##### 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: June 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
    
    (I.R.S. Employer Identification Number)incorporation or organization)
 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 August 11, 2006:2,514,561 common shares




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##### Table of Contents



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
    
    
    15ITEM 4  CONTROLS AND PROCEDURES
    
    
    16Part II  Other InformationITEM 1  Legal Proceedings
    
    
    171A  Risk Factors
    
    
    172  Unregistered Sales of Equity Securities and Use of Proceeds
    
    
    173  Defaults upon Senior Securities
    
    
    174 Submission of Matters to a Vote of Security Holders
    
    
    175  Other Information
    
    
    186  Exhibits
    
    
    19Signatures
    
    
    20EX-11EX-31.1EX-31.2EX-32.1EX-32.2




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June 30,
    
    
    December 31,2006
    
    
    2005ASSETSCash and due from banks
    
    $
    11,990,923
    
    
    $
    14,785,250Interest-earning deposits in other banks
    
    
    9,964
    
    
    
    124,726Federal funds sold
    
    
    350,000
    
    
    
    1,740,000Total cash and cash equivalents
    
    
    12,350,887
    
    
    
    16,649,976Securities available-for-sale, at fair value
    
    
    69,256,199
    
    
    
    78,273,248Restricted stock, at cost
    
    
    3,023,800
    
    
    
    2,947,000Total securities
    
    
    72,279,999
    
    
    
    81,220,248Loans held for sale
    
    
    
    
    
    
    Loans
    
    
    228,110,564
    
    
    
    215,019,673Less allowance for loan loans
    
    
    2,467,284
    
    
    
    2,445,494Net loans
    
    
    225,643,280
    
    
    
    212,574,179Premises and equipment, net
    
    
    7,486,661
    
    
    
    7,671,822Accrued interest receivable and other assets
    
    
    3,137,890
    
    
    
    2,873,007Total Assets
    
    $
    320,898,717
    
    
    $
    320,989,232LIABILITIESDepositsNoninterest-bearing
    
    $
    38,119,508
    
    
    $
    41,807,069Interest-bearing
    
    
    204,703,822
    
    
    
    213,595,648Total deposits
    
    
    242,823,330
    
    
    
    255,402,717Short-term borrowings
    
    
    39,889,842
    
    
    
    21,417,616Other borrowings
    
    
    2,704,998
    
    
    
    8,067,840Accrued interest payable and other liabilities
    
    
    1,681,549
    
    
    
    930,800Total liabilities
    
    
    287,099,719
    
    
    
    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
    
    
    6,418,965
    
    
    
    6,413,915Retained earnings
    
    
    15,388,867
    
    
    
    14,752,250Treasury stock at cost: 148,053 shares in 2006 and
89,287 shares in 2005
    
    
    (3,275,850
    )
    
    
    (2,086,686
    )Accumulated other comprehensive loss
    
    
    (1,406,651
    )
    
    
    (582,887
    )Total shareholders equity
    
    
    33,798,998
    
    
    
    35,170,259Total Liabilities and Shareholders Equity
    
    $
    320,898,717
    
    
    $
    320,989,232
  3




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Interest incomeLoans, including fees
    
    $
    4,146,971
    
    
    $
    3,542,196
    
    
    $
    7,969,475
    
    
    $
    6,827,588Taxable securities
    
    
    759,166
    
    
    
    517,862
    
    
    
    1,536,966
    
    
    
    1,037,191Nontaxable securities
    
    
    99,693
    
    
    
    157,810
    
    
    
    201,516
    
    
    
    326,598Other
    
    
    247
    
    
    
    897
    
    
    
    6,839
    
    
    
    1,567Total interest income
    
    
    5,006,077
    
    
    
    4,218,765
    
    
    
    9,714,796
    
    
    
    8,192,944Interest expenseDeposits
    
    
    1,272,915
    
    
    
    993,894
    
    
    
    2,439,835
    
    
    
    1,862,891Other
    
    
    460,229
    
    
    
    196,444
    
    
    
    707,755
    
    
    
    372,922Total interest expense
    
    
    1,733,144
    
    
    
    1,190,338
    
    
    
    3,147,590
    
    
    
    2,235,813Net interest income
    
    
    3,272,933
    
    
    
    3,028,427
    
    
    
    6,567,206
    
    
    
    5,957,131Provision for loan losses
    
    
    114,667
    
    
    
    105,999
    
    
    
    146,667
    
    
    
    211,998Net interest income after provision
for loan losses
    
    
    3,158,266
    
    
    
    2,922,428
    
    
    
    6,420,539
    
    
    
    5,745,133Non-interest incomeService charges on deposit
accounts
    
    
    337,640
    
    
    
    234,186
    
    
    
    652,726
    
    
    
    446,741Gain on sale of securities
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    247,047Trust and financial services
    
    
    164,348
    
    
    
    120,885
    
    
    
    256,590
    
    
    
    238,036Other income
    
    
    230,218
    
    
    
    198,790
    
    
    
    393,333
    
    
    
    402,294Total non-interest income
    
    
    732,206
    
    
    
    553,861
    
    
    
    1,302,649
    
    
    
    1,334,118Non-interest expensesSalaries and employee benefits
    
    
    1,435,548
    
    
    
    1,347,708
    
    
    
    2,926,553
    
    
    
    2,750,172Occupancy expense
    
    
    167,530
    
    
    
    186,869
    
    
    
    338,743
    
    
    
    345,647Equipment expense
    
    
    121,377
    
    
    
    125,611
    
    
    
    257,513
    
    
    
    249,099State franchise tax
    
    
    112,192
    
    
    
    107,655
    
    
    
    221,392
    
    
    
    212,578Professional and director fees
    
    
    174,431
    
    
    
    151,523
    
    
    
    348,452
    
    
    
    307,998Other expenses
    
    
    897,041
    
    
    
    714,179
    
    
    
    1,523,276
    
    
    
    1,445,200Total non-interest expenses
    
    
    2,908,119
    
    
    
    2,633,545
    
    
    
    5,615,929
    
    
    
    5,310,694Income before income taxes
    
    
    982,353
    
    
    
    842,744
    
    
    
    2,107,259
    
    
    
    1,768,557Federal income tax provision
    
    
    305,700
    
    
    
    229,000
    
    
    
    656,700
    
    
    
    488,000Net income
    
    $
    676,653
    
    
    $
    613,744
    
    
    $
    1,450,559
    
    
    $
    1,280,557Basic and diluted earnings
per share
    
    $
    0.27
    
    
    $
    0.23
    
    
    $
    0.57
    
    
    $
    0.48
  4




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Three Months Ended
    
    
    Six Months EndedJune 30,
    
    
    June 30,2006
    
    
    2005
    
    
    2006
    
    
    2005Balance at beginning of period
    
    $
    34,991,684
    
    
    $
    35,769,494
    
    
    $
    35,170,259
    
    
    $
    36,207,507Comprehensive income (loss):Net income
    
    
    676,653
    
    
    
    613,744
    
    
    
    1,450,559
    
    
    
    1,280,557Change in net unrealized
gain (loss), net of reclassification
adjustments and related
income taxes $(265,441),
$235,088, $(424,363), and
$(143,369), respectively
    
    
    (515,267
    )
    
    
    456,348
    
    
    
    (823,764
    )
    
    
    (278,304
    )Total comprehensive income
    
    
    161,386
    
    
    
    1,070,092
    
    
    
    626,795
    
    
    
    1,002,253Issuance of 6 shares from treasury
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    121Stock-based compensation expense
    
    
    2,525
    
    
    
    
    
    
    
    5,050Purchase of treasury shares
    
    
    (953,440
    )
    
    
    (40
    )
    
    
    (1,189,164
    )
    
    
    (40
    )Cash dividends declared
($0.16 and $0.32 per share in
2006, and $0.14 and $0.28
per share in 2005)
    
    
    (403,157
    )
    
    
    (370,296
    )
    
    
    (813,942
    )
    
    
    (740,591
    )Balance at end of period
    
    $
    33,798,998
    
    
    $
    36,469,250
    
    
    $
    33,798,998
    
    
    $
    36,469,250
  5




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Six Months EndedJune 30,2006
    
    
    2005Net cash from operating activities
    
    $
    2,048,216
    
    
    $
    1,604,788Cash flows from investing activitiesSecurities available-for-sale:Proceeds from maturities, calls and repayments
    
    
    7,740,727
    
    
    
    2,914,280Proceeds from sales
    
    
    
    
    
    
    5,098,433Purchases
    
    
    (1,589
    )
    
    
    (1,128,596
    )Purchase of FHLB stock
    
    
    (76,800
    )
    
    
    (86,400
    )Proceeds from sale of other real estate
    
    
    412,500
    
    
    
    Net change in loans
    
    
    (13,247,253
    )
    
    
    (6,350,727
    )Premises and equipment expenditures, net
    
    
    (104,938
    )
    
    
    (489,617
    )Net cash provided by (from) investing activities
    
    
    (5,277,353
    )
    
    
    (42,627
    )Cash flows from financing activitiesNet change in deposits
    
    
    (12,579,387
    )
    
    
    (2,556,364
    )Net change in short-term borrowings
    
    
    18,472,226
    
    
    
    1,350,302Repayment of other borrowings
    
    
    (5,362,842
    )
    
    
    (5,426,614
    )Purchase of treasury shares
    
    
    (1,189,164
    )
    
    
    (40
    )Cash dividends paid
    
    
    (410,785
    )
    
    
    (714,141
    )Net cash from financing activities
    
    
    (1,069,952
    )
    
    
    (7,346,857
    )Net change in cash and cash equivalents
    
    
    (4,299,089
    )
    
    
    (5,784,696
    )Cash and cash equivalents at beginning of period
    
    
    16,649,976
    
    
    
    15,644,292Cash and cash equivalents at end of period
    
    $
    12,350,887
    
    
    $
    9,859,596Supplemental disclosuresInterest paid
    
    $
    3,084,518
    
    
    $
    2,205,326Income taxes paid
    
    
    411,198
    
    
    
    240,000Non-cash investing activity-transfer of loans to OREO
    
    
    -0-
    
    
    
    625,000
  6




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NOTE 1  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
    STOCK-BASED COMPENSATION
 Share-Based Payment
  Quarter ended
    
    
    Six months endedJune 30, 2005Net income, as reported
    
    $
    613,744
    
    
    $
    1,280,557Deduct: Total stock-based employee compensation
expense determined under fair value based
method for all awards, net of related tax effects
    
    
    2,800
    
    
    
    5,600Pro forma net income
    
    $
    610,944
    
    
    $
    1,274,957Earnings per shareBasic  as reported
    
    $
    .23
    
    
    $
    .48Basic  pro forma
    
    $
    .23
    
    
    $
    .48Diluted  as reported
    
    $
    .23
    
    
    $
    .48Diluted  pro forma
    
    $
    .23
    
    
    $
    .48
 7




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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.
     WeightedAverageWeighted
    
    RemainingNumber
    
    Average
    
    Contractual
    
    Aggregateof Options
    
    Exercise Price
    
    Term (in yrs.)
    
    Intrinsic ValueOutstanding at January 1, 2006
    
    
    21,970
    
    
    $
    17.09
    
    
    
    4.28Granted
    
    
    
    
    
    
    Exercised
    
    
    
    
    
    
    Forfeited
    
    
    
    
    
    
    Outstanding at June 30, 2006
    
    
    21,970
    
    
    
    17.09
    
    
    
    3.76Exercisable at June 30, 2006
    
    
    18,361
    
    
    $
    17.29
    
    
    
    3.28
    
    
    $
    57,103
 8




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NOTE 2  SECURITIES
  June 30, 2006
 Gross
    
    
    GrossAmortized
    
    
    unrealized
    
    
    unrealized
    
    
    FairCost
    
    
    gains
    
    
    losses
    
    
    ValueAvailable-for-sale:U.S. Treasury security
    
    $
    99,966
    
    
    $
    
    
    
    $
    1,279
    
    
    $
    98,687Obligations of U.S.
government
corporations and agencies
    
    
    38,492,329
    
    
    
    
    
    
    
    1,358,262
    
    
    
    37,134,067Mortgage-backed securities
    
    
    24,656,172
    
    
    
    523
    
    
    
    905,865
    
    
    
    23,750,830Obligations of states and
political subdivisions
    
    
    7,832,621
    
    
    
    142,646
    
    
    
    7,317
    
    
    
    7,967,950Total debt securities
    
    
    71,081,088
    
    
    
    143,169
    
    
    
    2,272,723
    
    
    
    68,951,534Equity Securities
    
    
    305,965
    
    
    
    7,900
    
    
    
    9,200
    
    
    
    304,665Total available-for-sale
    
    
    71,387,053
    
    
    
    151,069
    
    
    
    2,281,923
    
    
    
    69,256,199Restricted stock
    
    
    3.023,800
    
    
    
    
    
    
    
    
    
    
    
    3,023,800Total securities
    
    $
    74,410,853
    
    
    $
    151,069
    
    
    $
    2,281,923
    
    
    $
    72,279,999
 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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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 June 30, 2006 and 2005
    11




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Six months ended June 30, 2006 and 2005
     12




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13




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Accounting for Certain Hybrid Instruments, as an amendment of FASB
Statements No. 133 and 140
 Accounting for Servicing of Financial Assets
 Accounting for Uncertainty in
Income Taxes Accounting for Income Taxes
 14




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ITEM 3  QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK
   June 30, 2006
 Changes inInterest Rates
    
    Net Interest
    
    Dollar
    
    Percentage(basis points)
    
    Income
    
    Change
    
    Change(Dollars in Thousands)+200
    
    $
    14,263
    
    
    $
    735
    
    
    
    5.4
    %+100
    
    
    13,791
    
    
    
    263
    
    
    
    1.90
    
    
    13,528
    
    
    
    0
    
    
    
    0.0-100
    
    
    13,305
    
    
    
    (223
    )
    
    
    (1.6
    )-200
    
    
    12,922
    
    
    
    (606
    )
    
    
    (4.5
    )
 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
    )
 15




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ITEM 4 CONTROLS AND PROCEDURES
       16




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ITEM 1
       LEGAL PROCEEDINGS
  
 ITEM
1A     RISK FACTORS
  
 ITEM 2        UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS
  ssuer Purchase of Equity Securities
 MaximumTotal Number of
    
    Number of SharesTotal Number
    
    Average
    
    Shares Purchased
    
    that May Yet beof Shares
    
    Price Paid
    
    as Part of Publicly
    
    Purchased UnderPeriod
    
    Purchased
    
    Per Share
    
    Announced Plans
    
    the PlanApril 1, 2006 to
April 30, 2006
    
    
    34,040
    
    
    $
    20.00
    
    
    
    34,040
    
    
    
    153,107May 1, 2006 to
May 31, 2006
    
    
    13,632
    
    
    $
    20.00
    
    
    
    13,632
    
    
    
    139,475June 1, 2006 to
June 30, 2006
    
    None
    
    None
    
    None
    
    
    139,475
  
   
  17




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Nominee
    
    For
    
    WithheldRonald E. Holtman
    
    
    1,624,481
    
    
    
    157,765Daniel J. Miller
    
    
    1,589,458
    
    
    
    192,788Eddie L. Steiner
    
    
    1,622,320
    
    
    
    159,926
  
 
   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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CSB BANCORP, INC.(Registrant)Date: August 11, 2006
    
    /s/ Eddie L. SteinerEddie L. SteinerPresidentChief Executive OfficerDate: August 11, 2006
    
    /s/ Paula J. MeilerPaula J. MeilerSenior Vice PresidentChief Financial Officer
 20




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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