# CSB Bancorp, Inc.: Form 10-Q for the period ended Sep 30, 2016

- Company: [CSB Bancorp, Inc.](/companies/csbb.md) (CIK 880417)
- Form: 10-Q
- Filed: 2016-11-10
- Accepted by EDGAR: Nov 10, 2016, 16:04 ET
- Period: 2016-09-30
- Accession: 0001193125-16-765871
- Inline XBRL: yes
- Main document: https://www.sec.gov/Archives/edgar/data/880417/000119312516765871/d261467d10q.htm
- All documents and exhibits: https://www.sec.gov/Archives/edgar/data/880417/000119312516765871/

## Figures reported in this filing

Standardized XBRL line items for the period ended 2016-09-30.

| Line item | Period | Value | XBRL concept |
| --- | --- | ---: | --- |
| Interest expense | 3 months, 2016-07-01 to 2016-09-30 | $366.0k | us-gaap:InterestExpense |
| Interest expense | 9 months, 2016-01-01 to 2016-09-30 | $1.1m | us-gaap:InterestExpense |
| Income tax | 3 months, 2016-07-01 to 2016-09-30 | $740.0k | us-gaap:IncomeTaxExpenseBenefit |
| Income tax | 9 months, 2016-01-01 to 2016-09-30 | $2.1m | us-gaap:IncomeTaxExpenseBenefit |
| Net income | 3 months, 2016-07-01 to 2016-09-30 | $1.7m | us-gaap:NetIncomeLoss |
| Net income | 9 months, 2016-01-01 to 2016-09-30 | $4.8m | us-gaap:NetIncomeLoss |
| Diluted EPS | 9 months, 2016-01-01 to 2016-09-30 | $1.74 | us-gaap:EarningsPerShareBasicAndDiluted |
| Operating cash flow | 9 months, 2016-01-01 to 2016-09-30 | $6.2m | us-gaap:NetCashProvidedByUsedInOperatingActivitiesContinuingOperations |
| Capital expenditure | 9 months, 2016-01-01 to 2016-09-30 | $1.1m | us-gaap:PaymentsToAcquireProductiveAssets |
| Dividends paid | 9 months, 2016-01-01 to 2016-09-30 | $1.0m | us-gaap:PaymentsOfDividendsCommonStock |
| Total assets | at 2016-09-30 | $654.4m | us-gaap:Assets |
| Total liabilities | at 2016-09-30 | $588.6m | us-gaap:Liabilities |
| Shareholders' equity | at 2016-09-30 | $65.8m | us-gaap:StockholdersEquity |

## Management's discussion and analysis

As filed, 24,508 characters.

The following management’s discussion and analysis focuses on the consolidated financial condition of the Company at September 30, 2016 as compared to December 31, 2015, and the consolidated results of operations for the three and nine month periods ended September 30, 2016 compared to the same periods in 2015. The purpose of this discussion is to provide the reader with a more thorough understanding of the Consolidated Financial Statements. This discussion should be read in conjunction with the interim Consolidated Financial Statements and related footnotes contained in Part I, Item 1 of this Quarterly Report.

### FORWARD-LOOKING STATEMENTS

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

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

### FINANCIAL CONDITION

Total assets were $654 million at September 30, 2016 as compared to $650 million at December 31, 2015. During the nine month period ended September 30, 2016, net loans increased $40 million, funded by decreases in cash and cash and equivalents of $11 million and investments of $26 million. On the liability side, deposits declined by $3 million while repurchase agreements increased by $2 million.

Net loans increased $40 million, or 10%, during the nine months ended September 30, 2016. The increase occurred as demand for both business and consumer loans within the bank’s markets improved. The bank has added lending and operations staff to accommodate the increase in demand. Commercial loans including commercial real estate loans increased $20 million, or 7%, while construction and land development loans increased $3 million, or 20%. Residential real estate loans increased $13 million, or 10%, and consumer loans increased $4 million, or 47% from December 31, 2015. Home purchase activity has increased and consumers continued to refinance their mortgage loans for lower long-term fixed rates. Residential mortgage loan originations for the nine months ended September 30, 2016 and 2015 were $48 million and $35 million, respectively. Originations sold into the secondary market were $6 million during the nine month period ended September 30, 2016 as compared to $10 million during the nine months ended September 30, 2015. The Bank originates and sells primarily fixed-rate thirty year mortgages into the secondary market.

The allowance for loan losses as a percentage of total loans was 1.08% at September 30, 2016 as compared to 1.10% at December 31, 2015. Outstanding loan balances increased 10% to $463 million at September 30, 2016. A provision of $493 thousand, partially offset by net charge-offs of $153 thousand, increased the allowance for loan losses to $5 million at September 30, 2016.

Nonaccrual loans increased during the first nine months of 2016. For the nine months ending September 30, 2016 loans totaling $1.4 million were placed on nonaccrual status, $85 thousand in charge-offs were recognized and pay downs of $303 thousand were received. It is anticipated that collection efforts on several of the non-performing loans should result in repayment of their full carrying value.

*(Dollars in thousands)*

|  | September 30, 2016 | December 31, 2015 | September 30, 2015 |
| --- | ---: | ---: | ---: |
| Non-performing loans | $2,816 | $1,681 | $2,018 |
| Other real estate | 33 | — | — |
| Allowance for loan losses | 5,002 | 4,662 | 4,632 |
| Total loans | 463,211 | 422,871 | 412,974 |
| Allowance: Loans | 1.08% | 1.10% | 1.12% |
| Allowance: Non-performing loans | 1.8x | 2.8x | 2.3x |

The ratio of gross loans to deposits was 89% at September 30, 2016, compared to 81% at December 31, 2015.

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 $241 thousand within the available-for-sale and held-to-maturity portfolios as of September 30, 2016, were primarily the result of customary and expected fluctuations in the bond market and not necessarily the expected cash flows of the individual securities. As a result, all security impairments on September 30, 2016, are considered temporary and no impairment loss relating to these securities has been recognized.

Deposits decreased $3 million, or 1%, from December 31, 2015 with noninterest bearing deposits increasing $9 million and interest-bearing deposit accounts decreasing $12 million. Total deposits as of September 30, 2016 are $17 million greater than September 30, 2015 deposit balances. On a year over year comparison, increases were recognized in noninterest-bearing demand deposits.

Short-term borrowings consisting of overnight repurchase agreements with retail customers increased $2 million to $51 million at September 30, 2016 as compared to December 31, 2015 and other borrowings decreased $1 million as the Company repaid FHLB advances with required monthly amortization.

Total shareholders’ equity amounted to $65.8 million, or 10.0% of total assets, at September 30, 2016, compared to $61.3 million, or 9.4% of total assets, at December 31, 2015. The increase in shareholders’ equity during the nine months ending September 30, 2016 was due to net income of $4.8 million and other comprehensive income of $1.3 million, partially offset by dividends declared of $1.6 million. The Company and the Bank met all regulatory capital requirements at September 30, 2016.

### RESULTS OF OPERATIONS

### Three months ended September 30, 2016 and 2015

For the quarters ended September 30, 2016 and 2015, the Company recorded net income of $1.7 and $1.6 million and $0.61 and $0.57 per share, respectively. The $138 thousand increase in net income for the quarter was primarily the result of a $429 thousand increase in net interest income. The increase was partially offset by an increase in the provision for loan losses of $164 thousand, a decline in noninterest income of $24 thousand and an increase in noninterest expenses of $50 thousand. Return on average assets and return on average equity were 1.03% and 10.29%, respectively, for the three month period of 2016, compared to 0.98% and 10.27%, respectively for the same quarter in 2015.

### Average Balance Sheets and Net Interest Margin Analysis

*(Dollars in thousands)*

| ASSETS | For the three months ended September 30, 2016 Average balance | Average rate | 2015 Average balance | Average rate |
| --- | ---: | ---: | ---: | ---: |
| Interest-earning deposits in other banks | $13,847 | 0.66% | $38,994 | 0.25% |
| Federal funds sold | 690 | 0.52 | 1,041 | 0.23 |
| Taxable securities | 116,220 | 2.17 | 126,103 | 2.15 |
| Tax-exempt securities | 28,933 | 3.51 | 21,599 | 3.93 |
| Loans | 456,865 | 4.40 | 408,069 | 4.49 |
| Total earning assets | 616,555 | 3.84% | 595,806 | 3.69% |
| Other assets | 37,080 |  | 36,733 |  |
| **TOTAL ASSETS** | $653,635 |  | $632,539 |  |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY** |  |  |  |  |
| Interest-bearing demand deposits | $83,699 | 0.04% | $76,679 | 0.03% |
| Savings deposits | 162,561 | 0.07 | 156,698 | 0.07 |
| Time deposits | 115,925 | 0.72 | 125,061 | 0.75 |
| Other borrowed funds | 65,933 | 0.71 | 67,892 | 0.72 |
| Total interest bearing liabilities | 428,118 | 0.34% | 426,330 | 0.37% |
| Non-interest bearing demand deposits | 157,643 |  | 144,076 |  |
| Other liabilities | 2,403 |  | 2,021 |  |
| Shareholders’ Equity | 65,471 |  | 60,112 |  |
| **TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY** | $653,635 |  | $632,539 |  |
| Taxable equivalent net interest spread |  | 3.50% |  | 3.32% |
| Taxable equivalent net interest margin |  | 3.61% |  | 3.43% |

Interest income for the quarter ended September 30, 2016, was $5.9 million representing a $401 thousand increase, or a 7% improvement, compared to the same period in 2015. This increase was primarily due to average loan volume increasing $49 million for the quarter ended September 30, 2016 as compared to the third quarter 2015. Interest expense for the quarter ended September 30, 2016 was $366 thousand, a decrease of $28 thousand, or 7%, from the same period in 2015. The decrease in interest expense occurred due to the decrease in the average balance of time deposits, as well as rate decreases on time deposits and other borrowings for the quarter ended September 30, 2016.

The provision for loan losses for the quarter ended September 30, 2016 was $164, compared to no provision for the same quarter in 2015. The provision for loan losses is determined based on management’s calculation of the adequacy of the allowance for loan losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data, including past charge-offs and current economic trends.

Noninterest income for the quarter ended September 30, 2016, was $1.1 million, a decrease of $24 thousand, or 2%, compared to the same quarter in 2015. Service charges on deposit accounts decreased $14 thousand, or 4%, compared to the same quarter in 2015 primarily from decreases in overdraft fees. Fees from trust and brokerage services increased $15 thousand to $213 thousand for the third quarter 2016 as compared to the same quarter in 2015 due to increased brokerage and trust fee income. The gain on the sale of mortgage loans to the secondary market decreased to $71 thousand for the quarter ending September 30, 2016, from $114 thousand in the same quarter in 2015. The gain in 2015 was greater due to an additional volume of loans sold during the third quarter of 2015 as compared to the third quarter 2016. Debit card interchange income increased $20 thousand, or 8%, with greater fee income in the third quarter of 2016.

Noninterest expenses for the quarter ended September 30, 2016 increased $50 thousand, or 1%, compared to the third quarter of 2015. Salaries and employee benefits increased $97 thousand, or 4%, a result of increases in base salary, medical and other benefits. Professional and director fees increased $48 thousand for the quarter ended September 30, 2016 as compared to the third quarter 2015. The increase resulted from $40 thousand in retained search fees during third quarter 2016 to expand commercial lending. Debit card expenses increased $18 thousand, or 18%, compared to the third quarter 2015 due to an increase in charge-backs. The charge-back expense should begin to decline as the Company continues to replace all outstanding debit cards with EMV chip cards. FDIC assessment declined $33 thousand due to the new rate structure beginning third quarter 2016. Occupancy and equipment expenses decreased $19 thousand in 2016 over the third quarter of 2015 due to expense reductions that resulted from the reduction of office lease expense. Marketing and public relations expense decreased $17 thousand over the prior year quarter.

Federal income tax expense increased $53 thousand, or 8%, for the quarter ended September 30, 2016 as compared to the third quarter of 2015. The provision for income taxes was $740 thousand (effective rate of 30.4%) for the quarter ended September 30, 2016, compared to $687 thousand (effective rate of 30.6%) for the same quarter ended 2015.

### RESULTS OF OPERATIONS

### Nine months ended September 30, 2016 and 2015

Net income for the nine months ended September 30, 2016, was $4.8 million or $1.74 per share, as compared to $4.4 million or $1.61 per share during the same period in 2015. Return on average assets and return on average equity were 0.99% and 9.99%, respectively, for the nine month period of 2016, compared to 0.94% and 9.95%, respectively for 2015.

Comparative net income increased as total interest and dividend income increased $900 thousand or 5% for the nine month period in 2016 as compared to 2015. The provision for loan losses increased $104 thousand, or 27%, during the same comparative period. Noninterest income decreased $169 thousand to $3.2 million, or 5%, for the nine month period ending in 2016 as compared to 2015. Noninterest expense increased to $12 million for the nine months ended September 30, 2016, an increase of $179 thousand, or 2%, from the same period last year.

### Average Balance Sheet and Net Interest Margin Analysis

*(Dollars in thousands)*

| ASSETS | For the nine months ended September 30, 2016 Average balance | Average rate | 2015 Average balance | Average rate |
| --- | ---: | ---: | ---: | ---: |
| Due from banks-interest bearing | $13,886 | 0.68% | $28,589 | 0.26% |
| Federal funds sold | 558 | 0.48 | 1,036 | 0.23 |
| Taxable securities | 124,398 | 2.18 | 126,956 | 2.15 |
| Tax-exempt securities | 27,737 | 3.55 | 20,330 | 4.06 |
| Loans | 443,977 | 4.45 | 413,368 | 4.51 |
| Total earning assets | 610,556 | 3.85% | 590,279 | 3.78% |
| Other assets | 36,451 |  | 36,466 |  |
| **TOTAL ASSETS** | $647,007 |  | $626,745 |  |
| **LIABILITIES AND SHAREHOLDERS’ EQUITY** |  |  |  |  |
| Interest bearing demand deposits | $82,973 | 0.04% | $76,532 | 0.03% |
| Savings deposits | 164,140 | 0.07 | 157,426 | 0.07 |
| Time deposits | 117,266 | 0.73 | 126,304 | 0.75 |
| Other borrowed funds | 65,017 | 0.72 | 65,676 | 0.74 |
| Total interest bearing liabilities | 429,396 | 0.34% | 425,938 | 0.37% |
| Non-interest bearing demand deposits | 151,479 |  | 139,530 |  |
| Other liabilities | 2,136 |  | 1,961 |  |
| Shareholders’ Equity | 63,996 |  | 59,316 |  |
| **TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY** | $647,007 |  | $626,745 |  |
| Taxable equivalent net interest spread |  | 3.51% |  | 3.41% |
| Taxable equivalent net interest margin |  | 3.61% |  | 3.51% |

Interest income on loans increased $820 thousand, or 6%, for the nine months ended September 30, 2016, as compared to the same period in 2015. This increase was primarily due to an average loan volume increase of $31 million for the comparable nine month period. Interest income on securities increased $65 thousand, or 3%, as the average yield on securities increased 0.01% to 2.43% on a fully taxable equivalent basis, while the volume of securities increased $5 million for the comparable nine month period. Interest income on fed funds sold and interest bearing deposits increased $15 thousand for the nine months ended September 30, 2016 as the yield on fed funds sold and due from banks interest bearing balances increased 42 basis points, compared to the same period in 2015.

Interest expense decreased $71 thousand to $1.1 million for the nine months ended September 30, 2016, compared to the same period in 2015. Interest expense on deposits decreased $57 thousand, or 7%, from the same period as last year, while interest expense on short-term and other borrowings decreased $14 thousand, or 4%. The decrease in interest expense has been caused by lower interest rates being paid on time deposits and borrowings. Additionally, during the comparable nine month periods, the Company grew non-interest bearing deposits by $12 million in 2016. Time deposits continue to renew at lower interest rates, and some depositors have moved monies to savings instruments anticipating higher interest rates. Competition for deposits appears to be increasing from a year ago with larger money center banks and community banks increasing rates offered for money market savings accounts. The net interest margin increased by 10 basis points for the nine month period ended September 30, 2016, to 3.61%, from 3.51% for the same period in 2015. This margin increase is primarily the result of increased loan and investment volumes.

The provision for loan losses was $493 thousand during the nine months of 2016, compared to $389 thousand in the same nine month period of 2015. The increase in the provision for loan losses from a year ago reflects an increase in the volume of loans compared to the same period in 2015. The provision for loan losses is determined based on management’s calculation of the adequacy of the allowance for loan losses, which includes provisions for classified loans as well as for the remainder of the portfolio based on historical data including past charge-offs and current economic trends.

Non-interest income decreased $169 thousand during the nine months ended September 30, 2016, as compared to the same period in 2015. A loss on asset retirement of $64 thousand was recognized in other income during the nine month period in 2016. Gain on the sale of investments decreased by $55 thousand for the nine months ended September 30, 2016 as compared to the same period in 2015. Service charges on deposits decreased $49 thousand from the same period in 2015 reflecting a decrease in overdraft fees based on volume. Decreases were recognized in gains on mortgage loans sold in the secondary market on a year over year basis as more loans were originated and retained for portfolio. Debit card interchange income increased $80 thousand, or 11%, as a result of increased servicer revenue during the nine months of 2016.

Non-interest expenses increased $179 thousand, or 2%, for the nine months ended September 30, 2016, compared to the same period in 2015. Salaries and employee benefits increased $349 thousand, or 5%, primarily the result of salary and medical benefit increases. Marketing and public relations expense increased $36 thousand, or 13%, primarily due to expenses related to redesign of the company’s website. Professional fees decreased $81 thousand, or 12%, as a one-time expense of $110 thousand was incurred during first quarter 2015 to contract a professional firm to assist the company with assessment of market opportunities and long-term strategic goals. Loan legal and collection fees were $55 thousand for the nine month period ended September 30, 2016 as compared to an $88 thousand recognized for the nine months ended September 30, 2015 as the Company recognized a greater recovery of overall legal billings in 2016. Software expense decreased $13 thousand for the nine month period in 2016 as compared to the same period in 2015. The Bank’s telephone and data line expense decreased $33 thousand to $183 thousand for the nine months ended 2016 reflecting an expense reduction initiative for the nine months ended September 30, 2016 as compared to 2015. Occupancy and equipment expense decreased $54 thousand, or 4%, reflecting a decrease in building lease expense and an increase in building rental income when compared to 2015.

The provision for income taxes of $2.1 million remained stable in 2016 from 2015 with an effective rate of 30.4% and 30.5%, respectively, for the nine months ended September 30, 2016 and 2015.

### CAPITAL RESOURCES

CSB maintained a strong capital position with tangible common equity to tangible assets of 9.3% at September 30, 2016 compared with 8.8% at September 30, 2015.

Effective January 1, 2015 the Federal Reserve adopted final rules implementing Basel III and regulatory capital changes required by the Dodd-Frank Act. The rules apply to both the Company and the Bank. The rules established minimum risk-based and leverage capital requirements for all banking organizations. The quality of capital will be provided by the new measurement of Tier 1 capital called common equity tier 1 or (“CET1”). Effective with the March 31, 2015 Call Report the Bank selected the opt-out election for accumulated other comprehensive income (“AOCI”). This election will neutralize the effects of unrealized gains and losses from available-for-sale securities and other elements of the AOCI account for regulatory capital purposes.

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 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, 2015. As of September 30, 2016 the Company and the Bank met all capital adequacy requirements to which they were subject.

| Common Equity Tier 1 Capital To Risk Weighted Assets | Capital Ratios September 30, 2016 | December 31, 2015 |
| --- | ---: | ---: |
| Consolidated | 12.5% | 12.5% |
| Bank | 12.2% | 12.3% |
| Tier 1 Capital To Risk Weighted Assets Ratio |  |  |
| Consolidated | 12.5% | 12.5% |
| Bank | 12.2% | 12.3% |
| Total Capital To Risk Weighted Assets Ratio |  |  |
| Consolidated | 13.5% | 13.5% |
| Bank | 13.3% | 13.3% |
| Tier 1 Leverage Ratio |  |  |
| Consolidated | 9.3% | 8.7% |
| Bank | 9.1% | 8.6% |

### LIQUIDITY

*(Dollars in millions)*

|  | September 30, 2016 | December 31, 2015 | Change |
| --- | ---: | ---: | ---: |
| Cash and cash equivalents | $28 | $38 | $(10) |
| Unused lines of credit | 61 | 52 | 9 |
| Unpledged AFS securities at fair market value | 45 | 70 | (25) |
|  | $134 | $160 | $(26) |
| Net deposits and short-term liabilities | $506 | $516 | $(10) |
| Liquidity ratio | 26.6% | 31.1% | (4.5) |
| Minimum board approved liquidity ratio | 20.0% | 20.0% | — |

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

The liquidity ratio was 26.6% and 31.1% at September 30, 2016 and December 31, 2015.

### OFF-BALANCE SHEET ARRANGEMENTS

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

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

## Market risk

As filed, 2,114 characters.

There have been no material changes in the quantitative and qualitative disclosures about market risks as of September 30, 2016, from the disclosures presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015.

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. Minor variances with net interest income exceeding the board approved policy are being projected in the September 2016 dynamic balance sheet simulation coupled with immediate rate shocks. All other balance sheet positions and interest rate projections are currently within the Company’s board-approved policy.

The following table presents an analysis of the estimated sensitivity of the Company’s annual net interest income to sudden and sustained -100 through +400 basis point changes, in 100 basis point increments, in market interest rates at September 30, 2016 and December 31, 2015. The net interest income reflected is for the first twelve month period of the modeled twenty-four month horizon. The underlying balance sheet for illustrative purposes is dynamic with projected growth in assets and liabilities.

*September 30, 2016*

*(Dollars in thousands)*

| Change in Interest Rates (basis points) | Net Interest Income | Dollar Change | Percentage Change | Board Policy Limits |
| --- | ---: | ---: | ---: | --- |
| +400 | $24,117 | $1,988 | 9.0% | +/- 25% |
| +300 | 23,632 | 1,503 | 6.8 | +/-15 |
| +200 | 23,130 | 1,001 | 4.4 | +/-10 |
| +100 | 22,582 | 453 | 2.1 | +/-5 |
| 0 | 22,129 | — | — | — |
| -100 | 21,520 | (609) | (2.8) | +/-5 |

*December 31, 2015*

|  |  |  |  |  |
| --- | ---: | ---: | ---: | --- |
| +400 | $23,360 | $1,624 | 7.5% | +/- 25% |
| +300 | 22,957 | 1,221 | 5.6 | +/-15 |
| +200 | 22,500 | 764 | 3.5 | +/-10 |
| +100 | 22,071 | 335 | 1.5 | +/-5 |
| 0 | 21,736 | — | — | — |
| -100 | 21,172 | (564) | (2.6) | +/-5 |

34

CONTROLS AND PROCEDURES

## Controls and procedures

As filed, 3,179 characters.

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

(a) information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be accumulated and communicated to the Company’s management, including its Chief Executive Officer and Chief Financial Officer, as appropriate, to allow timely decisions regarding required disclosure;

(b) information required to be disclosed by the Company in this Quarterly Report on Form 10-Q would be recorded, processed, summarized and reported within the time periods specified in the Commission’s rules and forms; and

(c) the Company’s disclosure controls and procedures are effective as of the end of the period covered by this Quarterly Report on Form 10-Q to ensure that material information relating to the Company and its consolidated subsidiary is made known to them, particularly during the period for which the Company’s periodic reports, including this Quarterly Report on Form 10-Q, are being prepared.

### CHANGES IN INTERNAL CONTROL OVER FINANCIAL REPORTING

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

FORM 10-Q

Quarter ended September 30, 2016

PART II – OTHER INFORMATION

| ITEM 1- | LEGAL PROCEEDINGS. |
| --- | --- |
|  | In the opinion of management there are no outstanding legal proceedings that are reasonably likely to have a material adverse effect on the company’s financial condition or results of operations. |
| **ITEM 1A-** | **RISK FACTORS.** |
|  | There have been no material changes to the Company’s risk factors from those disclosed in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2015. |
| **ITEM 2-** | **UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS.** |
|  | On July 7, 2005 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 10% of the Company’s common shares then outstanding. 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. No repurchases were made during the quarterly period ended September 30, 2016. |
| **ITEM 3-** | **DEFAULTS UPON SENIOR SECURITIES.** |
|  | Not applicable. |
| **ITEM 4-** | **MINE SAFETY DISCLOSURES.** |
|  | Not applicable. |
| **ITEM 5-** | **OTHER INFORMATION.** |
|  | Not applicable. |

36

FORM 10-Q

Quarter ended September 30, 2016

Filed Nov 10, 2016.
Source: SEC EDGAR, the filing index for accession 0001193125-16-765871. Last ingested by Listed: Nov 2, 2026, 09:27 ET. No prices; not investment advice.