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Press Release | October 16, 2007
CSB BANCORP, INC. REPORTS INCREASE IN THIRD QUARTER EARNINGS
Third Quarter and Year-to-Date Highlights:
Three Months Ended Nine Months Ended
September 30, 2007 September 30, 2007
Diluted earnings per share $0.35 $1.07
Net Income $863,000 $2,634,000
Return on average common equity 9.55% 9.92%
Return on average assets 1.04% 1.08%
Millersburg, Ohio – October 16, 2007 – CSB Bancorp, Inc. (OTCBB: CSBB.ob) today announced third quarter net income of $863 thousand, or $0.35 per basic and diluted share, as compared to $813 thousand, or $0.32 per basic and diluted share for the same period in 2006.
Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 9.55% and 1.04%, respectively, compared with 9.42% and 1.01% for the third quarter of 2006.
For the nine months ended September 30, 2007, the Company reported net income of $2.63 million, or $1.07 per diluted share, up from $2.26 million, or $0.89 per diluted share in 2006. ROE and ROA for the nine-month period were 9.92% and 1.08%, respectively, compared to 8.69% and .95% for the first nine months of 2006.
“We were able to maintain our net interest margin during the past quarter while achieving growth in loan and deposit balances,” commented Eddie Steiner, President and CEO. “We also continued our trend of improved operating efficiencies and the combined result was a solid quarter.”
Revenue, (defined as net interest income on a fully tax-equivalent basis plus non-interest income net of securities transactions), totaled $4.2 million in the third quarter, an increase of $162 thousand or 4.0% over the same period in the prior year. Revenue increased 2.8%, or $336 thousand, in the first nine months of 2007 to $12.3 million, as compared to $12.0 million during the first nine months of 2006.
The Company’s third quarter efficiency ratio, which measures operating expenses as a percentage of revenue, improved to 65.0% as compared to 67.2% in the third quarter of 2006. The year-to-date efficiency ratio of 64.7% also compares favorably to the 69.3% ratio for the first nine months of the prior year.
Non-interest expense totaled $2.7 million during the quarter, an increase
of $18 thousand, or 0.7%, from third quarter 2006. For the nine months
ended September 30, 2007, non-interest expense declined $331 thousand,
or 4.0% as compared to the first nine months of 2006. The 2006 year-to-date
non-interest expense included a pre-tax charge of $237 thousand from an
isolated and nonrecurring cash assets irregularity discovered and recorded
during the second quarter of 2006. Excluding the 2006 irregularity, non-interest
expenses declined $95 thousand, or 1.2% in the first nine months of 2007
as compared to the same period of the prior year.
Federal income tax expense was $416 thousand for third quarter 2007, compared to $378 thousand for the same quarter in 2006. The effective tax rate for the quarter was 32.5% versus 31.7% in the prior year period. The increase in the effective tax rate was primarily the result of a reduction in the tax-exempt securities portion of the Company’s investment portfolio due to less attractive rates of return available on tax-exempt securities.
Total assets averaged $329 million during the quarter, an increase of $9.0 million, or 2.8% from the same quarter in the prior year. Average loan balances of $245 million reflect an increase of $15.6 million, or 6.8%, over the prior year third quarter, while average securities balances of $66 million declined $6.2 million, or 8.5% as compared to third quarter 2006. The Company has funded a portion of its 2007 loan growth with proceeds from maturities in the investment securities portfolio.
The majority of the Company’s investment portfolio is comprised of U.S. government obligations, corporate bonds and state and municipal securities. Approximately one third of the Company’s investment portfolio is comprised of mortgage-backed securities. The portfolio contains little, if any, embedded sub-prime security exposure and all securities are performing fully to terms.
Average commercial loan balances, including commercial real estate, increased $11.8 million, or 8.9% over the prior year third quarter. Average home mortgage and home equity balances grew $6.0 million, or 7.1% on a comparative quarter basis, while average consumer installment loan and credit card balances declined $2.2 million, or 19.6%.
As of September 30, 2007, nonperforming assets totaled $1.09 million, or .44% of period-end loans and other real estate, compared with $1.47 million, or .64%, at September 30, 2006. Net charge-offs for the quarter totaled $23 thousand, an annualized rate of .04% of average total loans. For the nine months ended September 30, 2007, net charge-offs total $406 thousand or .23% of average total loans as compared to net charge-offs of $130 thousand or .08% for the same period during 2006.
The allowance for loan losses at September 30, 2007 was 1.04% of period end loans and the Company funded $151 thousand in loan loss provision during the third quarter. The ratio of allowance for loan losses to nonperforming loans stood at 234% at September 30, 2007. Commenting on the Company’s credit quality, Mr. Steiner noted, “We experienced a very modest level of loan charge-offs in the third quarter and there has been no appreciable deterioration in the credit quality of our loan portfolio. Our lending practices remain unchanged. We continue to focus on high quality credit relationships and refrain from sub-prime mortgage lending.”
Total deposit balances averaged $253 million during third quarter 2007, an increase of 2.8% or $6.8 million over average deposit balances in third quarter 2006. Within the deposit category, average non interest-bearing account balances increased $4.8 million, or 12.4% as compared to the average in third quarter 2006, while interest-bearing checking, money market and savings average balances decreased $547 thousand, or 0.6% from third quarter year ago averages, and average time deposit balances grew $2.5 million or 2.1%.
Shareholders’ equity totaled $35.9 million on September 30, 2007 with 2.5 million common shares outstanding at quarter-end. The Company’s capital position remains strong, with tangible equity to assets at 10.9% on September 30, 2007 as compared to 10.8% on September 30, 2006. The Company declared a common dividend of $0.18 per share during the quarter, a $0.02 increase from the prior-year quarter. Year-to-date dividends declared during 2007 of $0.54 per share represent a 12.5% increase above prior year-to-date dividends.
About CSB Bancorp, Inc.
CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $330 million as of September 30, 2007. 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 ten banking centers in Holmes, Tuscarawas and Wayne counties and Trust offices in Millersburg and Wooster, Ohio. CSB can be found on the web at csb1.com.
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