##### Table of Contents



UNITED STATES SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-Q
 þ
    
    QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
 For the quarterly period ended: September 30, 2006
 OR
 o
    
    TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
 Commission file number: 0-21714
 CSB Bancorp, Inc.
 (Exact name of registrant as specified in its charter)
 Ohio
    
    34-1687530(State or other jurisdiction of 
incorporation or organization)
    
    (I.R.S. Employer Identification Number)
 91 North Clay, P.O. Box 232, Millersburg, Ohio 44654
 (Registrants telephone number)
  þ o
  o o þ
  o þ
  Common stock, $6.25 par value
    
    Outstanding at November 13, 2006:2,499,475 common shares




---



##### 



PagePart I  Financial InformationITEM 1  FINANCIAL STATEMENTS (Unaudited)Consolidated Balance Sheets
    
    
    3Consolidated Statements of Income
    
    
    4Consolidated Statements of Changes in Shareholders Equity
    
    
    5Condensed Consolidated Statements of Cash Flows
    
    
    6Notes to the Unaudited Consolidated Financial Statements
    
    
    7ITEM 2 -MANAGEMENTS DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
    
    
    10ITEM 3  QUANTITATIVE AND QUALITATIVE DISCLOSURES
ABOUT MARKET RISK
    
    
    16ITEM 4  CONTROLS AND PROCEDURES
    
    
    17Part II  Other InformationITEM 1  Legal Proceedings
    
    
    181A  Risk Factors
    
    
    182  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    183  Defaults upon Senior Securities
    
    
    184  Submission of Matters to a Vote of Security Holders
    
    
    185  Other Information
    
    
    186  Exhibits
    
    
    19Signatures
    
    
    20EX-11.0EX-31.1EX-31.2EX-32.1EX-32.2




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##### Table of Contents



September 30,
    
    
    December 31,2006
    
    
    2005ASSETSCash and due from banks
    
    $
    10,493,565
    
    
    $
    14,785,250Interest-earning deposits in other banks
    
    
    53,570
    
    
    
    124,726Federal funds sold
    
    
    
    
    
    
    1,740,000Total cash and cash equivalents
    
    
    10,547,135
    
    
    
    16,649,976Securities available-for-sale, at fair value
    
    
    69,412,444
    
    
    
    78,273,248Restricted stock, at cost
    
    
    3,063,700
    
    
    
    2,947,000Total securities
    
    
    72,476,144
    
    
    
    81,220,248Loans
    
    
    229,832,402
    
    
    
    215,019,673Less allowance for loan losses
    
    
    2,536,827
    
    
    
    2,445,494Net loans
    
    
    227,295,575
    
    
    
    212,574,179Premises and equipment, net
    
    
    7,432,171
    
    
    
    7,671,822Accrued interest receivable and other assets
    
    
    2,476,297
    
    
    
    2,873,007Total Assets
    
    $
    320,227,322
    
    
    $
    320,989,232LIABILITIESDepositsNoninterest-bearing
    
    $
    37,502,503
    
    
    $
    41,807,069Interest-bearing
    
    
    212,102,561
    
    
    
    213,595,648Total deposits
    
    
    249,605,064
    
    
    
    255,402,717Short-term borrowings
    
    
    31,421,981
    
    
    
    21,417,616Other borrowings
    
    
    2,594,067
    
    
    
    8,067,840Accrued interest payable and other liabilities
    
    
    2,052,890
    
    
    
    930,800Total liabilities
    
    
    285,674,002
    
    
    
    285,818,973SHAREHOLDERS EQUITYCommon stock, $6.25 par value: Authorized 9,000,000
shares; issued 2,667,786 shares
    
    
    16,673,667
    
    
    
    16,673,667Additional paid-in capital
    
    
    6,421,490
    
    
    
    6,413,915Retained earnings
    
    
    15,802,515
    
    
    
    14,752,250Treasury stock at cost: 168,311 shares in 2006 and
89,287 shares in 2005
    
    
    (3,690,576
    )
    
    
    (2,086,686
    )Accumulated other comprehensive loss
    
    
    (653,776
    )
    
    
    (582,887
    )Total shareholders equity
    
    
    34,553,320
    
    
    
    35,170,259Total Liabilities and Shareholders Equity
    
    $
    320,227,322
    
    
    $
    320,989,232
  3.




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest incomeLoans, including fees
    
    $
    4,325,203
    
    
    $
    3,730,451
    
    
    $
    12,294,678
    
    
    $
    10,558,039Taxable securities
    
    
    735,071
    
    
    
    534,281
    
    
    
    2,272,037
    
    
    
    1,571,472Nontaxable securities
    
    
    95,495
    
    
    
    160,315
    
    
    
    297,011
    
    
    
    486,913Other
    
    
    297
    
    
    
    46,720
    
    
    
    7,136
    
    
    
    48,287Total interest income
    
    
    5,156,066
    
    
    
    4,471,767
    
    
    
    14,870,862
    
    
    
    12,664,711Interest expenseDeposits
    
    
    1,440,410
    
    
    
    1,102,453
    
    
    
    3,880,245
    
    
    
    2,965,344Other
    
    
    421,566
    
    
    
    155,365
    
    
    
    1,129,321
    
    
    
    528,287Total interest expense
    
    
    1,861,976
    
    
    
    1,257,818
    
    
    
    5,009,566
    
    
    
    3,493,631Net interest income
    
    
    3,294,090
    
    
    
    3,213,949
    
    
    
    9,861,296
    
    
    
    9,171,080Provision for loan losses
    
    
    75,000
    
    
    
    70,666
    
    
    
    221,667
    
    
    
    282,664Net interest income after provision
for loan losses
    
    
    3,219,090
    
    
    
    3,143,283
    
    
    
    9,639,629
    
    
    
    8,888,416Non-interest incomeService charges on deposit
accounts
    
    
    325,029
    
    
    
    230,162
    
    
    
    977,755
    
    
    
    676,906Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,047Trust and financial services
    
    
    135,904
    
    
    
    113,021
    
    
    
    392,495
    
    
    
    351,057Other income
    
    
    215,409
    
    
    
    194,929
    
    
    
    608,742
    
    
    
    597,220Total non-interest income
    
    
    676,342
    
    
    
    538,112
    
    
    
    1,978,992
    
    
    
    1,872,230Non-interest expensesSalaries and employee benefits
    
    
    1,538,491
    
    
    
    1,424,205
    
    
    
    4,459,994
    
    
    
    4,174,377Occupancy expense
    
    
    176,360
    
    
    
    168,936
    
    
    
    515,104
    
    
    
    514,583Equipment expense
    
    
    118,813
    
    
    
    135,968
    
    
    
    376,326
    
    
    
    385,067State franchise tax
    
    
    113,425
    
    
    
    106,801
    
    
    
    334,817
    
    
    
    319,379Professional and director fees
    
    
    171,042
    
    
    
    187,126
    
    
    
    519,494
    
    
    
    495,124Other expenses
    
    
    585,737
    
    
    
    685,986
    
    
    
    2,114,063
    
    
    
    2,131,186Total non-interest expenses
    
    
    2,703,868
    
    
    
    2,709,022
    
    
    
    8,319,798
    
    
    
    8,019,716Income before income taxes
    
    
    1,191,564
    
    
    
    972,373
    
    
    
    3,298,823
    
    
    
    2,740,930Federal income tax provision
    
    
    378,000
    
    
    
    283,000
    
    
    
    1,034,700
    
    
    
    771,000Net income
    
    $
    813,564
    
    
    $
    689,373
    
    
    $
    2,264,123
    
    
    $
    1,969,930Basic and diluted earnings
per share
    
    $
    0.32
    
    
    $
    0.26
    
    
    $
    0.89
    
    
    $
    0.74
  4.




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Three Months Ended
    
    
    Nine Months EndedSeptember 30,
    
    
    September 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at beginning of period
    
    $
    33,798,998
    
    
    $
    36,469,250
    
    
    $
    35,170,259
    
    
    $
    36,207,507Comprehensive income:Net income
    
    
    813,564
    
    
    
    689,373
    
    
    
    2,264,123
    
    
    
    1,969,930Change in net unrealized
gain (loss), net of reclassification
adjustments and related
income taxes $387,845,
($203,939), ($36,518), and
($347,307), respectively
    
    
    752,875
    
    
    
    (395,881
    )
    
    
    (70,889
    )
    
    
    (674,185
    )Total comprehensive income
    
    
    1,566,439
    
    
    
    293,492
    
    
    
    2,193,234
    
    
    
    1,295,745Issuance of 6 shares from treasury
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121Stock-based compensation expense
    
    
    2,525
    
    
    
    
    
    
    
    7,575Purchase of treasury shares
    
    
    (414,726
    )
    
    
    (315
    )
    
    
    (1,603,890
    )
    
    
    (355
    )Cash dividends declared
($0.16 and $0.48 per share in
2006, and $0.14 and $0.42
per share in 2005)
    
    
    (399,916
    )
    
    
    (370,295
    )
    
    
    (1,213,858
    )
    
    
    (1,110,886
    )Balance at end of period
    
    $
    34,553,320
    
    
    $
    36,392,132
    
    
    $
    34,553,320
    
    
    $
    36,392,132
  5.




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##### Table of Contents



Nine Months EndedSeptember 30,2006
    
    
    2005Net cash from operating activities
    
    $
    3,787,731
    
    
    $
    2,706,343Cash flows from investing activitiesSecurities available-for-sale:Proceeds from maturities, calls and repayments
    
    
    8,715,847
    
    
    
    3,839,926Proceeds from sales
    
    
    
    
    
    
    5,098,433Purchases
    
    
    (1,589
    )
    
    
    (5,560,218
    )Purchase of FHLB stock
    
    
    (116,700
    )
    
    
    (118,400
    )Proceeds from sale of other real estate
    
    
    412,500
    
    
    
    Net change in loans
    
    
    (15,028,161
    )
    
    
    (1,429,163
    )Premises and equipment expenditures, net
    
    
    (187,576
    )
    
    
    (542,440
    )Net cash provided by (from) investing activities
    
    
    (6,205,679
    )
    
    
    1,288,138Cash flows from financing activitiesNet change in deposits
    
    
    (5,797,653
    )
    
    
    7,794,275Net change in short-term borrowings
    
    
    10,004,365
    
    
    
    (657,205
    )Repayment of other borrowings
    
    
    (5,473,773
    )
    
    
    (5,561,065
    )Purchase of treasury shares
    
    
    (1,603,890
    )
    
    
    (355
    )Cash dividends paid
    
    
    (813,942
    )
    
    
    (1,084,436
    )Net cash provided by (from) financing activities
    
    
    (3,684,893
    )
    
    
    491,214Net change in cash and cash equivalents
    
    
    (6,102,841
    )
    
    
    4,485,695Cash and cash equivalents at beginning of period
    
    
    16,649,976
    
    
    
    15,644,292Cash and cash equivalents at end of period
    
    $
    10,547,135
    
    
    $
    20,129,987Supplemental disclosuresInterest paid
    
    $
    4,954,291
    
    
    $
    3,478,684Income taxes paid
    
    
    756,198
    
    
    
    515,000Non-cash investing activity-transfer of loans to OREO
    
    
    39,560
    
    
    
    625,000
  6.




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    STOCK-BASED COMPENSATION
 Share-Based Payment
  Quarter ended
    
    
    Nine months endedSeptember 30, 2005Net income, as reported
    
    $
    689,373
    
    
    $
    1,969,930Deduct: Total
stock-based employee
compensation expense
determined under
fair value
based method for all
awards, net of
related tax effects
    
    
    2,800
    
    
    
    8,400Pro forma net income
    
    $
    686,573
    
    
    $
    1,961,530Earnings per share
Basic  as reported
    
    $
    .26
    
    
    $
    .74Basic  pro forma
    
    $
    .26
    
    
    $
    .74Diluted  as reported
    
    $
    .26
    
    
    $
    .74Diluted  pro forma
    
    $
    .26
    
    
    $
    .74
 7.




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##### Table of Contents



NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES-continued
  2004
    
    2003Risk-free interest rate
    
    
    3.34
    %
    
    
    2.75
    %Dividend yield
    
    
    2.60
    %
    
    
    2.50
    %Volatility
    
    
    37
    %
    
    
    37
    %Expected option life
    
    
    3.5
    yrs.
    
    
    6.4
    yrs.
     WeightedWeighted
    
    AverageNumber
    
    Average
    
    Remainingof
    
    Exercise
    
    Contractual
    
    AggregateOptions
    
    Price
    
    Term (in yrs.)
    
    Intrinsic ValueOutstanding at January 1, 2006
    
    
    21,970
    
    
    $
    17.09
    
    
    
    4.28Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    385
    
    
    
    16.05Outstanding at September 30,
2006
    
    
    21,585
    
    
    
    17.11
    
    
    
    3.50Exercisable at September 30,
2006
    
    
    18,106
    
    
    $
    17.31
    
    
    
    2.99
    
    
    $
    30,599
 8.




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##### Table of Contents



NOTE 2  SECURITIES
  September 30, 2006
 Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    FairCost
    
    
    gains
    
    
    losses
    
    
    ValueAvailable-for-sale:U.S. Treasury security
    
    $
    99,976
    
    
    $
    
    
    
    $
    601
    
    
    $
    99,375Obligations of U.S.
government
corporations and agencies
    
    
    38,492,789
    
    
    
    
    
    
    
    704,032
    
    
    
    37,788,757Mortgage-backed securities
    
    
    23,673,212
    
    
    
    4,558
    
    
    
    430,404
    
    
    
    23,247,366Obligations of states and
political subdivisions
    
    
    7,831,070
    
    
    
    148,855
    
    
    
    639
    
    
    
    7,979,286Total debt securities
    
    
    70,097,047
    
    
    
    153,413
    
    
    
    1,135,676
    
    
    
    69,114,784Equity Securities
    
    
    305,965
    
    
    
    3,651
    
    
    
    11,956
    
    
    
    297,660Total available-for-sale
    
    
    70,403,012
    
    
    
    157,064
    
    
    
    1,147,632
    
    
    
    69,412,444Restricted stock
    
    
    3.063,700
    
    
    
    
    
    
    
    
    
    
    
    3,063,700Total securities
    
    $
    73,466,712
    
    
    $
    157,064
    
    
    $
    1,147,632
    
    
    $
    72,476,144
 December 31, 2005
 Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    FairCost
    
    
    gains
    
    
    losses
    
    
    ValueAvailable-for-sale:U.S. Treasury security
    
    $
    99,938
    
    
    $
    
    
    
    $
    1,313
    
    
    $
    98,625Obligations of U.S.
government
corporations and agencies
    
    
    42,991,204
    
    
    
    4,376
    
    
    
    765,254
    
    
    
    42,230,326Mortgage-backed securities
    
    
    27,368,053
    
    
    
    14,166
    
    
    
    376,262
    
    
    
    27,005,957Obligations of states and
political subdivisions
    
    
    8,392,840
    
    
    
    242,499
    
    
    
    1,943
    
    
    
    8,633,396Total debt securities
    
    
    78,852,035
    
    
    
    261,041
    
    
    
    1,144,772
    
    
    
    77,968,304Equity Securities
    
    
    304,376
    
    
    
    6,080
    
    
    
    5,512
    
    
    
    304,944Total available-for-sale
    
    
    79,156,411
    
    
    
    267,121
    
    
    
    1,150,284
    
    
    
    78,273,248Restricted stock
    
    
    2,947,000
    
    
    
    
    
    
    
    
    
    
    
    2,947,000Total securities
    
    $
    82,103,411
    
    
    $
    267,121
    
    
    $
    1,150,284
    
    
    $
    81,220,248
 9.




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##### Table of Contents



ITEM 2  MANAGEMENTS DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
  FORWARD-LOOKING STATEMENTS
   FINANCIAL CONDITION
   10.




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RESULTS OF OPERATIONS
 Three months ended September 30, 2006 and 2005
   11.




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Nine months ended September 30, 2006 and 2005
     12.




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CAPITAL RESOURCES
  LIQUIDITY
  13.




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##### Table of Contents



OFF-BALANCE SHEET ARRANGEMENTS
  CONTRACTUAL OBLIGATIONS
  RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS
 Accounting for Certain Hybrid Instruments, as an amendment of FASB
Statements No. 133 and 140
 Accounting for Servicing of Financial Assets
 Fair Value Measurements
 14.




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##### Table of Contents



RECENLY ISSUED ACCOUNTING PRONOUNCEMENTS-continued
  Employers Accounting for Defined Benefit
Pension and Other Post Retirement Plans, an amendment of FASB Statements No. 87, 88, 106 and
132(R)
 Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
 Considering the
Effects of Prior Year Misstatements When Quantifying Misstatements in Current Year Financial
Statements
 Accounting for Deferred Compensation and Postretirement Benefit
Aspects of Endorsement Split-Dollar Life Insurance Arrangements
 15.




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##### Table of Contents



RECENLY ISSUED ACCOUNTING PRONOUNCEMENTS-continued
 Accounting for Purchases of Life InsuranceDetermining the Amount
That Could Be Realized in Accordance with FASB Technical Bulletin No. 85-4, Accounting for
Purchases of Life Insurance
 
 ITEM 3  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
   September 30, 2006
 Changes inInterest Rates
    
    Net Interest
    
    Dollar
    
    Percentage(basis points)
    
    Income
    
    Change
    
    Change(Dollars in Thousands)+200
    
    $
    13,942
    
    
    $
    654
    
    
    
    4.9
    %+100
    
    
    13,550
    
    
    
    263
    
    
    
    2.00
    
    
    13,288
    
    
    
    0
    
    
    
    0.0-100
    
    
    13,065
    
    
    
    (223
    )
    
    
    (1.7
    )-200
    
    
    12,703
    
    
    
    (585
    )
    
    
    (4.4
    )
 December 31, 2005
 Changes inInterest Rates
    
    Net Interest
    
    Dollar
    
    Percentage(basis points)
    
    Income
    
    Change
    
    Change(Dollars in Thousands)+200
    
    $
    15,042
    
    
    $
    1,198
    
    
    
    8.7
    %+100
    
    
    14,387
    
    
    
    544
    
    
    
    3.90
    
    
    13,844
    
    
    
    0
    
    
    
    0.0-100
    
    
    13,383
    
    
    
    (461
    )
    
    
    (3.3
    )-200
    
    
    12,741
    
    
    
    (1,103
    )
    
    
    (8.0
    )
 16.




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ITEM 4  CONTROLS AND PROCEDURES
       17.




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##### Table of Contents



ITEM 1   LEGAL PROCEEDINGS
  
 ITEM 1A   RISK FACTORS
  
 ITEM 2   UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ssuer Purchase of Equity Securities
 Total Number of
    
    Maximum NumberTotal Number of
    
    Average Price
    
    Shares Purchased as
    
    of Shares that MayShares
    
    Paid Per
    
    Part of Publicly
    
    Yet be PurchasedPeriod
    
    Purchased
    
    Share
    
    Announced Plans
    
    Under the PlanJuly 1, 2006 to
July 31, 2006
    
    
    5,172
    
    
    $
    20.40
    
    
    
    5,172
    
    
    
    134,409August 1, 2006 to
August 31, 2006
    
    
    15,086
    
    
    $
    20.50
    
    
    
    15,086
    
    
    
    119,004September 1, 2006 to
September 30, 2006
    
    None
    
    None
    
    None
    
    
    119,004
  
   
   
   18.




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ExhibitNumber
    
    Description of Document11
    
    Statement Regarding Computation of Per Share Earnings
(reference is hereby made to Consolidated Statements of Income on page 4
hereof.)31.1
    
    Rule 13a-14(a)/15d-14(a) CEOs Certification31.2
    
    Rule 13a-14(a)/15d-14(a) CFOs Certification32.1
    
    Section 1350 CEOs Certification32.2
    
    Section 1350 CFOs Certification
 19.




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##### Table of Contents



CSB BANCORP, INC.
(Registrant)Date: November 13, 2006
    
    /s/ Eddie L. Steiner

Eddie L. SteinerPresidentChief Executive OfficerDate: November 13, 2006
    
    /s/ Paula J. Meiler

Paula J. MeilerSenior Vice PresidentChief Financial Officer
 20.




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##### Table of Contents



Exhibit
    
    
    
    SequentialNumber
    
    Description of Document
    
    Page11
    
    Statement Regarding Computation of Per Share
Earnings (reference is hereby made to Consolidated Statements of
Income on page 4 hereof.)31.1
    
    Rule 13a-14(a)/15d-14(a) CEOs Certification31.2
    
    Rule 13a-14(a)/15d-14(a) CFOs Certification32.1
    
    Section 1350 CEOs Certification32.2
    
    Section 1350 CFOs Certification
 21.