Press Release  |  April 13, 2006


CSB BANCORP, INC. REPORTS INCREASE IN FIRST QUARTER 2006 EARNINGS PER SHARE

First Quarter 2006 Highlights
• Diluted earnings per share of $0.30

• Net income of $774 thousand

• Return on average common equity of 8.89%

• Return on average assets of 0.99%

Millersburg, Ohio
April 13, 2006

CSB Bancorp, Inc. (“CSB”) (OTC BB: CSBB.OB) today announced first quarter 2006 net income of $774 thousand, or $0.30 per diluted share, up from $667 thousand, or $0.25 per diluted share, for the same period in 2005. Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 8.89% and 0.99%, respectively, compared with 7.42% and 0.86% for the first quarter of 2005.
“Our first quarter results reflect continued progress in enhancing “other income” generation through the ongoing success of fee-based programs as well as improving our net interest margin,” said Rick L. Ginther, Interim Chief Executive Officer. “Our strategic focus of prudently growing the balance sheet remains unaltered as we have taken steps to increase the volume of earning assets while continuing to grow core deposit relationships. Growth in both assets and core deposits has had a positive effect this quarter despite a challenging interest rate environment. Service charges also increased significantly over the first quarter 2005, a result of our consumer and small business customer use of fee-based products.”
Focusing on CSB’s strong equity position, Mr. Ginther added, “Our capital position, coupled with the Company’s high credit quality and core earnings dependability, has allowed us to increase the shareholder’s current cash dividend declared for the first quarter 2006 to $.16, up $.02 from the first quarter dividend of $0.14 declared in 2005. Additionally, the share repurchase program continues to provide enhancement of earnings per share with the purchase of over 11,000 shares in the first quarter. Even with these purchases, our equity to assets ratio stands at a very strong 10.98%.”
Total revenue, defined as net interest income on a fully-tax equivalent basis plus non-interest income net of securities transactions, was $4.0 million for the first quarter of 2006, compared with $3.6 million in the prior-year first quarter, an increase of 11.1%. The net interest margin increased 43 basis points to 4.57%, while average assets increased $3.1 million to $316.8 million. During the first quarter of 2006, the average balance of securities increased approximately $7.2 million, or 8.8%, compared with the first quarter of 2005, while average loans decreased $6.4 million, or 2.9%, to $216.6 million.
Non-interest income for the first quarter of 2006 totaled $611 thousand, compared with $533 thousand, (net of securities gains of $247 thousand), for the first quarter of 2005, an increase of 14.6%. During the first quarter of 2006, service charges on deposits rose $103 thousand, or 48.2%, compared with the first quarter of 2005. Trust and brokerage fees decreased $25 thousand, or 21.3%, in the first quarter of 2006 compared with the same quarter last year.
Non-interest expense totaled $2.7 million for the first quarter of 2006, an increase of $71 thousand or 2.6% over the first quarter of 2005. The efficiency ratio for the quarter was 69.38%, compared with 70.47% for the year ago quarter.


Federal income tax expense was $351 thousand and $259 thousand for the quarters ended March 31, 2006 and 2005, respectively. The effective tax rate for the first quarter 2006 was 31.2% compared to 28.0% for the same quarter in 2005. The increase in the effective tax rate for first quarter 2006 reflects a decline in tax-free interest income, primarily resulting from the sale and maturity of bonds within the tax-free investment portfolio.
As of March 31, 2006, nonperforming assets were $1.1 million, or 0.48% of period-end loans plus other real estate, compared with $1.2 million, or 0.58%, as of December 31, 2005, and $1.4 million or 0.64%, as of March 31, 2005. Net charge-offs for the first quarter of 2006 totaled $7 thousand, compared with net charge-offs of $271 thousand for the first quarter of 2005. Commenting on the Company’s credit quality Ginther said, “At March 31, 2006, our delinquency rate stood at 0.58% versus 0.84% on March 31, 2005. Coupled with the low nonperforming assets and declining charge-off rates, we remain optimistic about our ability to manage credit deterioration that could be expected to result from a slowdown in the economy.”
The Company recorded a $32 thousand loan loss provision in the first quarter of 2006, as compared to $106 thousand in the first quarter of 2005. The decrease in loan loss provision for the first quarter 2006 from the first quarter 2005 reflects the increase in the Company’s level of allowance for loan losses as a percentage of nonperforming loans.
During the first quarter of 2006, the level of nonperforming loans improved from the prior quarter. This improvement, combined with a declining historical charge-off history, has factored into the Company’s reserve methodology. The allowance for loan losses at March 31, 2006, was 1.12% of period-end loans, compared with 1.14% on December 31, 2005, and 1.08% on March 31, 2005. The March 31, 2006, ratio of allowance for loan losses to nonperforming loans stood at 369%.
Assets at March 31, 2006, totaled $319 million, up 1.95% from March 31, 2005. Period-end loans were $221.4 million, declining $2.7 million or 1.2%, driven by a $3.9 million decline in mortgage loans coupled with a $3.0 million reduction in commercial participation loans that were primarily repurchased by the originating bank. These reductions in loan balances were partially offset by home equity loans increasing $3.5 million or 22.4%, and consumer installment loans increasing approximately $500 thousand. Investment securities increased $9.2 million, or 13.2%, over the March 31, 2005 balance.
Deposits totaled $247 million at March 31, 2006, compared with $244 million on March 31, 2005. Year-over-year, average checking account balances have decreased approximately $500 thousand. Over those same time periods, money market accounts increased $2 million, as a result of a new product offering, while average traditional savings accounts declined $2 million. As the period represented a time of rising short-term interest rates, time deposits of less than $100 thousand grew an average $3.4 million from first quarter 2005 to first quarter 2006, while time deposits greater than $100 thousand remained virtually unchanged.
Shareholders’ equity was $35.0 million on March 31, 2006. The Company’s capital position remains strong, as tangible equity to assets was 10.98%, compared with 11.44% on March 31, 2005. The common dividend declared during the quarter was $0.16 per share, a $0.02 increase from the prior-year quarter. During the first quarter of 2006 the Company repurchased 11,094 common shares. Period-end common shares outstanding totaled 2.567 million.
About CSB Bancorp, Inc.
CSB is a financial services holding company headquartered in Millersburg, Ohio, with approximate assets of $319 million as of March 31, 2006. CSB provides a complete range of banking and other financial services to consumers and businesses through its wholly owned subsidiary, The Commercial and Savings Bank, with nine banking centers in Holmes, Tuscarawas and Wayne counties and a Trust office in Wooster, Ohio.


Forward-Looking Statement
This release contains forward-looking statements relating to present or future trends or factors affecting the banking industry, and specifically the financial condition and results of operations, including without limitation, statements relating to the earnings outlook of the Company, as well as its operations, markets and products. Actual results could differ materially from those indicated. Among the important factors that could cause results to differ materially are interest rate changes, softening in the economy, which could materially impact credit quality trends and the ability to generate loans, changes in the mix of the Company’s business, competitive pressures, changes in accounting, tax or regulatory practices or requirements and those risk factors detailed in the Company’s periodic reports and registration statements filed with the Securities and Exchange Commission. The Company undertakes no obligation to release revisions to these forward-looking statements or reflect events or circumstances after the date of this release.


Contact Information:
Paula J. Meiler, SVP & CFO
330-763-2873
paula.meiler@csb1.com

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