-----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, GoRJHVCuQ8O617fDs1/TXd9oBLdvpKS0CNLIZ0mFyi3dHlBBO+RrTn8A8swbS3i4 V9slxg401EgvSN16UxQdVg== 0000743530-97-000008.txt : 19970222 0000743530-97-000008.hdr.sgml : 19970222 ACCESSION NUMBER: 0000743530-97-000008 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970214 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: CSB FINANCIAL GROUP INC CENTRAL INDEX KEY: 0000940006 STANDARD INDUSTRIAL CLASSIFICATION: SAVINGS INSTITUTIONS, NOT FEDERALLY CHARTERED [6036] IRS NUMBER: 371336338 STATE OF INCORPORATION: DE FISCAL YEAR END: 0831 FILING VALUES: FORM TYPE: 10QSB SEC ACT: 1934 Act SEC FILE NUMBER: 000-26650 FILM NUMBER: 97531688 BUSINESS ADDRESS: STREET 1: 200 S POPLAR ST STREET 2: PO BOX 469 CITY: CENTRALIA STATE: IL ZIP: 62801 BUSINESS PHONE: 6185321918 MAIL ADDRESS: STREET 1: 200 S POPLAR STREET 2: PO BOX 469 CITY: CENTRALIA STATE: IL ZIP: 62801 10QSB 1 SECURITY AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to _______________ Commission File Number: 0-26650 CSB FINANCIAL GROUP, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) United States 37-1336338 - --------------------------------- --------------------------- (State or other jurisdiction (I.R.S. Employer ID Number) of incorporation or organization) 200 South Poplar, Centralia, Illinois 62801 - ---------------------------------------- --------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (618) 532-1918 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 the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Shares outstanding at February 11, 1997 - ----------------------------- --------------------------------------- Common Stock, Par Value $0.01 941,850 Contents PART I. FINANCIAL INFORMATION Item I. Financial Statements - Consolidated Statements of Financial Condition - Consolidated Statements of Income - Consolidated Statements of Cash Flows - Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES CSB FINANCIAL GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, 1996 and September 30, 1996 (in thousands, except share data) December September ASSETS 31, 30, 1996 1996 - -------------------------------------------------------------------------------------- (Unaudited) (Audited) Cash and due from banks ....................................... $ 915 $ 598 Interest-bearing deposits ..................................... 1,701 4,168 ------- ------- Cash and cash equivalents ....................... 2,616 4,766 Securities held to maturity ................................... - 1,987 Securities available for sale ................................. 15,291 14,044 Nonmarketable equity securities ............................... 168 165 Securities purchased under agreements to resell ............... - 300 Loans ......................................................... 27,832 27,048 Allowance for loan losses ..................................... (131) (117) ------- ------- Loans, net ...................................... 27,701 26,931 Premises and equipment ........................................ 610 594 Accrued interest receivable ................................... 332 331 Intangible assets ............................................. 706 722 Other assets .................................................. 103 176 ------- ------- Total assets .................................... $47,527 $50,016 ======= ======= LIABILITIES: Deposits: Demand .................................................. $ 8,352 $ 8,754 Savings ................................................. 3,702 3,779 Time deposits > $100,000 ................................ 1,594 1,889 Other time deposits ..................................... 21,686 22,432 ------- ------- Total deposits .................................. 35,334 36,854 ------- ------- Other liabilities .......................................... 55 297 Deferred income taxes ...................................... 183 81 ------- ------- Total liabilities ............................... 35,572 37,232 ------- ------- COMMITMENTS, CONTINGENCIES AND CREDIT RISK STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value; 100,000 shares authorized; none issued and outstanding - - - - Common stock, $0.01 par value; authorized 2,000,000 shares; 1,035,000 shares issued ................................. 10 10 Paid-in capital ............................................ 7,588 7,586 Retained earnings .......................................... 5,902 5,794 Unrealized (loss) on securities available for sale, net of income taxes ............................................ (12) (24) Unearned employee stock ownership plan shares .............. (567) (582) ------- ------- 12,921 12,784 Less cost of treasury stock; 1996 93,150 shares ............ (966) - - ------- ------- Total stockholders' equity ...................... 11,955 12,784 ------- ------- Total liabilities and stockholders' equity ...... $47,527 $50,016 ======= =======
See Accompanying Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended December 31, 1996 and 1995 (Unaudited, in thousands, except per share data) Three Months Ended December 31, ----------------- 1996 1995 ------- ------- Interest income: Loans and fees on loans ...................................... $ 535 $ 402 Securities ................................................... 362 357 ------- ------- Total interest income ............................. 897 759 ------- ------- Interest expense on deposits .................................... 414 321 ------- ------- Net interest income ............................... 483 438 Provision for loan losses ....................................... 22 23 ------- ------- Net interest income after provision for loan losses 461 415 ------- ------- Noninterest income: Service charges on deposits .................................. 19 11 Gain on sale of securities ................................... 39 - Other ........................................................ 7 5 ------- ------- Total noninterest income .......................... 65 16 ------- ------- Noninterest expense: Compensation and employee benefits ........................... 146 96 Occupancy and equipment ...................................... 19 15 Data processing .............................................. 26 26 Audit, legal and other professional .......................... 38 36 SAIF deposit insurance ....................................... 21 16 Advertising .................................................. 5 6 Other ........................................................ 91 57 ------- ------- Total noninterest expense ......................... 346 252 ------- ------- Income before income taxes ........................ 180 179 Income taxes .................................................... 72 61 ------- ------- Net income ........................................ $ 108 $ 118 ------- ------- Earnings per share .............................................. $ 0.12 $ 0.12 ======= ======= Weighted average shares outstanding ............................. 920,332 952,263 ======= =======
See Accompanying Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended December 31, 1996 and 1995 (Unaudited, in thousands) Three Months Ended December 31, ----------------- 1996 1995 ------- ------- Cash Flows from Operating Activities: Net income ........................................................... $ 108 $ 118 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses ......................................... 22 23 Provision for depreciation ........................................ 6 5 Amortization of goodwill .......................................... 16 -- Employee stock ownership plan compensation expense ................ 17 -- Deferred income taxes ............................................. 95 29 Gain on sale of securities ........................................ (39) -- Amortization and accretion on securities .......................... 24 21 Change in assets and liabilities: (Increase) decrease in accrued interest receivable .............. (1) (14) Decrease in other assets ........................................ 73 606 (Decrease) in other liabilities ................................. (242) (100) ------ ------ Net cash provided by operating activities ................. 79 688 ------ ------ Cash Flows from Investing Activities: (Increase) decrease in securities purchased under agreements to resell 300 (300) Purchase of securities available for sale ............................ (952) (2,901) Purchase of securities held to maturity .............................. -- (100) Proceeds from sales of securities held available for sale ............ 369 -- Proceeds from maturities of securities available for sale ............ 1,357 -- Proceeds from maturities of securities held to maturity .............. -- 500 Purchase of nonmarketable equity securities .......................... (3) -- (Increase) in loans receivable ....................................... (792) (1,474) Purchase of premises and equipment ................................... (22) (5) ------ ------- Net cash provided by (used in) investing activities ....... 257 (4,280) ------ -------
(Continued) CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS, (CONTINUED) Three Months Ended December 31, 1996 and 1995 (Unaudited, in thousands) Three Months Ended December 31, ----------------------- 1996 1995 --------- --------- Cash Flows from Financing Activities: Increase (decrease) in stock conversion deposits ................ $ -- $ (9,193) (Decrease) in deposits .......................................... (1,520) (1,248) Proceeds from sale of common stock, net of conversion expenses .. -- 6,988 Purchase of treasury stock ...................................... (966) -- --------- -------- Net cash provided by (used in) financing activities .. (2,486) (3,453) (Decrease) increase in cash and cash equivalents ..... (2,150) (7,068) Cash and cash equivalents at beginning of period ................... 4,766 10,906 --------- -------- Cash and cash equivalents at end of period ......................... $ 2,616 $ 3,838 --------- -------- Supplemental Disclosures: Cash paid for: Interest on deposits ....................................... $ 414 $ 321 Income taxes ............................................... $ -- $ -- Change in gross unrealized gain/loss on securities available for sale ................................................... $ 19 $ 47 Change in deferred taxes on unrealized gain/loss on securities available for sale ......................................... $ (7) $ (30) Transfer of securities from held to maturity to available for sale ....................................................... $ 1,987 $ 8,602
See Accompanying Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Note 1. Background Information On October 5, 1995, CSB Financial Group, Inc. (the "Company") acquired all of the outstanding shares of Centralia Savings Bank (the "Bank") upon the Bank's conversion from a state chartered mutual savings bank to a state chartered capital stock savings bank. The Company purchased 100% of the outstanding capital stock of the Bank using 50% of the net proceeds from the Company's initial stock offering which was completed on October 5, 1995. The Company sold 1,035,000 shares of $0.01 par value common stock at a price of $8 per share, including 82,800 shares purchased by the Bank's Employee Stock Ownership Plan ("ESOP"). The ESOP shares were acquired by the Bank with proceeds from a Company loan totaling $662,400. The gross proceeds of the offering were $8,280,000. After reducing gross proceeds for conversion costs of $696,000, net proceeds totaled $7,584,000. The Company's stock trades on the NASDAQ Small Caps market under the symbol "CSBF". The acquisition of the Bank by the Company is being accounted for as a "pooling of interests" under generally accepted accounting principles. The application of the pooling of interests method records the assets and liabilities of the merged entities on a historical cost basis with no goodwill or other intangible assets being recorded. Note 2. Basis of Presentation The accompanying consolidated financial statements include the accounts of CSB Financial Group, Inc. and its wholly owned subsidiary, Centralia Savings Bank. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in the Bank's annual report on Form 10-KSB for the year ended September 30, 1996. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-QSB and, therefore, do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of management of the Company, the unaudited consolidated financial statements reflect all adjustments necessary to present fairly the financial position of the Company at December 31, 1996 the results of operations for the three months ended December 31, 1996 and 1995. All adjustments to the financial statements were normal and recurring in nature. Operating results for the three months ended December 31, 1996 are not necessarily indicative of the results that may be expected for the year ending September 30, 1997. Note 3. Earnings Per Share Earnings per share is computed based upon the weighted average common shares outstanding during the period. Unallocated shares of the ESOP are not considered outstanding. Note 4. Employee Stock Ownership Plan In connection with the conversion to the stock form of ownership, the Board of Directors established an employee stock ownership plan (ESOP) for the exclusive benefit of participating employees. Employees age 21 or older who have completed one year of service are eligible to participate. Upon the issuance of the common stock, the ESOP acquired 82,800 shares of $0.01 par value common stock at the subscription price of $8 per share. The Bank makes contributions to the ESOP equal to the ESOP's debt service less dividends received by the ESOP. All dividends received by the ESOP are used to pay debt service. The ESOP shares were pledged as collateral for its debt. As the debt is repaid, shares are released from collateral and allocated to active employees, based on the ratio of debt service paid to the total original principal plus the interest to be paid. The Bank accounts for its ESOP in accordance with Statement of Position 93-6. As shares are released from collateral, the Bank reports compensation expense equal to the current market price of the shares, and the shares become outstanding for earnings-per-share calculations. ESOP compensation expense was $16,986 for the three months ended December 31, 1996. As of December 31, 1996, there were 70,832 unallocated ESOP shares with a fair value of $717,174. CSB FINANCIAL GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS General The principal assets of the Company are its investment in the Bank's common stock and the net proceeds from the sale of the Company's common stock in connection with the conversion. The Company's principal revenue source is interest and dividends on its investments. The principal business of the Bank consists of attracting deposits from the general public and using these funds to originate mortgage loans secured by one- to four-family residences located primarily in Centralia, Illinois and surrounding areas. The Bank engages in various forms of consumer and commercial lending and invests in mortgage-backed U.S. Government and federal agency securities, local municipal issues, and interest-bearing deposits. The Bank's profitability depends primarily on its net interest income, which is the difference between the interest income it earns on its loans, mortgage-backed and investment portfolio, and its cost of funds, which consists mainly of interest paid on deposits. Net interest income is affected by the relative amounts of interest-earning assets, interest-bearing liabilities, and the interest rates earned or paid on these balances. The Bank's profitability is also affected by the level of noninterest income and expense. Noninterest income consists primarily of late charges and other fees. Noninterest expense consists of salaries and benefits, occupancy related expenses, deposit insurance premiums paid to the SAIF, and other operating expenses. The operations of the Bank are significantly influenced by general economic conditions, related monetary, and fiscal policies of financial institutions' regulatory agencies. Deposit flows and the cost of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting loan demand and the availability of funds. Business Strategy The business strategy is to operate as a well capitalized, profitable and independent community savings bank dedicated to financing home ownership and consumer needs in its primary market area. The Bank has implemented this strategy by: (1) closely monitoring the needs of customers and providing quality service; (2) emphasizing consumer-oriented banking by originating construction and permanent loans on residential and commercial real estate and consumer loans, and by offering other financial services and products; (3) improving and maintaining high asset quality; (4) maintaining capital in excess of regulatory requirements; and (5) managing interest rate risk by emphasizing the origination of loans with adjustable rates or shorter terms and investments in short-term and liquid investments. The Bank has adopted various new business strategies intended to increase its presence in its primary market area, thereby increasing its lending activities and sources of income. Liquidity and Capital Resources The Bank's primary sources of funds consists of deposits, repayment and prepayment of loans, maturities of investments and interest-bearing deposits. Scheduled repayments of loans and mortgage-backed securities and maturities of investment securities are predictable, influenced by general interest rates, economic conditions, and competition. The Bank uses its liquidity resources principally to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, to maintain liquidity, and to meet operating expenses. Management believes that loan repayments and other sources of funds will be adequate to meet the Bank's liquidity needs for the immediate future. A portion of the Bank's liquidity consists of cash and cash equivalents, which include investments in highly liquid, short-term deposits. The level of these assets is dependent on the Bank's operating, investing, lending and financing activities during any given period. At December 31, 1996 and September 30, 1996, cash and cash equivalents totaled $2.6 million and $4.8 million, respectively. Liquidity management is both a daily and long-term function of business management. If the Bank requires funds beyond its ability to generate them internally, the Bank may borrow additional funds from the FHLB. At December 31, 1996, the Bank had no outstanding advances from the FHLB. At December 31, 1996, the Bank had $380,000 in outstanding commitments to originate loans. The Bank anticipates that it will have sufficient funds available to meet its current loan origination commitments. Regulatory Capital Federally insured savings associations such as the Bank are required to maintain a minimum level of regulatory capital. The capital regulations require institutions to have tangible capital equal to 1.5% of total adjusted assets (as defined by regulation), a minimum core capital ratio of 4% of adjusted total assets, and a risk-based capital ratio of 8% of risk-based assets (as defined by regulation). The risk-based capital requirement is calculated based on the credit risk presented by both on-balance-sheet assets and off-balance-sheet commitments and obligations. Assets are assigned a credit-risk weighting based upon their relative risk ranging from 0% for assets backed by the full faith and credit of the United States or that pose no credit risk to the institution to 100% for assets such as delinquent or repossessed assets. As of December 31, 1996, the Bank was in compliance with all of these capital requirements. Financial Condition Total assets decreased $2,489,000 to $47,527,000 at December 31, 1996 from $50,016,000 at September 30, 1996. Cash and cash equivalents decreased $2,150,000. Cash and cash equivalents decreased during the first quarter due to the purchase of treasury stock and the maturity of time deposits. The increase in loans of $784,000 since September 30, 1996 was primarily commercial real estate. This growth in loans was due to expansion into the commercial loan market in early 1995. The decrease in securities of $737,000 since September 30, 1996 was due to the repurchase of treasury stock combined with a decrease in time deposits. Results of Operations Three months ended Net Income - The Company's net income for the three months ended December 31, 1996 was $108,000 compared to $118,000 for the three months ended December 31, 1995. The decrease in net income resulted primarily from an increase in compensation costs associated with the Employee Stock Option Plan and the addition of personnel due to the acquisition of the Carlyle branch in September 1996. The increase in noninterest expense of $94,000 is attributable to an increase of $50,000 in compensation and employee benefits expense related to the employee stock option plan and to the addition of personnel due to the acquisition of the Carlyle branch in September 1996 and $34,000 in other nonoperating expenses. The increase in other nonoperating expenses was primarily attributable to amortization of goodwill from the Carlyle acquisition. Net Interest Income - Net interest income for the three months ended December 31, 1996 increased by $45,000 to $483,000 from $438,000 for the three months ended December 31, 1995. The increase is attributable to an increase in the yield on interest earning assets combined with an increased loan base due to the acquisition of the Carlyle branch in September 1996. Provision for Loan Losses - The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in its loan portfolio and the general economy. Such evaluation considers numerous factors including, general economic conditions, loan portfolio composition, prior loss experience, the estimated fair value of the underlying collateral and other factors that warrant recognition in providing for an adequate loan loss allowance. During the three months ended December 31, 1996 and 1995, the provision for loan losses was $22,000 and $23,000, respectively. Allowance for Loan Losses - The allowance for loan losses was $131,000 or .47% of loans receivable at December 31, 1996, compared to $117,000, or .43% of loans receivable at September 30, 1996. The level of non-performing loans was 1.33% of total loans at December 31, 1996 compared to .93% as of September 30, 1996. Based on current reserve levels in relation to total loans receivable and classified assets and the diligent effort put forth by management to address problem loan situations in recent years, management believes its reserves are currently adequate. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb losses on existing loans that may become uncollectible, based on evaluation of the collectibility of loans and prior loss experience. The evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions that may affect the borrowers' ability to pay. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations. Loans are considered impaired when, based on current information and events, it is probable that the Bank will not be able to collect all amounts due. The portion of the allowance for loan losses applicable to impaired loans has been computed based on the present value of the estimated future cash flows of interest and principal discounted at the loan's effective interest rate or on the fair value of the collateral for collateral dependent loans. The entire change in present value of expected cash flows of impaired loans or of collateral value is reported as bad debt expense in the same manner in which impairment initially was recognized or as a reduction in the amount of bad debt expense that otherwise would be reported. As of December 31, 1996 and September 30, 1996, management had not identified any loans as impaired. The Bank's effective tax rate for the three months ended December 31, 1996 and 1995 was approximately 40% and 34%, respectively. Nonperforming Assets At December 31, 1996, the Bank had $371,000, of nonperforming assets, .78% of total assets. On September 30, 1996, the Bank had $252,000 of nonperforming assets, .50% of total assets. Impact on Inflation and Changing Prices The unaudited consolidated financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and results of operations in terms of historical dollars without considering changes in the relative purchasing power of money over time because of inflation. Unlike most industrial companies, virtually all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8K Exhibits: None. Reports on Form 8K: SIGNATURES Pursuant to the requirement 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 Financial Group, Inc. Date: February 13 1997 /s/ K. Gary Reynolds --------------------- ------------------------------------ K. Gary Reynolds Chief Executive Officer and Director Date: February 13 1997 /s/ Joanne Ticknor --------------------- ------------------------------------ Joanne Ticknor Secretary and Treasurer EX-27 2
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE DECEMBER 31, 1996 10-QSB OF CSB FINANCIAL GROUP, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS 1,000 3-MOS SEP-30-1997 DEC-31-1996 915 1,701 0 0 15,291 0 0 27,832 131 47,527 35,334 35,334 238 0 0 0 10 11,945 47,527 535 362 0 897 414 414 483 22 39 346 180 108 0 0 108 .12 .12 0 371 0 0 0 117 8 0 131 131 0 0
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