EXHIBIT 99.1
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JUNE 30, 2004
QUARTERLY REPORT
C S B B A N C O R P, I N C .
TO OUR SHAREHOLDERS
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Dear Fellow Shareholder:
Our second quarter earnings reflect continued improvements across most sectors
of CSB. Net income of $607,000 ($.23 per share) compares to $571,000 ($.21 per
share) for the same quarter a year ago, representing a 6.3% increase!
The six-month comparison shows 2004 trailing the same period in 2003. Six-month
earnings of $1,128,000 ($.43 per share) are below 2003's $1,169,000 ($.44 per
share). I would remind the reader that the six-month results for 2003 reflect a
$51,000 reversal in the allowance for loan losses while 2004 net earnings
contain an allocation to the reserve of $173,000. This $224,000 swing in reserve
allocation accounts for the earnings variance.
We are proud of our continued improvements, and confident these trends are
sustainable. This confidence is exhibited by positive trends in several critical
areas. First, our noninterest expenses continue to decline, falling $129,000 for
the second quarter compared to the same quarter in 2003. This is a 4.8%
reduction in noninterest expenses. And the results are positive for the six
months, reflecting a $207,000 reduction in noninterest expenses for the same
period in 2003. Our NIE/REV ratio fell to 77.2% for the six months ended June
30, 2004 and, while this ratio still somewhat trails our peers, it is an
indicator that our expense monitoring efforts are paying off. Our noninterest
income is improving and is also ahead of both the second quarter and six-month
period of a year ago. Lastly, our net interest income for the quarter, before
the provision for loan losses, is also ahead of the same period of a year ago.
We view this as having turned the corner on our core earnings.
Events nationally and locally will greatly influence the remaining half of the
year. On a national basis, the Federal Reserve's recent quarter of a percent
increase in the Federal Funds rate marks the first such increase in over four
years. A large portion of our loan portfolio is tied to variable rates, and we
believe this and future increases will positively impact our net interest
income. Our loan portfolio continues to be strong, and we feel the inherent
business customer risks associated with a rising rate environment are being
adequately monitored.
On the local stage, the continued acquisition environment saw the area's oldest
and largest bank enter into an agreement to be acquired by a large national
banking organization. We enjoyed competing against this quality institution, and
will miss the unique competitive challenges associated with locally owned and
managed financial institutions. We believe that certain marketplace
opportunities may be available, while keenly aware that the level of competition
may have significantly increased. Your directors, bank officers and all our
associates continue to dedicate themselves to serving our customers, giving back
to our communities and rewarding our shareholders for their continued commitment
and support.
As always, please feel free to contact us with any questions or concerns about
our direction or results.
Sincerely,
JOHN J. LIMBERT ROBERT K. BAKER
President and C.E.O. Chairman
CONSOLIDATED STATEMENTS OF CONDITION (UNAUDITED)
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(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
JUNE 30
2004 2003
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ASSETS:
Cash and due from banks $ 12,525 $ 16,585
Federal funds sold -- --
Securities 77,630 67,971
Net loans 219,156 209,437
Premises & equipment, net 8,458 8,844
Other assets 2,741 2,254
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TOTAL ASSETS $ 320,510 $ 305,091
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LIABILITIES:
Deposits $ 239,183 $ 233,264
Securities sold under agreements to repurchase 13,405 11,402
Federal funds purchased 13,300 4,800
Other borrowings 19,023 19,820
Other liabilities 1,045 1,401
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TOTAL LIABILITIES $ 285,956 $ 270,687
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SHAREHOLDERS' EQUITY:
Common stock $ 16,674 $ 16,674
Additional paid-in capital 6,414 6,414
Retained earnings 12,655 12,060
Treasury stock (646) (882)
Accumulated other comprehensive income (loss) (543) 138
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TOTAL SHAREHOLDERS' EQUITY $ 34,554 $ 34,404
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TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 320,510 $ 305,091
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CONSOLIDATED STATEMENTS OF EARNINGS (UNAUDITED)
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(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30 JUNE 30
2004 2003 2004 2003
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INTEREST INCOME:
Interest & fees on loans $ 2,957 $ 3,190 $ 5,950 $ 6,363
Interest on securities 786 747 1,458 1,524
Other interest income 0 1 3 10
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TOTAL INTEREST INCOME $ 3,743 $ 3,938 $ 7,411 $ 7,897
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INTEREST EXPENSE:
Interest on deposits 788 973 1,623 2,000
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Other interest expense 179 216 316 415
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TOTAL INTEREST EXPENSE $ 967 $ 1,189 $ 1,939 $ 2,415
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Net interest income 2,776 2,749 5,472 5,482
Provision (credit) for loan losses 79 20 173 (51)
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Net interest income after provision (credit)
for loan losses 2,697 2,729 5,299 5,533
Noninterest income 572 559 1,071 1,027
Noninterest expense 2,535 2,664 5,050 5,257
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Net income before federal income taxes 734 624 1,320 1,303
Federal income tax provision 127 53 192 134
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NET INCOME $ 607 $ 571 $ 1,128 $ 1,169
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EARNINGS PER SHARE $ 0.23 $ 0.21 $ 0.43 $ 0.44
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FINANCIAL HIGHLIGHTS
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(DOLLARS IN THOUSANDS EXCEPT PER SHARE DATA)
AT OR FOR THE SIX MONTHS
ENDED JUNE 30
2004 2003
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Assets $320,510 $305,091
Net loans $219,156 $209,437
Securities $ 77,630 $ 67,971
Deposits $239,183 $233,264
Shareholders' equity $ 34,554 $ 34,404
Net income $ 1,128 $ 1,169
Earnings per share $ 0.43 $ 0.44
Book value per outstanding share $ 13.07 $ 13.05
KEY RATIOS
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AT OR FOR THE SIX MONTHS
ENDED JUNE 30
2004 2003
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Return on average assets 0.73% 0.81%
Return on average equity 6.51% 7.09%
Net interest margin 3.77% 3.95%
Loans to deposits 92.69% 90.88%
Allowance for loan loss to total loans 1.15% 1.21%
Shareholders' equity to assets 10.78% 11.28%
Noninterest expense to revenue 77.18% 80.76%
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
RONALD E. HOLTMAN EDDIE L. STEINER
J. THOMAS LANG JOHN R. WALTMAN
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
STOCK PERFORMANCE & DIVIDENDS
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TRADE PRICE CASH
QUARTER ------------------ CLOSING DIVIDEND
ENDING HIGH LOW PRICE DECLARED
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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
6/30/04 18.50 17.07 17.85 0.13
COMMON STOCK PERFORMANCE
[GRAPH]
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 Street
Millersburg, OH 44654
(330) 674-9015 or
(800) 654-9015