SECURITY AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-QSB (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended December 31, 1997 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________________ to ____________________ Commission File Number: 0-26650 CSB FINANCIAL GROUP, INC. ------------------------------------------------------ (Exact name of registrant as specified in its charter) United States 37-1336338 - --------------------------------- --------------------------- (State or other jurisdiction (I.R.S. Employer ID Number) of incorporation or organization) 200 South Poplar, Centralia, Illinois 62801 - ---------------------------------------- ---------- (Address of principal executive offices) (Zip code) Registrant's telephone number, including area code (618) 532-1918 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 the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date. Class Shares outstanding at February 11, 1998 - ----------------------------- --------------------------------------- Common Stock, Par Value $0.01 839,725 Contents PART I. FINANCIAL INFORMATION Item I. Financial Statements - Consolidated Statements of Financial Condition - Consolidated Statements of Income - Consolidated Statements of Cash Flows - Notes to Consolidated Financial Statements Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 2. Changes in Securities Item 3. Defaults Upon Senior Securities Item 4. Submission of Matters to a Vote of Security Holders Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K SIGNATURES CSB FINANCIAL GROUP, INC. AND SUBSIDIARY CONSOLIDATED BALANCE SHEETS December 31, 1997 and September 30, 1997 (in thousands, except share data) December September 31, 30, --------------------- 1997 1997 --------------------- (Unaudited) (Audited) Cash and cash equivalents ......................................... $ 1,090 $ 2,675 Securities: Available for sale ............................................. 17,443 16,777 Nonmarketable equity securities ................................ 210 210 Loans ............................................................. 27,245 27,299 Allowance for loan losses ......................................... (173) (165) ------------------ Loans, net .......................................... 27,072 27,134 Premises and equipment ............................................ 597 602 Accrued interest receivable ....................................... 402 290 Intangible assets ................................................. 645 660 Other assets ...................................................... 143 186 ------------------ Total assets ........................................ $47,602 $48,534 ================== LIABILITIES: Deposits: Demand ...................................................... $ 8,661 $ 9,073 Savings ..................................................... 3,397 3,395 Time deposits > $100,000 .................................... 1,195 1,085 Other time deposits ......................................... 23,026 23,033 ------------------ Total deposits ...................................... 36,279 36,586 ------------------ Other liabilities .............................................. 84 52 Deferred income taxes .......................................... 244 244 ------------------ Total liabilities ................................... 36,607 36,882 ------------------ COMMITMENTS, CONTINGENCIES AND CREDIT RISK STOCKHOLDERS' EQUITY Preferred stock, $0.01 par value; 100,000 shares authorized; none issued Common stock, $0.01 par value; authorized 2,000,000 shares; 1,035,000 shares issued ..................................... 10 10 Paid-in capital ................................................ 7,816 7,813 Retained earnings .............................................. 6,136 6,039 Unrealized gain on securities available for sale, net of income taxes ................................................ 109 110 Unearned employee stock ownership plan shares .................. (195) (202) Management recognition plan .................................... (580) (589) ------------------ 13,296 13,181 Less cost of treasury stock; 195,275 shares at December 31, 1997 and 132,775 shares at September 30, 1997 .................... (2,301) (1,529) ------------------ Total stockholders' equity .......................... 10,995 11,652 ------------------ Total liabilities and stockholders' equity .......... $47,602 $48,534 ================== See Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended December 31, 1997 and 1996 (Unaudited, in thousands, except per share data) Three Months Ended December 31, ----------------- 1997 1996 ----------------- Interest income: Loans and fees on loans ...................................... $ 568 $ 535 Securities ................................................... 284 362 ----------------- Total interest income ............................. 852 897 ----------------- Interest expense on deposits .................................... 417 414 ----------------- Net interest income ............................... 435 483 Provision for loan losses ....................................... 15 22 ----------------- Net interest income after provision for loan losses 420 461 ----------------- Noninterest income: Service charges on deposits .................................. 22 19 Gain on sale of securities ................................... 8 39 Other ........................................................ 8 7 ---------------- Total noninterest income .......................... 38 65 ---------------- Noninterest expense: Compensation and employee benefits ........................... 176 146 Occupancy and equipment ...................................... 21 19 Data processing .............................................. 25 26 Audit, legal and other professional .......................... 30 38 Other ........................................................ 92 117 ---------------- Total noninterest expense ......................... 344 346 ---------------- Income before income taxes ........................ 114 180 Income taxes .................................................... 17 72 ---------------- Net income ........................................ $ 97 $ 108 ================ Earnings per share Basic ........................................................ $ 0.12 $ 0.12 ================ Diluted ...................................................... $ 0.12 $ 0.12 ================ Weighted average shares outstanding Basic ........................................................ 777,434 910,329 ================= Diluted ...................................................... 807,167 924,590 ================= See Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended December 31, 1997 and 1996 (Unaudited, in thousands) Three Months Ended December 31, ----------------- 1997 1996 ----------------- Cash Flows from Operating Activities: Net income ...................................................... $ 97 $ 108 Adjustments to reconcile net income to net cash provided by operating activities: Provision for loan losses .................................... 15 22 Provision for depreciation ................................... 6 6 Amortization of intangible assets ............................ 15 16 Employee stock ownership plan compensation expense ........... 10 17 Management recognition plan compensation expense ............. 9 -- Deferred income taxes ........................................ -- 95 Gain on sale of securities ................................... (8) (39) Amortization and accretion on securities ..................... -- 24 Change in assets and liabilities: (Increase) in accrued interest receivable .................. (112) (1) Decrease in other assets ................................... 43 70 (Decrease) increase in other liabilities ................... 32 (242) ----------------- Net cash provided by operating activities ............ 107 76 ----------------- Cash Flows from Investing Activities: Securities available for sale: Purchases .................................................... (3,097) (952) Proceeds from sales .......................................... 1,007 -- Proceeds from maturities and paydowns ........................ 1,431 1,367 Securities held to maturity: Proceeds from sales .......................................... -- 359 (Increase) decrease in securities purchased under agreements to resell ......................................... -- 300 (Increase) decrease in loans .................................... 47 (792) Purchase of premises and equipment .............................. (1) (22) ------------------ Net cash provided by (used in) investing activities .. (613) 260 ------------------ Cash Flows from Financing Activities: (Decrease) in deposits .......................................... $ (307) $(1,520) Purchase of treasury stock ...................................... (772) (966) ------------------ Net cash (used in) financing activities .............. (1,079) (2,486) (Decrease) in cash and cash equivalents .............. (1,585) (2,150) ------------------ Cash and cash equivalents at beginning of period ................... 2,675 4,766 ------------------ Cash and cash equivalents at end of period ......................... $ 1,090 $ 2,616 ================== Supplemental Disclosures: Cash paid for: Interest on deposits ....................................... $ 418 $ 414 Income taxes ............................................... -- -- Change in gross unrealized gain/loss on securities available for sale ................................................... $ (1) $ 19 Change in deferred taxes on unrealized gain/loss on securities available for sale ......................................... $ -- $ (7) Transfer of securities from held to maturity to available for sale ....................................................... $ -- $ 1,657 See Notes to Consolidated Financial Statements. CSB FINANCIAL GROUP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (IN THOUSANDS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------- Note 1. Background Information On October 5, 1995, CSB Financial Group, Inc. (the "Company") acquired all of the outstanding shares of Centralia Savings Bank (the "Bank") upon the Bank's conversion from a state chartered mutual savings bank to a state chartered capital stock savings bank. Centralia Savings Bank is located in Masson County, Illinois. The Company purchased 100% of the outstanding capital stock of the Bank using 50% of the net proceeds from the Company's initial stock offering which was completed on October 5, 1995. The Company sold 1,035,000 shares of $0.01 par value common stock at a price of $8 per share, including 82,800 shares purchased by the Bank's Employee Stock Ownership Plan ("ESOP"). The ESOP shares were acquired by the Bank with proceeds from a Company loan totaling $662,400. The gross proceeds of the offering were $8,280,000. After reducing gross proceeds for conversion costs of $696,000, net proceeds totaled $7,584,000. The Company's stock trades on the NASDAQ Small Caps market under the symbol "CSBF". The acquisition of the Bank by the Company was accounted for as a "pooling of interests" under generally accepted accounting principles. The application of the pooling of interests method records the assets and liabilities of the merged entities on a historical cost basis with no goodwill or other intangible assets being recorded. Note 2. Basis of Presentation The accompanying consolidated financial statements include the accounts of CSB Financial Group, Inc., its wholly owned subsidiary, Centralia Savings Bank, the Bank, and the Bank's wholly-owned subsidiary, Centralia SLA. Centralia SLA, Inc.'s principal business activity is to provide insurance services. All significant intercompany accounts and transactions have been eliminated in consolidation. The accompanying consolidated financial statements are unaudited and should be read in conjunction with the consolidated financial statements and notes thereto included in the Bank's annual report on Form 10-KSB for the year ended September 30, 1997. The accompanying unaudited consolidated financial statements have been prepared in accordance with the instructions for Form 10-QSB and, therefore, do not include information or footnotes necessary for a complete presentation of financial condition, results of operations, and cash flows in conformity with generally accepted accounting principles. In the opinion of management of the Company, the unaudited consolidated financial statements reflect all adjustments necessary to present fairly the financial position of the Company at December 31, 1997 the results of operations and cash flows for the three months ended December 31, 1997 and 1996. All adjustments to the financial statements were normal and recurring in nature. Operating results for the three months ended December 31, 1997 are not necessarily indicative of the results that may be expected for the year ending September 30, 1998. Note 3. Earnings Per Share Basic earnings per share ("EPS") is computed as net income available to common stockholders divided by the weighted average common shares outstanding and vested shares of the Management Recognition Plan. Diluted EPS is computed as net income available to common stockholders divided by the weighted average common shares outstanding, common stock equivalents, and shares awarded under the Management Recognition Plan weighted to reflect the portion of the period the shares were outstanding. The following reflects earnings per share calculation for basic and diluted methods: For the three months ending December 31, 1997 ---------------------------------- Income Shares Per Share Numerator Denominator Amount ---------------------------------- Basic Earnings Per Share: Weighted average shares outstanding ............ 773,708 Management Recognition Plan shares vested ...... 3,726 -------- Income available to common shareholders ........ $ 97,000 777,434 --------------------- Basic Earnings Per Share ....................... 0.12 Effect of Dilutive Securities: Management Recognition Plan shares granted, but not vested .............................. 14,904 Stock option equivalents ....................... 14,829 -------- Diluted EPS .................................... $ 97,000 807,167 0.12 ================================ December 31, 1996 -------------------------------- Basic Earnings Per Share: Income available to common shareholders divided by weighted average shares ................. $108,000 910,329 --------------------- Basic Earnings Per Share ...................... 0.12 Effect of Dilutive Securities: Management Recognition Plan shares granted and weighted to reflect the portion of the period outstanding ........................ 7,418 Stock option equivalents ...................... 6,843 -------- Diluted Earnings Per Share .................... $108,000 924,590 0.12 ================================ Note 4. Employee Stock Ownership Plan In conjunction with the conversion, an ESOP was created and 82,800 shares of the Company's stock were purchased for future allocation to employees. The purchase was funded with a loan from the Company. Shares are allocated to all eligible employees as the debt is repaid based on a prorata share of total eligible compensation. Employees 21 or older with at least 1,000 hours of service in a twelve month period are eligible to participate. Benefits will vest over a five year period and in full after five years of qualified service. As shares are committed to be released from unallocated shares, the Bank recognizes compensation expense equal to the current market price of the shares, and the shares become outstanding for purposes of calculating earnings per share. The Bank recognized compensation expense for the ESOP of $10 and $17 for the three months ended December 31, 1997 and 1996, respectively. Dividends received, if any, by the ESOP on unallocated shares will be used for debt service. In July 1997, the Company repurchased 41,400 shares of common stock from the ESOP. The ESOP used the proceeds received from the repurchase to reduce outstanding debt to the Company. The balance in unearned ESOP shares was reduced by the cost of the shares sold to the Company. As of December 31, 1997 and September 30, 1997, the ESOP held 24,371 and 25,108, respectively, non-committed shares with a fair value of $329 and $309, respectively. Note 5. Stock Option Plan At the annual stockholder's meeting on May 22, 1996, the Stock Option Plan ("SOP") was approved. The board has reserved an amount of stock equal to 103,500 shares or 10% of the common stock sold in the conversion for issuance under the SOP. The options will be granted by a Committee, comprised of directors, to key employees and directors based on their services. The exercise price of options granted must be at least equal to the fair market value of the common stock on the date the option is granted. The options granted under the plan become exercisable at a rate of 20 percent per year commencing one year after the grant date and 20 percent on each anniversary date for the following four years. As of December 31, 1997, 61,750 options had been granted. The Board adopted the 1997 Nonqualified Stock Option Plan (SOP) effective January 9, 1997. The Board has reserved up to 103,500 shares of common stock under the SOP. The options will be granted by a committee, comprised of directors, to key employees and directors based on their services. The exercise price of the option granted must be at least equal to the fair market value of the common stock on the date the option is granted. The terms of the options and the exercise schedule are at the discretion of the committee and option agreements need not be identical. As of December 31, 1997, no options had been granted. Note 6. Management Recognition Plan The Management Recognition Plan ("MRP") was approved with an effective date of October 10, 1996 and amended on January 9, 1997. The MRP intends to purchase with funds provided by the Company, whether in the open market or from the Holding Company in the form of newly issued shares, 62,100 shares, or 6% of the aggregate number of shares of Common Stock issued and sold in connection with the Conversion for issuance to officers, directors, and employees of the Holding Company. Directors, officers, and employees become vested in the shares of common stock awarded to them under the MRP at a rate of 20% per year, commencing one year after the grant date, and 20% on the anniversary date thereof for the following four years. As of December 31, 1997, 18,630 shares have been awarded and remain outstanding to officers, directors, and employees. MRP compensation expense was $9 for the three months ended December 31, 1997. The bank accounts for its MRP in accordance with Accounting Principle Board Statement 25. Compensation expense is recognized over the vesting period for shares awarded under the plan. Note 7. New Accounting Standards Reporting Comprehensive Income Statement of Financial Accounting Standard No. 130, "Reporting Comprehensive Income" (FAS 130), was issued in July 1997 by the Financial Accounting Standards Board. The standard establishes reporting of comprehensive income for general purpose financial statements. Comprehensive income is defined as the change in equity of a business enterprise during a period and all other events and circumstances from nonowner sources. The Standard is effective for financial statement periods beginning after December 15, 1997. The Company does not believe the adoption of the Standard will have a material impact on the consolidated financial statements. Disclosures about Segments of an Enterprise and Related Information Statement of Financial Accounting Standard No. 131, "Disclosures about Segments of an Enterprise and Related Information" (FAS 131), was issued in July 1997 by the Financial Accounting Standards Board. The standard requires the Corporation to disclose the factors used to identify reportable segments including the basis of organization, differences in products and services, geographic areas, and regulatory environments. FAS 131 additionally requires financial results to be reported in the financial statements for each reportable segment. The Standard is effective for financial statement years beginning after December 15, 1997. The Company does not believe the adoption of the Standard will have a material impact on the consolidated financial statements. CSB FINANCIAL GROUP, INC. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (IN THOUSANDS, EXCEPT PER SHARE DATA) - -------------------------------------------------------------------------------- General The principal assets of the Company are its investment in the Bank's common stock and the net proceeds from the sale of the Company's common stock in connection with the conversion. The Company's principal revenue source is interest and dividends on its investments. The principal business of the Bank consists of attracting deposits from the general public and using these funds to originate mortgage loans secured by one- to four-family residences located primarily in Centralia, Illinois and surrounding areas. The Bank engages in various forms of consumer and commercial lending and invests in mortgage-backed U.S. Government and federal agency securities, local municipal issues, and interest-bearing deposits. The Bank's profitability depends primarily on its net interest income, which is the difference between the interest income it earns on its loans, mortgage-backed and investment portfolio, and its cost of funds, which consists mainly of interest paid on deposits. Net interest income is affected by the relative amounts of interest-earning assets, interest-bearing liabilities, and the interest rates earned or paid on these balances. The Bank's profitability is also affected by the level of noninterest income and expense. Noninterest income consists primarily of late charges and other fees. Noninterest expense consists of salaries and benefits, occupancy related expenses, deposit insurance premiums paid to the SAIF, and other operating expenses. The operations of the Bank are significantly influenced by general economic conditions, related monetary, and fiscal policies of financial institutions' regulatory agencies. Deposit flows and the cost of funds are influenced by interest rates on competing investments and general market rates of interest. Lending activities are affected by the demand for financing real estate and other types of loans, which in turn is affected by the interest rates at which such financing may be offered and other factors affecting loan demand and the availability of funds. Business Strategy The business strategy is to operate as a well capitalized, profitable and independent community savings bank dedicated to financing home ownership and consumer needs in its primary market area. The Bank has implemented this strategy by: (1) closely monitoring the needs of customers and providing quality service; (2) emphasizing consumer-oriented banking by originating construction and permanent loans on residential and commercial real estate and consumer loans, and by offering other financial services and products; (3) improving and maintaining high asset quality; (4) maintaining capital in excess of regulatory requirements; and (5) managing interest rate risk by emphasizing the origination of loans with adjustable rates or shorter terms and investments in short-term and liquid investments. The Bank has adopted various new business strategies intended to increase its presence in its primary market area, thereby increasing its lending activities and sources of income. Liquidity and Capital Resources The Bank's primary sources of funds consists of deposits, repayment and prepayment of loans, maturities of investments and interest-bearing deposits. Scheduled repayments of loans and mortgage-backed securities and maturities of investment securities are predictable, influenced by general interest rates, economic conditions, and competition. The Bank uses its liquidity resources principally to fund existing and future loan commitments, to fund maturing certificates of deposit and demand deposit withdrawals, to invest in other interest-earning assets, to maintain liquidity, and to meet operating expenses. Management believes that loan repayments and other sources of funds will be adequate to meet the Bank's liquidity needs for the immediate future. A portion of the Bank's liquidity consists of cash and cash equivalents, which include investments in highly liquid, short-term deposits. The level of these assets is dependent on the Bank's operating, investing, lending and financing activities during any given period. At December 31, 1997 and September 30, 1997, cash and cash equivalents totaled $1.1 million and $2.7 million, respectively. The decrease in cash and cash equivalents is due to the repurchase of treasury shares. Liquidity management is both a daily and long-term function of business management. If the Bank requires funds beyond its ability to generate them internally, the Bank may borrow additional funds from the FHLB. At December 31, 1997, the Bank had no outstanding advances from the FHLB. At December 31, 1997, the Bank had $343 of outstanding commitments to originate loans. Regulatory Capital Federally insured savings associations such as the Bank are required to maintain a minimum level of regulatory capital. The Corporation and its subsidiary have capital ratios which substantially exceed all regulatory requirements. The Corporation's capital ratios are shown below. December 31, September 30, Minimum 1997 1997 Requirements ------------------------------------------ Total capital to risk weighted assets ........ 48.40% 51.17% 8.0% Tier I capital to risk weighted assets ....... 47.60% 50.40% 4.0% Tier I capital to average assets ............. 21.41% 22.94% 4.0% Financial Condition Total assets decreased $932 to $47,602 at December 31, 1997 from $48,534 at September 30, 1997. The decrease resulted from a decrease of $1,585 in cash and cash equivalents due to the purchase of treasury stock totaling $772 combined with an increase in investments of $666. Gross loans have decreased $54 from $27,299 at September 30, 1997 to $27,245 at December 31, 1997. While the loan portfolio remained consistent at December 31, 1997, the Bank continues to focus their efforts in the expansion of the commercial loan market and continues to originate commercial loans which meet prudent underwriting standards. Securities increased $666 since September 30, 1997. The portfolio consists primarily of U.S. Government and agency securities. All securities are held as available for sale. Results of Operations Three months ended December 31, 1997 compared to three months ended December 31, 1996 Net Income - The Company's net income for the three months ended December 31, 1997 was $97 compared to $108 for the three months ended December 31, 1996. The decrease in net income resulted primarily from a decrease in the average balance of interest earning assets due to the repurchase of treasury shares. Interest Income - Interest income decreased for the three months ended December 31, 1997 by $45 to $852 from $897 for the three months ended December 31, 1996. The decrease is due to a decline in the average balance of interest earning assets due to the repurchase of treasury shares. Interest Expense - Interest expense increased for the three months ended December 31, 1997 by $3 to $417 from $414 for the three months ended December 31, 1996. The deposit portfolio has remained relatively consistent. Management continues to price deposit products based on competition. Net Interest Income - Net interest income for the three months ended December 31, 1997 decreased by $48 to $435 from $483 for the three months ended December 31, 1996. The decrease is attributable to the decrease in the Company's interest earning assets as a result of stock repurchases. Noninterest expense decreased for the three months ended December 31, 1997 by $2 to $344 from $346 for the three months ended December 31, 1996. Compensation cost increased for the quarter by $30. This increase was offset by a decrease in deposit insurance costs of $15 combined with a $8 decrease in professional fees. Management continues to focus efforts on controlling compensation costs. Provision for Loan Losses - The allowance for loan losses is established through a provision for loan losses based on management's evaluation of the risk inherent in its loan portfolio and the general economy. Such evaluation considers numerous factors including, general economic conditions, loan portfolio composition, prior loss experience, the estimated fair value of the underlying collateral and other factors that warrant recognition in providing for an adequate loan loss allowance. During the three months ended December 31, 1997 and 1996, the provision for loan losses was $15 and $22, respectively. Allowance for Loan Losses - The allowance for loan losses was $173 or .63% of loans receivable at December 31, 1997, compared to $165, or .60% of loans receivable at September 30, 1997. The level of nonperforming loans was 1.87% of total loans at December 31, 1997 compared to 1.5% as of September 30, 1997. Based on current reserve levels in relation to total loans receivable and classified assets and the diligent effort put forth by management to address problem loan situations in recent years, management believes its reserves are currently adequate. Net charge-offs amounted to $7 during the first three months of fiscal year 1998, compared to net charge-offs of $8 during the first three months of fiscal year 1997. The allowance for loan losses is established through a provision for loan losses charged to expense. Loans are charged against the allowance for loan losses when management believes that the collectibility of the principal is unlikely. The allowance is an amount that management believes will be adequate to absorb losses on existing loans that may become uncollectible, based on evaluation of the collectibility of loans and prior loss experience. The evaluation also takes into consideration such factors as changes in the nature and volume of the loan portfolio, overall portfolio quality, review of specific problem loans and current economic conditions that may affect the borrowers' ability to pay. While management uses the best information available to make its evaluation, future adjustments to the allowance may be necessary if there are significant changes in economic conditions. In addition, regulatory agencies, as an integral part of their examination process, periodically review the Bank's allowance for loan losses, and may require the Bank to make additions to the allowance based on their judgment about information available to them at the time of their examinations. Loans are considered impaired when, based on current information and events, it is probable that the Bank will not be able to collect all amounts due. The portion of the allowance for loan losses applicable to impaired loans has been computed based on the present value of the estimated future cash flows of interest and principal discounted at the loan's effective interest rate or on the fair value of the collateral for collateral dependent loans. The entire change in present value of expected cash flows of impaired loans or of collateral value is reported as bad debt expense in the same manner in which impairment initially was recognized or as a reduction in the amount of bad debt expense that otherwise would be reported. As of December 31, 1997 and September 30, 1997, management had not identified any loans as impaired. Nonperforming Assets At December 31, 1997, the Bank had $327, of nonperforming assets, .69% of total assets. On September 30, 1997, the Bank had $413 of nonperforming assets, .85% of total assets. Impact on Inflation and Changing Prices The unaudited consolidated financial statements and related data presented herein have been prepared in accordance with generally accepted accounting principles, which require the measurement of financial position and results of operations in terms of historical dollars without considering changes in the relative purchasing power of money over time because of inflation. Unlike most industrial companies, virtually all of the assets and liabilities of the Company are monetary in nature. As a result, interest rates have a more significant impact on the Company's performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as the prices of goods and services. PART II - OTHER INFORMATION Item 1. Legal Proceedings None. Item 2. Changes in Securities None. Item 3. Defaults Upon Senior Securities None. Item 4. Submission of Matters to a Vote of Security Holders Not applicable. Item 5. Other Information None. Item 6. Exhibits and Reports on Form 8K Exhibits: None. Reports on Form 8K: None. SIGNATURES Pursuant to the requirement 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 Financial Group, Inc. Date: 2/13/98 /s/ K. Gary Reynolds ----------------------------- ------------------------------------ K. Gary Reynolds Chief Executive Officer and Director Date: 2/13/98 /s/ Joanne Ticknor ------------------------------ ------------------------------------ Joanne Ticknor Secretary and Treasurer