Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Sections 12, 13 or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court. Yes ☒ No ☐

As of ~~August~~November 1, 2023, the registrant had ~~2,680,325~~2,671,313 shares of common stock, $6.25 par value per share, outstanding.


	June 30,			December 31,			September 30,			December 31,
(Dollars in thousands, except per share data)	2023			2022			2023			2022
ASSETS
Cash and cash equivalents
Cash and due from banks	$	21,897		$	19,911		$	20,409		$	19,911
Interest-earning deposits with banks		38,329			66,509			29,000			66,509
Total cash and cash equivalents		60,226			86,420			49,409			86,420
Securities
Available-for-sale, at fair value		145,357			150,069			145,330			150,069
Held-to-maturity (fair value 2023-$203,979; 2022-$211,954)		238,222			247,401
Held-to-maturity (fair value 2023-$187,695; 2022-$211,954)								230,505			247,401
Equity securities		257			244			246			244
Restricted stock, at cost		1,607			3,430			1,561			3,430
Total securities		385,443			401,144			377,642			401,144
Loans held for sale		184			52			—			52
Loans		664,605			627,171			680,949			627,171
Less allowance for credit losses		6,559			6,838			6,691			6,838
Net loans		658,046			620,333			674,258			620,333
Premises and equipment, net		13,240			13,414			13,105			13,414
Bank-owned life insurance		25,050			24,709			25,229			24,709
Goodwill		4,728			4,728			4,728			4,728
Accrued interest receivable and other assets		9,240			8,308			12,227			8,308
TOTAL ASSETS	$	1,156,157		$	1,159,108		$	1,156,598		$	1,159,108

LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Deposits
Noninterest-bearing	$	315,200		$	350,283		$	300,018		$	350,283
Interest-bearing		706,471			673,134			718,057			673,134
Total deposits		1,021,671			1,023,417			1,018,075			1,023,417
Short-term borrowings		28,520			32,550			30,734			32,550
Other borrowings		1,862			2,461			1,808			2,461
Allowance for credit losses on off-balance sheet commitments		328			141			492			141
Accrued interest payable and other liabilities		3,636			4,619			4,079			4,619
TOTAL LIABILITIES		1,056,017			1,063,188			1,055,188			1,063,188
SHAREHOLDERS' EQUITY
Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; outstanding 2,680,325 shares in 2023 and 2,718,024 in 2022		18,629			18,629
Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; outstanding 2,671,313 shares in 2023 and 2,707,576 in 2022								18,629			18,629
Additional paid-in capital		9,815			9,815			9,815			9,815
Retained earnings		92,149			86,502			94,614			86,502
Treasury stock at cost: 300,277 shares in 2023 and 273,026 shares in 2022		(7,137	)		(6,107	)
Treasury stock at cost: 309,289 shares in 2023 and 273,026 shares in 2022								(7,481	)		(6,107	)
Accumulated other comprehensive loss		(13,316	)		(12,919	)		(14,167	)		(12,919	)
TOTAL SHAREHOLDERS' EQUITY		100,140			95,920			101,410			95,920
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,156,157		$	1,159,108		$	1,156,598		$	1,159,108


	Three Months Ended June 30,						Six Months Ended June 30,						Three Months Ended September 30,						Nine Months Ended September 30,
(Dollars in thousands, except per share data)	2023			2022			2023			2022			2023			2022			2023			2022
INTEREST AND DIVIDEND INCOME
Loans, including fees	$	8,711		$	6,032		$	16,680		$	11,809		$	9,175		$	6,680		$	25,855		$	18,489
Taxable securities		1,945			1,660			3,957			2,941			1,910			1,780			5,867			4,721
Nontaxable securities		102			108			203			218			102			110			305			328
Other		444			203			989			277			531			586			1,520			863
Total interest and dividend income		11,202			8,003			21,829			15,245			11,718			9,156			33,547			24,401
INTEREST EXPENSE
Deposits		2,128			344			3,712			693			2,772			559			6,484			1,252
Short-term borrowings		70			14			136			26			100			25			236			51
Other borrowings		10			15			22			31			9			12			31			43
Total interest expense		2,208			373			3,870			750			2,881			596			6,751			1,346
NET INTEREST INCOME		8,994			7,630			17,959			14,495			8,837			8,560			26,796			23,055
CREDIT LOSS EXPENSE
Provision (recovery) for credit loss expense - loans		242			(345	)		274			(645	)		13			(250	)		287			(895	)
Recovery of credit loss expense - off-balance sheet commitments		(102	)		—			(165	)		—
Provision (recovery) for credit loss expense - off-balance sheet commitments														164			—			(1	)		—
Total provision (recovery) for credit loss expense		140			(345	)		109			(645	)		177			(250	)		286			(895	)
NET INTEREST INCOME AFTER CREDIT LOSS EXPENSE		8,854			7,975			17,850			15,140			8,660			8,810			26,510			23,950
NONINTEREST INCOME
Service charges on deposit accounts		300			289			592			554			332			321			924			875
Trust services		252			253			510			517			259			216			769			733
Debit card interchange fees		533			543			1,054			1,038			525			530			1,579			1,568
Credit card fees		192			191			369			346			166			170			535			516
Gain on sale of loans, net		56			147			59			265			47			49			106			314
Earnings on bank owned life insurance		172			168			341			334			179			170			520			504
Unrealized gain or (loss) on equity securities, net		4			3			13			4
Unrealized gain (loss) on equity securities, net														(11	)		(2	)		2			2
Other income		224			188			423			366			208			221			631			587
Total noninterest income		1,733			1,782			3,361			3,424			1,705			1,675			5,066			5,099
NONINTEREST EXPENSE
NONINTEREST EXPENSES
Salaries and employee benefits		3,389			3,412			6,683			6,567			3,429			3,199			10,112			9,766
Occupancy expense		284			276			566			548			290			272			856			820
Equipment expense		189			197			396			411			199			193			595			604
Professional and director fees		386			330			707			606			366			555			1,073			1,161
Financial institutions and franchise tax expense		192			194			384			389
Financial institutions tax														192			195			576			584
Marketing and public relations		136			110			259			221			124			141			383			362
Software expense		421			326			820			659			408			397			1,228			1,056
Debit card expense		169			185			315			349			179			201			494			550
FDIC insurance expense		178			75			249			158			131			93			380			251
Other expenses		705			669			1,389			1,334			716			699			2,105			2,033
Total noninterest expense		6,049			5,774			11,768			11,242
Total noninterest expenses														6,034			5,945			17,802			17,187
Income before income taxes		4,538			3,983			9,443			7,322			4,331			4,540			13,774			11,862
FEDERAL INCOME TAX PROVISION		894			774			1,865			1,412			850			890			2,715			2,302
NET INCOME	$	3,644		$	3,209		$	7,578		$	5,910		$	3,481		$	3,650		$	11,059		$	9,560
Basic and diluted net earnings per share	$	1.36		$	1.18		$	2.82		$	2.17		$	1.30		$	1.35		$	4.12		$	3.52


(Dollars in thousands, except per share data)	Common stock		Additional paid-in capital		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total			Common stock		Additional paid-in capital		Retained earnings			Treasury stock			Accumulated other comprehensive loss			Total
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023
Balance, beginning of period	$	18,629	$	9,815	$	89,524		$	(7,126	)	$	(11,835	)	$	99,007		$	18,629	$	9,815	$	92,149		$	(7,137	)	$	(13,316	)	$	100,140
Net income		—		—		3,644			—			—			3,644			—		—		3,481			—			—			3,481
Other comprehensive income		—		—		—			—			(1,481	)		(1,481	)
Purchase of 300 treasury shares		—		—		—			(11	)		—			(11	)
Other comprehensive loss																		—		—		—			—			(851	)		(851	)
Purchase of 9,012 treasury shares																		—		—		—			(344	)		—			(344	)
Cash dividends declared, $0.38 per share		—		—		(1,019	)		—			—			(1,019	)		—		—		(1,016	)		—			—			(1,016	)
Balance, June 30, 2023	$	18,629	$	9,815	$	92,149		$	(7,137	)	$	(13,316	)	$	100,140
Six Months Ended June 30, 2023
Balance, September 30, 2023																	$	18,629	$	9,815	$	94,614		$	(7,481	)	$	(14,167	)	$	101,410
Nine Months Ended September 30, 2023
Balance, beginning of period	$	18,629	$	9,815	$	86,502		$	(6,107	)	$	(12,919	)	$	95,920		$	18,629	$	9,815	$	86,502		$	(6,107	)	$	(12,919	)	$	95,920
Net income		—		—		7,578			—			—			7,578			—		—		11,059			—			—			11,059
Cumulative effect of adoption of ASU 2016-13		—		—		52			—			—			52			—		—		52			—			—			52
Other comprehensive loss		—		—		—			—			(397	)		(397	)		—		—		—			—			(1,248	)		(1,248	)
Purchase of 27,251 treasury shares		—		—		—			(1,030	)		—			(1,030	)
Cash dividends declared, $0.74 per share		—		—		(1,983	)		—			—			(1,983	)
Balance, end of period	$	18,629	$	9,815	$	92,149		$	(7,137	)	$	(13,316	)	$	100,140
Three Months Ended June 30, 2022
Purchase of 36,263 treasury shares																		—		—		—			(1,374	)		—			(1,374	)
Cash dividends declared, $1.12 per share																		—		—		(2,999	)		—			—			(2,999	)
Balance, September 30, 2023																	$	18,629	$	9,815	$	94,614		$	(7,481	)	$	(14,167	)	$	101,410
Three Months Ended September 30, 2022
Balance, beginning of period	$	18,629	$	9,815	$	79,416		$	(5,719	)	$	(7,213	)	$	94,928		$	18,629	$	9,815	$	80,940		$	(5,719	)	$	(10,003	)	$	93,662
Net income		—		—		3,209			—			—			3,209			—		—		3,650			—			—			3,650
Other comprehensive loss		—		—		—			—			(2,790	)		(2,790	)		—		—		—			—			(4,049	)		(4,049	)
Cash dividends declared, $0.62 per share		—		—		(1,685	)		—			-			(1,685	)
Balance, June 30, 2022	$	18,629	$	9,815	$	80,940		$	(5,719	)	$	(10,003	)	$	93,662
Six Months Ended June 30, 2022
Purchase of 10,448 treasury shares																		—		—		—			(388	)		—			(388	)
Cash dividends declared, $0.33 per share																		—		—		(894	)		—			—			(894	)
Balance, September 30, 2022																	$	18,629	$	9,815	$	83,696		$	(6,107	)	$	(14,052	)	$	91,981
Nine Months Ended September 30, 2022
Balance, beginning of period	$	18,629	$	9,815	$	76,715		$	(5,719	)	$	(2,125	)	$	97,315		$	18,629	$	9,815	$	76,715		$	(5,719	)	$	(2,125	)	$	97,315
Net income		—		—		5,910			—			—			5,910			—		—		9,560			—			—			9,560
Other comprehensive loss		—		—		—			—			(7,878	)		(7,878	)		—		—		—			—			(11,927	)		(11,927	)
Cash dividends declared, $0.62 per share		—		—		(1,685	)		—			—			(1,685	)
Balance, end of period	$	18,629	$	9,815	$	80,940		$	(5,719	)	$	(10,003	)	$	93,662
Purchase of 10,448 treasury shares																		—		—		—			(388	)		—			(388	)
Cash dividends declared, $0.95 per share																		—		—		(2,579	)		—			—			(2,579	)
Balance, September 30, 2022																	$	18,629	$	9,815	$	83,696		$	(6,107	)	$	(14,052	)	$	91,981

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying condensed consolidated financial statements include the accounts of CSB Bancorp, Inc. and its wholly-owned subsidiaries, The Commercial and Savings Bank (the “Bank”) and CSB Investment Services, LLC (together referred to as the “Company” or “CSB”). All significant intercompany transactions and balances have been eliminated in consolidation.

The condensed consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company’s financial position at ~~June~~September 30, 2023, and the results of operations and changes in cash flows for the periods presented have been made.

Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. generally accepted accounting principles (“GAAP”) have been omitted. The Annual Report for CSB for the year ended December 31, 2022, contains Consolidated Financial Statements and related footnote disclosures, which should be read in conjunction with the accompanying condensed Consolidated Financial Statements. The results of operations for the periods ended ~~June~~September 30, 2023 are not necessarily indicative of the operating results for the full year or any future interim period.

Certain items in the prior-year financial statements were reclassified to conform to the current-year presentation. Such reclassifications had no effect on net income or shareholders’ equity.

ALLOWANCE FOR CREDIT LOSSES - LOANS AND LEASES POLICY

In connection with our adoption of ASU 2016-13, we made changes to our loan portfolio segments to align with the methodology applied in determining the allowance under CECL. Refer to Note 3 Loans, for further discussion of these portfolio segments. In addition to our existing segments, our new segmentation breaks out commercial lessors of buildings, and consumer indirect loans as well as separating consumer mortgage loans from home equity line of credit loans.

The ACL is a valuation reserve established and maintained by charges against operating income and is deducted from the amortized cost basis of loans to present the net amount expected to be collected on the loans. Loans, or portions thereof, are charged off against the ACL when they are deemed uncollectible. Expected recoveries do not exceed the aggregate of amounts previously charged-off and expected to be charged-off. The ACL is an estimate of expected credit losses, measured over the contractual life of a loan (adjusted for expected prepayment), that considers our historical loss experience, current conditions and forecasts of future economic conditions. Determination of an appropriate ACL is inherently subjective and may have significant changes from period to period.

The methodology for determining the ACL has two main components: evaluation of expected credit losses for certain groups of homogeneous loans that share similar risk characteristics and evaluation of loans that do not share risk characteristics with other loans.

The ACL for homogeneous loans is calculated using a life-time loss rate methodology with both a quantitative and a qualitative analysis that is applied on a quarterly basis. The ACL model is comprised of eight distinct portfolio segments: 1) Commercial and Industrial or C&I, 2) Commercial Real Estate, or CRE, 3) Commercial Lessors of Buildings, 4) Construction, 5) Consumer Mortgage, 6) Home Equity Line of Credit or HELOC, 7) Consumer Installment, and 8) Consumer Indirect loans. Each segment has a distinct set of risk characteristics monitored by management. We further evaluate the ACL at a disaggregated level which includes type of collateral, loan participations, non-owner occupied and our internal risk rating system for the commercial segments, and type of collateral and lien position, for the consumer segments.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Historical credit loss experience is the basis for the estimation of expected credit losses. We apply historical loss rates to pools of loans with similar risk characteristics. After consideration of the historic loss calculation, management applies qualitative adjustments to reflect the current conditions and reasonable and supportable forecasts not already reflected in the historical loss information at the balance sheet date. Our reasonable and supportable forecast adjustment is based on the unemployment forecast and management judgment. For periods beyond our two-year reasonable and supportable forecast, we revert to the historical loss rate. The qualitative adjustments for current conditions are based upon changes in lending policies and practices, change in economic conditions, change in nature of the portfolio, experience and ability of lending staff, problem loan trends, quality of the bank’s loan review system, value of underlying collateral for collateral dependent loans, the existence of and changes in concentrations, and other external factors. These modified historical loss rates are multiplied by the outstanding principal balance of each loan to calculate a required reserve. A similar process is employed to calculate a reserve assigned to the portion of off-balance sheet commitments that we expect to fund, specifically unfunded loan commitments, and any needed reserve is recorded in other liabilities.

The ACL for individual loans begins with the use of normal credit review procedures to identify whether a loan no longer shares similar risk characteristics with other pooled loans and therefore, should be individually assessed. We evaluate all commercial loans greater than $500 thousand that meet the following criteria: 1) when it is determined that foreclosure is probable, 2) substandard, doubtful and nonperforming loans when repayment is expected to be provided substantially through the operation or sale of the collateral, and 3) when it is determined by management that a loan does not share similar risk characteristics with other loans. Collateral values are discounted to consider disposition costs when appropriate. A specific reserve is established or a charge-off is taken if the fair value of the loan is less than the loan balance.

Although we believe our process for determining the ACL appropriately considers all the factors that would likely result in credit losses, the process includes subjective elements and may be susceptible to significant change. To the extent actual losses are higher than management estimates, additional provision for credit losses could be required and could adversely affect our earnings or financial position in future periods.

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

In preparing the Consolidated Financial Statements, in conformity with accounting principles generally accepted in the United States of America, management makes estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Balance Sheets and reported amounts of revenues and expenses during each reporting period. Actual results could differ from those estimates. The most significant estimates susceptible to change in the near term relate to management’s determination of the allowance for credit losses and the fair value of financial instruments.

ACCOUNTING PRONOUNCEMENTS ADOPTED IN 2023

In June 2016, the FASB issued ASU No. 2016-13, "Financial Instruments – Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments" and subsequent related updates. This ASU replaces the incurred loss methodology for recognizing credit losses and requires businesses and other organizations to measure the current expected credit losses (CECL) on financial assets measured at amortized cost, including loans and held-to-maturity securities, net investments in leases, off-balance sheet credit exposures such as unfunded commitments, and other financial instruments. In addition, ASC 326 requires credit losses on available-for-sale debt securities to be presented as an allowance rather than as a write-down when management does not intend to sell or believes that it is not more likely than not they will be required to sell the debt securities. This guidance became effective on January 1, 2023 for the Bank. The results reported for periods beginning after January 1, 2023 are presented under ASC 326 while prior period amounts continue to be reported in accordance with previously applicable accounting standards.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The Bank adopted this guidance, and subsequent related updates, using the modified retrospective approach for all financial assets measured at amortized cost, including loans and held-to-maturity debt securities, available-for-sale debt securities and unfunded commitments. On January 1, 2023, the Bank recorded a cumulative effect increase to retained earnings of $52 thousand, net of tax, of which $442 thousand related to loans, offset by $390 thousand related to unfunded commitments, net of tax. There was no allowance for credit losses recorded for either available-for-sale or held-to-maturity debt securities. See Note 3 for further discussion on the adoption of CECL.

The Bank adopted the provisions of ASC 326 related to presenting other-than-temporary impairment on available-for- sale debt securities ~~prior to~~on January 1, 2023 using the prospective transition approach, though no such charges had been recorded on the securities held by the Bank as of the date of adoption.

The Bank expanded the pooling utilized under the legacy incurred loss method to include additional segmentation based on risk. The impact of the change from the incurred loss model to the current expected credit loss model is detailed below:


	January 1, 2023
(Dollars in thousands)	Pre-adoption		Adoption Impact			As Reported
Assets:
ACL on loans
Commercial and industrial	$	1,110	$	658		$	1,768
Commercial real estate		2,760		(541	)		2,219
Commercial lessors of buildings		—		974			974
Construction		803		(515	)		288
Consumer mortgage		1,268		(580	)		688
Home equity line of credit		—		201			201
Consumer installment		233		(183	)		50
Consumer indirect		—		91			91
Unallocated		664		(664	)		—
Total allowance for credit losses - loans		6,838		(559	)	$	6,279

Liabilities:
ACL for off-balance sheet commitments		—		493			493
Total allowance for credit losses	$	6,838		(66	)	$	6,772

The following table presents the Bank's loan portfolio, prior to the adoption of ASC 326, by category of loans and the impact of the change from the adoption of the standard:


(Dollars in thousands)	December 31, 2022			Adoption Impact			Post Adoption January 1, 2023
Commercial and industrial	$	129,343		$	(2,209	)	$	127,134
Commercial real estate		231,785			(70,625	)		161,160
Commercial lessors of buildings		—			83,728			83,728
Construction		55,318			(10,452	)		44,866
Consumer mortgage		194,125			(44,338	)		149,787
Home equity line of credit		—			44,243			44,243
Consumer installment		16,387			(6,730	)		9,657
Consumer indirect		—			6,383			6,383
	$	626,958		$	—		$	626,958
Gross loans prior to deferred fees
Deferred loan costs, net		213			—			213
Allowance for credit losses		(6,838	)		559			(6,279	)
Total net loans	$	620,333		$	559		$	620,892

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In March 2022, the FASB issued ASU 2022-02, “Financial Instruments – Credit Losses (ASC 326): Troubled Debt Restructurings (TDRs) and Vintage Disclosures”. The guidance amends ASC 326 to eliminate the accounting guidance for TDRs by creditors, while enhancing disclosure requirements for certain loan refinancing and restructuring activities by creditors when a borrower is experiencing financial difficulty. Specifically, rather than applying TDR recognition and measurement guidance, creditors will determine whether a modification results in a new loan or continuation of existing loan. The guidance also requires disclosures about the performance of modified loans to borrowers experiencing financial difficulty in the 12 months following the modification.

These amendments are intended to enhance existing disclosure requirements and introduce new requirements related to certain modifications of receivables made to borrowers experiencing financial difficulty. Additionally, the amendments to ASC 326 require that an entity disclose current period gross write-offs by year of origination within the vintage disclosures, which requires that an entity disclose the amortized cost basis of financing receivables by credit quality indicator and class of financing receivable by year of origination. The guidance is only for entities that have adopted the amendments in Update 2016-13. This guidance has been adopted as of January 1, 2023, however, there have been no reportable loan modifications during the ~~six~~nine months ended ~~June~~September 30, 2023.

Note 2 – SECURITIES

Securities consist of the following on ~~June~~September 30, 2023 and December 31, 2022:


(Dollars in thousands)	Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value		Amortized cost		Gross unrealized gains		Gross unrealized losses			Fair value
June 30, 2023
September 30, 2023
Available-for-sale
U.S. Treasury securities	$	23,153	$	—	$	(828	)	$	22,325	$	23,133	$	—	$	(675	)	$	22,458
U.S. Government agencies		13,999		—		(1,263	)		12,736		13,999		—		(1,151	)		12,848
Mortgage-backed securities of government agencies		73,271		2		(8,640	)		64,633		74,457		2		(10,008	)		64,451
Asset-backed securities of government agencies		583		—		(35	)		548		569		—		(17	)		552
State and political subdivisions		20,401		—		(1,043	)		19,358		20,372		—		(1,573	)		18,799
Corporate bonds		29,182		—		(3,425	)		25,757		29,158		—		(2,936	)		26,222
Total available-for-sale		160,589		2		(15,234	)		145,357		161,688		2		(16,360	)		145,330
Held-to-maturity
U.S. Treasury Securities	$	12,779	$	—	$	(1,033	)	$	11,746
U.S. Treasury securities										$	10,292	$	—	$	(1,083	)	$	9,209
Mortgage-backed securities of government agencies		222,878		—		(32,966	)		189,912		217,656		—		(41,334	)		176,322
State and political subdivisions		2,565		—		(244	)		2,321		2,557		—		(393	)		2,164
Total held-to-maturity		238,222		—		(34,243	)		203,979		230,505		—		(42,810	)		187,695
Equity securities		185		72		—			257		185		61		—			246
Restricted stock		1,607		—		—			1,607		1,561		—		—			1,561
Total securities	$	400,603	$	74	$	(49,477	)	$	351,200	$	393,939	$	63	$	(59,170	)	$	334,832
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	23,194	$	—	$	(969	)	$	22,225	$	23,194	$	—	$	(969	)	$	22,225
U.S. Government agencies		13,999		—		(1,369	)		12,630		13,999		—		(1,369	)		12,630
Mortgage-backed securities of government agencies		77,677		72		(8,859	)		68,890		77,677		72		(8,859	)		68,890
Asset-backed securities of government agencies		633		—		(15	)		618		633		—		(15	)		618
State and political subdivisions		20,462		—		(985	)		19,477		20,462		—		(985	)		19,477
Corporate bonds		28,740		—		(2,511	)		26,229		28,740		—		(2,511	)		26,229
Total available-for-sale		164,705		72		(14,708	)		150,069		164,705		72		(14,708	)		150,069
Held-to-maturity
U.S Treasury Securities	$	12,753	$	—	$	(1,136	)	$	11,617
U.S Treasury securities										$	12,753	$	—	$	(1,136	)	$	11,617
Mortgage-backed securities of government agencies		232,068		—		(34,051	)		198,017		232,068		—		(34,051	)		198,017
State and political subdivisions		2,580		1		(261	)		2,320		2,580		1		(261	)		2,320
Total held-to-maturity		247,401		1		(35,448	)		211,954		247,401		1		(35,448	)		211,954
Equity securities		185		59		—			244		185		59		—			244
Restricted stock		3,430		—		—			3,430		3,430		—		—			3,430
Total securities	$	415,721	$	132	$	(50,156	)	$	365,697	$	415,721	$	132	$	(50,156	)	$	365,697

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – SECURITIES (continued)

The amortized cost and fair value of debt securities on ~~June~~September 30, 2023, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.


(Dollars in thousands)	Amortized cost		Fair value		Amortized cost		Fair value
Available-for-sale
Due in one year or less	$	12,999	$	12,692	$	15,006	$	14,780
Due after one through five years		57,688		53,435		55,512		51,631
Due after five through ten years		24,674		22,143		24,135		21,304
Due after ten years		65,228		57,087		67,035		57,615
Total debt securities available-for-sale	$	160,589	$	145,357	$	161,688	$	145,330
Held-to-maturity
Due in one year or less	$	2,499	$	2,470	$	—	$	—
Due after one through five years		7,427		6,848		7,434		6,876
Due after five through ten years		4,733		4,140		5,138		4,295
Due after ten years		223,563		190,521		217,933		176,524
Total debt securities held-to-maturity	$	238,222	$	203,979	$	230,505	$	187,695

Securities with a fair value of approximately $~~129.3~~129.1 millionand $110.1 million were pledged on ~~June~~September 30, 2023 and December 31, 2022, respectively, to secure public deposits, as well as other deposits and borrowings as required or permitted by law.

Restricted stock primarily consists of investments in Federal Home Loan Bank of Cincinnati (FHLB) and Federal Reserve Bank stock. The Bank’s investment in FHLB stock amounted to approximately $~~1.1~~1.0 million and $2.9 million on ~~June~~September 30, 2023 and December 31, 2022. The FHLB has redeemed approximately $~~1.8~~1.9 million in stock at $100 par value per share during the ~~six~~nine month period ended ~~June~~September 30, 2023. Federal Reserve Bank stock was $471 thousand on ~~June~~September 30, 2023 and December 31, 2022.

There were no proceeds from sales of securities for the three and ~~six-month~~nine-month periods ended ~~June~~September 30, 2023, and 2022. All gains and losses recognized on equity securities during the three and ~~six-month~~nine-month periods were unrealized.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – SECURITIES (continued)

The following table presents gross unrealized losses and fair value of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, on ~~June~~September 30, 2023 and December 31, 2022:


	Securities in a continuous unrealized loss position															Securities in a continuous unrealized loss position
	Less than 12 months					12 months or more					Total					Less than 12 months					12 months or more					Total
(Dollars in thousands)	Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value		Gross unrealized losses			Fair value
June 30, 2023
September 30, 2023
Available-for-sale
U.S. Treasury securities	$	(111	)	$	3,877	$	(717	)	$	18,448	$	(828	)	$	22,325	$	—		$	—	$	(675	)	$	22,458	$	(675	)	$	22,458
U.S. Government agencies		—			—		(1,263	)		12,736		(1,263	)		12,736		—			—		(1,151	)		12,848		(1,151	)		12,848
Mortgage-backed securities of government agencies		(211	)		9,487		(8,429	)		52,250		(8,640	)		61,737		(235	)		12,748		(9,773	)		51,513		(10,008	)		64,261
Asset-backed securities of government agencies		—			—		(35	)		548		(35	)		548		—			—		(17	)		552		(17	)		552
State and political subdivisions		(98	)		7,059		(945	)		12,073		(1,043	)		19,132		(79	)		1,952		(1,494	)		16,622		(1,573	)		18,574
Corporate bonds		(124	)		867		(3,301	)		24,890		(3,425	)		25,757		(1	)		492		(2,935	)		25,730		(2,936	)		26,222
Held-to-maturity
U.S. Treasury Securities		—			—		(1,033	)		11,746		(1,033	)		11,746
U.S. Treasury securities																	—			—		(1,083	)		9,209		(1,083	)		9,209
Mortgage-backed securities of government agencies		(626	)		15,424		(32,340	)		174,488		(32,966	)		189,912		(356	)		8,080		(40,978	)		168,233		(41,334	)		176,313
State and political subdivisions		(4	)		410		(240	)		1,911		(244	)		2,321		(21	)		393		(372	)		1,771		(393	)		2,164
Total impaired securities	$	(1,174	)	$	37,124	$	(48,303	)	$	309,090	$	(49,477	)	$	346,214
Total securities with unrealized losses																$	(692	)	$	23,665	$	(58,478	)	$	308,936	$	(59,170	)	$	332,601
December 31, 2022
Available-for-sale
U.S. Treasury securities	$	(798	)	$	17,405	$	(171	)	$	4,820	$	(969	)	$	22,225	$	(798	)	$	17,405	$	(171	)	$	4,820	$	(969	)	$	22,225
U.S. Government agencies		—			—		(1,369	)		12,630		(1,369	)		12,630		—			—		(1,369	)		12,630		(1,369	)		12,630
Mortgage-backed securities of government agencies		(1,046	)		16,188		(7,813	)		44,519		(8,859	)		60,707		(1,046	)		16,188		(7,813	)		44,519		(8,859	)		60,707
Asset-backed securities of government agencies		—			—		(15	)		618		(15	)		618		—			—		(15	)		618		(15	)		618
State and political subdivisions		(189	)		9,079		(796	)		9,848		(985	)		18,927		(189	)		9,079		(796	)		9,848		(985	)		18,927
Corporate bonds		(1,165	)		13,502		(1,346	)		12,727		(2,511	)		26,229		(1,165	)		13,502		(1,346	)		12,727		(2,511	)		26,229
Held-to-maturity															—
U.S. Treasury Securities		—			—		(1,136	)		11,617		(1,136	)		11,617
U.S. Treasury securities																	—			—		(1,136	)		11,617		(1,136	)		11,617
Mortgage-backed securities of government agencies		(9,733	)		79,325		(24,318	)		118,692		(34,051	)		198,017		(9,733	)		79,325		(24,318	)		118,692		(34,051	)		198,017
State and political subdivisions		—			—		(261	)		1,903		(261	)		1,903		—			—		(261	)		1,903		(261	)		1,903
Total temporarily impaired securities	$	(12,931	)	$	135,499	$	(37,225	)	$	217,374	$	(50,156	)	$	352,873
Total securities with unrealized losses																$	(12,931	)	$	135,499	$	(37,225	)	$	217,374	$	(50,156	)	$	352,873

~~There were~~ ~~204~~ ~~securities in an unrealized loss position on June 30, 2023,~~ ~~163~~ of which were in a continuous loss position for twelve (12) months or more. At least quarterly, the Company conducts a comprehensive security-level impairment assessment on the available-for-sale securities. Management believes the Company will fully recover the cost of these securities. It does not intend to sell these securities and likely will not be required to sell them before the anticipated recovery of the remaining amortized cost basis, which may be maturity. As a result, management concluded that these securities were not at a credit loss on June 30, 2023 and were not other than temporarily impaired on December 31, 2022, respectively.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

Note 2 – SECURITIES (continued)

There were 203 securities in an unrealized loss position on September 30, 2023, 183 of which were in a continuous loss position for twelve (12) months or more. Each quarter the Company conducts a comprehensive security-level impairment assessment on the securities portfolio. Management believes the Company will fully recover the cost of these securities. Unrealized losses on the Company’s fixed-rate debt securities are a result of interest rate increases. U.S. Treasury securities and investments in securities of U.S. government sponsored agency bonds comprise $100 million of total AFS securities. The remaining $45 million of non-agency debt securities is made up of Corporate Bonds and debt securities to State and Political Subdivisions. For non-agency debt securities, the Company verified the current credit ratings remain above investment grade. Non-rated debt securities total $5 million. Annually, management reviews the credit profile of each non-rated issue and assesses whether any impairment to the contractually obligated cash flow is likely to occur. Based on these reviews, management has concluded the underlying creditworthiness for each security remains sufficient to maintain required payment obligations and, therefore, no allowance for credit losses has been recorded. Management believes the value will recover as the securities approach maturity or market interest rates change.

The Bank monitors the credit quality of held-to-maturity debt securities primarily through utilizing their credit rating. The Bank monitors the credit rating on a quarterly basis. There are no nonperforming held-to-maturity securities. As of ~~June~~September 30, 2023, no ACL was required for any held-to-maturity security. The majority of the securities are explicitly or implicitly guaranteed by the United States government, and any estimate of expected credit losses would be insignificant to the Bank. The following table summarizes the amortized cost of held-to maturity debt securities at ~~June~~September 30, 2023, aggregated by credit quality indicator:


(Dollars in thousands)	U.S. Treasury securities		Mortgage- backed securities of government agencies		State and political subdivisions		U.S. Treasury securities		Mortgage- backed securities of government agencies		State and political subdivisions
June 30, 2023
September 30, 2023
Credit rating:
AAA / AA / A	$	12,779	$	222,878	$	2,565	$	10,292	$	217,656	$	2,557
BBB / BB / B		—		—		—		—		—		—
Lower than B		—		—		—		—		—		—
Non-rated		—		—		—		—		—		—
Total	$	12,779	$	222,878	$	2,565	$	10,292	$	217,656	$	2,557

NOTE 3 – LOANS

The composition of net loans receivable as of ~~June~~September 30, 2023 and December 31, 2022:


(Dollars in thousands)	June 30, 2023			September 30, 2023
Commercial and industrial	$	146,567		$	143,227
Commercial real estate		166,579			188,910
Commercial lessors of buildings		85,062			78,520
Construction		46,022			44,446
Consumer mortgage		161,963			167,419
Home equity line of credit		41,464			41,093
Consumer installment		10,584			11,197
Consumer indirect		6,289			6,168
Total loans		664,530			680,980
Allowance for credit losses		(6,559	)		(6,691	)
Deferred loan costs, net		75
Deferred loan fees, net					(31	)
Net Loans	$	658,046		$	674,258


(Dollars in thousands)	December 31, 2022
Commercial and industrial	$	129,343
Commercial real estate		231,785
Residential real estate		194,125
Construction & land development		55,318
Consumer		16,387
Total loans		626,958
Allowance for loan losses		(6,838	)
Deferred loan costs, net		213
Total Loans *	$	620,333

* See Note 1 for reclassification of balances due to the adoption of ASC 326.

Loan Origination/Risk Management

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of ~~Risk.~~risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and non-performing and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. The Company’s management examines current and occasionally projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. The cash flows of borrowers; however, may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable, inventory, and equipment, and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – LOANS (CONTINUED)

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts, and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single industry. Management monitors and evaluates commercial real estate loans based on collateral, geography, and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied.

With respect to loans to developers and builders that are secured by non-owner-occupied properties, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Construction and land development loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate.

Construction and land development loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property, or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions, and the availability of long-term financing.

The Company originates consumer loans utilizing a judgmental underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by line and staff personnel. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, mitigates risk.

The Company maintains an independent credit department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Loans serviced for others approximated $~~133.8~~132.2 and $137.5 million on ~~June~~September 30, 2023 and December 31, 2022, respectively.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – LOANS (CONTINUED)

Concentrations of Credit

Nearly all the Company’s lending activity occurs within the state of Ohio, including the four counties of Holmes, Stark, Tuscarawas and Wayne, as well as other markets. The majority of the Company’s loan portfolio consists of commercial and commercial real estate loans. Credit concentrations, including commitments, as determined using North American Industry Classification Codes (NAICS), to the two largest industries compared to total loans on ~~June~~September 30, 2023, included $~~69.1~~62.9 million, or 109%, of total loans to lessors of non-residential buildings, and $~~35.4~~39.6 million, or 56%, of total loans to ~~other~~manufacturers of animal food. These loans are generally secured by real property and equipment, with repayment expected from operational cash flow. Credit evaluation is based on a review of cash flow coverage of principal, interest payments, and the adequacy of the collateral received.

Allowance for Credit Losses

The following table details activity in the allowance for credit losses ("ACL") by portfolio segment for the three and ~~six~~nine months ended ~~June~~September 30, 2023. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

For the three ~~and six month periods~~months ended in September 2023, the ~~increase~~decrease in the provision for commercial and industrial loans primarily relates to the ~~increase~~recovery of prior loan charge-offs, as well as the decrease in substandard loan balances in this loan category. The remaining provision changes for the quarter are primarily a result of changes in loan ~~volume. The change~~volume in ~~provision for commercial lessors of buildings relates to~~each loan category.

For the ~~increase~~nine month period in ~~loans graded special mention. The~~2023, the decrease in provision for commercial real estate loans is due to the payoff of one larger loan relationship with a specific allocation. The increase in the provision for commercial lessors of buildings relates to the increase in loans graded special mention in this category. All other changes during the nine month period are related to loan volume changes.


(Dollars in thousands)	Beginning Balance		Impact of Adopting ASC 326			Charge-offs			Recoveries		Provisions (Reductions)			Ending Balance		Beginning Balance		Impact of Adopting ASC 326			Charge-offs			Recoveries		Provisions (Recovery)			Ending Balance
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023
Commercial and industrial	$	1,821	$	—		$	—		$	9	$	289		$	2,119	$	2,119	$	—		$	—		$	147	$	(303	)	$	1,963
Commercial real estate		2,236		—			—			—		(354	)		1,882		1,882		—			—			8		239			2,129
Commercial lessors of buildings		965		—			—			—		272			1,237		1,237		—			—			—		(11	)		1,226
Construction		271		—			—			—		12			283		283		—			—			—		(28	)		255
Consumer mortgage		693		—			—			1		20			714		714		—			—			—		61			775
Home equity line of credit		186		—			—			—		(8	)		178		178		—			—			—		9			187
Consumer installment		47		—			(15	)		5		15			52		52		—			(8	)		—		13			57
Consumer indirect		88		—			—			10		(4	)		94		94		—			(35	)		7		33			99
Unallocated		—		—			—			—		—			—		—		—			—			—		—			—
	$	6,307	$	—		$	(15	)	$	25	$	242		$	6,559	$	6,559	$	—		$	(43	)	$	162	$	13		$	6,691

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023
Commercial and industrial	$	1,110	$	658		$	—		$	19	$	332		$	2,119	$	1,110	$	658		$	—		$	166	$	29		$	1,963
Commercial real estate		2,760		(541	)		—			1		(338	)		1,882		2,760		(541	)		—			9		(99	)		2,129
Commercial lessors of buildings		—		974			—			—		263			1,237		—		974			—			—		252			1,226
Construction		803		(515	)		—			—		(5	)		283		803		(515	)		—			—		(33	)		255
Consumer mortgage		1,268		(580	)		—			1		25			714		1,268		(580	)		—			1		86			775
Home equity line of credit		—		201			—			—		(23	)		178		—		201			—			—		(14	)		187
Consumer installment		233		(183	)		(23	)		5		20			52		233		(183	)		(31	)		12		26			57
Consumer indirect		—		91			(31	)		34		—			94		—		91			(66	)		34		40			99
Unallocated		664		(664	)		—			—		—			—		664		(664	)		—			—		—			—
	$	6,838	$	(559	)	$	(54	)	$	60	$	274		$	6,559	$	6,838	$	(559	)	$	(97	)	$	222	$	287		$	6,691

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – LOANS (CONTINUED)

Allowance for Loan Losses

The following tables detail activity in the allowance for loan losses by portfolio segment for the three and ~~six~~nine months ended ~~June~~September 30, 2022.


(Dollars in thousands)	Commercial and industrial			Commercial Real Estate			Residential Real Estate		Construction & Land Development			Consumer			Unallocated			Total			Commercial and industrial			Commercial Real Estate			Residential Real Estate		Construction & Land Development			Consumer			Unallocated		Total
Three Months Ended June 30, 2022
Three Months Ended September 30, 2022
Beginning balance	$	1,169		$	2,550		$	1,039	$	1,534		$	382		$	631		$	7,305		$	1,213		$	2,422		$	1,177	$	1,607		$	395		$	454	$	7,268
(Recovery of) provision for loan losses		50			(129	)		138		(239	)		12			(177	)		(345	)		45			(298	)		111		(331	)		(137	)		360		(250	)
Charge-offs		(8	)		—			—		—			(3	)					(11	)		(13	)		(12	)		—		—			(4	)				(29	)
Recoveries		2			1			—		312			4						319			4			—			1		—			14					19
Net (charge-offs) recoveries		(6	)		1			—		312			1						308			(9	)		(12	)		1		—			10					(10	)
Ending balance	$	1,213		$	2,422		$	1,177	$	1,607		$	395		$	454		$	7,268		$	1,249		$	2,112		$	1,289	$	1,276		$	268		$	814	$	7,008
Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022
Beginning balance	$	1,240		$	2,838		$	992	$	1,380		$	421		$	747		$	7,618		$	1,240		$	2,838		$	992	$	1,380		$	421		$	747	$	7,618
(Recovery of) provision for loan losses		(15	)		(417	)		184		(85	)		(19	)		(293	)		(645	)		30			(715	)		295		(416	)		(156	)		67		(895	)
Charge-offs		(18	)		—			—		—			(24	)					(42	)		(31	)		(12	)		—		—			(28	)				(71	)
Recoveries		6			1			1		312			17						337			10			1			2		312			31					356
Net (charge-offs) recoveries		(12	)		1			1		312			(7	)					295			(21	)		(11	)		2		312			3					285
Ending balance	$	1,213		$	2,422		$	1,177	$	1,607		$	395		$	454		$	7,268		$	1,249		$	2,112		$	1,289	$	1,276		$	268		$	814	$	7,008

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

The performance and credit quality of the loan portfolio is also monitored by analyzing the age of the loans receivable as determined by the length of time a recorded payment is past due. The following table presents the classes of the loan portfolio summarized by the past-due status.

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information, and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis includes all commercial loans before origination and an annual review of those with an outstanding commitment greater than $500 thousand. The Company uses the following definitions for risk ratings:

Pass. Loans classified as pass (Cash Secured, Exceptional, Acceptable, Monitor, or Pass Watch) may exhibit a wide array of characteristics but at a minimum represent an acceptable risk to the Bank. Borrowers in this rating may have leveraged but acceptable balance sheet positions, satisfactory asset quality, stable to favorable sales and earnings trends, acceptable liquidity and adequate cash flow. Loans are considered fully collectible and require an average amount of administration. While generally adhering to credit policy, these loans may exhibit occasional exceptions that do not result in undue risk to the Bank. Borrowers are generally capable of absorbing setbacks, financial and otherwise, without the threat of failure.

Special Mention. Assets assigned a Special Mention grade are not considered classified assets but are considered criticized. These assets exhibit potential weaknesses that, deserve management’s close attention. If left uncorrected, those potential weaknesses may result in deterioration of the repayment prospects for the asset or in the Bank’s credit position at some future date. Loans in this rating warrant special attention but have not yet reached the point of concern for loss. These assets have deteriorated sufficiently to the point they would have difficulty refinancing elsewhere. Similarly, purchasers of the business would not be eligible for bank financing unless they represent a significantly stronger credit risk.

Substandard. Loans classified as substandard are inadequately protected by the current sound worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the institution will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently known facts, conditions, and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above-described process are considered to be pass rated loans. Based on the most recent analysis performed, the following tables present the recorded investment in non-homogeneous loans by internal risk rating system as of ~~June~~September 30, 2023 and December 31, 2022:


	Term Loans Amortized Costs Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term				Term Loans Amortized Costs Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior						Total		2023		2022		2021		2020		2019		Prior						Total
June 30, 2023
September 30, 2023
Commercial and industrial:
Pass	$	12,814	$	26,906	$	15,664	$	6,793	$	4,679	$	9,043	$	60,060	$	—	$	135,959	$	21,665	$	27,127	$	13,867	$	5,840	$	4,057	$	8,540	$	45,546	$	—	$	126,642
Special mention		—		458		—		—		192		46		31		—		727		16		19		651		178		90		352		7,248		—		8,554
Substandard		50		2,768		480		3,072		823		2,589		99		—		9,881		294		570		483		901		60		1,230		4,493		—		8,031
Doubtful		—		—		—		—		—		—				—		—		—		—		—		—		—		—		—		—		—
Total	$	12,864	$	30,132	$	16,144	$	9,865	$	5,694	$	11,678	$	60,190	$	—	$	146,567	$	21,975	$	27,716	$	15,001	$	6,919	$	4,207	$	10,122	$	57,287	$	—	$	143,227
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial real estate:
Pass	$	16,239	$	24,425	$	48,720	$	13,410	$	19,408	$	28,739	$	2,992	$	—	$	153,933	$	20,649	$	36,877	$	57,330	$	14,776	$	19,773	$	24,035	$	695	$	—	$	174,135
Special Mention		—		469		658		404		—		—		—		—		1,531		213		465		652		398		—		2,688		—		—		4,416
Substandard		—		—		918		636		475		9,086		—		—		11,115		—		—		902		—		471		8,986		—		—		10,359
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	16,239	$	24,894	$	50,296	$	14,450	$	19,883	$	37,825	$	2,992	$	—	$	166,579	$	20,862	$	37,342	$	58,884	$	15,174	$	20,244	$	35,709	$	695	$	—	$	188,910
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Commercial lessors of buildings:
Pass	$	2,489	$	25,968	$	25,480	$	8,268	$	4,392	$	10,517	$	1,747	$	—	$	78,861	$	13,317	$	22,938	$	15,821	$	6,516	$	3,594	$	9,202	$	381	$	—	$	71,769
Special Mention		—		456		1,528		—		3,674		—		—		—		5,658		—		446		1,513		—		3,627		—		—		—		5,586
Substandard		—		—		—		371		—		172		—		—		543		—		—		—		999		—		166		—		—		1,165
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	2,489	$	26,424	$	27,008	$	8,639	$	8,066	$	10,689	$	1,747	$	—	$	85,062	$	13,317	$	23,384	$	17,334	$	7,515	$	7,221	$	9,368	$	381	$	—	$	78,520
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction:
Pass	$	7,539	$	28,689	$	663	$	948	$	376	$	306	$	—	$	—	$	38,521	$	16,348	$	19,495	$	599	$	275	$	288	$	269	$	—	$	—	$	37,274
Special Mention		—		—		—		—		—		—		—		—		—		—		289		6		635		—		—		—		—		930
Substandard		—		—		—		—		—		—		—		—		—		—		—		—		33		80		—		—		—		113
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	7,539	$	28,689	$	663	$	948	$	376	$	306	$	—	$	—	$	38,521	$	16,348	$	19,784	$	605	$	943	$	368	$	269	$	—	$	—	$	38,317
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Total
Pass	$	39,081	$	105,988	$	90,527	$	29,419	$	28,855	$	48,605	$	64,799	$	—	$	407,274	$	71,979	$	106,437	$	87,617	$	27,407	$	27,712	$	42,046	$	46,622	$	—	$	409,820
Special Mention		—		1,383		2,186		404		3,866		46		31		—		7,916		229		1,219		2,822		1,211		3,717		3,040		7,248		—		19,486
Substandard		50		2,768		1,398		4,079		1,298		11,847		99		—		21,539		294		570		1,385		1,933		611		10,382		4,493		—		19,668
Doubtful		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	39,131	$	110,139	$	94,111	$	33,902	$	34,019	$	60,498	$	64,929	$	—	$	436,729	$	72,502	$	108,226	$	91,824	$	30,551	$	32,040	$	55,468	$	58,363	$	—	$	448,974


(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
December 31, 2022
Commercial and industrial	$	119,353	$	282	$	7,927	$	—	$	1,781	$	129,343
Commercial real estate		220,414		485		8,352		—		2,534		231,785
Construction & land development		40,640		6,655		—		—		8,023		55,318
Total	$	380,407	$	7,422	$	16,279	$	—	$	12,338	$	416,446

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 3 – LOANS (CONTINUED)

The Company monitors the credit risk profile by payment activity for the loan classes listed below. Loans past due 90 days or more and loans on nonaccrual status are considered nonperforming. The following table presents the amortized cost in residential consumer loans based on payment activity:


	Term Loans Amortized Costs Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term				Term Loans Amortized Costs Basis by Origination Year												Revolving Loans Amortized Cost Basis		Revolving Loans Converted to Term
(Dollars in thousands)	2023		2022		2021		2020		2019		Prior						Total		2023		2022		2021		2020		2019		Prior						Total
June 30, 2023
September 30, 2023
Consumer mortgage:
Performing	$	12,124	$	34,356	$	38,887	$	34,347	$	9,242	$	32,943	$	—	$	—	$	161,899	$	19,430	$	35,098	$	38,086	$	33,815	$	9,080	$	31,800	$	—	$	—	$	167,309
Nonperforming		—		—		—		—		—		64		—		—		64		—		—		—		—		—		110		—		—		110
Total	$	12,124	$	34,356	$	38,887	$	34,347	$	9,242	$	33,007	$	—	$	—	$	161,963	$	19,430	$	35,098	$	38,086	$	33,815	$	9,080	$	31,910	$	—	$	—	$	167,419
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Construction
Performing	$	2,042	$	3,665	$	277	$	1,270	$	124	$	123	$	—	$	—	$	7,501	$	3,422	$	1,736	$	270	$	576	$	83	$	42	$	—	$	—	$	6,129
Nonperforming		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—		—
Total	$	2,042	$	3,665	$	277	$	1,270	$	124	$	123	$	—	$	—	$	7,501	$	3,422	$	1,736	$	270	$	576	$	83	$	42	$	—	$	—	$	6,129
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Home equity line of credit:
Performing	$	—	$	—	$	—	$	—	$	—	$	—	$	41,403	$	51	$	41,454	$	—	$	—	$	—	$	—	$	—	$	—	$	41,046	$	47	$	41,093
Nonperforming		—		—		—		—		—		—		10		—		10		—		—		—		—		—		—		—		—		—
Total	$	—	$	—	$	—	$	—	$	—	$	—	$	41,413	$	51	$	41,464	$	—	$	—	$	—	$	—	$	—	$	—	$	41,046	$	47	$	41,093
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—	$	—
Consumer installment:
Performing	$	3,634	$	4,101	$	1,536	$	719	$	259	$	266	$	63	$	—	$	10,578	$	5,410	$	3,476	$	1,187	$	603	$	211	$	208	$	74	$	—	$	11,169
Nonperforming		—		—		6		—		—		—		—		—		6		—		1		17		—		10		—		—		—		28
Total	$	3,634	$	4,101	$	1,542	$	719	$	259	$	266	$	63	$	—	$	10,584	$	5,410	$	3,477	$	1,204	$	603	$	221	$	208	$	74	$	—	$	11,197
YTD gross charge-offs	$	—	$	9	$	9	$	3	$	1	$	1	$	—	$	—	$	23	$	1	$	11	$	10	$	3	$	2	$	4	$	—	$	—	$	31
Consumer indirect:
Performing	$	601	$	1,256	$	651	$	621	$	668	$	2,420	$	—	$	—	$	6,217	$	760	$	1,219	$	636	$	589	$	643	$	2,295	$	—	$	—	$	6,142
Nonperforming		—		—		—		—		21		51		—		—		72		—		—		—		—		21		5		—		—		26
Total	$	601	$	1,256	$	651	$	621	$	689	$	2,471	$	—	$	—	$	6,289	$	760	$	1,219	$	636	$	589	$	664	$	2,300	$	—	$	—	$	6,168
YTD gross charge-offs	$	—	$	—	$	—	$	—	$	—	$	31	$	—	$	—	$	31	$	—	$	—	$	—	$	—	$	—	$	66	$	—	$	—	$	66
Total
Performing	$	18,401	$	43,378	$	41,351	$	36,957	$	10,293	$	35,752	$	41,466	$	51	$	227,649	$	29,022	$	41,529	$	40,179	$	35,583	$	10,017	$	34,345	$	41,120	$	47	$	231,842
Nonperforming		—		—		6		—		21		115		10		—		152		—		1		17		—		31		115		—		—		164
Total	$	18,401	$	43,378	$	41,357	$	36,957	$	10,314	$	35,867	$	41,476	$	51	$	227,801	$	29,022	$	41,530	$	40,196	$	35,583	$	10,048	$	34,460	$	41,120	$	47	$	232,006

Consumer mortgages are substantially secured by one to four family owner occupied properties and consumer indirect loans are substantially secured by recreational vehicles. All nonperforming consumer loans are evaluated when placed on nonaccrual status and may be charged down based on the fair value less cost to sell if that value is lower than the outstanding balance.

Occasionally, the Bank modifies loans to borrowers in financial distress by providing – principal forgiveness, term extension, an other-than-insignificant payment delay or interest rate reduction. When principal forgiveness is provided, the amount of forgiveness is charged-off against the allowance for credit losses.

In some cases, the Bank may provide multiple types of concessions on one loan. Typically, one type of concession, such as a term extension, is granted initially. If the borrower continues to experience financial difficulty, another concession, such as principal forgiveness, may be granted.

There were no modifications of loans to borrowers in financial distress completed during the ~~six~~nine months ended ~~June~~September 30, 2023.

The following impaired loan information relates to required disclosures under the previous incurred loan loss methodology and are only presented with prior period information.

NOTE 5 – FAIR VALUE MEASUREMENTS

The Company provides disclosures about assets and liabilities carried at fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. The three broad levels of the fair value hierarchy are described below:


Level I:	Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.
Level II:	Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by corroborated or other means. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability.
Level III:	Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 5 – FAIR VALUE MEASUREMENTS (CONTINUED)

The following table presents the assets reported on the Consolidated Balance Sheets at their fair value on a recurring basis as of ~~June~~September 30, 2023 and December 31, 2022 by level within the fair value hierarchy. No liabilities are carried at fair value. Financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Equity securities with readily determinable values and U.S. Treasury Notes are valued at the closing price reported on the active market on which the individual securities are traded. Obligations of U.S. government agencies, mortgage-backed securities, asset-backed securities, obligations of states and political subdivisions and corporate bonds are valued at observable market data for similar assets. Equity securities without readily determinable values are carried at amortized cost adjusted for impairment and observable price changes and are not included in the table below.


(Dollars in thousands)	Level I		Level II		Level III		Total		Level I		Level II		Level III		Total
June 30, 2023
September 30, 2023
Assets:
Securities available-for-sale
U.S. Treasury securities	$	22,325	$	—	$	—	$	22,325	$	22,458	$	—	$	—	$	22,458
U.S. Government agencies		—		12,736		—		12,736		—		12,848		—		12,848
Mortgage-backed securities of government agencies		—		64,633		—		64,633		—		64,451		—		64,451
Asset-backed securities of government agencies		—		548		—		548		—		552		—		552
State and political subdivisions		—		19,358		—		19,358		—		18,799		—		18,799
Corporate bonds		—		25,757		—		25,757		—		26,222		—		26,222
Total available-for-sale securities	$	22,325	$	123,032	$	—	$	145,357	$	22,458	$	122,872	$	—	$	145,330
Equity securities	$	211	$	—	$	—	$	211	$	211	$	—	$	—	$	211

December 31, 2022
Assets:
Securities available-for-sale
U.S. Treasury securities	$	22,225	$	—	$	—	$	22,225	$	22,225	$	—	$	—	$	22,225
U.S. Government agencies		—		12,630		—		12,630		—		12,630		—		12,630
Mortgage-backed securities of government agencies		—		68,890		—		68,890		—		68,890		—		68,890
Asset-backed securities of government agencies		—		618		—		618		—		618		—		618
State and political subdivisions		—		19,477		—		19,477		—		19,477		—		19,477
Corporate bonds		—		26,229		—		26,229		—		26,229		—		26,229
Total available-for-sale securities	$	22,225	$	127,844	$	—	$	150,069	$	22,225	$	127,844	$	—	$	150,069
Equity securities	$	198	$	—	$	—	$	198	$	198	$	—	$	—	$	198

There were no assets ~~reported at fair value and recorded~~measured on a nonrecurring basis on ~~June~~September 30, 2023, and December 31, 2022.

NOTE 6 – FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair values of recognized financial instruments carried at amortized cost as of ~~June~~September 30, 2023 and December 31, 2022 are as follows:


(Dollars in thousands)	Carrying Value		Level I		Level II		Level III		Fair Value		Carrying Value		Level I		Level II		Level III		Fair Value
June 30, 2023
September 30, 2023
Financial assets
Securities held-to-maturity	$	238,222	$	11,746	$	192,233	$	—	$	203,979	$	230,505	$	9,209	$	178,486	$	—	$	187,695
Loans held for sale		184		187		—		—		187		—		—		—		—		—
Net loans		658,046		—		—		626,195		626,195		674,258		—		—		640,671		640,671
Mortgage servicing rights		607		—		—		607		607		601		—		—		601		601
Financial liabilities
Deposits	$	1,021,671	$	862,034	$	—	$	160,725	$	1,022,759	$	1,018,075	$	840,637	$	—	$	179,008	$	1,019,645
Other borrowings		1,862		—		—		1,750		1,750		1,808		—		—		1,687		1,687

December 31, 2022
Financial assets
Securities held-to-maturity	$	247,401	$	11,617	$	200,337	$	—	$	211,954	$	247,401	$	11,617	$	200,337	$	—	$	211,954
Loans held for sale		52		55		—		—		55		52		55		—		—		55
Net loans		620,333		—		—		600,720		600,720		620,333		—		—		600,720		600,720
Mortgage servicing rights		621		—		—		621		621		621		—		—		621		621
Financial liabilities
Deposits	$	1,023,417	$	905,335	$	—	$	114,478	$	1,019,813	$	1,023,417	$	905,335	$	—	$	114,478	$	1,019,813
Other borrowings		2,461		—		—		2,321		2,321		2,461		—		—		2,321		2,321

Other financial instruments carried at amortized cost include cash and cash equivalents, restricted stock, bank-owned life insurance, accrued interest receivable, short-term borrowings, and accrued interest payable, all of which have a Level I fair value that approximates their carrying value. The Company also has unrecognized financial instruments on ~~June~~September 30, 2023 and December 31, 2022. These financial instruments relate to commitments to extend credit and letters of credit. The aggregate contract amount of such financial instruments was approximately $~~304~~301 million on ~~June~~September 30, 2023 and $268 million on December 31, 2022. Such amounts are also considered to be the fair values.

The fair value estimates of financial instruments are made at a specific point in time based on relevant market information. Since no ready market exists for a significant portion of the financial instruments, fair value estimates are largely based on judgments after considering such factors as future expected credit losses, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

Note 7- ACCUMULATED OTHER COMPREHENSIVE LOSS

The following table presents the changes in accumulated other comprehensive loss by component net of tax for the three and ~~six~~nine months ended ~~June~~September 30, 2023 and 2022:


(Dollars in thousands)	Pretax			Tax Effect			After-tax			Pretax			Tax Effect			After-tax
Three Months Ended June 30, 2023
Three Months Ended September 30, 2023
Balance, beginning of period	$	(14,981	)	$	3,146		$	(11,835	)	$	(16,856	)	$	3,540		$	(13,316	)
Unrealized holding loss on available-for-sale securities arising during the period		(1,923	)		404			(1,519	)		(1,127	)		237			(890	)
Amortization of held-to-maturity discount resulting from transfer		48			(10	)		38			50			(11	)		40
Total other comprehensive loss		(1,875	)		394			(1,481	)		(1,077	)		226			(851	)
Balance, end of period	$	(16,856	)	$	3,540		$	(13,316	)	$	(17,933	)	$	3,766		$	(14,167	)

Six Months Ended June 30, 2023
Nine Months Ended September 30, 2023
Balance, beginning of period	$	(16,354	)	$	3,435		$	(12,919	)	$	(16,354	)	$	3,435		$	(12,919	)
Unrealized holding loss on available-for-sale securities arising during the period		(596	)		125			(471	)		(1,722	)		361			(1,361	)
Amortization of held-to-maturity discount resulting from transfer		94			(20	)		74			143			(30	)		113
Total other comprehensive loss		(502	)		105			(397	)		(1,579	)		331			(1,248	)
Balance, end of period	$	(16,856	)	$	3,540		$	(13,316	)	$	(17,933	)	$	3,766		$	(14,167	)

Three Months ended June 30, 2022
Three Months ended September 30, 2022
Balance, beginning of period	$	(9,131	)	$	1,918		$	(7,213	)	$	(12,663	)	$	2,660		$	(10,003	)
Unrealized holding loss on available-for-sale securities arising during the period		(3,607	)		757			(2,850	)		(5,189	)		1,090			(4,099	)
Amortization of held-to-maturity discount resulting from transfer		75			(15	)		60			64			(14	)		50
Total other comprehensive loss		(3,532	)		742			(2,790	)		(5,125	)		1,076			(4,049	)
Balance, end of period	$	(12,663	)	$	2,660		$	(10,003	)	$	(17,788	)	$	3,736		$	(14,052	)

Six Months Ended June 30, 2022
Nine Months Ended September 30, 2022
Balance, beginning of period	$	(2,691	)	$	566		$	(2,125	)	$	(2,691	)	$	566		$	(2,125	)
Unrealized holding loss on available-for-sale securities arising during the period		(10,145	)		2,130			(8,015	)		(15,334	)		3,220			(12,114	)
Amortization of held-to-maturity discount resulting from transfer		173			(36	)		137			237			(50	)		187
Total other comprehensive loss		(9,972	)		2,094			(7,878	)		(15,097	)		3,170			(11,927	)
Balance, end of period	$	(12,663	)	$	2,660		$	(10,003	)	$	(17,788	)	$	3,736		$	(14,052	)

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

ITEM 2 - MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The following management’s discussion and analysis focuses on the consolidated financial condition of the Company on ~~June~~September 30, 2023 as compared to December 31, 2022, and the consolidated results of operations for the three and ~~six~~nine months ended ~~June~~September 30, 2023 compared to the same periods in 2022. The purpose of this discussion is to provide the reader with a more thorough understanding of the Consolidated Financial Statements. This discussion should be read in conjunction with the interim condensed Consolidated Financial Statements and related footnotes contained in Part I, Item 1 of this Quarterly Report.

Certain statements contained in this Quarterly Report are not historical facts but rather are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipates”, “plans”, “expects”, “believes”, and similar expressions as they relate to the Company or its management are intended to identify forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. The Company’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, governmental policies and regulations, and rapidly changing technology affecting financial services. Other factors not currently anticipated may also materially and adversely affect the Company’s results of operations, cash flows, and financial position. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in this report are reasonable, the reader should not place undue reliance on any forward-looking statement.

The Company does not undertake, and specifically disclaims any obligation, to publicly revise any forward-looking statements to reflect events or circumstances after the date of such statements or to reflect the occurrence of anticipated or unanticipated events, except as may be required by applicable law.

Total assets decreased $2.5 million to ~~$1.15~~$1.157 billion at ~~June~~September 30, 2023 compared to ~~$1.16~~$1.159 billion December 31, 2022. During the ~~six~~nine months ended ~~June~~September 30, 2023, securities decreased ~~$16~~$24 million, net loans increased ~~$38~~$54 million, and cash and cash equivalents decreased ~~$26~~$37 million. Deposits and short-term borrowings decreased $6$7 million.

Net loans increased ~~$38~~$54 million, or ~~14%~~9%, as ~~construction loans decreased $8 million, or 14%, and~~ residential real estate loans increased ~~$12~~$18 million, or 8%12%, from December 31, 2022. Commercial and commercial real estate loans increased ~~$36~~$39 million, or ~~14%~~10% compared to December 31, 2022. Consumer refinance activity slowed significantly on mortgage loans, home purchase activity remained stable despite limited inventory, and home equity line balances decreased by $3 million. Residential mortgage loan originations for the ~~six~~nine months ended ~~June~~September 30, 2023 totaled ~~$27~~$40 million, a decrease from ~~$44~~$61 million in originations during the ~~six~~nine months ended ~~June~~September 30, 2022. As interest rates continued to rise in 2023, more variable rate residential mortgage loans were originated for the portfolio. Originations sold into the secondary market were $2$3 million and $7$8 million, respectively during the ~~six~~nine months ended ~~June~~September 30, 2023 and ~~June~~September 30, 2022. The Bank originates and sells primarily fixed rate thirty-year mortgages into the secondary market.

The allowance for credit losses decreased ~~$709~~$317 thousand from the year ago quarter to ~~$6.6~~$6.7 million. The Company adopted CECL on January 1, 2023. Net recoveries were $6$119 thousand, or an annualized ~~0.00%~~(0.07)% of average loans, in the current ~~six-month~~nine-month period compared to net ~~recoveries~~charge-offs of ~~$295~~$10 thousand, or ~~0.10%~~0.01% of average loans in the year-ago ~~six-month~~nine-month period. At ~~June~~September 30, 2023, the allowance for credit losses to total loans was ~~0.99%~~0.98%. We believe the allowance level is appropriate given the low level of problem loans and composition of the overall loan portfolio in the current economic environment.

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

Nonperforming loans ~~decreased $2~~increased $4 thousand to ~~$254~~$260 thousand, or 0.04%, of total loans from $256 thousand, or 0.04% of total loans, on December 31, 2022. For the ~~six~~nine months ended ~~June~~September 30, 2023, ~~$60~~$125 thousand in loans were placed on nonaccrual status, ~~$70~~$99 thousand in paydowns were received, and $2$34 thousand in personal loans were charged-off due to non-payment.

The ratio of gross loans to deposits was ~~65.1%~~66.9% at ~~June~~September 30, 2023, compared to 61.3% at December 31, 2022.

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 ~~$49.5~~$59.2 million within the available-for-sale and held-to-maturity portfolios as of ~~June~~September 30, 2023, 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 ~~June~~September 30, 2023, are considered temporary and no allowance for credit loss is necessary.

The weighted average life of total debt securities was ~~5.30~~5.22 years at ~~June~~September 30, 2023 as compared to 5.57 years at December 31, 2022. If interest rates declined 100 basis points, the weighted average life was estimated to fall to ~~5.20~~5.17 years at ~~June~~September 30, 2023 and 5.10 years at December 31, 2022. If interest rates rose 100 basis points the weighted average life would be expected to increase to ~~5.31~~5.22 years at ~~June~~September 30, 2023 and 6.01 years at December 31, 2022.

Deposits decreased $2$5 million, or less than 1%, from December 31, 2022 with noninterest-bearing deposits decreasing approximately ~~$35~~$50 million, or ~~10%~~14%, and interest-bearing deposit accounts increasing approximately ~~$33~~$45 million, or 5%7%. Total deposits as of ~~June~~September 30, 2023 are $1.02 billion,or 3%1%, ~~greater than June~~below September 30, 2022 deposit balances. On a year over year comparison, decreases were recognized in noninterest-bearing demand deposits of ~~$13~~$38 million, savings of $28 million and ~~savings~~money market accounts of $18 million. Increases were recognized in interest bearing demand ~~of $13 million, money market~~ accounts of $5$11 million, and time deposits of ~~$42~~$61 million. ~~Deposit growth has stabilized with~~Deposits have declined somewhat as customers ~~transfering~~use excess liquid funds and move funds into time certificates of deposit to take advantage of the increased interest rates. The estimated amount of uninsured deposits was ~~$272~~$267 million, $267 million, and ~~$262~~$286 million as of ~~June~~September 30, 2023, December 31, 2022, and ~~June~~September 30, 2022, respectively.

Short-term borrowings consisting of overnight repurchase agreements with retail customers decreased $4$2 million, or ~~12%~~6%, to ~~$29~~$31 million at ~~June~~September 30, 2023 as compared to December 31, 2022 and other borrowings decreased ~~$599~~$653 thousand as the Company repaid FHLB advances.

Total shareholders’ equity amounted to ~~$100~~$101 million, or ~~8.7%~~8.8%, of total assets at ~~June~~September 30, 2023, an increase of $4$5 million, or 4%6%, from $96 million December 31, 2022.The increase in shareholders’ equity during the ~~six~~nine months ended ~~June~~September 30, 2023 was due to net income of ~~$7.6~~$11.1 million, accumulated other comprehensive loss (“AOCL”) of ~~$397 thousand,~~$1.2 million, less cash dividends of ~~$2.0~~$3.0 million, and treasury stock repurchase of ~~$1.0~~$1.4 million. An increase of U.S. Treasury rates during the ~~six~~nine months ended ~~June~~September 30, 2023 caused the AOCL to increase as AFS securities are marked to fair market value. As interest rates increase, the fair value of AFS fixed-rate securities decrease with a corresponding net of tax increase recorded in the AOCL portion of equity. This remaining 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 ~~June~~September 30, ~~2023.~~2023 as shown in the Capital Resources section of this report.

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

For the quarters ended ~~June~~September 30, 2023 and 2022, the Company recorded net income of ~~$3.6~~$3.5 million and ~~$3.2~~$3.7 million and ~~$1.36~~$1.30 and ~~$1.18~~$1.35 per share, respectively. The ~~$435~~$169 thousand ~~increase~~decrease in net income for the period was primarily the result of ~~a $1.4 million~~the provision for credit losses of $177 thousand compared to the recovery for credit losses in the prior year period of $250 thousand. The increase of $277 thousand in net interest income and $30 thousand increase in noninterest income was offset by an increase in noninterest expenses of ~~$275 thousand, and a decrease of $49 thousand in noninterest income.~~$89 thousand. The ~~total provision for credit losses was $140 thousand in 2023 compared to a recovery of $345 thousand for the three-month period in 2022, and the~~ federal income tax provision ~~increased $120~~decreased $40 thousand. Return on average assets and return on average equity were ~~1.27%~~1.19% and ~~14.62%~~13.63%, respectively, for the three-month period of 2023, compared to ~~1.13%~~1.25% and ~~13.73%~~15.24%, respectively for the same quarter in 2022.


	For the Three Months Ended June 30,																For the Three Months Ended September 30,
	2023								2022								2023								2022
(Dollars in thousands)	Average balance1		Interest			Average rate2			Average balance1		Interest			Average rate2			Average balance1		Interest			Average rate2			Average balance1		Interest			Average rate2
ASSETS
Interest-earning deposits	$	34,601	$	444			5.15	%	$	99,122	$	203			0.82	%	$	38,669	$	531			5.45	%	$	101,460	$	586			2.29	%
Taxable securities		368,959		1,945			2.11			374,246		1,660			1.78			360,868		1,910			2.10			373,290		1,780			1.89
Tax-exempt securities 4		22,187		129			2.33			24,184		137			2.27			21,859		130			2.36			24,627		139			2.24
Loans 3,4		660,004		8,717			5.30			574,824		6,039			4.21			675,283		9,181			5.39			594,820		6,687			4.46
Total interest-earning assets		1,085,751		11,235			4.15	%		1,072,376		8,039			3.01	%		1,096,679		11,752			4.25	%		1,094,197		9,192			3.33	%
Noninterest-earning assets		65,652								63,942								65,350								65,326
TOTAL ASSETS	$	1,151,403							$	1,136,318							$	1,162,029							$	1,159,523

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand deposits	$	248,775	$	616			0.99	%	$	237,950	$	56			0.09	%	$	256,223	$	689			1.07	%	$	243,343	$	151			0.25	%
Savings deposits		299,957		590			0.79			307,234		75			0.10			292,706		662			0.90			323,033		183			0.22
Time deposits		141,001		922			2.62			118,232		213			0.72			169,766		1,420			3.32			115,899		225			0.77
Borrowed funds		31,765		80			1.01			41,663		29			0.28			35,618		110			1.23			37,479		37			0.39
Total interest-bearing liabilities		721,498		2,208			1.23	%		705,079		373			0.21	%		754,313		2,881			1.52	%		719,754		596			0.33	%
Noninterest-bearing demand deposits		324,898								333,692								301,440								340,576
Other liabilities		5,049								3,797								4,982								4,150
Shareholders' Equity		99,958								93,750								101,294								95,043
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,151,403							$	1,136,318							$	1,162,029							$	1,159,523
Taxable equivalent net interest income, (Non-GAAP)			$	9,027							$	7,666							$	8,871							$	8,596
Tax equivalent adjustment 4				(33	)							(36	)							(34	)							(36	)
Net interest income, (GAAP)			$	8,994							$	7,630							$	8,837							$	8,560
Net interest margin, (GAAP)							3.32	%							2.86	%							3.20	%							3.10	%
Tax equivalent adjustment 4							0.01								0.01								0.01								0.02
Net interest margin-taxable equivalent, (Non-GAAP)							3.33	%							2.87	%							3.21	%							3.12	%
Taxable equivalent net interest spread							2.92	%							2.80	%							2.73	%							3.00	%

2 Average rates have been computed based on the amortized cost of the corresponding asset or liability.

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.

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

Interest income for the quarter ended ~~June~~September 30, 2023, was ~~$11.2~~$11.7 million representing a ~~$3.2~~$2.6 million increase, or ~~40%~~22%, compared to the same period in 2022. This increase was primarily due to increased volume and rates on loans and increased rates on interest-earning deposits, and taxable securities partially offset by the volume decrease in interest-earning deposits in the comparable period. Average interest-earning deposit rates increased ~~433 bps~~316 basis points while loan rates increased ~~109~~93 basis points, and taxable securities interest rates rose ~~33 bps~~21 basis points for the quarter ended ~~June~~September 30, 2023 as compared to the same period in ~~2022~~.2022. The Federal Reserve raised managed interest rates 76 times and ~~350 bps~~225 basis points during the 1 year period. Interest expense for the quarter ended ~~June~~September 30, 2023 was ~~$2.2~~$2.9 million, an increase of ~~$1.8~~$2.3 million, or ~~492%~~383%, from the same quarter in 2022. The increase in interest expense occurred primarily due to the increase in interest rates on all deposit types as well as an increase in volume of demand and time deposit accounts for the quarter ended ~~June~~September 30, 2023.

For the quarter ended ~~June~~September 30, 2023, with improving credit quality and minimal loan charge-offs, the bank recognized net recoveries of ~~$10~~$119 thousand, compared to ~~$308~~$10 thousand net ~~recoveries~~charge-offs for the same quarter in 2022. The provision for credit losses for loans in the current quarter of ~~$242~~$13 thousand, compared to a credit provision of ~~$345~~$250 thousand in the ~~second~~third quarter 2022, reflects loan growth in 2023. The company recorded ~~$102~~$164 thousand credit provision for off-balance credit exposure in 2023 compared to a $0 provision in the ~~second~~third quarter of 2022. This ~~decrease~~increase results from ~~a decline~~an increase primarily in commercial construction loans in 2023 compared to 2022. Economic indicators reflect a leveling off in residential real estate prices and low unemployment. The provision for credit losses is determined based on management’s calculation of the adequacy of the allowance for credit losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offs and current economic trends.

Noninterest income for the quarter ended ~~June~~September 30, 2023, was $1.7 million, ~~a decrease~~an increase of ~~$49~~$30 thousand, or 3%2%, compared to the same quarter in 2022. The gain on the sale of mortgage loans into the secondary market decreased by ~~$91~~$2 thousand, or ~~62%~~4%, for the quarter ended ~~June~~September 30, 2023as fewer loans were sold into the secondary market due to decreasing demand for mortgage refinancing as interest rates increased and inventories of homes available for sale declined. Fees from trust and brokerage services amounted to ~~$252~~$259 thousand for the ~~second~~third quarter 2023, ~~a decrease~~an increase of $1$43 thousand, or ~~less than 1%~~20%, as compared to the same quarter in 2022. Service charges on deposit accounts increased $11 thousand, or 4%3%, compared to the same quarter in 2022,primarily from increased customer fees, partially offset by a decline in customer overdraft ~~fees.~~fees.. Debit card interchange income decreased ~~$10~~$5 thousand, or 2%less than 1%, with less fees generated from usage in the ~~second~~third quarter 2023. Credit card fee income ~~increased $1~~decreased $4 thousand, or ~~less than 1%, as improvements to the card program have resulted in increased customer usage.~~ 2%.Earnings on bank owned life insurance increased $4$9 thousand, or 2%5%, for the ~~second~~third quarter 2023.

Noninterest expenses for the quarter ended ~~June~~September 30, 2023 increased ~~$275~~$89 thousand, or 5%2%, compared to the ~~second~~third quarter 2022. Salaries and employee benefits ~~decreased $23~~increased $230 thousand, or ~~less than 1%~~7%, a result ~~the capitalization of~~increases in headcount and base salary ~~and benefits due to increased loan originations~~ compared to ~~second~~third quarter 2022. Occupancy and equipment expense increased $8$24 thousand, or 3%5%, in 2023 over the ~~second~~third quarter 2022,, primarily due to increases in ~~property insurance.~~rooftop air conditioner repair. Software expense increased ~~$95~~$11 thousand due toadditional software purchases over ~~second~~third quarter 2022. Professional and director fees ~~increased $56~~decreased $189 thousand, or ~~17%~~34%, for the quarter ended ~~June~~September 30, 2023 as compared to the ~~second~~third quarter 2022, primarily ~~due~~reflecting a consulting fee in 2022 to ~~an increase in audit and outside consulting fees.~~renegotiate the core data processing software contract. Marketingand public relations expense ~~increased $26~~decreased $17 thousand, or ~~24%~~12%. Data line and phone expense ~~decreased $14~~increased $2 thousand, or ~~22%~~4%, ~~with~~as renegotiated ~~contracts.~~contracts have stabilized. Debit card expense decreased ~~$16~~$22 thousand or 9%11%. FDIC insurance expense increased ~~$103~~$38 thousand, or ~~137%~~41%, with the increase in insurance rates. Federal income tax expense ~~increased $120~~decreased $40 thousand, or ~~16%~~4%, for the quarter ended ~~June~~September 30, 2023 as compared to the ~~second~~third quarter 2022. The provision for income taxes was ~~$894~~$850 thousand (effective rate of ~~19.7%~~18.2%) for the quarter ended ~~June~~September 30, 2023, compared to ~~$774~~$890 thousand (effective rate of ~~19.4%~~19.6%) for the same quarter ended ~~2022.~~2022.

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

For the ~~six~~nine months ended ~~June~~September 30, 2023, and 2022, the Company recorded net income of ~~$7.6~~$11.1 million and ~~$5.9~~$9.6 million and ~~$2.82~~$4.12 and ~~$2.17~~$3.52 per share, respectively. The ~~$1.7~~$1.5 million increase in net income for the ~~six-month~~nine-month period was primarily the result of an increase in net interest income of ~~$3.5~~$3.7 million, which was partially offset by an increase in the total provision for credit losses of ~~$754 thousand,~~$1.2 million, an increase in noninterest expenses of ~~$526~~$615 thousand, and a reduction in noninterest income of ~~$63~~$33 thousand. The federal income tax provision was ~~$453~~$413 thousand higher during the ~~six-month~~nine-month period in 2023. Return on average assets and return on average equity were ~~1.33%~~1.28% and ~~15.49%~~14.85%, respectively, for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~1.05%~~1.12% and ~~12.48%~~13.41%, respectively for the same period in 2022.


	For the Six Months Ended June 30,																For the Nine Months Ended September 30,
	2023								2022								2023								2022
(Dollars in thousands)	Average balance1		Interest			Average rate2			Average balance1		Interest			Average rate2			Average balance1		Interest			Average rate2			Average balance1		Interest			Average rate2
ASSETS
Interest-earning deposits	$	41,087	$	989			4.85	%	$	128,478	$	277			0.43	%	$	40,272	$	1,520			5.05	%	$	119,373	$	863			0.97	%
Taxable securities		372,394		3,957			2.14			354,411		2,941			1.67			368,510		5,867			2.13			360,774		4,721			1.75
Tax-exempt securities 4		22,140		258			2.35			24,745		277			2.26			22,045		387			2.35			24,705		416			2.25
Loans 3,4		648,760		16,692			5.19			567,671		11,823			4.20			657,698		25,874			5.26			576,821		18,510			4.29
Total interest-earning assets		1,084,381		21,896			4.07	%		1,075,305		15,318			2.87	%		1,088,525		33,648			4.13	%		1,081,673		24,510			3.03	%
Noninterest-earning assets		64,859								62,147								65,024								63,217
TOTAL ASSETS	$	1,149,240							$	1,137,452							$	1,153,549							$	1,144,890

LIABILITIES AND SHAREHOLDERS' EQUITY
Interest-bearing demand deposits	$	243,112	$	1,121			0.93	%	$	237,816	$	106			0.09	%	$	247,530	$	1,810			0.98	%	$	239,679	$	257			0.14	%
Savings deposits		308,609		1,121			0.73			308,159		142			0.09			303,250		1,784			0.79			313,172		325			0.14
Time deposits		131,717		1,470			2.25			119,067		445			0.75			144,539		2,890			2.67			117,999		670			0.76
Borrowed funds		33,614		158			0.95			42,838		57			0.27			34,289		267			1.04			41,032		94			0.31
Total interest-bearing liabilities		717,052		3,870			1.09	%		707,880		750			0.21	%		729,608		6,751			1.24	%		711,882		1,346			0.25	%
Noninterest-bearing demand deposits		328,254								330,228								319,218								333,715
Other liabilities		5,288								3,857								5,185								3,956
Shareholders' Equity		98,646								95,487								99,538								95,337
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$	1,149,240							$	1,137,452							$	1,153,549							$	1,144,890
Taxable equivalent net interest income, (Non-GAAP)			$	18,026							$	14,568							$	26,897							$	23,164
Tax equivalent adjustment 4				(67	)							(73	)							(101	)							(109	)
Net interest income, (GAAP)			$	17,959							$	14,495							$	26,796							$	23,055
Net interest margin, (GAAP)							3.34	%							2.72	%							3.29	%							2.85	%
Tax equivalent adjustment 4							0.01								0.01								0.01								0.01
Net interest margin-taxable equivalent, (Non-GAAP)							3.35	%							2.73	%							3.30	%							2.86	%
Taxable equivalent net interest spread							2.98	%							2.66	%							2.89	%							2.78	%

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

Interest income for the ~~six~~nine months ended ~~June~~September 30, 2023, was ~~$21.8~~$33.5 million representing a ~~$6.6~~$9.1 million increase, or ~~43%~~37%, compared to the same period in 2022. This increase was primarily due to volume and yield increases on loans and taxable securities along with rate increases on ~~overnight~~interest-earning deposits in other banks for the period ended ~~June~~September 30, 2023, as compared to the same period in 2022. Interest expense for the ~~six~~nine months ended ~~June~~September 30, 2023, was ~~$3.9~~$6.8 million, an increase of ~~$3.1~~$5.4 million, or ~~416%~~402%, from the same period in 2022. The increase in interest expense occurred primarily due to an increase in rates on all interest-bearing liabilities for the ~~six~~nine months ended ~~June~~September 30, ~~2023.~~2023, as well as a shift in balances into higher rate time deposits.

For the ~~six~~nine months ended ~~June~~September 30, 2023, the provision for credit losses was ~~$274~~$287 thousand, compared to a credit reversal of ~~$645~~$895 thousand for the same period in 2022. For more discussion see Results of Operations, three months. The provision for loan losses is determined based on management’s calculation of the adequacy of the allowance for credit losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offs and current economic trends.

Noninterest income for the ~~six~~nine months ended ~~June~~September 30, 2023, was ~~$3.4~~$5.1 million, a decrease of ~~$63~~$33 thousand, or 2%less than 1%, compared to the same period in 2022. The gain on the sale of mortgage loans to the secondary market decreased ~~$206~~$208 thousand to ~~$59~~$106 thousand for the ~~six~~nine months ended ~~June~~September 30, 2023, as increases in interest rates slowed mortgage loan refinancing. Service charges on deposit accounts increased ~~$38~~$49 thousand, or 7%6%, compared to the same period in 2022primarily from ~~increases in overdraft fees, as well as~~ increases in business service charges on deposit ~~accounts.~~accounts and customer nsf fees. Credit card fee income increased ~~$23~~$19 thousand, or 7%4% with growth in business credit card customers and interchange ~~income~~. income. Debit card interchange income increased ~~$16~~$11 thousand, or 2%less than 1%. Earnings on bank owned life insurance policies increased $7$16 thousand for the period. Fees from trust and brokerage services ~~declined $7~~increased $36 thousand for the period.

Noninterest expenses for the ~~six~~nine months ended ~~June~~September 30, 2023, increased ~~$526~~$615 thousand, or 5%4%, compared to the same period in 2022. Salaries and employee benefits increased ~~$116~~$346 thousand, or 2%4%, a result of increased salaries and medical benefits. Software increased $172 thousand, or 16%, with investment in enhanced reporting software. FDIC assessment rose $129 thousand, or 51%, a result of increasing rates set by the FDIC in 2002 for 2023. Marketing and public relations expense increased ~~$38~~$21 thousand, or ~~17%~~6%, with marketing, brand recognition initiatives, and community support in the company’s market slowly increasing in volume due to increasing opportunities presenting after previous cancellations due to COVID-19. Occupancy and equipment expenses increased $3$27 thousand over the same period in 2022 with an increase in maintenance ~~and insurance~~ expense. Professional and director fees ~~increased $101~~decreased $88 thousand for the ~~six~~nine months ended ~~June~~September 30, 2023, as compared to the same period in 2022 as an IT consulting fee did not recur in 2023 which was partially offset with ~~increased accounting and professional fees related to the~~increases in audit function and CECL.

Federal income tax expense increased ~~$453~~$413 thousand, or ~~32%~~18%, for the ~~six~~nine months ended ~~June~~September 30, 2023, as compared to the same period in 2022. The provision for income taxes was ~~$1.9~~$2.7 million (effective rate of ~~19.8%~~19.7%) for the ~~six~~nine months ended ~~June~~September 30, 2023, compared to ~~$1.4~~$2.3 million (effective rate of ~~19.3%~~19.4%) for the same period ended 2022.

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

The Company maintained a strong capital position with tangible common equity to tangible assets of ~~8.3%~~8.4% at ~~June~~September 30, 2023 compared with 7.9% at December 31, 2022.

Consistent with the Board of Director’s commitment to public confidence and safe and sound banking operations, capital targets and minimum risk-based capital ratios for CSB were established to maintain excess capital to well-capitalized standards. To be considered well-capitalized, an institution must have a total risk-based capital ratio of at least 10%, a tier 1 capital ratio of at least 8%, a leverage capital ratio of at least 5%, a common equity tier 1 (“CET1”) ratio of at least 6.5% and must not be subject to any order or directive requiring the institution to improve its capital level. An adequately capitalized institution has a total risk-based capital ratio of at least 8%, a tier 1 capital ratio of at least 6%, a CET1 ratio of at least 4.5%, and a leverage ratio of at least 4%.

Failure to meet specified minimum capital requirements could result in regulatory actions by the Federal Reserve or Ohio Division of Financial Institutions that could have a material effect on the Company’s financial condition or results of operations. Management believes there were no material changes to capital resources as presented in the Company’s Annual Report on Form 10-K for the year ended December 31, 2022. As of ~~June~~September 30, 2023, the Company and the Bank met all capital adequacy requirements to which they were subject.

Liquidity refers to the Company’s ability to generate sufficient cash to fund current loan demand, meet deposit withdrawals, pay operating expenses, and meet other obligations. Liquidity is monitored by the Company’s Asset Liability Committee. Other sources of liquidity include, but are not limited to, purchases of federal funds, advances from the FHLB, adjustments of interest rates to attract deposits, brokered deposits, and borrowing at the Federal Reserve discount window. Management believes that its sources of liquidity are adequate to meet cash flow obligations for the foreseeable future.

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

The Company does not have any off-balance sheet arrangements (as such term is defined in applicable Securities and Exchange Commission (the “Commission”) rules) that are reasonably likely to have a current or future material effect on our financial condition, results of operations, liquidity, capital expenditures, or capital resources.

Earnings per share is computed based on the weighted average number of shares of common stock outstanding during each year. The company currently maintains a simple capital structure, thus, there are no dilutive effects on earnings per share.

The weighted average number of common shares outstanding for earnings per share computations was as follows:

By ~~June~~September 2023, Ohio's unemployment rate ~~declined to~~had stabilized at 3.4%. The bank based in Holmes County is reporting an unemployment rate of ~~3.0%~~2.5% in ~~June~~September 2023. Of the counties within the bank's footprint, ~~Tuscarawas~~Stark County reported the highest unemployment rate at ~~4.1%~~3.5% in ~~June.~~September. Tuscarawas and Wayne ~~County~~Counties posted a ~~low~~lower unemployment ~~rate~~rates of ~~2.9%~~3.2% and 2.7% in ~~June~~September 2023. Many jobs within the Bank's market footprint continue to go unfilled. The rate of inflation, ~~slowed~~increased to ~~3.1%~~3.7% on a year over year basis at ~~June~~September 2023, following a high base rate in 2022. The rate continues to be above the Federal Reserve target rate of 2%, but has fallen from 8.5% in March 2022. The Federal Reserve continues to raise interest rates in an effort to stabilize prices with maximum employment. Credit quality in the Bank's loan portfolio is good, however risks to the economy remain with higher prices for goods and labor.

Management performs a quarterly analysis of the Company’s interest rate risk over a twenty-four-month horizon. The analysis includes two balance sheet models, one based on a static balance sheet and one on a dynamic balance sheet with projected growth in assets and liabilities. All balance sheet positions, and interest rate projections are currently within the Company’s board-approved policy for both the twelve- month and twenty-four-month periods.

The following table presents an analysis of the estimated sensitivity of the Company’s annual net interest income to sudden and sustained -400 through +400 basis point changes, in 100 basis point increments, in market interest rates at ~~June~~September 30, 2023 and December 31, 2022. The net interest income reflected is for the first twelve-month period of the modeled twenty-four-month horizon. The underlying balance sheet for illustrative purposes is dynamic with projected growth in assets and liabilities.


June 30, 2023
September 30, 2023													September 30, 2023
(Dollars in thousands)	(Dollars in thousands)												(Dollars in thousands)
Change in Interest Rates (basis points)	Change in Interest Rates (basis points)	Net Interest Income		Dollar Change			Percentage Change				Board Policy Limits		Change in Interest Rates (basis points)	Net Interest Income		Dollar Change			Percentage Change				Board Policy Limits
+400	+400	$	37,003	$	124			0.3		%	± 25	%	+400	$	37,686	$	537			1.4		%	± 25	%
+300	+300		37,020		141			0.4			± 15		+300		37,640		491			1.3			± 15
+200	+200		36,977		98			0.3			± 10		+200		37,495		346			0.9			± 10
+100	+100		36,921		42			0.1			± 5		+100		37,324		175			0.5			± 5
0	0		36,879		—			—					0		37,149		—			—
-100	-100		36,764		(115	)		(0.3	)		± 5		-100		36,701		(448	)		(1.2	)		± 5
-200	-200		36,407		(472	)		(1.3	)		± 10		-200		35,696		(1,453	)		(3.9	)		± 10
-300	-300		36,024		(855	)		(2.3	)		± 15		-300		34,841		(2,308	)		(6.2	)		± 15
-400	-400		35,514		(1,365	)		(3.7	)		± 25		-400		33,673		(3,476	)		(9.4	)		± 25

December 31, 2022	December 31, 2022												December 31, 2022
+ 400	+ 400	$	38,810	$	1,090			2.9		%	± 25	%	+ 400	$	38,810	$	1,090			2.9		%	± 25	%
+ 300	+ 300		38,581		861			2.3			± 15		+ 300		38,581		861			2.3			± 15
+ 200	+ 200		38,302		582			1.5			± 10		+ 200		38,302		582			1.5			± 10
+ 100	+ 100		38,003		283			0.8			± 5		+ 100		38,003		283			0.8			± 5
	0		37,720		—			—					0		37,720		—			—
– 100	– 100		37,368		(352	)		(0.9	)		± 5		– 100		37,368		(352	)		(0.9	)		± 5
– 200	– 200		36,869		(851	)		(2.3	)		± 10		– 200		36,869		(851	)		(2.3	)		± 10
– 300	– 300		35,973		(1,747	)		(4.6	)		± 15		– 300		35,973		(1,747	)		(4.6	)		± 15
– 400	– 400		35,519		(2,201	)		(5.8	)		± 25		– 400		35,519		(2,201	)		(5.8	)		± 25

With the participation of the Company’s management, including its Chief Executive Officer and Chief Financial Officer, the Company has evaluated the effectiveness of its disclosure controls and procedures (as defined in Rule 13a-15(e) under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) as of the end of the period covered by this Quarterly Report on Form 10-Q. Based upon that evaluation, the Company’s Chief Executive Officer and Chief Financial Officer have concluded that:

There were no changes during the period covered by this Quarterly Report on Form 10-Q in the Company’s internal control over financial reporting (as defined in Rule 13a-15(f) under the Exchange Act) that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

In the opinion of management there are no outstanding legal proceedings that are reasonably likely to have a material adverse effect on the company’s financial condition or results of operations.

On March 2, 2021, CSB Bancorp, Inc. filed Form 8-K with the Commission announcing that its Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to 5% of the Company’s common shares or 137,117 of the Company’s outstanding shares. Repurchases may be made from time to time as market and business conditions warrant, in the open market, through block purchases, and in negotiated private transactions. ~~{10b5-1}~~

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.


Ohio	34-1687530
( State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)
91 North Clay Street, P.O. Box 232 Millersburg, OH	44654
(Address of principal executive offices)	(Zip Code)


	Part I - Financial Information
		Page
ITEM 1 –	FINANCIAL STATEMENTS (Unaudited)	3
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income (Loss)	5
	Consolidated Statements of Changes in Shareholders' Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
ITEM 2 –	MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS	30
ITEM 3 –	QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK	38
ITEM 4 –	CONTROLS AND PROCEDURES	39

	Part II - Other Information
ITEM 1 –	Legal Proceedings	40
ITEM 1A –	Risk Factors	40
ITEM 2 –	Unregistered Sales of Equity Securities and Use of Proceeds	40
ITEM 3 –	Defaults upon Senior Securities	40
ITEM 4 –	Mine Safety Disclosures	40
ITEM 5 –	Other Information	40
ITEM 6 –	Exhibits	41
	Signatures	42


	Six Months Ended June 30,						Nine Months Ended September 30,
(Dollars in thousands)	2023			2022			2023			2022
NET CASH FROM OPERATING ACTIVITIES	$	6,194		$	4,889		$	8,079		$	8,894
CASH FLOWS FROM INVESTING ACTIVITIES
Securities:
Proceeds from repayments, available-for-sale		4,350			8,541			7,088			11,293
Proceeds from repayments, held-to-maturity		9,118			11,255			16,798			16,901
Purchases, available-for-sale		(492	)		(31,904	)		(4,458	)		(38,868	)
Purchases, held-to-maturity		—			(84,759	)		—			(94,542	)
Purchases, equity securities		—			(131	)		—			(131	)
Redemption of FHLB stock		1,823			—			1,869			1,183
Loan originations, net		(37,565	)		(33,231	)		(53,895	)		(61,004	)
Property, equipment, and software acquisitions		(234	)		(174	)		(308	)		(217	)
Net cash used in investing activities		(23,000	)		(130,403	)		(32,906	)		(165,385	)
CASH FLOWS FROM FINANCING ACTIVITIES
Net decrease in deposits		(1,746	)		(9,634	)
Net (decrease) increase in deposits								(5,342	)		26,527
Net decrease in short-term borrowings		(4,030	)		(2,645	)		(1,816	)		(2,331	)
Repayment of other borrowings		(599	)		(813	)		(653	)		(879	)
Cash dividends paid		(1,983	)		(1,685	)		(2,999	)		(2,579	)
Purchase of treasury shares		(1,030	)		—			(1,374	)		(388	)
Net cash used in financing activities		(9,388	)		(14,777	)
Net cash (used in) provided by financing activities								(12,184	)		20,350
NET DECREASE IN CASH AND CASH EQUIVALENTS		(26,194	)		(140,291	)		(37,011	)		(136,141	)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD		86,420			243,657			86,420			243,657
CASH AND CASH EQUIVALENTS AT END OF PERIOD	$	60,226		$	103,366		$	49,409		$	107,516
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest	$	3,778		$	756		$	6,584		$	1,351
Income taxes		2,650			1,050			3,365			1,760


	Capital Ratios						Capital Ratios
	June 30, 2023			December 31, 2022			September 30, 2023			December 31, 2022
Total Capital To Risk Weighted Assets Ratio
Consolidated		15.9	%		16.0	%		16.1	%		16.0	%
Bank		15.8			15.9			16.0			15.9

Tier 1 Capital To Risk Weighted Assets Ratio
Consolidated		15.0			15.1			15.1			15.1
Bank		14.9			14.9			15.1			14.9

Common Equity Tier 1 Capital To Risk Weighted Assets
Consolidated		15.0			15.1			15.1			15.1
Bank		14.9			14.9			15.1			14.9

Tier 1 Leverage Ratio
Consolidated		9.4			8.8			9.5			8.8
Bank		9.3			8.7			9.4			8.7


(Dollars in thousands)	June 30, 2023			December 31, 2022			Change			September 30, 2023			December 31, 2022			Change
Cash and cash equivalents	$	60,226		$	86,420		$	(26,194	)	$	49,409		$	86,420		$	(37,011	)
Available from FHLB		131,044			122,062			8,982			124,045			122,062			1,983
Unpledged AFS securities at fair market value		118,275			134,401			(16,126	)		123,340			134,401			(11,061	)
	$	309,545		$	342,883		$	(33,338	)	$	296,794		$	342,883		$	(46,089	)
Net deposits and short-term liabilities	$	1,023,729		$	1,041,016		$	(17,287	)	$	1,027,414		$	1,041,016		$	(13,602	)
Liquidity ratio		30.2	%		32.9	%		(2.7	)		28.9	%		32.9	%		(4.0	)
Minimum board approved liquidity ratio		20.0	%		20.0	%					20.0	%		20.0	%


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


(Dollars in thousands)	Current		30-60 Days Past Due		61-89 Days Past Due		90 Days + Past Due		Total Past Due		Total Loans		Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Total Past Due		Total Loans
June 30, 2023
September 30, 2023
Commercial and industrial	$	146,547	$	20	$	—	$	—	$	20	$	146,567	$	143,026	$	184	$	17	$	—	$	201	$	143,227
Commercial real estate		166,579		—		—		—		—		166,579		188,576		334		—		—		334		188,910
Commercial lessors of buildings		85,062		—		—		—		—		85,062		78,520		—		—		—		—		78,520
Construction		46,022		—		—		—		—		46,022		44,446		—		—		—		—		44,446
Consumer mortgage		161,657		264		42		—		306		161,963		166,980		394		45		—		439		167,419
Home equity line of credit		41,229		225		—		10		235		41,464		40,874		219		—		—		219		41,093
Consumer installment		10,417		150		17		—		167		10,584		11,044		121		20		12		153		11,197
Consumer indirect		6,289		—		—		—		—		6,289		6,168		—		—		—		—		6,168
Total Loans	$	663,802	$	659	$	59	$	10	$	728	$	664,530	$	679,634	$	1,252	$	82	$	12	$	1,346	$	680,980


(Dollars in thousands)	Nonaccrual with no ACL		Nonaccrual with ACL		Total Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Total Nonperforming		Nonaccrual with no ACL		Nonaccrual with ACL		Total Nonaccrual		Loans Past Due Over 90 Days Still Accruing		Total Nonperforming
June 30, 2023
September 30, 2023
Commercial and industrial	$	19	$	—	$	19	$	—	$	19	$	17	$	—	$	17	$	—	$	17
Commercial real estate		83		—		83		—		83		79		—		79		—		79
Commercial lessors of buildings		—		—		—		—		—		—		—		—		—		—
Construction		—		—		—		—		—		—		—		—		—		—
Consumer mortgage		64		—		64		—		64		110		—		110		—		110
Home equity line of credit		—		—		—		10		10		—		—		—		—		—
Consumer installment		6		—		6		—		6		16		—		16		12		28
Consumer indirect		72		—		72		—		72		26		—		26		—		26
Total Loans	$	244	$	—	$	244	$	10	$	254	$	248	$	—	$	248	$	12	$	260


			Accruing Loans
(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Non- Accrual		Total Past Due and Non- Accrual		Total Loans
December 31, 2022
Commercial and industrial	$	129,270	$	70	$	3	$	—	$	—	$	73	$	129,343
Commercial real estate		231,693		—		—		—		92		92		231,785
Residential real estate		193,794		95		137		—		99		331		194,125
Construction & land development		55,286		32		—		—		—		32		55,318
Consumer		16,091		103		128		—		65		296		16,387
Total Loans	$	626,134	$	300	$	268	$	—	$	256	$	824	$	626,958


(Dollars in thousands)	Unpaid Principal Balance		Recorded Investment with no Allowance		Recorded Investment with Allowance		Total recorded investment1		Related Allowance
December 31, 2022
Commercial and industrial	$	123	$	124	$	—	$	124	$	—
Commercial real estate		117		92		20		112		—
Residential real estate		733		166		518		683		—
Construction & land development		—		—		—		—		—
Consumer		127		6		121		127		4
Total impaired loans	$	1,101	$	387	$	659	$	1,046	$	4


	Remaining Contractual Maturity Overnight and Continuous				Remaining Contractual Maturity Overnight and Continuous
	June 30,		December 31,		September 30,		December 31,
(Dollars in thousands)	2023		2022		2023		2022
Securities of U.S. Government Agencies and mortgage-backed securities of government agencies pledged, fair value	$	28,691	$	32,775	$	30,911	$	32,755
Repurchase agreements		28,520		32,550		30,734		32,550


	Three Months Ended				Six Months Ended				Three Months Ended				Nine Months Ended
	June 30,				June 30,				September 30,				September 30,
(Dollars in thousands, except per share data)	2023		2022		2023		2022		2023		2022		2023		2022
Net income	$	3,644	$	3,209	$	7,578	$	5,910	$	3,481	$	3,650	$	11,059	$	9,560
Weighted average common shares outstanding		2,680,526		2,718,024		2,686,382		2,718,024		2,675,967		2,712,686		2,682,872		2,716,225
Earnings per share, basic and diluted		1.36		1.18		2.82		2.17		1.30		1.35		4.12		3.52


Period	Total Number of Common Shares Purchased		Average Price Paid per Common Share			Total Number of Shares Purchased as Part of Publicly Announced Authorization		Maximum Number of Remaining Shares that May be Purchased as Part of Publicly Announced Authorization
April 1, 2023 - April 30, 2023		—		—			—		75,393
May 1, 2023 - May 31, 2023		—		—			—		75,393
June 1, 2023 - June 30, 2023		300		36.65			300		75,093
Total for quarter		300		36.65	—		300		75,093


Exhibit Number		Description of Document

3.1		Amended Articles of Incorporation of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Quarterly Report on Form 10-Q filed August 6, 2004, Exhibit 3.1, film number 04958544).
3.1.1		Amended form of Article Fourth of Amended Articles of Incorporation, as effective April 9, 1998 (incorporated by reference to registrant’s Annual Report on Form 10-K filed on March 30, 1999, Exhibit 3.1.1, film number 99579179).
3.2		Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to the Registrant’s Form 10-SB).

3.2.1		Amended Article VIII of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a filed on March 25, 2009, Appendix A, film number 09703970).
3.2.2		Amended Article II of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form DEF 14a file on March 16, 2021, Appendix A, film number 21747059).
3.2.3		Amended Article III of the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to ~~Regisrant's~~Registrant's Form DEF 14a file on March 16, 2023, Appendix A, film number 23738842).

4.0		Description of Capital Stock (incorporated by reference to registrants Annual Report on Form 10-K filed on March 16, 2020, Exhibit 4.0, film number 20717009).

31.1		Rule 13a-14(a)/15d-14(a) Chief Executive Officer’s Certification.

31.2		Rule 13a-14(a)/15d-14(a) Chief Financial Officer’s Certification.

32.1		Section 1350 Chief Executive Officer’s Certification.

32.2		Section 1350 Chief Financial Officer’s Certification.

101		The following financial statements from the Company's Quarterly Report on Form 10-Q for the quarter ended ~~June~~September 30, 2023, formatted in Inline XBRL: (i) Consolidated Balance Sheets, (ii) Consolidated Statements of Net Loss and Comprehensive Loss , (iii) Consolidated Statements of Stockholders' Equity, (iv) Consolidated Statements of Cash Flows, and (v) Notes to Consolidated Financial Statements, tagged as blocks of text and including detailed tags.

104		Cover Page Interactive Data File (formatted as Inline XBRL and contained in Exhibit 101).


		CSB BANCORP, INC.
		(Registrant)


Date:	~~August 10,~~November 13, 2023	/s/ Eddie L. Steiner
		Eddie L. Steiner
		President
		Chief Executive Officer


Date:	~~August 10,~~November 13, 2023	/s/ Paula J. Meiler
		Paula J. Meiler
		Senior Vice President
		Chief Financial Officer

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