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CSB Bancorp, Inc. - Quarter Report: 2006 March (Form 10-Q)

CSB Bancorp, Inc. 10-Q
Table of Contents

 
 
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
     
þ   QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: March 31, 2006
OR
     
o   TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number: 0-21714
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 Number)
91 North Clay, P.O. Box 232, Millersburg, Ohio 44654
 
(Address of principal executive offices)
(330) 674-9015
 
(Registrant’s telephone number)
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 þ No o
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer. See definition of “accelerated filer and large accelerated filer” in Rule 12b-2 of the Exchange Act. (Check one):
Large accelerated filer o     Accelerated filer o     Non-accelerated filer þ
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
Yes o No þ
Indicate the number of shares outstanding of the registrant’s common stock, as of the latest practicable date.
 
Common stock, $6.25 par value   Outstanding at May 12, 2006:
    2,519,733 common shares   
 
 

 


 

CSB BANCORP, INC.
FORM 10-Q
QUARTER ENDED March 31, 2006
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 EX-11 Statement Regarding Computation of Per Share Earnings
 EX-31.1 302 Certification for CEO
 EX-31.2 302 Certification for CFO
 EX-32.1 906 Certification for CEO
 EX-32.2 906 Certification for CFO

 


Table of Contents

CSB BANCORP, INC.
PART I — FINANCIAL INFORMATION
ITEM 1. — FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
(Unaudited)
                 
    March 31,     December 31,  
    2006     2005  
ASSETS
               
Cash and due from banks
  $ 10,267,739     $ 14,785,250  
Interest-earning deposits in other banks
    47,167       124,726  
Federal funds sold
          1,740,000  
 
           
Total cash and cash equivalents
    10,314,906       16,649,976  
 
               
Securities available-for-sale, at fair value
    75,856,687       78,273,248  
Restricted stock, at cost
    2,984,900       2,947,000  
 
           
Total securities
    78,841,587       81,220,248  
Loans held for sale
    242,212        
Loans
    221,123,243       215,019,673  
Less allowance for loan losses
    2,470,768       2,445,494  
 
           
Net loans
    218,652,475       212,574,179  
 
           
Premises and equipment, net
    7,587,163       7,671,822  
Accrued interest receivable and other assets
    3,138,328       2,873,007  
 
           
 
               
Total Assets
  $ 318,776,671     $ 320,989,232  
 
           
 
               
LIABILITIES
               
Deposits
               
Noninterest-bearing
  $ 36,938,182     $ 41,807,069  
Interest-bearing
    210,106,032       213,595,648  
 
           
Total deposits
    247,044,214       255,402,717  
Short-term borrowings
    32,307,224       21,417,616  
Other borrowings
    2,852,923       8,067,840  
Accrued interest payable and other liabilities
    1,580,626       930,800  
 
           
Total liabilities
    283,784,987       285,818,973  
 
           
 
               
SHAREHOLDERS’ EQUITY
               
Common stock, $6.25 par value: Authorized 9,000,000 shares; issued 2,667,786 shares
    16,673,667       16,673,667  
Additional paid-in capital
    6,416,440       6,413,915  
Retained earnings
    15,115,371       14,752,250  
Treasury stock at cost- 100,381 shares in 2006 and 89,287 shares in 2005
    (2,322,410 )     (2,086,686 )
Accumulated other comprehensive loss
    (891,384 )     (582,887 )
 
           
Total shareholders’ equity
    34,991,684       35,170,259  
 
           
 
               
Total Liabilities and Shareholders’ Equity
  $ 318,776,671     $ 320,989,232  
 
           
See notes to unaudited consolidated financial statements.

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CSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2006     2005  
Interest income
               
Loans, including fees
  $ 3,822,504     $ 3,285,392  
Taxable securities
    777,800       519,329  
Nontaxable securities
    101,823       168,788  
Other
    6,592       670  
 
           
Total interest income
    4,708,719       3,974,179  
 
           
 
               
Interest expense
               
Deposits
    1,166,920       868,997  
Other
    247,526       176,478  
 
           
Total interest expense
    1,414,446       1,045,475  
 
           
 
               
Net interest income
    3,294,273       2,928,704  
Provision for loan losses
    32,000       105,999  
 
           
 
               
Net interest income after provision for loan losses
    3,262,273       2,822,705  
 
           
 
               
Non-interest income
               
Service charges on deposit accounts
    315,086       212,555  
Gain on sale of securities
          247,047  
Trust and financial services
    92,242       117,151  
Other income
    203,115       203,504  
 
           
Total non-interest income
    610,443       780,257  
 
           
 
               
Non-interest expenses
               
Salaries and employee benefits
    1,491,005       1,402,464  
Occupancy expense
    171,213       158,778  
Equipment expense
    136,136       123,488  
State franchise tax
    109,200       104,923  
Professional and director fees
    174,020       156,475  
Other expenses
    666,236       731,021  
 
           
Total non-interest expenses
    2,747,810       2,677,149  
 
           
 
Income before income taxes
    1,124,906       925,813  
Federal income tax provision
    351,000       259,000  
 
           
 
               
Net income
  $ 773,906     $ 666,813  
 
           
 
               
Basic and diluted earnings per share
  $ 0.30     $ 0.25  
 
           
See notes to unaudited consolidated financial statements.

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CSB BANCORP, INC.
CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2006     2005  
Balance at beginning of period
  $ 35,170,259     $ 36,207,507  
 
               
Comprehensive income (loss):
               
Net income
    773,906       666,813  
Change in net unrealized loss, net of reclassification adjustments and related income taxes ($158,774 and $378,457)
    (308,497 )     (734,652 )
 
           
Total comprehensive income (loss)
    465,409       (67,839 )
 
               
Issuance of 6 shares from treasury stock
            121  
 
               
Stock-based compensation expense
    2,525          
 
               
Purchase of 11,094 shares of treasury stock
    (235,724 )        
Cash dividends declared ($0.16 per share in 2006, and $0.14 per share in 2005)
    (410,785 )     (370,295 )
 
           
 
               
Balance at end of period
  $ 34,991,684     $ 35,769,494  
 
           
See notes to unaudited consolidated financial statements.

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CSB BANCORP, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
                 
    Three Months Ended  
    March 31,  
    2006     2005  
Net cash from operating activities
  $ 1,302,626     $ 677,680  
 
               
Cash flows from investing activities
               
Securities available-for-sale
               
Proceeds from maturities, calls and repayments
    1,928,276       725,910  
Proceeds from sales
            5,098,433  
Purchases
    (1,589 )     (99,891 )
Purchase of FHLB stock
    (37,900 )     (26,900 )
Net change in loans
    (6,127,352 )     (6,271,614 )
Net change in loans held for sale
    (242,212 )        
Premises and equipment expenditures, net
    (68,810 )     (327,277 )
 
           
Net cash used for investing activities
    (4,307,375 )     (901,339 )
 
           
 
               
Cash flows from financing activities
               
Net change in deposits
    (8,358,503 )     (4,227,957 )
Net change in short-term borrowings
    10,889,608       4,928,379  
Repayments of other borrowings
    (5,214,917 )     (5,252,179 )
Purchase of treasury shares
    (235,724 )        
Cash dividends paid
    (410,785 )     (343,845 )
 
           
Net cash used by financing activities
    (3,330,321 )     (4,895,602 )
 
           
 
               
Net change in cash and cash equivalents
    (6,335,070 )     (5,119,261 )
 
               
Cash and cash equivalents at beginning of period
    16,649,976       15,644,292  
 
           
 
   
Cash and cash equivalents at end of period
  $ 10,314,906     $ 10,525,031  
 
           
 
               
Supplemental disclosures
               
Interest paid
  $ 1,403,819     $ 1,068,566  
Income taxes paid
    100,000     $  
See notes to unaudited consolidated financial statements.

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CSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The accompanying consolidated financial statements include the accounts of CSB Bancorp, Inc. and its wholly-owned subsidiaries, The Commercial and Savings 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 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 March 31, 2006, 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 have been omitted. The Annual Report for CSB for the year ended December 31, 2005, contains consolidated financial statements and related footnote disclosures, which should be read in conjunction with the accompanying consolidated financial statements. The results of operations for the period ended March 31, 2006 are not necessarily indicative of the operating results for the full year or any future interim period.
STOCK-BASED COMPENSATION
The Company sponsors a stock-based compensation plans, administered by a committee, under which incentive stock options may be granted periodically to certain employees. Effective January 1, 2006, CSB adopted FASB Statement No. 123 (revised 2004), Share-Based Payment (FASB No. 123r), using the modified prospective application method. The modified prospective application method applies to new awards, to any outstanding liability awards, and to awards modified, repurchased, or cancelled after January 1, 2006. For all awards granted prior to January 1, 2006, unrecognized compensation cost, on the date of adoption, will be recognized as an expense in future periods. The results for prior periods have not been restated.
The adoption of FASB No. 123r reduced net income by approximately $2,525 for the three months ended March 31, 2006. The following table illustrates the effect on net income and earnings per share if CSB had applied the fair value recognition provisions to stock-based employee compensation during the prior period presented. For purposes of this pro forma disclosure, the value of the options is estimated using the Black-Scholes option-pricing model and amortized to expense over the options’ vesting period.
         
    March 31,  
    2005  
Net income, as reported
  $ 666,813  
Deduct: Total stock-based employee compensation expense determined under fair value based method for all awards, net of related tax effects
    2,800  
 
     
Pro forma net income
  $ 664,013  
 
     
Earnings per share
       
Basic — as reported
  $ .25  
Basic — pro forma
  $ .25  
Diluted — as reported
  $ .25  
Diluted — pro forma
  $ .25  

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CSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-continued
The pro forma effects are computed using option pricing models, using the following weighted-average assumptions as of grant date.
                 
      2004       2003  
Risk-free interest rate
    3.34%       2.75%  
 
               
Expected option life (years)
    3.5       6.4  
 
               
Dividend yield
    2.60%       2.50%  
As of March 31, 2006, there was approximately $17,800 of unrecognized compensation cost related to unvested share-based compensation awards granted. That cost is expected to be recognized over the next two years.
Options are granted to certain employees at prices equal to the market value of the stock on the date the options are granted. The 2002 Plan authorizes the issuance of 75,000 shares. The Plan was amended April 27, 2005 to authorize the issuance of 200,000 shares. The time period during which any option is exercisable under the Plan is determined by the committee but shall not continue beyond the expiration of ten years after the date the option is awarded. As of March 31, 2006, there were 11,970 options outstanding under this Plan.
The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the option and each vesting date. CSB estimated the fair value of stock options on the date of the grant using the Black-Scholes option pricing model. The model requires the use of numerous assumptions, many of which are highly subjective in nature. There were no options granted in the first quarter of 2006 or 2005.
NOTE 2 — SECURITIES
Securities consist of the following at March 31, 2006 and December 31, 2005:
March 31, 2006
                                 
            Gross     Gross        
    Amortized     unrealized     unrealized     Fair  
    Cost     gains     losses     value  
Available-for-sale:
                               
U.S. Treasury security
  $ 99,951     $     $ 1,326     $ 98,625  
Obligations of U.S. government corporations and agencies
    42,491,628             956,620       41,535,008  
Mortgage-backed securities
    25,919,257       342       577,172       25,342,427  
Obligations of states and political subdivisions
    8,390,031       192,620       2,183       8,580,468  
 
                       
Total debt securities
    76,900,867       192,962       1,537,301       75,556,528  
Equity Securities
    305,965       171       5,977       300,159  
 
                       
Total available-for-sale
    77,206,832       193,133       1,543,278       75,856,687  
Restricted stock
    2,984,900                   2,984,900  
 
                       
Total securities
  $ 80,191,732     $ 193,133     $ 1,543,278     $ 78,841,587  
 
                       

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CSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 2 — SECURITIES- continued
December 31, 2005
                                 
            Gross     Gross        
    Amortized     unrealized     unrealized     Fair  
    Cost     gains     losses     Value  
Available-for-sale:
                               
U.S. Treasury security
  $ 99,938     $     $ 1,313     $ 98,625  
Obligations of U.S. government corporations and agencies
    42,991,204       4,376       765,254       42,230,326  
Mortgage-backed securities
    27,368,053       14,166       376,262       27,005,957  
Obligations of states and political subdivisions
    8,392,840       242,499       1,943       8,633,396  
 
                       
Total debt securities
    78,852,035       261,041       1,144,772       77,968,304  
Equity Securities
    304,376       6,080       5,512       304,944  
 
                       
Total available-for-sale
    79,156,411       267,121       1,150,284       78,273,248  
Restricted stock
    2,947,000                   2,947,000  
 
                       
Total securities
  $ 82,103,411     $ 267,121     $ 1,150,284     $ 81,220,248  
 
                       
NOTE 3 – RECENT ACCOUNTING PRONOUNCEMENTS
In February 2006, the Financial Accounting Standards Board (“FASB”) issued Statement of Financial Accounting (“FAS”) No. 155, Accounting for Certain Hybrid Instruments, as an amendment of FASB Statements No. 133 and 140. FAS No. 155 allows financial instruments that have embedded derivatives to be accounted for as a whole (eliminating the need to bifurcate the derivative from its host) if the holder elects to account for the whole instrument on a fair value basis. This statement is effective for all financial instruments acquired or issued after the beginning of an entity’s first fiscal year that begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position
In March 2006, the FASB issued FAS No. 156, Accounting for Servicing of Financial Assets. This Statement, which is an amendment to FAS No. 140, will simplify the accounting for servicing assets and liabilities, such as those common with mortgage securitization activities. Specifically, FAS No. 156 addresses the recognition and measurement of separately recognized servicing assets and liabilities and provides an approach to simplify efforts to obtain hedge-like (offset) accounting. FAS No. 156 also clarifies when an obligation to service financial assets should be separately recognized as a servicing asset or a servicing liability, requires that a separately recognized servicing asset or servicing liability be initially measured at fair value, if practicable, and permits an entity with a separately recognized servicing asset or servicing liability to choose either of the amortization or fair value methods for subsequent measurement. The provisions of FAS No. 156 are effective as of the beginning of the first fiscal year that begins after September 15, 2006. The adoption of this standard is not expected to have a material effect on the Company’s results of operations or financial position.

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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 discussion focuses on the consolidated financial condition of CSB Bancorp, Inc. and its subsidiaries (the “Company”) at March 31, 2006 as compared to December 31, 2005, and the consolidated results of operations for the quarterly period ending March 31, 2006 compared to the same period in 2005. 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 consolidated financial statements and related footnotes.
FORWARD-LOOKING STATEMENTS
Certain statements contained in this report that 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 such forward-looking statements. 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.
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.
FINANCIAL CONDITION
Total assets were $318.8 million at March 31, 2006, compared to $321.0 million at December 31, 2005, representing a decrease of $2.2 million or 0.7%. Cash and cash equivalents decreased $6.3 million, or 38.0%, during the three-month period ending March 31, 2006, due to a $4.6 million decrease in cash and due from banks and a $1.7 million decrease in Federal funds sold. Securities decreased $2.4 million or 2.9% during the quarter principally due to the maturity and pay-down of securities. Net loans increased $6.1 million, or 2.9%. The increase is a result of seasonal credit draws, growth in home equity line lending and a slowing of prepayments within the mortgage loan portfolio. Total liabilities decreased $2.0 million or 0.7% during the quarter, as seasonal deposit declines were offset with short-term borrowings.

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CSB BANCORP, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net loans increased $6.1 million, or 2.9% during the three-month period ended March 31, 2006. The allowance for loan losses amounted to $2,471,000, or 1.12% of gross loans at March 31, 2006, compared to $2,445,000, or 1.14% of gross loans at December 31, 2005. The components of the change in the allowance for loan losses during the three-month period ended March 31, 2006, included a provision of $32,000 and net loan charge-offs of $7,000. Loans past due more than 90 days and still accruing interest and loans placed on nonaccrual status aggregated $670,000, or 0.30% of total loans at March 31, 2006 compared to $801,000, or 0.37% of total loans at December 31, 2005.
At March 31, 2006, the ratio of net loans to deposits was 88.6%, compared to 83.2% at December 31, 2005. The increase in this ratio is due to loan growth coupled with seasonal deposit shrinkage experienced during the three months ended March 31, 2006.
The Company had net unrealized losses of $1,350,000 within its investment portfolio at March 31, 2006 as compared against unrealized losses of $883,000 at December 31, 2005. Management has considered industry analyst reports, sector credit reports and volatility in the bond market in concluding that the unrealized losses as of March 31, 2006 were primarily the result of customary and expected fluctuations in the bond market. As a result, all security impairments as of March 31, 2006 are considered temporary.
The decrease in other borrowings of $5.2 million resulted from the maturity of existing Federal Home Loan advances, which have been reborrowed from the Federal Home Loan Bank as short-term borrowings.
Total shareholders’ equity amounted to $35.0 million, or 11.0% of total assets, at March 31, 2006, compared to $35.2 million, or 11.0% of total assets, at December 31, 2005. The decrease in shareholders’ equity during the three months ended March 31, 2006 was principally due to dividends declared of $411,000, an unrealized loss on securities, net of tax, of $308,000, the repurchase of treasury stock of $236,000, which was offset by net income of $774,000. Through its share repurchase program the Company repurchased 11,094 shares of treasury stock during the quarter ended March 31, 2006. The Company and its subsidiaries met all regulatory capital requirements at March 31, 2006.

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CSB BANCORP, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Three months ended March 31, 2006 and 2005
For the quarter ended March 31, 2006, the Company recorded net income of $774,000 or $.30 per share, as compared to $667,000 or $.25 per share for the quarter ended March 31, 2005. The increase in net income for the quarter of $107,000 was principally due to a $366,000 increase in net interest income, offset by decreases in non-interest income of $170,000, an increase in non-interest expenses of $71,000 and an increase of $92,000 in the federal income tax provision.
Interest income for the quarter ended March 31, 2006 of $4.7 million represents an increase of $735,000, or 18.5%, compared to the same period in 2005. Interest income on loans increased $537,000 over the first quarter of 2005, which was primarily due to an increase of 118 basis points in average loan rates partially offset by a $6.4 million decrease in average gross loan balances. The increase in interest income on securities of $192,000 was due to increases in average balances of securities of $8.0 million and increases of 72 basis points in average rates on taxable securities and increases of 50 basis points in average taxable equivalent rates on nontaxable securities over the first quarter of 2005. Interest expense for the quarter ended March 31, 2006 was $1,414,000, an increase of $369,000, or 35.3%, from the same period in 2005. The increase in interest expense occurred due to both increases in rate and average volume of interest-bearing liabilities. The average balance of interest-bearing liabilities rose $2.1 million with an average rate increase of 60 basis points to 2.36% for the quarter ended March 31, 2006 as compared to the quarter ended March 31, 2005. Average interest-bearing deposits increased $4.6 million over the first quarter of 2005, while average interest bearing liabilities decreased $2.5 million over the same period.
The provision for loan losses for the quarter ended March 31, 2006 was $32,000, compared to a $106,000 provision for the same quarter in 2005. The provision for loan losses is determined based on management’s calculation 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.
Non-interest income for the quarter ended March 31, 2006 of $611,000 represents a decrease of $170,000 or 21.8%, compared to the same quarter in 2005. This reduction was primarily due to a decrease in the gain on the sale of securities of $247,000, a decrease in trust and brokerage income of $25,000, offset by increases of $103,000 in fees on deposits. The increases in deposit fees were a result of the consumer and small business customer use of fee-based products, primarily an overdraft privilege program that was implemented during the fourth quarter of 2005.
Non-interest expenses for the quarter ended March 31, 2006 increased $71,000 or 2.6%, compared to the first quarter of 2005. This increase was due primarily to the increase in salaries and employee benefit expense of $89,000 resulting from additional expense for executive bonuses and annual employee compensation increases. The Company recognized stock-based compensation expense under FAS 123(R) of $2,500 for the quarter ended March 31, 2006. Professional and director fees increased $18,000 primarily due to expenses related to engagement of an outside consultant to perform a management compensation review as well as increases in director fees. Other expense decreased during the first

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CSB BANCORP, INC.
quarter of 2006 due to a reduction in security personnel costs and cash losses related to two robberies at a branch office in 2005.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY
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. The Company’s primary sources of liquidity are cash and cash equivalents, which totaled $10.3 million at March 31, 2006 a decrease of $6.3 million from $16.6 million at December 31, 2005. Net income, securities available-for-sale, and loan repayments also serve as sources of liquidity. Cash and cash equivalents and securities maturing within one year represent 5.6% of total assets as of March 31, 2006 compared to 7.7% of total assets at year-end 2005. Other sources of liquidity include, but are not limited to, purchase of federal funds, advances from the FHLB, adjustments of interest rates to attract deposits, and borrowing at the Federal Reserve discount window. Management believes that its sources of liquidity are adequate to meet both short and long-term liquidity needs of the Company.
OFF-BALANCE SHEET ARRANGEMENTS
We do not have any off-balance sheet arrangements (as such term is defined in applicable Securities and Exchange 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.
CONTRACTUAL OBLIGATIONS
During the first three months of 2006, the Company’s contractual obligations have not changed materially from those discussed in the Company’s Annual Report of Form 10-K for the year ended December 31, 2005.

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CSB BANCORP, INC.
ITEM 3 — QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
There have been no material changes in the quantitative and qualitative disclosures about market risks as of March 31, 2006 from that presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2005. Management performs a quarterly analysis of the Company’s interest rate risk. All positions are currently within the Board-approved policy.
The following table presents an analysis of the estimated sensitivity of the Company’s annual net interest income to sudden and sustained 100 basis point changes in market interest rates at March 31, 2006 and December 31, 2005:
March 31, 2006
                             
Changes in            
Interest Rates   Net Interest   Dollar   Percentage
(basis points)   Income   Change   Change
(Dollars in Thousands)
  +200     $ 14,229     $ 856       6.4 %
  +100       13,756       384       2.9  
  0       13,373       0       0.0  
  -100       13,058       (315 )     (2.4 )
  -200       12,582       (791 )     (5.9 )
December 31, 2005
                             
Changes in            
Interest Rates   Net Interest   Dollar   Percentage
(basis points)   Income   Change   Change
(Dollars in Thousands)
  +200     $ 15,042     $ 1,198       8.7 %
  +100       14,387       544       3.9  
  0       13,844       0       0.0  
  -100       13,383       (461 )     (3.3 )
  -200       12,741       (1,103 )     (8.0 )

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CSB BANCORP, INC.
ITEM 4 — CONTROLS AND PROCEDURES
With the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our 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, our Chief Executive Officer and Chief Financial Officer have concluded that:
(a) information required to 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 Securities and Exchange 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 our 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 our 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.

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CSB BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 2006
PART II — OTHER INFORMATION
ITEM 1 — LEGAL PROCEEDINGS
                    There are no matters required to be reported under this item.
ITEM 1A — RISK FACTORS
There were no material changes to the Risk Factors described in Item 1A in CSB’s Annual Report on Form 10-K for the period ended December 31, 2005.
ITEM 2 — UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
                    There are no matters required to be reported under this item.
Issuer Purchase of Equity Securities
                                 
                            Maximum
                    Total Number of   Number of Shares
    Total Number   Average   Shares Purchased   that May Yet be
    of Shares   Price Paid   as Part of Publicly   Purchased Under
                                   Period   Purchased   Per Share   Announced Plans   the Plan
 
January 1, 2006 to January 31, 2006
  None   None   None     198,027  
February 1, 2006 to February 28, 2006
    11,094     $ 21.25       11,094       186,933  
March 1, 2006 to March 31, 2006
  None   None   None     186,933  
On July 7, 2005 CSB Bancorp, Inc. filed Form 8-k with the Securities and Exchange Commission announcing that its Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to 10% of the Company’s common shares outstanding. Repurchases will 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 UPON SENIOR SECURITIES
                    There are no matters required to be reported under this item.
ITEM 4 — SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
                    There are no matters required to be reported under this item.
ITEM 5 — OTHER INFORMATION
                    There are no matters required to be reported under this item.

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CSB BANCORP, INC.
FORM 10-Q
Quarter ended March 31, 2006
PART II — OTHER INFORMATION
Item 6 — Exhibits:
     
Exhibit    
Number   Description of Document
 
   
11
  Statement Regarding Computation of Per Share Earnings (reference is hereby made to Consolidated Statements of Income on page 4 hereof.)
 
   
31.1
  Rule 13a-14(a)/15d-14(a) CEO’s Certification
 
   
31.2
  Rule 13a-14(a)/15d-14(a) CFO’s Certification
 
   
32.1
  Section 1350 CEO’s Certification
 
   
32.2
  Section 1350 CFO’s Certification

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CSB BANCORP, INC.
SIGNATURES
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: May 12, 2006
  /s/ Eddie L. Steiner    
 
       
 
  Eddie L. Steiner    
 
  President    
 
  Chief Executive Officer    
 
       
Date: May 12, 2006
  /s/ Paula J. Meiler    
 
       
 
  Paula J. Meiler    
 
  Senior Vice President    
 
  Chief Financial Officer    

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CSB BANCORP, INC.
Index to Exhibits
         
Exhibit       Sequential
Number   Description of Document   Page
 
       
11
  Statement Regarding Computation of Per Share Earnings (reference is hereby made to Consolidated Statements of Income on page 4 hereof.)    
 
       
31.1
  Rule 13a-14(a)/15d-14(a) CEO’s Certification    
 
       
31.2
  Rule 13a-14(a)/15d-14(a) CFO’s Certification    
 
       
32.1
  Section 1350 CEO’s Certification    
 
       
32.2
  Section 1350 CFO’s Certification    

19.