Press Release | January 30, 2009
CSB BANCORP, INC. REPORTS FOURTH QUARTER AND FULL YEAR EARNINGS
Fourth Quarter and Full Year Highlights
Quarter Ended Full Year Ended
December 31, 2008 December 31, 2008
Diluted earnings per share $.29 $1.43
Net Income $767,000 $3,537,000
Return on average common equity 7.40% 9.23%
Return on average assets 0.76% 0.99%
Millersburg, Ohio – January 30, 2009 – CSB Bancorp, Inc. (OTCBB: CSBB.ob) today announced fourth quarter 2008 net income of $767 thousand, or $.29 per basic and diluted share, as compared to $880 thousand, or $.35 per basic and diluted share for the same period in 2007.
Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 7.40% and 0.76%, respectively, compared with 9.54% and 1.05% for the fourth quarter of 2007.
For the full year of 2008, the Company reported net income of $3.54 million, or $1.43 per diluted share, up from $3.51 million, or $1.42 per diluted share in 2007. Full year ROE and ROA were 9.23% and 0.99%, respectively, compared to 9.82% and 1.07% in 2007.
“We are pleased that full year earnings slightly exceeded last year’s results in spite of the very difficult economic and interest rate environments that prevailed throughout 2008,” said Eddie Steiner, President and CEO.
“During the fourth quarter, CSB acquired Indian Village Bancorp, Inc., adding $75 million to our balance sheet and expanding the eastern edge of our primary market area to include North Canton, New Philadelphia and Gnadenhutten,” continued Steiner. “We expect additional growth in these new markets as we fully deploy our commercial banking services. We are also focusing intently on the assets obtained in the Indian Village acquisition, and will work to conform the acquired loan and investment portfolios to our business model over the next twelve to eighteen months. Our core operations yielded solid performance through the fourth quarter, although net interest margin decreased to 3.98% due to the declining interest rate environment. We expect continued pressure on margins through 2009, as market rates will likely remain depressed while the economy struggles to regain forward momentum.”
Revenue totaled $4.5 million for the fourth quarter of 2008, an increase of 9.0% over the prior-year fourth quarter. Revenue increased 3.6% for the full year of 2008 to $17.1 million, as compared to $16.5 million in 2007.
Non-interest expense amounted to $3.3 million during the quarter, an increase of $591 thousand, or 21.8%, from fourth quarter 2007. For the full year ended December 31, 2008, non-interest expense increased $610 thousand, or 5.7% versus the prior full year. Current quarter and full year non-interest expense includes a charge of $250 thousand to reduce the book value of the Company’s W. Jackson St. building in Millersburg, which currently serves primarily as a backup facility and is available for sale. Without the impairment charge, non-interest expense would have increased 12.6% and 3.4% for the quarter and full year, respectively.
The Company’s fourth quarter efficiency ratio was 72.8% as compared to 65.4% for the same quarter in the prior year. For the full year of 2008, the efficiency ratio totaled 66.2% versus 64.9% in 2007. Without the aforementioned facility impairment charge, the Company’s efficiency ratio would have been 67.3% for the quarter and 64.8% for the year.
Federal income tax expense was $354 thousand for fourth quarter 2008, compared to $420 thousand for the same quarter in 2007. Full year income tax of $1.7 million for both 2008 and 2007 reflects effective tax rates of 32.8% and 32.3%, respectively. The increase in the effective tax rate for 2008 was the result of comparatively lower tax-free interest income due to maturities of bonds within the Company’s tax-free investment portfolio during 2008.
Average deposit balances grew by $38.9 million during the fourth quarter,
or 15.7%, primarily as a result of the Indian Village acquisition. Total
average deposits of $286 million for the quarter were 11.8% above the
prior year’s fourth quarter average.
Average assets totaled $400.9 million during the quarter, an increase of $68.6 million, or 20.7% from the same quarter in the prior year; again, primarily the result of the Indian Village acquisition. Average loan balances of $293.7 million reflect an increase of $44.3 million, or 17.8%, over the prior year fourth quarter, while average securities balances increased $12.9 million, or 20.2% as compared to fourth quarter 2007.
Assets totaled $425 million at year-end, up $74 million, or 21.2% from December 31, 2007. Net loans increased to $313 million, up $59 million, or 23.2%, from the prior year-end. Year-end securities balances of $82 million reflect an increase of $7.4 million, or 9.9%. The increase in securities balances resulted from the aforementioned acquisition and a $10 million matched leverage investment strategy implemented during the first quarter of 2008, partially offset by the use of proceeds from certain maturing securities to fund a portion of the Company’s loan growth.
Average commercial loan balances for the quarter, including commercial real estate, increased $22.8 million, or 15.5% above year ago levels. Average residential mortgage balances increased by $16.6 million, or 22.8% during the year and home equity balances increased $5.5 million, or 27.1% while average consumer credit balances declined $.7 million, or 7.6% due to the sale of the Company’s $2.0 million credit card portfolio during the first quarter of 2008.
The Company’s allowance for loan losses at December 31, 2008 was 1.07% of period end loans and the Company funded $71 thousand in loan loss provision during the fourth quarter. Recoveries exceeded charge-offs for the quarter and the full year by $84 thousand and $17 thousand, respectively, as compared to net charge-offs of $406 thousand or 0.23% of average loans during 2007.
As of December 31, 2008, nonperforming assets totaled $2.7 million, or 0.86% of period-end loans plus other real estate, compared with $.6 million, or 0.26%, at the prior year-end. The ratio of allowance for loan losses to nonperforming loans stood at 125% at year-end.
Commenting on the Company’s credit quality, Steiner noted, “Our nonperforming asset ratio compares favorably to available industry and peer data, but the level of nonperforming assets has increased, primarily due to certain loans acquired through the Indian Village acquisition. We are working diligently to control and eventually reduce nonperforming balances. At the same time, we anticipate that loan delinquencies will rise above our experience level of the past few years as customers continue to deal with challenging economic conditions. We believe the loan loss reserve is appropriately funded for our current portfolio risk, and charge-offs remain at modest levels.”
Deposit balances totaled $305 million at year-end, an increase of $46 million, or 17.8% from the prior year-end total. Within the deposit category, average non interest-bearing account balances for the fourth quarter increased by $5.8 million, or 13.2% above the same period in the prior year. Average interest-bearing checking, money market and traditional savings balances increased $8.7 million, or 9.7% from year ago levels, while average time deposit balances grew by $15.8 million, or 12.8% during the year. In addition to the changes in average deposit balances, the average balance of securities sold under repurchase agreement during the fourth quarter grew by $2.0 million, or 9.0%, above the average for the same period in the prior year. The repurchase agreements, while considered short-term borrowings, are primarily tied to overnight customer sweep accounts.
Shareholders’ equity totaled $43.5 million on December 31, 2008 with 2.7 million common shares outstanding at year-end. The Company’s capital position remains strong, with tangible equity to assets approximating 9.8% on December 31, 2008, compared to 10.4% on December 31, 2007. The Company declared a common dividend of $.18 per share during the quarter. Total dividends declared during 2008 were $0.72 per share, or 50% of reported earnings per share.
About CSB Bancorp, Inc.
CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $425 million as of December 31, 2008. 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 thirteen banking centers in Holmes, Tuscarawas, Wayne and Stark counties and Trust offices located in Millersburg and Wooster, Ohio.
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