Press Release  |  January 26, 2007


Fourth Quarter and Calendar Year Highlights

Quarter Ended
December 31, 2006
Full Year Ended
December 31, 2006
Diluted earnings per share
Net Income
Return on average common equity
Return on average assets

Millersburg, Ohio – January 26, 2007 – CSB Bancorp, Inc. (OTCBB: CSBB.ob) today announced fourth quarter net income of $846 thousand, or $.34 per basic and diluted share, as compared to $903 thousand, or $.35 per basic and diluted share for the same period in 2005.

Annualized returns on average common equity (“ROE”) and average assets (“ROA”) for the quarter were 9.65% and 1.05%, respectively, compared with 9.93% and 1.12% for the fourth quarter of 2005.

For the full year of 2006, the Company reported net income of $3.11 million, or $1.23 per diluted share, up from $2.87 million, or $1.09 per diluted share in 2005. Full year ROE and ROA were 8.95% and .97%, respectively, compared to 7.92% and .91% in 2005.

“During the fourth quarter, the Company continued to make progress in controlling operating costs while sustaining its income generating ability,” said Eddie L. Steiner, President and CEO. “Our efficiency ratio improved 154 basis points compared to the same quarter in the prior year. We view these operating efficiencies as fundamental to improved earnings. At the same time, we’ve been able to protect our net interest margin, which held steady in the fourth quarter at 4.40%, our eighth consecutive quarter above 4%. And while non-interest income of $614 thousand was 13% below the same quarter last year, more than half of this reduction resulted from a loss on sale of $4 million in U.S. Agency bonds which will be more than offset in the coming year with higher-yields from replacement securities. The remainder of the fourth quarter’s lower non-interest income was attributable to reduced customer use of overdraft privilege services.”

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 fourth quarter of 2006 compared with $4.2 million in the prior-year fourth quarter, a decrease of 3.2%. Revenue increased 5.3% for the full year of 2006 to $16.0 million, as compared to $15.2 million in 2005.

Commenting on the Company’s operating initiatives, Mr. Steiner noted, “During the fourth quarter, we introduced Xpress Remote Deposit Capture, an electronic imaging service that provides our business customers the convenience of depositing checks electronically without coming to the bank. We also continued preparations for opening a new banking center near Orrville, Ohio in March 2007. These initiatives are examples of our commitment to enhancing customer service while simultaneously improving company-wide operating efficiencies.”

Mr. Steiner continued, “Our fourth quarter efficiency ratio, defined as operating expenses divided by revenue, was 65.4%, comparing very favorably to last year’s same period results of 67.0%. For the full year of 2006, we improved the ratio by 152 basis points to 68.4% versus the prior year’s 69.9% efficiency ratio.”

Non-interest expense totaled $2.6 million during the quarter, a decrease of $188 thousand, or 6.8%, from fourth quarter 2005. For the full year ended December 31, 2006, non-interest expense increased $112 thousand, or 1.0% versus the prior full year. The full year non-interest expense includes a pre-tax charge of $237 thousand from an isolated irregularity regarding cash assets. The irregularity was discovered, recorded and reported during the second quarter reporting period and remains the subject of an ongoing investigation. The Company’s insurance against this type of loss carries a $50 thousand deductible, and a loss claim is pending.

Federal income tax expense was $398 thousand for fourth quarter 2006, compared to $397 thousand for the same quarter in 2005. Full year income tax of $1.4 million for 2006 reflects an effective tax rate of 31.5% compared to an effective tax rate of 28.9% in 2005. The increase in the effective tax rate for 2006 was primarily the result of comparatively lower tax-free interest income due to sales and maturities of bonds within the Company’s tax-free investment portfolio during both 2005 and 2006.

Average deposit balances grew by $5.6 million in the fourth quarter, an increase of 2.3%, but remained 2.2% below the average of the fourth quarter in 2005. Commenting on the continuing competitive banking environment, Mr. Steiner noted, “Deposit growth and retention remain challenging issues for our Company and for the banking industry as a whole. While the strongly competitive environment is a somewhat limiting factor for organic growth, our combined average total deposit and repurchase agreement balances grew by 1.9% in 2006. We also sustained our loan growth in the fourth quarter, although noting some deceleration in the growth rate with average loan balances increasing .4% over the prior quarter’s average balances.”

Total assets averaged $320.4 million during the quarter, a decline of $.8 million, or .2% from the same quarter in the prior year. Average loan balances of $230.0 million reflect an increase of $14.6 million, or 6.8%, over fourth quarter prior year, while average securities balances declined $14.5 million, or 16.8% as compared to fourth quarter 2005.

Assets totaled $327 million at year-end, up $6.4 million, or 2.0% from December 31, 2005. Year-end loans totaled $232 million, up $17.4 million, or 8.1%, versus the end of 2005. The Company funded some of its loan growth through cash flow from maturing investments, allowing total investment securities, to decline $11.0 million, or 13.5% as compared to the prior year-end.

Within the loan category, commercial loans including commercial real estate increased $5.6 million, or 4.6% over the prior year-end, construction loans increased $5.5 million, or 250%, residential mortgage balances grew $6.2 million, or 10.3% during the year, and home equity balances increased $1.0 million, or 5.4%. Consumer installment loan and credit card balances declined by $1.0 million, or 8.9% during the year.

As of December 31, 2006, nonperforming assets totaled $1.51 million, or .65% of period-end loans plus other real estate, compared with $1.24 million, or .58%, at the prior year-end. Net charge-offs for the quarter totaled $10 thousand, or an annualized rate of .02% of average total loans. For the full year of 2006, net charge-offs totaled $140 thousand or .06% of average total loans as compared to net charge-offs of $412 thousand or .19% during 2005.

The Company’s allowance for loan losses at December 31, 2006 was 1.12% of period end loans and the Company funded $80 thousand in loan loss provision during the fourth quarter. The ratio of allowance for loan losses to nonperforming loans stood at 173% at year-end. Commenting on the Company’s credit quality, Mr. Steiner noted, “We believe the loan loss reserve is appropriately funded for our current portfolio risk and loan charge-offs remain at modest levels.”

Liabilities totaled $292 million at December 31, 2006, up $6.4 million or 2.2% from the prior year-end. Deposit balances totaled $260 million at year-end, an increase of $4.8 million, or 1.9% above the prior year-end total. Within the deposit category, time deposits increased $8.6 million, or 7.4% above the prior year balance, while non interest-bearing account balances increased $2.6 million, or 6.3%. Interest-bearing checking, money market and traditional savings balances declined a combined $6.5 million, or 6.7% from year ago levels. In addition to the increase in year-end deposit balances, securities sold under repurchase agreement grew by $6.6 million, or 40% over the prior year-end balance. These agreements, while considered short-term borrowings, are primarily tied to customer deposit sweep accounts.

Shareholders’ equity totaled $35.1 million on December 31, 2006 with 2.5 million common shares outstanding at year-end. The Company’s capital position remains strong, with tangible equity to assets at 10.7% on December 31, 2006, compared to 11.0% on December 31, 2005. The Company declared a common dividend of $.16 per share during the quarter, a $.02 increase from the prior-year quarter. Total dividends declared during 2006 were $.64 per share, a 14% increase above prior year dividends.

About CSB Bancorp, Inc.
CSB is a financial holding company headquartered in Millersburg, Ohio, with approximate assets of $327 million as of December 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 Trust offices located in Millersburg and Wooster, Ohio. The Commercial and Savings Bank will be opening a new banking center near Orrville, in Wayne County, Ohio during March 2007.

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

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