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CSBB CSB Bancorp

Filed: 10 May 21, 4:01pm

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

 

FORM 10-Q

 

(Mark One)

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended: March 31, 2021

OR

TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

 

Commission File Number: 0-21714

 

CSB Bancorp, Inc.

(Exact Name of Registrant as Specified in its Charter)

 

 

Ohio

34-1687530

( State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)

91 North Clay Street, P.O. Box 232

Millersburg, OH

44654

(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (330) 674-9015

 

Securities registered pursuant to Section 12(b) of the Act:

 

Title of each class

 

Trading

Symbol(s)

 

Name of each exchange on which registered

Common Shares, $6.25 par value

 

CSBB

 

OTCPink

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      No  

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).     Yes      No  

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer

 

  

Accelerated filer

 

 

 

 

 

Non-accelerated filer

 

  

Smaller reporting company

 

 

 

 

 

 

 

 

Emerging growth company

 

 

 

 

 

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes      No  

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.     Yes      No  

As of May 1, 2021, the registrant had 2,742,350 shares of common stock, $6.25 par value per share, outstanding.

 

 

 


 

 

CSB BANCORP, INC.

FORM 10-Q

QUARTER ENDED March 31, 2021

Table of Contents

 

 

 

Part I - Financial Information

 

 

 

Page

ITEM 1

FINANCIAL STATEMENTS (Unaudited)

3

 

Consolidated Balance Sheets

3

 

Consolidated Statements of Income

4

 

Consolidated Statements of Comprehensive Income

5

 

Consolidated Statements of Changes in Shareholders' Equity

6

 

Condensed Consolidated Statements of Cash Flows

7

 

Notes to Consolidated Financial Statements

8

ITEM 2

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

25

ITEM 3

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

30

ITEM 4

CONTROLS AND PROCEDURES

31

 

 

 

 

Part II - Other Information

 

ITEM1

Legal Proceedings

32

ITEM1A

Risk Factors

32

ITEM2

Unregistered Sales of Equity Securities and Use of Proceeds

32

ITEM3

Defaults upon Senior Securities

32

ITEM4

Mine Safety Disclosures

32

ITEM5

Other Information

32

ITEM6

Exhibits

33

 

Signatures

34

 

2


 

 

CSB BANCORP, INC.

PART I – FINANCIAL INFORMATION

ITEM 1. – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

 

 

March 31,

 

 

December 31,

 

(Dollars in thousands)

 

2021

 

 

2020

 

ASSETS

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

 

 

 

 

 

 

 

Cash and due from banks

 

$

22,174

 

 

$

19,281

 

Interest-earning deposits in other banks

 

 

256,736

 

 

 

162,371

 

Total cash and cash equivalents

 

 

278,910

 

 

 

181,652

 

Securities

 

 

 

 

 

 

 

 

Available-for-sale, at fair value

 

 

197,470

 

 

 

190,438

 

Held-to-maturity (fair value 2021-$8,410; 2020-$9,225)

 

 

8,270

 

 

 

9,045

 

Equity securities

 

 

100

 

 

 

87

 

Restricted stock, at cost

 

 

4,614

 

 

 

4,614

 

Total securities

 

 

210,454

 

 

 

204,184

 

Loans held for sale

 

 

1,450

 

 

 

1,378

 

Loans

 

 

582,714

 

 

 

609,159

 

Less allowance for loan losses

 

 

8,338

 

 

 

8,274

 

Net loans

 

 

574,376

 

 

 

600,885

 

Premises and equipment, net

 

 

12,968

 

 

 

12,633

 

Core deposit intangible

 

 

33

 

 

 

44

 

Goodwill

 

 

4,728

 

 

 

4,728

 

Bank-owned life insurance

 

 

21,566

 

 

 

21,416

 

Accrued interest receivable and other assets

 

 

5,672

 

 

 

4,712

 

TOTAL ASSETS

 

$

1,110,157

 

 

$

1,031,632

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

 

 

 

 

 

 

 

 

Deposits

 

 

 

 

 

 

 

 

Noninterest-bearing

 

$

303,803

 

 

$

272,051

 

Interest-bearing

 

 

664,766

 

 

 

619,511

 

Total deposits

 

 

968,569

 

 

 

891,562

 

Short-term borrowings

 

 

39,665

 

 

 

37,215

 

Other borrowings

 

 

4,564

 

 

 

4,664

 

Accrued interest payable and other liabilities

 

 

4,274

 

 

 

4,332

 

Total liabilities

 

 

1,017,072

 

 

 

937,773

 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

Common stock, $6.25 par value.  Authorized 9,000,000 shares; issued

   2,980,602 shares; outstanding 2,742,350 shares 2021 and 2020

 

 

18,629

 

 

 

18,629

 

Additional paid-in capital

 

 

9,815

 

 

 

9,815

 

Retained earnings

 

 

71,271

 

 

 

69,209

 

Treasury stock at cost:  238,252 shares 2021 and 2020

 

 

(4,780

)

 

 

(4,780

)

Accumulated other comprehensive income (loss)

 

 

(1,850

)

 

 

986

 

Total shareholders' equity

 

 

93,085

 

 

 

93,859

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

1,110,157

 

 

$

1,031,632

 

 

See notes to unaudited consolidated financial statements.

3


 

 

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

(Dollars in thousands, except per share data)

 

2021

 

 

2020

 

INTEREST AND DIVIDEND INCOME

 

 

 

 

 

 

 

 

Loans, including fees

 

$

6,865

 

 

$

6,850

 

Taxable securities

 

 

559

 

 

 

609

 

Nontaxable securities

 

 

111

 

 

 

119

 

Other

 

 

46

 

 

 

239

 

Total interest and dividend income

 

 

7,581

 

 

 

7,817

 

INTEREST EXPENSE

 

 

 

 

 

 

 

 

Deposits

 

 

538

 

 

 

831

 

Short-term borrowings

 

 

13

 

 

 

41

 

Other borrowings

 

 

22

 

 

 

29

 

Total interest expense

 

 

573

 

 

 

901

 

NET INTEREST INCOME

 

 

7,008

 

 

 

6,916

 

PROVISION FOR LOAN LOSSES

 

 

30

 

 

 

178

 

Net interest income, after provision for loan losses

 

 

6,978

 

 

 

6,738

 

NON INTEREST INCOME

 

 

 

 

 

 

 

 

Service charges on deposit accounts

 

 

207

 

 

 

291

 

Trust services

 

 

282

 

 

 

230

 

Debit card interchange fees

 

 

471

 

 

 

375

 

Gain on sale of loans, net

 

 

487

 

 

 

114

 

Earnings on bank owned life insurance

 

 

150

 

 

 

129

 

Unrealized gain or (loss) on equity securities, net

 

 

13

 

 

 

(13

)

Other income

 

 

268

 

 

 

217

 

Total noninterest income

 

 

1,878

 

 

 

1,343

 

NON INTEREST EXPENSES

 

 

 

 

 

 

 

 

Salaries and employee benefits

 

 

3,029

 

 

 

2,968

 

Occupancy expense

 

 

254

 

 

 

220

 

Equipment expense

 

 

177

 

 

 

135

 

Professional and director fees

 

 

295

 

 

 

330

 

Financial institutions and franchise tax expense

 

 

188

 

 

 

171

 

Marketing and public relations

 

 

79

 

 

 

127

 

Software expense

 

 

300

 

 

 

227

 

Debit card expense

 

 

171

 

 

 

140

 

Amortization of intangible assets

 

 

11

 

 

 

15

 

FDIC insurance expense

 

 

108

 

 

 

 

Other expenses

 

 

669

 

 

 

674

 

Total noninterest expenses

 

 

5,281

 

 

 

5,007

 

Income before income taxes

 

 

3,575

 

 

 

3,074

 

FEDERAL INCOME TAX PROVISION

 

 

690

 

 

 

591

 

NET INCOME

 

$

2,885

 

 

$

2,483

 

Basic and diluted net earnings per share

 

$

1.05

 

 

$

0.91

 

See notes to unaudited consolidated financial statements

4


 

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

(Dollars in thousands)

 

2021

 

 

2020

 

Net income

 

$

2,885

 

 

$

2,483

 

Other comprehensive income (loss)

 

 

 

 

 

 

 

 

Unrealized (losses) gains arising during the period

 

 

(3,607

)

 

 

540

 

Amortization of discount on securities transferred to held-to-maturity

 

 

16

 

 

 

14

 

Income tax effect

 

 

755

 

 

 

(116

)

Other comprehensive income (loss)

 

 

(2,836

)

 

 

438

 

Total comprehensive income

 

$

49

 

 

$

2,921

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited consolidated financial statements.

5


 

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

(Unaudited)

 

(Dollars in thousands)

 

Common

stock

 

 

Additional

paid-in

capital

 

 

Retained

earnings

 

 

Treasury

stock

 

 

Accumulated

other

comprehensive

income (loss)

 

 

Total

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

18,629

 

 

$

9,815

 

 

$

69,209

 

 

$

(4,780

)

 

$

986

 

 

$

93,859

 

Net income

 

 

 

 

 

 

 

 

2,885

 

 

 

 

 

 

 

 

 

2,885

 

Other comprehensive loss

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(2,836

)

 

 

(2,836

)

Cash dividends declared, $0.30 per share

 

 

 

 

 

 

 

 

(823

)

 

 

 

 

 

 

 

 

(823

)

Balance, end of period

 

$

18,629

 

 

$

9,815

 

 

$

71,271

 

 

$

(4,780

)

 

$

(1,850

)

 

$

93,085

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

18,629

 

 

$

9,815

 

 

$

61,740

 

 

$

(4,780

)

 

$

72

 

 

$

85,476

 

Net income

 

 

 

 

 

 

 

 

2,483

 

 

 

 

 

 

 

 

 

2,483

 

Other comprehensive income

 

 

 

 

 

 

 

 

 

 

 

 

 

 

438

 

 

 

438

 

Cash dividends declared, $0.28 per share

 

 

 

 

 

 

 

 

(768

)

 

 

 

 

 

 

 

 

(768

)

Balance, end of period

 

$

18,629

 

 

$

9,815

 

 

$

63,455

 

 

$

(4,780

)

 

$

510

 

 

$

87,629

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited consolidated financial statements.

6


 

CSB BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

 

 

Three Months Ended

March 31,

 

(Dollars in thousands)

 

2021

 

 

2020

 

NET CASH FROM OPERATING ACTIVITIES

 

$

3,315

 

 

$

2,488

 

CASH FLOWS FROM INVESTING ACTIVITIES

 

 

 

 

 

 

 

 

Securities:

 

 

 

 

 

 

 

 

Proceeds from repayments, available-for-sale

 

 

16,369

 

 

 

10,338

 

Proceeds from repayments, held-to-maturity

 

 

784

 

 

 

2,635

 

Purchases, available-for-sale

 

 

(27,334

)

 

 

(6,055

)

Loan (originations) repayments, net

 

 

25,325

 

 

 

(3,808

)

Property, equipment, and software acquisitions

 

 

(558

)

 

 

(551

)

Net cash provided by investing activities

 

 

14,586

 

 

 

2,559

 

CASH FLOWS FROM FINANCING ACTIVITIES

 

 

 

 

 

 

 

 

Net change in deposits

 

 

77,007

 

 

 

(12,384

)

Net change in short-term borrowings

 

 

2,450

 

 

 

1,716

 

Repayment of other borrowings

 

 

(100

)

 

 

(124

)

Net cash provided by (used in) financing activities

 

 

79,357

 

 

 

(10,792

)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS

 

 

97,258

 

 

 

(5,745

)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

 

 

181,652

 

 

 

102,017

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

 

$

278,910

 

 

$

96,272

 

SUPPLEMENTAL DISCLOSURES

 

 

 

 

 

 

 

 

Cash paid during the year for:

 

 

 

 

 

 

 

 

Interest

 

$

579

 

 

$

909

 

Income taxes

 

 

 

 

 

 

Noncash financing activities:

 

 

 

 

 

 

 

 

Dividends declared

 

 

823

 

 

 

768

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

See notes to unaudited consolidated financial statements.

7


 

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated financial statements include the accounts of CSB Bancorp, Inc. and its wholly-owned subsidiaries, The Commercial and Savings Bank (the “Bank”) and CSB Investment Services, LLC (together referred to as the “Company” or “CSB”).  All significant intercompany transactions and balances have been eliminated in consolidation.

The condensed consolidated financial statements have been prepared without audit.  In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company’s financial position at March 31, 2021, and the results of operations and changes in cash flows for the periods presented have been made.

Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been omitted.  The Annual Report for CSB for the year ended December 31, 2020, contains Consolidated Financial Statements and related footnote disclosures, which should be read in conjunction with the accompanying condensed Consolidated Financial Statements.  The results of operations for the periods ended March 31, 2021 are not necessarily indicative of the operating results for the full year or any future interim period.

Certain items in the prior-year financial statements were reclassified to conform to the current-year presentation. Such reclassifications had no effect on net income or shareholders’ equity.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

In preparing the Consolidated Financial Statements, in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Balance Sheets and reported amounts of revenues and expenses during each reporting period. Actual results could differ from those estimates. The most significant estimates susceptible to change in the near term relate to management’s determination of the allowance for loan losses and the fair value of financial instruments.

 

  

8


 

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

 

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ASU 2016-13 - Financial Instruments - Credit Losses. The Update and all subsequent ASU’s that modified Topic 326, requires that financial assets be presented at the net amount expected to be collected (i.e. net of expected credit losses), eliminating the probable recognition threshold for credit losses on financial assets measured at amortized cost. The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. We expect the Update will result in an increase in the allowance for credit losses for the estimated life of the financial asset, including an estimate for held-to-maturity debt securities. The amount of any increase will be impacted by the portfolio composition and quality at the adoption date, as well as economic conditions and forecasts at that time. A cumulative-effect adjustment to retained earnings is required as of the beginning of the year of adoption. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements. In November 2019, the FASB deferred the effective date for ASC 326, Financial Instruments – Credit Losses, for smaller reporting companies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company qualifies as a smaller reporting company and does not expect to early adopt these ASU’s.  

ASU 2017-04 - Simplifying the Test for Goodwill Impairment. The Update, and all subsequent ASU’s, simplifies the goodwill impairment test.  Under the new guidance, Step 2 of the goodwill impairment process that requires an entity to determine the implied fair value of its goodwill by assigning fair value to all its assets and liabilities is eliminated. Instead, the entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit's fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance is effective for annual and interim goodwill tests performed in fiscal years beginning after December 15, 2019. Early adoption is permitted. In November 2019, the FASB deferred the effective date for ASC 350, Intangibles – Goodwill and Other, for smaller reporting companies to fiscal years beginning after December 15, 2022, and interim periods within those fiscal years. This Update is not expected to have a material impact on the Company’s financial statements.

ASU 2020-4 – Reference Rate Reform (Topic 848).  This update provides temporary optional expedients and exceptions to the U.S. GAAP guidance on contract modifications and hedge accounting to ease the financial reporting burdens of the expected market transition from LIBOR and other interbank offered rates to alternative reference rates, such as Secured Overnight Financing Rate. Entities can elect not to apply certain modification accounting requirements to contracts affected by what the guidance calls reference rate reform, if certain criteria are met. An entity that makes this election would not have to remeasure the contracts at the modification date or reassess a previous accounting determination. Also, entities can elect various optional expedients that would allow them to continue applying hedge accounting for hedging relationships affected by reference rate reform, if certain criteria are met, and can make a one-time election to sell and/or reclassify held-to-maturity debt securities that reference an interest rate affected by reference rate reform. The amendments in this ASU are effective for all entities upon issuance through December 31, 2022. This Update is not expected to have a significant impact on the Company’s financial statements.

 

 

 

 

 

 

9


 

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 2 – SECURITIES

Securities consist of the following on March 31, 2021 and December 31, 2020:

 

(Dollars in thousands)

 

Amortized

cost

 

 

Gross

unrealized

gains

 

 

Gross

unrealized

losses

 

 

Fair value

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

 

$

3,924

 

 

$

9

 

 

$

(153

)

 

$

3,780

 

U.S. Government agencies

 

 

13,999

 

 

 

 

 

 

(216

)

 

 

13,783

 

Mortgage-backed securities of government agencies

 

 

149,455

 

 

 

894

 

 

 

(3,208

)

 

 

147,141

 

Asset-backed securities of government agencies

 

 

828

 

 

 

 

 

 

(16

)

 

 

812

 

State and political subdivisions

 

 

22,683

 

 

 

458

 

 

 

(24

)

 

 

23,117

 

Corporate bonds

 

 

8,822

 

 

 

65

 

 

 

(50

)

 

 

8,837

 

Total available-for-sale

 

 

199,711

 

 

 

1,426

 

 

 

(3,667

)

 

 

197,470

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities of government agencies

 

 

4,845

 

 

 

165

 

 

 

(25

)

 

 

4,985

 

State and political subdivisions

 

 

3,425

 

 

 

 

 

 

 

 

 

3,425

 

Total held-to-maturity

 

 

8,270

 

 

 

165

 

 

 

(25

)

 

 

8,410

 

Equity securities

 

 

53

 

 

 

47

 

 

 

 

 

 

100

 

Restricted stock

 

 

4,614

 

 

 

 

 

 

 

 

 

4,614

 

Total securities

 

$

212,648

 

 

$

1,638

 

 

$

(3,692

)

 

$

210,594

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

 

$

999

 

 

$

12

 

 

$

 

 

$

1,011

 

U.S. Government agencies

 

 

13,998

 

 

 

8

 

 

 

 

 

 

14,006

 

Mortgage-backed securities of government agencies

 

 

138,964

 

 

 

1,184

 

 

 

(136

)

 

 

140,012

 

Asset-backed securities of government agencies

 

 

848

 

 

 

 

 

 

(11

)

 

 

837

 

State and political subdivisions

 

 

23,422

 

 

 

544

 

 

 

 

 

 

23,966

 

Corporate bonds

 

 

10,841

 

 

 

42

 

 

 

(277

)

 

 

10,606

 

Total available-for-sale

 

 

189,072

 

 

 

1,790

 

 

 

(424

)

 

 

190,438

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities of government agencies

 

 

5,620

 

 

 

192

 

 

 

(12

)

 

 

5,800

 

State and political subdivisions

 

 

3,425

 

 

 

 

 

 

 

 

 

3,425

 

Total held-to-maturity

 

 

9,045

 

 

 

192

 

 

 

(12

)

 

 

9,225

 

Equity securities

 

 

53

 

 

 

34

 

 

 

 

 

 

87

 

Restricted stock

 

 

4,614

 

 

 

 

 

 

 

 

 

4,614

 

Total securities

 

$

202,784

 

 

$

2,016

 

 

$

(436

)

 

$

204,364

 

 

10


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

Note 2 – SECURITIES (continued)

 

The amortized cost and fair value of debt securities on March 31, 2021, by contractual maturity, are shown below.  Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

 

 

(Dollars in thousands)

 

Amortized cost

 

 

Fair value

 

Available-for-sale

 

 

 

 

 

 

 

 

Due in one year or less

 

$

1,971

 

 

$

1,990

 

Due after one through five years

 

 

22,506

 

 

 

22,636

 

Due after five through ten years

 

 

32,265

 

 

 

32,211

 

Due after ten years

 

 

142,969

 

 

 

140,633

 

Total debt securities available-for-sale

 

$

199,711

 

 

$

197,470

 

Held-to-maturity

 

 

 

 

 

 

 

 

Due in one year or less

 

$

3,425

 

 

$

3,425

 

Due after five through ten years

 

 

184

 

 

 

185

 

Due after ten years

 

 

4,661

 

 

 

4,800

 

Total debt securities held-to-maturity

 

$

8,270

 

 

$

8,410

 

 

 

Securities with a fair value of approximately $101.2 million and $91.0 million were pledged on March 31, 2021 and December 31, 2020, respectively, to secure public deposits, as well as other deposits and borrowings as required or permitted by law.

Restricted stock primarily consists of investments in Federal Home Loan Bank of Cincinnati (FHLB) and Federal Reserve Bank stock.  The Bank’s investment in FHLB stock amounted to approximately $4.1 million on March 31, 2021 and December 31, 2020. Federal Reserve Bank stock was $471 thousand on March 31, 2021 and December 31, 2020.

There were 0 proceeds from sales of securities for the three-month periods ended March 31, 2021 and 2020. All gains and losses recognized on equity securities during the three-month periods were unrealized.

11


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 2 – SECURITIES (continued)

The following table presents gross unrealized losses and fair value of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, on March 31, 2021 and December 31, 2020:

 

 

 

Securities in a continuous unrealized loss position

 

 

 

Less than 12 months

 

 

12 months or more

 

 

Total

 

(Dollars in thousands)

 

Gross

unrealized

losses

 

 

Fair

value

 

 

Gross

unrealized

losses

 

 

Fair

value

 

 

Gross

unrealized

losses

 

 

Fair

value

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury Security

 

$

(153

)

 

$

2,772

 

 

$

 

 

$

 

 

$

(153

)

 

$

2,772

 

U.S. Government agencies

 

 

(216

)

 

 

13,783

 

 

 

 

 

 

 

 

 

(216

)

 

 

13,783

 

Mortgage-backed securities of government

   agencies

 

 

(3,192

)

 

 

94,563

 

 

 

(16

)

 

 

2,314

 

 

 

(3,208

)

 

 

96,877

 

Asset-backed securities of government

   agencies

 

 

 

 

 

 

 

 

(16

)

 

 

812

 

 

 

(16

)

 

 

812

 

State and political subdivisions

 

 

(24

)

 

 

1,475

 

 

 

 

 

 

 

 

 

(24

)

 

 

1,475

 

Corporate bonds

 

 

(1

)

 

 

1,805

 

 

 

(49

)

 

 

952

 

 

 

(50

)

 

 

2,757

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities of government

   agencies

 

 

(25

)

 

 

1,380

 

 

 

 

 

 

 

 

 

(25

)

 

 

1,380

 

Total temporarily impaired securities

 

$

(3,611

)

 

$

115,778

 

 

$

(81

)

 

$

4,078

 

 

$

(3,692

)

 

$

119,856

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities of government

   agencies

 

$

(70

)

 

$

10,808

 

 

$

(66

)

 

$

8,974

 

 

$

(136

)

 

$

19,782

 

Asset-backed securities of government

   agencies

 

 

 

 

 

 

 

 

(11

)

 

 

837

 

 

 

(11

)

 

 

837

 

Corporate bonds

 

 

(32

)

 

 

1,968

 

 

 

(245

)

 

 

3,733

 

 

 

(277

)

 

 

5,701

 

Held-to-maturity

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Mortgage-backed securities of government

   agencies

 

 

(12

)

 

 

1,734

 

 

 

 

 

 

 

 

 

(12

)

 

 

1,734

 

Total temporarily impaired securities

 

$

(114

)

 

$

14,510

 

 

$

(322

)

 

$

13,544

 

 

$

(436

)

 

$

28,054

 

 

 

There were NaN securities in an unrealized loss position on March 31, 2021, 10 of which were in a continuous loss position for twelve months or more.  At least quarterly, the Company conducts a comprehensive security-level impairment assessment.  The assessments are based on the nature of the securities, the extent and duration of the securities in an unrealized loss position, the extent and duration of the loss and management’s intent to sell or if it is more likely than not that management will be required to sell a security before recovery of its amortized cost basis, which may be maturity. Management believes the Company will fully recover the cost of these securities.  It does not intend to sell these securities and likely will not be required to sell them before the anticipated recovery of the remaining amortized cost basis, which may be maturity.  As a result, management concluded that these securities were not other-than-temporarily impaired on March 31, 2021.

 

12


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

 

NOTE 3 – LOANS

Loans consist of the following:

 

(Dollars in thousands)

 

March 31,

2021

 

 

December 31,

2020

 

Commercial 1

 

$

172,795

 

 

$

191,540

 

Commercial real estate

 

 

181,648

 

 

 

187,221

 

Residential real estate

 

 

175,877

 

 

 

177,155

 

Construction & land development

 

 

36,529

 

 

 

36,038

 

Consumer

 

 

17,068

 

 

 

17,916

 

Total loans before deferred costs

 

 

583,917

 

 

 

609,870

 

Deferred loan (fees) costs, net

 

 

(1,203

)

 

 

(711

)

Total Loans

 

$

582,714

 

 

$

609,159

 

1 Includes $63.6 million and $70.1 million of Paycheck Protection Program loans on March 31, 2021 and December 31, 2020 respectively.

 

Loan Origination/Risk Management

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. The Company’s management examines current and occasionally projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers; however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable, inventory, and equipment, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans.  These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loan.

 

 

 

 

13


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (continued)

 

 

With respect to loans to developers and builders that are secured by non-owner occupied properties, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success.  Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners.  Construction and land development loans are generally based upon estimates of costs and value associated with the completed project.  These estimates may be inaccurate.

Construction and land development loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained.  These loans are closely monitored by on-site inspections and are considered to have higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing.

The Company originates consumer loans utilizing a judgmental underwriting process.  To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by line and staff personnel.  This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk.

The Company maintains an independent credit department that reviews and validates the credit risk program on a periodic basis.  Results of these reviews are presented to management.  The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.  

Loans serviced for others approximated $125.9 million and $117.5 million on March 31, 2021 and December 31, 2020, respectively.

Paycheck Protection Program

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020 and provided over $2 trillion in economic relief to individuals and businesses impacted by the COVID-19 pandemic. The CARES Act authorized the Small Business Administration (“SBA”) to temporarily guarantee loans under a new 7(a) loan program called the Paycheck Protection Program (“PPP”). As a qualified SBA lender, the Company was automatically authorized to originate PPP loans. The PPP provides loans to small businesses who were affected by economic conditions as a result of COVID-19 to provide cash flow assistance to employers who maintain their payroll (including healthcare and certain related expenses), mortgage interest, rent, leases, utilities and interest on existing debt during the COVID-19 emergency. The Company had 543 PPP loans with outstanding principal balances of $63.6 million as of March 31, 2021 and 671 PPP loans with balances of $70.1 million outstanding as of December 31, 2020. The PPP loans are 100% guaranteed by the SBA and may be eligible for forgiveness by the SBA to the extent that the proceeds are used to cover eligible payroll costs, interest costs, rent, and utility costs over a period of up to 24 weeks after the loan is made as long as certain conditions are met regarding employee retention and compensation levels. PPP loans deemed eligible for forgiveness by the SBA will be repaid by the SBA to the Company. PPP loans are included in the Commercial loan category with no allowance for loan losses allocated.

In accordance with the SBA terms and conditions on these PPP loans, as of March 31, 2021 the Company has received approximately $5 million in fees associated with the processing of these loans since the inception of the program. Upon funding of the loans, the fees are deferred and amortized over the life of the loan with the unearned balance fully recognized at the time a loan is forgiven as an adjustment to yield in accordance with FASB ASC 310-20-25-2. As of March 31, 2021 there were $1.8 million in remaining unearned fees on PPP loans outstanding.

14


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (continued)

 

Concentrations of Credit

Nearly all of the Company’s lending activity occurs within the state of Ohio, including the four counties of Holmes, Stark, Tuscarawas and Wayne, as well as other markets.  The majority of the Company’s loan portfolio consists of commercial and commercial real estate loans.  As of March 31, 2021, and December 31, 2020, there were 0 concentrations of loans related to any single industry.

The Company has identified industries that could be at a higher risk due to the COVID-19 pandemic. As of March 31, 2021, the total balance of loans identified to COVID-19 affected businesses was $48 million, with $25 million of those loans to assisted living facilities and $19 million to businesses in the hotel industry.

 

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the three months ended March 31, 2021 and 2020.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

For the three months ended March 31, 2021, the decrease in the provision for loan losses for commercial loans was primarily related to payoffs of loans in the sawmill industry, which was partially offset by an increase related to provisions for impaired loans. The decrease in provision for the consumer loan category is primarily due to a reduction in delinquencies and historical losses, along with net recoveries for the three-month period. The increase in the provision related to construction loans is primarily due to the uncertainty related to businesses affected by the COVID economic shutdown. The increase in the unallocated portion of the allowance for loan losses is due to the continuing uncertainty from the effects of the pandemic.

For the three-month period ended March 31, 2020 the increased allocation across all categories was primarily

related to worsening economic conditions and the increasing unemployment rate at the end of March 2020 associated with the COVID-19 pandemic.

 

Summary of Allowance for Loan Losses

 

(Dollars in thousands)

 

Commercial

 

 

Commercial

Real Estate

 

 

Residential

Real Estate

 

 

Construction

& Land

Development

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

1,739

 

 

$

3,469

 

 

$

1,156

 

 

$

756

 

 

$

352

 

 

$

802

 

 

$

8,274

 

Provision for loan losses

 

 

(115

)

 

 

20

 

 

 

(23

)

 

 

44

 

 

 

(79

)

 

 

183

 

 

 

30

 

Charge-offs

 

 

(3

)

 

 

 

 

 

 

 

 

 

 

 

(2

)

 

 

 

 

 

 

(5

)

Recoveries

 

 

19

 

 

 

 

 

 

1

 

 

 

 

 

 

19

 

 

 

 

 

 

 

39

 

Net recoveries

 

 

16

 

 

 

 

 

 

1

 

 

 

 

 

 

17

 

 

 

 

 

 

 

34

 

Ending balance

 

$

1,640

 

 

$

3,489

 

 

$

1,134

 

 

$

800

 

 

$

290

 

 

$

985

 

 

$

8,338

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

 

$

2,408

 

 

$

2,153

 

 

$

1,152

 

 

$

203

 

 

$

481

 

 

$

620

 

 

$

7,017

 

Provision for loan losses

 

 

212

 

 

 

147

 

 

 

209

 

 

 

52

 

 

 

87

 

 

 

(529

)

 

 

178

 

Charge-offs

 

 

(15

)

 

 

 

 

 

(15

)

 

 

 

 

 

(57

)

 

 

 

 

 

 

(87

)

Recoveries

 

 

4

 

 

 

 

 

 

1

 

 

 

 

 

 

7

 

 

 

 

 

 

 

12

 

Net (charge-offs) recoveries

 

 

(11

)

 

 

 

 

 

(14

)

 

 

 

 

 

(50

)

 

 

 

 

 

 

(75

)

Ending balance

 

$

2,609

 

 

$

2,300

 

 

$

1,347

 

 

$

255

 

 

$

518

 

 

$

91

 

 

$

7,120

 

 

15


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (continued)

 

 

The following table presents the balance in the allowance for loan losses and the ending loan balances by portfolio class, based on the impairment method as of March 31, 2021 and December 31, 2020:

 

(Dollars in thousands)

 

Commercial

 

 

Commercial

Real Estate

 

 

Residential

Real Estate

 

 

Construction

 

 

Consumer

 

 

Unallocated

 

 

Total

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

527

 

 

$

19

 

 

$

3

 

 

$

 

 

$

3

 

 

$

 

 

$

552

 

Collectively evaluated for impairment

 

 

1,113

 

 

 

3,470

 

 

 

1,131

 

 

 

800

 

 

 

287

 

 

 

985

 

 

 

7,786

 

Total ending allowance balance

 

$

1,640

 

 

$

3,489

 

 

$

1,134

 

 

$

800

 

 

$

290

 

 

$

985

 

 

$

8,338

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for

   impairment

 

$

2,151

 

 

$

2,477

 

 

$

830

 

 

$

 

 

$

136

 

 

 

 

 

 

$

5,594

 

Loans collectively evaluated for

   impairment

 

 

170,644

 

 

 

179,171

 

 

 

175,047

 

 

 

36,529

 

 

 

16,932

 

 

 

 

 

 

 

578,323

 

Total ending loans balance

 

$

172,795

 

 

$

181,648

 

 

$

175,877

 

 

$

36,529

 

 

$

17,068

 

 

 

 

 

 

$

583,917

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

 

$

4

 

 

$

20

 

 

$

1

 

 

$

 

 

$

5

 

 

$

 

 

$

30

 

Collectively evaluated for impairment

 

 

1,735

 

 

 

3,449

 

 

 

1,155

 

 

 

756

 

 

 

347

 

 

 

802

 

 

 

8,244

 

Total ending allowance balance

 

$

1,739

 

 

$

3,469

 

 

$

1,156

 

 

$

756

 

 

$

352

 

 

$

802

 

 

$

8,274

 

Loans:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for

   impairment

 

$

2,560

 

 

$

2,875

 

 

$

756

 

 

$

 

 

$

141

 

 

 

 

 

 

$

6,059

 

Loans collectively evaluated for

   impairment

 

 

188,980

 

 

 

184,346

 

 

 

176,399

 

 

 

36,038

 

 

 

17,775

 

 

 

 

 

 

 

603,538

 

Total ending loans balance

 

$

191,540

 

 

$

187,221

 

 

$

177,155

 

 

$

36,038

 

 

$

17,916

 

 

 

 

 

 

$

609,870

 

 

The following table presents loans individually evaluated for impairment by class of loans as of March 31, 2021 and December 31, 2020:

 

(Dollars in thousands)

 

Unpaid

Principal

Balance

 

 

Recorded

Investment

with no

Allowance

 

 

Recorded

Investment

with

Allowance

 

 

Total

recorded

investment1

 

 

Related

Allowance

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

2,197

 

 

$

1,356

 

 

$

793

 

 

$

2,149

 

 

$

527

 

Commercial real estate

 

 

2,948

 

 

 

2,352

 

 

 

126

 

 

 

2,478

 

 

 

19

 

Residential real estate

 

 

1,002

 

 

 

501

 

 

 

335

 

 

 

836

 

 

 

3

 

Consumer

 

 

139

 

 

 

12

 

 

 

129

 

 

 

141

 

 

 

3

 

Total impaired loans

 

$

6,286

 

 

$

4,221

 

 

$

1,383

 

 

$

5,604

 

 

$

552

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

2,604

 

 

$

1,965

 

 

$

597

 

 

$

2,562

 

 

$

4

 

Commercial real estate

 

 

3,755

 

 

 

2,673

 

 

 

211

 

 

 

2,884

 

 

 

20

 

Residential real estate

 

 

923

 

 

 

513

 

 

 

247

 

 

 

760

 

 

 

1

 

Consumer

 

 

143

 

 

 

 

 

 

146

 

 

 

146

 

 

 

5

 

Total impaired loans

 

$

7,425

 

 

$

5,151

 

 

$

1,201

 

 

$

6,352

 

 

$

30

 

 

1

includes principal, accrued interest, unearned fees, and origination costs

16


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (continued)

 

 

The following table presents the average recorded investment in impaired loans and related interest income recognized for the periods indicated.

 

 

 

Three Months Ended

March 31,

 

(Dollars in thousands)

 

2021

 

 

2020

 

Average recorded investment:

 

 

 

 

 

 

 

 

Commercial

 

$

2,025

 

 

$

2,453

 

Commercial real estate

 

 

3,139

 

 

 

2,556

 

Residential real estate

 

 

810

 

 

 

846

 

Consumer

 

 

139

 

 

 

9

 

Average recorded investment in impaired loans

 

$

6,113

 

 

$

5,864

 

Interest income recognized:

 

 

 

 

 

 

 

 

Commercial

 

$

10

 

 

$

18

 

Commercial real estate

 

 

30

 

 

 

2

 

Residential real estate

 

 

8

 

 

 

10

 

Consumer

 

 

2

 

 

 

 

Interest income recognized on a cash basis on impaired loans

 

$

50

 

 

$

30

 

 

The following table presents the aging of past due loans and nonaccrual loans as of March 31, 2021 and December 31, 2020 by class of loans:

 

 

 

 

 

 

 

Accruing Loans

 

 

 

 

 

 

 

 

 

 

 

 

 

(Dollars in thousands)

 

Current

 

 

30-59

Days

Past

Due

 

 

60-89

Days

Past

Due

 

 

90 Days +

Past Due

 

 

Non-

Accrual

 

 

Total

Past

Due

and

Non-

Accrual

 

 

Total

Loans

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

171,268

 

 

$

 

 

$

 

 

$

 

 

$

1,527

 

 

$

1,527

 

 

$

172,795

 

Commercial real estate

 

 

181,063

 

 

 

 

 

 

 

 

 

 

 

 

585

 

 

 

585

 

 

 

181,648

 

Residential real estate

 

 

175,120

 

 

 

120

 

 

 

 

 

 

 

 

 

637

 

 

 

757

 

 

 

175,877

 

Construction & land development

 

 

36,200

 

 

 

 

 

 

 

 

 

 

 

 

329

 

 

 

329

 

 

 

36,529

 

Consumer

 

 

16,964

 

 

 

93

 

 

 

 

 

 

 

 

 

11

 

 

 

104

 

 

 

17,068

 

Total Loans

 

$

580,615

 

 

$

213

 

 

$

 

 

$

 

 

$

3,089

 

 

$

3,302

 

 

$

583,917

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

190,264

 

 

$

51

 

 

$

 

 

$

 

 

$

1,225

 

 

$

1,276

 

 

$

191,540

 

Commercial real estate

 

 

185,005

 

 

 

11

 

 

 

 

 

 

 

 

 

2,205

 

 

 

2,216

 

 

 

187,221

 

Residential real estate

 

 

175,812

 

 

 

606

 

 

 

 

 

 

49

 

 

 

688

 

 

 

1,343

 

 

 

177,155

 

Construction & land development

 

 

35,721

 

 

 

 

 

 

 

 

 

 

 

 

317

 

 

 

317

 

 

 

36,038

 

Consumer

 

 

17,713

 

 

 

168

 

 

 

22

 

 

 

 

 

 

13

 

 

 

203

 

 

 

17,916

 

Total Loans

 

$

604,515

 

 

$

836

 

 

$

22

 

 

$

49

 

 

$

4,448

 

 

$

5,355

 

 

$

609,870

 

 

 

Troubled Debt Restructurings

All troubled debt restructurings (“TDRs”) are individually evaluated for impairment and a related allowance is recorded, as needed.  Loans whose terms have been modified as TDR’s totaled $3.3 million as of March 31, 2021, and $2.8 million as of December 31, 2020, with $319 thousand of specific reserves allocated to those loans at March 31, 2021 and $30 thousand at December 31, 2020, respectively.  On March 31, 2021, $3.0

17


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (continued)

 

million of the loans classified as TDR’s were performing in accordance with their modified terms.  Of the remaining $307 thousand, all were in nonaccrual of interest status.  

Loan modifications considered TDRs completed during the three months ended March 31 were as follows:  

 

(Dollars in thousands)

 

Number of

loans

restructured

 

Pre-

Modification

Recorded

Investment

 

 

Post-

Modification

Recorded

Investment

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

Commercial real estate

 

1

 

$

1,300

 

 

$

1,300

 

Residential real estate

 

1

 

 

88

 

 

 

88

 

Total Restructured Loans

 

2

 

$

1,388

 

 

$

1,388

 

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

Commercial

 

1

 

$

69

 

 

$

69

 

Total Restructured Loans

 

1

 

$

69

 

 

$

69

 

 

 

 

The loans restructured were modified by changing the monthly payment to interest only and extending the maturity dates.

NaN of the loans restructured in 2020 have defaulted in first quarter 2021.  NaN of the loans restructured in 2019 defaulted in the first quarter 2020.

There was 0 other real estate owned on March 31, 2021 and December 31, 2020.  There were $38 thousand in mortgage loans in the process of foreclosure on March 31, 2021 and $21 thousand on December 31, 2020.  There were 0 other repossessed assets on March 31, 2021 and December 31, 2020.

 

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors.  The Company analyzes commercial loans individually by classifying the loans as to credit risk.  This analysis includes all commercial loans before origination and an annual review of those with an outstanding commitment greater than $500 thousand.  The Company uses the following definitions for risk ratings:

Pass.  Loans classified as pass (Cash Secured, Exceptional, Acceptable, Monitor, or Pass Watch) may exhibit a wide array of characteristics but at a minimum represent an acceptable risk to the Bank.  Borrowers in this rating may have leveraged but acceptable balance sheet positions, satisfactory asset quality, stable to favorable sales and earnings trends, acceptable liquidity and adequate cash flow.  Loans are considered fully collectible and require an average amount of administration.  While generally adhering to credit policy, these loans may exhibit occasional exceptions that do not result in undue risk to the Bank.  Borrowers are generally capable of absorbing setbacks, financial and otherwise, without the threat of failure.

Special Mention.  Assets assigned a Special Mention grade are not considered classified assets but are considered criticized.  These assets exhibit potential weaknesses that, deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date.  Loans in this rating warrant special attention but have not yet reached the point of concern for loss.  These assets have deteriorated sufficiently to the point they would have difficulty refinancing elsewhere.  Similarly, purchasers of the business would not be eligible for bank financing unless they represent a significantly stronger credit risk.

18


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (continued)

 

Substandard.  Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any.  Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt.  They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful.  Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans.  Loans listed as not rated annually are either less than $500 thousand or are included in groups of homogeneous loans.  Based on the most recent analysis performed, the risk category of loans by class is as follows as of March 31, 2021 and December 31, 2020:

(Dollars in thousands)

 

Pass

 

 

Special

Mention

 

 

Substandard

 

 

Doubtful

 

 

Not

Rated

 

 

Total

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

165,674

 

 

$

399

 

 

$

4,894

 

 

$

 

 

$

1,828

 

 

$

172,795

 

Commercial real estate

 

 

159,318

 

 

 

1,650

 

 

 

19,437

 

 

 

 

 

 

1,243

 

 

 

181,648

 

Residential real estate

 

 

171

 

 

 

 

 

 

38

 

 

 

 

 

 

175,668

 

 

 

175,877

 

Construction & land development

 

 

29,701

 

 

 

 

 

 

329

 

 

 

 

 

 

6,499

 

 

 

36,529

 

Consumer

 

 

 

 

 

 

 

 

166

 

 

 

 

 

 

16,902

 

 

 

17,068

 

Total

 

$

354,864

 

 

$

2,049

 

 

$

24,864

 

 

$

 

 

$

202,140

 

 

$

583,917

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

177,620

 

 

$

2,352

 

 

$

9,644

 

 

$

 

 

$

1,924

 

 

$

191,540

 

Commercial real estate

 

 

161,091

 

 

 

2,545

 

 

 

21,812

 

 

 

 

 

 

1,773

 

 

 

187,221

 

Residential real estate

 

 

174

 

 

 

 

 

 

114

 

 

 

 

 

 

176,867

 

 

 

177,155

 

Construction & land development

 

 

29,182

 

 

 

 

 

 

 

 

 

317

 

 

 

6,539

 

 

 

36,038

 

Consumer

 

 

 

 

 

 

 

 

105

 

 

 

 

 

 

17,811

 

 

 

17,916

 

Total

 

$

368,067

 

 

$

4,897

 

 

$

31,675

 

 

$

317

 

 

$

204,914

 

 

$

609,870

 

 

The following table presents loans that are not rated by class of loans as of March 31, 2021 and December 31, 2020.  Nonperforming loans include loans past due 90 days or more and loans on nonaccrual of interest status.

 

(Dollars in thousands)

 

Performing

 

 

Non-

Performing

 

 

Total

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

1,828

 

 

$

 

 

$

1,828

 

Commercial real estate

 

 

1,243

 

 

 

 

 

 

1,243

 

Residential real estate

 

 

175,031

 

 

 

637

 

 

 

175,668

 

Construction & land development

 

 

6,499

 

 

 

 

 

 

6,499

 

Consumer

 

 

16,891

 

 

 

11

 

 

 

16,902

 

Total

 

$

201,492

 

 

$

648

 

 

$

202,140

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

1,924

 

 

$

 

 

$

1,924

 

Commercial real estate

 

 

1,773

 

 

 

 

 

 

1,773

 

Residential real estate

 

 

176,278

 

 

 

589

 

 

 

176,867

 

Construction & land development

 

 

6,539

 

 

 

 

 

 

6,539

 

Consumer

 

 

17,798

 

 

 

13

 

 

 

17,811

 

Total

 

$

204,312

 

 

$

602

 

 

$

204,914

 

 

19


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

NOTE 4 – SHORT-TERM BORROWINGS

The following table provides additional detail regarding repurchase agreements and the related collateral accounted for as secured borrowings.

 

 

 

Remaining Contractual Maturity

Overnight and Continuous

 

 

 

March 31,

 

 

December 31,

 

(Dollars in thousands)

 

2021

 

 

2020

 

Securities of U.S. Government Agencies and mortgage-backed securities of

   government agencies pledged, fair value

 

$

39,860

 

 

$

37,393

 

Repurchase agreements

 

 

39,665

 

 

 

37,215

 

 

 

NOTE 5 – FAIR VALUE MEASUREMENTS

The Company provides disclosures about assets and liabilities carried at fair value.  The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value.  The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. The three broad levels of the fair value hierarchy are described below:

 

Level I:

Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level II:

Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by corroborated or other means.  If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability.

Level III:

Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

 

20


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

NOTE 5 – FAIR VALUE MEASUREMENTS (CONTINUED)

 

The following table presents the assets reported on the Consolidated Balance Sheets at their fair value on a recurring basis as of March 31, 2021 and December 31, 2020 by level within the fair value hierarchy. NaN liabilities are carried at fair value.  Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.  Equity securities with readily determinable values and U.S. Treasury Notes are valued at the closing price reported on the active market on which the individual securities are traded. Obligations of U.S. government agencies, mortgage-backed securities, asset-backed securities, obligations of states and political subdivisions and corporate bonds are valued at observable market data for similar assets.  Equity securities without readily determinable values are carried at amortized cost adjusted for impairment and observable price changes and are not included in the table below.

 

(Dollars in thousands)

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

 

$

3,780

 

 

$

 

 

$

 

 

$

3,780

 

U.S. Government agencies

 

 

 

 

 

13,783

 

 

 

 

 

 

13,783

 

Mortgage-backed securities of government agencies

 

 

 

 

 

147,141

 

 

 

 

 

 

147,141

 

Asset-backed securities of government agencies

 

 

 

 

 

812

 

 

 

 

 

 

812

 

State and political subdivisions

 

 

 

 

 

23,117

 

 

 

 

 

 

23,117

 

Corporate bonds

 

 

 

 

 

8,837

 

 

 

 

 

 

8,837

 

Total available-for-sale securities

 

$

3,780

 

 

$

193,690

 

 

$

 

 

$

197,470

 

Equity securities

 

$

54

 

 

$

 

 

$

 

 

$

54

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securities available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

 

$

1,011

 

 

$

 

 

$

 

 

$

1,011

 

U.S. Government agencies

 

 

 

 

 

14,006

 

 

 

 

 

 

14,006

 

Mortgage-backed securities of government agencies

 

 

 

 

 

140,012

 

 

 

 

 

 

140,012

 

Asset-backed securities of government agencies

 

 

 

 

 

837

 

 

 

 

 

 

837

 

State and political subdivisions

 

 

 

 

 

23,966

 

 

 

 

 

 

23,966

 

Corporate bonds

 

 

 

 

 

10,606

 

 

 

 

 

 

10,606

 

Total available-for-sale securities

 

$

1,011

 

 

$

189,427

 

 

$

 

 

$

190,438

 

Equity securities

 

$

41

 

 

$

 

 

$

 

 

$

41

 

 

21


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

NOTE 5 – FAIR VALUE MEASUREMENTS (CONTINUED)

 

The following table presents the assets measured on a nonrecurring basis on the Consolidated Balance Sheets at their fair value as of March 31, 2021 and December 31, 2020, by level within the fair value hierarchy. An impaired loan is written down to fair value through the establishment of specific reserves or a charge down is taken to reduce the loan to fair value of the collateral (less estimated selling costs) and the loan is included in the following table as a Level III measurement.  Techniques used to value the collateral that secure the impaired loans include quoted market prices for identical assets classified as Level I inputs, and observable inputs, employed by certified appraisers, for similar assets classified as Level II inputs.  In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level III inputs.

 

(Dollars in thousands)

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets measured on a nonrecurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

 

 

$

 

 

$

 

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets measured on a nonrecurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

 

 

$

 

 

$

10

 

 

$

10

 

 

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level III inputs to determine fair value.   

 

 

 

Quantitative Information about Level III Fair Value Measurements

 

(Dollars in thousands)

 

Fair Value

Estimate

 

 

Valuation

Techniques

 

Unobservable

Input

 

Range

(Weighted Average)

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

10

 

 

Appraisal of collateral 1

 

Appraisal adjustments 2

 

-20%

 

 

 

 

 

 

 

 

 

Liquidation expense 2

 

-10%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

1

Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various inputs which are not identifiable.

2

Appraisals may be adjusted by management for qualitative factors.  The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

 

 

22


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

 

NOTE 6 – FAIR VALUES OF FINANCIAL INSTRUMENTS

The fair values of recognized financial instruments as of March 31, 2021 and December 31, 2020 are as follows:

 

(Dollars in thousands)

 

Carrying

Value

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Fair Value

 

March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

278,910

 

 

$

278,910

 

 

$

 

 

$

 

 

$

278,910

 

Securities held-to-maturity

 

 

8,270

 

 

 

 

 

 

8,410

 

 

 

 

 

 

8,410

 

Restricted stock

 

 

4,614

 

 

NA

 

 

N/A

 

 

N/A

 

 

N/A

 

Loans held for sale

 

 

1,450

 

 

 

1,450

 

 

 

 

 

 

 

 

 

1,450

 

Net loans

 

 

574,376

 

 

 

 

 

 

 

 

 

572,656

 

 

 

572,656

 

Bank-owned life insurance

 

 

21,566

 

 

 

21,566

 

 

 

 

 

 

 

 

 

21,566

 

Accrued interest receivable

 

 

2,086

 

 

 

2,086

 

 

 

 

 

 

 

 

 

2,086

 

Mortgage servicing rights

 

 

527

 

 

 

 

 

 

 

 

 

527

 

 

 

527

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

968,569

 

 

$

844,098

 

 

$

 

 

$

125,288

 

 

$

969,386

 

Short-term borrowings

 

 

39,665

 

 

 

39,665

 

 

 

 

 

 

 

 

 

39,665

 

Other borrowings

 

 

4,564

 

 

 

 

 

 

 

 

 

4,564

 

 

 

4,564

 

Accrued interest payable

 

 

84

 

 

 

84

 

 

 

 

 

 

 

 

 

84

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

181,652

 

 

$

181,652

 

 

$

 

 

$

 

 

$

181,652

 

Securities held-to-maturity

 

 

9,045

 

 

 

 

 

 

9,225

 

 

 

 

 

 

9,225

 

Restricted stock

 

 

4,614

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Loans held for sale

 

 

1,378

 

 

 

1,378

 

 

 

 

 

 

 

 

 

1,378

 

Net loans

 

 

600,885

 

 

 

 

 

 

 

 

 

598,583

 

 

 

598,583

 

Bank-owned life insurance

 

 

21,416

 

 

 

21,416

 

 

 

 

 

 

 

 

 

21,416

 

Accrued interest receivable

 

 

2,159

 

 

 

2,159

 

 

 

 

 

 

 

 

 

2,159

 

Mortgage servicing rights

 

 

488

 

 

 

 

 

 

 

 

 

488

 

 

 

488

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

891,562

 

 

$

768,230

 

 

$

 

 

$

124,127

 

 

$

892,357

 

Short-term borrowings

 

 

37,215

 

 

 

37,215

 

 

 

 

 

 

 

 

 

37,215

 

Other borrowings

 

 

4,664

 

 

 

 

 

 

 

 

 

4,775

 

 

 

4,775

 

Accrued interest payable

 

 

90

 

 

 

90

 

 

 

 

 

 

 

 

 

90

 

 

The Company also has unrecognized financial instruments on March 31, 2021 and December 31, 2020.  These financial instruments relate to commitments to extend credit and letters of credit.  The aggregate contract amount of such financial instruments was approximately $224 million on March 31, 2021 and $228 million on December 31, 2020.  Such amounts are also considered to be the fair values.

The fair value estimates of financial instruments are made at a specific point in time based on relevant market information.  Since no ready market exists for a significant portion of the financial instruments, fair value estimates are largely based on judgments after considering such factors as future expected credit losses, current economic conditions, risk characteristics of various financial instruments, and other factors.  These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision.  Changes in assumptions could significantly affect these estimates.

23


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

Note 7- ACCUMULATED OTHER COMPREHENSIVE INCOME (LOSS)

The following table presents the changes in accumulated other comprehensive income (loss) by component net of tax for the three months ended March 31, 2021 and 2020:

 

(Dollars in thousands)

 

Pretax

 

 

Tax Effect

 

 

After-tax

 

Three Months Ended March 31, 2021

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

1,249

 

 

$

(263

)

 

$

986

 

Unrealized holding (loss) on available-for-sale securities arising during

   the period

 

 

(3,607

)

 

 

758

 

 

 

(2,849

)

Amortization of held-to-maturity discount resulting from transfer

 

 

16

 

 

 

(3

)

 

 

13

 

Total other comprehensive loss

 

 

(3,591

)

 

 

755

 

 

 

(2,836

)

Balance, end of period

 

$

(2,342

)

 

$

492

 

 

$

(1,850

)

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

 

$

92

 

 

$

(20

)

 

$

72

 

Unrealized holding gain on available-for-sale securities arising during

   the period

 

 

540

 

 

 

(113

)

 

 

427

 

Amortization of held-to-maturity discount resulting from transfer

 

 

14

 

 

 

(3

)

 

 

11

 

Total other comprehensive income

 

 

554

 

 

 

(116

)

 

 

438

 

Balance, end of period

 

$

646

 

 

$

(136

)

 

$

510

 

 

 

 

 

 

 

 

24


CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis focuses on the consolidated financial condition of the Company at March 31, 2021 as compared to December 31, 2020, and the consolidated results of operations for the three months ended March 31, 2021 compared to the same period in 2020. The purpose of this discussion is to provide the reader with a more thorough understanding of the Consolidated Financial Statements. This discussion should be read in conjunction with the interim condensed Consolidated Financial Statements and related footnotes contained in Part I, Item 1 of this Quarterly Report.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this Quarterly Report are not historical facts but rather are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipates”, “plans”, “expects”, “believes”, and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services. Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows, and financial position.  There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in this report are reasonable, the reader should not place undue reliance on any forward-looking statement.

The Company does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as may be required by applicable law.

FINANCIAL CONDITION

Total assets were $1.1 billion at March 31, 2021 as compared to $1.0 billion at December 31, 2020. During the three months ended March 31, 2021, net loans decreased $27 million. Cash and cash equivalents, and securities increased $104 million. Deposits and short-term borrowings increased $79 million.

Net loans decreased $27 million, or 4%, as commercial real estate and construction loans decreased $5 million, or 2%, and residential real estate loans decreased $1 million, or less than 1%, from December 31, 2020. Commercial loans decreased $19 million, or 10%. Loans originated under SBA Paycheck Protection Program totaled $34 million during first quarter 2021 and $92 million during the first round in 2020. Consumers continued to refinance their mortgage loans for historically low long-term fixed rates while home purchase activity remained robust despite limited inventory through the first three-months of 2021. Residential mortgage loan originations for the three months ended March 31, 2021 totaled $29.6 million, an increase from $13.2 million in originations during the three months ended March 31, 2020. Originations sold into the secondary market were $13 million and $4 million, respectively during the three months ended March 31, 2021 and March 31, 2020. The Bank originates and sells primarily fixed rate thirty-year mortgages into the secondary market.  

 

 

 

25


CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

 

The allowance for loan losses increased $1.2 million from the year ago quarter to $8.3 million. The Company has not early adopted CECL which has been delayed for smaller reporting companies. Year over year outstanding loan balances increased 5% to $583 million at March 31, 2021. Net recoveries were $34 thousand, or an annualized -0.02% of average loans, in the current three-month period compared to the $75 thousand net charge-off, or 0.05% of average loans in the year-ago three-month period. At March 31, 2021, the allowance for total loans minus the SBA guaranteed Payroll Protection loans was 1.61%. We believe the allowance level is appropriate given the low level of problem loans and current composition of the overall loan portfolio in the current economic environment.  

Nonperforming loans decreased $1.3 million to $3.1 million, or 0.53%, of total loans from $4.4 million, or 0.79%, a year ago. For the three months ended March 31, 2021 loans totaling $1.6 million were returned to accrual status, $321 thousand were placed on nonaccrual status, and pay downs of $45 thousand were received.

 

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

(Dollars in thousands)

 

2021

 

 

2020

 

 

2020

 

Non-performing loans

 

$

3,089

 

 

$

4,497

 

 

$

4,369

 

Other real estate

 

 

 

 

 

 

 

 

99

 

Repossessed assets

 

 

 

 

 

 

 

 

 

Allowance for loan losses

 

 

8,338

 

 

 

8,274

 

 

 

7,120

 

Total loans

 

$

582,714

 

 

$

609,159

 

 

$

555,320

 

Allowance for loan losses as a percentage of total loans

 

 

1.43

%

 

 

1.36

%

 

 

1.28

%

Allowance for loan losses to total nonperforming loans

 

2.7x

 

 

1.8x

 

 

1.6x

 

 

The ratio of gross loans to deposits was 60.2% at March 31, 2021, compared to 68.3% at December 31, 2020.

The Company has no exposure to government-sponsored enterprise preferred stocks, collateralized debt obligations, or trust preferred securities. Management has considered industry analyst reports, sector credit reports, and the volatility within the bond market in concluding that the gross unrealized losses of $3.7 million within the available-for-sale and held-to-maturity portfolios as of March 31, 2021, was primarily the result of customary and expected fluctuations in the bond market and not necessarily the expected cash flows of the individual securities. As a result, all embedded security losses on March 31, 2021, are considered temporary and no impairment loss relating to these securities has been recognized.

Deposits increased $77 million, or 9%, from December 31, 2020 with noninterest-bearing deposits increasing approximately $32 million and interest-bearing deposit accounts increasing approximately $45 million. Total deposits as of March 31, 2021 are $297 million, or 44%, greater than March 31, 2020 deposit balances. On a year over year comparison, increases were recognized in noninterest-bearing demand deposits of $116 million, interest-bearing demand deposits of $115 million, money market accounts of $21 million, and savings of $47 million. During 2020 and continuing into 2021, the Bank’s customers increased deposits through cash conservation and stimulus payments as a result of the COVID-19 pandemic.

Short-term borrowings consisting of overnight repurchase agreements with retail customers increased $2.5 million to $40 million at March 31, 2021 as compared to December 31, 2020 and other borrowings decreased $100 thousand as the Company repaid FHLB advances.  

Total shareholders’ equity amounted to $93.1 million, or 8.4%, of total assets at March 31, 2021 a decrease from $93.9 million December 31, 2020. The decrease in shareholders’ equity during the three months ended March 31, 2021 was due to a decrease in accumulated other comprehensive income of $2.8 million and dividends declared of $2.3 million.  Net income of $2.9 million partially offset the decreases. The Company and the Bank met all regulatory capital requirements at March 31, 2021.

RESULTS OF OPERATIONS

Three months ended March 31, 2021 and 2020

For the quarters ended March 31, 2021 and 2020, the Company recorded net income of $2.9 million and $2.5 million and $1.05 and $0.91 per share, respectively. The $402 thousand increase in net income for the period was primarily the result of a $535 thousand increase in noninterest income, a decrease in the provision for loan losses of $148 thousand, and a $92 thousand increase in net interest income. The increases were partially offset by an increase in noninterest expenses of $274 thousand and a $99 thousand increase in federal income tax provision.

26


CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

Return on average assets and return on average equity were 1.10% and 12.33%, respectively, for the three-month period of 2021, compared to 1.23% and 11.47%, respectively for the same quarter in 2020.

Average Balance Sheets and Net Interest Margin Analysis

 

 

 

For the Three Months Ended March 31,

 

 

 

2021

 

 

2020

 

(Dollars in thousands)

 

Average

balance1

 

 

Interest

 

 

Average

rate2

 

 

Average

balance1

 

 

Interest

 

 

Average

rate2

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-earning deposits

 

$

203,200

 

 

$

46

 

 

 

0.09

%

 

$

75,817

 

 

$

239

 

 

 

1.27

%

Taxable securities

 

 

181,634

 

 

 

559

 

 

 

1.25

 

 

 

104,474

 

 

 

609

 

 

 

2.34

 

Tax-exempt securities 4

 

 

23,368

 

 

 

141

 

 

 

2.45

 

 

 

21,186

 

 

 

151

 

 

 

2.87

 

Loans 3,4

 

 

596,319

 

 

 

6,873

 

 

 

4.67

 

 

 

560,142

 

 

 

6,855

 

 

 

4.92

 

Total interest-earning assets

 

 

1,004,521

 

 

 

7,619

 

 

 

3.08

%

 

 

761,619

 

 

 

7,854

 

 

 

4.15

%

Noninterest-earning assets

 

 

55,964

 

 

 

 

 

 

 

 

 

 

 

50,790

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

1,060,485

 

 

 

 

 

 

 

 

 

 

$

812,409

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS'

   EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

$

252,061

 

 

$

87

 

 

 

0.14

%

 

$

160,932

 

 

 

143

 

 

 

0.36

%

Savings deposits

 

 

262,828

 

 

 

70

 

 

 

0.11

 

 

 

201,450

 

 

 

128

 

 

 

0.26

 

Time deposits

 

 

122,723

 

 

 

381

 

 

 

1.26

 

 

 

127,198

 

 

 

560

 

 

 

1.77

 

Borrowed funds

 

 

43,311

 

 

 

35

 

 

 

0.33

 

 

 

43,582

 

 

 

70

 

 

 

0.65

 

Total interest-bearing liabilities

 

 

680,923

 

 

 

573

 

 

 

0.34

%

 

 

533,162

 

 

 

901

 

 

 

0.68

%

Noninterest-bearing demand deposits

 

 

280,451

 

 

 

 

 

 

 

 

 

 

 

188,510

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

4,182

 

 

 

 

 

 

 

 

 

 

 

3,647

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

94,929

 

 

 

 

 

 

 

 

 

 

 

87,090

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS'

   EQUITY

 

$

1,060,485

 

 

 

 

 

 

 

 

 

 

$

812,409

 

 

 

 

 

 

 

 

 

Taxable equivalent net interest income

 

 

 

 

 

$

7,046

 

 

 

 

 

 

 

 

 

 

$

6,953

 

 

 

 

 

Tax equivalent adjustment

 

 

 

 

 

 

(38

)

 

 

 

 

 

 

 

 

 

 

(37

)

 

 

 

 

Net interest income

 

 

 

 

 

$

7,008

 

 

 

 

 

 

 

 

 

 

$

6,916

 

 

 

 

 

Net interest margin

 

 

 

 

 

 

 

 

 

 

2.83

%

 

 

 

 

 

 

 

 

 

 

3.65

%

Tax equivalent adjustment

 

 

 

 

 

 

 

 

 

 

0.02

 

 

 

 

 

 

 

 

 

 

 

0.02

 

Net interest margin-taxable equivalent

 

 

 

 

 

 

 

 

 

 

2.85

%

 

 

 

 

 

 

 

 

 

 

3.67

%

Taxable equivalent net interest spread

 

 

 

 

 

 

 

 

 

 

2.74

%

 

 

 

 

 

 

 

 

 

 

3.47

%

 

1 Average balances have been computed on an average daily basis.

2 Average rates have been computed based on the amortized cost of the corresponding asset or liability.

3 Average loan balances include nonaccrual loans.

4 Interest income is shown on a fully tax-equivalent basis.

 

Interest income for the quarter ended March 31, 2021, was $7.6 million representing a $236 thousand decrease, or a 3% decline, compared to the same period in 2020. This decrease was primarily due to average loan rates decreasing 25 basis points partially offset by an average volume increase of $36 million for the quarter ended March 31, 2021 as compared to the same period in 2020. Interest expense for the quarter ended March 31, 2021 was $573 thousand, a decrease of $328 thousand, or 36%, from the same quarter in 2020. The decrease in interest expense occurred primarily due to a decrease in rates on all liabilities for the quarter ended March 31, 2021, partially offset by increases in the average balances.

For the quarter ended March 31, 2021, the provision for loan losses was $30 thousand, compared to a provision of $178 thousand provision for the same quarter in 2020. For more discussion see Financial Condition. The provision for loan losses is determined based on management’s calculation of the adequacy of the allowance for

27


CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

loan losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offs and current economic trends.

Noninterest income for the quarter ended March 31, 2021, was $1.9 million, an increase of $535 thousand, or 40%, compared to the same quarter in 2020.  The gain on the sale of mortgage loans to the secondary market increased by $373 thousand for the quarter ended March 31, 2021 as additional loan volume was sold into the secondary market. Debit card interchange income increased $96 thousand, or 26%, with greater fees generated from usage in the first quarter 2021. Earnings on bank owned life insurance increased $21 thousand for the first quarter 2021 a result of adding policies in 2020. Fees from trust and brokerage services amounted to $282 thousand for the first quarter 2021, an increase of $52 thousand, or 23%, as compared to the same quarter in 2020. Service charges on deposit accounts decreased $84 thousand, or 29%, compared to the same quarter in 2020 primarily from a volume decrease in overdraft fees.

Noninterest expenses for the quarter ended March 31, 2021 increased $274 thousand, or 5%, compared to the first quarter 2020. Salaries and employee benefits increased $61 thousand, or 2%, a result of an increase in capitalization of approximately $214 thousand in salary and benefits expense to deferred loan origination costs related to new commercial and mortgage loan originations. The loan capitalization reductions in salary were partially offset by increases in base wage, social security benefits and incentive accruals. FDIC assessment amounted to $108 thousand as compared to $0 in the first quarter 2020 due to small bank assessment credits. The Ohio financial institutions tax increased $17 thousand in the first quarter due to the Company’s increased capital base. Marketing and public relations expense decreased $48 thousand, or 38%, primarily due to events being cancelled due to COVID-19. Debit card expenses increased $31 thousand, or 22%, compared to the first quarter 2020 with increased volume. Software expense rose $73 thousand quarter over quarter with additional investment. Occupancy expense increased $34 thousand in 2021 over the first quarter 2020. Professional and director fees decreased $35 thousand for the quarter ended March 31, 2021 as compared to the first quarter 2020. This decrease resulted from a reduction in collection legal fees, a decrease in audit expense as the Company is no longer subject to an internal controls audit opinion from an outside accountant, and directors fees with the decrease of one director.  

Federal income tax expense increased $99 thousand, or 17%, for the quarter ended March 31, 2021 as compared to the first quarter 2020. The provision for income taxes was $690 thousand (effective rate of 19%) for the quarter ended March 31, 2021, compared to $591 thousand (effective rate of 19%) for the same quarter ended 2020.

CAPITAL RESOURCES

The Company maintained a strong capital position with tangible common equity to tangible assets of 8.0% at March 31, 2021 compared with 8.7% at December 31, 2020.

Consistent with the Board of Director’s commitment to public confidence and safe and sound banking operations, capital targets and minimum risk-based capital ratios for CSB were established to maintain excess capital to well-capitalized standards. To be considered well-capitalized, an institution must have a total risk-based capital ratio of at least 10%, a tier 1 capital ratio of at least 8%, a leverage capital ratio of at least 5%, a common equity tier 1 (“CET1”) ratio of at least 6.5% and must not be subject to any order or directive requiring the institution to improve its capital level. An adequately capitalized institution has a total risk-based capital ratio of at least 8%, a tier 1 capital ratio of at least 6%, a CET1 ratio of at least 4.5%, and a leverage ratio of at least 4%.

Failure to meet specified minimum capital requirements could result in regulatory actions by the Federal Reserve or Ohio Division of Financial Institutions that could have a material effect on the Company’s financial condition or results of operations. Management believes there were no material changes to capital resources as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2020. As of March 31, 2021, the Company and the Bank met all capital adequacy requirements to which they were subject.

28


CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

 

During October 2019, the federal banking agencies adopted an optional community bank leverage ratio (“CBLR”).  Depository institutions and depository institution holding companies, that have less than $10 billion in total consolidated assets and have a tier 1 leverage ratio of greater than 9 percent, are considered qualifying community banking organizations and are eligible to opt into the community bank leverage ratio framework.  Additionally, such insured depository institutions are considered to have satisfied the risk-based and leverage capital requirements and will be considered well-capitalized under the rule, effective January 1, 2020.  The Company has not elected to opt-in to the CBLR framework as of March 31, 2021.

 

 

 

Capital Ratios

 

 

 

March 31,

2021

 

 

December 31,

2020

 

Common Equity Tier 1 Capital To Risk Weighted Assets

 

 

 

 

 

 

 

 

Consolidated

 

 

16.6

%

 

 

15.7

%

Bank

 

 

16.3

%

 

 

15.4

%

 

 

 

 

 

 

 

 

 

Tier 1 Capital To Risk Weighted Assets Ratio

 

 

 

 

 

 

 

 

Consolidated

 

 

16.6

%

 

 

15.7

%

Bank

 

 

16.3

%

 

 

15.4

%

 

 

 

 

 

 

 

 

 

Total Capital To Risk Weighted Assets Ratio

 

 

 

 

 

 

 

 

Consolidated

 

 

17.9

%

 

 

16.9

%

Bank

 

 

17.6

%

 

 

16.6

%

 

 

 

 

 

 

 

 

 

Tier 1 Leverage Ratio

 

 

 

 

 

 

 

 

Consolidated

 

 

8.6

%

 

 

8.7

%

Bank

 

 

8.4

%

 

 

8.5

%

 

LIQUIDITY

 

(Dollars in thousands)

 

March 31,

2021

 

 

December 31,

2020

 

 

Change

 

Cash and cash equivalents

 

$

278,910

 

 

$

181,652

 

 

$

97,258

 

Available from FHLB

 

 

103,808

 

 

 

101,616

 

 

 

2,192

 

Unpledged AFS securities at fair market value

 

 

125,571

 

 

 

130,702

 

 

 

(5,131

)

 

 

$

508,289

 

 

$

413,970

 

 

$

94,319

 

Net deposits and short-term liabilities

 

$

937,809

 

 

$

870,498

 

 

$

67,311

 

Liquidity ratio

 

 

54.2

 

%

 

47.6

 

%

 

 

 

Minimum board approved liquidity ratio

 

 

20.0

 

 

 

20.0

 

 

 

 

 

 

Liquidity refers to the Company’s ability to generate sufficient cash to fund current loan demand, meet deposit withdrawals, pay operating expenses, and meet other obligations. Liquidity is monitored by the Company’s Asset Liability Committee. Other sources of liquidity include, but are not limited to, purchases of federal funds, advances from the FHLB, adjustments of interest rates to attract deposits, brokered deposits, and borrowing at the Federal Reserve discount window. Management believes that its sources of liquidity are adequate to meet cash flow obligations for the foreseeable future.

Off-Balance Sheet Arrangements

The Company does not have any off-balance sheet arrangements (as such term is defined in applicable Securities and Exchange Commission (the “Commission”) rules) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

 

29


CSB BANCORP, INC.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

 

ITEM 3 - QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

 

The COVID-19 pandemic added market risk disclosure which should be read with the disclosures presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020. While 2020 began with increased loan demand and strong employment, the economic picture reversed sharply as coronavirus wreaked havoc and became the lead story by mid-March. A series of emergency health orders for public safety curtailed nonessential activity and had the effect of shutting down vast swaths of Ohio’s economy, resulting in a peak of approximately one million people on unemployment, or an unemployment rate of 17.6%, in Ohio during April of 2020.  By March 2021, Ohio’s unemployment rate approximated 6%.  The bank is based in Holmes County which is reporting the lowest unemployment rate in Ohio at 2.4% in March 2021.  Of the counties within the bank’s footprint, Stark County reported the highest unemployment rate at 5.4% in March. With vaccination rates rising and government stimulus funds flowing into the economy, the Federal Reserve is projecting stronger economic activity than previously forecasted in December 2020.

Management performs a quarterly analysis of the Company’s interest rate risk over a twenty-four month horizon. The analysis includes two balance sheet models, one based on a static balance sheet and one on a dynamic balance sheet with projected growth in assets and liabilities. All balance sheet positions and interest rate projections are currently within the Company’s board-approved policy for the first twelve- month period. For the twenty-four month periods in the rising interest rate scenarios the increase in interest income is favorably above board policy limits.

The following table presents an analysis of the estimated sensitivity of the Company’s annual net interest income to sudden and sustained -200 through +400 basis point changes, in 100 basis point increments, in market interest rates at March 31, 2021 and December 31, 2020. The net interest income reflected is for the first twelve-month period of the modeled twenty-four month horizon. The underlying balance sheet for illustrative purposes is dynamic with projected growth in assets and liabilities.    

 

March 31, 2021

(Dollars in thousands)

 

 

Change in

Interest Rates

(basis points)

 

Net Interest

Income

 

 

Dollar

Change

 

 

Percentage

Change

 

 

Board Policy

Limits

 

 

+400

 

$

28,749

 

 

$

3,077

 

 

 

12.0

 

%

+/- 25

 

%

+300

 

 

27,962

 

 

 

2,290

 

 

 

8.9

 

 

+/-15

 

 

+200

 

 

27,186

 

 

 

1,514

 

 

 

5.9

 

 

+/-10

 

 

+100

 

 

26,374

 

 

 

702

 

 

 

2.7

 

 

+/-5

 

 

0

 

 

25,672

 

 

 

 

 

 

 

 

 

 

 

-100

 

 

25,622

 

 

 

(50

)

 

 

(0.2

)

 

+/-5

 

 

-200

 

 

25,228

 

 

 

(444

)

 

 

(1.7

)

 

+/-10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2020

 

 

+400

 

$

28,036

 

 

$

2,121

 

 

 

8.2

 

%

+/- 25

 

%

+300

 

 

27,495

 

 

 

1,580

 

 

 

6.1

 

 

+/-15

 

 

+200

 

 

26,969

 

 

 

1,054

 

 

 

4.1

 

 

+/-10

 

 

+100

 

 

26,430

 

 

 

515

 

 

 

2.0

 

 

+/-5

 

 

0

 

 

25,915

 

 

 

 

 

 

 

 

 

 

 

-100

 

 

25,767

 

 

 

(148

)

 

 

(0.6

)

 

+/-5

 

 

-200

 

 

25,414

 

 

 

(501

)

 

 

(1.9

)

 

+/-10

 

 

 

 

30


CSB BANCORP, INC.

CONTROLS AND PROCEDURES

 

 

ITEM 4 - CONTROLS AND PROCEDURES

With the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that:

 

(a)

information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure;

 

(b)

information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms; and

 

(c)

the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that material information relating to the Company and its consolidated subsidiary is made known to them, particularly during the period for which the Company’s periodic reports, including this Quarterly Report on Form 10-Q, are being prepared.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes during the period covered by this Quarterly Report on Form 10-Q in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

 

 

31


 

 

CSB BANCORP, INC.

FORM 10-Q

Quarter ended March 31, 2021

PART II – OTHER INFORMATION

In the opinion of management there are no outstanding legal proceedings that are reasonably likely to have a material adverse effect on the company’s financial condition or results of operations.

ITEM 1A - RISK FACTORS.

There have been no material changes to the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2020, other than the COVID-19 developments previously discussed under Item 3 - Quantitative and Qualitative Disclosures About Market Risk in Part I of this report.

ITEM 2 - UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.

On March 2, 2021 CSB Bancorp, Inc. filed Form 8-K with the Commission announcing that its Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to 5% of the Company’s common shares then outstanding. Repurchases may be made from time to time as market and business conditions warrant, in the open market, through block purchases, and in negotiated private transactions. The prior share repurchase program adopted by the Company in 2005 is terminated. No repurchases were made during the quarterly period ended March 31, 2021.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4 - MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5 - OTHER INFORMATION.

Not applicable.

 

 

32


CSB BANCORP, INC.

FORM 10-Q

Quarter ended March 31, 2021

PART II – OTHER INFORMATION

 

 

ITEM 6 - Exhibits.

 

Exhibit

Number

 

Description of Document

 

 

 

3.1

 

Amended Articles of Incorporation of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed August 6, 2004, Exhibit 3.1, film number 000-21714).

 

3.1.1

 

Amended form of Article Fourth of Amended Articles of Incorporation, as effective April 9, 1998 (incorporated by reference to registrant’s Annual Report on Form 10-K filed on March 30, 1999, Exhibit 3.1.1, file number 000-21714).

3.2

 

Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Form 10-SB).

 

 

 

3.2.1

 

Amended Article VIII of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a filed on March 25, 2009, Appendix A, film number 09703970).

 

3.2.2

 

Amended Article II of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a file on March 16, 2021, Appendix A, file number 000-21714.

 

 

 

4.0

 

Description of Capital Stock (incorporated by reference to registrants Annual Report on Form 10-K filed on March 16, 2020, Exhibit 4.0, file number 000-21714).

 

 

 

11

 

Statement Regarding Computation of Per Share Earnings.

 

 

 

31.1

 

Rule 13a-14(a)/15d-14(a) Chief Executive Officer’s Certification.

 

 

 

31.2

 

Rule 13a-14(a)/15d-14(a) Chief Financial Officer’s Certification.

 

 

 

32.1

 

Section 1350 Chief Executive Officer’s Certification.

 

 

 

32.2

 

Section 1350 Chief Financial Officer’s Certification.

 

 

 

101

 

The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 2021, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Net Loss and Comprehensive Loss , (iii) Consolidated Statements of Stockholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

 

 

 

104

 

Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).

 

 

33


 

 

CSB BANCORP, INC.

SIGNATURES

Pursuant to the requirements 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 BANCORP, INC.

 

 

 

(Registrant)

 

 

 

 

 

 

 

 

Date:

 

May 10, 2021

/s/ Eddie L. Steiner

 

 

 

Eddie L. Steiner

 

 

 

President

 

 

 

Chief Executive Officer

 

 

 

 

 

 

 

 

Date:

 

May 10, 2021

/s/ Paula J. Meiler

 

 

 

Paula J. Meiler

 

 

 

Senior Vice President

 

 

 

Chief Financial Officer

 

 

34