"Heartbleed" in the News - You may have read or heard about the recently announced "Heartbleed" vulnerability for the Internet community. CSB’s website, internet banking and mobile applications are secure and have not been affected. However, if you use the same password for multiple internet applications, including your CSB internet banking, we strongly advise you to change your CSB password to a unique password used only for CSB internet banking. It would be best to use a combination of upper and lower case letters and numbers. You may also want to refer to heartbleed.com for more information about the “Heartbleed” internet vulnerability. As companies patch their systems to protect from this vulnerability, they may request that you change your password and/or update your security questions. We highly recommend you follow their instructions, keeping in mind that no legitimate business would ask you to provide your password to them. Your password should be known only by you.
Press Release | January 26, 2006
CSB BANCORP, INC. REPORTS 45% INCREASE IN FOURTH QUARTER 2005 EARNINGS PER SHARE
Fourth Quarter Highlights:
• Diluted earnings per share of $0.35
• Net income of $903 thousand
• Return on average common equity of 9.93%
• Return on average assets of 1.12%
Millersburg, Ohio — January 26, 2006 — CSB Bancorp, Inc. (OTCBB: CSBB.ob) today announced fourth quarter 2005 net income of $903 thousand, or $0.35 per diluted share, up from $651 thousand, or $0.24 per diluted share, for the same period in 2004. Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 9.93% and 1.12%, respectively, compared with 7.13% and 0.82% for the fourth quarter of 2004.
For the full year of 2005, the Company reported net income of $2.9 million, or $1.09 per diluted share, up from $2.5 million, or $0.95 per diluted share, for the year of 2004. ROE and ROA were 7.92% and 0.91%, respectively, compared with 7.15% and 0.81% for the prior-year.
“CSB’s fourth quarter results reflect continued progress with enhancing our other income generation through the introduction of an overdraft privilege program as well as improving our net interest margin,” said John J. Limbert, President and CEO. “We have taken steps to increase the volume of earning assets while continuing to grow core deposit relationships on our balance sheet. These increases have had a positive effect this quarter despite a challenging interest rate environment.”
Focusing on CSB’s strong equity position, Mr. Limbert added, “Our capital management strategy of repurchasing shares resulted in the purchase of over 66,000 shares in the fourth quarter. Even with these purchases, our equity to assets ratio stands at a very strong 10.96%! This strong capital position, coupled with strong credit quality and core earnings dependability, will allow us to explore a variety of strategic alternatives, including expanding our company’s market presence via new banking centers or through acquisitions.”
Mr. Limbert also commented on the Company’s fee income during the fourth quarter, “Service charges improved strongly over the past quarter and on a year-over-year basis. We continue to look for ways to enhance service charge revenue and the addition of overdraft privilege to our product line has been embraced by our consumer and small business customer base.”
Total revenue, defined as net interest income on a fully-tax equivalent (“FTE”) basis plus non-interest income net of securities transactions, was $4.2 million for the fourth quarter of 2005, compared with $3.6 million in the prior-year quarter, an increase of 16.6%. FTE net interest income increased 13.5% year-over-year, to $3.4 million. The net interest margin increased 42 basis points to 4.54%, while average assets increased $8.7 million to $321 million. During the fourth quarter of 2005, the average investment portfolio increased approximately $11 million, or 16%, compared with the fourth quarter of 2004, while average loans decreased $1.1 million, or .5%, to $215.4 million.
Non-interest income for the fourth quarter of 2005 totaled $707 thousand, compared with $527 thousand for the fourth quarter of 2004, an increase of 34.2%. During the fourth quarter of 2005, service charges on deposits rose $139 thousand, or 62.9%, compared with the fourth quarter of 2004. Trust and brokerage fees increased $32 thousand, or 31.7%, in the fourth quarter of 2005 compared with the year-ago quarter, a direct result of increased assets under management and revenue from the opening of a Trust Office in Wooster, Ohio in 2005.
Non-interest expense totaled $2.8 million for the fourth quarter of 2005, compared with $2.6 million for the fourth quarter of 2004, an increase of 8.9%. The efficiency ratio for the quarter was 66.96%, compared with 71.65% for the year ago quarter.
Federal income tax expense was $397 thousand and $237 thousand for the quarters ended December 31, 2005 and 2004, respectively. The effective tax rate for the fourth quarter 2005 was 30.5% compared to 26.7% for the same quarter in 2004. The increase in the fourth quarter 2005 reflected a decline in tax-free interest income, primarily resulting from the sale and maturity of bonds within the tax-free investment portfolio. For the years ended December 31, 2005 and 2004, the federal income tax expense was $1.2 million (effective rate of 28.9%) and $653 thousand (effective rate of 20.6%), respectively.
As of December 31, 2005, nonperforming assets were $1.2 million, or 0.58%
of period-end loans plus other real estate, compared with $1.4 million,
or 0.64%, as of September 30, 2005, and $1.6 million or 0.76%, as of December
31, 2004. Net recoveries for the fourth quarter of 2005 totaled $1.0 thousand,
compared with net recoveries of $1.0 thousand for the fourth quarter of
2004. Commenting on the company’s credit quality Limbert said, “At
year end our delinquency rate stood at .53% versus 1.04% at year end 2004.
Coupled with the low non-performing assets and declining charge off rates
we remain optimistic about our ability to manage any credit deterioration
resulting from a slowing economy.”
The Company recorded no loan loss provision in the fourth quarter of 2005 or the fourth quarter of 2004. During the first and second quarters of 2005, two different commercial loans were reclassified from nonperforming loans to other real estate owned. The decrease in loan loss provision from the previous quarter reflects the increase in the Company’s level of allowance for loan losses as a percentage of nonperforming loans, resulting in lower or no loss provisions for the subsequent quarters during 2005.
During the fourth quarter of 2005, the level of nonperforming loans improved from the prior quarter. This improvement combined with a declining historical charge-off history, factored into the Company’s reserve methodology. The allowance for loan losses at December 31, 2005 was 1.14% of period-end loans, compared with 1.12% on September 30, 2005 and 1.18% on December 30, 2004. The year-end ratio of allowance for loan losses to non-performing loans stood at 305%.
Assets at December 31, 2005 totaled $321 million, up 1.15% from December 31, 2004. Period-end loans declined $3.1 million or 1.4%, driven by a $6 million decline in mortgage loans coupled with a $2 million reduction in commercial participation loans that were repurchased by the originating bank. These reductions in loan balances were partially offset by home equity loans increasing $4.4 million or 31.4%, and consumer installment loans increasing approximately $1 million. Investment securities increased $5.0 million, or 6.6%, over the same time period in 2004.
Deposits totaled $255 million at December 31, 2005, compared with $248 million on December 31, 2004. Compared with September 30, 2005, total deposit growth was flat for the fourth quarter. Year-over-year, average checking account balances have increased approximately $2 million. Over those same time periods, money market accounts increased $5 million, as a result of a new product offering, while average traditional savings accounts declined $2 million. As the period represented a time of rising short-term interest rates, time deposits of less than $100 thousand grew an average $6 million from fourth quarter 2004 to fourth quarter 2005, while time deposits greater than $100 thousand remained virtually unchanged.
Shareholders’ equity was $35.2 million on December 31, 2005. The Company’s capital position remains strong, as tangible equity to assets was 10.96%, compared with 11.41% on December 31, 2004. The common dividend paid during the quarter was $0.14 per share, a $0.01 increase from the prior-year quarter. During the fourth quarter of 2005 the Company repurchased 66,439 common shares. Period-end common shares outstanding totaled 2.578 million.
About CSB Bancorp
CSB Bancorp is a diversified financial services holding company headquartered in Millersburg, Ohio, with approximate assets of $321 million as of December 31, 2005. CSB Bancorp provides a complete range of banking and other financial services to consumers and businesses through its wholly-owned subsidiary, The Commercial & Savings Bank, with nine banking centers in Holmes, Tuscarawas and Wayne counties.
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.
Paula J. Meiler, SVP & CFO