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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

x

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE

SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended:  MARCH 31, 2003

OR

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)

6 W. Jackson Street, P.O. Box 232, Millersburg, Ohio 44654

(Address of principal executive offices)

(330) 674-9015

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Yes (X)

No (  )

Indicate by check mark whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).  

Yes (  )

No (X)

Indicate the number of shares outstanding of each of the registrant's classes of common stock, as of the latest practicable date.

Outstanding at April 28, 2003:

2,636,659 common shares

CSB BANCORP, INC.

FORM 10-Q

QUARTER ENDED MARCH 31, 2003

Table of Contents

Part I - Financial Information

ITEM 1 - FINANCIAL STATEMENTS

Page

Consolidated Balance Sheets

3

Consolidated Statements of Income

4

Condensed Consolidated Statements of Shareholders' Equity

5

Condensed Consolidated Statements of Cash Flows

6

Note to Consolidated Financial Statements

7

ITEM 2 -

MANAGEMENT'S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

8

ITEM 3 – QUANTITATIVE AND QUALITATIVE DISCLOSURES

ABOUT MARKET RISK

11

ITEM 4 – CONTROLS AND PROCEDURES……………………………………………….    12

Part II - Other Information

Other Information

12

Signatures

13

CSB BANCORP, INC.

CONSOLIDATED BALANCE SHEETS

(Unaudited)

See note to consolidated financial statements.

CSB BANCORP, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

See note to consolidated financial statements.

CSB BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF SHAREHOLDERS’ EQUITY

(Unaudited)

See note to consolidated financial statements.

CSB BANCORP, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

See note to consolidated financial statements.

CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

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

The consolidated financial statements have been prepared without audit.  In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company’s financial position at March 31, 2003, and the results of operations and changes in cash flows for the periods presented have been made.

Certain information and footnote disclosures typically included in financial statements prepared in accordance with generally accepted accounting principles have been omitted.  The Annual Report for CSB for the year ended December 31, 2002, contains consolidated financial statements and related footnote disclosures which should be read in conjunction with the accompanying consolidated financial statements.  The results of operations for the period ended March 31, 2003, are not necessarily indicative of the operating results for the full year or any future interim period.

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

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

The following discussion focuses on the consolidated financial condition of CSB Bancorp, Inc. (the Company) at March 31, 2003, compared to December 31, 2002, and the consolidated results of operations for the quarterly period ending March 31, 2003 compared to the same period in 2002.  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.

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report that are not historical facts 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 such forward-looking statements.  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 rapi dly changing technology affecting financial services.

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.

FINANCIAL CONDITION

Total assets were $301.8 million at March 31, 2003, compared to $304.7 million at December 31, 2002, representing a decrease of $2.9 million, or 1.0%. Cash and cash equivalents decreased $8.4 million, or 37.1%, during the quarter, including a $10.3 million decrease in federal funds sold. Total securities decreased approximately $3.8 million, or 5.3%, during the quarter.  Since one of the primary functions of the securities portfolio is to provide a source of liquidity, it is structured such that securities maturities and cash flows satisfy the Company’s liquidity needs and asset-liability management requirements.  

The decreases in cash and cash equivalents and securities were used to fund cash outflows for deposit withdrawals and securities sold under agreements to repurchase which decreased $6.4 million, or     2.6%, and $1.2 million, or 8.1%, respectively, during the quarter.  The Bank has historically experienced an outflow of deposit funds during the first quarter of the year, partially due to the slowdown in tourism.

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net loans increased $9.0 million, or 4.6% from December 31, 2002, to $206.2 million at March 31, 2003.  The loan growth in the first quarter of 2003 was primarily in commercial and commercial real estate loans and residential real estate loans. The allowance for loan losses amounted to $2.6 million, or 1.23% of total loans, at March 31, 2003, compared to $2.7 million, or 1.35% of total loans at December 31, 2002.  The components of the change in the allowance for loan loss during the quarter ended March 31, 2003, included net loan charge-offs of $69,000.  Loans past due more than 90 days and loans placed on nonaccrual status, were approximately $1.3 million, or 0.60% of total loans at March 31, 2003, compared to $1.7 million, or 0.86% of loans at December 31, 2002.  

At March 31, 2003, the ratio of net loans to deposits was 88.2%, compared to 82.1% at the end of 2002. The increase in this ratio is due to deposit shrinkage normally experienced during the first quarter along with the loan growth during the three months ended March 31, 2003.

Total shareholders’ equity increased to $34.0 million, or 11.3% of total assets, primarily due to year-to-date net income of $598,000, less the dividend declared of $316,000.  The Company and its subsidiary met all regulatory capital requirements at March 31, 2003.  

RESULTS OF OPERATIONS

Net income for the quarter ending March 31, 2003, was $598,000, or $0.23 per share, as compared to $376,000, or $0.14 per share during the same period last year, an increase of $222,000, or 58.8%.  The increase was a result of a $324,000, or 13.4%, increase in net interest income and a $106,000, or 3.9%, decrease in non-interest expenses, and a $71,000 credit for loan losses. These increases to net income were partially offset by a $115,000, or                           19.7%, decrease in non-interest income.  The decrease in non-interest income was essentially all due to a $115,000 gain on sale of securities in the first quarter of 2002.

Interest income for the quarter ended March 31, 2003 was $4.0 million, a decrease of $355,000, or 8.2%, over the same period last year.  Interest and fees on loans increased $22,000, or 0.7%, with the volume of loan growth more than offsetting the decrease in loan interest yields.  Interest on securities decreased $325,000, or 29.5%, as short term interest rates remained at historically low levels and certain callable securities were redeemed by the issuer.  Other interest income decreased $52,000, or 84.9%, due to federal funds sold being invested to fund growth of the loan portfolio.

CSB BANCORP, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest expense decreased $679,000, or 35.6%, to $1.2 million for the quarter ended March 31, 2003, compared to $1.9 million for the quarter ended March 31, 2002.  Interest expense on deposits decreased $767,000, or 42.8%, from the same period as last year.  This decrease was caused by a $5.3 million, or 2.2%, decrease in interest-bearing deposits, as well as higher rate certificate of deposits renewing at lower rates.

A credit for loan losses of $71,000 was recorded during the first quarter of 2003, as a result of an improvement in asset quality through the reduction and payoff of classified assets.

Non-interest income decreased $115,000 primarily as a result of the gain on sale of investment securities during the 2002 period, as noted previously.

Non-interest expenses decreased $106,000, or 3.9%, for the three months ended March 31, 2003, compared to the same period in 2002.  Salaries and employee benefits decreased $44,000, or 3.2%; occupancy expense increased $19,000, or 12.9%; professional and director fees decreased $24,000, or 11.4%; and other expenses decreased $60,000 or 7.9%. The provision for income taxes was $81,000 during the first quarter of 2003, as compared to a credit of $84,000 for the first quarter of 2002.  

CSB BANCORP, INC.

QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

ITEM 3  QUALITATIVE AND QUANTITATIVE DISCLOSURE ABOUT MARKET RISK

There have been no material changes in the quantitative and qualitative disclosures about market risks as of March 31, 2003 from that presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2002.  Management performs a quarterly analysis of the Company’s interest rate risk.  All positions are currently within the Board-approved policy limits.

ITEM 4.  

CONTROLS AND PROCEDURES

The Chief Executive Officer and the Chief Financial Officer of the Company have reviewed, as of a date within ninety days of this filing, the disclosure controls and procedures that ensure that information relating to the Company required to be disclosed by the Company in the reports that it files or submits under the Securities and Exchange Act of 1934, as amended, is recorded, processed, summarized and reported in a timely and proper manner.  Based upon this review, the Company believes that there are adequate controls and procedures in place.  There are no significant changes in the internal controls or other factors that could affect the internal controls after the date of the evaluation.

CSB BANCORP, INC.

FORM 10-Q

Quarter ended March 31, 2003

PART II – OTHER INFORMATION

Item 1 -

Legal Proceedings:

There are no matters required to be reported under this item.

Item 2 -

Changes in Securities and Use of Proceeds:

There are no matters required to be reported under this item.

Item 3 -

Defaults Upon Senior Securities:

There are no matters required to be reported under this item.

Item 4 -

Submission of Matters to a Vote of Security Holders:

There are no matters required to be reported under this item.

Item 5 -

Other Information:

There are no matters required to be reported under this item.

Item 6 -

Exhibits and Reports on Form 8-K:

(a)

Exhibits:  

(b)

Reports on Form 8-K:  

Form 8-K dated January 10, 2003, containing a quarterly report to shareholders regarding fourth quarter 2002 earnings and announcing a dividend to shareholders.

Form 8-K dated January 24, 2003, containing a quarterly report to shareholders that included financial statements for the period ended December 31, 2002.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

CSB BANCORP, INC.

(Registrant)

Date:  May 12, 2003

/s/ C. JAMES BESS

C. James Bess

President

Chief Executive Officer

Date:  May 12, 2003

/s/ A. LEE MILLER

A. Lee Miller

Senior Vice President

Chief Financial Officer

CERTIFICATIONS

President and Chief Executive Officer

I, C. James Bess, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of CSB Bancorp, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as of a date within ninety days prior to the filing date of this quarterly report (the "Evaluation Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)

any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.

The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003

/s/ C. JAMES BESS

C. James Bess

President and

Chief Executive Officer

CSB BANCORP, INC.

Senior Vice President and Chief Financial Officer

I, A. Lee Miller, certify that:

1.

I have reviewed this quarterly report on Form 10-Q of CSB Bancorp, Inc.;

2.

Based on my knowledge, this quarterly report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this quarterly report;

3.

Based on my knowledge, the financial statements, and other financial information included in this quarterly report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this quarterly report;

4.

The registrant's other certifying officers and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Securities Exchange Act of 1934 Rules 13a-14 and 15d-14) for the registrant and we have:

a)

designed such disclosure controls and procedures to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this quarterly report is being prepared;

b)

evaluated the effectiveness of the registrant's disclosure controls and procedures as    of a date within ninety days prior to the filing date of this quarterly report (the "Evaluation  Date"); and

c)

presented in this quarterly report our conclusions about the effectiveness of the disclosure controls and procedures based on our evaluation as of the Evaluation Date;

5.

The registrant's other certifying officers and I have disclosed, based on our most recent evaluation, to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent function):

a)

all significant deficiencies in the design or operation of internal controls which could adversely affect the registrant's ability to record, process, summarize and report financial data and have identified for the registrant's auditors any material weaknesses in internal controls; and

b)    any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal controls; and

6.     The registrant's other certifying officers and I have indicated in this quarterly report whether there were significant changes in internal controls or in other factors that could significantly affect internal controls subsequent to the date of our most recent evaluation, including any corrective actions with regard to significant deficiencies and material weaknesses.

Date: May 12, 2003

/s/ A. LEE MILLER

A. Lee Miller

Senior Vice President and

Chief Financial Officer