What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-05-10 compared with 2021-11-09 · 68 added, 146 removed, 88 unchanged (71% of the section changed)

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 at September 30, 2021 as compared to December 31, 2020, and the consolidated results of operations for the three and nine months ended September 30, 2021 compared to the same periods in 2020.

The following management’s discussion and analysis focuses on the consolidated financial condition of the Company at March 31, 2022 as compared to December 31, 2021, and the consolidated results of operations for the three months ended March 31, 2022 compared to the same period in 2021.

The purpose of this discussion is to provide the reader with a more thorough understanding of the Consolidated Financial Statements.

10 unchanged sentences

FINANCIAL CONDITION

Total assets were $1.1 billion at September 30, 2021 as compared to $1.0 billion at December 31, 2020.

During the nine months ended September 30, 2021, net loans decreased $62 million.

Cash and cash equivalents, and securities increased $139 million.

Deposits and short-term borrowings increased $78 million.

Net loans decreased $62 million, or 10%, as commercial real estate and construction loans increased $10 million, or 4%, and residential real estate loans decreased $9 million, or 5%, from December 31, 2020.

Commercial loans decreased $63 million, or 33%, including $53 million in PPP loans forgiven by the SBA.

Loans originated under SBA Paycheck Protection Program totaled $37 million during 2021 and $92 million during 2020.

Consumer refinance activity slowed on mortgage loans and home purchase activity remained robust despite limited inventory through the first nine months of 2021.

Residential mortgage loan originations for the nine months ended September 30, 2021 totaled $49 million, a decrease from $54 million in originations during the nine months ended September 30, 2020.

Originations sold into the secondary market were $36 million and $38 million, respectively during the nine months ended September 30, 2021 and September 30, 2020.

Total assets remained constant at $1.1 billion at March 31, 2022 as compared to December 31, 2021.

During the three months ended March 31, 2022, securities increased $83 million, net loans increased $19 million, and cash and cash equivalents decreased $113 million.

Deposits and short-term borrowings decreased $5 million.

Net loans increased $19 million, or 3%, as construction loans increased $16 million, or 35%, residential real estate loans increased $5 million, or 3%, and commercial real estate loans decreased $5 million, or 3% from December 31, 2021.

Commercial loans increased $3 million, or 3%.

PPP loans outstanding at March 31, 2022 were $2 million after the bank originated $129 million during 2020 and 2021.

Consumer refinance activity slowed significantly on mortgage loans, home purchase activity remained stable despite limited inventory through the first three months of 2022, and home equity line originations increased by $3 million.

Residential mortgage loan originations for the three months ended March 31, 2022 totaled $17 million, a decrease from $30 million in originations during the three months ended March 31, 2021.

Originations sold into the secondary market were $3 million and $13 million, respectively during the three months ended March 31, 2022 and March 31, 2021.

The Bank originates and sells primarily fixed rate thirty-year mortgages into the secondary market.

The allowance for loan losses decreased $710 thousand from the year ago quarter to $7.6 million.

The allowance for loan losses decreased $1 million from the year ago quarter to $7.3 million.

The Company has not early adopted CECL which has been delayed for smaller reporting companies.

Year over year outstanding loan balances decreased 13% to $538 million at September 30, 2021.

Net recoveries were $26 thousand, or an annualized -0.01% of average loans, in the current nine-month period compared to a $66 thousand net recovery, or -0.01% of average loans in the year-ago nine-month period.

At September 30, 2021, the allowance for total loans minus the SBA guaranteed Payroll Protection loans was 1.44%.

Year over year outstanding loan balances decreased 3% to $567 million at March 31, 2022.

Net charge-offs were $13 thousand, or an annualized 0.01% of average loans, in the current three-month period compared to a net recoveries of $34 thousand net recovery, or -0.02% of average loans in the year-ago three-month period.

At March 31, 2022, the allowance for total loans was 1.29%.

We believe the allowance level is appropriate given the low level of problem loans and current composition of the overall loan portfolio in the current economic environment.

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MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Non performing loans decreased $ 3.2 million to $ 1.3 million , or 0.

24 % , of total loans from $ 4.

Non performing loans in creased $ 9 3 thousand to $ 1.

2 million , or 0.

2 1 % , of total loans from $ 1.1 million, or 0.

20 %, at December 31, 202 1 .

For the nine months ended September 30, 2021 loans totaling $ 329 thousand were placed on n onaccrual status , $ 1.8 million in paydowns were received , and the bank returned $1.6 million back to accrual status due to ongoing payment performance .

September 30,

For the three months ended March 31, 2022 no loans were placed on n onaccrual status , $ 22 thousand in paydowns were received , and the bank charged off $2 thousand in personal loans due to non-payment .

(Dollars in thousands)

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Allowance for loan losses to total nonperforming loans

The ratio of gross loans to deposits was 56.4% at September 30, 2021, compared to 68.3% at December 31, 2020.

The ratio of gross loans to deposits was 57.0% at March 31, 2022, compared to 54.8% at December 31, 2021.

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 $2.8 million within the available-for-sale and held-to-maturity portfolios as of September 30, 2021, 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, 2021, are considered temporary and no impairment loss relating to these securities has been recognized.

Deposits increased $77 million, or 9%, from December 31, 2020 with noninterest-bearing deposits increasing approximately $32 million and interest-bearing deposit accounts increasing approximately $45 million.

Total deposits as of September 30, 2021 are $969 million, or 15%, greater than September 30, 2020 deposit balances.

On a year over year comparison, increases were recognized in noninterest-bearing demand deposits of $51 million, interest-bearing demand deposits of $23 million, money market accounts of $14 million, savings of $40 million, and time deposits declined by $1 million.

During 2020 and continuing into 2021, the Bank’s customers increased deposits through stimulus payments and cash conservation as a result of the COVID-19 pandemic.

Short-term borrowings consisting of overnight repurchase agreements with retail customers increased $915 thousand to $38 million at September 30, 2021 as compared to December 31, 2020 and other borrowings decreased $1 million as the Company repaid FHLB advances.

Total shareholders’ equity amounted to $97.1 million, or 8.7%, of total assets at September 30, 2021, an increase of $3.2 million, from $93.9 million December 31, 2020.

The increase in shareholders’ equity during the nine months ended September 30, 2021 was due to net income of $8.5 million partially offset by declared dividends of $2.5 million, other comprehensive loss of $2.2 million and the repurchase of treasury shares for $644 thousand.

The Company and the Bank met all regulatory capital requirements at September 30, 2021.

Management has considered industry analyst reports, sector credit reports, and the volatility within the bond market in concluding that the gross unrealized losses of $20.9 million within the available-for-sale and held-to-maturity portfolios as of March 31, 2022, 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 March 31, 2022, are considered temporary and no impairment loss relating to these securities has been recognized.

Deposits decreased $7.8 million, or less than 1%, from December 31, 2021 with noninterest-bearing deposits increasing approximately $1.6 million, or less than 1%, and interest-bearing deposit accounts decreasing approximately $9.4 million, or 11%.

Total deposits as of March 31, 2022 are $995 million, or 3%, greater than March 31, 2021 deposit balances.

On a year over year comparison, increases were recognized in noninterest-bearing demand deposits of $32 million, money market accounts of $17 million, savings of $25 million, and a decline in interest-bearing demand deposits of $42 million and time deposits by $6 million.

Deposit growth has normalized following the Bank’s customers increasing deposits through stimulus payments and cash conservation as a result of the COVID-19 pandemic.

Short-term borrowings consisting of overnight repurchase agreements with retail customers increased $2.4 million, or 6%, to $39 million at March 31, 2022 as compared to December 31, 2021 and other borrowings decreased $82 thousand as the Company repaid FHLB advances.

Total shareholders’ equity amounted to $94.9 million, or 8.4%, of total assets at March 31, 2022, a decrease of $2.4 million, or 2%, from $97.3 million December 31, 2021.

The decrease in shareholders’ equity during the three months ended March 31, 2022 was due to accumulated other comprehensive loss (“AOCL”) of $5.1 million, that was partially offset by net income of $2.7 million.

Rapidly rising interest rates during first quarter 2022 have caused the AOCL to increase as AFS securities are marked to fair market value.

As interest rates rise, the fair value of AFS fixed rate securities decline with a corresponding net of tax decline recorded in the AOCL portion of equity.

This unrealized 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 March 31, 2022.

RESULTS OF OPERATIONS

Three months ended September 30, 2021 and 2020

For the quarters ended September 30, 2021 and 2020, the Company recorded net income of $2.9 million and $2.8 million and $1.06 and $1.02 per share, respectively.

The $101 thousand increase in net income for the period was primarily the result of a recovery of provision for loan losses of $587 thousand and a $284 thousand increase in net interest income.

The increases were partially offset by an increase in noninterest expenses of $663 thousand, a $94 thousand decrease in noninterest income and a $13 thousand increase in the federal income tax provision.

Three months ended March 31, 2022 and 2021

For the quarters ended March 31, 2022 and 2021, the Company recorded net income of $2.7 million and $2.9 million and $0.99 and $1.05 per share, respectively.

The $184 thousand decrease in net income for the period was primarily the result of a $236 thousand decrease in noninterest income, an increase in noninterest expenses of $187 thousand, and a decrease of $143 thousand in net interest income.

The decreases were partially offset by a recovery of provision for loan losses of $300 thousand and a $52 thousand decrease in the federal income tax provision.

Return on average assets and return on average equity were 0.96% and 11.26%, respectively, for the three-month period of 2022, compared to 1.10% and 12.33%, respectively for the same quarter in 2021.

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Average Balance Sheets and Net Interest Margin Analysis

For the Three Months Ended September 30,

For the Three Months Ended March 31,

(Dollars in thousands)

25 unchanged sentences

4 Interest income is shown on a fully tax-equivalent basis, which is a Non-GAAP measure and is reconciled to the GAAP measure at the bottom of the table.

Interest income for the quarter ended September 30, 2021, was $7.8 million representing a $91 thousand increase, or 1%, compared to the same period in 2020.

This increase was primarily due to the increase in security and interest earning deposit balance volume in the comparable periods.

Average loan rates increased 51 basis points for the quarter ended September 30, 2021 as compared to the same period in 2020.

Interest expense for the quarter ended September 30, 2021 was $480 thousand, a decrease of $193 thousand, or 29%, from the same quarter in 2020.

The decrease in interest expense occurred primarily due to a decrease on all rates on interest-bearing liabilities for the quarter ended September 30, 2021, partially offset by increases in the average deposit balances.

Interest income for the quarter ended March 31, 2022, was $7.2 million representing a $339 thousand decrease, or 4%, compared to the same period in 2021.

This decrease was primarily due to the decrease in loan interest and fee rate offset by an increase in securities balance volume in the comparable periods.

Average loan rates decreased 48 basis points for the quarter ended March 31, 2022 as compared to the same period in 2021.

Interest expense for the quarter ended March 31, 2022 was $377 thousand, a decrease of $196 thousand, or 34%, from the same quarter in 2021.

The decrease in interest expense occurred primarily due to a decrease on all rates on interest-bearing liabilities for the quarter ended March 31, 2022, partially offset by increases in the average deposit balances.

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

For the quarter ended September 30, 2021, with strengthening economic conditions and improving credit quality, the bank recognized a recovery for loan losses of $210 thousand to the provision for loan losses, compared to a provision for loan losses of $377 thousand for the same quarter in 2020.

The Company’s provision for loan losses for the three months ended September 30, 2020, reflected the unknown COVID-19 pandemic and an elevated qualitative factor adjustment (“Q-factor”) under managements estimate of loss at that time.

The recapture of provision for loan losses for the current quarter primarily reflects the improvement in credit quality including the reduction of impaired and adversely classified loans, as well as the improvement in economic indicators including unemployment, residential real estate prices and consumer confidence and a $63 million decrease of loans over December 31, 2020.

For the quarter ended March 31, 2022, with strengthening economic conditions and improving credit quality, the bank recognized a recovery for loan losses of $300 thousand to the provision for loan losses, compared to a provision for loan losses of $30 thousand for the same quarter in 2021.

The recapture of provision for loan losses for the current quarter primarily reflects the sustained improvement in credit quality including the increase in loans graded as pass as well as a reduction of impaired and adversely classified loans.

Economic indicators reflect improvement in residential real estate prices and low unemployment.

The provision for loan losses is determined based on management’s calculation of the adequacy of the allowance for loan 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 quarter ended September 30, 2021, was $1.8 million, a decrease of $94 thousand, or 5%, compared to the same quarter in 2020.

The gain on the sale of mortgage loans into the secondary market decreased by $297 thousand for the quarter ended September 30, 2021 as fewer loans were sold into the secondary market due to decreasing demand for mortgage refinancing and declining inventories of homes available for sale.

Debit card interchange income increased $82 thousand, or 19%, with greater fees generated from usage in the third quarter 2021.

Earnings on bank owned life insurance increased $32 thousand, or 24%, for the third quarter 2021, a result of adding policies in 2021 and fourth quarter 2020.

Fees from trust and brokerage services amounted to $252 thousand for the second quarter 2021, an increase of $16 thousand, or 7%, as compared to the same quarter in 2020.

Service charges on deposit accounts decreased $2 thousand, or less than 1%, compared to the same quarter in 2020.

Noninterest expenses for the quarter ended September 30, 2021 increased $663 thousand, or 13%, compared to the third quarter 2020.

Salaries and employee benefits increased $269 thousand, or 9%, a result of increases recognized in base wage, incentive and retirement accruals, and social security benefits.

Noninterest income for the quarter ended March 31, 2022, was $1.6 million, a decrease of $236 thousand, or 13%, compared to the same quarter in 2021.

The gain on the sale of mortgage loans into the secondary market decreased by $369 thousand, or 76%, for the quarter ended March 31, 2022 as fewer loans were sold into the secondary market due to decreasing demand for mortgage refinancing and declining inventories of homes available for sale.

Fees from trust and brokerage services amounted to $264 thousand for the first quarter 2022, a decrease of $18 thousand, or 6%, as compared to the same quarter in 2021.

Service charges on deposit accounts increased $58 thousand, or 28%, compared to the same quarter in 2021.

Debit card interchange income increased $24 thousand, or 5%, with greater fees generated from usage in the first quarter 2022.

Earnings on bank owned life insurance increased $16 thousand, or 11%, for the first quarter 2022, a result of adding policies in 2021.

Noninterest expenses for the quarter ended March 31, 2022 increased $187 thousand, or 4%, compared to the first quarter 2021.

Salaries and employee benefits increased $126 thousand, or 4%, a result of decreases recognized in salary expense through the capitalization of salary expense assigned to loan origination that occurred during the first quarter of 2021.

Additional increases in base wages and retirement accruals were recognized in first quarter 2022 as compared to first quarter 2021.

The provision for unfunded loan commitments increased $13 thousand over the prior year’s quarter with additional provision recorded for unfunded construction loans within the assisted/senior living sector that have been adversely affected by COVID-19.

FDIC assessment amounted to $130 thousand as compared to $91 thousand in the third quarter 2020 due to small bank assessment credits being utilized in 2020.

Marketing and public relations expense increased $51 thousand, or 53%, primarily due to more events taking place after being cancelled due to COVID-19.

Software expense rose $49 thousand, or 18%, quarter over quarter with additional investment.

Occupancy expense increased $24 thousand in 2021 over the third quarter 2020.

The Ohio financial institutions tax increased $17 thousand in the third quarter due to the Company’s increased capital base.

Debit card expenses increased $16 thousand, or 10%, compared to the third quarter 2020 with increased volume.

Professional and director fees decreased $52 thousand for the quarter ended September 30, 2021 as compared to the third quarter 2020.

This decrease resulted from a collection of legal fees on a nonperforming loan that exited the bank.

Federal income tax expense increased $13 thousand, or 2%, for the quarter ended September 30, 2021 as compared to the third quarter 2020.

The provision for income taxes was $689 thousand (effective rate of 19.2%) for the quarter ended September 30, 2021, compared to $676 thousand (effective rate of 19.4%) for the same quarter ended 2020.

RESULTS OF OPERATIONS

Nine months ended September 30, 2021 and 2020

For the nine months ended September 30, 2021 and 2020, the Company recorded net income of $8.5 million and $7.9 million and $3.12 and $2.88 per share, respectively.

The $642 thousand increase in net income for the nine-month period was primarily the result of a recovery for loan losses of $655 thousand for the period as compared to a provision for loan losses of $1.3 million for the same period in 2020.

Other income increased $643 thousand.

The increases were partially offset by an increase of $1.6 million in noninterest expense, a $165 thousand decrease in net interest income, and an $145 thousand increase in the federal income tax provision.

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Return on average assets and return on average equity were 1.

0 3 % and 11.

9 1 %, respectively, for the nine months ended September 30, 2 02 1 , compared to 1.

1 7 % and 1 1.

8 0 %, respectively for the same period in 20 20 .

Average Balance Sheets and Net Interest Margin Analysis

For the Nine Months Ended September 30,

(Dollars in thousands)

Interest-earning deposits in other banks

Taxable securities

Tax-exempt securities 4

Total earning assets

LIABILITIES AND SHAREHOLDERS' EQUITY

Interest-bearing demand deposits

Savings deposits

Time deposits

Other borrowed funds

Total interest bearing liabilities

Non-interest bearing demand deposits

Other liabilities

Shareholders' Equity

TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY

Taxable equivalent net interest income, (Non-GAAP)

Tax equivalent adjustment 4

Net interest income, (GAAP)

Net interest margin, (GAAP)

Tax equivalent adjustment 4

Net interest margin-taxable equivalent, (Non-GAAP)

Taxable equivalent net interest spread

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 Interest income is shown on a fully tax-equivalent basis, which is a Non-GAAP measure and is reconciled to the GAAP measure at the bottom of the table.

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest income for the nine months ended September 30, 202 1 , was $ 22.4 million representing a $ 862 thousand decrease, or a 4 % decline, compared to the same period in 20 20 .

This decrease was primarily due to yield decreases as follows:

64 basis points in average tax-exempt securities , 65 basis points in average taxable security yields, and 22 basis points in interest-earning deposits in other banks for the period ended September 30, 202 1 as compared to the same period in 20 20 .

Partially offset by an increase in balance of taxable securities.

Interest expense for the nine months ended September 30, 202 1 was $ 1.6 million, a decrease of $ 697 thousand, or 3 0 %, from the same period in 20 20 .

The decrease in interest expense occurred primarily due to a decrease in rates on all interest-bearing liabilities for the nine months ended September 30, 202 1 , partially offset by increases in the average balances of savings and interest-bearing demand deposits .

For the nine months ended September 30, 2021, the provision for loan losses was a recovery of provision of $655 thousand, compared to a provision of $1.3 million for the same period in 2020.

For more discussion see Results of Operations, three months.

Noninterest income for the nine months ended September 30, 2021, was $5.5 million, an increase of $643 thousand, or 13%, compared to the same period in 2020.

Debit card interchange income increased $303 thousand, or 25%, with increased card usage in the first nine months of 2021.

Fees from trust and brokerage services increased $136 thousand for the period.

Earnings on bank owned life insurance policies increased $67 thousand for the period with the additional purchase of $2 million in policies in 2021.

Service charges on deposit accounts decreased $77 thousand, or 10%, compared to the same period in 2020 primarily from decreases in overdraft fees.

The gain on the sale of mortgage loans to the secondary market decreased $15 thousand to $1.2 million for the nine months ended September 30, 2021.

Noninterest expenses for the nine months ended September 30, 2021 increased $1.6 million, or 11%, compared to the same period in 2020.

Salaries and employee benefits increased $698 thousand, or 8%, a result increased salary, with additions to lending staff, social security tax, and reduced capitalization of deferred loan costs with less volume originated in commercial and mortgage loans.

FDIC assessment increased $255 thousand in 2021 as the small bank credits have expired.

Software expense increased $199 thousand, or 26%, due to increased expenses with backup redundancy, multifactor authentication, and online banking enhancements.

Debit card expenses increased $73 thousand, or 16%, compared to the prior period in 2020.

Occupancy expense increased $60 thousand over the same period in 2020 with an increase in depreciation, maintenance, and supplies expense.

Marketing and public relations expense increased $35 thousand, or 12%, with marketing, brand recognition initiatives, and community support in the company’s market increasing in volume due to increasing opportunities presenting after previous cancellations due to COVID-19.

Professional and director fees decreased $12 thousand for the nine months ended September 30, 2021 as compared to the same period in 2020 with the collection of legal expense of a nonperforming credit exiting the bank.

Federal income tax expense increased $145 thousand, or 8%, for the nine months ended September 30, 2021 as compared to the same period in 2020.

The provision for income taxes was $2.0 million (effective rate of 19.3%) for the nine months ended September 30, 2021, compared to $1.9 million (effective rate of 19.3%) for the same period ended 2020.

FDIC assessment amounted to $83 thousand as compared to $108 thousand in the first quarter 2021 due to improvement within nonperforming loans.

Marketing and public relations expense increased $32 thousand, or 41%, primarily due to new opportunities and more events taking place after being cancelled due to COVID-19.

Occupancy expense increased $18 thousand, or 7%, in 2022 over the first quarter 2021.

The Ohio financial institutions tax increased $7 thousand, or 4%, in the first quarter due to the Company’s increased capital base.

Professional and director fees decreased $19 thousand, or 6%, for the quarter ended March 31, 2022 as compared to the first quarter 2021.

This decrease resulted from a reduction in outside audit fees.

Federal income tax expense decreased $52 thousand, or 8%, for the quarter ended March 31, 2022 as compared to the first quarter 2021.

The provision for income taxes was $638 thousand (effective rate of 19.1%) for the quarter ended March 31, 2022, compared to $690 thousand (effective rate of 19.3%) for the same quarter ended 2021.

CAPITAL RESOURCES

The Company maintained a strong capital position with tangible common equity to tangible assets of 8.4% at September 30, 2021 compared with 8.7% at December 31, 2020.

The Company maintained a strong capital position with tangible common equity to tangible assets of 8.0% at March 31, 2022 compared with 8.1% at December 31, 2021.

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

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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, 2020.

As of September 30, 2021, the Company and the Bank met all capital adequacy requirements to which they were subject.

During October 2019, the federal banking agencies adopted an optional community bank leverage ratio (“CBLR”).

Depository institutions and depository institution holding companies, that have less than $10 billion in total consolidated assets and have a tier 1 leverage ratio of greater than 9 percent, are considered qualifying community banking organizations and are eligible to opt into the community bank leverage ratio framework.

Additionally, such insured depository institutions are considered to have satisfied the risk-based and leverage capital requirements and will be considered well-capitalized under the rule, effective January 1, 2020.

The Company has not elected to opt-in to the CBLR framework as of September 30, 2021.

Management believes there were no material changes to capital resources as

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2021 .

As of March 31, 2022 , the Company and the Bank met all capital adequacy requirements to which they were subject.

Capital Ratios

September 30,

Common Equity Tier 1 Capital To Risk Weighted Assets

3 unchanged sentences

(Dollars in thousands)

September 30,

Cash and cash equivalents

8 unchanged sentences

Management believes that its sources of liquidity are adequate to meet cash flow obligations for the foreseeable future.

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The growth in core deposits was largely a result of PPP loan funds deposited into customer accounts and an increase in general customer liquidity due to reduced business investment and consumer spending during the COVID-19 pandemic.

Off-Balance Sheet Arrangements

3 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-Q

Item 2. Management’s Discussion and Analysis