What changed in this filing

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Item 7. Management’s Discussion and Analysis

2026-03-16 compared with 2025-03-14 · 60 added, 64 removed, 391 unchanged (24% of the section changed)

8 unchanged sentences

Its customers are located primarily in Holmes, Stark, Tuscarawas, Wayne, and portions of surrounding counties in Ohio.

Economic activity in the Company’s market area grew modestly in the fourth quarter of 2024.

Demand for goods and services increased moderately as steady sales were recorded during the fourth quarter of 2024.

Economic activity in the Company’s market area increased slightly in the fourth quarter of 2025.

Consumer demand for goods and services declined moderately and is expected to flatten out in the near future.

Reported unemployment levels in December 2025 ranged from 2.8% to 4.4% in the four primary counties served by the Company.

These levels increased from the December 2023 range of 2.1% to 3.3%.

Labor demand remained solid as competition for workers with specialized skills has put upward pressure on labor costs.

The local housing market continues to be strong with low inventory levels.

Residential construction activity has increased modestly with stable interest rates and resolution of uncertainty after the election as the main factors increasing demand.

Nonresidential construction activity has also improved since the prior year.

Core deposits decreased slightly, and customers continue to move funds into higher yielding interest-bearing accounts.

These levels decreased from the December 2024 range of 2.9% to 4.6%.

Labor demand remained fairly flat while competition for workers with specialized skills has put upward pressure on labor costs.

The local housing market has increasing inventory levels.

Residential construction activity has increased with stable interest rates increasing demand.

Nonresidential construction activity has also increased modestly since the prior year.

All deposit types increased and customers continue to move funds into higher yielding interest-bearing accounts.

FORWARD-LOOKING STATEMENTS

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FINANCIAL DATA

The following table set forth certain selected consolidated financial information:

The following table sets forth certain selected consolidated financial information:

(Dollars in thousands, except per share data)

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1 Net interest margin is shown on a fully taxable equivalent, ("FTE") basis, (non-GAAP).

2 Dividend payout ratio is calculated as dividends declared as a percentage of net income.

2 Dividend payout ratio is calculated as dividends per share as a percentage of earnings per share.

RESULTS OF OPERATIONS

CSB’s 2024 net income was $10.0 million compared to $14.8 million for 2023, a decrease of 32%.

CSB’s 2025 net income was $13.4 million compared to $10.0 million for 2024, an increase of 33.5%.

Total revenue, net interest income plus noninterest income, increased $5.7 million, or 13%, over the prior year to a total of $50 million.

The provision for credit losses increased to $7.0 million as compared to $442 thousand for the prior year .

Noninterest expense increased $529 thousand, or 2% and the provision for income tax decreased $1.3 million over the prior year due to a decrease in taxable income .

Basic and diluted earnings per share were $3.76, down 32% from the prior year.

The provision for credit loss expense decreased to $5.4 million as compared to $7.0 million for the prior year.

Noninterest expense increased $3.2 million, or 13% and the provision for income tax increased $877 thousand over the prior year due to an increase in taxable income.

Basic and diluted earnings per share were $5.07, up 35% from the prior year.

The return on average assets was 1.08% in 2025 compared to 0.85% in 2024 and return on average equity was 10.94% in 2025 compared to 8.96% in 2024.

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Changes in volume, interest rates, composition of interest-earning assets, and interest-bearing liabilities affect net interest income.

Net interest income increased $712 thousand, or 2%, in 2024 compared to 2023.

The increase was a result of a $5.6 million increase in interest income, partially offset by an increase of $4.9 million in interest expense.

The FTE net interest margin decreased to 3.31% from 3.32% in 2023 .

Interest income increased $5.6 million, or 12%, in 2024 compared to 2023 primarily due to an increase of $5.8 million, or 16%, in interest and fees on loans from an increase in average balances of $52 million and an increase in yield of 42 basis points ("bps").

Net interest income increased $5.5 million, or 15%, in 2025 compared to 2024.

The increase was a result of a $5.4 million increase in interest income and a decrease of $95 thousand in interest expense.

The FTE net interest margin increased to 3.63% from 3.31% in 2024.

Interest income increased $5.4 million, or 11%, in 2025 compared to 2024 primarily due to an increase of $5.3 million, or 13%, in interest and fees on loans primarily due to an increase in average balances of $70 million and an increase in yield of 15 basis points ("bps").

Interest income on taxable securities decreased $300 thousand due to a decrease in average balances of $35 million.

Interest income on interest-earning deposits mainly held at the Federal Reserve increased $530 thousand in 2025 compared to 2024 primarily due to an increase in average balances of $22 million.

Interest expense increased $4.9 million, or 49%, in 2024 as compared to 2023 primarily due to shifts in volume from noninterest-bearing demand deposits and lower yielding interest-bearing demand deposits to higher yielding time deposits.

Average noninterest-bearing demand and interest-bearing demand deposit balances decreased $57 million during the year and average time deposit balances increased $69 million, and the average interest rate paid on time deposits increased by 112 bps.

Interest expense decreased $95 thousand, or less than 1%, in 2025 as compared to 2024, primarily due to lower cost of deposits as short-term interest rates dropped.

Average noninterest-bearing demand and interest-bearing demand deposit balances increased $6 million during the year and average time deposit balances increased $34 million, and the average interest rate paid on time deposits decreased by 30 bps.

The following table provides detailed analysis of changes in average balances, yield, and net interest income:

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The provision for credit losses on loans is determined by management as the amount required to bring the allowance for credit losses to a level considered appropriate to absorb an estimation of credit loss during the expected weighted average life of the loan.

During 2024, a provision for credit loss expense on loans of $7.2 million was recognized compared to a provision of $198 thousand in 2023.

A recovery for credit loss expense on off-balance sheet commitments of $213 thousand was recognized in 2024 as compared to a provision for credit loss expense for off-balance sheet commitments of $244 thousand in 2023.

Nonperforming loans increased $1.3 million from 2023 to 2024.

During 2025, a provision for credit loss expense on loans of $5.3 million was recognized compared to a provision of $7.2 million in 2024.

A provision for credit loss expense on off-balance sheet commitments of $72 thousand was recognized in 2025 as compared to a recovery for credit loss expense for off-balance sheet commitments of $213 thousand in 2024.

Nonperforming loans decreased $1.1 million from 2024 to 2025.

See Financial Condition – Allowance for Credit Losses for additional discussion and information relative to the provision for credit losses.

12 unchanged sentences

Noninterest income increased $193 thousand, or 3%, in 2025 compared to the same period in 2024.

Trust services revenue increased $206 thousand with asset market value increases.

Gain on sales of mortgage loans, including mortgage servicing rights ("MSRs") increased $120 thousand, as $9 million in loans were sold into the secondary market compared to $5 million in 2023.

Earnings on bank owned life insurance increased $129 thousand, with the purchase of an additional $2 million of insurance.

Credit card interchange income decreased $58 thousand due to an overall decline in volume.

Service charges on deposit accounts decreased $53 thousand, as increases in monthly deposit account service charges were offset by decreases in non-sufficient funds ("NSF") charges.

Debit card interchange income increased $92 thousand due to an overall increase in volume.

Service charges on deposit accounts increased $56 thousand, as increases in monthly deposit account service charges and increases in non-sufficient funds ("NSF") charges.

Trust services revenue decreased $73 thousand due to a one time fee collected in 2024 which did not recur in 2025.

Noninterest Expenses

12 unchanged sentences

Total noninterest expenses

Noninterest expense increased $529 thousand, or 2%, in 2024 compared to 2023.

Salaries and employee benefits decreased $50 thousand as increases in base salaries were offset by decreases in employee profit sharing and incentive compensation.

Ohio financial institutions tax expense increased $97 thousand, which is based on the increase in shareholders' equity.

Professional and director fees increased $94 thousand, primarily from increases in legal expenses related to loan collection efforts.

Other expenses increased $116 thousand, or 4%.

Noninterest expense increased $3 million, or 13%, in 2025 compared to 2024.

Salaries and employee benefits increased $2 million with increases in base salaries due to filled positions and increases in medical, incentive compensation and retirement benefits.

Professional and director fees increased $228 thousand, primarily from increases in legal and audit and accounting expenses.

Occupancy expense increased $194 thousand, due to snow removal and HVAC repairs.

Other expenses increased $221 thousand, or 8% as increases in education expenses of $53 thousand over the prior year contributed to this difference.

The provision for income taxes amounted to $3.2 million in 2025 as compared to $2.3 million in 2024.

The decrease in 2024 resulted from lower taxable income.

The increase in 2025 resulted from higher taxable income.

The corporate statutory tax rate was 21% for 2025 and 2024.

1 unchanged sentence

FINANCIAL CONDITION

Total assets of the Company were $1.2 billion on December 31, 2024 and 2023, representing an increase of $13 million, or 1%.

Total assets of the Company were $1.3 billion and $1.2 billion on December 31, 2025 and 2024, representing an increase of $101 million, or 8%.

Net loans increased $87 million, or 12%, while investment securities decreased $14 million, or 4%, and total cash and cash equivalents increased $26 million, or 35%.

12 unchanged sentences

Volume increases were recognized as follows:

commercial real estate buildings held for investment and leased to others increased $18 million, or 22%, construction loans increased $15 million, or 31%, residential real estate loans increased $11 million, or 6%, and home equity lines of credit increased $2 million, or 4%.

Commercial and industrial loans decreased $8 million, or 5% during 2024, and consumer installment loans, including consumer indirect loans, also decreased $2 million, or 10%.

commercial real estate $65 million, or 34%, commercial real estate buildings held for investment and leased to others increased $13 million, or 13%, residential real estate loans increased $16 million, or 9%, and home equity lines of credit increased $8 million, or 17%.

Commercial and industrial loans increased $8 million, or 6% during 2025, construction loans decreased $16 million, or 25%, and consumer installment loans, including consumer indirect loans, also decreased $2 million, or 10%.

At year-end 2025, commercial real estate is comprised mostly of owner occupied buildings of $256 million, and $114 million of buildings held for investment and leased to others.

2 unchanged sentences

The Company originated $78 million and $58 million of residential mortgage loans held in the portfolio, including residential construction, conventional 1-4 family, and equity line loans, which were predominately variable rate, in 2025 and 2024, respectively.

The increase in interest rates slowed consumer demand for 1-4 family fixed-rate thirty-year residential mortgages which are sold into the secondary market, thus limiting the Company's mortgage sales to $9 million in 2024 and $5 million in 2023.

Home equity loan balances increased $2 million during 2024 with demand improving as interest rates declined during the second half of the year.

Management anticipates modest economic growth in the Company’s local service areas will continue to improve.

Demand for homes increased as rates declined then stabilized and borrowers chose variable-rate products hopeful for lower rates in the future, thus limiting the Company's mortgage sales to $8 million in 2025 and $9 million in 2024.

Home equity loan balances increased $8 million during 2025 with demand improving as interest rates dropped.

Management anticipates modest economic growth in the Company’s local service areas will continue.

Commercial and commercial real estate loans, in aggregate, comprise approximately 63% and 59% of the total loan portfolio at year-end 2025 and 2024, respectively.

Residential real estate loans approximated 30% of the portfolio in 2025 and 2024.

Construction and land development loans increased from 7% to 9% of the portfolio.

Construction and land development loans decreased from 9% to 6% of the portfolio.

The Company is well within the respective regulatory guidelines for investment in construction, development, and investment property loans that are not owner occupied.

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Loans are placed on nonaccrual status when they become past due 90 days or more, or when mortgage loans are past due as to principal and interest 120 days or more, unless they are both well secured and in the process of collection.

During 2025, $614 thousand in nonaccrual loans were collected, $404 thousand were charged-off, and $451 thousand new loans entered nonaccrual status.

NONPERFORMING ASSETS

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The ACL increased by $5 million, or 64%, to $12.5 million on December 31, 2025, from $7.6 million on December 31, 2024.

The additional ACL was primarily the result of the increase in the historical loss rate applied to the commercial and industrial loan portfolio as well as the increase in the average life of the loans.

The Bank continues to maintain qualitative factors tied to changes in:

the lending policy, economic conditions, lending credit management, delinquent and classified loans, and the value of collateral.

During 2024, $381 thousand in nonaccrual loans were collected, $5.9 million were charged-off, and $7.1 million new loans entered nonaccrual status.

The additional ACL was primarily the result of the recognition of a fourth quarter valuation allowance of $4 million for one large commercial credit that remains a performing asset.

The Bank continues to maintain qualitative factors tied to changes in the lending policy, economic conditions, lending credit management, delinquent and classified loans, and the value of collateral.

ALLOWANCE FOR CREDIT LOSSES

9 unchanged sentences

The ACL on loans totaled $12.5 million, or 1.5% of total loans at year-end 2025 as compared to $7.6 million, or 1.03%, of total loans at year-end 2024.

The Bank had net credit losses of $6.3 million in 2024, compared to $130 thousand in recoveries in 2023.

As previously disclosed during 2024, court liquidation continues on a $7 million commercial relationship that has been charged down by $6 million.

Related to this loan, approximately $900 thousand remains in nonperforming assets with $400 thousand in auction proceeds held by the receiver and $500 thousand in commercial real estate (office building) remaining to be liquidated.

The Bank had net credit losses of $428 thousand in 2025, compared to $6.3 million in 2024.

During fourth quarter 2025, a performing loan was determined to be collateral dependent through continued operation.

As a result, a $4 million valuation allowance was recognized.

As previously disclosed during 2024, the credit facility being liquidated through court receivership has no remaining loan balances at December 31, 2025.

The Company maintains an internal watch list for loans where management’s analysis of the borrower’s operating results and financial condition indicates the borrower’s cash flows are inadequate to meet its debt service requirements and for loans where there exists an increased risk that a shortfall may occur.

See the Credit Quality Indicators section of Note 3 to the Consolidated Financial Statements for additional information.

Nonperforming loans, which consist of loans past due 90 days or more and nonaccrual loans, aggregated $1.7 million, or 0.23%, of loans at year-end 2024 compared to $396 thousand, or 0.06%, of loans at year-end 2023.

Net premises and equipment increased $1 million to $14 million at year-end 2024 with $2 million in capitalized purchases and $1 million in depreciation expense.

Nonperforming loans, which consist of loans past due 90 days or more and nonaccrual loans, aggregated $652 thousand, or 0.08%, of loans at year-end 2025 compared to $1.7 million, or 0.23%, of loans at year-end 2024.

Net premises and equipment decreased $492 thousand to $13.6 million at year-end 2025 with $426 thousand in capitalized purchases and $886 thousand in depreciation expense.

Total bank-owned life insurance increased from $28 million at year-end 2024 to $31 million at year-end 2025, including a $2 million purchase of insurance and increasing cash surrender values.

There was no other real estate owned on December 31, 2025 or 2024.

The Company recognized a net deferred tax asset of $2.3 million on December 31, 2024, compared to a net deferred tax asset of $2.6 million on December 31, 2023.

The decrease is primarily due to an improvement in the net unrealized loss on securities.

The Company recognized a net deferred tax asset of $2.3 million on December 31, 2025, and 2024, respectively.

The Company’s deposits are obtained primarily from individuals and businesses located in its market area.

For deposits, the Company must compete with products offered by other financial institutions, as well as alternative investment options.

Time deposits and money market savings account balances increased for the year ended 2024.

Market rates on deposits and cash management products increased during the first half of the year before beginning to decrease in the second half of the year.

Market rates on deposits and cash management products decreased during the year.

Change from 2024

9 unchanged sentences

The Company obtains additional funds through securities sold under repurchase agreements, overnight borrowings from the FHLB or other financial institutions, and advances from the FHLB.

Short-term borrowings, consisting of securities sold under repurchase agreements, decreased $10 million.

Short-term borrowings, consisting of securities sold under repurchase agreements, increased $5.8 million.

Other borrowings, consisting of FHLB advances, decreased $349 thousand as the result of principal repayments.

3 unchanged sentences

This increase was primarily due to net income of $13.4 million and a $3.4 million decrease in the accumulated other comprehensive loss recognized on the available-for-sale securities portfolio, resulting from investment payment and maturities as well as decreasing interest rates.

Dividends were paid of $4.2 million and $762 thousand of common shares were repurchased in 2024.

During 2025, the Company paid $4.3 million in dividends, and repurchased $999 thousand of its common shares.

The Board of Directors approved a Stock Repurchase Program on February 26, 2021, allowing the repurchase of up to 5% of the Company’s then-outstanding common shares.

Repurchased shares are to be held as treasury stock and are available for general corporate purposes.

On December 31, 2024, approximately 45 thousand shares could still be repurchased under the current authorized program.

Shares repurchased during 2024 totaled 19,849 shares for $762 thousand and shares purchased in 2023 totaled 37,638 shares for $1.4 million .

On December 31, 2025, approximately 22 thousand common shares could still be repurchased under the current authorized program.

Shares repurchased during 2025 totaled 23,074 shares for $999 thousand and shares purchased in 2024 totaled 19,849 shares for $762 thousand.

Effective January 1, 2015, the Federal Reserve adopted final rules implementing Basel III and regulatory capital changes required by the Dodd-Frank Act.

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As summarized in the Consolidated Statements of Cash Flows, the most significant investing activities for the Company in 2025 included net loan originations of $92 million and securities purchases of $52 million, offset by maturities and repayment of securities totaling $71 million.

The Company’s financing activities included a $17 million increase in deposits, $10 million decrease in short-term borrowings, and $4 million in cash dividends paid.

The Company’s financing activities included a $83 million increase in deposits, $6 million increase in short-term borrowings, and $4 million decrease in cash dividends paid.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

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Management reviews Net Interest Income at Risk with the Board on a periodic basis.

Additional earnings simulations are run to test an immediate interest rate shock over a twenty-four month period.

The Company was within all Board-approved limits at December 31, 2025 and 2024 for the first twelve-month periods of the twenty-four month horizon.

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As of December 31, 2025, the Company was within all policy limits set by the Board.

As of December 31, 2023, the percentage change of the market value of equity was outside of the board policy limit in the -400 basis point scenario.

The technical fail in the declining rate scenario in 2023 was caused by the duration of liabilities remaining high and loan and investment prepayment speeds increasing.

SIGNIFICANT ASSUMPTIONS AND OTHER CONSIDERATIONS

The above analysis is based on numerous assumptions, including relative levels of market interest rates, loan prepayments, and reactions of depositors to changes in interest rates and this should not be relied upon as being indicative of actual results.

Significant Assumptions Related to Market Risk

The market risk analysis is based on numerous assumptions, including relative levels of market interest rates, loan prepayments, and reactions of depositors to changes in interest rates and this should not be relied upon as being indicative of actual results.

Further, the analysis does not contemplate all actions the Company may undertake in response to changes in interest rates.

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the strength of current and projected customer loan demand, the Company’s federal funds sold or purchased position, projected cash flows from maturing investment securities, the current and projected market interest rate environment, local and national economic conditions, and customer demand for the Company’s deposit product offerings.

CRITICAL ACCOUNTING ESTIMATES

CRITICAL ACCOUNTING POLICIES

The Company’s Consolidated Financial Statements are prepared in accordance with U.S.

11 unchanged sentences

When sustained unemployment is significantly increased to 8% over a two-year period, an additional provision of approximately $1 million would be required under current model assumptions.

While the weighted average life of the loan portfolio has extended to five years, at December 31, 2024, stressing the commercial real estate, lessors of buildings and residential mortgage portfolios' weighted average lives by 10%, or an increase of 6 months, resulted in a minimal increase of $124 thousand to the allowance for credit losses.

While the weighted average life of the loan portfolio remains five years, at December 31, 2025, stressing the commercial real estate, lessors of buildings and residential mortgage portfolios' weighted average lives by 10%, or an increase of 4 months, resulted in a minimal increase of $61 thousand to the allowance for credit losses.

The Company accounts for business combinations using the acquisition method of accounting.

32 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 7. Management’s Discussion and Analysis