CSB Bancorp, Inc.

Previous wording

The following management’s discussion and analysis focuses on the consolidated financial condition of the Company on March 31, 2026 as compared to December 31, 2025, and the consolidated results of operations for the three months ended March 31, 2026 compared to the same periods in 2025. 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.

Current wording

The following management’s discussion and analysis focuses on the consolidated financial condition of the Company on June 30, 2026 as compared to December 31, 2025, and the consolidated results of operations for the three and six months ended June 30, 2026 compared to the same periods in 2025. 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.

Previous wording

Total assets decreased $27 million to $1.27 billion at March 31, 2026 compared to $1.29 billion at December 31, 2025. During the three months ended March 31, 2026, securities decreased $7 million, net loans increased $22 million, and cash and cash equivalents decreased $44 million. Deposits and short-term borrowings decreased $30 million.

Current wording

Total assets remain steady at $1.29 billion at June 30, 2026 and December 31, 2025. During the six months ended June 30, 2026, securities decreased $20 million, net loans increased $39 million, and cash and cash equivalents decreased $18 million. Deposits and short-term borrowings decreased $4 million.

Previous wording

Net loans increased $22 million, or 3%, as commercial and commercial real estate loans increased $13 million, or 3%, compared to December 31, 2025 and residential real estate loans increased $4 million, or 2%, from December 31, 2025. Construction loans increased $2 million, or 5%, from December 31, 2025. Consumer refinance activity remains slow on mortgage loans, while home construction activity rose as well as home equity line origination increases of $3 million. Residential mortgage loan originations, including home equity lines, for the three months ended March 31, 2026 totaled $17 million, an increase from $10 million in mortgage originations during the three months ended March 31, 2025. Mortgage loan originations sold into the secondary market remained stable at $1.5 million, during the three months ended March 31, 2026 and March 31, 2025 respectively. The Bank originates and sells primarily fixed rate thirty-year mortgages into the secondary market.

Current wording

Net loans increased $39 million, or 5%, as commercial and commercial real estate loans increased $21 million, or 4%, compared to December 31, 2025 and residential real estate loans increased $5 million, or 2%, from December 31, 2025. Construction loans increased $8 million, or 17%, from December 31, 2025. Consumer refinance activity remains slow on mortgage loans, while home construction activity rose as well as home equity line origination increases of $21 million. Residential mortgage loan originations, including home equity lines, for the six months ended June 30, 2026 totaled $40 million, an increase from $32 million in mortgage originations during the six months ended June 30, 2025. Mortgage loan originations sold into the secondary market remained stable at $4 million, during the six months ended June 30, 2026 and June 30, 2025 respectively. The Bank originates and sells primarily fixed rate thirty-year mortgages into the secondary market.

Previous wording

The allowance for credit losses for loans increased $477 thousand from December 31, 2025 to $12.9 million. The increase in the allowance was primarily due to the volume increase in loans originated. Net charge-offs were $7 thousand, or an annualized 0.0% of average loans, in the current three-month period compared to net charge-offs of $29 thousand, or 0.02% of average loans in the year-ago three-month period. At March 31, 2026, the allowance for credit losses to total loans was 1.52%. We believe the allowance level is appropriate given the level of problem loans and composition of the overall loan portfolio in the current economic environment.

Current wording

The allowance for credit losses for loans increased $1 million from December 31, 2025 to $13.5 million. The increase in the allowance was due to one individually evaluated loan relationship, an increase in loan volume, and an increase in risk forecast within the home equity line portfolio. Net charge-offs were $35 thousand, or an annualized 0.01% of average loans, in the current six-month period compared to net charge-offs of $391 thousand, or 0.10% of average loans in the year-ago six-month period. At June 30, 2026, the allowance for credit losses to total loans was 1.56%. We believe the allowance level is appropriate given the level of problem loans and composition of the overall loan portfolio in the current economic environment.

Previous wording

Nonperforming loans increased $366 thousand to $1.0 million, or 0.12%, of total loans from $652 thousand, or 0.08% of total loans, on December 31, 2025. For the three months ended March 31, 2026, $45 thousand in loans were placed on nonaccrual status and one mortgage loan for $351 thousand was 90 days past due, $30 thousand in paydowns were received, and no nonperforming loans were charged-off due to non-payment.

Current wording

Nonperforming loans increased $6.6 million to $7.3 million, or 0.84%, of total loans from $652 thousand, or 0.08% of total loans, on December 31, 2025. For the six months ended June 30, 2026, $6.7 million in loans were placed on nonaccrual status, $93 thousand in paydowns were received, and no nonperforming loans were charged-off due to non-payment.

Previous wording

The weighted average life of total debt securities was 5.03 years at March 31, 2026 as compared to 5.12 years at December 31, 2025. If interest rates declined 100 basis points, the weighted average life was estimated to fall to 4.55 years at March 31, 2026. If interest rates rose 100 basis points the weighted average life would be expected to increase to 5.57 years at March 31, 2026.

Current wording

The weighted average life of total debt securities was 5.10 years at June 30, 2026 as compared to 5.12 years at December 31, 2025. If interest rates declined 100 basis points, the weighted average life was estimated to fall to 4.57 years at June 30, 2026. If interest rates rose 100 basis points the weighted average life would be expected to increase to 5.57 years at June 30, 2026.

Previous wording

Deposits decreased $26 million, or 2%, from December 31, 2025 with noninterest-bearing deposits decreasing approximately $16 million, or 6%, and interest-bearing deposit accounts decreasing approximately $10 million, or 1%. Total deposits as of March 31, 2026 are $1.1 billion, or 3%, above March 31, 2025 deposit balances. On a year over year comparison, increases were recognized in interest bearing demand accounts of $34 million, and time deposits of $8 million. Decreases were recognized in noninterest-bearing demand deposits of $10 million and money market accounts of $1 million. Deposits have increased as customers move funds into interest bearing demand accounts and time certificates of deposit to take advantage of higher interest rates in those products. The estimated amount of uninsured deposits was $263 million, $281 million, and $262 million as of March 31, 2026, December 31, 2025, and March 31, 2025, respectively.

Current wording

Deposits increased $5 million, or 0.5%, from December 31, 2025 with noninterest-bearing deposits decreasing approximately $1.8 million, or 0.6%, and interest-bearing deposit accounts increasing approximately $7 million, or 0.9%. Total deposits as of June 30, 2026 are $1.1 billion, or 4%, above June 30, 2025 deposit balances. On a year over year comparison, increases were recognized in interest bearing demand accounts of $11 million, time deposits of $27 million noninterest-bearing demand deposits of $4 million, and savings accounts of $3 million. Decreases were recognized in money market accounts of $378 thousand. Deposits have increased as customers move funds into interest bearing demand accounts and time certificates of deposit to take advantage of higher interest rates in those products. The estimated amount of uninsured deposits was $272 million, $281 million, and $266 million as of June 30, 2026, December 31, 2025, and June 30, 2025, respectively.

Previous wording

Short-term borrowings consisting of overnight repurchase agreements with retail customers decreased $4 million, or 12%, to $28 million at March 31, 2026 as compared to December 31, 2025 as these balances are cyclical and typically lower in the first quarter. Other borrowings decreased $25 thousand as the Company repaid FHLB advances.

Current wording

Short-term borrowings consisting of overnight repurchase agreements with retail customers decreased $10 million, or 30%, to $22 million at June 30, 2026 as compared to December 31, 2025. These balances have returned to a more typical amount and are even with June 30, 2025. Other borrowings decreased $223 thousand as the Company repaid FHLB advances.

Previous wording

Total shareholders’ equity amounted to $129 million, or 10%, of total assets at March 31, 2026, an increase of $2.9 million, or 2%, from $126 million at December 31, 2025. The increase in shareholders’ equity during the three months ended March 31, 2026 was due to net income of $4.4 million, net of other comprehensive loss of $392 thousand and cash dividends of $1.1 million. Total accumulated other comprehensive loss ("AOCL") increased during the three months ended March 31, 2026 due to higher U.S. Treasury rates and decreased prices in government agency and corporate bonds as AFS securities are marked to fair value. 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 March 31, 2026 as shown in the Capital Resources section of this report.

Current wording

Total shareholders’ equity amounted to $133 million, or 10%, of total assets at June 30, 2026, an increase of $6.3 million, or 5%, from $126 million at December 31, 2025. The increase in shareholders’ equity during the six months ended June 30, 2026 was due to net income of $9.2 million, net of other comprehensive loss of $570 thousand and cash dividends of $2.3 million. Total accumulated other comprehensive loss ("AOCL") increased during the six months ended June 30, 2026 due to higher U.S. Treasury rates and decreased prices in government agency and corporate bonds as AFS securities are marked to fair value. 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 30, 2026 as shown in the Capital Resources section of this report.

Previous wording

For the quarters ended March 31, 2026 and 2025, the Company recorded net income of $4.4 million and $3.6 million and $1.69 and $1.37 per share, respectively. The $828 thousand increase in net income for the period was primarily the result of an increase of $1.8 million in net interest income, offset by an increase in the provision for credit losses and off-balance sheet commitments of $93 thousand. Additionally, a $176 thousand increase in noninterest income was offset by a $824 thousand increase in noninterest expenses. The federal income tax provision increased $215 thousand. Pre-provision net revenue ("PPNR"), (a non-GAAP measure), totaled $6 million for the quarter ended March 31, 2026, an increase of $1.1 million, or 23%, from the prior year's first quarter.

Current wording

For the quarters ended June 30, 2026 and 2025, the Company recorded net income of $4.7 million and $3.7 million and $1.80 and $1.41 per share, respectively. The $1 million increase in net income for the period was primarily the result of an increase of $1.5 million in net interest income, a $175 thousand increase in non interest income, and a decrease in the provision for credit losses and off-balance sheet commitments of $29 thousand. The noninterest expense increase of $465 thousand partially offset the revenue increases. The federal income tax provision increased $262 thousand. Pre-provision net revenue ("PPNR"), (a non-GAAP measure), totaled $6 million for the quarter ended June 30, 2026, an increase of $1.2 million, or 24%, from the prior year's second quarter.

Previous wording

Return on average assets and return on average equity were 1.42% and 14.03%, respectively, for the three-month period of 2026, compared to 1.22% and 12.58%, respectively for the same quarter in 2025.

Current wording

Return on average assets and return on average equity were 1.48% and 14.48%, respectively, for the three-month period of 2026, compared to 1.23% and 12.48%, respectively for the same quarter in 2025.

Previous wording

Interest income for the quarter ended March 31, 2026, was $15 million representing a $1.7 million, or 13% increase, compared to the same period in 2025. This increase was primarily due to the higher average balances of loans of $89 million. These increases were partially offset by volume decreases in securities and interest-earning deposits in other banks of $13 million over the comparable period. Rates on average interest-earning deposits in other banks decreased 76 basis points, while loan rates increased 17 basis points, and securities' interest rates increased 30 basis points for the quarter ended March 31, 2026 as compared to the same period in 2025. Interest expense for the quarter ended March 31, 2026 was $3.5 million, a decrease of $95 thousand, or 3%, from the same quarter in 2025. The decrease in interest expense occurred primarily due to rate decreases in time deposit accounts during the quarter ended March 31, 2026.

Current wording

Interest income for the quarter ended June 30, 2026, was $15 million representing a $1.5 million, or 11% increase, compared to the same period in 2025. This increase was primarily due to the higher average balances of loans of $83 million. These increases were partially offset by volume decreases in securities and interest-earning deposits in other banks of $18 million over the comparable period. Rates on average interest-earning deposits in other banks decreased 76 basis points, while loan rates increased 13 basis points, and securities' interest rates increased 32 basis points for the quarter ended June 30, 2026 as compared to the same period in 2025. Interest expense for the quarter ended June 30, 2026 was $3.5 million, a decrease of $35 thousand, or 1%, from the same quarter in 2025. The decrease in interest expense occurred primarily due to rate decreases in time deposit accounts during the quarter ended June 30, 2026.

Previous wording

For the quarter ended March 31, 2026, the bank recognized net charge-offs of $7 thousand, compared to $29 thousand net charge-offs for the same quarter in 2025. The provision for credit losses on loans in the current quarter of $484 thousand, compared to a provision of $408 thousand in the same quarter ended 2025. The Company recorded a $11 thousand provision for credit loss expense on off-balance commitments in the first quarter 2026 compared to a $6 thousand recovery in the same quarter of 2025.

Current wording

For the quarter ended June 30, 2026, the bank recognized net charge-offs of $28 thousand, compared to $362 thousand net charge-offs for the same quarter in 2025. The provision for credit losses on loans in the current quarter of $609 thousand, compared to a provision of $639 thousand in the same quarter ended 2025. The Company recorded a $24 thousand recovery for credit loss expense on off-balance commitments in the second quarter 2026 compared to a $25 thousand recovery in the same quarter of 2025. 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.

Previous wording

Noninterest income increased $176 thousand, or 10%, compared to the first quarter of 2025. The increase was primarily the result of a $41 thousand increase in credit card interchange fees, a $40 thousand increase in trust fees, $39 thousand increase in earnings on bank owned life insurance, $28 thousand increase in debit card interchange fees and a $24 thousand increase in unrealized gains on equity securities.

Current wording

Noninterest income increased $175 thousand, or 10%, compared to the second quarter of 2025. The increase was primarily the result of a $49 thousand increase in debit card interchange fees, a $42 thousand increase in credit card fees, $37 thousand increase in earnings on bank owned life insurance, $28 thousand increase in service charges on deposits.

Previous wording

Noninterest expense increased $824 thousand, or 13%, from the first quarter 2025. Salary and employee benefit costs increased $536 thousand, or 15%, compared to the prior year quarter with an increase in the number of full time equivalent employees from 173 in 2025 to 182 in 2026 as vacant positions were filled. Software expense increased $118 thousand, or 29%, professional and director fees increased $45 thousand, or 11%, marketing and public relations expense increased $26 thousand, or 25%, state financial institutions tax increased $23 thousand, or 10%, due to the increase in capital. Occupancy expense decreased $8 thousand, or 2%. The Company’s first quarter efficiency ratio decreased to 54.8% compared to 56.8% in the prior year.

Current wording

Noninterest expense increased $465 thousand, or 7%, from the second quarter 2025. Salary and employee benefit costs increased $328 thousand, or 8%, compared to the prior year quarter with an increase in the number of full time equivalent employees from 175 in 2025 to 185 in 2026 as vacant positions were filled. Software expense increased $83 thousand, or 19%, debit card expense increased $23 thousand or 12%. Occupancy expense decreased $16 thousand, or 5%. The Company’s second quarter efficiency ratio decreased to 53.1% compared to 56.6% in the prior year.

Previous wording

Federal income tax expense increased $215 thousand, or 24%, for the quarter ended March 31, 2026 as compared to the first quarter 2025. The provision for income taxes was $1.1 million (effective rate of 19.7%) for the quarter ended March 31, 2026, compared to $878 thousand (effective rate of 19.5%) for the same quarter ended 2025.

Current wording

Federal income tax expense increased $262 thousand, or 29%, for the quarter ended June 30, 2026 as compared to the second quarter 2025. The provision for income taxes was $1.2 million (effective rate of 19.8%) for the quarter ended June 30, 2026, compared to $903 thousand (effective rate of 19.5%) for the same quarter ended 2025.

Previous wording

Economic indicators reflect somewhat flat business activity with uncertainty related to trade policies and rising energy prices. 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.

Current wording

For the six months ended June 30, 2026, the provision for credit losses and off-balance sheet commitments was $1 million stable with 2025. For more discussion see Results of Operations, three months. 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.

Previous wording

The Company maintained a strong capital position with tangible common equity to tangible assets of 9.9% at March 31, 2026 compared with 9.4% at December 31, 2025.

Current wording

The Company maintained a strong capital position with tangible common equity to tangible assets (a non-GAAP measure) of 9.9% at June 30, 2026 compared with 9.4% at December 31, 2025.