Discounted cash flow    Remaining term

Discount rate

  12 mos to 30 yrs/(244 mos)
1.5% / (1.5%)

 

(1) Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various inputs which are not identifiable.
(2) Appraisals may be adjusted by management for qualitative factors such as estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.
(3) Includes qualitative adjustments by management and estimated liquidation expenses.

 

21


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 5 – FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair values of recognized financial instruments as of March 31, 2014 and December 31, 2013 are as follows:

 

(Dollars in thousands)    Carrying
Value
     Level 1      Level II      Level III      Total Fair
Value
 

March 31, 2014

              

Financial assets:

              

Cash and cash equivalents

   $ 19,292       $ 19,292       $ —         $ —         $ 19,292   

Securities available for sale

     102,934         1,122         101,812         —           102,934   

Securities held-to-maturity

     43,688         —           42,988         —           42,988   

Restricted stock

     4,613         —           4,613         —           4,613   

Net loans

     402,705         —           —           406,391         406,391   

Bank-owned life insurance

     9,614         9,614         —           —           9,614   

Accrued interest receivable

     1,630         1,630         —           —           1,630   

Financial liabilities:

              

Deposits

   $ 466,573       $ 337,346       $ —         $ 129,922       $ 467,268   

Short-term borrowings

     61,792         61,792         —           —           61,792   

Other borrowings

     17,406         —           —           17,844         17,844   

Accrued interest payable

     93         93         —           —           93   

December 31, 2013

              

Financial assets:

              

Cash and cash equivalents

   $ 42,599       $ 42,599       $ —         $ —         $ 42,599   

Securities available for sale

     101,722         1,125         100,597         —           101,722   

Securities held-to-maturity

     44,350         —           42,643         —           42,643   

Restricted stock

     5,463         —           5,463         —           5,463   

Net loans

     374,040         —           —           375,055         375,055   

Bank-owned life insurance

     9,551         9,551         —           —           9,551   

Accrued interest receivable

     1,374         1,374         —           —           1,374   

Financial liabilities:

              

Deposits

   $ 480,933       $ 346,589       $ —         $ 135,106       $ 481,695   

Short-term borrowings

     48,671         48,671         —           —           48,671   

Other borrowings

     12,459         —           —           12,559         12,559   

Accrued interest payable

     96         96         —           —           96   

For purposes of the above disclosures of estimated fair value, the following assumptions are used:

Cash and cash equivalents; Accrued interest receivable; Short-term borrowings, and Accrued interest payable

The fair value of the above instruments is considered to be carrying value. Classified as Level I in the fair value hierarchy.

Securities

The fair value of securities available-for-sale and securities held-to-maturity which are measured on a recurring basis are determined primarily by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on securities’ relationship to other similar securities. Classified as Level I or Level II in the fair value hierarchy.

 

22


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 5 – FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

 

Net loans

The fair value for loans is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality. Where quoted market prices were available, primarily for certain residential mortgage loans, such market rates were utilized as estimates for fair value. Fair value of non-accrual loans is based on carrying value, classified as Level III.

Bank-owned life insurance

The carrying amount of bank-owned life insurance is based on the cash surrender value of the policies and is a reasonable estimate of fair value, classified as Level I.

Restricted stock

Restricted stock includes Federal Home Loan Bank Stock and Federal Reserve Bank Stock. It is not practicable to determine the fair value of regulatory equity securities due to restrictions placed on their transferability. Fair value is based on carrying value, classified as Level II.

Deposits

The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rates are estimated using market rates currently offered for similar instruments with similar remaining maturities, resulting in a Level III classification. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of quarter end, resulting in a Level I classification.

Other borrowings

The fair value of Federal Home Loan Bank advances are estimated using a discounted cash flow analysis based on the current borrowing rates for similar types of borrowings, resulting in a Level III classification.

The Company also has unrecognized financial instruments at March 31, 2014 and December 31, 2013. These financial instruments relate to commitments to extend credit and letters of credit. The aggregated contract amount of such financial instruments was approximately $107.8 million at March 31, 2014 and $120.3 million at December 31, 2013. Such amounts are also considered to be the estimated fair values.

The fair value estimates of financial instruments are made at a specific point in time based on relevant market information. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument over the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Since no ready market exists for a significant portion of the financial instruments, fair value estimates are largely based on judgments after considering such factors as future expected credit losses, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

 

23


Table of Contents

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 6 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents the changes in accumulated other comprehensive income by component net of tax for the three month periods ended March 31, 2014 and 2013:

 

(Dollars in thousands)

   Pretax     Tax
(Expense)
Benefit
    After-tax     Affected Line
Item in the
Consolidated
Statements of
Income
 

Balance as of December 31, 2013

   $ (2,207   $ 751      $ (1,456  

Unrealized holding gain on available-for-sale securities arising during the period

     774        (263     511     

Amortization of held-to-maturity discount resulting from transfer

     52        (18     34        (c
  

 

 

   

 

 

   

 

 

   

Total other comprehensive income

     826        (281     545     
  

 

 

   

 

 

   

 

 

   

Balance as of March 31, 2014

   $ (1,381   $ 470      $ (911  
  

 

 

   

 

 

   

 

 

   

Balance as of December 31, 2012

   $ 2,824      $ (960   $ 1,864     

Unrealized holding loss on available-for-sale securities arising during the period

     (745     253        (492  
  

 

 

   

 

 

   

 

 

   

Total other comprehensive loss

     (745     253        (492  
  

 

 

   

 

 

   

 

 

   

Balance as of March 31, 2013

   $ 2,079      $ (707   $ 1,372     
  

 

 

   

 

 

   

 

 

   

(c) There was no income statement effect from the transfer of securities to held-to-maturity.

 

24


Table of Contents

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 management’s discussion and analysis focuses on the consolidated financial condition of the Company at March 31, 2014 as compared to December 31, 2013, and the consolidated results of operations for the three month period ended March 31, 2014 compared to the same period in 2013. 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 contained in Part I, Item 1 of this Quarterly Report.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report are not historical facts but rather 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 forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. 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. Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows and financial position. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in this report are reasonable, the reader should not place undue reliance on any forward-looking statement.

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, except as may be required by applicable law.

FINANCIAL CONDITION

Total assets were $602 million at March 31, 2014, compared to $596 million at December 31, 2013, representing an increase of $6 million, or 1%. This growth was funded by a short-term borrowing increase of $13 million, or 27%, during the three month period ended March 31, 2014 to $62 million. Cash and cash equivalents decreased $23 million, or 55%, during the three months ending March 31, 2014, as a result of funding a $29 million increase in loans and a $14 million decrease in deposits.

Net loans increased $29 million, or 8%, during the three months ended March 31, 2014. Commercial loans including commercial real estate loans increased $27 million, or 11%, while construction and land development loans decreased $2 million, or 15%, with several construction projects transferring to permanent financing during the three month period. Residential real estate loans increased $3 million, or 3%, and consumer loans increased slightly over December 31, 2013. Consumers continued to refinance their mortgage loans for lower long-term rates. Since 2012, the Bank originated and retained some fifteen year fixed-rate mortgage loans for its portfolio. Residential mortgage originations retained for the three months ended March 31, 2014 were $5.5 million as compared to $5 million for the prior year three month period. The Bank originates and sells fixed-rate thirty year mortgages into the secondary market.

The allowance for loan losses as a percentage of total loans was 1.24% at March 31, 2014, a decrease from 1.34% at December 31, 2013. Outstanding loan balances increased 8% to $408 million at March 31, 2014. A provision of $185 thousand, offset by net charge-offs of $205 thousand, decreased the allowance for loan losses for the three months ended March 31, 2014.

 

25


Table of Contents

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

 

     March 31,     December 31,     March 31,  
(Dollars in thousands)    2014     2013     2013  

Non-performing loans

   $ 5,291      $ 3,270      $ 2,187   

Other real estate

     —          —          —     

Allowance for loan losses

     5,065        5,085        4,804   

Total loans

     407,770        379,125        373,367   

Allowance: Loans

     1.24     1.34     1.29

Allowance: Non-performing loans

     1.0     1.6     2.2

The ratio of gross loans to deposits was 87% at March 31, 2014, compared to 79% at December 31, 2013. The increase in this ratio is the result of loan volume increases and decreases in deposits during the three months ended March 31, 2014.

The Company has no exposure to government-sponsored enterprise preferred stocks, collateralized debt obligations or trust preferred securities. Management has considered industry analyst reports, sector credit reports and the volatility within the bond market in concluding that the gross unrealized losses of $1.7 million within the available-for-sale and held-to-maturity portfolios as of March 31, 2014, were primarily the result of customary and expected fluctuations in the bond market and not necessarily the expected cash flows of the individual securities. As a result, all security impairments detailed above on March 31, 2014, are considered temporary and no impairment loss relating to these securities has been recognized.

Deposits decreased $14 million, or 3%, from December 31, 2013 with noninterest bearing deposits decreasing $5 million and interest-bearing deposit accounts decreasing $9 million. Total deposits as of March 31, 2014 are $9 million above March 31, 2013 deposit balances. On a year over year comparison, increases were recognized in noninterest bearing demand deposits, statement and passbook savings, and money market savings accounts for the period ended March 31, 2014.

Short-term borrowings consisting of overnight repurchase agreements with retail customers and overnight fed funds borrowings from banks increased $13 million from December 31, 2013 and other borrowings increased $5 million as the Company borrowed long-term from the FHLB to offset interest rate risk from the origination of the fixed-rate portfolioed mortgages.

Total shareholders’ equity amounted to $53.9 million, or 9.0% of total assets, at March 31, 2014, compared to $52.4 million, or 8.8% of total assets, at December 31, 2013. The increase in shareholders’ equity during the three months ending March 31, 2014 was due to net income of $1.4 million and other comprehensive income increasing $545 thousand, which were partially offset by dividends declared of $493 thousand. The Company and the Bank met all regulatory capital requirements at March 31, 2014.

RESULTS OF OPERATIONS

Three months ended March 31, 2014 and 2013

For the quarter ended March 31, 2014, the Company recorded net income of $1.416 million or $0.52 per share, as compared to net income of $1.362 million, or $0.50 per share for the quarter ended March 31, 2013. The $54 thousand increase in net income for the quarter was a result of net interest income increasing $206 thousand and federal income tax provision decreasing $26 thousand. These gains were partially offset by an increase in noninterest expense of $118 thousand and a decrease in noninterest income of $85 thousand. Return on average assets and return on average equity were 0.97% and 10.70%, respectively, for the three month period of 2014, compared to 0.96% and 10.43%, respectively for the same quarter in 2013.

 

26


Table of Contents

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

 

Average Balance Sheets and Net Interest Margin Analysis

 

     For the three months ended March 31,  
     2014     2013  
(Dollars in thousands)    Average
balance
     Average
rate
    Average
balance
     Average
rate
 

ASSETS

          

Interest-earning deposits in other banks

   $ 6,944         0.35   $ 34,088         0.29

Federal funds sold

     96         0.24        106         0.16   

Taxable securities

     136,800         2.33        119,432         1.98   

Tax-exempt securities

     15,624         4.52        16,378         4.76   

Loans

     396,028         4.55        373,064         4.98   
  

 

 

      

 

 

    

Total earning assets

     555,492         3.95     543,068         4.01

Other assets

     35,485           32,857      
  

 

 

      

 

 

    

TOTAL ASSETS

   $ 590,977         $ 575,925      
  

 

 

      

 

 

    

LIABILITIES AND SHAREHOLDERS’ EQUITY

          

Interest-bearing demand deposits

   $ 72,309         0.06   $ 70,299         0.06

Savings deposits

     152,182         0.09        140,222         0.11   

Time deposits

     131,288         0.80        156,536         1.10   

Other borrowed funds

     64,806         0.84        57,678         0.94   
  

 

 

      

 

 

    

Total interest bearing liabilities

     420,585         0.42     424,735         0.58

Non-interest bearing demand deposits

     114,708           95,973      

Other liabilities

     2,003           2,257      

Shareholders’ Equity

     53,681           52,960      
  

 

 

      

 

 

    

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

   $ 590,977         $ 575,925      
  

 

 

      

 

 

    

Taxable equivalent net interest spread

        3.53        3.43

Taxable equivalent net interest margin

        3.63        3.56

Interest income for the quarter ended March 31, 2014, was $5.3 million representing a $36 thousand increase, or a 1% improvement, compared to the same period in 2013. This increase was primarily due to average loan volume increasing $23 million for the quarter ended March 31, 2014 as compared to the first quarter 2013. Interest expense for the quarter ended March 31, 2014 was $438 thousand, a decrease of $170 thousand, or 28%, from the same period in 2013. The decrease in interest expense occurred primarily due to a decrease of 0.17% in interest rates paid on interest-bearing deposits which decreased from 0.5% in 2013 to 0.3% in 2014 and a rate decrease of .10% on all other borrowings which declined from 0.9% in 2013 to 0.8% for the quarter ended March 31, 2014.

The provision for loan losses for the quarter ended March 31, 2014 was $185 thousand, compared to a $210 thousand provision for the same quarter in 2013. The provision for loan losses is determined based on management’s calculation of the adequacy of the allowance for loan losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offs and current economic trends.

Noninterest income for the quarter ended March 31, 2014, was $1.0 million, a decrease of $85 thousand, or 8%, compared to the same quarter in 2013. Service charges on deposit accounts decreased $18 thousand, or 6%, compared to the same quarter in 2013 primarily from decreases in overdraft fees. Debit card interchange income increased $20 thousand, or 11%, with greater fee income. Fees from trust and brokerage services increased $2 thousand to $216 thousand for the first quarter 2014 as compared to the same quarter in 2013. The gain on the sale of mortgage loans to the secondary market decreased to $24 thousand for the quarter ending March 31, 2014, from $114 thousand in the quarter ended March 31, 2013. Mortgage originations decreased during the quarter as secondary market mortgage refinancings have declined with higher mortgage interest rates.

 

27


Table of Contents

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS

OF OPERATIONS

 

Noninterest expenses for the quarter ended March 31, 2014 increased $118 thousand, or 3%, compared to the first quarter of 2013. Salaries and employee benefits decreased $31 thousand, or 2%. Occupancy and equipment expenses increased $24 thousand in 2014 over the first quarter of 2013. Other expenses increased $17 thousand, or 4%, compared to the first quarter 2013.

Federal income tax expense decreased $26 thousand, or 4%, for the quarter ended March 31, 2014 as compared to the first quarter of 2013. The provision for income taxes was $573 thousand (effective rate of 29%) for the quarter ended March 31, 2014, compared to $599 thousand (effective rate of 31%) for the quarter ended March 31, 2013. The decrease in the expense resulted from the recapture of a $35 thousand capital loss valuation reserve.

CAPITAL RESOURCES

The Board of Governors of the Federal Reserve System (the “Federal Reserve”) has established risk-based capital guidelines that must be observed by financial holding companies and banks. Failure to meet specified minimum capital requirements could result in regulatory actions by the Federal Reserve or Ohio Division of Financial Institutions that could have a material effect on the Company’s financial condition or results of operations. Management believes there were no material changes to capital resources as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2013. As of March 31, 2014 the Company and the Bank met all capital adequacy requirements to which they were subject.

LIQUIDITY

 

(Dollars in millions)

   March 31, 2014     December 31, 2013     Change  

Cash and cash equivalents

   $ 19      $ 43      $ (24

Unused lines of credit

     29        42        (13

Unpledged securities at fair market value

     64        42        22   
  

 

 

   

 

 

   

 

 

 
   $ 112      $ 127      $ (15
  

 

 

   

 

 

   

 

 

 

Net deposits and short-term liabilities

   $ 494      $ 473      $ 21   
  

 

 

   

 

 

   

 

 

 

Liquidity ratio

     23.0     26.9  

Minimum board approved liquidity ratio

     20.0     20.0  

Liquidity refers to the Company’s ability to generate sufficient cash to fund current loan demand, meet deposit withdrawals, pay operating expenses and meet other obligations. Liquidity is monitored by the Company’s Asset Liability Committee. Other sources of liquidity include, but are not limited to, purchases of federal funds, advances from the FHLB, adjustments of interest rates to attract deposits, brokered deposits and borrowing at the Federal Reserve discount window. Management believes that its sources of liquidity are adequate to meet cash flow obligations for the foreseeable future.

The liquidity ratio declined to 23% at March 31, 2014, from 27% at December 31, 2013 as a result of seasonal deposit decline with temporary funding from the overnight funds market combined with loan growth.

OFF-BALANCE SHEET ARRANGEMENTS

The Company does not have any off-balance sheet arrangements (as such term is defined in applicable Securities and Exchange Commission (the “Commission”) rules) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures or capital resources.

 

28


Table of Contents

CSB BANCORP, INC.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3—QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the quantitative and qualitative disclosures about market risks as of March 31, 2014, from the disclosures presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

Management performs a quarterly analysis of the Company’s interest rate risk over a twenty-four month horizon. The analysis includes two balance sheet models, one based on a static balance sheet and one on a dynamic balance sheet with projected growth in assets and liabilities. All positions are currently within the Company’s board-approved policy.

The following table presents an analysis of the estimated sensitivity of the Company’s annual net interest income to sudden and sustained 100 through 400 basis point changes, in 100 basis point changes, in market interest rates at March 31, 2014 and December 31, 2013. The net interest income reflected is for the first twelve month period of the modeled twenty-four month horizon. The underlying balance sheet for illustrative purposes is dynamic with projected growth in assets and liabilities.

 

(Dollars in thousands)                     
March 31, 2014  

Change in interest rates
(basis points)

   Net interest income      Dollar change     Percentage change     Board Policy Limits  
+     400    $ 21,006         $487        2.4     +/-25   
+     300      20,817         298        1.5        +/-15   
+     200      20,649         130        0.6        +/-10   
+     100      20,519         —          —          +/-5   
        0      20,519         —          —       
-     100      20,416         (103     (0.5     +/-5   
December 31, 2013  

Change in interest rates
(basis points)

   Net interest income      Dollar change     Percentage change     Board Policy Limits  
+     400    $ 20,812         $962        4.8     +/-25   
+     300      20,507         657        3.3        +/-15   
+     200      20,217         367        1.8        +/-10   
+     100      19,966         116        0.6        +/-5   
        0      19,850         —          —       
-     100      19,644         (206     (1.0     +/-5   

 

29


Table of Contents

CSB BANCORP, INC.

CONTROLS AND PROCEDURES

ITEM 4—CONTROLS AND PROCEDURES

With the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that:

 

  (a) information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure;

 

  (b) information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms; and

 

  (c) the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that material information relating to the Company and its consolidated subsidiary is made known to them, particularly during the period for which the Company’s periodic reports, including this Quarterly Report on Form 10-Q, are being prepared.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes during the period covered by this Quarterly Report on Form 10-Q in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

30


Table of Contents

CSB BANCORP, INC.

FORM 10-Q

Quarter ended March 31, 2014

PART II – OTHER INFORMATION

ITEM 1—LEGAL PROCEEDINGS.

In the opinion of management there are no outstanding legal proceedings that are reasonably likely to have a material adverse effect on the company’s financial condition or results of operations.

ITEM 1A—RISK FACTORS.

There have been no material changes to the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2013.

ITEM 2—UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On July 7, 2005 CSB Bancorp, Inc. filed Form 8-K with the Commission announcing that its Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to 10% of the Company’s common shares then outstanding. Repurchases may be made from time to time as market and business conditions warrant, in the open market, through block purchases and in negotiated private transactions. No repurchase were made during the quarterly period ended March 31, 2014.

ITEM 3—DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4—MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5—OTHER INFORMATION.

Not applicable.

 

31


Table of Contents

CSB BANCORP, INC.

FORM 10-Q

Quarter ended March 31, 2014

PART II – OTHER INFORMATION

ITEM 6—Exhibits.

 

Exhibit
Number

  

Description of Document

3.1    Amended Articles of Incorporation of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed August 6, 2004, Exhibit 3.1, film number 04958544).
3.2    Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Form 10-SB).
3.2.1    Amended Article VIII of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a filed on March 25, 2009, Appendix A, film number 09703970).
4.0    Specimen stock certificate (incorporated by reference to Registrant’s Form 10-SB).
11    Statement Regarding Computation of Per Share Earnings.
31.1    Rule 13a-14(a)/15d-14(a) Chief Executive Officer’s Certification.
31.2    Rule 13a-14(a)/15d-14(a) Chief Financial Officer’s Certification.
32.1    Section 1350 Chief Executive Officer’s Certification.
32.2    Section 1350 Chief Financial Officer’s Certification.
101    The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 formatted in XBRL (extensible Business Reporting Language): (i) Consolidated Balance Sheets: (ii) Consolidated Statements of Income: (iii) Consolidated Statements of Comprehensive Income: (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity: (v) Condensed Consolidated Statements of Cash Flows: and (vi) Notes to Consolidated Financial Statements.

 

32


Table of Contents

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: May 13, 2014      

/s/ Eddie L. Steiner

      Eddie L. Steiner
      President
      Chief Executive Officer
Date: May 13, 2014      

/s/ Paula J. Meiler

      Paula J. Meiler
      Senior Vice President
      Chief Financial Officer

 

33


Table of Contents

CSB BANCORP, INC.

INDEX TO EXHIBITS

 

Exhibit
Number

  

Description of Document

3.1    Amended Articles of Incorporation of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed August 6, 2004, Exhibit 3.1, film number 04958544).
3.2    Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Form 10-SB).
3.2.1    Amended Article VIII of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a filed on March 25, 2009, Appendix A, film number 09703970).
4.0    Specimen stock certificate (incorporated by reference to Registrant’s Form 10-SB).
11    Statement Regarding Computation of Per Share Earnings.
31.1    Rule 13a-14(a)/15d-14(a) Chief Executive Officer’s Certification.
31.2    Rule 13a-14(a)/15d-14(a) Chief Financial Officer’s Certification.
32.1    Section 1350 Chief Executive Officer’s Certification.
32.2    Section 1350 Chief Financial Officer’s Certification.
101    The following materials from the Company’s Quarterly Report on Form 10-Q for the quarter ended March 31, 2014 formatted in XBRL (extensible Business Reporting Language): (i) Consolidated Balance Sheets: (ii) Consolidated Statements of Income: (iii) Consolidated Statements of Comprehensive Income: (iv) Condensed Consolidated Statements of Changes in Shareholders’ Equity: (v) Condensed Consolidated Statements of Cash Flows: and (vi) Notes to Consolidated Financial Statements.

 

34