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CSB Bancorp, Inc. 10-K Analysis & Summary – 3/14/2025

⚠️This is not investment advice.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️

CSB Bancorp, Inc.

Filing date:

03/14/2025

TLDR:

ELI5:

CSB Bancorp, a bank holding company, made less money in 2024 because they had to set aside a lot more money to cover potentially bad loans. While they’re still financially strong, they need to be careful about lending and managing risks.

Accession #:

0000950170-25-039227

Published on

Analyst Summary

  • Net income decreased by 32% from $14.8 million in 2023 to $10.0 million in 2024, primarily due to a significant increase in the provision for credit losses.
  • Net interest income increased slightly by 2% to $36.85 million.
  • The provision for credit losses increased substantially from $442 thousand to $7.031 million.
  • Total assets increased slightly by 1% to $1.191 billion, while net loans increased by 5% to $730.046 million.
  • Return on Average Assets (ROA) decreased from 1.27% in 2023 to 0.85% in 2024, and Return on Average Equity (ROE) decreased from 14.69% to 8.96%.
  • Nonperforming Loans to Total Loans increased from 0.06% in 2023 to 0.23% in 2024, indicating a deterioration in credit quality.
  • Operating Profit Margin decreased by 39.69% from 34.85% in 2023 to 21.02% in 2024.
  • Net Profit Margin decreased by 38.98% from 27.96% in 2023 to 17.06% in 2024.
  • Interest Coverage Ratio decreased by 35.66% from 2.86 in 2023 to 1.84 in 2024.
  • Basic and Diluted Earnings Per Share (EPS) decreased by 31.76% from $5.51 in 2023 to $3.76 in 2024.

Opportunities and Risks

  • Risk: Credit Quality Deterioration – The significant increase in the provision for credit losses and the rise in nonperforming loans are major concerns.
  • Risk: Interest Rate Risk – Adverse interest rate movements could negatively impact net interest income and the economic value of equity.
  • Risk: Competition – CSB faces competition from larger institutions and fintech companies.
  • Risk: Cybersecurity – The company acknowledges the increasing threat of cyberattacks and the potential for significant data loss or financial losses.
  • Opportunity: Loan Growth – The company experienced loan growth in 2024, particularly in commercial real estate and construction loans.
  • Opportunity: Trust Services – Trust services revenue increased, indicating a potential growth area.
  • Opportunity: Strong Capital Position – The company maintains a strong capital position, providing a buffer against potential losses.

Potential Implications

Company Performance

  • Continued deterioration in credit quality could further negatively impact profitability and require additional provisions for credit losses.
  • Effective management of interest rate risk is crucial to maintaining net interest income and protecting the economic value of equity.
  • Successful diversification of revenue streams, such as expanding trust services, could help offset the impact of credit quality issues.
  • Maintaining a strong capital position will be essential to absorb potential losses and support future growth.

Stock Price

  • Increased concerns about credit quality could negatively impact the stock price.
  • Positive developments in managing credit risk and diversifying revenue streams could improve investor confidence and support the stock price.
  • The company’s Price-to-Book ratio of 0.93 suggests the stock might be slightly undervalued.
  • The company’s Price-to-Earnings ratio of 10.69 might be considered reasonable for a community bank.

SEC Filing Report: CSB Bancorp, Inc. (10-K) – Fiscal Year Ended December 31, 2024

Executive Summary

CSB Bancorp, Inc.’s 2024 10-K filing reveals a mixed financial performance. While net interest income saw a slight increase, net income significantly decreased due to a substantial increase in the provision for credit losses. The company maintains a strong capital position and is well-capitalized according to regulatory standards. However, the increased provision for credit losses and a rise in nonperforming assets warrant close monitoring. Overall, a hold rating is suggested, pending further observation of credit quality trends and management’s response to the changing economic environment.

Company Overview

CSB Bancorp, Inc. is a financial holding company operating primarily through The Commercial and Savings Bank, serving northeast Ohio. The bank provides a range of retail and commercial banking services. The local economy experienced modest growth in 2024, but unemployment levels increased slightly. The company faces competition from larger regional banks, credit unions, and fintech companies.

Detailed Analysis

Management’s Discussion and Analysis (MD&A)

Management acknowledges the modest economic growth in their market area but also highlights increased unemployment levels. The MD&A focuses on the increase in net interest income but downplays the significant increase in the provision for credit losses, which is a potential red flag. The tone is generally optimistic, but a closer look at the numbers reveals some underlying concerns.

Financial Statement Analysis

Income Statement

  • Net income decreased by 32% from $14.8 million in 2023 to $10.0 million in 2024.
  • Net interest income increased slightly by 2% to $36.85 million.
  • A significant increase in the provision for credit losses from $442 thousand to $7.031 million.
  • Noninterest income increased by 5% to $7.102 million.
  • Noninterest expense increased by 2% to $24.589 million.

Balance Sheet

  • Total assets increased slightly by 1% to $1.191 billion.
  • Net loans increased by 5% to $730.046 million.
  • Securities decreased by 10% to $331.529 million.
  • Deposits increased by 1.7% to $1.044 billion.
  • Shareholders’ equity increased by 6.4% to $114.835 million.

Key Ratios

  • Net Interest Margin (FTE): 3.31% (slight decrease from 3.32% in 2023)
  • Return on Average Assets: 0.85% (decreased from 1.27% in 2023)
  • Return on Average Equity: 8.96% (decreased from 14.69% in 2023)
  • Allowance for Credit Losses to Total Loans: 1.03% (increased from 0.94% in 2023)
  • Nonperforming Loans to Total Loans: 0.23% (increased from 0.06% in 2023)

Cash Flow Statement

  • Net cash provided by operating activities increased slightly.
  • Net cash used in investing activities decreased significantly due to changes in securities activity and loan originations.
  • Net cash provided by financing activities increased.

Risk and Opportunity Assessment

Risks

  • Credit Quality Deterioration: The significant increase in the provision for credit losses and the rise in nonperforming loans are major concerns. The company attributes this to one large commercial relationship, but this needs to be monitored closely.
  • Interest Rate Risk: The company is exposed to interest rate risk, as highlighted in the market risk disclosures. While currently within policy limits, adverse interest rate movements could negatively impact net interest income and the economic value of equity.
  • Competition: The financial services industry is highly competitive, and CSB faces competition from larger institutions and fintech companies.
  • Cybersecurity: The company acknowledges the increasing threat of cyberattacks and the potential for significant data loss or financial losses.

Opportunities

  • Loan Growth: The company experienced loan growth in 2024, particularly in commercial real estate and construction loans.
  • Trust Services: Trust services revenue increased, indicating a potential growth area.
  • Strong Capital Position: The company maintains a strong capital position, providing a buffer against potential losses.

Uncommon Metrics

  • The company’s uninsured deposits are significant, totaling $244 million as of December 31, 2024. This could pose a risk in a stressed economic environment.

Conclusion and Actionable Insights

CSB Bancorp, Inc. faces challenges related to credit quality, as evidenced by the increased provision for credit losses and nonperforming assets. While the company maintains a strong capital position and experienced loan growth, the deterioration in credit quality warrants caution. The company’s exposure to interest rate risk and competition also needs to be carefully managed.

Recommendations:

  • Monitor Credit Quality: Closely monitor credit quality trends, particularly in the commercial loan portfolio.
  • Manage Interest Rate Risk: Continue to actively manage interest rate risk through asset-liability management strategies.
  • Diversify Revenue Streams: Explore opportunities to diversify revenue streams, such as expanding trust services.
  • Enhance Cybersecurity: Continue to invest in cybersecurity measures to protect against cyberattacks.

Commentary

CSBB’s financial performance in 2024 shows a mixed picture. Net income decreased significantly compared to 2023, driven primarily by a substantial increase in the provision for credit loss expense. However, total assets, loans, and deposits experienced modest growth. The bank maintains strong capital ratios, exceeding regulatory requirements, but profitability metrics declined.

Financial Ratio and Metric Analysis

Profitability

  • Metric: Gross Profit Margin

    • Metric: Not applicable for banks as they don’t have “Cost of Goods Sold” in the traditional sense.
  • Metric: Operating Profit Margin

    • Metric: (Income Before Income Taxes) / (Total Interest Income + Noninterest Income)

      • 2024: $12,335 / ($51,601 + $7,102) = 21.02%
      • 2023: $18,383 / ($46,016 + $6,744) = 34.85%
    • Trend: (21.02% – 34.85%) / 34.85% = -39.69%
    • Industry: Industry averages for operating profit margin vary, but a well-managed community bank typically aims for a margin in the 30-40% range. CSBB’s 2024 margin is below this range, indicating potential areas for improvement in expense management or revenue generation.
  • Metric: Net Profit Margin

    • Metric: Net Income / (Total Interest Income + Noninterest Income)

      • 2024: $10,012 / ($51,601 + $7,102) = 17.06%
      • 2023: $14,756 / ($46,016 + $6,744) = 27.96%
    • Trend: (17.06% – 27.96%) / 27.96% = -38.98%
    • Industry: A healthy net profit margin for a community bank is generally in the 15-25% range. CSBB’s 2024 margin is within this range but trending downwards.
  • Metric: Return on Assets (ROA)

    • Metric: Net Income / Average Total Assets

      • 2024: $10,012 / $1,181,417 = 0.85%
      • 2023: $14,756 / $1,158,286 = 1.27%
    • Trend: (0.85% – 1.27%) / 1.27% = -33.07%
    • Industry: An ROA of 1% or higher is generally considered good for banks. CSBB’s ROA decreased in 2024 and is below the ideal benchmark.
  • Metric: Return on Equity (ROE)

    • Metric: Net Income / Average Shareholders’ Equity

      • 2024: $10,012 / $111,722 = 8.96%
      • 2023: $14,756 / $100,452 = 14.69%
    • Trend: (8.96% – 14.69%) / 14.69% = -38.9%
    • Industry: An ROE of 10% or higher is often considered a good benchmark. CSBB’s ROE decreased significantly in 2024 and is below the benchmark.
  • Metric: Earnings Per Share (EPS) – Basic and Diluted

    • Metric:

      • Basic EPS 2024: $3.76
      • Diluted EPS 2024: $3.76
      • Basic EPS 2023: $5.51
      • Diluted EPS 2023: $5.51
    • Trend: ($3.76 – $5.51) / $5.51 = -31.76%
    • Industry: EPS varies widely based on the size and profitability of the bank. The decrease in EPS reflects the decline in net income.

Liquidity

  • Metric: Current Ratio

    • Metric: Current Assets / Current Liabilities. Need to derive current assets and liabilities from balance sheet. Assuming cash and cash equivalents, securities, loans held for sale, and accrued interest receivable are current assets. Assuming short-term borrowings and accrued interest payable are current liabilities.

      • Current Assets 2024: $73,509 + $331,529 + $283 + $9,111 = $414,432
      • Current Liabilities 2024: $25,683 + $4,305 = $29,988
      • Current Ratio 2024: $414,432 / $29,988 = 13.82
      • Current Assets 2023: $64,077 + $368,153 + $0 + $8,522 = $440,752
      • Current Liabilities 2023: $35,843 + $4,990 = $40,833
      • Current Ratio 2023: $440,752 / $40,833 = 10.79
    • Trend: (13.82 – 10.79) / 10.79 = 28.08%
    • Industry: A current ratio above 1 is generally considered healthy. CSBB’s current ratio is very high, suggesting strong liquidity.
  • Metric: Quick Ratio (Acid-Test Ratio)

    • Metric: (Current Assets – Inventory) / Current Liabilities. Banks don’t typically have inventory, so we’ll exclude loans held for sale.

      • Quick Ratio 2024: ($414,432 – $283) / $29,988 = 13.81
      • Quick Ratio 2023: ($440,752 – $0) / $40,833 = 10.79
    • Trend: (13.81 – 10.79) / 10.79 = 27.99%
    • Industry: A quick ratio of 1 or greater is generally considered acceptable. CSBB’s quick ratio is very strong.
  • Metric: Cash Ratio

    • Metric: (Cash and Cash Equivalents) / Current Liabilities

      • Cash Ratio 2024: $73,509 / $29,988 = 2.45
      • Cash Ratio 2023: $64,077 / $40,833 = 1.57
    • Trend: (2.45 – 1.57) / 1.57 = 56.05%
    • Industry: A cash ratio of 0.5 to 1 is often considered adequate. CSBB’s cash ratio is very high, indicating a conservative approach to liquidity.

Solvency/Leverage

  • Metric: Debt-to-Equity Ratio

    • Metric: Total Liabilities / Shareholders’ Equity

      • 2024: $1,076,665 / $114,835 = 9.37
      • 2023: $1,070,750 / $107,939 = 9.92
    • Trend: (9.37 – 9.92) / 9.92 = -5.54%
    • Industry: A debt-to-equity ratio of around 10 or lower is generally considered acceptable for banks. CSBB’s ratio is within this range.
  • Metric: Debt-to-Assets Ratio

    • Metric: Total Liabilities / Total Assets

      • 2024: $1,076,665 / $1,191,500 = 90.36%
      • 2023: $1,070,750 / $1,178,689 = 90.84%
    • Trend: (90.36% – 90.84%) / 90.84% = -0.53%
    • Industry: Banks typically have high debt-to-assets ratios due to the nature of their business. A ratio below 90% might indicate a more conservative approach.
  • Metric: Interest Coverage Ratio (Times Interest Earned)

    • Metric: EBIT / Interest Expense = (Net Income + Income Tax Provision + Interest Expense) / Interest Expense

      • 2024: ($10,012 + $2,323 + $14,748) / $14,748 = 1.84
      • 2023: ($14,756 + $3,627 + $9,875) / $9,875 = 2.86
    • Trend: (1.84 – 2.86) / 2.86 = -35.66%
    • Industry: A ratio of 2 or higher is generally considered healthy. CSBB’s interest coverage ratio decreased significantly and is below the healthy benchmark.

Activity/Efficiency

  • Metric: Inventory Turnover

    • Metric: Not applicable for banks as they don’t hold inventory.
  • Metric: Days Sales Outstanding (DSO)

    • Metric: Not directly applicable to banks. Instead, consider “Days to Collect Interest Income”. Average Loans / (Interest Income / 365)

      • 2024: $710,963 / ($51,601 / 365) = 5,026 days
      • 2023: $660,266 / ($46,016 / 365) = 5,229 days
    • Trend: (5,026 – 5,229) / 5,229 = -3.88%
    • Industry: This metric is highly dependent on the bank’s loan portfolio and interest rate environment.
  • Metric: Days Payable Outstanding (DPO)

    • Metric: Not directly applicable to banks. Instead, consider “Days to Pay Interest Expense”. Average Deposits / (Interest Expense / 365)

      • 2024: $1,035,559 / ($14,748 / 365) = 25,648 days
      • 2023: $1,017,983 / ($9,875 / 365) = 37,678 days
    • Trend: (25,648 – 37,678) / 37,678 = -31.93%
    • Industry: This metric is highly dependent on the bank’s deposit base and interest rate environment.
  • Metric: Asset Turnover

    • Metric: Total Revenue / Average Total Assets = (Total Interest Income + Noninterest Income) / Average Total Assets

      • 2024: ($51,601 + $7,102) / $1,181,417 = 4.97%
      • 2023: ($46,016 + $6,744) / $1,158,286 = 4.55%
    • Trend: (4.97% – 4.55%) / 4.55% = 9.23%
    • Industry: Asset turnover for banks is typically low. The increase suggests improved efficiency in utilizing assets to generate revenue.

Valuation

  • Metric: Price-to-Earnings Ratio (P/E)

    • Metric: Stock Price / EPS

      • EPS: $3.76
      • Stock Price: $40.21
      • P/E Ratio: $40.21 / $3.76 = 10.69
    • Industry: The average P/E ratio for banks varies depending on market conditions and growth prospects. A P/E of 10.69 might be considered reasonable for a community bank.
  • Metric: Price-to-Book Ratio (P/B)

    • Metric: Stock Price / Book Value Per Share

      • Book Value Per Share: $43.33
      • Stock Price: $40.21
      • P/B Ratio: $40.21 / $43.33 = 0.93
    • Industry: A P/B ratio around 1 is often considered fair value. CSBB’s P/B ratio suggests the stock might be slightly undervalued.
  • Metric: Price-to-Sales Ratio (P/S)

    • Metric: Market Cap / Total Revenue. Market Cap = Stock Price * Shares Outstanding. Shares outstanding is 2,650,089

      • Market Cap: $40.21 * 2,650,089 = $106,559,077 / 1000 = $106,559 thousands
      • Total Revenue: $51,601 + $7,102 = $58,703
      • P/S Ratio: $106,559 / $58,703 = 1.82
    • Industry: P/S ratios for banks are typically low. A P/S of 1.82 is within a reasonable range.
  • Metric: Enterprise Value to EBITDA (EV/EBITDA)

    • Metric: (Market Cap + Total Debt – Cash) / EBITDA. EBITDA = Net Income + Interest Expense + Taxes + Depreciation and Amortization

      • Market Cap: $106,559 thousands
      • Total Debt: $25,683 + $1,266 = $26,949 thousands
      • Cash: $73,509 thousands
      • EBITDA: $10,012 + $14,748 + $2,323 + $941 = $28,024 thousands
      • EV: ($106,559 + $26,949 – $73,509) = $60,099 thousands
      • EV/EBITDA: $60,099 / $28,024 = 2.14
    • Industry: EV/EBITDA ratios for banks are generally low. A ratio of 2.14 is within a reasonable range.

Growth Rates

  • Metric: Revenue Growth

    • Metric: (Current Year Revenue – Previous Year Revenue) / Previous Year Revenue

      • Revenue 2024: $51,601 + $7,102 = $58,703
      • Revenue 2023: $46,016 + $6,744 = $52,760
      • Revenue Growth: ($58,703 – $52,760) / $52,760 = 11.26%
    • Industry: Revenue growth for banks is dependent on economic conditions and loan demand.
  • Metric: Net Income Growth

    • Metric: (Current Year Net Income – Previous Year Net Income) / Previous Year Net Income

      • Net Income Growth: ($10,012 – $14,756) / $14,756 = -32.15%
    • Industry: Net income growth is a key indicator of profitability. The negative growth rate is concerning.
  • Metric: EPS Growth

    • Metric: (Current Year EPS – Previous Year EPS) / Previous Year EPS

      • EPS Growth: ($3.76 – $5.51) / $5.51 = -31.76%
    • Industry: EPS growth reflects the change in profitability on a per-share basis. The negative growth rate aligns with the decline in net income.

Other Relevant Metrics

  • Metric: Nonperforming Assets to Total Assets

    • Metric: Total Nonperforming Assets / Total Assets

      • 2024: $1,719 / $1,191,500 = 0.14%
      • 2023: $396 / $1,178,689 = 0.03%
    • Trend: (0.14% – 0.03%) / 0.03% = 366.67%
    • Industry: A low ratio is desirable. The increase in nonperforming assets is a negative signal.
  • Metric: Allowance for Credit Losses to Total Loans

    • Metric: Allowance for Credit Losses / Total Loans

      • 2024: $7,595 / $737,790 = 1.03%
      • 2023: $6,607 / $701,481 = 0.94%
    • Trend: (1.03% – 0.94%) / 0.94% = 9.57%
    • Industry: This ratio indicates the bank’s reserves for potential loan losses. The increase suggests a more cautious approach to lending.

⚠️ This is an experimental project and this report is for informational purposes only and should not be considered investment advice. Conduct your own thorough research and consult with a qualified financial advisor before making any investment decisions. ⚠️