UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM10-Q

 

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

For the quarterly period ended:  June 30, 2019March 31, 2020

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 Number)

Registrant’s address:  91 North Clay, P.O. Box 232, Millersburg, Ohio 44654

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

Name of each exchange

on which registered

Common StockCSBBOTCPink

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 (X)         No (   )

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of RegulationS-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 (X)        No (   )

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or anon-accelerated filer.an emerging growth company.  See definitionthe definitions of “accelerated filer and large“large accelerated filer”, “accelerated filer”, “smaller reporting company” and “emerging growth company” in Rule12b-2 of the Exchange Act. (Check one):

Large accelerated filerAccelerated filer
Non-accelerated filerLarge accelerated filer (   ) Accelerated filer (X) Non-accelerated filer (   ) Smaller reporting company

Indicate by check mark whether the registrant is a shell company (as defined in Rule12b-2 of the Exchange Act).    Yes  ☐    No  ☒

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule12b-2 of the Securities Exchange Act of 1934(§240.12b-2 of this chapter).

 X ) 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 (X)

Title of each class

Trading Symbol

Name of each exchange on which registered

Common Stock

CSBB

OTCPink

Indicate the number of shares outstanding of the registrant’sregistrant's common stock, as of the latest practicable date.

 

Common stock, $6.25 par value

Outstanding at AugustMay 1, 2019, 2020, 2,742,350 common shares

 

 

 


CSB BANCORP, INC.

FORM10-Q

QUARTER ENDED June  30, 2019MARCH 31, 2020

Table of Contents

Part I –

Part I - Financial Information

 

Page

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’Shareholders' Equity

6

Condensed Consolidated Statements of Cash Flows

7

Notes to Consolidated Financial Statements

8

ITEM 2 –

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

27

24

ITEM 3 –

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

34

29

ITEM 4 –

CONTROLS AND PROCEDURES

35

30

Part II - Other Information

ITEM 1

ITEM1

Legal Proceedings

36

31

ITEM 1A

ITEM1A –

Risk Factors

36

31

ITEM2 –

Unregistered Sales of Equity Securities and Use of Proceeds

36

31

ITEM 3

ITEM3

Defaults upon Senior Securities

36

31

ITEM 4

ITEM4

Mine Safety Disclosures

36

31

ITEM5

Other Information

36

31

ITEM 6

ITEM6

Exhibits

37

32

Signatures

38

33


CSB BANCORP, INC.

PART I – FINANCIAL INFORMATION

ITEM 1. – FINANCIAL STATEMENTS

CONSOLIDATED BALANCE SHEETS

(Unaudited)

 

  June 30, December 31, 

 

March 31,

 

 

December 31,

 

(Dollars in thousands)

  2019 2018 

 

2020

 

 

2019

 

ASSETS

   

 

 

 

 

 

 

 

 

Cash and cash equivalents

   

 

 

 

 

 

 

 

 

Cash and due from banks

  $15,214  $23,214 

 

$

18,277

 

 

$

17,648

 

Interest-earning deposits in other banks

   42,063  22,350 

 

 

77,995

 

 

 

84,369

 

  

 

  

 

 

Total cash and cash equivalents

   57,277  45,564 

 

 

96,272

 

 

 

102,017

 

  

 

  

 

 

Securities

   

 

 

 

 

 

 

 

 

Available-for-sale, at fair value

   86,297  85,528 

 

 

108,263

 

 

 

112,146

 

Held-to-maturity (fair value 2019-$19,696; 2018-$20,118)

   19,657  20,688 

Equity Securities

   87  83 

Held-to-maturity (fair value 2020-$11,542; 2019-13,950)

 

 

11,242

 

 

 

13,869

 

Equity securities

 

 

79

 

 

 

92

 

Restricted stock, at cost

   4,614  4,614 

 

 

4,614

 

 

 

4,614

 

  

 

  

 

 

Total securities

   110,655  110,913 

 

 

124,198

 

 

 

130,721

 

  

 

  

 

 

Loans held for sale

   409  108 

 

 

256

 

 

 

622

 

Loans

   550,612  548,974 

 

 

555,320

 

 

 

551,633

 

Less allowance for loan losses

   6,537  5,907 

 

 

7,120

 

 

 

7,017

 

  

 

  

 

 

Net loans

   544,075  543,067 

 

 

548,200

 

 

 

544,616

 

  

 

  

 

 

Premises and equipment, net

   11,638  9,961 

 

 

12,387

 

 

 

12,040

 

Core deposit intangible

   135  167 

 

 

89

 

 

 

104

 

Goodwill

   4,728  4,728 

 

 

4,728

 

 

 

4,728

 

Bank-owned life insurance

   16,760  13,554 

 

 

19,023

 

 

 

18,894

 

Accrued interest receivable and other assets

   4,575  3,660 

 

 

4,888

 

 

 

4,941

 

  

 

  

 

 

TOTAL ASSETS

  $750,252  $731,722 

 

$

810,041

 

 

$

818,683

 

  

 

  

 

 

LIABILITIES AND SHAREHOLDERS’ EQUITY

   

LIABILITIES AND SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

LIABILITIES

   

 

 

 

 

 

 

 

 

Deposits

   

 

 

 

 

 

 

 

 

Noninterest-bearing

  $180,766  $185,871 

 

$

188,137

 

 

$

197,780

 

Interest-bearing

   442,562  420,627 

 

 

483,025

 

 

 

485,766

 

  

 

  

 

 

Total deposits

   623,328  606,498 

 

 

671,162

 

 

 

683,546

 

  

 

  

 

 

Short-term borrowings

   35,474  37,415 

 

 

40,605

 

 

 

38,889

 

Other borrowings

   6,576  8,525 

 

 

6,206

 

 

 

6,330

 

Accrued interest payable and other liabilities

   3,416  2,748 

 

 

4,439

 

 

 

4,442

 

  

 

  

 

 

Total liabilities

   668,794  655,186 

 

 

722,412

 

 

 

733,207

 

  

 

  

 

 

SHAREHOLDERS’ EQUITY

   

Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; outstanding 2,742,350 shares 2019 and 2,742,242 shares 2018

   18,629  18,629 

SHAREHOLDERS' EQUITY

 

 

 

 

 

 

 

 

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

2,980,602 shares; outstanding 2,742,350 shares 2020 and 2019

 

 

18,629

 

 

 

18,629

 

Additionalpaid-in capital

   9,815  9,815 

 

 

9,815

 

 

 

9,815

 

Retained earnings

   57,988  54,288 

 

 

63,455

 

 

 

61,740

 

Treasury stock at cost: 238,252 shares 2019, 238,360 shares 2018

   (4,780 (4,784

Accumulated other comprehensive loss

   (194 (1,412
  

 

  

 

 

Total shareholders’ equity

   81,458  76,536 
  

 

  

 

 

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

  $750,252  $731,722 
  

 

  

 

 

Treasury stock at cost: 238,252 shares 2020 and 2019

 

 

(4,780

)

 

 

(4,780

)

Accumulated other comprehensive income

 

 

510

 

 

 

72

 

Total shareholders' equity

 

 

87,629

 

 

 

85,476

 

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

 

$

810,041

 

 

$

818,683

 

See notes to unaudited consolidated financial statements.


CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

 

  Three Months Ended   Six Months Ended 
  June 30,   June 30, 

 

Three Months Ended

March 31,

 

(Dollars in thousands, except per share data)

  2019 2018   2019   2018 

 

2020

 

 

2019

 

INTEREST AND DIVIDEND INCOME

       

 

 

 

 

 

 

 

 

Loans, including fees

  $7,185  $6,515   $14,257   $12,654 

 

$

6,850

 

 

$

7,072

 

Taxable securities

   584  594    1,171    1,197 

 

 

609

 

 

 

587

 

Nontaxable securities

   134  152    268    313 

 

 

119

 

 

 

134

 

Other

   218  83    393    129 

 

 

239

 

 

 

175

 

  

 

  

 

   

 

   

 

 

Total interest and dividend income

   8,121  7,344    16,089    14,293 

 

 

7,817

 

 

 

7,968

 

  

 

  

 

   

 

   

 

 

INTEREST EXPENSE

       

 

 

 

 

 

 

 

 

Deposits

   921  560    1,746    1,014 

 

 

831

 

 

 

825

 

Short-term borrowings

   93  84    186    138 

 

 

41

 

 

 

93

 

Other borrowings

   36  48    75    100 

 

 

29

 

 

 

39

 

  

 

  

 

   

 

   

 

 

Total interest expense

   1,050  692    2,007    1,252 

 

 

901

 

 

 

957

 

  

 

  

 

   

 

   

 

 

NET INTEREST INCOME

   7,071  6,652    14,082    13,041 

 

 

6,916

 

 

 

7,011

 

PROVISION FOR LOAN LOSSES

   285  324    570    648 

 

 

178

 

 

 

285

 

  

 

  

 

   

 

   

 

 

Net interest income, after provision for loan losses

   6,786  6,328    13,512    12,393 

 

 

6,738

 

 

 

6,726

 

  

 

  

 

   

 

   

 

 

NONINTEREST INCOME

       

NON INTEREST INCOME

 

 

 

 

 

 

 

 

Service charges on deposit accounts

   313  300    605    584 

 

 

291

 

 

 

292

 

Trust services

   212  217    436    436 

 

 

230

 

 

 

224

 

Debit card interchange fees

   369  323    716    636 

 

 

375

 

 

 

347

 

Gain on sale of loans, net

   76  60    155    137 

 

 

114

 

 

 

79

 

Earnings on bank owned life insurance

   122  85    205    166 

 

 

129

 

 

 

83

 

Unrealized gain (loss) on equity securities

   (2  —      4    4 

Unrealized gain or (loss) on equity securities, net

 

 

(13

)

 

 

6

 

Other income

   223  183    416    350 

 

 

217

 

 

 

193

 

  

 

  

 

   

 

   

 

 

Total noninterest income

   1,313  1,168    2,537    2,313 

 

 

1,343

 

 

 

1,224

 

  

 

  

 

   

 

   

 

 

NONINTEREST EXPENSES

       

NON INTEREST EXPENSES

 

 

 

 

 

 

 

 

Salaries and employee benefits

   2,915  2,718    5,757    5,355 

 

 

2,968

 

 

 

2,842

 

Occupancy expense

   205  214    409    434 

 

 

220

 

 

 

204

 

Equipment expense

   143  160    280    316 

 

 

135

 

 

 

137

 

Professional and director fees

   308  239    647    551 

 

 

330

 

 

 

339

 

Financial institutions and franchise tax expense

   153  142    306    284 

 

 

171

 

 

 

153

 

Marketing and public relations

   139  119    256    239 

 

 

127

 

 

 

117

 

Software expense

   232  221    450    434 

 

 

227

 

 

 

218

 

Debit card expense

   132  126    259    242 

 

 

140

 

 

 

127

 

Amortization of intangible assets

   16  25    32    50 

 

 

15

 

 

 

16

 

FDIC insurance expense

   48  72    98    147 

Other expenses

   609  583    1,197    1,104 

 

 

674

 

 

 

638

 

  

 

  

 

   

 

   

 

 

Total noninterest expenses

   4,900  4,619    9,691    9,156 

 

 

5,007

 

 

 

4,791

 

  

 

  

 

   

 

   

 

 

Income before income taxes

   3,199  2,877    6,358    5,550 

 

 

3,074

 

 

 

3,159

 

FEDERAL INCOME TAX PROVISION

   613  553    1,232    1,062 

 

 

591

 

 

 

619

 

  

 

  

 

   

 

   

 

 

NET INCOME

  $2,586  $2,324   $5,126   $4,488 

 

$

2,483

 

 

$

2,540

 

  

 

  

 

   

 

   

 

 

Basic and diluted net earnings per share

  $0.94  $0.85   $1.87   $1.64 

 

$

0.91

 

 

$

0.93

 

  

 

  

 

   

 

   

 

 

See notes to unaudited consolidated financial statements


CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

 

  Three Months Ended Six Months Ended 
  June 30, June 30, 

 

Three Months Ended

March 31,

 

(Dollars in thousands)

  2019 2018 2019 2018 

 

2020

 

 

2019

 

Net income

  $2,586  $2,324  $5,126  $4,488 

 

$

2,483

 

 

$

2,540

 

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss)

     

Unrealized gains (losses) arising during the period

   762  (156 1,511  (1,467

Amounts reclassified from accumulated other comprehensive income,held-to-maturity

   15  20  30  41 

Other comprehensive income

 

 

 

 

 

 

 

 

Unrealized gains arising during the period

 

 

540

 

 

 

749

 

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

 

 

14

 

 

 

15

 

Income tax effect

   (163 29  (323 300 

 

 

(116

)

 

 

(160

)

  

 

  

 

  

 

  

 

 

Other comprehensive income (loss)

   614  (107 1,218  (1,126
  

 

  

 

  

 

  

 

 

Other comprehensive income

 

 

438

 

 

 

604

 

Total comprehensive income

  $3,200  $2,217  $6,344  $3,362 

 

$

2,921

 

 

$

3,144

 

  

 

  

 

  

 

  

 

 

See notes to unaudited consolidated financial statements.


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
loss
 Total 

 

Common

stock

 

 

Additional

paid-in

capital

 

 

Retained

earnings

 

 

Treasury

stock

 

 

Accumulated

other

comprehensive

income (loss)

 

 

Total

 

Three Months Ended June 30, 2019

         

Three Months Ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

  $18,629   $9,815   $56,115  $(4,784 $(808 $78,967 

 

$

18,629

 

 

$

9,815

 

 

$

54,288

 

 

$

(4,784

)

 

$

(1,412

)

 

$

76,536

 

Net income

   —      —      2,586   —     —    2,586 

 

 

 

 

 

 

 

 

2,540

 

 

 

 

 

 

 

 

 

2,540

 

Other comprehensive income

   —      —      —     —    614  614 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

604

 

 

 

604

 

Issuance of 108 treasury shares

   —      —      —    4   —    4 

Cash dividends declared, $0.26 per share

   —      —      (713  —     —    (713

 

 

 

 

 

 

 

 

(713

)

 

 

 

 

 

 

 

 

(713

)

  

 

   

 

   

 

  

 

  

 

  

 

 

Balance, end of period

  $18,629   $9,815   $57,988  $(4,780 $(194 $81,458 

 

$

18,629

 

 

$

9,815

 

 

$

56,115

 

 

$

(4,784

)

 

$

(808

)

 

$

78,967

 

  

 

   

 

   

 

  

 

  

 

  

 

 

Six Months Ended June 30, 2019

         

Three Months Ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Balance, beginning of period

  $18,629   $9,815   $54,288  $(4,784 $(1,412 $76,536 

 

$

18,629

 

 

$

9,815

 

 

$

61,740

 

 

$

(4,780

)

 

$

72

 

 

$

85,476

 

Net income

   —      —      5,126   —     —    5,126 

 

 

 

 

 

 

 

 

2,483

 

 

 

 

 

 

 

 

 

2,483

 

Other comprehensive income

   —      —      —     —    1,218  1,218 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

438

 

 

 

438

 

Issuance of 108 treasury shares

   —      —      —    4   —    4 

Cash dividends declared, $0.52 per share

   —      —      (1,426  —     —    (1,426
  

 

   

 

   

 

  

 

  

 

  

 

 

Cash dividends declared, $0.28 per share

 

 

 

 

 

 

 

 

(768

)

 

 

 

 

 

 

 

 

(768

)

Balance, end of period

  $18,629   $9,815   $57,988  $(4,780 $(194 $81,458 

 

$

18,629

 

 

$

9,815

 

 

$

63,455

 

 

$

(4,780

)

 

$

510

 

 

$

87,629

 

  

 

   

 

   

 

  

 

  

 

  

 

 

Three Months Ended June 30, 2018

         

Balance, beginning of period

  $18,629   $9,815   $49,070  $(4,784 $(1,711 $71,019 

Net income

   —      —      2,324   —     —    2,324 

Other comprehensive loss

   —      —      —     —    (107 (107

Cash dividends declared, $0.24 per share

   —      —      (658  —     —    (658
  

 

   

 

   

 

  

 

  

 

  

 

 

Balance, end of period

  $18,629   $9,815   $50,736  $(4,784 $(1,818 $72,578 
  

 

   

 

   

 

  

 

  

 

  

 

 

Six Months Ended June 30, 2018

         

Balance, beginning of period

  $18,629   $9,815   $47,535  $(4,784 $(663 $70,532 

Net income

   —      —      4,488   —     —    4,488 

Other comprehensive loss

   —      —      —     —    (1,126 (1,126

Cumulative effect adjustment equity securities, related to ASU2016-01

   —      —      29   —    (29  —   

Cash dividends declared, $0.48 per share

   —      —      (1,316  —     —    (1,316
  

 

   

 

   

 

  

 

  

 

  

 

 

Balance, end of period

  $18,629   $9,815   $50,736  $(4,784 $(1,818 $72,578 
  

 

   

 

   

 

  

 

  

 

  

 

 

See notes to unaudited consolidated financial statements.


CSB BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

 

  Six Months Ended 
  June 30, 

 

Three Months Ended

March 31,

 

(Dollars in thousands)

  2019 2018 

 

2020

 

 

2019

 

NET CASH FROM OPERATING ACTIVITIES

  $4,500  $4,023 

 

$

2,488

 

 

$

1,894

 

CASH FLOWS FROM INVESTING ACTIVITIES

   

 

 

 

 

 

 

 

 

Securities:

   

 

 

 

 

 

 

 

 

Proceeds from repayments,available-for-sale

   6,268  6,151 

 

 

10,338

 

 

 

1,836

 

Proceeds from repayments,held-to-maturity

   1,045  5,956 

 

 

2,635

 

 

 

477

 

Purchases,available-for-sale

   (5,705 (992

 

 

(6,055

)

 

 

(2,023

)

Purchases,held-to-maturity

   —    (2,029

Loan originations, net of repayments

   (1,587 (18,938

 

 

(3,808

)

 

 

870

 

Property, equipment, and software acquisitions

   (2,039 (639

 

 

(551

)

 

 

(976

)

Purchase of bank-owned life insurance

   (3,000  —   

 

 

 

 

 

(3,000

)

Proceeds from sale of other real estate

   —    30 
  

 

  

 

 

Net cash used in investing activities

   (5,018 (10,461
  

 

  

 

 

Net cash provided by (used in) investing activities

 

 

2,559

 

 

 

(2,816

)

CASH FLOWS FROM FINANCING ACTIVITIES

   

 

 

 

 

 

 

 

 

Net change in deposits

   16,830  11,814 

 

 

(12,384

)

 

 

844

 

Net change in short-term borrowings

   (1,941 4,675 

 

 

1,716

 

 

 

(1,091

)

Repayment of other borrowings

   (1,949 (2,582

 

 

(124

)

 

 

(152

)

Cash dividends paid

   (713 (658

Issuance of treasury stock

   4   —   
  

 

  

 

 

Net cash provided by financing activities

   12,231  13,249 
  

 

  

 

 

NET INCREASE IN CASH AND CASH EQUIVALENTS

   11,713  6,811 

Net cash used in financing activities

 

 

(10,792

)

 

 

(399

)

NET DECREASE IN CASH AND CASH EQUIVALENTS

 

 

(5,745

)

 

 

(1,321

)

CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD

   45,564  36,420 

 

 

102,017

 

 

 

45,564

 

  

 

  

 

 

CASH AND CASH EQUIVALENTS AT END OF PERIOD

  $57,277  $43,231 

 

$

96,272

 

 

$

44,243

 

  

 

  

 

 

SUPPLEMENTAL DISCLOSURES

   

 

 

 

 

 

 

 

 

Cash paid during the year for:

   

 

 

 

 

 

 

 

 

Interest

  $1,969  $1,276 

 

$

909

 

 

$

921

 

Income taxes

   1,475  1,110 

 

 

 

 

 

 

Noncash financing activities:

   

 

 

 

 

 

 

 

 

Dividends declared

   713  658 

 

 

768

 

 

 

713

 

Lease adoption:

   

 

 

 

 

 

 

 

 

Right of use lease asset

   477   —   

 

 

 

 

 

477

 

Lease liability

   469   —   

 

 

 

 

 

469

 

See notes to unaudited consolidated financial statements.


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—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 June 30, 2019,March 31, 2020, 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, 2018,2019, contains Consolidated Financial Statements and related footnote disclosures, which should be read in conjunction with the accompanying Consolidated Financial Statements.  The results of operations for the period ended June 30, 2019March 31, 2020 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.

ADOPTIONREVENUE RECOGNITION

Management has determined the primary sources of revenue emanating from interest and dividend income on loans and securities along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans, commitment fees, fees from financial guarantees, certain credit cards fees, and income on bank-owned life insurance are not within the scope of ASC 606. These sources of revenue comprise 88% of the total revenue of the Company. Services within the scope of ASC 606 include income from fiduciary activities, brokerage fees, service charges on deposit accounts, other fee income, ATM fees, interchange fees, and gain on sale of OREO, net. For these accounts, fees are related to specific customer transactions, or attributable to specific performance obligations of the Bank where revenue is recognized at a defined point in time upon completion of the requested service/transaction.  


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF NEWSIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ASU 2016-13 - Financial Instruments - Credit Losses2016-02 – Leases.This. The Update and all subsequent ASU’s that modified Topic 842 set forth a new lease accounting model for lessors and lessees. For lessees, virtually all leases will be required to be recognized on the balance sheet by recording aright-of-use asset and lease liability. Subsequent accounting for leases varies depending on whether the lease is an operating lease or a finance lease. The accounting provided by a lessor is largely unchanged from326, requires that applied under the existing guidance. The ASU requires additional qualitative and quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases.

The Update and its related amendments were adopted as of January 1, 2019, which resulted in the recognition of operatingright-of-use assets totaling $477 thousand and operating lease liabilities totaling $469 thousand. The Company elected to adopt the transition relief provisions from ASU2018-11 and recorded the impact of adoption as of January 1, 2019, without restating any prior-year amounts or disclosures. The Company has presented the necessary disclosures in Note 8.

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ASU2016-13—Financial Instruments—Credit Losses.This Update and all subsequent ASU’s that modify Topic 326, require 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. The Update is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. 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 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 aone-time cumulative effect adjustment to the allowance for loan losses, but cannot yet determine the magnitude of any suchone-time adjustment or the overall impact of the new guidance on the consolidated financial statements. During JulyIn November 2019, the FASB deferred the effective date for ASC 326, Financial Accounting Standards Board (FASB)

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1—SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

unanimously voted for a proposal to delay this Update to January, 2023Instruments – Credit Losses, for smaller reporting companies. While there iscompanies to fiscal years beginning after December 15, 2022, including interim periods within those fiscal years. The Company qualifies as a thirty day comment period starting in August, the proposed delay is widely expectedsmaller reporting company and does not expect to be adopted.early adopt these ASU’s.

ASU2017-04— 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’sunit'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.


CSB BANCORP, INC.

ASU2018-13—Fair Value Measurement—Changes the Disclosure Requirements for Fair Value Measurements.The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

ASU(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES2018-15— (CONTINUED)

ASU 2018-15 - Intangibles – Goodwill and Other –Internal-Use Software. Software.This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred forinternal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtaininternal-use software (and hosting arrangements that include aninternal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update is not expectedIn November 2019, the FASB deferred the effective date for ASC 350, Intangibles – Goodwill and Other, for smaller reporting companies to have a significant impact on the Company’s financial statements.

ASU2019-01—Leases (Topic 842): Codification Improvements. This Update addresses issues lessors sometimes encounter. Specifically addressed in this Update were issues related to 1) determining the fair value of the underlying asset by the lessor that are not manufacturers or dealers (generally financial institutions and captive finance companies, and 2) lessors that are depository and lending institutions should classify principal and payments received under sales-type and direct financing leases within investing activities in the cash flow statement. The ASU also exempts both lessees and lessors from having to provide the interim disclosures required by ASC250-10-50-3 in the fiscal year in which a company adopts the new leases standard. The amendments addressing the two lessor accounting issues are effective for public business entities for fiscal years beginning after December 15, 2019,2022, and interim periods within those fiscal years. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2019-12 - Income Taxes. This update simplifies the accounting for income taxes, changes the accounting for certain tax transactions, and makes minor improvements to the codification. This Update provides a policy election to not allocate consolidated income taxes when a member of a consolidated tax return is not subject to income tax and provides guidance to evaluate whether a step-up in tax basis of goodwill relates to a business combination in which book goodwill was recognized as a separate transaction. The Update also changes current guidance for making an intra-period allocation, if there is a loss in continuing operations and gains outside of continuing operations; determining when a deferred tax liability is recognized after an investor in a foreign entity transitions to or from the equity method of accounting; accounting for tax law changes and year-to-date losses in interim periods; and determining how to apply the income tax guidance to franchise taxes that are partially based on income. For public business entities, the amendments in this Update are effective for fiscal years and interim periods within those fiscal years, beginning after December 15, 2020. This update is not expected to have a significant 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.

10


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTENote 2 – SECURITIES

Securities consist of the following at June 30, 2019March 31, 2020 and December 31, 2018:2019:

 

(Dollars in thousands)  Amortized
cost
   Gross
unrealized
gains
   Gross
unrealized
losses
   Fair value 

 

Amortized

cost

 

 

Gross

unrealized

gains

 

 

Gross

unrealized

(losses)

 

 

Fair value

 

June 30, 2019

        

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

  $990   $—     $2   $988 

 

$

999

 

 

$

21

 

 

$

 

 

$

1,020

 

U.S. Government agencies

   7,350    —      32    7,318 

 

 

2,000

 

 

 

3

 

 

 

 

 

 

2,003

 

Mortgage-backed securities of government agencies

   46,233    181    191    46,223 

 

 

74,328

 

 

 

1,104

 

 

 

(225

)

 

 

75,207

 

Asset-backed securities of government agencies

   987    —      12    975 

 

 

910

 

 

 

 

 

 

(105

)

 

 

805

 

State and political subdivisions

   23,131    303    5    23,429 

 

 

20,648

 

 

 

309

 

 

 

 

 

 

20,957

 

Corporate bonds

   7,626    19    281    7,364 

 

 

8,566

 

 

 

2

 

 

 

(297

)

 

 

8,271

 

  

 

   

 

   

 

   

 

 

Totalavailable-for-sale

   86,317    503    523    86,297 

 

 

107,451

 

 

 

1,439

 

 

 

(627

)

 

 

108,263

 

  

 

   

 

   

 

   

 

 

Held-to-maturity

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

   9,484    14    41    9,457 

 

 

3,000

 

 

 

8

 

 

 

 

 

 

3,008

 

Mortgage-backed securities of government agencies

   10,173    142    76    10,239 

 

 

8,242

 

 

 

292

 

 

 

 

 

 

8,534

 

  

 

   

 

   

 

   

 

 

Totalheld-to-maturity

   19,657    156    117    19,696 

 

 

11,242

 

 

 

300

 

 

 

 

 

 

11,542

 

Equity securities

   53    34    —      87 

 

 

53

 

 

 

26

 

 

 

 

 

 

79

 

Restricted stock

   4,614    —      —      4,614 

 

 

4,614

 

 

 

 

 

 

 

 

 

4,614

 

  

 

   

 

   

 

   

 

 

Total securities

  $ 110,641   $ 693   $ 640   $ 110,694 

 

$

123,360

 

 

$

1,765

 

 

$

(627

)

 

 

124,498

 

  

 

   

 

   

 

   

 

 

December 31, 2018

        

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

  $997   $—     $1   $996 

 

$

998

 

 

$

1

 

 

$

 

 

$

999

 

U.S. Government agencies

   7,350    —      180    7,170 

 

 

5,500

 

 

 

 

 

 

(4

)

 

 

5,496

 

Mortgage-backed securities of government agencies

   45,744    41    884    44,901 

 

 

75,676

 

 

 

326

 

 

 

(145

)

 

 

75,857

 

Asset-backed securities of government agencies

   1,040    —      16    1,024 

 

 

934

 

 

 

 

 

 

(17

)

 

 

917

 

State and political subdivisions

   23,282    49    206    23,125 

 

 

21,161

 

 

 

351

 

 

 

(1

)

 

 

21,511

 

Corporate bonds

   8,646    —      334    8,312 

 

 

7,605

 

 

 

23

 

 

 

(262

)

 

 

7,366

 

  

 

   

 

   

 

   

 

 

Totalavailable-for-sale

   87,059    90    1,621    85,528 

 

 

111,874

 

 

 

701

 

 

 

(429

)

 

 

112,146

 

Held-to-maturity

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

   9,482    6    390    9,098 

 

 

4,999

 

 

 

 

 

 

(6

)

 

 

4,993

 

Mortgage-backed securities of government agencies

   11,206    28    214    11,020 

 

 

8,870

 

 

 

143

 

 

 

(56

)

 

 

8,957

 

  

 

   

 

   

 

   

 

 

Totalheld-to-maturity

   20,688    34    604    20,118 

 

 

13,869

 

 

 

143

 

 

 

(62

)

 

 

13,950

 

Equity securities

   53    30    —      83 

 

 

53

 

 

 

39

 

 

 

 

 

 

92

 

Restricted stock

   4,614    —      —      4,614 

 

 

4,614

 

 

 

 

 

 

 

 

 

4,614

 

  

 

   

 

   

 

   

 

 

Total securities

  $112,414   $154   $ 2,225   $110,343 

 

$

130,410

 

 

$

883

 

 

$

(491

)

 

$

130,802

 

  

 

   

 

   

 

   

 

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2 – SECURITIES(CONTINUED)

 

The amortized cost and fair value of debt securities at June 30, 2019,March 31, 2020, 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

  $2,994   $2,995 

Due after one through five years

   17,214    17,254 

Due after five through ten years

   24,676    24,753 

Due after ten years

   41,433    41,295 
  

 

 

   

 

 

 

Total debt securitiesavailable-for-sale

  $ 86,317   $ 86,297 
  

 

 

   

 

 

 

Held-to-maturity

    

Due after one through five years

  $3,485   $3,473 

Due after ten years

   16,172    16,223 
  

 

 

   

 

 

 

Total debt securitiesheld-to-maturity

  $19,657   $19,696 
  

 

 

   

 

 

 

(Dollars in thousands)

 

Amortized cost

 

 

Fair value

 

Available-for-sale

 

 

 

 

 

 

 

 

Due in one year or less

 

$

5,285

 

 

$

5,283

 

Due after one through five years

 

 

11,542

 

 

 

11,649

 

Due after five through ten years

 

 

18,308

 

 

 

18,465

 

Due after ten years

 

 

72,316

 

 

 

72,866

 

Total debt securities available-for-sale

 

$

107,451

 

 

$

108,263

 

Held-to-maturity

 

 

 

 

 

 

 

 

Due after one through five years

 

$

3,000

 

 

$

3,008

 

Due after ten years

 

 

8,242

 

 

 

8,534

 

Total debt securities held-to-maturity

 

$

11,242

 

 

$

11,542

 

11


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – SECURITIES (CONTINUED)

Securities with a fair value of approximately $77.3$87.6 million and $83.4$80.3 million were pledged at June 30, 2019March 31, 2020 and December 31, 2018,2019, 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 at June 30, 2019March 31, 2020 and December 31, 2018.2019. Federal Reserve Bank stock was $471 thousand at June 30, 2019March 31, 2020 and December 31, 2018.2019.

There were no proceeds from sales of securities for the three or six month periods ending June 30, 2019March 31, 2020 and 2018.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 2 – SECURITIES(CONTINUED)

2019. All gains and losses recognized on equity securities during the three month periods were unrealized.

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, at June 30, 2019March 31, 2020 and December 31, 2018:2019:

 

  Securities in a continuous unrealized loss position 

 

Securities in a continuous unrealized loss position

 

  Less than 12 months   12 months or more   Total 

 

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 

 

Gross

unrealized

losses

 

 

Fair

value

 

 

Gross

unrealized

losses

 

 

Fair

value

 

 

Gross

unrealized

losses

 

 

Fair

value

 

June 30, 2019

            

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

            

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

  $2   $988   $—     $—     $2   $988 

Mortgage-backed securities of government

agencies

 

$

(208

)

 

$

27,404

 

 

$

(17

)

 

$

2,496

 

 

$

(225

)

 

$

29,900

 

Asset-backed securities of government

agencies

 

 

 

 

 

 

 

 

(105

)

 

 

805

 

 

 

(105

)

 

 

805

 

Corporate bonds

 

 

(7

)

 

 

3,009

 

 

 

(290

)

 

 

3,686

 

 

 

(297

)

 

 

6,695

 

Total temporarily impaired securities

 

$

(215

)

 

$

30,413

 

 

$

(412

)

 

$

6,987

 

 

$

(627

)

 

$

37,400

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Available-for-sale

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

   —      —      32    7,318    32    7,318 

 

 

 

 

 

 

 

$

(4

)

 

$

3,496

 

 

$

(4

)

 

$

3,496

 

Mortgage-backed securities of government agencies

   38    4,370    153    15,488    191    19,858 

 

$

(74

)

 

$

22,702

 

 

 

(71

)

 

 

8,924

 

 

 

(145

)

 

 

31,626

 

Asset-backed securities of government agencies

   —      —      12    975    12    975 

 

 

 

 

 

 

 

 

(17

)

 

 

917

 

 

 

(17

)

 

 

917

 

State and political subdivisions

   —      —      5    1,292    5    1,292 

 

 

 

 

 

 

 

 

(1

)

 

 

653

 

 

 

(1

)

 

 

653

 

Corporate bonds

   —      —      281    3,693    281    3,693 

 

 

 

 

 

 

 

 

(262

)

 

 

3,712

 

 

 

(262

)

 

 

3,712

 

Held-to-maturity

            

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Government agencies

   —      —      41    6,958    41    6,958 

 

 

 

 

 

 

 

 

(6

)

 

 

4,993

 

 

 

(6

)

 

 

4,993

 

Mortgage-backed securities of government agencies

   17    446    59    3,034    76    3,480 

 

 

 

 

 

 

 

 

(56

)

 

 

3,009

 

 

 

(56

)

 

 

3,009

 

  

 

   

 

   

 

   

 

   

 

   

 

 

Total temporarily impaired securities

  $57   $5,804   $583   $ 38,758   $640   $ 44,562 

 

$

(74

)

 

$

22,702

 

 

$

(417

)

 

$

25,704

 

 

$

(491

)

 

$

48,406

 

  

 

   

 

   

 

   

 

   

 

   

 

 

December 31, 2018

            

Available-for-sale

            

U.S. Treasury security

  $1   $996   $—     $—     $1   $996 

U.S. Government agencies

   —      —      180    7,170    180    7,170 

Mortgage-backed securities of government agencies

   33    4,206    851    35,188    884    39,394 

Asset-backed securities of government agencies

   16    1,024    —      —      16    1,024 

State and political subdivisions

   9    3,326    197    8,626    206    11,952 

Corporate bonds

   131    5,014    203    3,298    334    8,312 

Held-to-maturity

            

U.S. Government agencies

   —      —      390    8,609    390    8,609 

Mortgage-backed securities of government agencies

   72    3,404    142    3,360    214    6,764 
  

 

   

 

   

 

   

 

   

 

   

 

 

Total temporarily impaired securities

  $ 262   $ 17,970   $ 1,963   $66,251   $ 2,225   $84,221 
  

 

   

 

   

 

   

 

   

 

   

 

 

12


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – SECURITIES (CONTINUED)

There were 42twenty-four securities in an unrealized loss position at June 30, 2019, 36March 31, 2020, nine 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 at June 30, 2019.

March 31, 2020.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTENote 3 – LOANSLoans

Loans consist of the following:

 

(Dollars in thousands)

  June 30, 2019   December 31, 2018 

 

March 31,

2020

 

 

December 31,

2019

 

Commercial

  $140,411   $ 146,875 

 

$

139,964

 

 

$

137,114

 

Commercial real estate

   202,661    183,605 

 

 

192,387

 

 

 

196,748

 

Residential real estate

   174,635    167,296 

 

 

177,404

 

 

 

174,259

 

Construction & land development

   12,460    31,227 

 

 

26,516

 

 

 

23,960

 

Consumer

   19,899    19,402 

 

 

18,598

 

 

 

19,052

 

  

 

   

 

 

Total loans before deferred costs

   550,066    548,405 

 

 

554,869

 

 

 

551,133

 

Deferred loan costs

   546    569 

 

 

451

 

 

 

500

 

  

 

   

 

 

Total Loans

  $550,612   $548,974 

 

$

555,320

 

 

$

551,633

 

  

 

   

 

 

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 andnon-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 or inventory 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.

13


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (CONTINUED)

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 versusnon-owner occupied loans.

With respect to loans to developers and builders that are secured bynon-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.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – LOANS(CONTINUED)

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 bepre-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 byon-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 loan review 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 $94.9$88.1 million and $92.3$95.7 million at June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.

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 June 30, 2019March 31, 2020 and December 31, 2018,2019, there were no concentrations of loans related to any single industry.

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and six months ended June 30, 2019March 31, 2020 and 2018.2019.  Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

14


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 3 – LOANS (CONTINUED)

For 2019,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 associated with the COVID-19 pandemic.

The decrease in the provision for loan losses for the three months ended March 31, 2019 related to commercial loans reflected an additional allocation for loans within the hardwood industry that are affected by trade tariffs, which was offset byprimarily due to a first quarter recovery related to one loan relationship.relationship which contributed to declining historical losses of loans in this category. The decrease in the provision for commercial real estaterelated to construction and land development loans was increasedprimarily due to recognizethe decrease in loan volume increasesbalances as loansconstruction projects were completed and transferred from construction to permanent financing. The increase in the provision for consumer loans was primarily duerelated to increasing charge-offs as well as an increase in historical losses partially offset by lower delinquencies.

The increase in the provision for loan losses for the six months ended June 30, 2018 related to commercial loans was primarily due to the increase in substandard loans in this category. The decrease in the provision related to commercial real estate loans is due to the decrease of loan delinquencies in this category. The increase in the provision related to consumer loans is primarily due to the increase loan volume and charge-offs of loans in this category.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS(CONTINUED)

SummarySummary of Allowance for Loan Losses

 

(Dollars in thousands)

  Commercial Commercial
Real Estate
 Residential
Real Estate
 Construction &
Land

Development
 Consumer Unallocated Total 

 

Commercial

 

 

Commercial

Real Estate

 

 

Residential

Real Estate

 

 

Construction

& Land

Development

 

 

Consumer

 

 

Unallocated

 

 

Total

 

Three months ended June 30, 2019

        

Three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

  $1,997  $1,808  $1,222  $170  $325  $765  $6,287 

 

$

2,408

 

 

$

2,153

 

 

$

1,152

 

 

$

203

 

 

$

481

 

 

$

620

 

 

$

7,017

 

Provision for loan losses

   277  138  5  (66 46  (115 285 

 

 

212

 

 

 

147

 

 

 

209

 

 

 

52

 

 

 

87

 

 

 

(529

)

 

 

178

 

Charge-offs

   (11  —     —     —    (43  (54

 

 

(15

)

 

 

 

 

 

(15

)

 

 

 

 

 

(57

)

 

 

 

 

 

 

(87

)

Recoveries

   4   —    2   —    13   19 

 

 

4

 

 

 

 

 

 

1

 

 

 

 

 

 

7

 

 

 

 

 

 

 

12

 

  

 

  

 

  

 

  

 

  

 

   

 

 

Net charge-offs

   (7  —    2   —    (30  (35

 

 

(11

)

 

 

 

 

 

(14

)

 

 

 

 

 

(50

)

 

 

 

 

 

 

(75

)

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Ending balance

  $2,267  $1,946  $1,229  $104  $341  $650  $6,537 

 

$

2,609

 

 

$

2,300

 

 

$

1,347

 

 

$

255

 

 

$

518

 

 

$

91

 

 

$

7,120

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Six months ended June 30, 2019

        

Three months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Beginning balance

  $2,178  $1,791  $1,245  $258  $306  $129  $5,907 

 

$

2,178

 

 

$

1,791

 

 

$

1,245

 

 

$

258

 

 

$

306

 

 

$

129

 

 

$

5,907

 

Provision for loan losses

   (62 155  (19 (154 129  521  570 

 

 

(339

)

 

 

17

 

 

 

(24

)

 

 

(88

)

 

 

83

 

 

 

636

 

 

 

285

 

Charge-offs

   (16 0  0  0  (108  (124

 

 

(5

)

 

 

 

 

 

 

 

 

 

 

 

(65

)

 

 

 

 

 

 

(70

)

Recoveries

   167  0  3  0  14   184 

 

 

163

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

1

 

 

 

 

 

 

 

165

 

  

 

  

 

  

 

  

 

  

 

   

 

 

Net recoveries

   151  0  3  0  (94  60 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Net (charge-offs) recoveries

 

 

158

 

 

 

-

 

 

 

1

 

 

 

-

 

 

 

(64

)

 

 

 

 

 

 

95

 

Ending balance

  $2,267  $1,946  $1,229  $104  $341  $650  $6,537 

 

$

1,997

 

 

$

1,808

 

 

$

1,222

 

 

$

170

 

 

$

325

 

 

$

765

 

 

$

6,287

 

  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Three months ended June 30, 2018

        

Beginning balance

  $1,884  $1,699  $1,196  $244  $188  $422  $5,633 

Provision for loan losses

   (31 (87 39  35  107  261  324 

Charge-offs

   (9  —     —     —    (36  (45

Recoveries

   5   —    1   —     —     6 
  

 

  

 

  

 

  

 

  

 

   

 

 

Net charge-offs

   (4 0  1   —    (36  (39
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Ending balance

  $1,849  $1,612  $1,236  $279  $259  $683  $5,918 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Six months ended June 30, 2018

        

Beginning balance

  $1,813  $1,735  $1,273  $237  $175  $371  $5,604 

Provision for loan losses

   226  (61 (1 42  130  312  648 

Charge-offs

   (203 (62 (37  —    (46  (348

Recoveries

   13   —    1   —     —     14 
  

 

  

 

  

 

  

 

  

 

   

 

 

Net charge-offs

   (190 (62 (36  —    (46  (334
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

Ending balance

  $1,849  $1,612  $1,236  $279  $259  $683  $5,918 
  

 

  

 

  

 

  

 

  

 

  

 

  

 

 

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 June 30, 2019March 31, 2020 and December 31, 2018:2019:

 

(Dollars in thousands)

  Commercial   Commercial
Real Estate
   Residential
Real Estate
   Construction   Consumer   Unallocated   Total 

 

Commercial

 

 

Commercial

Real Estate

 

 

Residential

Real Estate

 

 

Construction

 

 

Consumer

 

 

Unallocated

 

 

Total

 

June 30, 2019

              

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

              

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

  $16   $16   $1   $—     $—     $ —     $33 

 

$

10

 

 

$

18

 

 

$

1

 

 

$

 

 

$

 

 

$

 

 

$

29

 

Collectively evaluated for impairment

   2,251    1,930    1,228    104    341    650    6,504 

 

 

2,599

 

 

 

2,282

 

 

 

1,346

 

 

 

255

 

 

 

518

 

 

 

91

 

 

 

7,091

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total ending allowance balance

  $2,267   $1,946   $1,229   $104   $341   $650   $6,537 

 

$

2,609

 

 

$

2,300

 

 

$

1,347

 

 

$

255

 

 

$

518

 

 

$

91

 

 

$

7,120

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Loans:

              

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

  $2,547   $2,597   $880   $—     $15     $6,039 

 

$

2,497

 

 

$

2,577

 

 

$

834

 

 

$

 

 

$

 

 

 

 

 

 

$

5,908

 

Loans collectively evaluated for impairment

   137,864    200,064    173,755    12,460    19,884      544,027 

 

 

137,467

 

 

 

189,810

 

 

 

176,570

 

 

 

26,516

 

 

 

18,598

 

 

 

 

 

 

 

548,961

 

  

 

   

 

   

 

   

 

   

 

     

 

 

Total ending loans balance

  $ 140,411   $ 202,661   $ 174,635   $ 12,460   $ 19,899     $ 550,066 

 

$

139,964

 

 

$

192,387

 

 

$

177,404

 

 

$

26,516

 

 

$

18,598

 

 

 

 

 

 

$

554,869

 

  

 

   

 

   

 

   

 

   

 

     

 

 

December 31, 2018

              

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Allowance for loan losses:

              

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Individually evaluated for impairment

  $36   $64   $1   $—     $—     $—     $101 

 

$

16

 

 

$

17

 

 

$

1

 

 

$

 

 

$

 

 

$

 

 

$

34

 

Collectively evaluated for impairment

   2,142    1,727    1,244    258    306    129    5,806 

 

 

2,392

 

 

 

2,136

 

 

 

1,151

 

 

 

203

 

 

 

481

 

 

 

620

 

 

 

6,983

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total ending allowance balance

  $2,178   $1,791   $1,245   $258   $306   $129   $5,907 

 

$

2,408

 

 

$

2,153

 

 

$

1,152

 

 

$

203

 

 

$

481

 

 

$

620

 

 

$

7,017

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Loans:

              

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Loans individually evaluated for impairment

  $419   $2,403   $1,030   $—     $—       $3,852 

 

$

2,555

 

 

$

2,637

 

 

$

853

 

 

$

 

 

$

14

 

 

 

 

 

 

$

6,059

 

Loans collectively evaluated for impairment

   146,456    181,202    166,266    31,227    19,402      544,553 

 

 

134,559

 

��

 

194,111

 

 

 

173,406

 

 

 

23,960

 

 

 

19,038

 

 

 

 

 

 

 

545,074

 

  

 

   

 

   

 

   

 

   

 

     

 

 

Total ending loans balance

  $146,875   $183,605   $167,296   $31,227   $19,402     $548,405 

 

$

137,114

 

 

$

196,748

 

 

$

174,259

 

 

$

23,960

 

 

$

19,052

 

 

 

 

 

 

$

551,133

 

  

 

   

 

   

 

   

 

   

 

     

 

 

15


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTENote 3 – LOANS(CONTINUED)

 

The following table presents loans individually evaluated for impairment by class of loans as of June 30, 2019March 31, 2020 and December 31, 2018:2019:

 

(Dollars in thousands)

  Unpaid
Principal
Balance
   Recorded
Investment
with no
Allowance
   Recorded
Investment
with
Allowance
   Total
recorded
investment1
   Related
Allowance
 

 

Unpaid

Principal

Balance

 

 

Recorded

Investment

with no

Allowance

 

 

Recorded

Investment

with

Allowance

 

 

Total

recorded

investment1

 

 

Related

Allowance

 

June 30, 2019

          

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

2,924

 

 

$

2,489

 

 

$

10

 

 

$

2,499

 

 

$

10

 

Commercial real estate

 

 

2,921

 

 

 

2,416

 

 

 

170

 

 

 

2,586

 

 

 

18

 

Residential real estate

 

 

1,010

 

 

 

577

 

 

 

259

 

 

 

836

 

 

 

1

 

Total impaired loans

 

$

6,855

 

 

$

5,482

 

 

$

439

 

 

$

5,921

 

 

$

29

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

  $ 2,944   $ 2,533   $16   $ 2,549   $16 

 

$

2,982

 

 

$

2,541

 

 

$

16

 

 

$

2,557

 

 

$

16

 

Commercial real estate

   2,850    2,463    143    2,606    16 

 

 

2,952

 

 

 

2,471

 

 

 

176

 

 

 

2,647

 

 

 

17

 

Residential real estate

   1,045    618    264    882    1 

 

 

1,024

 

 

 

457

 

 

 

396

 

 

 

853

 

 

 

1

 

Consumer

   15    15    —      15    —   

 

 

14

 

 

 

14

 

 

 

 

 

 

14

 

 

 

 

  

 

   

 

   

 

   

 

   

 

 

Total impaired loans

  $6,854   $5,629   $ 423   $6,052   $33 

 

$

6,972

 

 

$

5,483

 

 

$

588

 

 

$

6,071

 

 

$

34

 

  

 

   

 

   

 

   

 

   

 

 

December 31, 2018

          

Commercial

  $815   $383   $36   $419   $36 

Commercial real estate

   2,616    1,976    433    2,409    64 

Residential real estate

   1,190    763    269    1,032    1 
  

 

   

 

   

 

   

 

   

 

 

Total impaired loans

  $4,621   $3,122   $738   $3,860   $101 
  

 

   

 

   

 

   

 

   

 

 

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

    

        

1

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

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

 

  Three months   Six months 
  ended June 30,   ended June 30, 

 

Three Months Ended

March 31,

 

(Dollars in thousands)  2019   2018   2019   2018 

 

2020

 

 

2019

 

Average recorded investment:

        

 

 

 

 

 

 

 

 

Commercial

  $ 1,582   $ 1,190   $ 1,228   $ 1,491 

 

$

2,453

 

 

$

861

 

Commercial real estate

   2,152    2,700    2,233    3,595 

 

 

2,556

 

 

 

2,289

 

Residential real estate

   943    1,131    986    1,287 

 

 

846

 

 

 

1,018

 

Consumer

   15    —      9    —   

 

 

9

 

 

 

3

 

  

 

   

 

   

 

   

 

 

Average recorded investment in impaired loans

  $4,692   $5,021   $4,447   $6,373 

 

$

5,864

 

 

$

4,171

 

  

 

   

 

   

 

   

 

 

Interest income recognized:

        

 

 

 

 

 

 

 

 

Commercial

  $28   $10   $37   $21 

 

$

18

 

 

$

13

 

Commercial real estate

   3    4    6    8 

 

 

2

 

 

 

3

 

Residential real estate

   12    12    23    26 

 

 

10

 

 

 

12

 

Consumer

   —      —      —      —   
  

 

   

 

   

 

   

 

 

Interest income recognized on a cash basis on impaired loans

  $43   $26   $66   $55 

 

$

30

 

 

$

28

 

  

 

   

 

   

 

   

 

 

16


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTENote 3 – LOANS(CONTINUED)

 

The following table presents the aging of past due loans and nonaccrual loans as of June 30, 2019March 31, 2020 and December 31, 20182019 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
 

 

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

 

June 30, 2019

              

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

  $ 138,892   $26   $ 56   $71   $ 1,366   $ 1,519   $ 140,411 

 

$

138,544

 

 

$

104

 

 

$

 

 

$

 

 

$

1,316

 

 

$

1,420

 

 

$

139,964

 

Commercial real estate

   200,149    169    —      —      2,343    2,512    202,661 

 

 

189,953

 

 

 

80

 

 

 

 

 

 

 

 

 

2,354

 

 

 

2,434

 

 

 

192,387

 

Residential real estate

   173,262    703    —      113    557    1,373    174,635 

 

 

176,176

 

 

 

357

 

 

 

207

 

 

 

2

 

 

 

662

 

 

 

1,228

 

 

 

177,404

 

Construction & land development

   12,460    —      —      —      —      —      12,460 

 

 

26,516

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

26,516

 

Consumer

   19,601    226    25    7    40    298    19,899 

 

 

18,344

 

 

 

198

 

 

 

21

 

 

 

 

 

 

35

 

 

 

254

 

 

 

18,598

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total Loans

  $544,364   $ 1,124   $81   $ 191   $4,306   $5,702   $550,066 

 

$

549,533

 

 

$

739

 

 

$

228

 

 

$

2

 

 

$

4,367

 

 

$

5,336

 

 

$

554,869

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

December 31, 2018

              

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

  $146,431   $253   $34   $—     $157   $444   $146,875 

 

$

135,707

 

 

$

15

 

 

$

 

 

$

67

 

 

$

1,325

 

 

$

1,407

 

 

$

137,114

 

Commercial real estate

   181,388    86    —      —      2,131    2,217    183,605 

 

 

194,157

 

 

 

186

 

 

 

 

 

 

 

 

 

2,405

 

 

 

2,591

 

 

 

196,748

 

Residential real estate

   165,837    265    213    174    807    1,459    167,296 

 

 

173,023

 

 

 

264

 

 

 

277

 

 

 

174

 

 

 

521

 

 

 

1,236

 

 

 

174,259

 

Construction & land development

   31,169    58    —      —      —      58    31,227 

 

 

23,960

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

23,960

 

Consumer

   18,965    291    86    —      60    437    19,402 

 

 

18,640

 

 

 

365

 

 

 

 

 

 

 

 

 

47

 

 

 

412

 

 

 

19,052

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

Total Loans

  $543,790   $953   $ 333   $174   $3,155   $4,615   $548,405 

 

$

545,487

 

 

$

830

 

 

$

277

 

 

$

241

 

 

$

4,298

 

 

$

5,646

 

 

$

551,133

 

  

 

   

 

   

 

   

 

   

 

   

 

   

 

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 3 – LOANS(CONTINUED)

Troubled Debt Restructurings

All troubled debt restructurings (“TDR’s) are individually evaluated for impairment and a related allowance is recorded, as needed.  Loans whose terms have been modified as TDR’s totaled $2.4 million as of June 30, 2019,March 31, 2020, and $1.5$2.5 million as of December 31, 2018,2019, with $17$18 thousand of specific reserves allocated to those loans at June 30, 2019March 31, 2020 and December 31, 2018,2019, respectively.  At June 30, 2019, $2.2March 31, 2020, $2.1 million of the loans classified as TDR’s were performing in accordance with their modified terms.  Of the remaining $266$252 thousand, all were in nonaccrual of interest status.

Other real estate owned amounted to one property at $99 thousand at June 30, 2019 and December 31, 2018, respectively. There were no consumer mortgage loans in the process of foreclosure at June 30, 2019 and $57 thousand at December 31, 2018. There were no other repossessed assets at June 30, 2019 and December 31, 2018.

 

(Dollars in thousands)

  Number of
loans
restructured
   Pre-Modification
Recorded
Investment
   Post-Modification
Recorded
Investment
 

 

Number of

loans

restructured

 

Pre-

Modification

Recorded

Investment

 

 

Post-

Modification

Recorded

Investment

 

For the six months ended June 30, 2019

      

For the Three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

Commercial

   1   $17   $17 

 

1

 

$

69

 

 

$

69

 

  

 

   

 

   

 

 

Total Restructured Loans

   1   $17   $17 

 

1

 

$

69

 

 

$

69

 

  

 

   

 

   

 

 

For the three months ended June 30, 2018

      

Commercial

   1   $200   $200 
  

 

   

 

   

 

 

For the Three months ended March 31, 2019

 

 

 

 

 

 

 

 

 

 

Consumer

 

1

 

$

17

 

 

$

17

 

Total Restructured Loans

   1   $200   $200 

 

1

 

$

17

 

 

$

17

 

  

 

   

 

   

 

 

For the six months ended June 30, 2018

      

Commercial Real Estate

   1   $200   $200 
  

 

   

 

   

 

 

Total Restructured Loans

   1   $200   $200 
  

 

   

 

   

 

 

The loans restructured were modified by changing the monthly payment to interest only and extending the maturity dates. There were nowas one new TDR’s for the three month period ended June 30, 2019.March 31, 2020.

None of the loans restructured in 2019 defaulted in the first quarter of 2020. There was one loan in the amount of $200 thousand restructured in 2018 that has subsequently defaulted in in the first quarter of 2019. None of the loans restructured in 2017 defaulted in 2018.

17


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTENote 3 – LOANS(CONTINUED)

Other real estate owned amounted to one property at $99 thousand at March 31, 2020 and December 31, 2019, respectively.  There were $44 thousand in consumer mortgage loans in the process of foreclosure at March 31, 2020 and $50 thousand at December 31, 2019.  There were no other repossessed assets at March 31, 2020 and December 31, 2019.

 

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 commercial loans with an outstanding balance greater than $300$500 thousand.  This analysis is performed on an annual basis.  The Company uses the following definitions for risk ratings:

Pass.  Loans classified as pass (Acceptable, Low(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.  LoansAssets assigned a Special Mention grade are not considered classified as special mention have materialassets but are considered criticized.  These assets exhibit potential weaknesses that, deserve management’s close attention. If left uncorrected, thesethose potential weaknesses may result in deterioration of the repayment prospects for the loanasset 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.

Substandard.  Loans classified as substandard are inadequately protected by the current netsound 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 existingknown 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 are either less than $300$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 June 30, 2019March 31, 2020 and December 31, 2018:2019:

18

(Dollars in thousands)

  Pass   Special
Mention
   Substandard   Doubtful   Not Rated   Total 

June 30, 2019

            

Commercial

  $115,162   $10,323   $14,000   $—     $926   $140,411 

Commercial real estate

   183,259    7,234    11,682    —      486    202,661 

Residential real estate

   188    —      68    —      174,379    174,635 

Construction & land development

   9,843    —      115    —      2,502    12,460 

Consumer

   —      —      50    —      19,849    19,899 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $308,452   $17,557   $25,915   $ —     $198,142   $550,066 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

December 31, 2018

            

Commercial

  $125,840   $5,383   $14,775   $—     $877   $146,875 

Commercial real estate

   163,261    5,582    13,578    —      1,184    183,605 

Residential real estate

   194    —      637    —      166,465    167,296 

Construction & land development

   27,540    —      —      —      3,687    31,227 

Consumer

   —      —      60    —      19,342    19,402 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 

Total

  $316,835   $10,965   $29,050   $—     $191,555   $548,405 
  

 

 

   

 

 

   

 

 

   

 

 

   

 

 

   

 

 

 


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTENote 3 – LOANS(CONTINUED)

 

(Dollars in thousands)

 

Pass

 

 

Special

Mention

 

 

Substandard

 

 

Doubtful

 

 

Not

Rated

 

 

Total

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

112,315

 

 

$

8,402

 

 

$

18,190

 

 

$

 

 

$

1,057

 

 

$

139,964

 

Commercial real estate

 

 

170,352

 

 

 

7,221

 

 

 

13,615

 

 

 

 

 

 

1,199

 

 

 

192,387

 

Residential real estate

 

 

180

 

 

 

 

 

 

243

 

 

 

 

 

 

176,981

 

 

 

177,404

 

Construction & land development

 

 

22,626

 

 

 

99

 

 

 

 

 

 

 

 

 

3,791

 

 

 

26,516

 

Consumer

 

 

 

 

 

 

 

 

78

 

 

 

 

 

 

18,520

 

 

 

18,598

 

Total

 

$

305,473

 

 

$

15,722

 

 

$

32,126

 

 

$

 

 

$

201,548

 

 

$

554,869

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

 

$

110,731

 

 

$

15,040

 

 

$

10,295

 

 

$

 

 

$

1,048

 

 

$

137,114

 

Commercial real estate

 

 

174,045

 

 

 

11,546

 

 

 

9,994

 

 

 

 

 

 

1,163

 

 

 

196,748

 

Residential real estate

 

 

183

 

 

 

 

 

 

237

 

 

 

 

 

 

173,839

 

 

 

174,259

 

Construction & land development

 

 

19,423

 

 

 

104

 

 

 

 

 

 

 

 

 

4,433

 

 

 

23,960

 

Consumer

 

 

 

 

 

 

 

 

73

 

 

 

 

 

 

18,979

 

 

 

19,052

 

Total

 

$

304,382

 

 

$

26,690

 

 

$

20,599

 

 

$

 

 

$

199,462

 

 

$

551,133

 

The following table presents loans that are not rated by class of loans as of June 30, 2019March 31, 2020 and December 31, 2019.  Nonperforming loans include loans past due 90 days or more and loans on nonaccrual of interest status.

 

(Dollars in thousands)

  Performing   Non-Performing   Total 

 

Performing

 

 

Non-

Performing

 

 

Total

 

June 30, 2019

      

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

  $926   $—     $926 

 

$

1,057

 

 

$

 

 

$

1,057

 

Commercial real estate

   486    —      486 

 

 

1,199

 

 

 

 

 

 

1,199

 

Residential real estate

   173,772    607    174,379 

 

 

176,574

 

 

 

407

 

 

 

176,981

 

Construction & land development

   2,502    —      2,502 

 

 

3,791

 

 

 

 

 

 

3,791

 

Consumer

   19,849    —      19,849 

 

 

18,520

 

 

 

 

 

 

18,520

 

  

 

   

 

   

 

 

Total

  $197,535   $607   $198,142 

 

$

201,141

 

 

$

407

 

 

$

201,548

 

  

 

   

 

   

 

 

December 31, 2018

      

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

Commercial

  $877   $ —     $877 

 

$

1,048

 

 

$

 

 

$

1,048

 

Commercial real estate

   1,184    —      1,184 

 

 

1,163

 

 

 

 

 

 

1,163

 

Residential real estate

   166,122    343    166,465 

 

 

173,407

 

 

 

432

 

 

 

173,839

 

Construction & land development

   3,687    —      3,687 

 

 

4,433

 

 

 

 

 

 

4,433

 

Consumer

   19,342    —      19,342 

 

 

18,979

 

 

 

 

 

 

18,979

 

  

 

   

 

   

 

 

Total

  $191,212   $343   $191,555 

 

$

199,030

 

 

$

432

 

 

$

199,462

 

  

 

   

 

   

 

 

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

 

  Remaining Contractual Maturity
Overnight and Continuous
 

 

March 31,

 

 

December 31,

 

(Dollars in thousands)

  June 30,
2019
   December 31,
2018
 

 

2020

 

 

2019

 

Securities of U.S. Government Agencies and mortgage-backed securities of government agencies pledged, fair value

  $35,652   $37,574 

 

$

40,807

 

 

$

39,058

 

Repurchase agreements

   35,474    37,415 

 

 

40,605

 

 

 

38,889

 

19


CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

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.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE5- 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 June 30, 2019March 31, 2020 and December 31, 20182019 by level within the fair value hierarchy. No 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.

 

(Dollars in thousands)

  Level I   Level II   Level III   Total 

 

Level I

 

 

Level II

 

 

Level III

 

 

Total

 

June 30, 2019

        

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

  

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securitiesavailable-for-sale

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

  $988   $—     $—     $988 

 

$

1,020

 

 

$

 

 

$

 

 

$

1,020

 

U.S. Government agencies

   —      7,318    —      7,318 

 

 

 

 

 

2,003

 

 

 

 

 

 

2,003

 

Mortgage-backed securities of government agencies

   —      46,223    —      46,223 

 

 

 

 

 

75,207

 

 

 

 

 

 

75,207

 

Asset-backed securities of government agencies

   —      975    —      975 

 

 

 

 

 

805

 

 

 

 

 

 

805

 

State and political subdivisions

   —      23,429    —      23,429 

 

 

 

 

 

20,957

 

 

 

 

 

 

20,957

 

Corporate bonds

   —      7,364    —      7,364 

 

 

 

 

 

8,271

 

 

 

 

 

 

8,271

 

  

 

   

 

   

 

   

 

 

Totalavailable-for-sale securities

  $988   $85,309   $—     $86,297 

 

$

1,020

 

 

$

107,243

 

 

$

 

 

$

108,263

 

Equity securities

  $41   $—     $46   $87 

 

$

33

 

 

$

 

 

$

 

 

$

33

 

December 31, 2018

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets:

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Securitiesavailable-for-sale

        

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

U.S. Treasury security

  $996   $—     $—     $996 

 

$

999

 

 

$

 

 

$

 

 

$

999

 

U.S. Government agencies

   —      7,170    —      7,170 

 

 

 

 

 

5,496

 

 

 

 

 

 

5,496

 

Mortgage-backed securities of government agencies

   —      44,901    —      44,901 

 

 

 

 

 

75,857

 

 

 

 

 

 

75,857

 

Asset-backed securities of government agencies

   —      1,024    —      1,024 

 

 

 

 

 

917

 

 

 

 

 

 

917

 

State and political subdivisions

   —      23,125    —      23,125 

 

 

 

 

 

21,511

 

 

 

 

 

 

21,511

 

Corporate bonds

   —      8,312    —      8,312 

 

 

 

 

 

7,366

 

 

 

 

 

 

7,366

 

  

 

   

 

   

 

   

 

 

Totalavailable-for-sale securities

  $996   $84,532   $ —     $85,528 

 

$

999

 

 

$

111,147

 

 

$

 

 

$

112,146

 

Equity securities

  $37   $—     $46   $83 

 

$

46

 

 

$

 

 

$

 

 

$

46

 

20


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 June 30, 2019March 31, 2020 and December 31, 2018,2019, by level within the fair value hierarchy. Impaired loans areAn impaired loan is written down to fair value through the establishment of specific reserves.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:include quoted market prices for identical assets classified as Level I inputs;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, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets measured on a nonrecurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Other real estate owned

 

$

 

 

$

 

 

$

99

 

 

$

99

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Assets measured on a nonrecurring basis:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Impaired loans

 

$

 

 

$

 

 

$

553

 

 

$

553

 

Other real estate owned

 

 

 

 

 

 

 

 

99

 

 

 

99

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE5- FAIR VALUE MEASUREMENTS(CONTINUED)

(Dollars in thousands)

  Level I   Level II   Level III   Total 

June 30, 2019

        

Assets measured on a nonrecurring basis:

  

Impaired loans

  $ —     $ —     $389   $389 

Other real estate owned

   —      —      99    99 

December 31, 2018

        

Assets measured on a nonrecurring basis:

        

Impaired loans

  $—     $—     $636   $636 

Other real estate owned

   —      —      99    99 

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:value. As of March 31, 2020 there were no impaired loans carried at fair value under the methods described above.

 

   Quantitative Information about Level III Fair Value Measurements
   Fair Value   Valuation  Unobservable  Range
(Dollars in thousands)  Estimate   

Techniques

  

Input

  

(Weighted Average)

June 30, 2019

        

Impaired loans

  $389   Discounted cash flow  Remaining term Discount rate  

8.5 mos to 26 yrs / ( 15 yrs)

5.1% to 7.5% / (5.7%)

Other real estate owned

   99   Appraisal of collateral(1)  

Appraisal adjustments (2)

Liquidation expense(2)

  -33%-10%

December 31, 2018

        

Impaired loans

  $636   Discounted cash flow  Remaining term Discount rate  1.2 yrs to 26.5 yrs / (10.9 yrs) 5.1% to 7.5% / (5.88%)

Other real estate owned

   99   Appraisal of collateral(1)  

Appraisal adjustments(2)

Liquidation expense(2)

  -33%-10%

 

 

Quantitative Information about Level III Fair Value Measurements

 

(Dollars in thousands)

 

Fair Value

Estimate

 

 

Valuation

Techniques

 

Unobservable

Input

 

Range

(Weighted Average)

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Appraisal adjustments 2

 

 

-33

%

Other real estate

   owned

 

$

99

 

 

Appraisal of collateral 1

 

Liquidation expense 2

 

 

-10

%

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Remaining term

 

3.9 yrs to 26.9 yrs / (16 yrs)

 

Impaired loans

 

$

553

 

 

Discounted cash flow

 

Discount rate

 

3.5% to 6.0% / (5.3%)

 

 

 

 

 

 

 

 

 

Appraisal adjustments 2

 

 

-33

%

Other real estate

   owned

 

 

99

 

 

Appraisal of collateral 1

 

Liquidation expense 2

 

 

-10

%

 

(1)

1

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

(2)

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.

21


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 June 30, 2019March 31, 2020 and December 31, 20182019 are as follows:

 

(Dollars in thousands)

  Carrying
Value
   Level I   Level II   Level III   Fair Value 

June 30, 2019

          

Financial assets

          

Cash and cash equivalents

  $57,277   $57,277   $—     $—     $57,277 

Securitiesavailable-for-sale

   86,297    988    85,309    —      86,297 

Securitiesheld-to-maturity

   19,657    —      19,696    —      19,696 

Equity securities

   87    41    —      46    87 

Restricted stock

   4,614    N/A    N/A    N/A    N/A 

Loans held for sale

   409    409    —      —      409 

Net loans

   544,075    —      —      554,080    554,080 

Bank-owned life insurance

   16,760    16,760    —      —      16,760 

Accrued interest receivable

   1,671    1,671    —      —      1,671 

Mortgage servicing rights

   296    —      —      296    296 

Financial liabilities

          

Deposits

  $623,328   $498,967   $—     $124,093   $623,060 

Short-term borrowings

   35,474    35,474    —      —      35,474 

Other borrowings

   6,576    —      —      6,508    6,508 

Accrued interest payable

   125    125    —        125 

December 31, 2018

          

Financial assets

          

Cash and cash equivalents

  $45,564   $45,564   $—     $—     $45,564 

Securitiesavailable-for-sale

   85,528    996    84,532    —      85,528 

Securitiesheld-to-maturity

   20,688    —      20,118    —      20,118 

Equity securities

   83    37    —      46    83 

Restricted stock

   4,614    N/A    N/A    N/A    N/A 

Loans held for sale

   108    108    —      —      108 

Net loans

   543,067    —      —      543,076    543,076 

Bank-owned life insurance

   13,554    13,554    —      —      13,554 

Accrued interest receivable

   1,581    1,581    —      —      1,581 

Mortgage servicing rights

   281    —      —      281    281 

Financial liabilities

          

Deposits

  $606,498   $490,007   $—     $114,434   $604,441 

Short-term borrowings

   37,415    37,415    —      —      37,415 

Other borrowings

   8,525    —      —      8,251    8,251 

Accrued interest payable

   88    88    —      —      88 

(Dollars in thousands)

 

Carrying

Value

 

 

Level I

 

 

Level II

 

 

Level III

 

 

Fair Value

 

March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

96,272

 

 

$

96,272

 

 

$

 

 

$

 

 

$

96,272

 

Securities available-for-sale

 

 

108,263

 

 

 

1,020

 

 

 

107,243

 

 

 

 

 

 

108,263

 

Securities held-to-maturity

 

 

11,242

 

 

 

 

 

 

11,542

 

 

 

 

 

 

11,542

 

Equity securities

 

 

79

 

 

 

33

 

 

 

 

 

 

46

 

 

 

79

 

Restricted stock

 

 

4,614

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Loans held for sale

 

 

256

 

 

 

256

 

 

 

 

 

 

 

 

 

256

 

Net loans

 

 

548,200

 

 

 

 

 

 

 

 

 

549,544

 

 

 

549,544

 

Bank-owned life insurance

 

 

19,023

 

 

 

19,023

 

 

 

 

 

 

 

 

 

19,023

 

Accrued interest receivable

 

 

1,611

 

 

 

1,611

 

 

 

 

 

 

 

 

 

1,611

 

Mortgage servicing rights

 

 

330

 

 

 

 

 

 

 

 

 

330

 

 

 

330

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

671,162

 

 

$

544,849

 

 

$

 

 

$

128,022

 

 

$

672,871

 

Short-term borrowings

 

 

40,605

 

 

 

40,605

 

 

 

 

 

 

 

 

 

40,605

 

Other borrowings

 

 

6,206

 

 

 

 

 

 

 

 

 

6,326

 

 

 

6,326

 

Accrued interest payable

 

 

119

 

 

 

119

 

 

 

 

 

 

 

 

 

119

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2019

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Financial assets

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash and cash equivalents

 

$

102,017

 

 

$

102,017

 

 

$

 

 

$

 

 

$

102,017

 

Securities available-for-sale

 

 

112,146

 

 

 

999

 

 

 

111,147

 

 

 

 

 

 

112,146

 

Securities held-to-maturity

 

 

13,869

 

 

 

 

 

 

13,950

 

 

 

 

 

 

13,950

 

Equity securities

 

 

92

 

 

 

46

 

 

 

 

 

 

46

 

 

 

92

 

Restricted stock

 

 

4,614

 

 

N/A

 

 

N/A

 

 

N/A

 

 

N/A

 

Loans held for sale

 

 

622

 

 

 

622

 

 

 

 

 

 

 

 

 

622

 

Net loans

 

 

544,616

 

 

 

 

 

 

 

 

 

542,981

 

 

 

542,981

 

Bank-owned life insurance

 

 

18,894

 

 

 

18,894

 

 

 

 

 

 

 

 

 

18,894

 

Accrued interest receivable

 

 

1,641

 

 

 

1,641

 

 

 

 

 

 

 

 

 

1,641

 

Mortgage servicing rights

 

 

328

 

 

 

 

 

 

 

 

 

328

 

 

 

328

 

Financial liabilities

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Deposits

 

$

683,546

 

 

$

555,985

 

 

$

 

 

$

127,440

 

 

$

683,425

 

Short-term borrowings

 

 

38,889

 

 

 

38,889

 

 

 

 

 

 

 

 

 

38,889

 

Other borrowings

 

 

6,330

 

 

 

 

 

 

 

 

 

6,273

 

 

 

6,273

 

Accrued interest payable

 

 

127

 

 

 

127

 

 

 

 

 

 

 

 

 

127

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 6 – FAIR VALUES OF FINANCIAL INSTRUMENTS(CONTINUED)

 

The Company also has unrecognized financial instruments at June 30, 2019March 31, 2020 and December 31, 2018.2019.  These financial instruments relate to commitments to extend credit and letters of credit.  The aggregated contract amount of such financial instruments was approximately $190$207.1 million at June 30, 2019March 31, 2020 and $173.3$211.3 million at December 31, 2018.2019.  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.

NOTE22


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 and six month period ended June 30, 2019March 31, 2020 and 2018:2019:

 

(Dollars in thousands)

  Pretax   Tax Effect   After-tax 

Three months ended June 30, 2019

      

Balance as of March 31, 2019

  $(1,022  $214   $(808

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

   762    (160   602 

Amortization of held-to-maturity discount resulting from transfer

   15    (3   12 
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income

   777    (163   614 
  

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2019

  $(245  $51   $(194
  

 

 

   

 

 

   

 

 

 

Six months ended June 30, 2019

      

Balance as of December 31, 2018

  $(1,786  $374   $(1,412

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

   1,511    (317   1,194 

Amortization of held-to-maturity discount resulting from transfer

   30    (6   24 
  

 

 

   

 

 

   

 

 

 

Total other comprehensive income

   1,541    (323   1,218 
  

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2019

  $(245  $51   $(194
  

 

 

   

 

 

   

 

 

 

Three months ended June 30, 2018

      

Balance as of March 31, 2018

  $(2,165  $454   $(1,711

Unrealized holding loss on available-for-sale securities arising during the period

   (156   33    (123

Amortization of held-to-maturity discount resulting from transfer

   20    (4   16 
  

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

   (136   29    (107
  

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2018

  $(2,301  $483   $(1,818
  

 

 

   

 

 

   

 

 

 

Six months ended June 30, 2018

      

Balance as of December 31, 2017

  $(839  $176   $(663

Unrealized holding loss on available-for-sale securities arising during the period

   (1,467   309    (1,158

Reclassify equity AOCI gain to retained earnings

   (36   7    (29

Amortization of held-to-maturity discount resulting from transfer

   41    (9   32 
  

 

 

   

 

 

   

 

 

 

Total other comprehensive loss

   (1,462   307    (1,155
  

 

 

   

 

 

   

 

 

 

Balance as of June 30, 2018

  $(2,301  $483   $(1,818
  

 

 

   

 

 

   

 

 

 

(Dollars in thousands)

 

Pretax

 

 

Tax Effect

 

 

After-tax

 

Three months ended March 31, 2020

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of  December 31, 2019

 

$

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 as of March 31, 2020

 

$

646

 

 

$

(136

)

 

$

510

 

Three months ended March 31,2019

 

 

 

 

 

 

 

 

 

 

 

 

Balance as of  December 31, 2018

 

 

(1,786

)

 

 

374

 

 

$

(1,412

)

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

   the period

 

 

749

 

 

 

(157

)

 

 

592

 

Amortization of held-to-maturity discount resulting from transfer

 

 

15

 

 

 

(3

)

 

 

12

 

Total other comprehensive income

 

 

764

 

 

 

(160

)

 

 

604

 

Balance as of March 31, 2019

 

$

(1,022

)

 

$

214

 

 

$

(808

)

 

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

 

NOTE 8 – LEASESSUBSEQUENT EVENTS

Operating leases

Paycheck Protection Program

The Coronavirus Aid, Relief, and Economic Security Act, or CARES Act, was signed into law on March 27, 2020, and provides over $2 trillion in whicheconomic relief to individuals and businesses impacted by the Company isCOVID-19 pandemic.  The CARES Act authorized the lessee are recorded as operating lease RightSmall 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, we were automatically authorized to originate PPP loans.  An eligible business can apply for a PPP loan up to the greater of: (1) 2.5 times its average monthly “payroll costs;” or (2) $10 million.  PPP loans will have: (a) an interest rate of Use (“ROU”) assets1.0%, (b) a two-year loan term to maturity; and operating lease liabilities, included in other assets(c) principal and other liabilities, respectively, on the consolidated balance sheets. The Company does not currently have any finance leases. Operating lease ROU assets represent the right to use an underlying asset during the lease term and operating lease liabilities represent the obligation to make leaseinterest payments arisingdeferred for six months from the lease. The Company elected to adopt the transition method, which uses a modified retrospective transition approach. ROU assets and operating lease liabilities are recognized as of the date of adoption based on the present valuedisbursement.  The SBA will guarantee 100% of the remaining lease payments using a discount rate that represents the Company’s incremental borrowing rate at the date of initial application.

Operating lease expense, which is comprised of amortizationPPP loans made to eligible borrowers.  The entire principal amount of the ROU assetborrower’s PPP loan, including any accrued interest, is eligible to be reduced by the loan forgiveness amount under the PPP so long as employee and compensation levels of the implicit interest accreted onbusiness are maintained and 75% of the operating lease liability, is recognized on a straight-line basis overloan proceeds are used for payroll expenses, with the lease term, and is recorded in occupancy and equipment expense inremaining 25% of the consolidated statements of income andloan proceeds used for other comprehensive income. The leases relate to bank branches with remaining lease terms of generally 7 to 8 years. Certain lease arrangements contain extension options which are typically 5 years at the then fair market rental rates. As these extension options are generally considered reasonably certain of exercise, they are included in the lease term.qualifying expenses.

As of June 30, 2019, operating lease ROU assetsMay 5, 2020, we had disbursed approximately 667 loans for $91.6 million under the PPP. 

Loan Modifications

As of May 5, we had modified 213 loans aggregating $65.7 million in loan principal, primarily consisting of three to four months deferral of principal and interest payments, and extension of maturity date. The classifications of loans modified were:  151 commercial loans totaling $61.7 million, 31 residential real estate loans totaling $3.4 million and 31 consumer loans totaling $559 thousand. All of the loans provided modifications were $450 thousand and liabilities were $424 thousand. At June 30, 2019, CSB recognized $36 thousandperforming in operating lease cost.

The following table summarizes other information related to our operating leases:accordance with their terms.

 

June 30, 2019

Weighted-average remaining lease term - operating leases in years

7.2

Weighted-average discount rate - operating leases

3.77

The following table presents aggregate lease maturities and obligations as of June 30, 2019:

 

(Dollars in thousands)    

June 30, 2019

  

2019

  $18 

2020

   63 

2021

   71 

2022

   71 

2023

   71 

2024 and thereafter

   195 
  

 

 

 

Total lease payments

   489 
  

 

 

 

Less: interest

   65 
  

 

 

 

Present value of lease liabilities

  $424 
  

 

 

 

23


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 June 30, 2019March 31, 2020 as compared to December 31, 2018,2019, and the consolidated results of operations for the three and six month periodsperiod ended June 30, 2019March 31, 2020 compared to the same periodsperiod in 2018.2019. 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 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 $750$810 million at June 30, 2019 March 31, 2020 as compared to $732$819 million at December 31, 2018.2019. During the sixthree month period ended June 30, 2019,March 31, 2020, net loans increased $1 $4 million. Cash and cash equivalents, and securities increaseddecreased $12 million. Deposits and short-term borrowings decreased $11 million. On the liability side, deposits and repurchase agreements increased by $15 million.

Net loans increased $1 $4 million, or less than 1%, during the six months ended June, 30, 2019 as combined commercial real estate and construction loans decreased $2 million, or -1%, and residential real estate loans increased $3 million, or 2%, from December 31, 2019. Commercial loans increased $3 million, or 2%, as business lines of credits decreaseddrew based on the improved cash flow of businesses within the bank’s markets. Commercial loans decreased $6 million, or 4%, while construction and land development loans decreased $19 million, contributing to the increase in commercial real estate loans by $19 million as construction loans moved to permanent financing. Residential real estate loans increased $7 million, or 4%, and consumer loans increased $497 thousand, or 3%, from December 31, 2018.normal seasonality. Consumers continued to refinance their mortgage loans for historically low long-term fixed rates while home purchase activity has increased. increased through the first half of March. Residential mortgage loan originations for the sixthree months ended June 30, 2019March 31, 2020 totaled $28$13 million, a decreasean increase from $31$12.5 million in originations during the sixthree month period ended June 30, 2018.March 31, 2019. Originations sold into the secondary market were $5.9$4.2 million and $4.3$2.6 million, respectively during the sixthree month periods ended June 30, 2019March 31, 2020 and June 30, 2018.March 31, 2019. The Bank originates and sells primarily fixed-rate thirty year mortgages into the secondary market.

The allowance for loan losses as a percentage of total loans was 1.19% at June 30, 2019 as compared to 1.08% at December 31, 2018. Outstanding loan balances increased 1% to $551 million at June 30, 2019. The allowance for loan losses increased to $6.5 million at June 30, 2019 following a provision of $570 thousand and net loan recoveries of $60 thousand for the current six months ended June 30, 2019.

 

24


CSB BANCORP, INC.

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

 

NonaccrualThe allowance for loan losses increased $833 thousand from the year ago quarter to $7.1 million or 1.28% of total loans. The Company has not early adopted CECL which has been delayed for smaller reporting companies. Outstanding loan balances increased 1% to $555 million at March 31, 2020. Net charge-offs increased to $75 thousand, or an annualized 0.05% of average loans, in the current quarter compared to the $95 thousand recovery, or -0.07% in the year-ago quarter. We believe the allowance level is appropriate given the low level of problem loans and current composition of the overall loan portfolio.  

Nonperforming loans increased to $4.4 million, or 0.79% of total loans from $3.2 million, or 0.58%, a year ago. The increase is a result of one commercial real estate credit facility for $1.5 million being placed on nonaccrual status during the first six months ofsecond quarter 2019. For the sixthree months ending June 30, 2019 March 31, 2020 loans totaling $1.9 million$174 thousand were placed on nonaccrual status, there were $32$26 thousand in charge-downs recognized, and pay downs of $673$79 thousand were received.

 

 

March 31,

 

 

December 31,

 

 

March 31,

 

(Dollars in thousands)

  June 30,
2019
 December 31,
2018
 June 30,
2018
 

 

2020

 

 

2019

 

 

2019

 

Non-performing loans

  $4,497  $3,329  $4,399 

 

$

4,369

 

 

$

4,539

 

 

 

3,188

 

Other real estate

   99  99   —   

 

 

99

 

 

 

99

 

 

 

99

 

Repossessed assets

   —     —     —   

 

 

 

 

 

20

 

 

 

15

 

Allowance for loan losses

   6,537  5,907  5,918 

 

 

7,120

 

 

 

7,017

 

 

 

6,287

 

Total loans

   550,612  548,974  535,427 

 

 

555,320

 

 

 

551,632

 

 

 

548,220

 

Allowance: Loans

   1.19 1.08 1.11

Allowance:Non-performing loans

   1.5 1.8 1.3

Allowance for loan losses as a percentage of total loans

 

 

1.28

%

 

 

1.27

%

 

 

1.15

%

Allowance for loan losses to total nonperforming loans

 

1.6x

 

 

1.5x

 

 

2.0x

 

The ratio of gross loans to deposits was 88.3%82.7% at June 30, 2019,March 31, 2020, compared to 90.5%80.7% at December 31, 2018.2019.

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 gainslosses of $53$627 thousand within theavailable-for-sale andheld-to-maturity portfolios as of June 30, 2019, March 31, 2020, were 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 impairments on June 30, 2019,March 31, 2020, are considered temporary and no impairment loss relating to these securities has been recognized.

Deposits increased $17decreased $12 million, or 3%2%, from December 31, 20182019 with noninterest bearing deposits decreasing approximately $5$9 million and interest-bearing deposit accounts increasingdecreasing approximately $22$3 million. Total deposits as of June 30, 2019March 31, 2020 are $28$64 million greater than June 30, 2018March 31, 2019 deposit balances. On a year over year comparison, increases were recognized in noninterest-bearing demand deposits of $2$11 million, interest-bearing demand deposits of $13$38 million, money market accounts of $2$3 million, savings of $3$6 million, and time deposits of $8$6 million.

Short-term borrowings consisting of overnight repurchase agreements with retail customers decreased $2increased $1 million to $35$41 million at June 30, 2019 March 31, 2020 as compared to December 31, 20182019 and other borrowings decreased $1.9 million$124 thousand as the Company repaid FHLB advances.

Total shareholders’ equity amounted to $81$88 million, or 10.9%10.8%, of total assets at June 30, 2019 March 31, 2020 up slightly from December 31, 2018.2019. The increase in shareholders’ equity during the sixthree months ending June 30, 2019 March 31, 2020 was due to net income of $5.1$2.5 million and an increase in accumulated other comprehensive income of $1.2 million$438 thousand offset by dividends declared of $1.4 million.$768 thousand. The Company and the Bank met all regulatory capital requirements at June 30, 2019.March 31, 2020.

RESULTS OF OPERATIONS

Three months ended June 30,March 31, 2020 and 2019 and 2018

For the quarters ended June 30,March 31, 2020 and 2019, and 2018, the Company recorded net income of $2.6$2.5 million and $2.3$2.5 million and $.94$0.91 and $.85$0.93 per share, respectively. The $262$57 thousand increasedecrease in net income for the quarterperiod was primarily the result of a $419$95 thousand increase decrease in net interest income and an increase of $145$216 thousand in other noninterest expenses. The decreases were partially offset by an increase of $119 thousand in other noninterest income, and a decrease in the provision for loan losses of $39 thousand. The increases were partially offset by an increase of $281$107 thousand in other noninterest expenses and a $60$28 thousand increasedecrease in federal income tax provision.provision.

Return on average assets and return on average equity were 1.39% and 12.91%, respectively, for the three month period of 2019, compared to 1.30% and 12.94%, respectively for the same quarter in 2018.25


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 1.23% and 11.47%, respectively, for the three month period of 2020, compared to 1.41% and 13.20%, respectively for the same quarter in 2019.

Average Balance Sheets and Net Interest Margin Analysis

 

   For the three months ended June 30, 
   2019  2018 

(Dollars in thousands)

  Average
balance
   Average
rate
  Average
balance
   Average
rate
 

ASSETS

       

Fedeeral funds sold

  $212    2.08 $621    1.74

Interest-earning deposits with other banks

   39,772    2.19   19,960    1.61 

Taxable securities

   87,942    2.66   93,170    2.57 

Tax-exempt securities

   23,322    2.92   26,096    2.92 

Loans

   547,981    5.26   534,852    4.89 
  

 

 

    

 

 

   

Total earning assets

   699,229    4.68  674,699    4.39

Other assets

   46,429     41,203   
  

 

 

    

 

 

   

TOTAL ASSETS

  $745,658    $715,902   
  

 

 

    

 

 

   

LIABILITIES AND SHAREHOLDERS’ EQUITY

       

Interest-bearing demand deposits

  $127,211    0.46 $118,506    0.30

Savings deposits

   186,179    0.54   181,097    0.33 

Time deposits

   124,001    1.69   116,824    1.11 

Other borrowed funds

   44,803    1.15   52,592    1.01 
  

 

 

    

 

 

   

Total interest bearing liabilities

   482,194    0.87  469,019    0.59

Non-interest bearing demand deposits

   180,167     172,784   

Other liabilities

   2,959     2,060   

Shareholders’ Equity

   80,338     72,039   
  

 

 

    

 

 

   

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

  $745,658    $715,902   
  

 

 

    

 

 

   

Taxable equivalent net interest spread

     3.81    3.80

Taxable equivalent net interest margin

     4.08    3.98

 

 

For the Three Months Ended March 31,

 

 

 

2020

 

 

2019

 

(Dollars in thousands)

 

Average

balance 1

 

 

Interest

 

 

Average

rate 2

 

 

Average

balance 1

 

 

Interest

 

 

Average

rate 2

 

ASSETS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Federal funds sold

 

$

 

 

$

 

 

 

0.00

%

 

$

400

 

 

$

3

 

 

 

2.53

%

Interest-earning deposits

 

 

75,817

 

 

 

239

 

 

 

1.27

 

 

 

26,442

 

 

 

172

 

 

 

2.64

 

Taxable securities

 

 

104,474

 

 

 

609

 

 

 

2.34

 

 

 

87,058

 

 

 

586

 

 

 

2.73

 

Tax-exempt securities 4

 

 

21,186

 

 

 

151

 

 

 

2.87

 

 

 

23,132

 

 

 

170

 

 

 

2.98

 

Loans 3,4

 

 

560,142

 

 

 

6,855

 

 

 

4.92

 

 

 

550,483

 

 

 

7,075

 

 

 

5.21

 

Total interest-earning assets

 

 

761,619

 

 

 

7,854

 

 

 

4.15

%

 

 

687,515

 

 

 

8,006

 

 

 

4.72

%

Noninterest-earning assets

 

 

50,790

 

 

 

 

 

 

 

 

 

 

 

42,666

 

 

 

 

 

 

 

 

 

TOTAL ASSETS

 

$

812,409

 

 

 

 

 

 

 

 

 

 

$

730,181

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

LIABILITIES AND SHAREHOLDERS'

   EQUITY

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interest-bearing demand deposits

 

$

160,932

 

 

 

143

 

 

 

0.36

%

 

 

118,844

 

 

 

113

 

 

 

0.39

%

Savings deposits

 

 

201,450

 

 

 

128

 

 

 

0.26

 

 

 

188,255

 

 

 

258

 

 

 

0.56

 

Time deposits

 

 

127,198

 

 

 

560

 

 

 

1.77

 

 

 

118,961

 

 

 

454

 

 

 

1.55

 

Borrowed funds

 

 

43,582

 

 

 

70

 

 

 

0.65

 

 

 

45,403

 

 

 

132

 

 

 

1.18

 

Total interest-bearing liabilities

 

 

533,162

 

 

 

901

 

 

 

0.68

%

 

 

471,463

 

 

 

957

 

 

 

0.82

%

Noninterest-bearing demand deposits

 

 

188,510

 

 

 

 

 

 

 

 

 

 

 

177,779

 

 

 

 

 

 

 

 

 

Other liabilities

 

 

3,647

 

 

 

 

 

 

 

 

 

 

 

2,901

 

 

 

 

 

 

 

 

 

Shareholders' Equity

 

 

87,090

 

 

 

 

 

 

 

 

 

 

 

78,038

 

 

 

 

 

 

 

 

 

TOTAL LIABILITIES AND SHAREHOLDERS'

   EQUITY

 

$

812,409

 

 

 

 

 

 

 

 

 

 

$

730,181

 

 

 

 

 

 

 

 

 

Taxable equivalent net interest income

 

 

 

 

 

$

6,953

 

 

 

 

 

 

 

 

 

 

$

7,049

 

 

 

 

 

Taxable equivalent net interest spread

 

 

 

 

 

 

 

 

 

 

3.47

%

 

 

 

 

 

 

 

 

 

 

3.90

%

Taxable equivalent net interest margin

 

 

 

 

 

 

 

 

 

 

3.67

%

 

 

 

 

 

 

 

 

 

 

4.16

%

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 June 30, 2019,March 31, 2020, was $8.1$7.8 million representing a $777$151 thousand increase,decrease, or an 11% improvement, a 2% decline, compared to the same period in 2018.2019. This increasedecrease was primarily due to average loan rates increasing 37decreasing 29 basis points as well aspartially offset by a volume increase of $13$10 million for the quarter ended June 30, 2019March 31, 2020 as compared to the secondfirst quarter 2018.2019. Interest expense for the quarter ended June 30, 2019March 31, 2020 was $1.1 million, an increase$901 thousand, a decrease of $358$56 thousand, or 52%6%, from the same period in 2018.2019. The increasedecrease in interest expense occurred primarily due to an increasea decrease in raterates on all interest-bearingdeposit liabilities except time deposits for the quarter ended June 30, 2019.March 31, 2020.

For the quarter ended June 30, 2019, theMarch 31, 2020, the provision for loan losses was $285 $178 thousand, compared to a provision of $324$285 thousand provision for the same quarter in 2018.2019. At December 31, 2019 the allowance had an unallocated reserve portion that was allocated during first quarter 2020 including a qualitative factor for the developing Covid-19 pandemic.  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 loan losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offscharge-ffs and current economic trends.

Noninterest income for the quarter ended June 30, 2019, was $1.3 million, an increase of $145 thousand, or 12%, compared to the same quarter in 2018. Service charges on deposit accounts increased $13 thousand, or 4%, compared to the same quarter in 2018 primarily from a volume increase in overdraft fees. The gain on the sale of mortgage loans to the secondary market increased to $76 thousand for the quarter ended June 30, 2019 as additional loan volume was sold into the secondary market. Debit card interchange income increased $46 thousand, or 14%, with greater fees generated from usage in the second quarter of 2019. Fees from trust and brokerage services decreased $5 thousand to $212 thousand for the second quarter 2019 as compared to the same quarter in 2018. Earnings on bank owned life insurance increased $37 thousand for the second quarter 2019, see discussion in Results of Operations for the six months periods.26

Noninterest expenses for the quarter ended June 30, 2019 increased $281 thousand, or 6%, compared to the second quarter of 2018. Salaries and employee benefits increased $197 thousand, or 7%, a result of increases in employees, base salary, and other benefits. Marketing and public relations expense increased


CSB BANCORP, INC.

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

 

$20Noninterest income for the quarter ended March 31, 2020, was $1.3 million, an increase of $119 thousand, or 10%, compared to the same quarter in 2019. Earnings on bank owned life insurance increased $46 thousand for the first quarter 2020 a result of adding policies in 2019. The gain on the sale of mortgage loans to the secondary market increased by $35 thousand for the quarter ended March 31, 2020 as additional loan volume was sold into the secondary market.Debit card interchange income increased $28 thousand, or 8%, with greater fees generated from usage in the first quarter of 2020. Fees from trust and brokerage services increased $6 thousand to $230 thousand for the first quarter 2020 as compared to the same quarter in 2019. Service charges on deposit accounts decreased $1 thousand, or 17%less than 1%, compared to the same quarter in 2019 primarily from a volume decrease in overdraft fees.

Noninterest expenses for the quarter ended March 31, 2020 increased $216 thousand, or 5%, compared to the first quarter of 2019. Salaries and employee benefits increased $126 thousand, or 4%, a result of increases in employees, base salary, and other benefits. The Ohio financial institutions tax increased $18 thousand in the first quarter due to the Company’s increased capital base. Marketing and public relations expense increased $10 thousand, or 9%, primarily due to brand recognition initiatives and the opening of a new banking center. Debit card expenses increased $6$13 thousand, or 5%10%, compared to the second first quarter 2018 2019 with increased volume. Software expense rose $11$9 thousand quarter over quarter with additional investment. Occupancy expense decreased $9increased $16 thousand in 20192020 over the secondfirst quarter of 2018.2019. Professional and director fees increased $69decreased $9 thousand for the quarter ended June 30, 2019March 31, 2020 as compared to the secondfirst quarter 2018. The increase was primarily a result of increased service costs related to network improvements.2019.

Federal income tax expense increased $60decreased $28 thousand, or 11%5%, for the quarter ended June 30, 2019 March 31, 2020 as compared to the secondfirst quarter of 2018.2019. The provision for income taxes was $613$591 thousand (effective rate of 19%) for the quarter ended June 30, 2019,March 31, 2020, compared to $553$619 thousand (effective rate of 19%) for the same quarter ended 2018.2019.

RESULTS OF OPERATIONS

Six months ended June 30, 2019 and 2018

For the six months ended June 30, 2019 and 2018, the Company recorded net income of $5.1 million and $4.5 million and $1.87 and $1.64 per share, respectively. The $638 thousand increase in net income for the quarter was primarily the result of a $1 million increase in net interest income, an increase of $224 thousand in other noninterest income, and a decrease in the provision for loan losses of $78 thousand. The increases were partially offset by an increase of $535 thousand in other noninterest expenses and an increase in the federal income tax provision of $170 thousand.

Return on average assets and return on average equity were 1.40% and 13.05%, respectively, for the six month period of 2019, compared to 1.28% and 12.64%, respectively for the same quarter in 2018.

CSB BANCORP, INC.

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

Average Balance Sheets and Net Interest Margin Analysis

   For the six months ended June 30, 
   2019  2018 

(Dollars in thousands)

  Average
balance
   Average
rate
  Average
balance
   Average
rate
 

ASSETS

       

Federal funds sold

  $305    2.38 $508    1.98

Interest-earning deposits in other banks

   33,144    2.37   14,294    1.75 

Taxable securities

   87,502    2.70   94,449    2.56 

Tax-exempt securities

   23,228    2.95   27,419    2.90 

Loans

   549,225    5.24   531,107    4.81 
  

 

 

    

 

 

   

Total earning assets

   693,404    4.70  667,777    4.34

Other assets

   44,598     40,421   
  

 

 

    

 

 

   

TOTAL ASSETS

  $738,002    $708,198   
  

 

 

    

 

 

   

LIABILITIES AND SHAREHOLDERS’ EQUITY

       

Interest-bearing demand deposits

  $123,050    0.42 $117,475    0.26

Savings deposits

   187,211    0.55   180,413    0.30 

Time deposits

   121,495    1.62   114,617    1.05 

Other borrowed funds

   45,101    1.17   52,708    0.91 
  

 

 

    

 

 

   

Total interest bearing liabilities

   476,857    0.85  465,213    0.54

Non-interest bearing demand deposits

   178,980     169,071   

Other liabilities

   2,971     2,306   

Shareholders’ Equity

   79,194     71,608   
  

 

 

    

 

 

   

TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY

  $738,002    $708,198   
  

 

 

    

 

 

   

Taxable equivalent net interest spread

     3.85    3.80

Taxable equivalent net interest margin

     4.12    3.97

Interest income for the six months ended June 30, 2019, was $16 million representing a $1.8 million increase, or a 13% improvement, compared to the same period in 2018. This increase was primarily due to the increase in average loan rates, as well as loan volume increasing $18 million for the period ended June 30, 2019 as compared to the same period in 2018. Interest expense for the six months ended June 30, 2019 was $2.0 million, an increase of $755 thousand, or 60%, from the same period in 2018. The increase in interest expense occurred primarily due to an increase in rate on all interest-bearing liabilities for the six month period ended June 30, 2019.

For the six month period ended June 30, 2019, the provision for loan losses was $570 thousand, compared to a provision of $648 thousand provision for the same period in 2018. 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 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 six month period ended June 30, 2019, was $2.5 million, an increase of $224 thousand, or 10%, compared to the same period in 2018. Service charges on deposit accounts increased $21 thousand, or 4%, compared to the same period in 2018 primarily from increases in overdraft fees. Debit card interchange income increased $80 thousand, or 13%, with increased card usage in the first six months of 2019. The cash surrender value of bank owned life insurance policies increased $39 thousand for the period with the additional purchase of $3 million in policies in 2019.The gain on the sale of mortgage loans to the secondary market increased $18 thousand to $155 thousand for the six month period ended June 30, 2019. Fees from trust and brokerage services were flat for the period.

CSB BANCORP, INC.

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

Noninterest expenses for the six month period ended June 30, 2019 increased $535 thousand, or 6%, compared to the same period in 2018. Salaries and employee benefits increased $402 thousand, or 8%, a result of increases in employees, base salary, and other benefits. Marketing and public relations expense increased $17 thousand, or 7%, with increases in market, brand recognition initiatives, and community support in the company’s market. Debit card expenses increased $17 thousand, or 7%, compared to the prior period in 2018. Occupancy expense declined $25 thousand over the same period in 2018 with a decrease in depreciation and rental expense. Professional and director fees increased $96 thousand for the six month period ended June 30, 2019 as compared to the same period in 2018 with increases in service fees to improve the network.

Federal income tax expense increased $170 thousand, or 16%, for the six months ended June 30, 2019 as compared to the same period in 2018. The provision for income taxes was $1.2 million (effective rate of 19%) for the six month period ended June 30, 2019, compared to $1.1 million (effective rate of 19%) for the same period ended 2018.

CAPITALCAPITAL RESOURCES

The Company maintained a strong capital position with tangible common equity to tangible assets of 10.3% at June 30, 2019March 31, 2020 compared with 9.9% at December 31, 2018.

Effective January 1, 2015 the Federal Reserve adopted final rules implementing Basel III and regulatory capital changes required by the Dodd-Frank Act. The rules apply to both the Company and the Bank. The rules established minimum risk-based and leverage capital requirements for all banking organizations. Effective with the March 31, 2015 Call Report the Bank selected theopt-out election for accumulated other comprehensive income (“AOCI”). This election neutralizes the effects of unrealized gains and losses fromavailable-for-sale securities and other elements of the AOCI account for regulatory capital purposes.2019.

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 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 Form10-K for the year ended December 31, 2018.2019. As of June 30, 2019 March 31, 2020 the Company and the Bank met all capital adequacy requirements to which they were subject.

27


CSB BANCORP, INC.

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

 

   Capital Ratios 
   June 30, 2019  December 31, 2018 

Common Equity Tier 1 Capital To Risk Weighted Assets

   

Consolidated

   14.0  13.4

Bank

   13.8  13.2

Tier 1 Capital To Risk Weighted Assets Ratio

   

Consolidated

   14.0  13.4

Bank

   13.8  13.2

Total Capital To Risk Weighted Assets Ratio

   

Consolidated

   15.2  14.5

Bank

   15.0  14.3

Tier 1 Leverage Ratio

   

Consolidated

   10.4  10.1

Bank

   10.2  9.9

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 met the well-capitalized ratios under the new standard at both March 31, 2020 and December 31, 2019, but has not elected to opt-in to the CBLR framework as of March 31, 2020.

 

 

Capital Ratios

 

 

 

March 31,

2020

 

 

December 31,

2019

 

Common Equity Tier 1 Capital To Risk Weighted Assets

 

 

 

 

 

 

 

 

Consolidated

 

 

14.5

 

 

 

14.3

 

Bank

 

 

14.3

 

 

 

14.1

 

 

 

 

 

 

 

 

 

 

Tier 1 Capital To Risk Weighted Assets Ratio

 

 

 

 

 

 

 

 

Consolidated

 

 

14.5

 

 

 

14.3

 

Bank

 

 

14.3

 

 

 

14.1

 

 

 

 

 

 

 

 

 

 

Total Capital To Risk Weighted Assets Ratio

 

 

 

 

 

 

 

 

Consolidated

 

 

15.7

 

 

 

15.5

 

Bank

 

 

15.5

 

 

 

15.3

 

 

 

 

 

 

 

 

 

 

Tier 1 Leverage Ratio

 

 

 

 

 

 

 

 

Consolidated

 

 

10.2

 

 

 

10.0

 

Bank

 

 

10.1

 

 

 

9.9

 

LIQUIDITY

 

(Dollars in millions)

  June 30, 2019 December 31, 2018 Change 

 

March 31,

2020

 

 

December 31,

2019

 

 

Change

 

Cash and cash equivalents

  $57  $46  $11 

 

$

96

 

 

$

102

 

 

$

(6

)

Unused lines of credit

   97  89  8 

Available from FHLB

 

 

100

 

 

 

97

 

 

 

3

 

Unpledged AFS securities at fair market value

   41  39  2 

 

 

46

 

 

 

61

 

 

 

(15

)

  

 

  

 

  

 

 

 

$

242

 

 

$

260

 

 

$

(18

)

  $195  $174  $21 
  

 

  

 

  

 

 

Net deposits and short-term liabilities

  $614  $599  $15 

 

$

652

 

 

$

673

 

 

$

(21

)

  

 

  

 

  

 

 

Liquidity ratio

   31.8 29.1 2.7 

 

 

37.2

 

 

 

38.6

 

 

 

 

 

Minimum board approved liquidity ratio

   20.0 20.0  —   

 

 

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.

The liquidity ratio was 31.8%37.2% and 29.1% 38.6% at June 30, 2019March 31, 2020 and December 31, 2018.2019.

OFF-BALANCE SHEET ARRANGEMENTSOff-Balance Sheet Arrangements

The Company does not have anyoff-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.

 

28


CSB BANCORP, INC.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

ITEM 3 –QUANTITATIVE- QUANTITATIVE AND QUALITATIVEQUALITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the quantitative and qualitative disclosures about

COVID-19 added market risks as of June 30, 2019, from risk disclosure which should be read with the disclosures presented in the Company’s Annual Report on Form10-K for the fiscal year ended December 31, 2018.2019. 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 more than 8% of Ohio’s active workforce filing for unemployment during the last two weeks of March alone. We anticipate that second quarter will be very difficult for many small businesses, organizations and households, and are focused on working to address the financial needs within our primary market areas during this extraordinarily challenging health crisis. This pandemic may affect the Company’s employee base which has been dispersed amongst different buildings and home to ensure no one department could be disrupted by illness. The lack of economic activity, layoffs, and illness among businesses may have a material adverse effect on the Company’s business.

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.

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 June 30, 2019March 31, 2020 and-200 through +400 basis point changes at December 31, 2018.2019. The net interest income reflected is for the first twelve monthtwelve-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.    

 

June 30, 2019

 

March 31, 2020

March 31, 2020

(Dollars in thousands)(Dollars in thousands)           

(Dollars in thousands)

 

 

Change in

Interest Rates

(basis points)

  Net
Interest
Income
   Dollar
Change
   Percentage
Change
 Board
Policy
Limits
 

 

Net Interest

Income

 

 

Dollar

Change

 

 

Percentage

Change

 

 

Board Policy

Limits

 

 

+400

  $ 29,780   $893    3.1 +/-25

 

$

26,615

 

 

$

(675

)

 

 

(2.5

)

 

+/- 25

 

%

+300

   29,597    710    2.5  +/-15 

 

 

26,980

 

 

 

(310

)

 

 

(1.1

)

 

+/-15

 

 

+200

   29,388    501    1.7  +/-10 

 

 

26,969

 

 

 

(321

)

 

 

(1.2

)

 

+/-10

 

 

+100

   29,118    231    0.8  +/-5 

 

 

27,087

 

 

 

(203

)

 

 

(0.7

)

 

+/-5

 

 

0

   28,887    —      —     —   

 

 

27,290

 

 

 

 

 

 

 

 

 

 

 

-100

   28,557    (330   (1.1 +/-5 

 

 

27,177

 

 

 

(113

)

 

 

(0.4

)

 

+/-5

 

 

-200

   27,950    (937   (3.3 +/-10 

 

 

26,800

 

 

 

(490

)

 

 

(1.8

)

 

+/-10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

December 31, 2018

 

December 31, 2019

December 31, 2019

 

 

+400

  $30,114   $931    3.2 +/-25

 

$

30,266

 

 

$

1,481

 

 

 

5.1

 

 

+/- 25

 

%

+300

   29,922    739    2.5  +/-15 

 

 

29,958

 

 

 

1,173

 

 

 

4.2

 

 

+/-15

 

 

+200

   29,701    518    1.8  +/-10 

 

 

29,599

 

 

 

814

 

 

 

3.0

 

 

+/-10

 

 

+100

   29,436    253    0.9  +/-5 

 

 

29,208

 

 

 

423

 

 

 

1.5

 

 

+/-5

 

 

0

   29,183    —      —     —   

 

 

28,785

 

 

 

 

 

 

 

 

 

 

 

-100

   28,831    (352   (1.2 +/-5 

 

 

27,955

 

 

 

(830

)

 

 

(2.9

)

 

+/-5

 

 

-200

   27,880    (1,303   (4.5 +/-10 

 

 

26,767

 

 

 

(2,018

)

 

 

(7.0

)

 

+/-10

 

 

29


CSB BANCORP, INC.

CONTROLS AND PROCEDURES

ITEM 4—CONTROLS4 - 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 Rule13a-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 Form10-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 Form10-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 Form10-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 Form10-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 Form10-Q, are being prepared.

CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

There were no changes during the period covered by this Quarterly Report on Form10-Q in the Company’s internal control over financial reporting (as defined in Rule13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.


CSB BANCORP, INC.

FORM10-Q

Quarter ended June  30, 2019March 31, 2020

PART II – OTHER INFORMATION

ITEM 1-ITEM 1 - LEGAL PROCEEDINGS.
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 Form10-K for the fiscal year ended December 31, 2018.
ITEM 2-UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.
On July 7, 2005 CSB Bancorp, Inc. filed Form8-K with the Commission announcing that its Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to 10% 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. No repurchases were made during the quarterly period ended June 30, 2019.
ITEM 3-DEFAULTS UPON SENIOR SECURITIES.
Not applicable.
ITEM 4-MINE SAFETY DISCLOSURES.
Not applicable.
ITEM 5-OTHER INFORMATION.
Not applicable.

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, 2019, 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 July 7, 2005 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 10% 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. No repurchases were made during the quarterly period ended March 31, 2020.

ITEM 3 - DEFAULTS UPON SENIOR SECURITIES.

Not applicable.

ITEM 4 - MINE SAFETY DISCLOSURES.

Not applicable.

ITEM 5 - OTHER INFORMATION.

Not applicable.

31


CSB BANCORP, INC.

FORM 10-Q

Quarter ended June 30, 2019March 31, 2020

PART II – OTHER INFORMATION

 

ITEM 6 - Exhibits.

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 Form10-Q filed August 6, 2004, Exhibit 3.1, film number 04958544)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 Form10-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).

4.0

Specimen stock certificate

Description of Capital Stock (incorporated by reference to Registrant’sregistrants Annual Report on Form10-SB) 10-K filed on March 16, 2020, Exhibit 4.0, file number 000-21714). (P).

11

Statement Regarding Computation of Per Share Earnings.

31.1

Rule13a-14(a)/15d-14(a) Chief Executive Officer’s Certification.

31.2

Rule13a-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 materials from the Company’s Quarterly Report on Form10-Q for the quarter ended June 30, 2019March 31, 2020 formatted in XBRL (extensible Business Reporting Language): (i) Consolidated Balance Sheets: (ii) Consolidated Statements of Income: (iii) Consolidated Statements of Comprehensive Income: (iv) Consolidated Statements of Changes in Shareholders’ Equity: (v) Condensed Consolidated Statements of Cash Flows: and (vi) Notes to Consolidated Financial Statements.

 


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: August

May 8, 2019

2020

/s/ Eddie L. Steiner

Eddie L. Steiner

President

Chief Executive Officer

Date: August

May 8, 2019

2020

/s/ Paula J. Meiler

Paula J. Meiler

Senior Vice President

Chief Financial Officer

 

 

3833