CSB Bancorp, Inc. 10-Q

10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 FORM 10-Q (Mark One) ☒ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended: September 30, 2024 OR ☐ TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission File Number: 000-21714 CSB Bancorp, Inc. (Exact Name of Registrant as Specified in its Charter) Ohio 34-1687530 ( State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.) 91 North Clay Street , P.O. Box 232 Millersburg , OH 44654 (Address of principal executive offices) (Zip Code) Registrant’s telephone number, including area code: ( 330 ) 674-9015 Securities registered pursuant to Section 12(g) of the Act: Title of each class Trading Symbol(s) Name of each exchange on which registered Common Shares, $6.25 par value CSBB OTCPink 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 ☒ No ☐ Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐ Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. Large accelerated filer ☐ Accelerated filer ☐ Non-accelerated filer ☒ Smaller reporting company ☒ Emerging growth company ☐ If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐ Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒ Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐ As of November 1, 2024, the registrant had 2,654,445 shares of common stock, $6.25 par value per share, outstanding. CSB BANCORP, INC. FORM 10-Q QUARTER ENDED September 30, 2024 Table of Contents Part I - Financial Information Page ITEM 1 – FINANCIAL STATEMENTS (Unaudited) Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Shareholders' Equity 6 Condensed Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 ITEM 2 – MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 28 ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 36 ITEM 4 – CONTROLS AND PROCEDURES 37 Part II - Other Information ITEM 1 – Legal Proceedings 38 ITEM 1A – Risk Factors 38 ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds 38 ITEM 3 – Defaults upon Senior Securities 38 ITEM 4 – Mine Safety Disclosures 38 ITEM 5 – Other Information 38 ITEM 6 – Exhibits 39 Signatures 40 2 CSB BANCORP, INC. PART I – FINANCI AL INFORMATION ITEM 1. – FINAN CIAL STATEMENTS CONSOLIDATED B ALANCE SHEETS (Unaudited) September 30, December 31, (Dollars in thousands, except per share data) 2024 2023 ASSETS Cash and cash equivalents Cash and due from banks $ 26,108 $ 24,463 Interest-earning deposits in other banks 69,108 39,614 Federal funds sold 427 — Total cash and cash equivalents 95,643 64,077 Securities Available-for-sale, at fair value 131,718 140,080 Held-to-maturity; fair value of $ 185,647 in 2024 and $ 194,730 in 2023 ($ 0 credit loss allowance) 211,655 226,279 Equity securities 247 259 Restricted stock, at cost 1,520 1,535 Total securities 345,140 368,153 Loans held for sale 509 — Loans 719,602 701,404 Less allowance for credit losses 7,224 6,607 Net loans 712,378 694,797 Premises and equipment, net 13,994 13,002 Bank-owned life insurance 27,996 25,410 Goodwill 4,728 4,728 Accrued interest receivable and other assets 8,793 8,522 TOTAL ASSETS $ 1,209,181 $ 1,178,689 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits Noninterest-bearing $ 286,525 $ 301,697 Interest-bearing 784,006 725,730 Total deposits 1,070,531 1,027,427 Short-term borrowings 19,224 35,843 Other borrowings 1,296 1,754 Allowance for credit losses on off-balance sheet commitments 532 736 Accrued interest payable and other liabilities 2,590 4,990 TOTAL LIABILITIES 1,094,173 1,070,750 SHAREHOLDERS' EQUITY Common stock, $ 6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; outstanding 2,659,324 shares in 2024 and 2,669,938 in 2023 18,629 18,629 Additional paid-in capital 9,815 9,815 Retained earnings 101,847 97,297 Treasury stock at cost: 321,278 shares in 2024 and 310,664 shares in 2023 ( 7,929 ) ( 7,532 ) Accumulated other comprehensive loss ( 7,354 ) ( 10,270 ) TOTAL SHAREHOLDERS' EQUITY 115,008 107,939 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,209,181 $ 1,178,689 See notes to unaudited consolidated financial statements. 3 CSB BANCORP, INC. CONSOLIDATED STAT EMENTS OF INCOME (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands, except per share data) 2024 2023 2024 2023 INTEREST AND DIVIDEND INCOME Loans, including fees $ 10,531 $ 9,175 $ 30,959 $ 25,855 Taxable securities 1,782 1,910 5,489 5,867 Nontaxable securities 88 102 264 305 Other 789 531 1,537 1,520 Total interest and dividend income 13,190 11,718 38,249 33,547 INTEREST EXPENSE Deposits 3,898 2,772 10,687 6,484 Short-term borrowings 71 100 252 236 Other borrowings 7 9 23 31 Total interest expense 3,976 2,881 10,962 6,751 NET INTEREST INCOME 9,214 8,837 27,287 26,796 CREDIT LOSS EXPENSE Provision for credit loss expense - loans 645 13 4,945 287 Provision (recovery) for credit loss expense - off-balance sheet commitments 55 164 ( 204 ) ( 1 ) Total provision for credit loss expense 700 177 4,741 286 NET INTEREST INCOME AFTER CREDIT LOSS EXPENSE 8,514 8,660 22,546 26,510 NONINTEREST INCOME Service charges on deposit accounts 301 332 872 924 Trust services 274 259 951 769 Debit card interchange fees 535 525 1,570 1,579 Credit card fees 162 166 484 535 Gain on sale of loans, net 106 47 215 106 Earnings on bank owned life insurance 203 179 585 520 Unrealized gain (loss) on equity securities 17 ( 11 ) ( 12 ) 2 Other income 211 208 657 631 Total noninterest income 1,809 1,705 5,322 5,066 NONINTEREST EXPENSES Salaries and employee benefits 3,656 3,429 10,181 10,112 Occupancy expense 295 290 872 856 Equipment expense 224 199 649 595 Professional and director fees 391 366 1,160 1,073 Financial institutions tax 216 192 648 576 Marketing and public relations 162 124 432 383 Software expense 421 408 1,263 1,228 Debit card expense 186 179 568 494 FDIC insurance expense 132 131 396 380 Other expenses 739 716 2,209 2,105 Total noninterest expenses 6,422 6,034 18,378 17,802 Income before income taxes 3,901 4,331 9,490 13,774 FEDERAL INCOME TAX PROVISION 756 850 1,797 2,715 NET INCOME $ 3,145 $ 3,481 $ 7,693 $ 11,059 Basic and diluted net earnings per share $ 1.18 $ 1.30 $ 2.89 $ 4.12 See notes to unaudited consolidated financial statements 4 CSB BANCORP, INC. CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (Unaudited) Three Months Ended September 30, Nine Months Ended September 30, (Dollars in thousands) 2024 2023 2024 2023 Net income $ 3,145 $ 3,481 $ 7,693 $ 11,059 Other comprehensive income (loss) Unrealized gain (loss) arising during the period 3,409 ( 1,127 ) 3,556 ( 1,722 ) Amortization of discount on securities transferred to held-to-maturity 48 50 135 143 Income tax effect ( 726 ) 226 ( 775 ) 331 Other comprehensive income (loss) 2,731 ( 851 ) 2,916 ( 1,248 ) Total comprehensive income $ 5,876 $ 2,630 $ 10,609 $ 9,811 See notes to unaudited consolidated financial statements. 5 CSB BANCORP, INC. CONSOLIDATED STATEMENTS OF CHA NGES IN SHAREHOLDERS’ EQUITY (Unaudited) (Dollars in thousands, except per share data) Common stock Additional paid-in capital Retained earnings Treasury stock Accumulated other comprehensive loss Total Three Months Ended September 30, 2024 Balance at beginning of period $ 18,629 $ 9,815 $ 99,766 $ ( 7,757 ) $ ( 10,085 ) $ 110,368 Net income — — 3,145 — — 3,145 Other comprehensive income — — — — 2,731 2,731 Purchase of 4,600 treasury shares — — — ( 172 ) — ( 172 ) Cash dividends declared, $ 0.40 per share — — ( 1,064 ) — — ( 1,064 ) Balance at September 30, 2024 $ 18,629 $ 9,815 $ 101,847 $ ( 7,929 ) $ ( 7,354 ) $ 115,008 Nine Months Ended September 30, 2024 Balance at December 31, 2023 $ 18,629 $ 9,815 $ 97,297 $ ( 7,532 ) $ ( 10,270 ) $ 107,939 Net income — — 7,693 — — 7,693 Other comprehensive income — — — — 2,916 2,916 Purchase of 10,614 treasury shares — — — ( 397 ) — ( 397 ) Cash dividends declared, $ 1.18 per share — — ( 3,143 ) — — ( 3,143 ) Balance at September 30, 2024 $ 18,629 $ 9,815 $ 101,847 $ ( 7,929 ) $ ( 7,354 ) $ 115,008 Three Months Ended September 30, 2023 Balance at beginning of period $ 18,629 $ 9,815 $ 92,149 $ ( 7,137 ) $ ( 13,316 ) $ 100,140 Net income — — 3,481 — — 3,481 Other comprehensive loss — — — — ( 851 ) ( 851 ) Purchase of 9,012 treasury shares — — — ( 344 ) — ( 344 ) Cash dividends declared, $ 0.38 per share — — ( 1,016 ) — — ( 1,016 ) Balance at September 30, 2023 $ 18,629 $ 9,815 $ 94,614 $ ( 7,481 ) $ ( 14,167 ) $ 101,410 Nine Months Ended September 30, 2023 Balance at December 31, 2022 $ 18,629 $ 9,815 $ 86,502 $ ( 6,107 ) $ ( 12,919 ) $ 95,920 Net income — — 11,059 — — 11,059 Cumulative effect of adoption of ASU 2016-13 — — 52 — — 52 Other comprehensive loss — — — — ( 1,248 ) ( 1,248 ) Purchase of 36,263 treasury shares — — — ( 1,374 ) — ( 1,374 ) Cash dividends declared, $ 1.12 per share — — ( 2,999 ) — — ( 2,999 ) Balance, September 30, 2023 $ 18,629 $ 9,815 $ 94,614 $ ( 7,481 ) $ ( 14,167 ) $ 101,410 See notes to unaudited consolidated financial statements. 6 CSB BANCORP, INC. CONDENSED CONSOLIDATED S TATEMENTS OF CASH FLOWS (Unaudited) Nine Months Ended September 30, (Dollars in thousands) 2024 2023 NET CASH PROVIDED BY OPERATING ACTIVITIES $ 8,934 $ 8,079 CASH FLOWS PROVIDED BY (USED IN) INVESTING ACTIVITIES Securities: Proceeds from repayments, available-for-sale 17,497 7,088 Proceeds from repayments, held-to-maturity 14,529 16,798 Purchases, available-for-sale ( 5,889 ) ( 4,458 ) Redemption of FHLB stock 15 1,869 Loan originations, net ( 22,279 ) ( 53,895 ) Property, equipment, and software acquisitions ( 1,728 ) ( 308 ) Purchase of bank-owned life insurance ( 2,000 ) — Net cash provided by (used in) investing activities 145 ( 32,906 ) CASH FLOWS PROVIDED BY (USED IN) FINANCING ACTIVITIES Net increase (decrease) in deposits 43,104 ( 5,342 ) Net decrease in short-term borrowings ( 16,619 ) ( 1,816 ) Repayment of other borrowings ( 458 ) ( 653 ) Cash dividends paid ( 3,143 ) ( 2,999 ) Purchase of treasury shares ( 397 ) ( 1,374 ) Net cash provided by (used in) financing activities 22,487 ( 12,184 ) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 31,566 ( 37,011 ) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 64,077 86,420 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 95,643 $ 49,409 SUPPLEMENTAL DISCLOSURES Cash paid during the year for: Interest $ 10,865 $ 6,584 Income taxes 2,775 3,365 See notes to unaudited consolidated financial statements. 7 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) N OTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying condensed consolidated financial statements include the accounts of CSB Bancorp, Inc. and its wholly-owned subsidiaries, The Commercial and Savings Bank (the “Bank”) and CSB Investment Services, LLC (together referred to as the “Company” or “CSB”). All significant intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company’s financial position at September 30, 2024, and the results of operations and changes in cash flows for the periods presented have been made. Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted. The Annual Report for CSB for the year ended December 31, 2023, contains Consolidated Financial Statements and related footnote disclosures, which should be read in conjunction with the accompanying condensed Consolidated Financial Statements. The results of operations for the period ended September 30, 2024 are not necessarily indicative of the operating results for the full year or any future interim period. Certain items in the prior-year financial statements were reclassified to conform to the current-year presentation. Such reclassifications had no effect on net income or shareholders’ equity. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS In preparing the Consolidated Financial Statements, in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Balance Sheets and reported amounts of revenues and expenses during each reporting period. Actual results could differ from those estimates. The most significant estimates susceptible to change in the near term relate to management’s determination of the allowance for credit losses and the fair value of financial instruments. RECENTLY ISSUED ACCOUNTING PRONOUNCMENTS In December 2023, the FASB issued ASU 2023-09, Income Taxes (Topic740): Improvements to Income Tax Disclosure . This new guidance is intended to enhance the transparency and decision usefulness of income tax disclosures. The amendments in this Update address investor requests for more transparency about income tax information through improvements to income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This Update also includes certain other amendments to improve the effectiveness of income tax disclosures. It is effective for public business entities for annual periods beginning after December 15, 2024. This update is not expected to have a significant impact on the Company's financial statements. 8 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES Securities consisted of the following on September 30, 2024 and December 31, 2023: (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value September 30, 2024 Available-for-sale U.S. Treasury securities $ 13,461 $ 16 $ ( 124 ) $ — $ 13,353 U.S. Government agencies 14,000 — ( 382 ) — 13,618 Mortgage-backed securities of government agencies 63,785 94 ( 5,715 ) — 58,164 Asset-backed securities of government agencies 410 — ( 3 ) — 407 State and political subdivisions 17,406 — ( 689 ) — 16,717 Corporate bonds 30,568 25 ( 1,134 ) — 29,459 Total available-for-sale 139,630 135 ( 8,047 ) — 131,718 Held-to-maturity U.S. Treasury securities $ 10,342 $ — $ ( 524 ) — $ 9,818 Mortgage-backed securities of government agencies 198,787 — ( 25,328 ) — 173,459 State and political subdivisions 2,526 — ( 156 ) — 2,370 Total held-to-maturity 211,655 — ( 26,008 ) — 185,647 Equity securities 185 62 — — 247 Restricted stock 1,520 — — — 1,520 Total securities $ 352,990 $ 197 $ ( 34,055 ) $ — $ 319,132 December 31, 2023 Available-for-sale U.S. Treasury securities $ 18,110 $ — $ ( 421 ) $ — $ 17,689 U.S. Government agencies 14,000 — ( 848 ) — 13,152 Mortgage-backed securities of government agencies 72,279 98 ( 7,332 ) — 65,045 Asset-backed securities of government agencies 548 — ( 25 ) — 523 State and political subdivisions 17,476 — ( 890 ) — 16,586 Corporate bonds 29,135 6 ( 2,056 ) — 27,085 Total available-for-sale 151,548 104 ( 11,572 ) — 140,080 Held-to-maturity U.S. Treasury securities 10,305 — ( 798 ) — 9,507 Mortgage-backed securities of government agencies 213,425 — ( 30,534 ) — 182,891 State and political subdivisions 2,549 2 ( 219 ) — 2,332 Total held-to-maturity 226,279 2 ( 31,551 ) — 194,730 Equity securities 185 74 — — 259 Restricted stock 1,535 — — — 1,535 Total securities $ 379,547 $ 180 $ ( 43,123 ) $ — $ 336,604 9 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES (continued) The amortized cost and fair value of debt securities on September 30, 2024, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties. (Dollars in thousands) Amortized cost Fair value Available-for-sale Due in one year or less $ 30,197 $ 29,959 Due after one through five years 31,043 30,115 Due after five through ten years 18,078 16,755 Due after ten years 60,312 54,889 Total debt securities available-for-sale $ 139,630 $ 131,718 Held-to-maturity Due in one year or less $ 2,500 $ 2,496 Due after one through five years 5,182 4,971 Due after five through ten years 4,866 4,431 Due after ten years 199,107 173,749 Total debt securities held-to-maturity $ 211,655 $ 185,647 Securities with a fair value of approximately $ 130 million and $ 126 million were pledged on September 30, 2024 and December 31, 2023, respectively, to secure public deposits, as well as other deposits and borrowings as required or permitted by law. Restricted stock primarily consists of investments in Federal Home Loan Bank of Cincinnati (FHLB) and Federal Reserve Bank stock. The Bank’s investment in FHLB stock amounted to approximately $ 1.0 million on September 30, 2024 and December 31, 2023 . The FHLB redeemed approximately $ 15 thousand in stock at $ 100 par value per share during the nine-month period ended September 30, 2024 . Federal Reserve Bank stock was $ 471 thousand on September 30, 2024 and December 31, 2023. There were no proceeds from sales of securities for the three and nine-month period ended September 30, 2024 and 2023. All gains and losses recognized on equity securities during the three and nine-month periods were unrealized. 10 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES (continued) The following table presents gross unrealized losses and fair value of securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, on September 30, 2024 and December 31, 2023: Securities in a continuous unrealized loss position Less than 12 months 12 months or more Total (Dollars in thousands) Gross unrealized losses Fair value Gross unrealized losses Fair value Gross unrealized losses Fair value September 30, 2024 Available-for-sale U.S. Treasury securities $ — $ — $ ( 124 ) $ 8,923 $ ( 124 ) $ 8,923 U.S. Government agencies — — ( 382 ) 13,618 ( 382 ) 13,618 Mortgage-backed securities of government agencies — — ( 5,715 ) 48,167 ( 5,715 ) 48,167 Asset-backed securities of government agencies — — ( 3 ) 407 ( 3 ) 407 State and political subdivisions ( 1 ) 424 ( 688 ) 14,712 ( 689 ) 15,136 Corporate bonds — — ( 1,134 ) 27,437 ( 1,134 ) 27,437 Total temporarily impaired $ ( 1 ) $ 424 $ ( 8,046 ) $ 113,264 $ ( 8,047 ) $ 113,688 December 31, 2023 Available-for-sale U.S. Treasury securities $ — $ — $ ( 421 ) $ 17,689 $ ( 421 ) $ 17,689 U.S. Government agencies — — ( 848 ) 13,152 ( 848 ) 13,152 Mortgage-backed securities of government agencies ( 3 ) 1,909 ( 7,329 ) 52,144 ( 7,332 ) 54,053 Asset-backed securities of government agencies — — ( 25 ) 523 ( 25 ) 523 State and political subdivisions ( 28 ) 1,783 ( 862 ) 14,263 ( 890 ) 16,046 Corporate bonds — — ( 2,056 ) 26,586 ( 2,056 ) 26,586 Total temporarily impaired $ ( 31 ) $ 3,692 $ ( 11,541 ) $ 124,357 $ ( 11,572 ) $ 128,049 11 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES (continued) There were 111 securities in an unrealized loss position on September 30, 2024 , 110 of which were in a continuous loss position for twelve (12) months or more. Each quarter the Company conducts a comprehensive security-level impairment assessment on the securities portfolio. Management believes the Company will fully recover the cost of these securities. Unrealized losses on the Company’s fixed-rate debt securities are a result of interest rate increases. U.S. Treasury securities and investments in securities of U.S. government sponsored agency bonds comprise $ 86 million of total AFS securities. The remaining $ 46 million of non-agency debt securities is made up of Corporate Bonds and debt securities to State and Political Subdivisions. For non-agency debt securities, the Company verified the current credit ratings remain above investment grade. Non-rated debt securities total $ 11 million. Annually, management reviews the credit profile of each non-rated issue and assesses whether any impairment to the contractually obligated cash flow is likely to occur. Based on these reviews, management has concluded the underlying creditworthiness for each security remains sufficient to maintain required payment obligations and, therefore, no allowance for credit losses has been recorded. Management believes the value will recover as the securities approach maturity or market interest rates change. The Bank monitors the credit quality of held-to-maturity debt securities primarily through utilizing their credit rating. The Bank monitors the credit rating on a quarterly basis. There are no nonperforming held-to-maturity securities. As of September 30, 2024 , no ACL was required for any held-to-maturity security. The majority of the securities are explicitly or implicitly guaranteed by the United States government, and any estimate of expected credit losses would be insignificant to the Bank. The following table summarizes the amortized cost of held-to maturity debt securities at September 30, 2024 and December 31, 2023, aggregated by credit quality indicator: (Dollars in thousands) U.S. Treasury securities Mortgage- backed securities of government agencies State and political subdivisions September 30, 2024 Credit rating: AAA / AA / A $ 10,342 $ 198,787 $ 2,526 BBB / BB / B — — — Lower than B — — — Non-rated — — — Total $ 10,342 $ 198,787 $ 2,526 December 31, 2023 Credit rating: AAA / AA / A $ 10,305 $ 213,425 $ 2,549 BBB / BB / B — — — Lower than B — — — Non-rated — — — Total $ 10,305 $ 213,425 $ 2,549 12 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS Loans consisted of the following on September 30, 2024 and December 31, 2023: (Dollars in thousands) September 30, 2024 December 31, 2023 Commercial and industrial $ 134,125 $ 152,125 Commercial real estate 194,329 190,702 Commercial lessors of buildings 98,049 82,687 Construction 57,283 49,214 Consumer mortgage 175,093 166,891 Home equity line of credit 44,978 43,269 Consumer installment 10,377 10,636 Consumer indirect 5,493 5,957 Total loans 719,727 701,481 Allowance for credit losses ( 7,224 ) ( 6,607 ) Deferred loan fees, net ( 125 ) ( 77 ) Net Loans $ 712,378 $ 694,797 Loan Origination/Risk Management The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions. Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. The Company’s management examines current and occasionally projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers; however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable, inventory, and equipment, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers. 13 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied. The top ten collateral exposures in commercial real estate and commercial lessors of buildings at September 30, 2024 are as follows: Industrial, manufacturing and production $ 59 million; warehouse $ 41 million: healthcare $ 27 million; residential investment property $ 25 million; retail strip center $ 17 million; auto repair $ 16 million; retail store $ 14 million; senior housing $ 12 million; hotels $ 11 million; office building $ 7 million. With respect to loans to developers and builders that are secured by non-owner-occupied properties, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Construction and land development loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction and land development loans often involve the disbursement of substantial funds with repayment dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing. The Company originates consumer loans utilizing a judgmental underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk. The Company maintains an independent credit department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures. Loans serviced for others approximated $ 137 million and $ 132 million on September 30, 2024 and December 31, 2023, respectively. 14 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) Concentrations of Credit Nearly all the Company’s lending activity occurs within the state of Ohio, including the four counties of Holmes, Stark, Tuscarawas and Wayne, as well as other markets. The majority of the Company’s loan portfolio consists of commercial and commercial real estate loans. Credit concentrations, including commitments, as determined using North American Industry Classification Codes (NAICS), to the three largest industries compared to total loans on September 30, 2024 , included $ 75 million, or 10 %, of total loans to lessors of non-residential buildings, $ 39 million, or 5 %, of total loans to manufacturers of animal food, and $ 30 million, or 4 %, of total loans to hotels. These loans are generally secured by real property and equipment, with repayment expected from operational cash flow. Credit evaluation is based on a review of cash flow coverage of principal, interest payments, and the adequacy of the collateral received. Allowance for Credit Losses The following table details activity in the allowance for credit losses ("ACL") by portfolio segment for the three and nine months ended September 30, 2024 and 2023. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories. For the three and nine months ended September 30, 2024 , the increase in the provision for commercial and industrial loans primarily relates to one individually evaluated commercial loan relationship which has been charged-down to the fair value of the collateral. The commercial and industrial charge-off amount related to this loan relationship was $ 3.9 million and the commercial real estate charge-off for this same relationship was $ 420 thousand. The charge-offs also increased the historical loss rates which are applied to the active balances multiplied by the weighted average life of the loan pools. The remaining provision amounts for the quarter are primarily a result of changes in loan volume and weighted average remaining maturities of the loans in each category. For the three months ended September 2023, the decrease in the provision for commercial and industrial loans primarily relates to the recovery of prior loan charge-offs, as well as the decrease in substandard loan balances in this loan category. The remaining provision changes for the quarter are primarily a result of changes in loan volume in each loan category. For the nine month period in 2023, the decrease in provision for commercial real estate loans is due to the payoff of one larger loan relationship with a specific allocation. The increase in the provision for commercial lessors of buildings relates to the increase in loans graded special mention in this category. All other changes during the nine month period are related to loan volume changes. 15 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) (Dollars in thousands) Beginning Balance Charge-offs Recoveries Provisions (Recovery) Ending Balance Three Months Ended September 30, 2024 Commercial and industrial $ 5,274 $ ( 3,663 ) $ 53 $ 706 $ 2,370 Commercial real estate 2,033 ( 420 ) — ( 13 ) 1,600 Commercial lessors of buildings 1,328 — — ( 32 ) 1,296 Construction 326 — — ( 16 ) 310 Consumer mortgage 1,061 — 1 30 1,092 Home equity line of credit 276 — — 4 280 Consumer installment 74 ( 11 ) 6 4 73 Consumer indirect 215 ( 1 ) 27 ( 38 ) 203 $ 10,587 $ ( 4,095 ) $ 87 $ 645 $ 7,224 Nine Months Ended September 30, 2024 Commercial and industrial $ 1,737 $ ( 3,931 ) $ 72 $ 4,492 $ 2,370 Commercial real estate 1,637 ( 420 ) 1 382 1,600 Commercial lessors of buildings 1,200 — — 96 1,296 Construction 333 — — ( 23 ) 310 Consumer mortgage 1,107 — 10 ( 25 ) 1,092 Home equity line of credit 288 — — ( 8 ) 280 Consumer installment 76 ( 46 ) 13 30 73 Consumer indirect 229 ( 60 ) 33 1 203 $ 6,607 $ ( 4,457 ) $ 129 $ 4,945 $ 7,224 (Dollars in thousands) Beginning Balance Impact of Adopting ASC 326 Charge-offs Recoveries Provisions (Recovery) Ending Balance Three Months Ended September 30, 2023 Commercial and industrial $ 2,119 $ — $ — $ 147 $ ( 303 ) $ 1,963 Commercial real estate 1,882 — — 8 239 2,129 Commercial lessors of buildings 1,237 — — — ( 11 ) 1,226 Construction 283 — — — ( 28 ) 255 Consumer mortgage 714 — — — 61 775 Home equity line of credit 178 — — — 9 187 Consumer installment 52 — ( 8 ) — 13 57 Consumer indirect 94 — ( 35 ) 7 33 99 Unallocated — — — — — — $ 6,559 $ — $ ( 43 ) $ 162 $ 13 $ 6,691 Nine Months Ended September 30, 2023 Commercial and industrial $ 1,110 $ 658 $ — $ 166 $ 29 $ 1,963 Commercial real estate 2,760 ( 541 ) — 9 ( 99 ) 2,129 Commercial lessors of buildings — 974 — — 252 1,226 Construction 803 ( 515 ) — — ( 33 ) 255 Consumer mortgage 1,268 ( 580 ) — 1 86 775 Home equity line of credit — 201 — — ( 14 ) 187 Consumer installment 233 ( 183 ) ( 31 ) 12 26 57 Consumer indirect — 91 ( 66 ) 34 40 99 Unallocated 664 ( 664 ) — — — — $ 6,838 $ ( 559 ) $ ( 97 ) $ 222 $ 287 $ 6,691 16 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) Age Analysis of Past-Due Loans Receivable and Nonperforming Loans The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past-due status. (Dollars in thousands) Current 30-59 Days Past Due 60-89 Days Past Due 90 Days + Past Due Total Past Due Total Loans September 30, 2024 Commercial and industrial $ 134,075 $ 50 $ — $ — $ 50 $ 134,125 Commercial real estate 194,329 — — — — 194,329 Commercial lessors of buildings 98,049 — — — — 98,049 Construction 57,283 — — — — 57,283 Consumer mortgage 174,143 246 440 264 950 175,093 Home equity line of credit 44,897 81 — — 81 44,978 Consumer installment 10,345 28 4 — 32 10,377 Consumer indirect 5,468 25 — — 25 5,493 Total Loans $ 718,589 $ 430 $ 444 $ 264 $ 1,138 $ 719,727 December 31, 2023 Commercial and industrial $ 151,964 $ 111 $ 50 $ — $ 161 $ 152,125 Commercial real estate 190,702 — — — — 190,702 Commercial lessors of buildings 82,687 — — — — 82,687 Construction 49,214 — — — — 49,214 Consumer mortgage 166,411 307 173 — 480 166,891 Home equity line of credit 42,955 33 281 — 314 43,269 Consumer installment 10,602 25 9 — 34 10,636 Consumer indirect 5,821 52 84 — 136 5,957 Total Loans $ 700,356 $ 528 $ 597 $ — $ 1,125 $ 701,481 17 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) The following table presents the amortized cost basis of loans on nonaccrual status and loans past due over 90 days still accruing interest as of September 30, 2024 and December 31, 2023: (Dollars in thousands) Nonaccrual with no ACL Nonaccrual with ACL Total Nonaccrual Loans Past Due 90 Days or More Still Accruing Total Nonperforming September 30, 2024 Commercial and industrial $ 16 $ 2,100 $ 2,116 $ — $ 2,116 Commercial real estate — 679 679 — 679 Commercial lessors of buildings 4 — 4 — 4 Construction — — — — — Consumer mortgage 115 — 115 264 379 Home equity line of credit 72 — 72 — 72 Consumer installment 44 — 44 — 44 Consumer indirect 78 — 78 — 78 Total Loans $ 329 $ 2,779 $ 3,108 $ 264 $ 3,372 December 31, 2023 Commercial and industrial $ 59 $ — $ 59 $ — $ 59 Commercial real estate 62 — 62 — 62 Commercial lessors of buildings 15 — 15 — 15 Construction — — — — — Consumer mortgage 172 — 172 — 172 Home equity line of credit — — — — — Consumer installment 49 — 49 — 49 Consumer indirect 39 — 39 — 39 Total Loans $ 396 $ — $ 396 $ — $ 396 Interest income recognized on nonaccrual loans for the nine months ended September 30, 2024 was $ 33 thousand, respectively. Collateral-Dependent Financial Assets When loan repayment is expected to be provided substantially through the operation or sale of collateral and the borrower is experiencing financial difficulty, expected credit losses are based on the fair value of the collateral. The class of loan represents the primary collateral type associated with the loan. There were no collateral dependent loans as of December 31, 2023. The following table presents the amortized cost basis of collateral dependent loans by class of loan: Type of Collateral (Dollars in thousands) Real Estate Blanket Liens September 30, 2024 Commercial and industrial $ — $ 2,100 Commercial real estate 679 — Total collateral dependent loans $ 679 $ 2,100 18 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) Credit Quality Indicators The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis includes all commercial loans before origination and an annual review of those with an outstanding commitment greater than $ 500 thousand. The Company uses the following definitions for risk ratings: Pass . Loans classified as pass (Cash Secured, Exceptional, Acceptable, Monitor, or Pass Watch) may exhibit a wide array of characteristics but at a minimum represent an acceptable risk to the Bank. Borrowers in this rating may have leveraged but acceptable balance sheet positions, satisfactory asset quality, stable to favorable sales and earnings trends, acceptable liquidity and adequate cash flow. Loans are considered fully collectible and require an average amount of administration. While generally adhering to credit policy, these loans may exhibit occasional exceptions that do not result in undue risk to the Bank. Borrowers are generally capable of absorbing setbacks, financial and otherwise, without the threat of failure. Special Mention . Assets assigned a Special Mention grade are not considered classified assets but are considered criticized. These assets exhibit potential weaknesses that, deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Loans in this rating warrant special attention but have not yet reached the point of concern for loss. These assets have deteriorated sufficiently to the point they would have difficulty refinancing elsewhere. Similarly, purchasers of the business would not be eligible for bank financing unless they represent a significantly stronger credit risk. Substandard . Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected. Doubtful . Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable. 19 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Based on the most recent analysis performed, the following tables present the recorded investment in non-homogeneous loans by internal risk rating system as of September 30, 2024 and December 31, 2023: Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total September 30, 2024 Commercial and industrial: Pass $ 10,904 $ 27,773 $ 16,018 $ 8,110 $ 3,419 $ 7,527 $ 41,362 $ — $ 115,113 Special mention 61 910 2,327 915 429 — 1,768 — 6,410 Substandard — 1,972 4,471 729 127 1,054 4,249 — 12,602 Doubtful — — — — — — — — — Total $ 10,965 $ 30,655 $ 22,816 $ 9,754 $ 3,975 $ 8,581 $ 47,379 $ — $ 134,125 YTD gross charge-offs $ — $ 246 $ — $ 22 $ — $ — $ 3,663 $ — $ 3,931 Commercial real estate: Pass $ 9,205 $ 26,248 $ 40,344 $ 43,223 $ 13,498 $ 26,649 $ 1,816 $ — $ 160,983 Special Mention — 208 1,256 5,268 2,036 9,752 435 — 18,955 Substandard 347 1,060 198 2,424 8 8,284 2,070 — 14,391 Doubtful — — — — — — — — — Total $ 9,552 $ 27,516 $ 41,798 $ 50,915 $ 15,542 $ 44,685 $ 4,321 $ — $ 194,329 YTD gross charge-offs $ — $ 420 $ — $ — $ — $ — $ — $ 420 Commercial lessors of buildings: Pass $ 18,901 $ 22,185 $ 21,768 $ 15,468 $ 3,216 $ 14,256 $ 317 $ — $ 96,111 Special Mention — — — 183 — — — — 183 Substandard — — 562 230 959 4 — — 1,755 Doubtful — — — — — — — — — Total $ 18,901 $ 22,185 $ 22,330 $ 15,881 $ 4,175 $ 14,260 $ 317 $ — $ 98,049 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial Construction: Pass $ 7,731 $ 29,353 $ 8,486 $ 784 $ 848 $ 445 $ 1,962 $ — $ 49,609 Special Mention — — — — — — — — — Substandard — — — — — 75 — — 75 Doubtful — — — — — — — — — Total $ 7,731 $ 29,353 $ 8,486 $ 784 $ 848 $ 520 $ 1,962 $ — $ 49,684 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Total Pass $ 46,741 $ 105,559 $ 86,616 $ 67,585 $ 20,981 $ 48,877 $ 45,457 $ — $ 421,816 Special Mention 61 1,118 3,583 6,366 2,465 9,752 2,203 — 25,548 Substandard 347 3,032 5,231 3,383 1,094 9,417 6,319 — 28,823 Doubtful — — — — — — — — — Total $ 47,149 $ 109,709 $ 95,430 $ 77,334 $ 24,540 $ 68,046 $ 53,979 $ — $ 476,187 YTD commercial gross charge-offs $ — $ 666 $ — $ 22 $ — $ — $ 3,663 $ — $ 4,351 20 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) Term Loans Amortized Cost Basis by Origination Year 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total December 31, 2023 Commercial and industrial: Pass $ 32,037 $ 25,996 $ 12,196 $ 5,207 $ 3,388 $ 7,112 $ 45,423 $ — $ 131,359 Special mention 76 225 522 33 33 65 3,872 — 4,826 Substandard 782 2,968 1,021 1,017 106 1,416 8,630 — 15,940 Doubtful — — — — — — — — — Total $ 32,895 $ 29,189 $ 13,739 $ 6,257 $ 3,527 $ 8,593 $ 57,925 $ — $ 152,125 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial real estate: Pass $ 22,206 $ 38,696 $ 54,830 $ 12,233 $ 19,543 $ 21,938 $ 647 $ — $ 170,093 Special Mention 241 1,380 2,292 2,496 — 322 — — 6,731 Substandard 1,150 — 888 — 466 11,374 — — 13,878 Doubtful — — — — — — — — — Total $ 23,597 $ 40,076 $ 58,010 $ 14,729 $ 20,009 $ 33,634 $ 647 $ — $ 190,702 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial lessors of buildings: Pass $ 18,353 $ 22,762 $ 15,455 $ 6,429 $ 3,543 $ 8,934 $ 360 $ — $ 75,836 Special Mention — 436 1,687 — 3,578 — — — 5,701 Substandard — — — 989 — 161 — — 1,150 Doubtful — — — — — — — — — Total $ 18,353 $ 23,198 $ 17,142 $ 7,418 $ 7,121 $ 9,095 $ 360 $ — $ 82,687 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Commercial construction: Pass $ 24,119 $ 14,855 $ 576 $ 272 $ 281 $ 256 $ — $ — $ 40,359 Special Mention — 258 43 635 — — — — 936 Substandard — — — 30 80 — — — 110 Doubtful — — — — — — — — — Total $ 24,119 $ 15,113 $ 619 $ 937 $ 361 $ 256 $ — $ — $ 41,405 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Total Pass $ 96,715 $ 102,309 $ 83,057 $ 24,141 $ 26,755 $ 38,240 $ 46,430 $ — $ 417,647 Special Mention 317 2,299 4,544 3,164 3,611 387 3,872 — 18,194 Substandard 1,932 2,968 1,909 2,036 652 12,951 8,630 — 31,078 Doubtful — — — — — — — — — Total $ 98,964 $ 107,576 $ 89,510 $ 29,341 $ 31,018 $ 51,578 $ 58,932 $ — $ 466,919 YTD commercial gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — 21 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) The Company monitors the credit risk profile by payment activity for the loan classes listed below. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. The following table presents the amortized cost in consumer loans based on payment activity as of September 30, 2024 and December 31, 2023: Term Loans Amortized Cost Basis by Origination Year (Dollars in thousands) 2024 2023 2022 2021 2020 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total September 30, 2024 Consumer mortgage: Performing $ 15,008 $ 28,980 $ 32,873 $ 33,472 $ 29,291 $ 35,090 $ — $ — $ 174,714 Nonperforming — — — — 52 327 — — 379 Total $ 15,008 $ 28,980 $ 32,873 $ 33,472 $ 29,343 $ 35,417 $ — $ — $ 175,093 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Consumer Construction: Performing $ 4,136 $ 2,161 $ 999 $ 162 $ 99 $ 42 $ — $ — $ 7,599 Nonperforming — — — — — — — — — Total $ 4,136 $ 2,161 $ 999 $ 162 $ 99 $ 42 $ — $ — $ 7,599 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Home equity line of credit: Performing $ — $ — $ — $ — $ — $ — $ 44,870 $ 36 $ 44,906 Nonperforming — — — — — — 72 — 72 Total $ — $ — $ — $ — $ — $ — $ 44,942 $ 36 $ 44,978 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Consumer installment: Performing $ 3,487 $ 3,919 $ 1,887 $ 529 $ 265 $ 185 $ 61 $ — $ 10,333 Nonperforming — 6 — — — 38 — — 44 Total $ 3,487 $ 3,925 $ 1,887 $ 529 $ 265 $ 223 $ 61 $ — $ 10,377 YTD gross charge-offs $ 1 $ 13 $ 18 $ 3 $ 3 $ 8 $ — $ — $ 46 Consumer indirect: Performing $ 702 $ 641 $ 970 $ 524 $ 501 $ 2,077 $ — $ — $ 5,415 Nonperforming — 20 — — — 58 — — 78 Total $ 702 $ 661 $ 970 $ 524 $ 501 $ 2,135 $ — $ — $ 5,493 YTD gross charge-offs $ — $ — $ — $ — $ — $ 60 $ — $ — $ 60 Total Performing $ 23,333 $ 35,701 $ 36,729 $ 34,687 $ 30,156 $ 37,394 $ 44,931 $ 36 $ 242,967 Nonperforming — 26 — — 52 423 72 — 573 Total $ 23,333 $ 35,727 $ 36,729 $ 34,687 $ 30,208 $ 37,817 $ 45,003 $ 36 $ 243,540 YTD consumer gross charge-offs $ 1 $ 13 $ 18 $ 3 $ 3 $ 68 $ — $ — $ 106 22 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS (CONTINUED) Term Loans Amortized Cost Basis by Origination Year 2023 2022 2021 2020 2019 Prior Revolving Loans Amortized Cost Basis Revolving Loans Converted to Term Total December 31, 2023 Consumer mortgage: Performing $ 24,521 $ 34,798 $ 35,802 $ 32,259 $ 8,931 $ 30,408 $ — $ — $ 166,719 Nonperforming — — — — — 172 — — 172 Total $ 24,521 $ 34,798 $ 35,802 $ 32,259 $ 8,931 $ 30,580 $ — $ — $ 166,891 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Consumer construction: Performing $ 5,463 $ 1,477 $ 264 $ 483 $ 81 $ 41 $ — $ — $ 7,809 Nonperforming — — — — — — — — — Total $ 5,463 $ 1,477 $ 264 $ 483 $ 81 $ 41 $ — $ — $ 7,809 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Home equity line of credit: Performing $ — $ — $ — $ — $ — $ — $ 43,223 $ 46 $ 43,269 Nonperforming — — — — — — — — — Total $ — $ — $ — $ — $ — $ — $ 43,223 $ 46 $ 43,269 YTD gross charge-offs $ — $ — $ — $ — $ — $ — $ — $ — $ — Consumer installment: Performing $ 5,705 $ 3,067 $ 981 $ 513 $ 118 $ 184 $ 68 $ — $ 10,636 Nonperforming — — — — — — — — — Total $ 5,705 $ 3,067 $ 981 $ 513 $ 118 $ 184 $ 68 $ — $ 10,636 YTD gross charge-offs $ 2 $ 12 $ 19 $ 5 $ 2 $ 6 $ — $ — $ 46 Consumer indirect: Performing $ 858 $ 1,086 $ 622 $ 568 $ 607 $ 2,128 $ — $ — $ 5,869 Nonperforming — 3 — — 81 4 — — 88 Total $ 858 $ 1,089 $ 622 $ 568 $ 688 $ 2,132 $ — $ — $ 5,957 YTD gross charge-offs $ — $ — $ — $ — $ — $ 66 $ — $ — $ 66 Total Performing $ 36,547 $ 40,428 $ 37,669 $ 33,823 $ 9,737 $ 32,761 $ 43,291 $ 46 $ 234,302 Nonperforming — 3 — — 81 176 — — 260 Total $ 36,547 $ 40,431 $ 37,669 $ 33,823 $ 9,818 $ 32,937 $ 43,291 $ 46 $ 234,562 YTD consumer gross charge-offs $ 2 $ 12 $ 19 $ 5 $ 2 $ 72 $ — $ — $ 112 Consumer mortgages are substantially secured by one to four family owner occupied properties and consumer indirect loans are substantially secured by recreational vehicles. All nonperforming consumer loans are evaluated when placed on nonaccrual status and may be charged down based on the collateral fair value less cost to sell if that value is lower than the outstanding balance. As of September 30, 2024 there was one loan secured by consumer real estate totaling $ 30 thousand in process of foreclosure. Modifications to Borrowers Experiencing Financial Difficulty Occasionally, the Bank modifies loans to borrowers in financial distress by providing – principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses. In some cases, the Bank may provide multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted. There were no modifications of loans to borrowers in financial distress completed during the nine months ended September 30, 2024 and 2023. 23 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 4 – SHORT-TERM BORROWINGS The following table provides additional detail regarding repurchase agreements and the related collateral accounted for as secured borrowings. Remaining Contractual Maturity Overnight and Continuous September 30, December 31, (Dollars in thousands) 2024 2023 Securities of U.S. Government Agencies and mortgage-backed securities of government agencies pledged, fair value $ 19,276 $ 36,002 Repurchase agreements 19,224 35,843 NOTE 5 – FAIR VALUE MEASUREMENTS The Company provides disclosures about assets and liabilities carried at fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. The three broad levels of the fair value hierarchy are described below: Level I: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access. Level II: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by corroborated or other means. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability. Level III: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 24 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 5 – FAIR VALUE MEASUREMENTS (CONTINUED) The following table presents the assets reported on the Consolidated Balance Sheets at their fair value on a recurring basis as of September 30, 2024 and December 31, 2023 by level within the fair value hierarchy. No liabilities are carried at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Equity securities with readily determinable values and U.S. Treasury Notes are valued at the closing price reported on the active market on which the individual securities or identical securities are traded. Obligations of U.S. government agencies, mortgage-backed securities, asset-backed securities, obligations of states and political subdivisions and corporate bonds are valued at observable market data for similar assets. Equity securities without readily determinable values are carried at amortized cost adjusted for impairment and observable price changes and are not included in the table below. (Dollars in thousands) Level I Level II Level III Total September 30, 2024 Assets: Securities available-for-sale U.S. Treasury securities $ 13,353 $ — $ — $ 13,353 U.S. Government agencies — 13,618 — 13,618 Mortgage-backed securities of government agencies — 58,164 — 58,164 Asset-backed securities of government agencies — 407 — 407 State and political subdivisions — 16,717 — 16,717 Corporate bonds — 29,459 — 29,459 Total available-for-sale securities $ 13,353 $ 118,365 $ — $ 131,718 Equity securities $ 201 $ — $ — $ 201 December 31, 2023 Assets: Securities available-for-sale U.S. Treasury securities $ 17,689 $ — $ — $ 17,689 U.S. Government agencies — 13,152 — 13,152 Mortgage-backed securities of government agencies — 65,045 — 65,045 Asset-backed securities of government agencies — 523 — 523 State and political subdivisions — 16,586 — 16,586 Corporate bonds — 27,085 — 27,085 Total available-for-sale securities $ 17,689 $ 122,391 $ — $ 140,080 Equity securities $ 213 $ — $ — $ 213 25 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 5 – FAIR VALUE MEASUREMENTS (CONTINUED) The following methods and assumptions were used by the Company in determining the fair value of assets measured at fair value on a nonrecurring basis as described below: Individually evaluated collateral dependent loans: Loans that are collateral dependent are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral securing these loans include: quoted market prices for identical assets classified as Level I inputs; observable inputs, employed by certified appraisers, for similar assets classified as Level II inputs. In cases where valuation techniques included unobservable inputs and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level III inputs. The following table presents the assets measured on a nonrecurring basis on the consolidated balance sheet at their fair value as of September 30, 2024 , by level within the fair value hierarchy. There were no individually evaluated collateral dependent loans at December 31, 2023. (Dollars in thousands) Level I Level II Level III Total September 30, 2024 Individually evaluated collateral dependent loans recorded at fair value: Commercial and industrial $ — $ — $ 1,577 $ 1,577 Commercial real estate — — 679 679 Total individually evaluated collateral dependent loans recorded at fair value: $ — $ — $ 2,256 $ 2,256 NOTE 6 – FAIR VALUES OF FINANCIAL INSTRUMENTS The estimated fair values of recognized financial instruments carried at amortized cost as of September 30, 2024 and December 31, 2023 are as follows: (Dollars in thousands) Carrying Value Level I Level II Level III Fair Value September 30, 2024 Financial assets Securities held-to-maturity $ 211,655 $ 9,818 $ 175,829 $ — $ 185,647 Loans held for sale $ 509 $ 519 $ — $ — $ 519 Net loans 712,378 — — 677,583 677,583 Mortgage servicing rights 614 — — 614 614 Financial liabilities Deposits $ 1,070,531 $ 830,206 $ — $ 239,880 $ 1,070,086 Other borrowings 1,296 — — 1,171 1,171 December 31, 2023 Financial assets Securities held-to-maturity $ 226,279 $ 9,507 $ 185,223 $ — $ 194,730 Net loans 694,797 — — 663,510 663,510 Mortgage servicing rights 600 — — 600 600 Financial liabilities Deposits $ 1,027,427 $ 835,847 $ — $ 193,126 $ 1,028,973 Other borrowings 1,754 — — 1,546 1,546 Other financial instruments carried at amortized cost include cash and cash equivalents, restricted stock, bank-owned life insurance, accrued interest receivable, short-term borrowings, and accrued interest payable, all of which have a Level I fair value that approximates their carrying value. The Company also has unrecognized financial instruments on September 30, 2024 and December 31, 2023 , related to commitments to extend credit 26 CSB BANCORP, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) and letters of credit. The aggregate contract amount of such financial instruments was approximately $ 287 million on September 30, 2024 and $ 282 million on December 31, 2023. NOTE 6 – FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED) The fair value estimates of financial instruments are made at a specific point in time based on relevant market information. Since no ready market exists for a significant portion of the financial instruments, fair value estimates are largely based on judgments after considering such factors as future expected credit losses, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates. Note 7- ACCUMULATED OTHER COMPREHENSIVE LOSS The following table presents the changes in accumulated other comprehensive loss by component net of tax for the three and nine months ended September 30, 2024 and 2023: (Dollars in thousands) Pretax Tax Effect After-tax Three Months Ended September 30, 2024 Balance, beginning of period $ ( 12,765 ) $ 2,680 ( 10,085 ) Unrealized holding gain on available-for-sale securities arising during the period 3,409 ( 716 ) 2,693 Amortization of held-to-maturity discount resulting from transfer 48 ( 10 ) 38 Total other comprehensive income 3,457 ( 726 ) 2,731 Balance, end of period $ ( 9,308 ) $ 1,954 $ ( 7,354 ) Nine Months Ended September 30, 2024 Balance, beginning of period $ ( 12,999 ) $ 2,729 $ ( 10,270 ) Unrealized holding gain on available-for-sale securities arising during the period 3,556 ( 747 ) 2,809 Amortization of held-to-maturity discount resulting from transfer 135 ( 28 ) 107 Total other comprehensive income 3,691 ( 775 ) 2,916 Balance, end of period $ ( 9,308 ) $ 1,954 $ ( 7,354 ) Three Months Ended September 30, 2023 Balance, beginning of period $ ( 16,856 ) $ 3,540 $ ( 13,316 ) Unrealized holding loss on available-for-sale securities arising during the period ( 1,127 ) 237 ( 890 ) Amortization of held-to-maturity discount resulting from transfer 50 ( 11 ) 39 Total other comprehensive loss ( 1,077 ) 226 ( 851 ) Balance, end of period $ ( 17,933 ) $ 3,766 $ ( 14,167 ) Nine Months Ended September 30, 2023 Balance, beginning of period $ ( 16,354 ) $ 3,435 $ ( 12,919 ) Unrealized holding loss on available-for-sale securities arising during the period ( 1,722 ) 361 ( 1,361 ) Amortization of held-to-maturity discount resulting from transfer 143 ( 30 ) 113 Total other comprehensive loss ( 1,579 ) 331 ( 1,248 ) Balance, end of period $ ( 17,933 ) $ 3,766 $ ( 14,167 ) 27 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following management’s discussion and analysis focuses on the consolidated financial condition of the Company on September 30, 2024 as compared to December 31, 2023, and the consolidated results of operations for the three and nine months ended September 30, 2024 compared to the same periods in 2023. The purpose of this discussion is to provide the reader with a more thorough understanding of the Consolidated Financial Statements. This discussion should be read in conjunction with the interim condensed Consolidated Financial Statements and related footnotes contained in Part I, Item 1 of this Quarterly Report. FORWARD-LOOKING STATEMENTS Certain statements contained in this Quarterly Report are not historical facts but rather are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipates”, “plans”, “expects”, “believes”, and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services. Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows, and financial position. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in this report are reasonable, the reader should not place undue reliance on any forward-looking statement. The Company does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as may be required by applicable law. FINANCIAL CONDITION Total assets increased $30 million to $1.21 billion at September 30, 2024 compared to $1.18 billion at December 31, 2023. During the nine months ended September 30, 2024, securities decreased $23 million, net loans increased $18 million, and cash and cash equivalents increased $32 million. Deposits and short-term borrowings increased $26 million. Net loans increased $18 million, or 3%, as commercial and commercial real estate loans increased $1 million, or less than 1%, compared to December 31, 2023 and residential real estate loans increased $8 million, or 5%, from December 31, 2023. Construction loans increased $8 million, or 16%, from December 31, 2023. Consumer refinance activity slowed from previous periods on mortgage loans, while home purchase activity remained stable despite limited inventory, and home equity line balances increased by $2 million. Residential mortgage loan originations, including home equity lines, for the nine months ended September 30, 2024 totaled $39 million, a slight increase from $38 million in mortgage originations during the nine months ended September 30, 2023. Mortgage loan originations sold into the secondary market were $7 million and $3 million, respectively during the nine months ended September 30, 2024 and September 30, 2023. The Bank originates and sells primarily fixed rate thirty-year mortgages into the secondary market. The allowance for credit losses for loans increased $617 thousand from December 31, 2023 to $7.2 million. A previously identified commercial lending relationship totaling $6.4 million experienced credit deterioration and was placed on nonaccrual during the second quarter 2024 while the company was being offered for sale. On July 23, 2024 the bank was notified that the borrower's company would cease operations. The credit was charged down in third quarter 2024 by $4.1 million as the liquidation of assets is in process. 28 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Net charge-offs were $4.3 million, or an annualized 0.81% of average loans, in the current nine-month period compared to net recoveries of $125 thousand, or (0.03%) of average loans in the year-ago nine-month period. At September 30, 2024, the allowance for credit losses to total loans was 1%. We believe the allowance level is appropriate given the level of problem loans and composition of the overall loan portfolio in the current economic environment. Nonperforming loans increased $3 million to $3.4 million, or 0.47%, of total loans from $396 thousand, or 0.06% of total loans, on December 31, 2023. For the nine months ended September 30, 2024, $7 million in loans were placed on nonaccrual status, $253 thousand in paydowns were received, and $4.1 million in loans were charged-off due to non-payment. September 30, December 31, September 30, (Dollars in thousands) 2024 2023 2023 Non-performing loans $ 3,372 $ 396 $ 260 Other real estate — — — Repossessed assets — — — Allowance for credit losses 7,224 6,607 6,691 Total loans 719,602 701,404 680,949 Allowance for credit losses as a percentage of total loans 1.00 % 0.94 % 0.98 % Allowance for credit losses to total nonperforming loans 214 % 1,668 % 2,573 % The ratio of gross loans to deposits was 67% at September 30, 2024, compared to 68% at December 31, 2023. The Company has no exposure to government-sponsored enterprise preferred stocks, collateralized debt obligations, or trust preferred securities. Management has considered industry analyst reports, sector credit reports, and the volatility within the bond market in concluding that the gross unrealized losses of $34 million within the available-for-sale and held-to-maturity portfolios as of September 30, 2024, was primarily the result of current market yields compared to the yields at the time the investments were purchased by the Company and not due to credit quality. As a result, all embedded security losses on September 30, 2024, are considered temporary and no allowance for credit loss is necessary. The weighted average life of total debt securities was 5.23 years at September 30, 2024 as compared to 5.09 years at December 31, 2023. If interest rates declined 100 basis points, the weighted average life was estimated to fall to 4.98 years at September 30, 2024 and 4.98 years at December 31, 2023. If interest rates rose 100 basis points the weighted average life would be expected to increase to 5.42 years at September 30, 2024 and 5.16 years at December 31, 2023. Deposits increased $43 million, or 4%, from December 31, 2023 with noninterest-bearing deposits decreasing approximately $15 million, or 5%, and interest-bearing deposit accounts increasing approximately $58 million, or 8%. Total deposits as of September 30, 2024 are $1.07 billion, or 5%, above September 30, 2023 deposit balances. On a year over year comparison, decreases were recognized in noninterest-bearing demand deposits of $13 million, interest bearing demand accounts of $19 million, and savings accounts of $7 million. Increases were recognized in money market accounts of $29 million, and time deposits of $63 million. Deposits have increased as customers move excess liquid funds into money market accounts and time certificates of deposit to take advantage of the increased interest rates. The estimated amount of uninsured deposits was $275 million, $254 million, and $267 million as of September 30, 2024, December 31, 2023, and September 30, 2023, respectively. Short-term borrowings consisting of overnight repurchase agreements with retail customers decreased $17 million, or 46%, to $19 million at September 30, 2024 as compared to December 31, 2023 as customers moved money into higher interest rate money market and time deposit accounts. Other borrowings decreased $458 thousand as the Company repaid FHLB advances. Total shareholders’ equity amounted to $115 million, or 9.5%, of total assets at September 30, 2024, an increase of $7 million, or 7%, from $108 million at December 31, 2023. The increase in shareholders’ equity during the nine months ended September 30, 2024 was due to net income of $7.7 million, other comprehensive income of $3 million, less cash dividends of $3 million, and treasury stock repurchase of $397 thousand. Total accumulated other comprehensive loss ("AOCL") decreased during the nine months ended September 30, 2024 due to decreases in interest rates and improvements in pricing in government agency and corporate bonds as AFS securities are marked to fair market value. This remaining unrealized 29 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS loss in securities is temporary and is adjusted monthly for additional interest rate fluctuations, principal paydowns, calls, and maturities. The Company and the Bank met all regulatory capital requirements at September 30, 2024 as shown in the Capital Resources section of this report. RESULTS OF OPERATIONS Three months ended September 30, 2024 and 2023 For the quarters ended September 30, 2024 and 2023, the Company recorded net income of $3.1 million and $3.5 million and $1.18 and $1.30 per share, respectively. The $300 thousand decrease in net income for the period was primarily the result of the provision for credit losses and off-balance sheet commitments of $700 thousand compared to the provision for credit losses in the prior year period of $177 thousand. The increase of $377 thousand in net interest income and $104 thousand increase in noninteret income was offset by a $388 thousand increase in noninterest expenses. The federal income tax provision decreased $94 thousand. Pre-provision net revenue ("PPNR"), (a non-GAAP measure), totaled $4.6 million for the quarter ended September 30, 2024, an increase of $93 thousand, or 2%, from the prior year's third quarter. Return on average assets and return on average equity were 1.05% and 11.14%, respectively, for the three-month period of 2024, compared to 1.19% and 13.63%, respectively for the same quarter in 2023. Average Balance Sheets and Net Interest Margin Analysis For the Three Months Ended September 30, 2024 2023 (Dollars in thousands) Average balance 1 Interest Average rate 2 Average balance 1 Interest Average rate 2 ASSETS Federal Funds Sold $ 446 $ 6 5.35 % $ — $ — — % Interest-earning deposits in other banks 57,543 783 5.41 38,669 531 5.45 Taxable securities 327,234 1,782 2.17 360,868 1,910 2.10 Tax-exempt securities 4 19,053 111 2.32 21,859 130 2.36 Loans 3,4 723,129 10,542 5.80 675,283 9,181 5.39 Total interest-earning assets 1,127,405 13,224 4.67 % 1,096,679 11,752 4.25 % Noninterest-earning assets 63,632 65,350 TOTAL ASSETS $ 1,191,037 $ 1,162,029 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing demand deposits $ 226,551 $ 527 0.93 % $ 256,223 $ 689 1.07 % Savings deposits 310,596 933 1.20 292,706 662 0.90 Time deposits 231,530 2,438 4.19 169,766 1,420 3.32 Borrowed funds 25,732 78 1.21 35,618 110 1.23 Total interest-bearing liabilities 794,409 3,976 1.99 % 754,313 2,881 1.52 % Noninterest-bearing demand deposits 279,537 301,440 Other liabilities 4,739 4,982 Shareholders' Equity 112,352 101,294 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,191,037 $ 1,162,029 Taxable equivalent net interest income, (Non-GAAP) $ 9,248 $ 8,871 Tax equivalent adjustment 4 (34 ) (34 ) Net interest income, (GAAP) $ 9,214 $ 8,837 Net interest margin, (GAAP) 3.25 % 3.20 % Tax equivalent adjustment 4 0.01 0.01 Net interest margin-taxable equivalent, (Non-GAAP) 3.26 % 3.21 % Taxable equivalent net interest spread 2.68 % 2.73 % 30 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 1 Average balances have been computed on an average daily basis. 2 Average rates have been computed based on the amortized cost of the corresponding asset or liability. 3 Average loan balances include nonaccrual loans. 4 Taxable equivalent adjustments have been computed assuming a 21% tax rate in 2024 and 2023 (non-GAAP). Interest income for the quarter ended September 30, 2024, was $13.2 million representing a $1.5 million, or 13% increase, compared to the same period in 2023. This increase was primarily due to increased interest rates and increased volumes on loans and interest-earning deposits in other banks. These increases were partially offset by the volume decreases in taxable securities to the comparable period. Average interest-earning deposit rates decreased 4 basis points while loan rates rose 41 basis points, and taxable securities' interest rates rose 7 basis points for the quarter ended September 30, 2024 as compared to the same period in 2023. Interest expense for the quarter ended September 30, 2024 was $4 million, an increase of $1.1 million, or 38%, from the same quarter in 2023. The increase in interest expense occurred primarily due to the increase in interest rates and volume increases of money market and time deposit accounts for the quarter ended September 30, 2024. For the quarter ended September 30, 2024, the bank recognized net charge-offs of $4 million, compared to $119 thousand net recoveries for the same quarter in 2023. The provision for credit losses on loans in the current quarter of $645 thousand, compared to a provision of $13 thousand in the same quarter ended 2023. The company recorded a $55 thousand provision for credit loss on off-balance commitments in the third quarter 2024 compared to a $164 thousand provision in the third quarter of 2023. The quarter increase results primarily from a single commercial credit facility that ceased operations on July 23, 2024. The credit facility has been charged down by $4.1 million with the company's assets being liquidated through the court system which increased the historical loss component of the calculation. Economic indicators reflect a leveling off in residential real estate prices and increases in unemployment rates. The provision for credit losses is determined based on management’s calculation of the adequacy of the allowance for credit losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offs and current economic trends. Noninterest income increased $104 thousand, or 6%, compared to third quarter of 2023. The increase was primarily the result of a $59 thousand increase in gain on sale of mortgage loans to the secondary market, a $28 thousand increase in the unrealized gain on equity securities, a $24 thousand increase in earnings on bank owned life insurance, and a $15 thousand increase in trust and brokerage fees. Offsetting decreases were recognized in service charges related to deposit overdraft fees and credit card fees. Noninterest expense increased $388 thousand, or 6%, from third quarter 2023. Salary and employee benefit costs increased $227 thousand, or 7%, compared to the prior year quarter with increases in base salary, insurance, and social security taxes. Marketing and public relation costs increased $38 thousand, or 31%, with increases in community related activities. Professional and directors’ fees increased $25 thousand, or 7%, state financial institutions tax increased $24 thousand, or 13%, due to the increase in capital. Debit card expenses increased $7 thousand, or 4%, primarily with increases in processing. Software expense increased $13 thousand, or 3%. Equipment expense increased $25 thousand, or 13%, with increasing costs of maintenance contracts and repairs. The Company’s third quarter efficiency ratio increased to 58.2% compared to 57.0% in the prior year. Federal income tax expense decreased $94 thousand, or 11%, for the quarter ended September 30, 2024 as compared to the third quarter 2023. The provision for income taxes was $756 thousand (effective rate of 19.4%) for the quarter ended September 30, 2024, compared to $850 thousand (effective rate of 19.6%) for the same quarter ended 2023. 31 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Nine months ended September 30, 2024, and 2023 For the nine months ended September 30, 2024, and 2023, the Company recorded net income of $7.7 million and $11.1 million and $2.89 and $4.12 per share, respectively. The $3.4 million decrease in net income for the nine-month period was primarily the result of the provision for credit losses and off-balance sheet commitments of $4.7 million compared to the provision for credit losses in the prior year period of $286 thousand and an increase in noninterest expenses of $576 thousand. These decreases to net income were partially offset by an increase in noninterest income of $256 thousand and an increase in net interest income of $491 thousand. PPNR totaled $14.2 million for the nine months ended September 30, 2024, an increase of $171 thousand, or 1%, from the prior year's nine months. The federal income tax provision was $918 thousand lower during the nine-month period in 2024 than in 2023. Return on average assets and return on average equity were 0.88% and 9.30%, respectively, for the nine months ended September 30, 2024, compared to 1.28% and 14.85%, respectively for the same period in 2023. For the Nine Months Ended September 30, 2024 2023 (Dollars in thousands) Average balance 1 Interest Average rate 2 Average balance 1 Interest Average rate 2 ASSETS Federal Funds Sold $ 405 $ 16 5.28 % $ — $ — — % Interest-earning deposits in other banks 37,354 1,521 5.44 40,272 1,520 5.05 Taxable securities 335,669 5,489 2.18 368,510 5,867 2.13 Tax-exempt securities 4 19,045 335 2.35 22,045 387 2.35 Loans 3,4 715,205 30,998 5.79 657,698 25,874 5.26 Total interest-earning assets 1,107,678 38,359 4.63 % 1,088,525 33,648 4.13 % Noninterest-earning assets 63,478 65,024 TOTAL ASSETS $ 1,171,156 $ 1,153,549 LIABILITIES AND SHAREHOLDERS' EQUITY Interest-bearing demand deposits $ 226,334 $ 1,583 0.93 % $ 247,530 $ 1,810 0.98 % Savings deposits 303,117 2,541 1.12 303,250 1,784 0.79 Time deposits 217,131 6,563 4.04 144,539 2,890 2.67 Borrowed funds 29,957 275 1.23 34,289 267 1.04 Total interest-bearing liabilities 776,539 10,962 1.89 % 729,608 6,751 1.24 % Noninterest-bearing demand deposits 278,678 319,218 Other liabilities 5,463 5,185 Shareholders' Equity 110,476 99,538 TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $ 1,171,156 $ 1,153,549 Taxable equivalent net interest income, (Non-GAAP) $ 27,397 $ 26,897 Tax equivalent adjustment 4 (110 ) (101 ) Net interest income, (GAAP) $ 27,287 $ 26,796 Net interest margin, (GAAP) 3.29 % 3.29 % Tax equivalent adjustment 4 0.01 0.01 Net interest margin-taxable equivalent, (Non-GAAP) 3.30 % 3.30 % Taxable equivalent net interest spread 2.74 % 2.89 % 1 Average balances have been computed on an average daily basis. 2 Average rates have been computed based on the amortized cost of the corresponding asset or liability. 3 Average loan balances include nonaccrual loans. 4 Taxable equivalent adjustments have been computed assuming a 21% tax rate in 2024 and 2023 (non-GAAP). 32 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Interest income for the nine months ended September 30, 2024, was $38 million representing a $5 million increase, or 14%, compared to the same period in 2023. This increase was primarily due to volume and yield increases on loans along with rate increases on interest-earning deposits in other banks and taxable securities for the period ended September 30, 2024, as compared to the same period in 2023. Interest expense for the nine months ended September 30, 2024, was $11 million, an increase of $4 million, or 62%, from the same period in 2023. The increase in interest expense occurred primarily due to an increase in rates on most interest-bearing liabilities for the nine months ended September 30, 2024, as well as a shift in balances into higher rate time deposits. For the nine months ended September 30, 2024, the provision for credit losses and off-balance sheet was $5 million, compared to $286 thousand for the same period in 2023. For more discussion see Results of Operations, three months. The provision for credit losses is determined based on management’s calculation of the adequacy of the allowance for credit losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offs and current economic trends. Noninterest income for the nine months ended September 30, 2024, was $5.3 million, an increase of $256 thousand, or 5%, compared to the same period in 2023. Fees from trust and brokerage services increased $182 thousand for the period due to a one time fee collected in the first quarter. The gain on the sale of mortgage loans to the secondary market increased $109 thousand to $215 thousand for the nine months ended September 30, 2024, as improved pricing for smaller balance mortgage loans attracted buyers and some mortgage loan refinancing. Earnings on bank owned life insurance policies increased $65 thousand for the period. Service charges on deposit accounts decreased $52 thousand, or 6%, compared to the same period in 2023 primarily from decreases in overdraft fees. Credit card fee income decreased $51 thousand, or 10%. Noninterest expenses for the nine months ended September 30, 2024, increased $576 thousand, or 3%, compared to the same period in 2023. Professional and director fees increased $87 thousand for the nine months ended September 30, 2024, as compared to the same period in 2023.Debit card expense increased $74 thousand, or 15%, primarily due to processing increases. Financial institutions tax increased $72 thousand, or 13%, based on increased capital. Occupancy and equipment expenses increased $70 thousand over the same period in 2023 with an increase in maintenance expense. Salaries and employee benefits increased $69 thousand, or less than 1%. Marketing and public relations expense increased $49 thousand, or 13%, with increases in community related activities. Software increased $35 thousand, or 3%. Federal income tax expense decreased $918 thousand, or 34%, for the nine months ended September 30, 2024, as compared to the same period in 2023. The provision for income taxes was $1.8 million (effective rate of 18.9%) for the nine months ended September 30, 2024, compared to $2.7 million (effective rate of 19.7%) for the same period ended 2023. 33 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CAPITAL RESOURCES The Company maintained a strong capital position with tangible common equity to tangible assets of 9.2% at September 30, 2024 compared with 8.8% at December 31, 2023. Consistent with the Board of Director’s commitment to public confidence and safe and sound banking operations, capital targets and minimum risk-based capital ratios for CSB were established to maintain excess capital to well-capitalized standards. To be considered well-capitalized, an institution must have a total risk-based capital ratio of at least 10%, a tier 1 capital ratio of at least 8%, a leverage capital ratio of at least 5%, a common equity tier 1 (“CET1”) ratio of at least 6.5% and must not be subject to any order or directive requiring the institution to improve its capital level. An adequately capitalized institution has a total risk-based capital ratio of at least 8%, a tier 1 capital ratio of at least 6%, a CET1 ratio of at least 4.5%, and a leverage ratio of at least 4%. Failure to meet specified minimum capital requirements could result in regulatory actions by the Federal Reserve or Ohio Division of Financial Institutions that could have a material effect on the Company’s financial condition or results of operations. Management believes there were no material changes to capital resources as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023. As of September 30, 2024, the Company and the Bank met all capital adequacy requirements to which they were subject. Capital Ratios September 30, 2024 December 31, 2023 Total Capital To Risk Weighted Assets Ratio Consolidated 16.5 % 16.3 % Bank 16.4 16.2 Tier 1 Capital To Risk Weighted Assets Ratio Consolidated 15.5 15.3 Bank 15.4 15.2 Common Equity Tier 1 Capital To Risk Weighted Assets Consolidated 15.5 15.3 Bank 15.4 15.2 Tier 1 Leverage Ratio Consolidated 9.8 9.6 Bank 9.8 9.5 34 CSB BANCORP, INC. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY (Dollars in thousands) September 30, 2024 December 31, 2023 Change Cash and cash equivalents $ 95,643 $ 64,077 $ 31,566 Available from FHLB 122,367 128,198 (5,831 ) Unpledged AFS securities at fair market value 131,718 127,387 4,331 $ 349,728 $ 319,662 $ 30,066 Net deposits and short-term liabilities $ 1,087,530 $ 1,051,156 $ 36,374 Liquidity ratio 31.9 % 30.4 % 1.5 % Minimum board approved liquidity ratio 20.0 % 20.0 % Liquidity refers to the Company’s ability to generate sufficient cash to fund current loan demand, meet deposit withdrawals, pay operating expenses, and meet other obligations. Liquidity is monitored by the Company’s Asset Liability Committee. Other sources of liquidity include, but are not limited to, purchases of federal funds, advances from the FHLB, adjustments of interest rates to attract deposits, brokered deposits, and borrowing at the Federal Reserve discount window. Additionally, the Company could sell all of its AFS securities and the loss would not cause a change in the capital adequacy classification. Management believes its sources of liquidity are adequate to meet cash flow obligations for the foreseeable future. Off-Balance Sheet Arrangements The Company does not have any off-balance sheet arrangements (as such term is defined in applicable Securities and Exchange Commission (the “Commission”) rules) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources. PER SHARE DATA Earnings per share is computed based on the weighted average number of shares of common stock outstanding during each year. The company currently maintains a simple capital structure, thus, there are no dilutive effects on earnings per share. The weighted average number of common shares outstanding for earnings per share computations was as follows: Three Months Ended Nine Months Ended September 30, September 30, (Dollars in thousands, except per share data) 2024 2023 2024 2023 Net income $ 3,145 $ 3,481 $ 7,693 $ 11,059 Weighted average common shares outstanding 2,661,474 2,675,967 2,663,737 2,682,872 Earnings per share, basic and diluted $ 1.18 $ 1.30 $ 2.89 $ 4.12 35 CSB BANCORP, INC. CONTROLS AND PROCEDURES ITEM 3 - QUANTITATIVE AND QUALITAT IVE DISCLOSURES ABOUT MARKET RISK Ohio's unemployment rate rose to 4.5% in September 2024 which was up from 3.7% in December 2023. Holmes County, where the bank is headquartered, is reporting an unemployment rate of 3.2% in September 2024. Of the counties within the bank's footprint, Stark County reported the highest unemployment rate at 4.4%, while Tuscarawas and Wayne Counties posted unemployment rates of 4.0% and 3.5% respectively in September 2024. The rate of inflation, as measured by the Consumer Price Index, decreased to 2.4% on a year over year basis at September 2024, following average inflation rates of 4.1% in 2023 and 8.0% in 2022. The rate continues to be above the Federal Reserve target rate of 2%. The Federal Reserve began to reduce the federal funds target rate by 0.50% in September 2024, and again by 0.25% in November 2024, to a range of 4.50% to 4.75%. Management performs a quarterly analysis of the Company’s interest rate risk over a twenty-four-month horizon. The analysis includes two balance sheet models, one based on a static balance sheet and one on a dynamic balance sheet with projected growth in assets and liabilities. All balance sheet positions, and interest rate projections are currently within the Company’s board-approved policy for both the twelve- month and twenty-four-month periods. The following table presents an analysis of the estimated sensitivity of the Company’s annual net interest income to sudden and sustained -400 through +400 basis point changes, in 100 basis point increments, in market interest rates at September 30, 2024 and December 31, 2023. The net interest income reflected is for the first twelve-month period of the modeled twenty-four-month horizon. The underlying balance sheet for illustrative purposes is dynamic with projected growth in assets and liabilities. September 30, 2024 (Dollars in thousands) Change in Interest Rates (basis points) Net Interest Income Dollar Change Percentage Change Board Policy Limits + 400 $ 41,634 $ 1,256 3.1 % ± 25 % + 300 41,325 947 2.3 ± 15 + 200 41,023 645 1.6 ± 10 + 100 40,715 337 0.8 ± 5 0 40,378 — — – 100 39,929 (449 ) (1.1 ) ± 5 – 200 39,390 (988 ) (2.4 ) ± 10 – 300 38,882 (1,496 ) (3.7 ) ± 15 – 400 38,538 (1,840 ) (4.6 ) ± 25 December 31, 2023 + 400 $ 39,184 $ (266 ) (0.7 ) % ± 25 % + 300 39,264 (186 ) (0.5 ) ± 15 + 200 39,340 (110 ) (0.3 ) ± 10 + 100 39,394 (56 ) (0.1 ) ± 5 0 39,450 — — – 100 39,201 (249 ) (0.6 ) ± 5 – 200 38,951 (499 ) (1.3 ) ± 10 – 300 38,718 (732 ) (1.9 ) ± 15 – 400 38,494 (956 ) (2.4 ) ± 25 36 CSB BANCORP, INC. CONTROLS AND PROCEDURES ITEM 4 - CONTROL S AND PROCEDURES With the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that: (a) information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure; (b) information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms; and (c) the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that material information relating to the Company and its consolidated subsidiary is made known to them, particularly during the period for which the Company’s periodic reports, including this Quarterly Report on Form 10-Q, are being prepared. CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING There were no changes during the period covered by this Quarterly Report on Form 10-Q in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting. 37 CSB BANCORP, INC. FORM 10-Q Quarter ended September 30, 2024 PART II – OTHER INFORMATION ITEM 1 - LEGA L PROCEEDINGS. In the opinion of management there are no outstanding legal proceedings that are reasonably likely to have a material adverse effect on the company’s financial condition or results of operations. ITEM 1A - RI SK FACTORS. Not required for Smaller Reporting Companies. ITEM 2 - UNREGISTERED SALES OF EQUI TY SECURITIES AND USE OF PROCEEDS. (a) Not applicable (b) Not applicable (c) The following table provides information about repurchases of common stock by the Company during the quarter ended September 30, 2024: Period Total Number of Common Shares Purchased Average Price Paid per Common Share Total Number of Shares Purchased as Part of Publicly Announced Authorization Maximum Number of Remaining Shares that May be Purchased as Part of Publicly Announced Authorization July 1, 2024 - July 31, 2024 1,465 37.60 1,465 57,227 August 1, 2024 - August 31, 2024 2,935 37.52 2,935 54,292 September 1, 2024 - September 30, 2024 200 37.46 200 54,092 Total for quarter 4,600 4,600 54,092 On March 2, 2021, CSB Bancorp, Inc. filed Form 8-K with the Commission announcing that its Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to 5% of the Company’s common shares, or 137,117 of the Company’s outstanding shares. Repurchases may be made from time to time as market and business conditions warrant, in the open market, through block purchases, and in negotiated private transactions. ITEM 3 - DEFAULTS UPO N SENIOR SECURITIES. Not applicable. ITEM 4 - MINE SAF ETY DISCLOSURES. Not applicable. ITEM 5 - OTHER INFORMATION. No t applicable. 38 CSB BANCORP, INC. FORM 10-Q Quarter ended September 30, 2024 PART II – OTHER INFORMATION ITEM 6 - E xhibits. Exhibit Number Description of Document 3.1 Amended Articles of Incorporation of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed August 6, 2004, Exhibit 3.1, film number 04958544). 3.1.1 Amended form of Article Fourth of Amended Articles of Incorporation, as effective April 9, 1998 (incorporated by reference to registrant’s Annual Report on Form 10-K filed on March 30, 1999, Exhibit 3.1.1, film number 99579179) . 3.2 Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Form 10-SB). 3.2.1 Amended Article VIII of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a filed on March 25, 2009, Appendix A, film number 09703970). 3.2.2 Amended Article II of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a file on March 16, 2021, Appendix A, film number 21747059) . 3.2.3 Amended Article III of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant's Form DEF 14a file on March 16, 2023, Appendix A, film number 23738842). 4.0 Description of Capital Stock (incorporated by reference to registrants Annual Report on Form 10-K filed on March 16, 2020, Exhibit 4.0, film number 20717009). 31.1 Rule 13a-14(a)/15d-14(a) Chief Executive Officer’s Certification. 31.2 Rule 13a-14(a)/15d-14(a) Chief Financial Officer’s Certification. 32.1 Section 1350 Chief Executive Officer’s Certification. 32.2 Section 1350 Chief Financial Officer’s Certification. 101 The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 2024, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Income and Comprehensive Income, (iii) Consolidated Statements of Changes in Shareholders' Equity, (iv) Condensed Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags. 104 Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101). 39 CSB BANCORP, INC. SIGNA TURES Pursuant to the requirements 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 BANCORP, INC. (Registrant) Date: November 14, 2024 /s/ Eddie L. Steiner Eddie L. Steiner President Chief Executive Officer Date: November 14, 2024 /s/ Paula J. Meiler Paula J. Meiler Senior Vice President Chief Financial Officer 40