EXHIBIT 99.1
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Quarterly Report of CSB Bancorp, Inc., for the quarter ended March 31, 2004
FINANCIAL HIGHLIGHTS
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(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
MARCH
2004 2003
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Assets $318,260 $301,778
Net loans $215,768 $206,154
Securities $79,808 $69,240
Deposits $239,467 $233,617
Shareholders' Equity $34,948 $34,041
Net income $521 $598
Earnings per share $0.20 $0.23
Book value per outstanding share $13.22 $12.93
STOCK PERFORMANCE & DIVIDENDS
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TRADE PRICE CASH
QUARTER ---------------------- CLOSING DIVIDEND
ENDING HIGH LOW PRICE DECLARED
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6/30/02 19.85 18.75 18.06 0.05
9/30/02 19.15 17.00 17.00 0.10
12/31/02 17.50 16.05 16.05 0.10
3/31/03 18.50 16.50 17.10 0.12
6/30/03 18.00 17.00 17.00 0.12
9/30/03 17.50 15.50 17.50 0.12
12/31/03 17.55 17.00 17.00 0.12
3/31/04 18.00 17.00 17.50 0.13
KEY RATIOS
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MARCH
2004 2003
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Return on average assets 0.68% 0.82%
Return on average equity 6.01% 7.11%
Net interest margin 3.79% 3.99%
Loans to deposits 91.13% 89.34%
Shareholders' equity to assets 10.98% 11.28%
Noninterest expense to revenue 79% 81%
COMMON STOCK PERFORMANCE
[GRAPH]
DIRECTORS
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ROBERT K. BAKER DANIEL J. MILLER
Chairman
JEFFERY A. ROBB, SR.
JOHN J. LIMBERT
President and CEO SAMUEL M. STEIMEL
EDDIE L. STEINER
RONALD E. HOLTMAN
JOHN R. WALTMAN
J. THOMAS LANG
EXECUTIVE OFFICERS
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JOHN J. LIMBERT
President and CEO
RICK L. GINTHER
Senior Vice President
Chief Lending Officer
PAUL D. GREIG
Senior Vice President
Chief Operation/Information Officer
A. LEE MILLER
Senior Vice President
Chief Financial Officer
ADDITIONAL STOCK INFORMATION
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STOCK LISTING
Common:
Symbol - CSBB.OB
STOCK TRANSFER
Registrar & Transfer Company
Attn: Investor Relations
10 Commerce Drive
Cranford, NJ 07016
(800) 368-5948
Copies of
CSB Bancorp, Inc.
S.E.C. Filings may be obtained by writing:
A. Lee Miller, CFO
CSB Bancorp, Inc.
6 West Jackson
Millersburg, OH 44654
(330) 674-9015 or
(800) 654-9015
March 31, 2004
QUARTERLY REPORT
[CSB BANCORP, INC. LOGO]
CSB BANCORP, INC.
TO OUR SHAREHOLDERS
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Dear Shareholder:
Please allow me to summarize this quarter... Compared to the same period last
year, assets are up by 5%, earnings are down by almost 13%, yet we increased the
cash dividend by over 8%! What just happened? Numerous things are happening, all
designed to strengthen and maintain the quality of your investment and the
Company. Please read the actual performance comparisons and then I'll tell you
"the rest of the story!"
Our unaudited net income for the first quarter of 2004 totaled $521,000, or $.20
per share. These results compare to net income of $598,000 and $.23 per share
for the same period in 2003. This represents a 12.9% decrease. Our quarter-end
assets increased from $302 million to $318 million, representing a 5.3% increase
in our balance sheet. Your Board of Directors voted to increase the cash
dividend from $.12 per share to $.13 per share, which results in an 8.3%
increase over a year ago.
First, for the first time in over two years additional funds were added to our
Allowance for Loan and Lease Losses (ALLL). We added $94,000 versus removing
$71,000 out of the reserve a year ago. This has the effect of creating a pretax
earnings swing of $165,000. So while we reported lower quarterly earnings,
excluding this impact we would have outperformed the year ago quarter. We
elected to add these funds (and anticipate doing so into the future) for several
reasons. Our overall loan portfolio is up, so increasing the reserve is
appropriate. Next, we have targeted a reserve percent to loans of 1.20% compared
to our current 1.12%. In order to attain this number we need to either shrink
loans or increase the reserve. Finally, our management of the loan portfolio
called for charging some uncollectible loans against the reserve, so
replenishing this reserve was warranted.
Second, please note that our Non-Interest Expense to Revenue ratio (NIE/REV) has
improved. Our actual non-interest expense was down almost $90,000 over the same
quarter a year ago. And this occurred even though we had larger expenses to
comply with new federal legislation and resulting reporting changes. The NIE/REV
ratio fell from 81% a year ago to 79% this year. Our objective is to continue to
reduce this ratio, and we are focused on accomplishing this task.
Third, after carefully reviewing the high variable rate concentration of the
asset side of our balance sheet, the bank management group presented and
received board approval of a "leveraged investment purchase." In this
transaction we borrowed $10 million dollars from the Federal Home Loan Bank and
purchased a like amount of Federal Agency Securities. This prudent investment
strategy contributed significantly to the Company's increase in size. We have
locked in an attractive first year margin, and will use the additional revenue
stream to increase our income. As we have mentioned previously, like most banks
our Net Interest Margin (NIM) is under intense pressure. The impact of this
transaction, coupled with our ongoing Asset/Liability initiatives, has resulted
in an improved NIM for the first time in three quarters. As this transaction did
not close until mid-March, the full benefit was not realized in the first
quarter.
Last, I wanted to update you on improvements in our loan portfolio. Our loan
group has significantly reduced the amount of our non-performing loans. As a
result, the critical ratios for non-performing loans also saw tremendous
improvement. Our non-performing loans, as of March 31, 2004 were at $730,000
versus $1,259,000 at March 31, 2003. This is a 42% reduction in dollars and
reduces the non-performing loans to total loans ratio to .33%! What this also
reflects is that the ALLL has a 300+% coverage to non-performing versus a 200%
coverage a year ago. While these type loans can experience sudden movements, we
believe that these results reflect diligence on the part of our loan group,
coupled with cooperation with our borrowers.
In closing, I wish to express my confidence in the continued improvement of your
Company. This confidence was an important part of our decision to increase the
dividend payment. We have set positive practices in place, and they are
beginning to generate the results to which we aspire. As always, feel free to
contact me with any questions concerning the Company or our performance.
JOHN J. LIMBERT
President and C.E.O.
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
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(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) MARCH 31
2004 2003
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ASSETS:
Cash and due from banks .................................... $11,664 $14,200
Securities ................................................. 79,808 69,240
Net loans .................................................. 215,768 206,154
Premises & equipment, net .................................. 8,525 8,980
Other assets ............................................... 2,495 3,204
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TOTAL ASSETS ............................................... $318,260 $301,778
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LIABILITIES:
Deposits ................................................... $239,467 $233,617
Securities sold under agreements to repurchase ............. 12,531 13,276
Federal funds purchased .................................... 11,100 4,601
Other borrowings ........................................... 19,221 15,045
Other liabilities .......................................... 993 1,198
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TOTAL LIABILITIES .......................................... $283,312 $267,737
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SHAREHOLDERS' EQUITY:
Common stock ............................................... $16,674 $16,674
Additional paid-in capital ................................. 6,414 6,414
Retained earnings .......................................... 12,393 11,853
Treasury stock ............................................. (646) (997)
Accumulated other comprehensive income ..................... 113 97
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TOTAL SHAREHOLDERS' EQUITY ................................. $34,948 $34,041
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY ................... $318,260 $301,778
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CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
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(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA) THREE MONTHS ENDED MARCH 31
2004 2003
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INTEREST INCOME:
Interest & fees on loans ................................... $2,993 $3,173
Interest on securities ..................................... 672 777
Other interest income ...................................... 3 9
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TOTAL INTEREST INCOME ...................................... $3,668 $3,959
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INTEREST EXPENSE:
Interest on deposits ....................................... 835 1,027
Other interest expense ..................................... 137 199
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TOTAL INTEREST EXPENSE ....................................... $972 $1,226
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Net interest income .......................................... 2,696 2,733
Provision (credit) for loan losses ......................... 94 (71)
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Net interest income after provision (credit) for loan losses . 2,602 2,804
Noninterest income ........................................... 499 468
Noninterest expense .......................................... 2,515 2,593
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Net income before federal income taxes ....................... 586 679
Federal income tax provision ................................. 65 81
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NET INCOME ................................................... $521 $598
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EARNINGS PER SHARE ........................................... $0.20 $0.23
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