UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

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, 2004

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.

6 W. Jackson Street, P.O. Box 232, Millersburg, Ohio 44654
(Address of principal executive offices)

(330) 674-9015
(Registrant’s telephone number)

Indicate by check mark whether the registrant (1) has 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 þ          No o

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

Yes o          No þ

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

CSB BANCORP, INC.
FORM 10-Q
QUARTER ENDED September 30, 2004

Table of Contents

CSB BANCORP, INC.

See note to consolidated financial statements.

3.

CSB BANCORP, INC.

See note to consolidated financial statements.

4.

CBS BANCORP, INC.

See note to consolidated financial statements.

5.

CSB BANCORP, INC.

See note to consolidated financial statements.

6.

CSB BANCORP, INC.

NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accompanying consolidated financial statements include the 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 transactions and balances 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 September 30, 2004, 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, 2003, 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 September 30, 2004 are not necessarily indicative of the operating results for the full year or any future interim period.

NOTE 2 — SECURITIES

Securities consist of the following at September 30, 2004 and December 31, 2003:

September 30, 2004

7.

CSB BANCORP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

NOTE 2 — SECURITIES (continued)

December 31, 2003

A one-time reclassification of all held-to-maturity securities to available-for-sale was completed during the quarter ended September 30, 2004.

8.

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. and its subsidiary (the Company) at September 30, 2004, compared to December 31, 2003, and the consolidated results of operations for the nine month and quarterly periods ending September 30, 2004 compared to the same periods in 2003. 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 footnote.

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 rapidly 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 $309.0 million at September 30, 2004, compared to $306.2 million at December 31, 2003, representing an increase of $2.8 million or .9%. Cash and cash equivalents increased $1.7 million, or 9.6%, during the nine-month period ending September 30, 2004, due to a $2.0 million decrease in cash and due from banks and a $3.8 million increase in Federal funds sold. Net loans increased $1.5 million (0.7%) while deposits decreased $9.4 million (3.8%) during the nine-month period. Consequently, Federal Home Loan Bank borrowings increased $9.4 million during the period.

9.

CSB BANCORP, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

As a strategic initiative, the Company is focusing on expanding its public fund relationships to grow both lending and deposit balances. Due to the Company’s inability to secure public fund deposits with out-of-state municipal securities, management determined that the best course of action would be to liquidate the out-of-state portfolio previously classified as held-to-maturity. As a result of a change in executive management and the implementation of this strategic initiative, the Company made a one-time reclassification of all held-to-maturity securities to available for sale with the intent to classify all future security purchases as available for sale. The action allows management to enhance the diversity and usage of the securities portfolio. The amortized cost of securities transferred from held-to-maturity to available-for-sale was $31.7 million resulting in the recording of gross unrealized gains of $1.7 million at September 30, 2004.

Net loans increased $1.5 million, or 0.7% during the nine-month period ended September 30, 2004. This increase was due to a combination of increased loan demand and production within the Company’s market area. The allowance for loan losses amounted to $2,575,000, or 1.20% of total loans at September 30, 2004, compared to $2,459,000, or 1.16 % of total loans at December 31, 2003. The components of the change in the allowance for loan losses during the nine-month period ended September 30, 2004, included a provision of $423,000 and net loan charge-offs of $307,000. Loans past due more than 90 days and still accruing interest and loans placed on nonaccrual status, aggregated $1,673,000, or 0.78% of total loans at September 30, 2004, compared to $1,345,000, or 0.63% of total loans at December 31, 2003.

At September 30, 2004, the ratio of net loans to deposits was 88.6%, compared to 84.7% at December 31, 2003. The increase in this ratio is due to loan growth coupled with deposit shrinkage experienced during the nine months ended September 30, 2004.

The increase in Federal Home Loan Bank borrowings resulted from a $10 million leverage program entered into during the first quarter of 2004. Such borrowings have been used to fund loan growth and deposit shrinkage. An increase of $1.0 million in securities sold under repurchase agreements during the nine-month period have also been used to fund portions of the loan growth.

Total shareholders’ equity amounted to $36.3 million, or 11.7% of total assets, at September 30, 2004, compared to $34.7 million, or 11.3% of total assets, at December 31, 2003. The increase in shareholders’ equity during the nine months ended September 30, 2004 was principally due to, net income of $1,875,000, dividends declared of $1,031,000, and the increase in unrealized gain on securities, net of tax, of $695,000. The Company and its subsidiary met all regulatory capital requirements at September 30, 2004.

10.

CSB BANCORP, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

RESULTS OF OPERATIONS

Three months ended September 30, 2004 and 2003

For the quarter ended September 30, 2004, the Company recorded net income of $747,000, or $.28 per share, as compared to net income of $339,000, or $.13 per share for the quarter ended September 30, 2003. The increase in net income for the quarter of $408,000 was principally due to a $139,000 increase in net interest income, gain on the sale of securities of $559,000, a $250,000 decrease in salaries and employee benefits associated with $237,000 in severance payments to the prior CEO, offset by a $250,000 increase in the provision for loan losses and a $280,000 increase in the federal income tax provision.

Interest income for the quarter ended September 30, 2004 was $3.8 million a decrease of $42,000 or 1.1%, compared to the same period in 2003. This decrease was primarily due to a decrease in loan interest rates. Interest expense for the quarter ended September 30, 2004 was $960,000, a decrease of $181,000, or 15.8%, from the same period in 2003. The decline in interest expense occurred due to both decreases in rate and average volume of interest-bearing liabilities.

The provision for loan losses for the quarter ended September 30, 2004 was $250,000, compared to no provision for the same quarter in 2003. The provision or credit for loan losses is determined based on management’s calculation 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 for the quarter ended September 30, 2004 was $1.1 million, an increase of $475,000, or 78.3%, compared to the same quarter in 2003. This increase was primarily due to a gain on the sale of securities of $559,000, and increases in the fees on deposits of $34,000. These increases were offset by decreases in mortgage banking income of $54,000, and trust and brokerage income of $17,000. For the quarter ended September 30, 2003 a nonrecurring gain of $79,000 was recognized on the sale of other real estate. Non-interest expenses for the quarter ended September 30, 2004 decreased $324,000, or 10.8%, compared to the third quarter of 2003. This decrease was due primarily to the decrease in salary and benefit expense explained above, as well as a $95,000, or 33.3%, decrease in professional and director fees, which was also related to severance payments to the prior CEO in the form of consulting fees.

Nine months ended September 30, 2004 and 2003

Net income for the nine months ending September 30, 2004, was $1.9 million, or $.71 per share, as compared to $1.5 million, or $.57 per share during the same period in 2003. Return on average assets and return on average equity were 0.80% and 7.17%, respectively, for the nine month period of 2004 compared to 0.67% and 5.86%, respectively for 2003.

Net interest income was $8.3 million for the nine months ended September 30, 2004, an increase of $129,000 of 1.6% from the same period last year. Total non-interest expenses

11.

CSB BANCORP, INC.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

decreased $531,000, or 6.4%, for the nine month period ended September 30, 2004, as compared to the same period of 2003 while non-interest income increased $519,000, or 31.8%. These improvements in net income were partially offset by a change in the provision (credit) for loan losses of $474,000.         .

Interest income for the nine months ended September 30, 2004 was $11.2 million, a decrease of $528,000, or 4.5%, from the same period in 2003. Interest income on securities decreased $24,000, or 1.1%, as short-term interest rates fell and certain callable securities were called.

Interest expense decreased $656,000 to $2.9 million for the nine months ended September 30, 2004, compared to the nine months ended September 30, 2003. Interest expense on deposits decreased $515,000, or 17.6%, from the same period as last year, while interest expense on other borrowings decreased $141,000, or 22.6%. The decrease in deposit interest expense was caused by the lower rates on transaction accounts and certificates of deposit, as well as an overall decrease in average interest-bearing deposit balances. The net interest margin improved by 10 basis points for the nine-month period ended September 30, 2004 to 3.83% from 3.73% for the same period in 2003.

The provision for loan losses was $423,000 during the first nine months of 2004, as compared to a credit of $51,000 in the same nine-month period of 2003. The provision or credit for loan losses is determined based on management’s calculation 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 increased $519,000, or 31.8%, during the nine months ended September 30, 2004 as compared to the same period in 2003. The increase in non-interest income was primarily due to a $585,000 gain on sale of securities in 2004 and a $37,000 increase in service charges on deposit accounts. Non-interest expenses decreased $531,000, or 6.4%, for the nine months ended September 30, 2004, compared to the same period in 2003. Salaries and employee benefits decreased $352,000 or 8.2%. Professional and director fees decreased $132,000, or 19.0%, primarily a result of the severance package of the prior CEO. Other expenses decreased $55,000, or 2.6%, primarily the result of reduced third party outsourcing fees within the Trust Department.

The provision for income taxes was $416,000 (effective rate of 18.2%) for the nine months ended September 30, 2004, compared to $78,000 (effective rate of 4.9%) for the nine months ended September 30, 2003. The increase in the effective tax rate resulted from a decrease in tax-exempt interest income as a portion of total income before income taxes.

12.

CSB BANCORP, INC.

ITEM 3 QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK

There have been no material changes in the quantitative and qualitative disclosures about market risks as of September 30, 2004 from that presented in the Company’s Annual Report on Form 10-K for the fiscal year ended December 31, 2003. Management performs a quarterly analysis of the Company’s interest rate risk. All positions are currently within the Board-approved policy.

ITEM 4 CONTROLS AND PROCEDURES

With the participation of our management, including our Chief Executive Officer and Chief Financial Officer, we have evaluated the effectiveness of our 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, our Chief Executive Officer and Chief Financial Officer have concluded that:

(a) information required to 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 SEC’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 our 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 our 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.

13.

CSB BANCORP, INC.

FORM 10-Q
Quarter ended September 30, 2004

PART II — OTHER INFORMATION

Item 1 — Legal Proceedings:

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

Item 2 — Unregistered Sales of 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.      

14.

CSB BANCORP, INC.
FORM 10-Q
Quarter ended September 30, 2004

PART II — OTHER INFORMATION

Item 6 — Exhibits:

15.

CSB BANCORP, INC.

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.

		/s/ CSB BANCORP, INC.
		CSB BANCORP, INC.
		(Registrant)

Date: November 12, 2004		/s/ John J. Limbert
		John J. Limbert
		President Chief Executive Officer

Date: November 12, 2004		/s/ Paula J. Meiler
		Paula J. Meiler
		Senior Vice President Chief Financial Officer

16.

CSB BANCORP, INC.
Index to Exhibits

17.