CSB Bancorp, Inc. (OTC Pink: CSBB)

Fourth Quarter Highlights

CSB Bancorp, Inc. (OTC Pink: CSBB) today announced fourth quarter 2024 net income of $2,319,000, or $0.87 per basic and diluted share, as compared to $3,697,000, or $1.38 per basic and diluted share, for the same period in 2023. For the twelve-month period ended December 31, 2024 net income totaled $10,012,000 compared to $14,756,000 for the same period last year, a decrease of 32%.

Credit loss provision expense for the quarter increased $2.1 million from fourth quarter 2023 and $6.6 million for the comparable twelve-month period. As previously identified in the prior two quarters, court liquidation of a commercial lending relationship totaling $7.1 million continues; the credit has been charged down by $6.2 million. The bank holds priority liens with the court holding approximately $413 thousand in auction proceeds from equipment and trucks, net of expenses, which will be applied to the loan balances when released. The commercial real estate loan has been charged down to an estimated auction liquidation value after several months of being listed. The court appointed receiver obtained auction values of the premises and the bank continues to move through the court system to schedule the remaining real estate liquidation. The court receiver expenses, and outside legal expenses are currently expensed.

Eddie Steiner, President and CEO stated, “Overall the loan pipeline was noticeably subdued during fourth quarter as borrowers awaited more clarity on the economy, interest rates, and post-election adjustments in fiscal policy. Net loan balances increased 5.1% during 2024, and the Company’s pre-provision net revenue totaled $19.4 million, up 2.9%. The large single relationship in court liquidation accounted for over 85% of the Company’s provision expense and has been charged down to less than $1 million comprised of real estate and cash held by the court receiver. Shareholders’ equity increased by 6.4% in 2024 to $115 million on December 31.”

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 7.99% and 0.76%, respectively, compared with 14.22% and 1.25% for the fourth quarter of 2023. For the twelve-month period ended December 31, 2024 ROE and ROA were 8.96% and 0.85% as compared to 14.69% and 1.27% for the comparable period in 2023.

Pre-Provision Net Revenue (“PPNR”) (a non-GAAP measure) totaled $5.1 million during the quarter, an increase of $370 thousand, or 8%, from the prior year’s fourth quarter. Net interest income increased $221 thousand, or 2%, noninterest income increased $102 thousand, or 6%, and noninterest expense declined $47 thousand, or less than 1%, in the fourth quarter of 2024 compared to the same period in 2023.

The allowance for expected credit losses amounted to $7.6 million, or 1.03% of total loans, on December 31, 2024, as compared to $6.6 million or 0.94% of total loans on December 31, 2023. The allowance for credit losses on off-balance sheet commitments on December 31, 2024 was $524 thousand, as compared to a December 31, 2023 balance of $736 thousand. CSB recorded no allowance for credit losses related to AFS or HTM debt securities with no meaningful loss expectation on these securities.

Loan interest income including fees increased $728 thousand, or 7%, during fourth quarter 2024 as compared to the same quarter in 2023. The increase was primarily the result of a $37 million volume increase, augmented by a 13 basis point (“bp”) increase in quarter over prior quarter yield. Securities interest income decreased $126 thousand, or 6%, during the fourth quarter 2024 compared to the same quarter 2023 as the Company continues to deploy cash flow from investments into loan originations. Loan yields for fourth quarter 2024 averaged 5.77%, an increase of 13 bp from the 2023 fourth quarter average of 5.64%, while overnight funds and securities yields for fourth quarter 2024 averaged 4.81% and 2.24%, respectively, compared to 5.54% and 2.19% in the fourth quarter 2023.

Interest expense rose $662 thousand, or 21%, during fourth quarter 2024 as compared to fourth quarter 2023. The increase follows a period of rapid interest rate increases spurred by the Federal Reserve during March 2022 through May 2023, followed by competitive pressures from banks and others to secure adequate funding. The cost to fund gross earning assets for the fourth quarter 2024 was 1.32% as compared to 1.12% for the fourth quarter of 2023.

The fully-taxable equivalent (“FTE”) (a non-GAAP measure) net interest margin was 3.33% compared to 3.36% for the fourth quarter 2023. Compared to the 2023 fourth quarter, FTE net interest income increased $222 thousand, or 2%, reflecting increasing interest income with a $38 million increase in average earning assets as well as a 17 bp increase in the yield on assets. The higher interest rate environment coupled with the continued mix shift into loans from securities primarily drove the increase in earnings from assets, which was partially offset by higher average interest-bearing liabilities and a 25 bp higher cost of funds. Tax equivalency effect on net interest margin was 0.01% in fourth quarter 2024 and 2023.

Noninterest income increased $102 thousand, or 6%, compared to fourth quarter of 2023. The increase was primarily the result of a $47 thousand increase in earnings on bank owned life insurance, a $24 thousand increase in trust and brokerage fees, an increase of $17 thousand in debit card interchange fees, an $11 thousand increase in gain on sale of mortgage loans to the secondary market, and a $7 thousand increase in the unrealized gain or loss on equity securities held. Offsetting decreases were recognized in service charges related to deposit overdraft fees and credit card fees.

Noninterest expense decreased $47 thousand, or less than 1%, from fourth quarter 2023. Salary and employee benefits decreased $119 thousand, or 3%, compared to the prior year quarter, with decreases in incentive compensation and profit sharing. Marketing and public relation costs decreased $37 thousand, or 22%, with lesser spent. Financial institutions tax increased $25 thousand, or 13%, with higher capital levels. Software expense increased $23 thousand, or 5%. Occupancy and equipment expense increased $18 thousand, and $17 thousand, respectively, with increasing costs of maintenance contracts and repair. The Company’s fourth quarter efficiency ratio decreased to 54.7% compared to 56.7% in the prior year.

Federal income tax expense was $526 thousand in the 2024 fourth quarter compared to $912 thousand in the 2023 fourth quarter. The effective tax rate for the 2024 and 2023 fourth quarter was 18% and 20%, respectively.

Average earning assets for the 2024 fourth quarter increased $38 million, or 3%, from the year-ago quarter, primarily reflecting a $37 million, or 5%, increase in average loans, a $28 million, or 8%, decrease in average securities, and a $30 million, or 71%, increase in interest-earning deposits in other banks, held mainly at the Federal Reserve Bank.

Average commercial loan balances for the quarter, including commercial real estate, increased $24 million, or 5%, from prior year levels, as construction loans were drawn, and borrowers used term loans to fund equipment and other purchases. Average residential mortgage balances increased $10 million, or 6%, above the prior year’s quarter as borrowers have been favoring adjustable-rate mortgages during this period of higher interest rates. The bank does not sell adjustable-rate mortgages to the secondary market. Home equity lines of credit increased $3 million from the prior year’s quarter as borrowers covered expenses and avoided refinancing their lower interest rate mortgages. Average consumer credit balances decreased $1.5 million, or 9%, versus the same quarter of the prior year. Commercial loan demand leveled out during fourth quarter, with households and businesses alike preferring to limit borrowing until the election provides some clarity as to tax rates and inflation.

Nonperforming loans were $1.7 million, or 0.23%, of total loans on December 31, 2024, compared to $396 thousand, or 0.06% of total loans, a year ago. Delinquent loan balances as of December 31, 2024, increased to 0.40% of total loans as compared to 0.22% on December 31, 2023. The remaining $914 thousand nonperforming balances of the identified commercial relationship mentioned above, account for 0.12% of the 0.22% nonperforming loan balances, and 0.12% of the 0.40% delinquent total loans at December 31, 2024. Net loan charge-offs recognized during fourth quarter 2024 were $1.9 million, or 1% of average loans annualized, compared to fourth quarter 2023 net loan recoveries of $5 thousand. The net charge-off dollars were fully attributable to the previously identified commercial relationship. Management has no estimate of future recovery of charged-off dollars related to the relationship in court liquidation.

Average deposit balances increased on a quarter over prior year quarter comparison by $38 million, or 4%. For the fourth quarter 2024, the average cost of deposits amounted to 1.39%, as compared to 1.16% for the fourth quarter 2023. Fourth quarter 2024 increases in average deposit balances over the prior year quarter included money market accounts of $28 million and time deposits of $58 million. Noninterest-bearing accounts decreased $12 million from the prior year’s fourth quarter while savings and interest-bearing demand accounts declined $36 million. The average balance of securities sold under repurchase agreement during the fourth quarter of 2024 decreased by $10 million, or 29%, compared to the average for the same period in the prior year.

Shareholders’ equity totaled $115 million on December 31, 2024, with 2.7 million common shares outstanding. The average equity to assets ratio amounted to 9.52% for the quarter ended December 31, 2024, and 8.80% for the quarter ended December 31, 2023. The Company declared a fourth quarter dividend of $0.40 per share, producing an annualized yield of 4.2% based on December 31, 2024 closing price of $38.30.

About CSB Bancorp, Inc.

CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $1.2 billion as of December 31, 2024. CSB provides a complete range of banking and other financial services to consumers and businesses through its wholly owned subsidiary, The Commercial and Savings Bank, with sixteen banking centers in Holmes, Wayne, Tuscarawas, and Stark counties and Trust offices located in Millersburg, North Canton, and Wooster, Ohio. A loan production office was opened in Medina, Ohio on March 20, 2024.

Forward-Looking Statement

This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets, and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release. See the non-GAAP disclosures at the end of this release for a reconciliation of GAAP and non-GAAP measures.

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