-----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, GMtre2XtpY/s8VAxRgNsIrJ1TvllS6jKO1KF3PukKQ3uDM+eoMGsPkgbuDjmNjDl yDGsQZsmEdtWPvj3Ebsr8g== 0000743530-97-000074.txt : 19970818 0000743530-97-000074.hdr.sgml : 19970818 ACCESSION NUMBER: 0000743530-97-000074 CONFORMED SUBMISSION TYPE: 10QSB PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970815 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: 97664410 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 June 30, 1997 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 August 13, 1997 - ----------------------------- --------------------------------------- Common Stock, Par Value $0.01 860,825 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 June 30, 1997 and September 30, 1996 (in thousands, except share data) June 30, September 30, ------------------------ ASSETS 1997 1996 - ------------------------------------------------------------------------- (Unaudited) (Audited) Cash and due from banks ........................ $ 1,876 $ 598 Interest-bearing deposits ...................... 2,076 4,168 ------------------ Cash and cash equivalents ........ 3,952 4,766 Securities held to maturity .................... -- 1,987 Securities available for sale .................. 15,831 14,044 Nonmarketable equity securities ................ 212 165 Securities purchased under agreements to resell -- 300 Loans .......................................... 27,219 27,048 Allowance for loan losses ...................... (156) (117) ------------------ Loans, net ....................... 27,063 26,931 Premises and equipment ......................... 607 594 Accrued interest receivable .................... 311 331 Intangible assets .............................. 676 722 Other assets ................................... 192 176 ------------------ Total assets ..................... $48,844 $50,016 ================== CSB FINANCIAL GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS June 30, 1997 and September 30, 1996 (in thousands, except share data) June 30, September 30, LIABILITIES AND STOCKHOLDERS' EQUITY 1997 1996 - ------------------------------------------------------------------------------------------- (Unaudited) (Audited) LIABILITIES: Deposits: Demand ...................................................... $ 8,887 $ 8,754 Savings ..................................................... 3,555 3,779 Time deposits - $100,000 .................................... 877 1,889 Other time deposits ......................................... 22,976 22,432 ------------------ Total deposits ...................................... 36,295 36,854 ------------------ Other liabilities .............................................. 73 297 Deferred income taxes .......................................... 246 81 ------------------ Total liabilities ................................... 36,614 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 ................................................ 8,140 7,586 Retained earnings .............................................. 6,011 5,794 Unrealized gain (loss) on securities available for sale, net of income taxes ................................................ 89 (24) Unearned employee stock ownership plan shares .................. (538) (582) Management recognition plan .................................... (516) -- ------------------ 13,196 12,784 Less cost of treasury stock; 1997 93,150 shares ................ (966) -- ------------------ Total stockholders' equity .......................... 12,230 12,784 ------------------ Total liabilities and stockholders' equity .......... $48,844 $50,016 ==================
See Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME Nine Months Ended June 30, 1997 and 1996 (Unaudited, in thousands, except per share data) - ------------------------------------------------------------------------------------- Nine Months Ended June 30, ----------------- 1997 1996 ----------------- Interest income: Loans and fees on loans ...................................... $ 1,621 $ 1,386 Securities ................................................... 806 752 ----------------- Total interest income ............................. 2,427 2,138 ----------------- Interest expense on deposits .................................... 1,224 959 ----------------- Net interest income ............................... 1,203 1,179 Provision for loan losses ....................................... 67 45 ----------------- Net interest income after provision for loan losses 1,136 1,134 ----------------- Noninterest income: Service charges on deposits .................................. 54 35 Gain on sale of securities ................................... 40 -- Other ........................................................ 23 21 ----------------- Total noninterest income .......................... 117 56 ----------------- Noninterest expense: Compensation and employee benefits ........................... 472 328 Occupancy and equipment ...................................... 67 46 Data processing .............................................. 70 54 Audit, legal and other professional .......................... 85 104 SAIF deposit insurance ....................................... 16 49 Other ........................................................ 265 136 ----------------- Total noninterest expense ......................... 975 717 ----------------- Income before income taxes ........................ 278 473 Income taxes .................................................... 61 170 ----------------- Net income ........................................ $ 217 $ 303 ================= Earnings per share .............................................. $ 0.24 $ 0.32 ================= Weighted average shares outstanding ............................. 914,012 957,634 =================
See Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended June 30, 1997 and 1996 (Unaudited, in thousands, except per share data) - ------------------------------------------------------------------------------------- Three Months Ended June 30, ----------------- 1997 1996 ----------------- Interest income: Loans and fees on loans ...................................... $ 545 $ 477 Securities ................................................... 264 233 ----------------- Total interest income ............................. 809 710 ----------------- Interest expense on deposits .................................... 412 320 ----------------- Net interest income ............................... 397 390 Provision for loan losses ....................................... 22 10 ----------------- Net interest income after provision for loan losses 375 380 ----------------- Noninterest income: Service charges on deposits .................................. 16 13 Gain on sale of securities ................................... 1 -- Other ........................................................ 7 9 ----------------- Total noninterest income .......................... 24 22 ----------------- Noninterest expense: Compensation and employee benefits ........................... 162 82 Occupancy and equipment ...................................... 24 15 Data processing .............................................. 21 16 Audit, legal and other professional .......................... 18 43 SAIF deposit insurance ....................................... 6 17 Other ........................................................ 81 61 ----------------- Total noninterest expense ......................... 312 234 ----------------- Income before income taxes ........................ 87 168 Income taxes .................................................... 35 63 ----------------- Net income ........................................ $ 52 $ 105 ================= Earnings per share .............................................. $ 0.06 $ 0.11 ================= Weighted average shares outstanding ............................. 902,360 959,804 =================
See Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended June 30, 1997 and 1996 (Unaudited, in thousands) - ---------------------------------------------------------------------------------------------------------- Nine Months Ended June 30, ------------------- 1997 1996 ------------------- Net income ....................................................................... $ 217 $ 303 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses ..................................................... 67 45 Provision for depreciation .................................................... 27 15 Amortization of intangible assets ............................................. 46 -- Employee stock ownership plan compensation expense ............................ 60 76 Management recognition plan compensation expense .............................. 22 -- Deferred income taxes ......................................................... 97 -- Gain on sale of securities .................................................... (40) -- Amortization and accretion on securities ...................................... 60 10 Change in assets and liabilities: (Increase) decrease in accrued interest receivable .......................... 20 (103) (Increase) decrease in other assets ......................................... (16) 634 (Decrease) in other liabilities ............................................. (224) (104) ------------------- Net cash provided by operating activities ............................. 336 876 ------------------- Cash Flows from Investing Activities: Securities available for sale: Purchases ..................................................................... (6,772) (5,781) Proceeds from sales ........................................................... 369 -- Proceeds from maturities and paydowns ......................................... 6,764 2,000 Securities held to maturity: Purchases ..................................................................... -- (1,370) Proceeds from maturities ...................................................... -- 2,000 Nonmarketable equity securities: Purchases of nonmarketable equity security .................................... (47) -- (Increase) decrease in securities purchased under agreements to resell .......................................................... 300 (300) (Increase) in loans receivable ................................................... (199) (3,655) Purchase of premises and equipment ............................................... (40) (34) ------------------- Net cash provided by (used in) investing activities ................... 375 (7,140) ------------------- Cash Flows from Financing Activities: (Decrease) in deposits ........................................................... $ (559) $(10,231) Proceeds from sale of common stock, net of conversion expenses ................... -- 6,920 Purchase of treasury stock ....................................................... (966) -- ------------------- Net cash (used in) financing activities ............................... (1,525) (3,311) (Decrease) in cash and cash equivalents ............................... (814) (9,575) Cash and cash equivalents at beginning of period .................................... 4,766 10,906 ------------------- Cash and cash equivalents at end of period .......................................... $ 3,952 $ 1,331 =================== Supplemental Disclosures: Cash paid for: Interest on deposits ........................................................ $ 1,223 $ 960 Income taxes ................................................................ $ 47 $ 164 Change in gross unrealized gain/loss on securities available for sale .................................................................... $ 181 $ (60) Change in deferred taxes on unrealized gain/loss on securities available for sale .......................................................... $ 68 $ (23) Transfer of securities from held to maturity to available for sale ........................................................................ $ 1,987 $ 7,983
See 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. Centralia Savings Bank is located in Masson County, Illinois. 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., its wholly owned subsidiary, Centralia Savings Bank, the Bank, and the Bank's wholly-owned subsidiary, Centralia SLA. Centralia SLA, Inc.'s principal business activity is to provide insurance services. 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 June 30, 1997 the results of operations for the three months ended June 30, 1997 and 1996, and the results of operations and cash flows for the nine months ended June 30, 1997 and 1996. All adjustments to the financial statements were normal and recurring in nature. Operating results for the three months and nine months ended June 30, 1997 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 are determined by dividing net income for the period by the weighted average number of shares of common stock and common stock equivalents outstanding. Common stock equivalents assume exercise of stock options and use of proceeds to purchase treasury stock at the average market price for the period. Shares awarded under the management recognition plan are considered outstanding as common stock equivalents at the issuance date. 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 $60,000 for the nine months ended June 30, 1997. On July 14, 1997, the Company announced a repurchase program whereby the Company would repurchase up to 94,185 shares of common stock. During July 1997, the Company repurchased 41,400 shares from the ESOP plan. Following this repurchase, the ESOP held 25,853 unallocated ESOP shares with a fair value of $310,236. Note 5. Stock Option Plan At the annual stockholder's meeting on May 22, 1996, the Stock Option Plan ("SOP") was approved. The board has reserved an amount of stock equal to 103,500 shares or 10% of the common stock sold in the conversion for issuance under the SOP. The options will be granted by a Committee, comprised of directors, to key employees and directors based on their services. The exercise price of options granted must be at least equal to the fair market value of the common stock on the date the option is granted. The options granted under the plan become exercisable at a rate of 20 percent per year commencing one year after the grant date and 20 percent on each anniversary date for the following four years. As of June 30, 1997, 51,750 options had been granted. The Board adopted the 1997 Nonqualified Stock Option Plan (SOP) effective January 9, 1997. The Board has reserved up to 103,500 shares of common stock under the SOP. The options will be granted by a committee, comprised of directors, to key employees and directors based on their services. The exercise price of the option granted must be at least equal to the fair market value of the common stock on the date the option is granted. The terms of the options and the exercise schedule are at the discretion of the committee and option agreements need not be identical. As of June 30, 1997, no options had been granted. Note 6. Management Recognition Plan The Management Recognition Plan ("MRP") was approved with an effective date of October 10, 1996 and amended on January 9, 1997. The MRP intends to purchase with funds provided by the Company, whether in the open market or from the Holding Company in the form of newly issued shares, 62,100 shares, or 6% of the aggregate number of shares of Common Stock issued and sold in connection with the Conversion for issuance to officers, directors, and employees of the Holding Company. Directors, officers, and employees become vested in the shares of common stock awarded to them under the MRP at a rate of 20% per year, commencing one year after the grant date, and 20% on the anniversary date thereof for the following four years. As of June 30, 1997, 18,630 shares have been awarded to officers, directors, and employees. MRP compensation expense was $22,000 for the nine months ended June 30, 1997. The bank accounts for its MRP in accordance with Accounting Principle Board Statement 25. Compensation expense is recognized over the vesting period for shares awarded under the plan. Note 7. New Accounting Standards Statement of Financial Accounting Standard No. 128, "Earnings per Share" (FAS 128), was issued in February 1997 by the Financial Accounting Standards Board. The Statement replaces the presentation of primary earnings per share (EPS) with a presentation of basic EPS. It also requires dual presentation of basic and diluted EPS on the face of the income statement for entities with complex capital structures. Basic EPS is computed as net income available to common stockholders divided by the weighted average common shares outstanding. The Statement is effective for financial statements issued for periods ending after December 15, 1997. The Company does not believe the adoption of the Statement will have a material impact on the consolidated financial statements. In June 1997, the FASB issued Statement #130, "Reporting Comprehensive Income," and Statement #131, "Disclosures About Segments of an Enterprise and Related Information." Statement #130 establishes standards for reporting comprehensive income in financial statements. Statement #131 expands certain reporting and disclosure requirements for segments from current standards. The statements are effective for fiscal years beginning after December 15, 1997 and the Company does not expect the adoption of these standards to result in material changes to previously reported amounts or disclosures. 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 June 30, 1997 and September 30, 1996, cash and cash equivalents totaled $4.0 million and $4.8 million, respectively. The decrease in cash and cash equivalents is due to the repurchase of treasury shares and the maturity of the Bank's time deposits. 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 June 30, 1997, the Bank had no outstanding advances from the FHLB. At June 30, 1997, the Bank had $924,000 of outstanding commitments to originate loans. Regulatory Capital Federally insured savings associations such as the Bank are required to maintain a minimum level of regulatory capital. The Corporation and its subsidiary have capital ratios which substantially exceed all regulatory requirements. The Corporation's capital ratios are shown below. June 30, September 30, Minimum 1997 1996 Requirements --------------------------------------------- Total capital to risk weighted assets 54.92% 60.30% 8.0% Tier I capital to risk weighted assets 54.18% 56.39% 4.0% Tier I capital to average assets 25.34% 27.72% 4.0%
Financial Condition Total assets decreased $1,172,000 to $48,844,000 at June 30, 1997 from $50,016,000 at September 30, 1996. The decrease resulted from a decrease of $814,000 in cash and cash equivalents due to the purchase of treasury stock and the maturity of time deposits. The gross loans have increased $171,000 from $27,048,000 at September 30, 1996 to $27,219,000 at June 30, 1997. The increase is primarily installment lending. While the loan growth since September 30, 1996 was primarily installment, the Bank continues to focus their efforts in the expansion of the commercial loan market and continues to originate commercial loans which meet prudent underwriting standards. Securities and securities purchased under agreements to resell decreased $453,000 since September 30, 1996. The proceeds from sales and paydowns were used to purchase treasury stock and fund the maturities of time deposits. Results of Operations Three months ended June 30, 1997 compared to three months ended June 30, 1996 Net Income - The Company's net income for the three months ended June 30, 1997 was $52,000 compared to $105,000 for the three months ended June 30, 1996. The decrease in net income resulted primarily from an increase in compensation costs associated with the Employee Stock Option Plan, the Management Recognition Plan, and the addition of personnel due to the acquisition of the Carlyle branch in September 1996. Interest Income - Interest income increased for the three months ended June 30, 1997 by $99,000 to $809,000 from $710,000 for the three months ended June 30, 1996. This increase is a result of the increase in the volume of loans held by the Bank due to continued focus on commercial and mortgage loan growth combined with the loans purchased during the Carlyle acquisition. Interest Expense - Interest expense increased for the three months ended June 30, 1997 by $92,000 to $412,000 from $320,000 for the three months ended June 30, 1996. This results from an increase in the cost of funds associated with time deposits purchased in the Carlyle branch acquisition combined with an increase in the volume of time deposits. Net Interest Income - Net interest income for the three months ended June 30, 1997 increased by $7,000 to $397,000 from $390,000 for the three months ended June 30, 1996. The increase is attributable to an increased loan base associated with the Carlyle branch acquisition September 13, 1996. The increase in noninterest expense of $78,000 is attributable to an increase of $80,000 in compensation and employee benefits expense related to the employee stock option plan, Management Recognition Plan, and the addition of personnel due to the acquisition of the Carlyle branch in September 1996. Additionally, the increase in other noninterest expense is attributable to amortization expense of intangible assets related to the Carlyle acquisition totaling $15,000. The decrease in professional fees is the result of fees incurred during fiscal year 1996 for the implementation of the ESOP plan. The Company continues to fund the allowance for loan losses as they conservatively monitor their loan portfolio. The provision for the three months ended June 30, 1997 was $22,000 compared to $10,000 for the three months ended June 30, 1996. Nine months ended June 30, 1997 compared to nine months ended June 30, 1996 Net Income -The Company's net income for the nine months ended June 30, 1997 was $217,000 compared to $303,000 for the nine months ended June 30, 1996. The decrease is a result of increased compensation expense associated with the Employee Stock Option Plan, Management Recognition Plan, and the additional personnel at the Carlyle branch. Amortization of intangible assets related to the Carlyle branch acquisition also contributed to the decrease in net income. Interest Income - Interest income increased $289,000 from $2,138,000 to $2,427,000 or by 13.5%, during the nine months of 1997 compared to the respective period of 1996. This increase resulted from an increase in loan portfolio due to the Carlyle branch acquisition combined with continued mortgage and commercial loan growth. Interest Expense - Interest expense increased $265,000 or 27.6%, to $1,224,000 for the nine months ended June 30, 1997 from $959,000 for the same period in 1996. The increase was primarily attributable to the increase in the deposit base associated with the Carlyle acquisition in September 1996. Net Interest Income - Net interest income for the nine months ended June 30, 1997 was $1,203,000 compared to $1,179,000 for the nine months ended June 30, 1996. The increase is attributable to an increased loan base associated with the Carlyle branch acquisition on September 13, 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 nine months ended June 30, 1997 and 1996, the provision for loan losses was $67,000 and $45,000, respectively. Allowance for Loan Losses - The allowance for loan losses was $156,000 or .57% of loans receivable at June 30, 1997, compared to $117,000, or .43% of loans receivable at September 30, 1996. The level of nonperforming loans was 1.0% of total loans at June 30, 1997 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. Net charge-offs amounted to $28,000 during the first nine months of 1997, compared to net charge-offs of $50,000 during the first nine months of 1996. 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 June 30, 1997 and September 30, 1996, management had not identified any loans as impaired. The Bank's effective tax rate for the nine months ended June 30, 1997 and 1996 was approximately 21.94% and 35.94%, respectively. Nonperforming Assets At June 30, 1997, the Bank had $273,000, of nonperforming assets, .59% 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: None. 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: August 14, 1997 /s/ K. Gary Reynolds ------------------------------ ------------------------------------- K. Gary Reynolds Chief Executive Officer and Director Date: August 14, 1997 /s/ Joanne Ticknor ------------------------------- ------------------------------------- Joanne Ticknor Secretary and Treasurer EX-27 2
9 THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE JUNE 30, 1997 FORM 10-QSB OF CSB FINANCIAL GROUP, INC. AND IS QUALIFIED IN ITS ENTIRETY BY REFERENC TO SUCH FINANCIAL STATEMENTS 1,000 9-MOS SEP-30-1997 JUN-30-1997 1,876 2,076 0 0 15,831 0 0 27,219 156 48,844 36,295 0 319 0 0 0 10 12,220 48,844 1,621 806 0 2,427 1,224 1,224 1,203 67 40 975 278 217 0 0 217 .24 .24 0 0 0 0 0 117 28 0 156 156 0 0
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