CSB Bancorp, Inc. Reports Fourth Quarter Earnings

CSB Bancorp, Inc. (OTC Pink: CSBB):

Fourth Quarter Highlights

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced fourth quarter 2019 net income of $2,593,000, or $.95 per basic and diluted share, as compared to $2,492,000, or $.91 per basic and diluted share, for the same period in 2018. Income before federal income tax amounted to $3,216,000, an increase of 3% over the same quarter in the prior year. For the twelve-month period ended December 31, 2019 net income totaled $10,414,000 compared to $9,412,000 in the same period last year, an increase of 11%.

Annualized returns on average common equity ("ROE") and average assets ("ROA") for the quarter were 12.13% and 1.27%, respectively, compared with 13.20% and 1.36% for the fourth quarter of 2018.

Eddie Steiner, President and CEO stated, "The business sector has become somewhat more cautious in outlook as uncertainties related to trade policy, slowing global economies, and continued difficulties in retail and agriculture weigh on forward-looking perspectives. The commercial lending environment is very competitive as banks and non-bank lenders vie over softer loan demand and accelerating prepayments. Consumer sentiment remains upbeat given steady job and wage conditions, and attractive interest rates have led to stronger home mortgage loan demand."

Revenue, calculated as Net interest income and noninterest income on a fully taxable equivalent basis, totaled $8.6 million during the quarter, a 5% increase from the prior-year fourth quarter. Net interest income increased $219 thousand, or 3%, in the fourth quarter of 2019 compared to the same period in 2018.

Loan interest income including fees increased $180 thousand during fourth quarter 2019 as compared to the same quarter in 2018, an increase of 3%. Average total loan balances during the current quarter were $13 million higher than the year ago quarter, an increase of 2%. Loan yields for fourth quarter 2019 averaged 5.05%, an increase of 2 basis points from the 2018 fourth quarter average of 5.03%.

The net interest margin was 3.73% compared to 4.01% for fourth quarter 2018 as the average yield was down 27 basis points on assets while the average cost to fund those assets was up 1 basis point.

Noninterest income increased 14%, compared to fourth quarter of 2018, driven by growth in gain on sale of loans, debit card fee income, increases in bank owned life insurance values, and service charges on deposit accounts.

Noninterest expense increased 7% from fourth quarter 2018. Salary and employee benefit costs increased $178 thousand, or 7% compared to the prior year quarter, as a result of higher wage and 401(k) retirement expenses. Professional and director's fees increased by $89 thousand, or 32%, reflecting higher technology investment to further improve network infrastructure in support of company growth. Communication system expenses increased by $29 thousand, or 39%, reflecting additional redundant connectivity within the operations center. The Company's fourth quarter efficiency ratio increased slightly to 58.7% with a slowing of loan growth affecting interest margins as a greater percentage of assets remained in short term investments.

Federal income tax expense totaled $623 thousand in fourth quarter 2019, as compared to $619 thousand tax expense for the same quarter in 2018. The effective tax rate reduced slightly to 19% in 2019.

Average total assets during the quarter amounted to $812 million, an increase of $85 million, or 12%, above the same quarter of the prior year. Average loan balances of $555 million increased $13 million, or 2%, from the prior year fourth quarter while average securities balances of $117 million increased $4 million, or 3%, as compared to fourth quarter 2018. Average overnight funds sold increased $59 million, or 185%, compared to fourth quarter 2018 as average deposits grew by 13%.

Average commercial loan balances for the quarter, including commercial real estate, increased $2 million, or less than 1%, from prior year levels. Average residential mortgage balances including home equity lines of credit increased $10 million, or 6%, over the prior year's quarter. Average consumer credit balances remained stable in fourth quarter 2019 versus the same quarter of the prior year.

Nonperforming assets increased $1.2 million from December 31, 2018 to $4.7 million, or 0.84%, of total loans plus other real estate at December 31, 2019. The increase in nonperforming assets reflects various commercial loans experiencing economic stress. At December 31, 2019, approximately $1.1 million of the non-performing loan total is guaranteed by either USDA or the SBA. Delinquent loan balances as of December 31, 2019 increased to 1.02% of total loans as compared to 0.84% at December 31, 2018.

Net loan losses recognized during fourth quarter 2019 were $44 thousand, or 0.03% annualized, compared to fourth quarter 2018 net loan losses of $641 thousand. The allowance for loan losses amounted to 1.27% of total loans at December 31, 2019 as compared to 1.08% at December 31, 2018.

Average deposit balances grew on a quarter over prior year quarter comparison by $77 million, or 13%, partially on the strength of customer response to higher rates paid on deposits. For the fourth quarter 2019, the average cost of deposits amounted to 0.52%, as compared to 0.48% for the fourth quarter 2018. During the fourth quarter 2019, increases in average deposit balances over the prior year quarter included non-interest-bearing demand accounts of $22 million, interest-bearing transaction accounts of $45 million, and time deposits of $15 million. The average balance of securities sold under repurchase agreement during the fourth quarter of 2019 decreased by less than $1 million, or 2%, compared to the average for the same period in the prior year.

Shareholders' equity totaled $85.5 million on December 31, 2019 with 2.7 million common shares outstanding. The tangible equity to assets ratio amounted to 9.9% on December 31, 2019 and 9.9% on December 31, 2018. The Company declared a fourth quarter dividend of $0.28 per share, a $.02 per share increase over fourth quarter 2018, producing an annualized yield of 2.7% based on the December 31, 2019 closing price of $40.97.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $819 million as of December 31, 2019. CSB provides a complete range of banking and other financial services to consumers and businesses through its wholly owned subsidiary, The Commercial and Savings Bank, with sixteen banking centers in Holmes, Wayne, Tuscarawas, and Stark counties and Trust offices located in Millersburg, North Canton, and Wooster, Ohio.

Forward-Looking Statement

This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company's business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company's periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.