-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, BknVsU8c/8Lu7tHIdJyI8PfKiK10a9TJPe/BZ7BcnikZKKSqmjnB6KPJ3ywhMDik qDkeKQOt9xzQ25v0sbB3lQ== 0000906318-98-000031.txt : 19980514 0000906318-98-000031.hdr.sgml : 19980514 ACCESSION NUMBER: 0000906318-98-000031 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980513 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSB BANCORP INC /OH CENTRAL INDEX KEY: 0000880417 STANDARD INDUSTRIAL CLASSIFICATION: STATE COMMERCIAL BANKS [6022] IRS NUMBER: 341687530 STATE OF INCORPORATION: OH FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-21714 FILM NUMBER: 98618782 BUSINESS ADDRESS: STREET 1: 6 W JACKSON ST STREET 2: P O BOX 232 CITY: MILLERSBURG STATE: OH ZIP: 44654 BUSINESS PHONE: 3306749015 MAIL ADDRESS: STREET 1: 6 WEST JACKSON STREET CITY: MILLERSBURG STATE: OH ZIP: 44654 10-Q 1 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, 1998 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 incorporation or organization) Number) 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 past 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 May 7, 1998: 2,637,272 common shares FORM 10-Q QUARTER ENDED MARCH 31, 1998 Table of Contents Part I - Financial Information ITEM I - FINANCIAL STATEMENTS Page 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 the Consolidated Financial Statements 8 ITEM II - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 15 ITEM III - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 17 Part II - Other Information Other Information 18 Signatures 19 CONSOLIDATED BALANCE SHEETS (Unaudited)
March 31, December 31, 1998 1997 ASSETS Cash and noninterest-bearing deposits with banks $ 7,426,549 $ 8,090,785 Interest-bearing deposits with banks 284,916 31,257 Federal funds sold 4,071,000 6,213,000 ----------- ----------- Total cash and cash equivalents 11,782,465 14,335,042 Time deposits with other institutions 3,000,000 3,000,000 Securities available for sale, at fair value 26,057,543 28,042,412 Securities held to maturity (Fair values of $55,985,215 in 1998 and $59,773,637 in 1997) 54,717,360 58,385,434 Loans Total loans 184,602,850 179,676,242 Allowance for loan losses 2,430,083 2,349,039 ----------- ----------- Net loans 182,172,767 177,327,203 Premises and equipment, net 3,996,669 3,601,254 Accrued interest receivable and other assets 3,870,345 3,750,570 ----------- ----------- Total assets $285,597,149 $288,441,915 =========== =========== LIABILITIES Deposits Noninterest-bearing $ 21,166,011 $ 24,678,146 Interest-bearing 217,248,760 216,525,123 ----------- ----------- Total deposits 238,414,771 241,203,269 Securities sold under repurchase agreements 6,275,762 7,290,759 Federal Home Loan Bank borrowings 11,035,641 11,686,863 Accrued interest payable and other liabilities 1,328,258 986,544 ----------- ----------- Total liabilities 257,054,432 261,167,435 SHAREHOLDERS' EQUITY Common stock, $6.25 par value: 3,000,000 shares authorized; 1998 - 1,321,870 shares issued; 1997 - 1,314,591 shares issued 8,261,685 8,216,191 Additional paid-in capital 5,501,021 5,135,899 Retained earnings 14,760,179 13,907,908 Treasury stock at cost: 1998 - 3,233 shares; 1997 - 3200 shares (58,032) (56,000) Unrealized gain on securities available for sale 77,864 70,482 ---------- ---------- Total shareholders' equity 28,542,717 27,274,480 ---------- ---------- Total liabilities and shareholders' equity $285,597,149 $288,441,915 =========== ===========
See notes to the consolidated financial statements. CONSOLIDATED STATEMENTS OF INCOME (Unaudited)
Three Months Ended March 31, 1998 1997 Interest income Loans, including fees $4,394,908 $4,034,410 Taxable securities 746,704 607,346 Nontaxable securities 455,504 277,690 Other 104,206 311,748 --------- --------- Total interest income 5,701,322 5,231,194 Interest expense Deposits 2,561,473 2,277,228 Other 244,219 239,028 --------- --------- Total interest expense 2,805,692 2,516,256 --------- ---------- Net interest income 2,895,630 2,714,938 Provision for loan losses 97,650 101,688 --------- --------- Net interest income after provision for loan losses 2,797,980 2,613,250 Other income Service charges on deposit accounts 181,379 171,664 Gain on sale of loans -- 220,200 Other income 136,500 85,905 -------- --------- Total other income 317,879 477,769 Other expenses Salaries and employee benefits 804,375 736,842 Occupancy expense 75,299 83,742 Equipment expense 114,190 107,923 State franchise tax 95,200 82,359 Other expenses 495,960 481,872 -------- -------- Total other expenses 1,585,024 1,492,738 Income before income taxes 1,530,835 1,598,281 Provision for income taxes 415,086 423,700 --------- --------- Net income $1,115,749 $1,174,581 ========= ========== Basic and diluted earnings per common share (See Note 1) $ 0.42 $ 0.45 ========= ==========
See notes to the consolidated financial statements. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended March 31, 1998 1997 Net income $1,115,749 $1,174,581 Other comprehensive income, net of tax: Unrealized gains (losses) arising during period 7,382 (84,393) --------- --------- Comprehensive income $1,123,131 $1,090,188 ========= ========= See notes to the consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (Unaudited) Three Months Ended March 31, 1998 1997 Balance at beginning of period $27,274,480 $23,426,480 Net income 1,115,749 1,174,581 Common stock issued under the dividend reinvestment program and 401(k) plan 408,584 222,972 Cash dividends ($.10 per share in 1998; $.085 per share in 1997) See Note 1 (263,478) (220,904) Change in unrealized gain/loss on securities available for sale 7,382 (84,393) ----------- ---------- Balance at end of period $28,542,717 $24,518,736 =========== ========== See notes to the consolidated financial statements. CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited)
Three Months Ended March 31, 1998 1997 Net cash from operating activities $ 1,553,223 $ 922,761 Cash flows from investing activities Securities available for sale Proceeds from maturities 5,000,000 2,000,000 Purchases (2,963,189) (15,958,800) Securities held to maturity Proceeds from maturities, calls and repayments 3,879,734 3,406,150 Purchases (203,268) (11,765,424) Net change in loans (5,024,155) (7,382,259) Loan sale proceeds -- 10,766,167 Premises and equipment expenditures, net (485,312) (183,239) --------- ---------- Net cash from investing activities 203,810 (19,117,405) --------- ---------- Cash flows from financing activities Net change in deposits (2,788,498) 9,822,324 Net change in securities sold under repurchase agreements (1,014,997) (370,537) Advances on FHLB borrowings -- 976,777 Principal reductions on FHLB borrowings (651,222) -- Shares issued for 401(k) plan 326,084 162,903 Cash dividends paid (180,977) (160,835) ---------- ---------- Net cash from financing activities (4,309,610) 10,430,632 ---------- --------- Net change in cash and cash equivalents (2,552,577) (7,764,012) Beginning cash and cash equivalents 14,335,042 30,317,756 ---------- ----------- Ending cash and cash equivalents $11,782,465 $22,553,744 ========== =========== Supplemental disclosures Interest paid $ 2,793,939 $ 2,492,764 Income taxes paid -- 50,866
See notes to the consolidated financial statements. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying consolidated financial statements include accounts of CSB Bancorp, Inc. and its wholly-owned subsidiary, The Commercial and Savings Bank (together referred to as the "Company"). All significant intercompany transactions and balances have been eliminated. These interim financial statements are prepared without audit and reflect all adjustments of a normal recurring nature which, in the opinion of management, are necessary to present fairly the consolidated financial position of CSB at March 31, 1998, and its results of operations and cash flows for the periods presented. The accompanying consolidated financial statements do not contain all financial disclosures required by generally accepted accounting principles that might otherwise be necessary in the circumstances. The Annual Report for CSB for the year ended December 31, 1997, contains consolidated financial statements and related notes which should be read in conjunction with the accompanying consolidated financial statements. The Company is engaged in the business of commercial and retail banking and trust services, with operations conducted through its main office and seven branches located in Millersburg, Ohio, and nearby communities. These communities are the source of substantially all deposit, loan and trust activities. The majority of the Company's income is derived from commercial and retail lending activities and investments in securities. To prepare financial statements in conformity with generally accepted accounting principles, management makes estimates and assumptions based on available information. These estimates and assumptions affect amounts reported in the financial statements and the disclosures provided, and future results could differ. The allowance for loan losses, realization of deferred tax assets, fair value of certain securities and determination and carrying value of impaired loans are particularly subject to change. The allowance for loan losses is a valuation allowance, increased by the provision for loan losses and decreased by charge-offs less recoveries. Management estimates the allowance required based on past loan loss experience, known and inherent risks in the portfolio, information about specific borrower situations and estimated collateral values, economic conditions and other factors. Allocations of the allowance may be made for specific loans, but the entire allowance is available for any loan that, in management's judgment, should be charged-off. Loan impairment is reported when full payment under the loan terms is not expected. If a loan is impaired, a portion of the allowance is allocated so that the loan is reported, net, at the present value of estimated future cash flows using the loan's existing interest rate or at the fair value of collateral if repayment is expected solely from the collateral. Loans are evaluated for impairment when payments are delayed, typically 90 days or more, or when the internal grading system indicates a doubtful classification. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Smaller-balance homogeneous loans are evaluated for impairment in total. Such loans include residential first-mortgage loans secured by one- to four-family residences, residential construction loans and automobile, home equity and other consumer loans less than $100,000. Commercial loans and mortgage loans secured by other properties are evaluated individually for impairment. The Company records income tax expense based on the amount of tax due on its tax return plus deferred taxes computed based on the expected future tax consequences of temporary differences between the carrying amounts and tax bases of assets and liabilities, using enacted tax rates. SFAS No. 128, "Earnings Per Share," became effective for the company in 1997. SFAS 128 requires dual presentation of basic and diluted earnings per share ("EPS") for entities with complex capital structures. All prior EPS data has been restated to conform to the new method. Basic EPS is based on net income divided by the weighted average number of shares outstanding during the period. Diluted EPS shows the dilutive effect of additional common shares issuable under stock options. The weighted average number of shares outstanding for basic EPS was 2,625,892 in 1998 and 2,592,652 in 1997. The weighted average number of shares outstanding for diluted EPS, which includes the effect of stock options granted using the treasury stock method, was 2,626,723 in 1998 and 2,593,332 in 1997. There was no per share dilution as a result of the stock options in 1997. On April 30, 1998, a two-for-one stock split in the form of a 100% stock dividend was distributed to shareholders of record as of March 31, 1998. All per share data was restated to reflect the stock split. SFAS No. 129, "Disclosures of Information about Capital Structure," consolidated existing accounting guidance relating to disclosure about a company's capital structure. Public companies generally have always been required to make disclosures now required by SFAS 129 and, therefore, SFAS 129 did not impact the Company's disclosures. SFAS No. 130, "Reporting Comprehensive Income," establishes standards for reporting and display of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements. SFAS 130 is effective for the Company in NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 1998. Reclassification of financial statements for earlier periods provided for comparative purposes is required. SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information," changes the way public business enterprises report information about operating segments in annual financial statements and requires those enterprises report selected information about reportable segments in interim financial reports issued to shareholders. It also establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS 131 becomes effective for the Company in 1998. NOTE 2 - SECURITIES The amortized cost and fair values of securities are as follows:
March 31, 1998 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for sale Debt securities U.S. Treasury securities $12,024,891 $ 76,358 $ -- $12,101,249 Obligations of U.S. government corporations and agencies 11,949,377 45,906 4,289 11,990,994 ---------- --------- ------- ---------- Total debt securities available for sale 23,974,268 122,264 4,289 24,092,243 Other securities 1,965,300 -- -- 1,965,300 ---------- --------- ------- ---------- Total securities available for sale $25,939,568 $ 122,264 $ 4,289 $26,057,543 ========== ========= ======= ========== Held to maturity U.S. Treasury securities $12,126,129 $ 128,151 $ -- $12,254,280 Obligations of U.S. government corporations and agencies 6,988,995 15,380 2,500 7,001,875 Obligations of states and political subdivisions 35,602,236 1,141,435 14,611 36,729,060 ---------- --------- ------- ---------- Total debt securities held to maturity $54,717,360 $1,284,966 $ 17,111 $55,985,215 ========== ========= ======= ==========
NOTE 2 - SECURITIES (Continued)
December 31, 1997 Gross Gross Amortized Unrealized Unrealized Fair Cost Gains Losses Value Available for sale Debt securities U.S. Treasury securities $16,021,859 $ 72,864 $ (349) $16,094,374 Obligations of U.S. government corporations and agencies 9,978,862 40,872 (6,596) 10,013,138 ---------- -------- --------- ----------- Total debt securities available for sale 26,000,721 113,736 (6,945) 26,107,512 Other securities 1,934,900 1,934,900 ---------- --------- --------- ----------- Total securities available for sale $27,935,621 $ 113,736 $ (6,945) $28,042,412 ========== ========= ========= =========== Held to maturity U.S. Treasury securities $15,121,855 $ 130,739 $ (1,095) $15,251,499 Obligations of U.S. government corporations and agencies 7,540,006 11,870 (6,343) 7,545,533 Obligations of states and political subdivisions 35,723,573 1,262,675 (9,643) 36,976,605 ---------- --------- --------- ---------- Total securities held to maturity $58,385,434 $1,405,284 $ (17,081) $59,773,637 ========== ========= ========= ===========
There were no sales of investment securities during the first three months of 1998 or 1997. The amortized cost and fair values of debt securities at March 31, 1998, by contractual maturity, are shown below. Available-for-sale Held-to-maturity securities securities Amortized Fair Amortized Fair Cost Value Cost Value Due in one year or less $10,962,354 $10,982,013 $10,026,538 $10,075,989 Due from one to five years 13,011,914 13,110,230 14,733,315 14,982,358 Due from five to ten years -- -- 14,550,000 15,083,783 Due after ten years -- -- 15,407,507 15,843,085 --------- ---------- ---------- ----------- $23,974,268 $24,092,243 $54,717,360 $55,985,215 ========== =========== =========== =========== NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES Loans consisted of the following: March 31, 1998 December 31, 1997 Commercial $ 82,580,641 $ 80,260,550 Commercial real estate 31,155,404 30,407,670 Residential real estate 50,346,442 49,049,948 Installment and credit card 16,691,953 16,450,211 Construction 3,828,410 3,507,863 ----------- ----------- Total loans $184,602,850 $179,676,242 =========== ============ During the first three months of 1997, the Company received $10,776,167 in proceeds from mortgage loan sales. A gain of $220,200 was recognized on this sale. Activity in the allowance for loan losses for the three months ended March 31, 1998 and 1997 is as follows: 1998 1997 Beginning balance $2,349,039 $2,120,845 Provision for loan losses 97,650 101,688 Charge-offs (23,267) (47,473) Recoveries 6,661 16,262 --------- --------- Balance - March 31 $2,430,083 $2,191,322 ========= ========= Impaired loans at March 31, 1998 and December 31, 1997 is as follows: March 31, December 31, 1998 1997 Loans with no allowance for loan losses allocated $ -- $ -- Loans with allowance for loan losses allocated 1,800,609 1,384,000 Amount of allowance allocated 556,000 437,000 NOTE 3 - LOANS AND ALLOWANCE FOR LOAN LOSSES (Continued) Impaired loans for the three months ended March 31, 1998 and 1997, is as follows: 1998 1997 Average of impaired loans 1,592,000 1,034,000 Interest income recognized during impairment 18,000 18,000 Cash basis interest income recognized 18,000 13,000 NOTE 4 - FEDERAL HOME LOAN BANK BORROWINGS The Company borrows from the Federal Home Loan Bank (FHLB) to fund certain fixed-rate residential real estate loans. At March 31, 1998, the Company had 189 outstanding borrowings from the FHLB. These borrowings carry fixed interest rates ranging from 5.60% to 7.15% and maturities of 10, 15, and 20 years. The Company matches each borrowing against a fixed-rate mortgage loan with a similar maturity. Monthly principal and interest payments are due on the borrowings. In addition, a principal curtailment of 10% of the outstanding principal balance is due on the anniversary date of each borrowing. FHLB borrowings are collateralized by the Company's FHLB stock and a blanket pledge on $16.6 million of qualifying mortgage loans at March 31, 1998. NOTE 5 - COMMITMENTS, OFF-BALANCE SHEET RISK, AND CONTINGENCIES The Company is a party to financial instruments with off-balance sheet risk in the normal course of business to meet customer financing needs. These financial instruments include commitments to make or purchase loans, undisbursed lines of credit, undisbursed credit card balances and letters of credit. The Company's exposure to credit loss in case of nonperformance by the other party to the financial instrument is represented by the contractual amount of those instruments. The Company follows the same credit policy to make such commitments as it uses for those loans recorded on the balance sheet. At March 31, 1998 and December 31, 1997, commitments to make loans, primarily in the form of undisbursed portions of approved lines of credit, amounted to approximately $27.8 million and $29.0 million, substantially all of which carried adjustable rates of interest. Commitments under outstanding standby letters of credit amounted to $981,000 at March 31, 1998 and $820,000 at December 31, 1997. Since many commitments to make loans expire without being used, the amount does not necessarily represent future cash commitments. Collateral obtained relating to these commitments is determined using management's credit evaluation of the borrower and may include real estate, vehicles, business assets, deposits and other items. NOTE 5 - COMMITMENTS, OFF-BALANCE SHEET RISK, AND CONTINGENCIES (Continued) The Company sold $10.8 million in residential mortgage loans during 1997. The Company has agreed to repurchase individual loans if they become delinquent by greater than ninety days. A recourse obligation has been established by management based on past loan loss experience, and other factors. This liability is not material. Occasionally, various contingent liabilities arise that are not recorded in the financial statements, including claims and legal actions arising in the ordinary course of business. In the opinion of management, after consultation with legal counsel, ultimate disposition of these matters is not expected to have a material affect on financial condition or results of operations. ITEM II - 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 March 31, 1998, compared to December 31, 1997, and the consolidated results of operations for the quarterly period ending March 31, 1998 compared to the same period in 1997. 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 contained in this discussion involve risks and uncertainties and are subject to change based on various important factors. Actual results could differ from those expressed or implied. The Company is not aware of any trends, events or uncertainties that will have or are reasonably likely to have a material effect on the liquidity, capital resources or operations except as discussed herein. Also, the Company is not aware of any current recommendations by regulatory authorities that would have such effect if implemented. FINANCIAL CONDITION Total assets were $285.6 million at March 31, 1998, compared to $288.4 million at December 31, 1997, representing a decrease of $2.8 million or 1.0%. Total securities decreased approximately $5.7 million during the quarter as a result of reduction in total deposits and in securities sold under repurchase agreements. Since one of the primary functions of the securities portfolio is to provide a source of liquidity, it is structured such that security maturities and cash flows satisfy the Company's liquidity needs and asset-liability management requirements. At March 31, 1998, approximately 27.0% of the securities portfolio matures within one year. Total loans increased $4.9 million, or 2.7%, to $184.6 million. Commercial loans increased $2.3 million, or 2.9%, primarily as a result of demand for such loans in the local market area. Residential real estate loans increased $1.3 million, or 2.6%. As a percentage of loans, the allowance for loan losses was 1.32% at March 31, 1998 and 1.31% at December 31, 1997. Loans past due more than 90 days and loans placed on nonaccrual status, were approximately $1.4 million, or 0.73% of total loans at March 31, 1998, compared to $1.2 million, or 0.69% of loans at December 31, 1997. These credits are considered in management's analysis of the allowance for loan losses. Premises and equipment increased $395,000, or 11.0%, during the first quarter of 1998. This was primarily due to the completion of the Shreve office, which opened in March, 1998. Additional investment was made in the design and plan of the new operations center, which should be completed in 1999. At March 31, 1998, the ratio of net loans to deposits was 76.4%, compared to 73.5% at the end of 1997 as total deposits decreased approximately $2.8 million, or 1.2%, during the first three months on 1998. Historically, the Company has experienced a decline in overall deposit balances during the first quarter of the year. Total shareholders' equity was increased in part by year-to-date net income of $1.1 million, less $263,000 of cash dividends declared. The cash dividend represents 23.6% of net income for the first quarter of 1998. Also contributing to capital was the dividend reinvestment program and the purchase of stock by the Company's 401(k) retirement plan. As a result of these programs, equity increased approximately $409,000 during the first quarter of 1998. The Company and its subsidiary meet all regulatory capital requirements at March 31, 1998. The Company's ratio of total capital to risk-weighted assets was 16.98% at March 31, 1998, while Tier 1 risk-based capital ratio was 15.73%. Regulatory minimums call for a total risk-based capital ratio of 8%, at least one-half of which must be Tier 1 capital. The Company's leverage ratio was 9.97% at March 31, 1998, which exceeds the regulatory minimum of 3% to 5%. RESULTS OF OPERATIONS Net income for the quarter ending March 31, 1998 was $1.1 million, or $.42 per share, as compared to $1.2 million, or $.45 per share earned during the same period last year (restated for the April, 1998 stock split), a decrease of $59,000, or 5.0%. The primary factors contributing to this decrease was a decrease in other income, and an increase in other expense, which were partially offset by an increase in net interest income. Net interest income for the quarter ended March 31, 1998 was $2.9 million, a 6.7% increase from the first quarter of 1997. Interest and fees on loans increased $360,000, or 8.9%, which resulted primarily from a higher average of net loans balance during the current quarter as compared to the previous year. Also, as deposit funds were invested in securities, interest on securities increased $317,000, which was partially offset by a $208,000 decrease in other interest income. Interest expense increased $289,000, to $2.8 million for the quarter ended March 31, 1998, compared to $2.5 million for the quarter ended March 31, 1997. This increase was the result of increased volumes on interest-bearing accounts and slightly higher rates. The provision for loan losses was $98,000 during the first quarter of 1998, which was near the $102,000 provision in the first quarter of 1997. This provision was made in recognition of continued loan origination volume, primarily in the commercial loan portfolio which typically carries a higher risk of loan loss. Other income decreased approximately $160,000 primarily as a result of the gain on the sale of loans during the 1997 period. Other expenses increased $92,000, or 6.2%, for the three months ended March 31, 1998, compared to the same period in 1997. Management continues to monitor the Company's efficiency ratio by controlling increases in other operating costs. Salaries and employee benefits increased by $68,000 or 9.2%, and state franchise taxes increased $13,000 or 15.6% as a result of earnings retention in 1997. Ohio's state franchise tax for financial institutions is based on the level of capital at the previous year-end. The provision for income taxes of $415,000 during the first quarter of 1998 reflected an effective rate of 27.1%, as compared to 26.5%, for the first quarter of 1997. YEAR 2000 ISSUE Many computer programs use only two digits to identify a year in the date field and were apparently designed and developed without considering the impact of the upcoming change in the century. Such programs could erroneously read entries for the Year 2000 as the Year 1900. This could result in major systems failures and miscalculations. Rapid and accurate data processing is essential to the operations of the financial institutions, such as the Company. The Company has formed a Year 2000 committee to assess the extent to which it and its outside vendors may be adversely affected by the Year 2000 problems. Management has determined that most programs are or will be capable of identifying the turn of the century. The issue is closely monitored by management and full compliance is expected by the end of 1998. While the Company does not anticipate that any Year 2000 computer problems or expenses required to correct such problems will materially affect its financial condition or results of operations, no assurance can be given in this regard. 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 March 31, 1998 from that presented in the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1997. FORM 10-Q Quarter ended March 31, 1998 PART II - OTHER INFORMATION Item 1 - Legal Proceedings: There are no matters required to be reported under this item. Item 2 - Changes in Securities: 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: There are no matters required to be reported under this item. 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.) 27 Financial Data Schedule (b) Reports on Form 8-K: No reports on Form 8-K were filed during the quarter for which this report is filed. 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 12, 1998 /s/ Douglas D. Akins (Signature) Douglas D. Akins President Chief Executive Officer Date: May 12, 1998 /s/ A. Lee Miller (Signature) A. Lee Miller Senior Vice President Chief Financial Officer Index to Exhibits Exhibit Sequential Number Description of Document Page 11 Statement Regarding Computation of Per Share Earnings (reference is hereby made to Consolidated Statements of Income on page 4 hereof.) 21 27 Financial Data Schedule 22 CSB BANCORP, INC. EXHIBIT 11 STATEMENT REGARDING COMPUTATION OF PER SHARE EARNINGS Three Months Ended March 31, 1998 1997 Net income $1,115,749 $1,174,581 ========= ========= Average basic shares outstanding 2,625,892 2,592,652 Add: Effect of stock options 831 680 --------- --------- Average diluted shares outstanding 2,626,723 2,593,332 ========= ========= Basic and diluted earnings per common share $ 0.42 $ 0.45 ========= ========= EX-27 2
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE CONSOLIDATED BALANCE SHEET AND THE CONSOLIDATED STATEMENT OF INCOME FILED AS PART OF THE QUARTERLY REPORT ON FORM 10-Q AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1000 3-MOS DEC-31-1998 MAR-31-1998 7,427 3,285 4,071 0 26,058 54,717 55,985 184,603 2,430 285,597 238,415 6,276 1,328 11,036 0 0 8,262 20,281 285,597 4,395 1,202 104 5,701 2,562 2,806 2,896 98 0 1,585 1,531 1,531 0 0 1,116 .42 .42 4.31 841 528 0 0 2,349 23 7 2,430 2,002 0 428
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