CSB Bancorp (CSBB) 10-K 2013 FY Annual report

Exhibit 13

Pictured on front cover: Brian Miller, ProVia; Robbie Keim, Keim Lumber; Judy Delaney, Goodwill Industries of Wayne and Holmes Counties

2013 Report to Shareholders  |  CSB Bancorp, Inc.        3

LETTER TO SHAREHOLDERS

FELLOW SHAREHOLDERS:

CSB continues to focus on providing excellent service to our customers, developing our employees, supporting our communities and increasing value for our shareholders.

2013 results were encouraging and continued the Company’s growth and forward performance momentum. Net income increased to $5.2 million, eclipsing last year’s record high, while average total assets climbed to $581 million, the seventh consecutive year of record size for the Company.

Return on average shareholders’ equity amounted to 9.93% and return on average assets equaled 0.90%. Both of these numbers, while respectable, leave considerable room for improvement. We are intent on continuing the upward trend.

Credit quality within the Company’s loan and investment portfolios remained solid during 2013. Net charge-offs totaled 0.09% of average loans for the second year in a row. Loans more than 30 days past due or on nonaccrual amounted to 1.26% of year-end balances. The Company has no significant concentrations within its commercial loan portfolio. At year-end, commercial real estate loans, both owner and non-owner occupied, comprised 34% of total loans, followed by commercial and industrial loans at 31% and residential loans at 29%. Construction and land development, and consumer installment loans, comprised the remainder of loan balances.

Average deposit balances increased for the seventh year in a row and reached a fifth consecutive record high. Our capital levels exceed all regulatory requirements.

CSB also continued to pay a strong dividend, with an average yield of 3.75% over the course of the year. Our annual dividend yield has amounted to at least 3.75% for each of the past seven years based on average published daily closing stock prices. Total return on CSB stock during 2013 amounted to 15.9% when including dividends with stock price appreciation.

GROWTH PLANS

We remain committed to steadily growing the Company. Growth provides scale to increase cash flow for needed investments in infrastructure and personnel, generates capital to move forward when opportunities arise and creates a venue for the continued professional development of staff.

We evaluate growth opportunities within the context of prudent risk management and their fit with our strategic plan. We believe our current market area offers considerable growth potential. Growing our existing customer relationships, attracting new customers and serving each customer very well is the daily focus of every CSB employee.

We are also open to select expansion opportunities. Over the past seven years, the Company has acquired one bank, opened two new branches and purchased two additional branches. We continue to evaluate similar opportunities through the lens of what makes good business sense.

THE BANKING ENVIRONMENT

In our view, the new normal for banking includes interest margins that are lower than historic average, pervasive regulatory guidance, disruptive innovation by less-regulated entities, and a general preference among many customers for digital services. The contributing factors to this outlook are myriad and some are complex, but a few are unmistakably noteworthy.

The plodding economic recovery and sustained low interest rate environment continues to tamp down fundamental momentum for banking, as well as many other industries. However, there are clear signs of slow and steady improvement in the housing market, employment, household financial conditions and consumer spending, both nationally and in our local markets. The banking industry also has been regaining its health from a safety and soundness perspective and making progress toward more normalized earnings.

Congress’ inability to meaningfully address our nation’s most vexing fiscal problems portends more significant difficulties down the road. The gridlock is currently having a negative impact on the nation’s gross domestic product and may ultimately have adverse implications for individuals, corporations and communities alike. We do not anticipate that any significant economic legislation will be signed into law during the coming mid-term election year.

Resource intensive regulatory initiatives, technology initiatives, emerging payment system alternatives and threats to data integrity are increasing rapidly and adding to the challenging banking environment. These developments will be present for some time to come and the pace of change is not likely to slow in the foreseeable future.

4        2013 Report to Shareholders  |  CSB Bancorp, Inc.

LETTER TO SHAREHOLDERS

Some of the related impacts these factors are having on the banking industry are hard to miss. Many customers now choose electronic devices to conduct much of their transactional banking. Mobile phones and tablet computers have become common personal items and, along with desktop and laptop computers, are convenient ways to make transfers, deposit checks and monitor account balances. Trips to the neighborhood branch are less frequent these days.

Major breaches of retailer and other databases have been creating mayhem through fraudulent use of private customer information, damaging consumer confidence, keeping I.T. professionals and security experts scrambling and on edge, and costing the banking industry millions of dollars in currently unrecovered fraud losses. More effective security barriers are being created and deployed, but such mischief is likely to remain a fact of life in this age of interconnected technologies.

Fledgling payment systems are testing the waters in peer-to-peer formats, seeking to disintermediate the banking system’s role of providing the reliable avenue for clearing of payments from one party to another. The Federal Reserve is actively working on an initiative to improve the U.S. payments system by coalescing stakeholders around an effort to create a ubiquitous near real-time retail payments system within the next five to ten years. It remains to be seen whether that can be accomplished, and whether that timeframe will be faster than the adoption of non-banking system platforms. Regulatory agencies are also monitoring increasing momentum among digital currencies in some sectors of monetary value exchange, although such currencies are currently without the safety of regulatory oversight.

SENIOR MANAGEMENT
STEVEN BAILEY	PAULA MEILER	EDDIE STEINER
Executive Vice President, Chief Operations/ Chief Information Officer	Senior Vice President, Chief Financial Officer	President, Chief Executive Officer

Many of the above factors are creating, individually or in concert with other factors, uncertainties for banks. These uncertainties are piling on top of existing incursions by nonbanks into traditional banking services such as lending and deposit-like services. Fundamentally, the overall challenge for banks will be to remain relevant in some of the aspects of the monetary system that have historically been the domain of the banking industry.

We are not waiting for more stable conditions to emerge. We are developing the capabilities and talent required for thriving in an environment of continuous change and innovation. We will continue keeping a sharp eye on costs and designing efficiencies. This will allow us to maximize the use of funds and talent for needed priorities. We are aligning our efforts in further development of delivery channels and organizing our teams in a manner that promotes agile response to opportunities at hand. We are investing for the future, positioning the Company for tomorrow’s requirements and opportunities as we grow and prepare for further growth.

INFRASTRUCTURE

In last year’s report, we outlined an ambitious list of technology upgrades and projects we were undertaking to further enhance our ability to serve customers effectively and efficiently. We are happy to report that we successfully completed deployment of a company-wide mortgage loan origination system, company-wide automated phone system, core computer processing system and an excellent mobile banking application. In addition, we’ve made considerable progress with our multi-year electronic document management initiative and are presently completing projects to upgrade all ATMs, install a company-wide commercial loan origination process and enhance debit card transaction capabilities. All of these initiatives are aimed squarely at supporting our commitment to provide excellent products and services safely, effectively and efficiently to our customers.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        5

6        2013 Report to Shareholders  |  CSB Bancorp, Inc.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        7

2013 FINANCIAL REVIEW

INTRODUCTION

CSB Bancorp, Inc. (the “Company” or “CSB”) was incorporated under the laws of the State of Ohio in 1991 and is a registered bank holding company. The Company’s wholly-owned subsidiaries are The Commercial and Savings Bank (the “Bank”) and CSB Investment Services, LLC, inactive. The Bank is chartered under the laws of the State of Ohio and was organized in 1879. The Bank is a member of the Federal Reserve System, with deposits insured by the Federal Deposit Insurance Corporation, and its primary regulators are the Ohio Division of Financial Institutions and the Federal Reserve Board.

The Company, through the Bank, provides retail and commercial banking services to its customers including checking and savings accounts, time deposits, cash management, safe deposit facilities, personal loans, commercial loans, real estate mortgage loans, installment loans, IRAs, night depository facilities and trust and brokerage services. Its customers are located primarily in Holmes, Tuscarawas, Wayne, Stark and portions of surrounding counties in Ohio.

The Company’s market area has historically exhibited relatively stable economic conditions; however, economic activity declined in the latter half of 2008 and the subsequent recovery continues at a slow pace. Unemployment levels in Holmes County have generally been among the lowest in the State of Ohio, while the balance of the Company’s market area reported unemployment levels below the state average for 2013 and 2012. Residential real estate property values have also returned to close to more normalized valuations. Household debt peaked in 2007 and has fallen as consumers were leery of taking on new loans; however, spending on durable goods, such as autos has begun to return to within the normal range. The Federal Reserve Bank of Cleveland has reported that a lot of Ohio’s growth activity in industrial production is coming from oil and shale. The Company’s market is adjacent to areas of primary shale activity.

FORWARD-LOOKING STATEMENTS

Certain statements contained in Management’s Discussion and Analysis of Financial Condition and Results of Operations are not related to historical results, but are forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. These statements involve a number of risks and uncertainties. Any forward-looking statements made by the Company herein and in future reports and statements are not guarantees of future performance, and actual results may differ materially from those in forward-looking statements because of various risk factors as discussed in this annual report and the Company’s Annual Report on Form 10-K. The Company does not undertake, and specifically disclaims, any obligation to publicly release the result of any revisions to any forward-looking statements to reflect the occurrence of unanticipated events or circumstances after the date of such statements.

8        2013 Report to Shareholders  |  CSB Bancorp, Inc.

2013 FINANCIAL REVIEW

SELECTED FINANCIAL DATA

The following table sets forth certain selected consolidated financial information:

(Dollars in thousands)	2013			2012			2011			2010			2009
Statements of income:
Total interest income	$	21,138		$	20,584		$	20,018		$	20,390		$	22,105
Total interest expense		2,255			2,978			3,678			4,820			6,340
Net interest income		18,883			17,606			16,340			15,570			15,765
Provision for loan losses		840			823			950			1,235			1,337
Net interest income after provision for loan losses		18,043			16,783			15,390			14,335			14,428
Noninterest income		4,318			4,204			3,508			3,275			3,243
Noninterest expense		14,848			14,450			13,609			12,546			12,746
Income before income taxes		7,513			6,537			5,289			5,064			4,925
Income tax provision		2,273			1,990			1,602			1,568			1,534
Net income	$	5,240		$	4,547		$	3,687		$	3,496	��	$	3,391
Per share of common stock:
Basic income per share	$	1.91		$	1.66		$	1.35		$	1.28		$	1.24
Diluted income per share		1.91			1.66			1.35			1.28			1.24
Dividends		0.72			0.72			0.72			0.72			0.72
Book value		19.15			19.17			18.07			17.24			16.76
Average basic common shares outstanding		2,736,473			2,734,889			2,734,799			2,734,799			2,734,799
Average diluted common shares outstanding		2,738,477			2,735,141			2,734,838			2,734,799			2,734,799
Year-end balances:
Loans, net	$	374,040		$	360,000		$	320,100		$	311,616		$	309,423
Securities		151,535			134,754			128,489			80,667			80,621
Total assets		596,465			586,900			551,233			457,056			450,666
Deposits		480,933			475,443			443,553			353,491			329,486
Borrowings		61,130			56,664			56,234			54,927			73,774
Shareholders’ equity		52,411			52,453			49,429			47,154			45,822
Average balances:
Loans, net	$	369,889		$	338,441		$	314,670		$	309,121		$	313,726
Securities		138,976			132,567			93,851			77,967			75,597
Total assets		581,150			564,875			471,329			445,649			427,613
Deposits		468,395			453,526			367,865			334,073			304,902
Borrowings		57,882			57,735			52,717			62,951			75,734
Shareholders’ equity		52,787			51,384			48,674			47,081			45,184
Select ratios:
Net interest margin, tax equivalent basis		3.51	%		3.36	%		3.71	%		3.73	%		3.93	%
Return on average total assets		0.90			0.80			0.78			0.78			0.79
Return on average shareholders’ equity		9.93			8.85			7.57			7.43			7.51
Average shareholders’ equity as a percent of average total assets		9.08			9.10			10.33			10.56			10.57
Net loan charge-offs as a percent of average loans		0.09			0.09			0.28			0.40			0.21
Allowance for loan losses as a percent of loans at year-end		1.34			1.26			1.26			1.28			1.29
Shareholders’ equity as a percent of total year-end assets		8.79			8.94			8.97			10.32			10.17
Dividend payout ratio		37.60			43.30			53.40			56.32			58.06

2013 Report to Shareholders  |  CSB Bancorp, Inc.        9

2013 FINANCIAL REVIEW

RESULTS OF OPERATIONS

Net Income

CSB’s 2013 net income was $5.2 million compared to $4.5 million for 2012, representing an increase of 15%. Basic and diluted earnings per share were $1.91, also up 15% from the prior year. The increased net income improved the return on average assets to 0.90% in 2013 from 0.80% in 2012 and return on average equity rose to 9.93% in 2013 from 8.85% in 2012.

Net income for 2012 was $4.5 million while basic and diluted earnings per share were $1.66, as compared to $3.7 million or $1.35 per share, for the year ended December 31, 2011. Net income increased 23% during 2012 as compared to 2011, due primarily to a $1.3 million increase in total net interest income and a $696 thousand increase in noninterest income. Partially offsetting the higher revenue were increases in noninterest expenses and federal income taxes. Return on average assets was 0.80% in 2012 compared to 0.78% in 2011, and return on average shareholders’ equity was 8.85% in 2012 as compared to 7.57% in 2011.

Net Interest Income

(Dollars in thousands)	2013			2012			2011
Net interest income	$	18,883		$	17,606		$	16,340
Taxable equivalent1		307			290			256
Net interest income, fully taxable equivalent	$	19,190		$	17,896		$	16,596
Net interest yield		3.46	%		3.31	%		3.65	%
Taxable equivalent adjustment1		0.05			0.05			0.06
Net interest yield-taxable equivalent		3.51	%		3.36	%		3.71	%

¹  Taxable equivalent adjustments have been computed assuming a 34% tax rate.

Net interest income is the largest source of the Company’s revenue and consists of the difference between interest income generated on earning assets and interest expense incurred on liabilities (deposits and short-term and long-term borrowings). Volumes, interest rates and composition of interest-earning assets and interest-bearing liabilities affect net interest income.

Net interest income increased $1.3 million or 7% in 2013 compared to 2012, partially due to a 3% increase in average earning assets, and a favorable mix trend of increased average loan balances and decreased cash balances. Additionally, the net interest margin increased to 3.51%, from 3.36% last year. The margin improvement was primarily due to lower funding costs resulting from a 3% increase in total average deposits, with average balance increases in lower cost demand, savings and maturing time deposits repricing at lower rates. Accretion of purchase accounting adjustments for loans, time deposits and borrowings acquired also improved the net interest margin by 5 basis points during 2013 and 2 basis points in 2012.

Interest income increased $554 thousand or 3% in 2013 compared to 2012 due to the $32 million increase in average loan balances, partially offset by lower yields. Rates decreased on all significant earning asset categories from reduced rates on new and repriced assets due to lending competition and the lower interest rate environment. Repricing of loans and lower rates to quality borrowers caused a decline in loan yields of 26 basis points in 2013 as compared to 2012. The increase in average loan volume helped mitigate the low interest rate environment. In 2013, average loan balances to average gross earning assets rose to 69%, compared to 64% in 2012. Securities yields continued to decline in 2013 with new and reinvestment cash flows being deployed at lower rates.

Interest income increased $566 thousand in 2012 as compared to 2011. The increase was primarily due to an increase of $85 million in average earning assets. The interest rate yield on average assets declined 61 basis points during 2012 as compared to 2011.

Interest expense decreased $723 thousand or 24% in 2013 as compared to 2012 due to decreases in the cost of all categories of interest bearing liabilities and a continued shift in the liability mix towards less expensive non-interest bearing demand deposits and savings accounts. Total average time deposits continue to decline with an emphasis on growing customers with multiple banking relationships, as opposed to single service time deposit customers.

Interest expense decreased $700 thousand, or 19%, for 2012 as compared to 2011, due to continued declines in average rates paid for interest bearing liabilities, from 1.05% in 2011 to 0.71% in 2012. Interest expense on deposits declined $541 thousand, even though average interest-bearing deposit balances increased by $65 million, or 22% in 2012 as compared to 2011. Interest expense on borrowed funds decreased by $159 thousand due to principal reductions and maturities of Federal Home Loan Bank (“FHLB”) advances, and lower interest rates remaining on outstanding borrowings.

10        2013 Report to Shareholders  |  CSB Bancorp, Inc.

2013 FINANCIAL REVIEW

The following table provides detailed analysis of changes in average balances, yield and net interest income:

	AVERAGE BALANCE SHEETS AND NET INTEREST
	MARGIN ANALYSIS
	2013								2012								2011
	Average					Average			Average					Average			Average					Average
(Dollars in thousands)	Balance1			Interest		Rate2			Balance1			Interest		Rate2			Balance1			Interest		Rate2
Interest-earning assets
Federal funds sold	$	188		$	0		0.16	%	$	148		$	0		0.12	%	$	92		$	0		0.04	%
Interest-earning deposits		32,127			90		0.28			56,422			147		0.26			34,205			82		0.24
Securities:
Taxable		122,314			2,572		2.10			118,867			2,672		2.25			81,341			2,538		3.12
Tax exempt		16,662			513		3.08			13,700			486		3.55			12,510			421		3.37
Loans3		374,821			17,963		4.79			342,868			17,279		5.05			318,781			16,977		5.33
Total interest-earning assets		546,112			21,138		3.87	%		532,005			20,584		3.87	%		446,929			20,018		4.48	%
Noninterest-earning assets
Cash and due from banks		12,911								12,399								11,094
Bank premises and equipment, net		9,222								8,630								8,040
Other assets		17,837								16,268								9,377
Allowance for loan losses		(4,932	)							(4,427	)							(4,111	)
Total assets	$	581,150							$	564,875							$	471,329
Interest-bearing liabilities
Demand deposits	$	70,648			42		0.06	%	$	63,346			50		0.08	%	$	53,896			44		0.08	%
Savings deposits		141,638			144		0.10			135,035			230		0.17			91,232			228		0.25
Time deposits		149,340			1,534		1.03			163,997			2,043		1.25			152,194			2,592		1.70
Borrowed funds		57,882			535		0.92			57,735			655		1.13			52,717			814		1.54
Total interest-bearing liabilities		419,508			2,255		0.54	%		420,113			2,978		0.71	%		350,039			3,678		1.05	%
Noninterest-bearing liabilities and shareholders’ equity
Demand deposits		106,769								91,148								70,543
Other liabilities		2,086								2,230								2,073
Shareholders’ equity		52,787								51,384								48,674
Total liabilities and equity	$	581,150							$	564,875							$	471,329
Net interest income				$	18,883							$	17,606							$	16,340
Net interest margin							3.46	%							3.31	%							3.65	%
Net interest spread							3.33	%							3.16	%							3.43	%

¹  Average balances have been computed on an average daily basis.

²  Average rates have been computed based on the amortized cost of the corresponding asset or liability.

³  Average loan balances include nonaccrual loans.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        11

2013 FINANCIAL REVIEW

The following table compares the impact of changes in average rates and changes in average volumes on net interest income:

	RATE/VOLUME ANALYSIS OF CHANGES
	IN INCOME AND EXPENSE1
	2013 v. 2012									2012 v. 2011
	Net Increase									Net Increase
(Dollars in thousands)	(Decrease)			Volume			Rate			(Decrease)			Volume		Rate
Increase (decrease) in interest income:
Interest-earning deposits	$	(57	)	$	(68	)	$	11		$	65		$	58	$	7
Securities:
Taxable		(100	)		72			(172	)		134			845		(711	)
Tax exempt		27			91			(64	)		65			42		23
Loans		684			1,531			(847	)		302			1,216		(914	)
Total interest income change		554			1,626			(1,072	)		566			2,161		(1,595	)
Increase (decrease) in interest expense:
Demand deposits		(8	)		4			(12	)		6			8		(2	)
Savings deposits		(86	)		7			(93	)		2			75		(73	)
Time deposits		(509	)		(151	)		(358	)		(549	)		147		(696	)
Other borrowed funds		(120	)		1			(121	)		(159	)		57		(216	)
Total interest expense change		(723	)		(139	)		(584	)		(700	)		287		(987	)
Net interest income	$	1,277		$	1,765		$	(488	)	$	1,266		$	1,874	$	(608	)

¹  Changes attributable to both volume and rate, which cannot be segregated, have been allocated based on the absolute value of the change due to volume and the change due to rate.

Provision For Loan Losses

The provision for loan losses is determined by management as the amount required to bring the allowance for loan losses to a level considered appropriate to absorb probable future net charge-offs inherent in the loan portfolio as of period end. The provision for loan losses was $840 thousand in 2013, $823 thousand for 2012 and $950 thousand for 2011. Lower provision expense in 2013 and 2012 reflects improving economic conditions which have led to a decrease in charge-offs and nonperforming loans. See “Financial Condition – Allowance for Loan Losses” below for additional discussion and information relative to the provision for loan losses.

Noninterest Income

	YEAR ENDED DECEMBER 31
			Change from 2012								Change from 2011
(Dollars in thousands)	2013		Amount			%			2012		Amount			%			2011
Service charges on deposit accounts	$	1,349	$	44			3.4	%	$	1,305	$	171			15.1	%	$	1,134
Trust services		826		155			23.1			671		(6	)		(0.9	)		677
Debit card interchange fees		779		(18	)		(2.3	)		797		166			26.3			631
Securities gains		159		159			100.0			—		(237	)		(100.0	)		237
Gain on sale of loans, including MSR’s		347		(244	)		(41.3	)		591		372			169.9			219
Other		858		18			2.1			840		230			37.7			610
Total noninterest income	$	4,318	$	114			2.7	%	$	4,204	$	696			19.8	%	$	3,508

12        2013 Report to Shareholders  |  CSB Bancorp, Inc.

2013 FINANCIAL REVIEW

Noninterest income increased $114 thousand, or 3% in 2013 compared to the same period in 2012. Trust and brokerage fees increased 23% as assets under management increased from overall market improvements and customer development initiatives. The average market value of trust assets under management in 2013 was $86 million as compared to $76 million in 2012. Brokerage fees increased $86 thousand in 2013 as customers returned to stock and annuity investments to increase their returns. Service charges on deposits which are primarily customer overdraft fees, increased 3% in 2013 due to growth in deposits. Net gains on sales of mortgage loans including mortgage servicing rights (“MSR’s”) decreased 41% due to a significant slowdown in mortgage refinance activity during 2013. The Bank originated and sold $12 million in mortgage loans in 2013 as compared to the sale of $20 million of loans in 2012. With historical low interest rates during the first half of 2013, available-for-sale securities with gains of $159 thousand were sold as net loan demand increased.

Noninterest income increased $696 thousand, or 20% for 2012 as compared to 2011. Service charges on deposits increased $171 thousand and debit card interchange fees increased $166 thousand in 2012 as compared to 2011, reflecting the increase in accounts following the fourth quarter 2011 Wooster branch acquisition. Trust services income decreased in 2012 as brokerage fees declined $36 thousand, or 20%, and trust revenue increased $30 thousand, or 6%. The average market value of trust assets under management during 2012 and 2011 was $76 million and $68 million, respectively. Gain on sale of loans increased in 2012 from 2011 due to volume increases in 1-4 family residential mortgages sold into the secondary market, reflecting a consumer refinancing wave due to historically low mortgage rates. There were no securities sold in 2012. Other income increased $230 thousand in 2012 over 2011 primarily from increases in cash surrender value of bank-owned life insurance of $124 thousand following an additional $5 million purchase of bank-owned life insurance during first quarter 2012, an increase of $28 thousand in all other credit card fee income and an increase of $10 thousand in noncustomer ATM usage fees in 2012 over 2011.

Noninterest Expenses

			YEAR ENDED DECEMBER 31
			Change from 2012								Change from 2011
(Dollars in thousands)	2013		Amount			%			2012		Amount			%			2011
Salaries and employee benefits	$	8,261	$	301			3.8	%	$	7,960	$	501			6.7	%	$	7,459
Occupancy expense		1,026		1			0.1			1,025		135			15.2			890
Equipment expense		719		101			16.3			618		94			17.9			524
Professional and director fees		628		(186	)		(22.9	)		814		101			14.2			713
Franchise tax expense		581		39			7.2			542		(8	)		(1.5	)		550
Marketing and public relations		395		3			0.8			392		72			22.5			320
Software expense		530		139			35.5			391		18			4.8			373
Debit card expense		268		(36	)		(11.8	)		304		51			20.2			253
Amortization of intangible assets		135		(5	)		(3.6	)		140		62			79.5			78
FDIC insurance		359		31			9.5			328		(24	)		(6.8	)		352
Branch acquisition expense		—		(8	)		(100.0	)		8		(329	)		(97.6	)		337
Other real estate expenses		9		(24	)		N.M.			33		58			N.M.			(25	)
Other		1,937		42			2.2			1,895		110			6.2			1,785
Total noninterest expenses	$	14,848	$	398			2.8	%	$	14,450	$	841			6.2	%	$	13,609

N.M., not a meaningful value

Noninterest expense increased $398 thousand, or 3% in 2013 as compared to 2012. Salaries and employee benefits increased $301 thousand due to annual adjustments to compensation of $211 thousand and benefit increases of $90 thousand due to higher payroll taxes and retirement benefits. Software expense rose $139 thousand in 2013 due to the acquisition of new core processing and loan documentation software. Equipment expense increased $101 thousand in 2013 as compared to 2012 with the acquisition of a new core processor, new telephone system and new ATMs in the branch network. Franchise tax expense increased $39 thousand in 2013 to $581 thousand but is expected to decrease to under $450 thousand in 2014 with the new Ohio Financial Institutions Tax.

Noninterest expense increased $841 thousand, or 6% in 2012 as compared to 2011. Salaries and employee benefits increased $449 thousand due to a full year increase in personnel costs of the acquired branches and annual adjustments to compensation with employee benefits expense increasing $52 thousand from increased health insurance and retirement benefit costs. Occupancy expense increased $135 thousand and equipment expense increased $94 thousand as both expenses reflected the increase in the number of branches for a full year in

2013 Report to Shareholders  |  CSB Bancorp, Inc.        13

2013 FINANCIAL REVIEW

2012 as compared to 2011. Professional and director fees increased $101 thousand reflecting employment search fees for the Chief Operating Officer and commercial lending positions as well as fees spent to review the Company’s computer operating system. FDIC deposit insurance expense decreased $24 thousand in 2012 as compared to 2011 due to a prior year change in the calculation which resulted in a decreased rate for a full year in 2012 as compared to a partial year in 2011. Other expenses increased $110 thousand primarily due to the cost of running a larger institution.

Income Taxes

The provision for income taxes amounted to $2.3 million in 2013, $2.0 million in 2012 and $1.6 million in 2011, an effective rate of 30.3% in 2013, 30.4% in 2012 and 30.3% in 2011. The decrease in the effective tax rate during 2013 as compared to 2012 is due primarily to increased tax exempt income on securities and loans.

FINANCIAL CONDITION

Total assets of the Company were $597 million at December 31, 2013, compared to $587 million at December 31, 2012, representing an increase of $10 million, or 2%. Net loans increased $14 million, or 4%, while investment securities increased $17 million, or 13% and interest-earning deposits with other banks decreased $19 million. Deposits increased $6 million, or 1%, while other borrowings from the FHLB decreased by $213 thousand, or 2%.

Securities

Total investment securities increased $17 million, or 13% to $152 million at year-end 2013. CSB’s portfolio is primarily comprised of agency mortgage-backed securities, other government agencies’ debt, and obligations of state and political subdivisions. Restricted securities consist primarily of FHLB stock. During 2013, increases occurred in government agency debt, mortgage-backed securities, and corporate bonds.

The Company has no exposure to government-sponsored enterprise preferred stocks, collateralized debt obligations or trust preferred securities. The Company’s municipal bond portfolio consists of both taxable and tax-exempt general obligation and revenue bonds. As of December 31, 2013, $13.7 million, or 83%, held an S&P or Moody’s investment grade rating and $2.8 million or 17% were non-rated. The municipal portfolio includes a broad spectrum of counties, towns, universities and school districts in Ohio. Total gross unrealized security losses within the portfolio were 1.5% of total available-for-sale securities at December 31, 2013, reflecting interest rate fluctuations, not credit downgrades.

During the third quarter 2013, the Company reclassified $39 million of U.S. Agency and U.S. Agency collateralized mortgage-backed obligations from available-for-sale to held-to-maturity. The Company considers the held-to-maturity classification to be more appropriate in a rising interest rate environment as other comprehensive income is no longer negatively impacted by the decline in value on specific bonds. The Company has the ability and the intent to hold the longer-term Agency debt securities and the mortgage-backed securities to maturity. On the date of transfer, the $1.9 million gross unrealized loss became a discount to the carrying value of the bonds while the net of tax unrealized loss remained in shareholders’ equity in other comprehensive income. The effect on interest income of the accretion of the discount on the bonds is basically offset by the amortization of the other comprehensive loss over the life of the bonds.

One of the primary functions of the securities portfolio is to provide a source of liquidity and it is structured such that maturities and cash flows satisfy the Company’s liquidity needs and asset/liability management requirements.

Loans

Total loans increased $15 million, or 4% during 2013. Volume increases were recognized in commercial and commercial real estate loans of $23 million, or 10%, and residential real estate loans of $1 million, or 1%. Construction loans saw a decline of $10 million, or 42% as projects were completed and converted to permanent financing. During 2012 the Company added two seasoned commercial lenders in its newly expanded markets and combined with low interest rates and business expansion, increases in commercial and commercial real estate loans continued in 2013.

As investment spreads tightened in the mortgage-backed securities market, the Company developed marketing campaigns for fifteen year, lower fee, fixed-rate, owner occupied loans which drove the $1 million increase in residential real estate loans. Attractive interest rates in the secondary market continued to drive consumer demand for longer-term 1-4 family fixed rate residential mortgages during 2013 and the Company sold $12 million of originated mortgages into the secondary market as compared to $20 million in 2012. This demand for low fixed-rate mortgages included some refinancing of the Company’s in-house mortgage portfolio. Demand for home equity loans flattened in 2013, with balances decreasing $107 thousand. Installment lending improved slightly with consumer loans increasing 3% on a year over year basis to $6.7 million at December 31, 2013.

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2013 FINANCIAL REVIEW

Management anticipates the Company’s local service areas will continue to exhibit modest economic growth in line with the past three years. Commercial and commercial real estate loans comprise approximately 65% and 61% of the total loan portfolio at year-end 2013 and 2012. Residential real estate loans decreased from 30% to approximately 29% between December 31, 2012 and December 31, 2013. Construction and land development loans decreased from 6% to 4% of the total portfolio between 2012 and 2013. The Company is well within the respective regulatory guidelines for investment in construction development and investment property loans that are not owner occupied.

Most of the Company’s lending activity is with customers primarily located within Holmes, Tuscarawas, Wayne and Stark Counties in Ohio. Credit concentrations, including commitments, as determined using North American Industry Classification Codes (NAICS), to the four largest industries compared to total loans at December 31, 2013 included $27 million, or 7% of total loans to lessors of non-residential buildings or dwellings; $19 million, or 5% of total loans to lessors of residential real estate; $17 million, or 4.5% of total loans to logging, sawmills and timber tract operations and $14 million, or 4% of total loans to borrowers in the hotel, motel and lodging business. These loans are generally secured by real property and equipment, and repayment is expected from operational cash flow. Credit evaluation is based on an evaluation of cash flow coverage of principal and interest payments and the adequacy of the collateral received.

Nonperforming Assets, Impaired Loans and Loans Past Due 90 Days or More

Nonperforming assets consist of nonaccrual loans, loans past due 90 days and still accruing and other real estate acquired through or in lieu of foreclosure. Other impaired loans include certain loans that are internally classified as substandard or doubtful. Loans are placed on nonaccrual status when they become past due 90 days or more, or when mortgage loans are past due as to principal and interest 120 days or more, unless they are both well secured and in the process of collection.

NONPERFORMING ASSETS

	DECEMBER 31
(Dollars in thousands)	2013			2012
Nonaccrual loans:
Commercial	$	84		$	483
Commercial real estate		1,108			1,745
Residential real estate		1,042			805
Construction & land development		—			173
Loans past due 90 days and still accruing:
Commercial		—			—
Commercial real estate		40			—
Residential real estate		46			131
Construction & land development		950			—
Total nonperforming loans		3,270			3,337
Other real estate owned		—			25
Total nonperforming assets	$	3,270		$	3,362
Nonperforming assets as a percentage of loans plus other real estate		0.86	%		0.92	%

Allowance for Loan Losses

The allowance for loan losses is maintained at a level considered adequate to cover loan losses that are currently anticipated based on past loss experience, general economic conditions, changes in mix and size of the loan portfolio, information about specific borrower situations and other factors and estimates which are subject to change over time. Management periodically reviews selected large loans, delinquent and other problem loans and selected other loans. Collectability of these loans is evaluated by considering the current financial position and performance of the borrower, estimated market value of the collateral, the Company’s collateral position in relationship to other creditors, guarantees and other potential sources of repayment. Management forms judgments, which are in part subjective, as to the probability of loss and the amount of loss on these loans as well as other loans taken together. The Company’s Allowance for Loan Losses Policy includes, among other items, provisions for classified loans and a provision for the remainder of the portfolio based on historical data, including past charge-offs.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        15

2013 FINANCIAL REVIEW

ALLOWANCE FOR LOAN LOSSES

	FOR THE YEAR ENDED
(Dollars in thousands)	2013			2012
Beginning balance of allowance for loan losses	$	4,580		$	4,082
Provision for loan losses		840			823
Charge-offs:
Commercial		149			29
Commercial real estate		108			283
Residential real estate & home equity		82			106
Construction & land development		—			—
Consumer		48			39
Deposit accounts		35			50
Credit cards		6			—
Total charge-offs		428			507
Recoveries:
Commercial		15			16
Commercial real estate		—			—
Residential real estate & home equity		18			102
Construction & land development		—			—
Consumer		50			44
Deposit accounts		10			20
Credit cards		—			—
Total recoveries		93			182
Net charge-offs		335			325
Ending balance of allowance for loan losses	$	5,085		$	4,580
Net charge-offs as a percentage of average total loans		0.09	%		0.09	%
Allowance for loan losses as a percentage of total loans		1.34			1.26
Allowance for loan losses to total nonperforming loans		1.56	x		1.37	x
Components of the allowance for loan losses:
General reserves	$	4,301		$	3,801
Specific reserve allocations		784			779
Total allowance for loan losses	$	5,085		$	4,580

The allowance for loan losses totaled $5.1 million, or 1.34%, of total loans at year-end 2013 as compared to $4.6 million, or 1.26% of total loans at year-end 2012. Net charge-offs for 2013 totaled $335 thousand as compared to net charge-offs of $325 thousand in 2012.

The Company maintains an internal watch list on which it places loans where management’s analysis of the borrower’s operating results and financial condition indicates that the borrower’s cash flows are inadequate to meet its debt service requirements and loans where there exists an increased risk that such a shortfall may occur. Nonperforming loans, which consist of loans past due 90 days or more and nonaccrual loans aggregated $3.3 million, or 0.9% of loans at year-end 2013 as compared to $3.3 million, or 0.9% of loans at year-end 2012. Impaired loans were $10.7 million at year-end 2013 as compared to $10.2 million at year-end 2012. Impaired loans as a percentage of total loans remained stable from 2012 to 2013 and reflect economic stabilization in the Company’s market area with decreasing unemployment levels. Management has assigned loss allocations to absorb the estimated losses on these impaired loans, and these allocations are included in the total allowance for loan losses balance.

16        2013 Report to Shareholders  |  CSB Bancorp, Inc.

2013 FINANCIAL REVIEW

Other Assets

Net premises and equipment increased $215 thousand to $8.7 million at year-end 2013 primarily as the purchase of equipment and furniture in 2013 exceeded depreciation expense. There was no other real estate owned at December 31, 2013 compared to $25 thousand owned at December 31, 2012. Bank-owned life insurance of $1 million was purchased on the life of a senior management member during 2013. At December 31, 2013 the Company recognized a net deferred tax asset of $1.2 million as compared to a net deferred tax liability of $476 thousand at December 31, 2012. The change in the Company’s net deferred tax position resulted primarily from the increase in the net deferred asset related to the unrealized loss on securities available-for-sale.

Deposits

The Company’s deposits are obtained primarily from individuals and businesses located in its market area. For deposits, the Company must compete with products offered by other financial institutions as well as alternative investment options. Demand and savings deposits increased for the year ended 2013, due to focused retail and business banking strategies to obtain more account relationships as well as customers reflecting their preference for shorter maturities.

	December 31				Change from 2012
(Dollars in thousands)	2013		2012		Amount			%
Noninterest-bearing demand	$	120,325	$	104,147	$	16,178			15.5	%
Interest-bearing demand		76,327		74,429		1,898			2.6
Traditional savings		76,630		67,957		8,673			12.8
Money market savings		73,307		70,837		2,470			3.5
Time deposits in excess of $100,000		42,562		54,163		(11,601	)		(21.4	)
Other time deposits		91,782		103,910		(12,128)			(11.7)
Total deposits	$	480,933	$	475,443	$	5,490			1.2	%

Other Funding Sources

The Company obtains additional funds through securities sold under repurchase agreements, overnight borrowings from the FHLB or other financial institutions and advances from the FHLB. Short-term borrowings, which consist of securities sold under repurchase agreements, increased $5 million; while other borrowings, which consist of FHLB advances, decreased $213 thousand due to required principal repayments during 2013.

CAPITAL RESOURCES

Total shareholders’ equity decreased to $52.4 million at December 31, 2013 as compared to $52.5 million at December 31, 2012. This decrease was primarily due to $3.3 million other comprehensive loss and the payment of $2.0 million cash dividends which were offset by $5.2 million of net income in 2013. The Board of Directors approved a Stock Repurchase Program on July 7, 2005 that would allow the repurchase of up to 10% of the Company’s then-outstanding common shares. Repurchased shares are to be held as treasury stock and would be available for general corporate purposes. At December 31, 2013, approximately forty-one thousand shares could still be repurchased under the current authorized program. No shares were repurchased in 2013 or 2012.

`Banking regulations have established minimum capital ratios for banks and bank holding companies. Therefore, the Company and the Bank must meet a risk-based capital requirement, which defines two tiers of capital and compares each to the Company’s “risk-weighted assets.” The Company’s assets and certain off-balance-sheet items, such as loan commitments, are each assigned a risk factor such that assets with potentially higher credit risk will require more capital support than assets with lower risk. These regulations require the Company to have a minimum total risk-based capital ratio of 8%, at least half of which must be Tier 1 capital. The Company’s Tier 1 capital is its shareholders’ equity before any unrealized gain or loss on securities available-for-sale, while total risk-based capital includes Tier 1 capital and a limited amount of the allowance for loan losses. In addition, a bank or bank holding company’s leverage ratio (which for the Company equals its shareholders’ equity before any unrealized gain or loss on securities available-for-sale, divided by average assets) must be maintained at a minimum of 4%. The Company and Bank’s actual and required capital amounts are disclosed in Note 12 to the consolidated financial statements.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        17

2013 FINANCIAL REVIEW

Dividends paid by the Bank to CSB are the primary source of funds available to the Company for payment of dividends to shareholders and for other working capital needs. The payment of dividends by the Bank to the Company is subject to restrictions by regulatory authorities, which generally limit dividends to current year net income and the prior two years net retained earnings, as defined by regulation. In addition, dividend payments generally cannot reduce regulatory capital levels below the minimum regulatory guidelines discussed above.

In July 2013, the Federal Reserve adopted final rules effective generally on January 1, 2015 to implement the Basel III and regulatory capital changes required by the Dodd-Frank Act. These changes will apply to the Company and the Bank. Among other things, the rules include new minimum risk-based and leverage capital requirements for all banking organizations and removal of references to credit ratings. A new capital conservation buffer of 2.5% of risk-weighted assets is being phased-in over a transition period ending December 31, 2018. Failure to maintain the required ratios will restrict or prohibit dividends, share repurchases and discretionary bonuses. Management is evaluating the new rules and their effects on the Company and the Bank, but Management believes the Company and the Bank will remain “well-capitalized” under the new rules.

LIQUIDITY

	December 31						Change
(Dollars in millions)	2013			2012			from 2012
Cash and cash equivalents	$	43		$	67		$	(24	)
Unused lines of credit		42			41			1
Unpledged securities at fair market value		42			59		$	(17	)
	$	127		$	167			(40	)
Net deposits and short-term liabilities	$	473		$	444		$	29
Liquidity ratio		26.9	%		37.6	%
Minimum board approved liquidity ratio		20.0	%		20.0	%

Liquidity refers to the Company’s ability to generate sufficient cash to fund current loan demand, meet deposit withdrawals, pay operating expenses and meet other obligations. The Company’s liquidity ratio declined in 2013 as a result of continuing to deploy cash received in the Wooster branch acquisition in fourth quarter 2011 into loans and investments. Liquidity is monitored by CSB’s Asset Liability Committee. The Company was within all Board-approved limits at December 31, 2013 and 2012. Additional sources of liquidity include net income, loan repayments, and adjustments of interest rates to attract deposit accounts.

As summarized in the consolidated statements of cash flows, the most significant investing activities for the Company in 2013 included net loan originations of $15 million and the maturities and repayments of securities totaling $37 million, offset by $64 million in securities purchases and the $1 million purchase of bank-owned life insurance. The Company’s financing activities included a $6 million increase in deposits, a $5 million increase in securities sold under agreements to repurchase and a $213 thousand net repayment of FHLB advances.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The most significant market risk to which the Company is exposed is interest rate risk. The business of the Company and the composition of its balance sheet consist of investments in interest-earning assets (primarily loans and securities), which are funded by interest-bearing liabilities (deposits and borrowings). These financial instruments have varying levels of sensitivity to changes in the market rates of interest, resulting in market risk. None of the Company’s financial instruments are held for trading purposes.

The Board of Directors establishes policies and operating limits with respect to interest rate risk. The Company manages interest rate risk regularly through its Asset Liability Committee. The Committee meets on a monthly basis and reviews various asset and liability management information including, but not limited to, the Company’s liquidity position, projected sources and uses of funds, interest rate risk position and economic conditions.

Interest rate risk is monitored primarily through the use of an earnings simulation model. The model is highly dependent on various assumptions, which change regularly as the balance sheet and market interest rates change. The earnings simulation model projects changes in net interest income resulting from the effect of changes in interest rates. The analysis is performed quarterly over a twenty-four month horizon. The analysis includes two balance sheet models, one based on a static balance sheet and one on a dynamic balance sheet with projected growth in assets and liabilities. This analysis is performed by estimating the expected cash flows of the Company’s financial instruments using interest rates in effect at year-end 2013 and 2012. Interest rate risk policy limits are tested by measuring the anticipated change in net interest income

18        2013 Report to Shareholders  |  CSB Bancorp, Inc.

2013 FINANCIAL REVIEW

over a two year period. The tests assume a quarterly ramped 100, 200, 300 and 400 basis point increase and a 100 basis point decrease in 2013 in market interest rates as compared to a stable rate environment or base model. The following table reflects the change to interest income for the first twelve month period of the twenty-four month horizon.

Net Interest Income at Risk

December 31, 2013
		Net
Change In		Interest		Dollar						Board
Interest Rates		Income		Change			Percentage			Policy
(Basis Points)		(Dollars in thousands)					Change			Limits
	+ 400	$	20,812	$	962			4.8	%		±25	%
	+ 300		20,507		657			3.3			±15
	+ 200		20,217		367			1.8			±10
	+ 100		19,966		116			0.6			±5
	0		19,850		—			—
	– 100		19,644		(206	)		(1.0	)		±5
December 31, 2012
	+ 400	$	19,420	$	1,762			10.0	%		±25	%
	+ 300		18,982		1,324			7.5			±15
	+ 200		18,507		849			4.8			±10
	+ 100		18,053		395			2.2			±5
	0		17,658		—			—
	– 100		17,483		(175	)		(1.0	)		±5

Management reviews Net Interest Income at Risk with the Board on a periodic basis. The Company was within all Board-approved limits at December 31, 2013 and 2012.

Economic Value of Equity at Risk

December 31, 2013
Change In Interest Rates (Basis Points)		Percentage Change			Board Policy Limits
	+ 400		9.8	%		±35	%
	+ 300		8.8			±30
	+ 200		7.4			±20
	+ 100		4.7			±15
	– 100		(7.6	)		±15
December 31, 2012
	+ 400		19.0	%		±35	%
	+ 300		17.4			±30
	+ 200		14.8			±20
	+ 100		9.5			±15

2013 Report to Shareholders  |  CSB Bancorp, Inc.        19

2013 FINANCIAL REVIEW

The economic value of equity is calculated by subjecting the period-end balance sheet to changes in interest rates and measuring the impact of the changes on the values of the assets and liabilities. Hypothetical changes in interest rates are then applied to the financial instruments, and the cash flows and fair values are again estimated using these hypothetical rates. For the net interest income estimates, the hypothetical rates are applied to the financial instruments based on the assumed cash flows.

Management periodically measures and reviews the Economic Value of Equity at Risk with the Board. At December 31, 2013, the market value of equity as a percent of base in a 400 basis point rising rate environment indicates an increase of 9.8%, as compared to an increase of 19.0% as of December 31, 2012. The Company added the review of a -100 basis change in interest rates during 2013 as rates had risen at December 31, 2013 in comparison with 2012. The Company was within all Board-approved limits at December 31, 2013 and 2012.

SIGNIFICANT ASSUMPTIONS AND OTHER CONSIDERATIONS

The above analysis is based on numerous assumptions, including relative levels of market interest rates, loan prepayments and reactions of depositors to changes in interest rates, and should not be relied upon as being indicative of actual results. Further, the analysis does not necessarily contemplate all actions the Company may undertake in response to changes in interest rates.

U.S. Treasury securities, obligations of U.S. Government corporations and agencies and obligations of states and political subdivisions will generally repay at their stated maturity, or if callable prior to their final maturity date. Mortgage-backed security payments increase when interest rates are low and decrease when interest rates rise. Many of the Company’s loans permit the borrower to prepay the principal balance prior to maturity without penalty. The likelihood of prepayment depends on a number of factors, including current interest rate and interest rate index (if any) on the loan, the financial ability of the borrower to refinance, the economic benefit to be obtained from refinancing, availability of refinancing at attractive terms, as well as economic and other factors in specific geographic areas which affect the sales and price levels of residential and commercial property. In a changing interest rate environment, prepayments may increase or decrease on fixed and adjustable rate loans depending on the current relative levels and expectations of future short-term and long-term interest rates. Prepayments on adjustable rate loans generally increase when long-term interest rates fall or are at historically low levels relative to short-term interest rates, thus making fixed rate loans more desirable. While savings and checking deposits generally may be withdrawn upon the customer’s request without prior notice, a continuing relationship with customers resulting in future deposits and withdrawals is generally predictable, resulting in a dependable and uninterrupted source of funds. Time deposits generally have early withdrawal penalties, which discourage customer withdrawal prior to maturity. Short-term borrowings have fixed maturities. Certain advances from the FHLB carry prepayment penalties and are expected to be repaid in accordance with their contractual terms.

FAIR VALUE MEASUREMENTS

The Company discloses the estimated fair value of its financial instruments at December 31, 2013 and 2012 in Note 15 to the consolidated financial statements.

OFF-BALANCE SHEET ARRANGEMENTS, CONTRACTUAL OBLIGATIONS, AND CONTINGENT LIABILITIES AND COMMITMENTS

The following table summarizes the Company’s loan commitments, including letters of credit, as of December 31, 2013:

	Amount of Commitment to Expire Per Period
(Dollars in thousands) Type of Commitment	Total Amount		Less than 1 year		1 to 3 Years		3 to 5 Years		Over 5 Years
Commercial lines-of-credit	$	68,029	$	62,438	$	209	$	2,081	$	3,301
Real estate lines-of-credit		35,880		2,936		5,510		4,947		22,487
Consumer lines-of-credit		842		842		—		—		—
Credit cards lines-of-credit		3,493		3,493		—		—		—
Overdraft privilege		6,523		6,523		—		—		—
Commercial real estate loan commitments		4,804		4,804		—		—		—
Letters of credit		679		679		—		—		—
Total commitments	$	120,250	$	81,715	$	5,719	$	7,028	$	25,788

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2013 FINANCIAL REVIEW

As indicated in Note 10 to the consolidated financial statements, the Company had $120 million in total loan commitments at the end of 2013, with $77 million of that amount expiring within one year. All lines-of-credit represent either fee-paid or legally binding loan commitments for the loan categories noted. Letters of credit are also included in the amounts noted in the table since the Company requires that each letter of credit be supported by a loan agreement. The commercial and consumer lines represent both unsecured and secured obligations. The real estate lines are secured by mortgages on residential and nonresidential property. It is anticipated that a significant portion of these lines will expire without being drawn upon.

The following table summarizes the Company’s other contractual obligations, exclusive of interest, as of December 31, 2013:

			Payment Due by period
(Dollars in thousands) Contractual Obligations	Total Amount		Less than 1 year		1 to 3 Years		3 to 5 Years		Over 5 Years
Total time deposits	$	134,344	$	75,051	$	44,073	$	15,173	$	47
Short-term borrowings		48,671		48,671		—		—		—
Other borrowings		12,459		2,190		266		10,003		—
Operating leases		797		299		466		32		—
Total obligations	$	196,271	$	126,211	$	44,805	$	25,208	$	47

The other borrowings noted in the preceding table represent borrowings from the FHLB of Cincinnati. The notes require payment of interest on a monthly basis with principal due in monthly installments or at maturity, depending upon the issue. The obligations bear stated fixed interest rates and stipulate a prepayment penalty if the note’s interest rate exceeds the current market rate for similar borrowings at the time of repayment. As the notes mature, the Company evaluates the liquidity and interest rate circumstances, at that time, to determine whether to pay off or renew the note. The evaluation process typically includes the strength of current and projected customer loan demand, the Company’s federal funds sold or purchased position, projected cash flows from maturing investment securities, the current and projected market interest rate environment, local and national economic conditions and customer demand for the Company’s deposit product offerings.

CRITICAL ACCOUNTING POLICIES

The Company’s consolidated financial statements are prepared in accordance with U.S. generally accepted accounting principles and follow general practices within the commercial banking industry. Application of these principles requires management to make estimates, assumptions and judgments that affect the amounts reported in the financial statements. These estimates, assumptions, and judgments are based upon the information available as of the date of the financial statements.

The most significant accounting policies followed by the Company are presented in the Summary of Significant Accounting Policies. These policies, along with the other disclosures presented in the Notes to Consolidated Financial Statements and the 2013 Financial Review, provide information about how significant assets and liabilities are valued in the financial statements and how those values are determined. Management has identified the allowance for loan losses and the fair value of financial instruments as the accounting areas that require the most subjective and complex estimates, assumptions and judgments and, as such, could be the most subject to revision as new information becomes available.

Securities are evaluated periodically to determine whether a decline in their value is other-than-temporary. Management utilizes criteria such as the magnitude and duration of the decline, in addition to the reasons underlying the decline, to determine whether the loss in value is other-than-temporary. The term “other-than-temporary” is not intended to indicate that the decline is permanent, but indicates that the prospect for a near-term recovery of value is not necessarily favorable, or that there is a lack of evidence to support a realizable value equal to or greater than the carrying value of the investment. Once a decline in value is determined to be other-than-temporary, the value of the security is reduced and a corresponding charge to earnings is recognized.

As previously noted in the section entitled Allowance for Loan Losses, management performs analysis to assess the adequacy of its allowance for loan losses. This analysis encompasses a variety of factors including the potential loss exposure for individually reviewed loans, the historical loss experience, the volume of nonperforming loans (i.e., loans in nonaccrual status or past due 90 days or more), the volume of loans past due, any significant changes in lending or loan review staff, an evaluation of current and future local and national economic conditions, any significant changes in the volume or mix of loans within each category, a review of the significant concentrations of credit and any legal, competitive or regulatory concerns.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        21

2013 FINANCIAL REVIEW

CSB accounts for business combinations using the acquisition method of accounting. Goodwill and intangible assets with indefinite useful lives are not amortized. Intangible assets with finite useful lives, consisting of core deposit intangibles, are amortized using accelerated methods over their estimated weighted-average useful lives, approximating ten years. Additional information is presented in Note 5, Core Deposit Intangible Asset.

IMPACT OF INFLATION AND CHANGING PRICES

The consolidated financial statements and related data presented herein have been prepared in accordance with U.S. generally accepted accounting principles, requiring measurement of financial position and results of operations primarily in terms of historical dollars without considering changes in the relative purchasing power of money over time due to inflation. Unlike most industrial companies, most assets and liabilities of the Company are monetary in nature. Therefore, interest rates have a more significant impact on the Company’s performance than the effects of general levels of inflation. Interest rates do not necessarily move in the same direction or in the same magnitude as prices of goods and services. The liquidity, maturity structure and quality of the Company’s assets and liabilities are critical to maintenance of acceptable performance levels.

COMMON STOCK AND SHAREHOLDER INFORMATION

Common shares of the Company are not traded on an established market. Shares are traded on the over-the-counter-bulletin-board through broker/dealers under the symbol “CSBB” and through private transactions. The table below represents the range of high and low prices paid for transactions known to the Company. Management does not have knowledge of prices paid on all transactions. Because of the lack of an established market, these prices may not reflect the prices at which stock would trade in an active market. These quotations reflect interdealer prices, without mark-up, markdown or commission and may not represent actual transactions. The table specifies cash dividends declared by the Company to its shareholders during 2013 and 2012. No assurances can be given that future dividends will be declared, or if declared, what the amount of any such dividends will be. Additional information concerning restrictions over the payment of dividends is included in Note 12 of the consolidated financial statements.

					Dividends
					Declared		Dividends
Quarter Ended	High		Low		Per Share		Declared
March 31, 2013	$	19.20	$	17.00	$	0.18	$	492,594
June 30, 2013		20.85		19.00		0.18		492,594
September 30, 2013		20.80		18.60		0.18		492,594
December 31, 2013		19.60		18.62		0.18		492,594
March 31, 2012	$	20.00	$	16.00	$	0.18	$	492,264
June 30, 2012		20.50		17.50		0.18		492,264
September 30, 2012		20.49		17.75		0.18		492,264
December 31, 2012		18.65		16.84		0.18		492,374

As of December 31, 2013, the Company had 1,300 known shareholders of record and 2,736,634 outstanding shares of common stock.

22        2013 Report to Shareholders  |  CSB Bancorp, Inc.

REPORT ON MANAGEMENT’S ASSESSMENT OF

INTERNAL CONTROL OVER FINANCIAL REPORTING

The management of CSB Bancorp, Inc. is responsible for establishing and maintaining adequate internal control over financial reporting. Management has designed our internal control over financial reporting to provide reasonable assurance that our published financial statements are fairly presented, in all material respects, in conformity with U.S. generally accepted accounting principles.

Management is required by paragraph (c) of Rule 13a-15 of the Securities Exchange Act of 1934, as amended, to assess the effectiveness of our internal control over financial reporting as of each year-end. In making this assessment, management used the Internal Control-Integrated Framework issued in July 1994 by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

Management conducted the required assessment of the effectiveness of our internal control over financial reporting as of December 31, 2013. Based upon this assessment, management believes that our internal control over financial reporting is effective as of December 31, 2013.

This annual report does not include an attestation report of the Company’s registered public accounting firm regarding internal control over financial reporting. Management’s report was not subject to attestation by the Company’s registered public accounting firm pursuant to the rules of the Securities and Exchange Commission that permit the Company to provide only management’s report in this annual report.

Eddie L. Steiner	Paula J. Meiler
President,	Senior Vice President,
Chief Executive Officer	Chief Financial Officer

2013 Report to Shareholders  |  CSB Bancorp, Inc.        23

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM REPORT

Board of Directors and Shareholders

CSB Bancorp, Inc.

We have audited the accompanying consolidated balance sheets of CSB Bancorp, Inc. and subsidiaries as of December 31, 2013 and 2012, and the related consolidated statements of income, comprehensive income, changes in shareholders’ equity, and cash flows for each of the three years in the period ended December 31, 2013. These consolidated financial statements are the responsibility of CSB Bancorp, Inc.’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. CSB Bancorp, Inc. is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of CSB Bancorp, Inc.’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of CSB Bancorp, Inc. and subsidiaries as of December 31, 2013 and 2012, and the consolidated results of their operations and their cash flows for each of the years then ended, in conformity with U.S. generally accepted accounting principles.

Wexford, Pennsylvania

March 6, 2014

24        2013 Report to Shareholders  |  CSB Bancorp, Inc.

CONSOLIDATED BALANCE SHEETS

December 31, 2013 and 2012

(Dollars in thousands)	2013			2012
ASSETS
Cash and cash equivalents
Cash and due from banks	$	15,777		$	21,485
Interest-earning deposits in other banks		26,822			45,393
Total cash and cash equivalents		42,599			66,878
Securities
Available-for-sale, at fair value		101,722			129,291
Held-to-maturity (fair value of $42,643)		44,350			—
Restricted stock, at cost		5,463			5,463
Total securities		151,535			134,754
Loans		379,125			364,580
Less allowance for loan losses		5,085			4,580
Net loans		374,040			360,000
Premises and equipment, net		8,690			8,475
Core deposit intangible		759			894
Goodwill		4,728			4,728
Bank-owned life insurance		9,551			8,298
Accrued interest receivable and other assets		4,563			2,873
TOTAL ASSETS	$	596,465		$	586,900
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits
Noninterest-bearing	$	120,325		$	104,147
Interest-bearing		360,608			371,296
Total deposits		480,933			475,443
Short-term borrowings		48,671			43,992
Other borrowings		12,459			12,672
Accrued interest payable and other liabilities		1,991			2,340
Total liabilities		544,054			534,447
SHAREHOLDERS’ EQUITY
Common stock, $ 6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; outstanding 2,736,634 shares in 2013 and 2,736,060 in 2012		18,629			18,629
Additional paid-in capital		9,964			9,974
Retained earnings		30,232			26,962
Treasury stock at cost - 243,968 shares in 2013 and 244,542 in 2012		(4,958	)		(4,976	)
Accumulated other comprehensive (loss) income		(1,456	)		1,864
Total shareholders’ equity		52,411			52,453
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	596,465		$	586,900

These consolidated financial statements should be read in connection with the accompanying summary of significant accounting policies and notes to the consolidated financial statements.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        25

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands, except per share data)	2013		2012		2011
INTEREST AND DIVIDEND INCOME
Loans, including fees	$	17,963	$	17,279	$	16,977
Taxable securities		2,572		2,672		2,538
Nontaxable securities		513		486		421
Other		90		147		82
Total interest and dividend income		21,138		20,584		20,018
INTEREST EXPENSE
Deposits		1,720		2,323		2,864
Short-term borrowings		67		91		139
Other borrowings		468		564		675
Total interest expense		2,255		2,978		3,678
NET INTEREST INCOME		18,883		17,606		16,340
PROVISION FOR LOAN LOSSES		840		823		950
Net interest income, after provision for loan losses		18,043		16,783		15,390
NONINTEREST INCOME
Service charges on deposit accounts		1,349		1,305		1,134
Trust services		826		671		677
Debit card interchange fees		779		797		631
Securities gain, net		159		—		237
Gain on sale of loans, net		347		591		219
Other income		858		840		610
Total noninterest income		4,318		4,204		3,508
NONINTEREST EXPENSES
Salaries and employee benefits		8,261		7,960		7,459
Occupancy expense		1,026		1,025		890
Equipment expense		719		618		524
Professional and director fees		628		814		713
Franchise tax expense		581		542		550
Marketing and public relations		395		392		320
Software expense		530		391		373
Debit card expense		268		304		253
Amortization of intangible assets		135		140		78
FDIC insurance expense		359		328		352
Branch acquisition expense		—		8		337
Net cost of operation of other real estate		9		33		(25	)
Other expenses		1,937		1,895		1,785
Total noninterest expenses		14,848		14,450		13,609
Income before income taxes		7,513		6,537		5,289
FEDERAL INCOME TAX PROVISION		2,273		1,990		1,602
NET INCOME	$	5,240	$	4,547	$	3,687
NET INCOME PER SHARE
Basic	$	1.91	$	1.66	$	1.35
Diluted	$	1.91	$	1.66	$	1.35

These consolidated financial statements should be read in connection with the accompanying summary of significant accounting policies and notes to the consolidated financial statements.

26        2013 Report to Shareholders  |  CSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands)	2013			2012			2011
Net income	$	5,240		$	4,547		$	3,687
Other comprehensive income (loss)
Unrealized gains (losses) arising during the period		(3,195	)		657			1,081
Unrealized losses on held-to-maturity transfer		(1,931	)		—			—
Amounts reclassified from accumulated other comprehensive income, held-to-maturity		255			—			—
Income tax effect		1,656			(223	)		(368	)
Reclassification adjustment for gains on available for sale securities included in net income		(159	)		—			(237	)
Income tax effect		54			—			81
Other comprehensive income (loss)		(3,320	)		434			557
Total comprehensive income	$	1,920		$	4,981		$	4,244

CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS’ EQUITY

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands)	Common Stock		Additional Paid-In Capital			Retained Earnings			Treasury Stock			Accumulated Other Comprehensive Income (Loss)			Total
BALANCE AT DECEMBER 31, 2010	$	18,629	$	9,994		$	22,673		$	(5,015	)	$	873		$	47,154
Net income		—		—			3,687			—			—			3,687
Other comprehensive income		—		—			—			—			557			557
Cash dividends declared, $ 0.72 per share		—		—			(1,969	)		—			—			(1,969	)
BALANCE AT DECEMBER 31, 2011	$	18,629	$	9,994		$	24,391		$	(5,015	)	$	1,430		$	49,429
Net income		—		—			4,547			—			—			4,547
Other comprehensive income		—		—			—			—			434			434
Stock options exercised, 1,261 shares		—		(20	)		(7	)		39			—			12
Cash dividends declared, $ 0.72 per share		—		—			(1,969	)		—			—			(1,969	)
BALANCE AT DECEMBER 31, 2012	$	18,629	$	9,974		$	26,962		$	(4,976	)	$	1,864		$	52,453
Net income		—		—			5,240			—			—			5,240
Other comprehensive loss		—		—			—			—			(3,320	)		(3,320	)
Stock options exercised, 574 shares		—		(10	)		—			18			—			8
Cash dividends declared, $ 0.72 per share		—		—			(1,970	)		—			—			(1,970	)
BALANCE AT DECEMBER 31, 2013	$	18,629	$	9,964		$	30,232		$	(4,958	)	$	(1,456	)	$	52,411

These consolidated financial statements should be read in connection with the accompanying summary of significant accounting policies and notes to the consolidated financial statements.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        27

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands)	2013			2012			2011
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	5,240		$	4,547		$	3,687
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises, equipment and software		779			644			662
Deferred income taxes		77			(50	)		345
Provision for loan losses		840			823			950
Gain on sale of loans, net		(347	)		(591	)		(219	)
Securities gain, net		(159	)		—			(237	)
Security amortization, net of accretion		456			553			226
Secondary market loan sale proceeds		12,393			20,873			7,201
Originations of secondary market loans held-for-sale		(12,106	)		(20,384	)		(7,019	)
Bank-owned life insurance		(253	)		(230	)		(107	)
Effects of changes in operating assets and liabilities:
Net deferred loan (fees) costs		(214	)		63			35
Accrued interest receivable		(57	)		32			(134	)
Accrued interest payable		(39	)		(47	)		(31	)
Other assets and liabilities		339			831			415
Net cash provided by operating activities	$	6,949		$	7,064		$	5,774
CASH FLOWS FROM INVESTING ACTIVITIES
Securities available-for-sale:
Proceeds from maturities and repayments, available-for-sale	$	36,200		$	76,220		$	45,332
Proceeds from repayments, held-to-maturity		1,211			—			—
Purchases, available-for-sale		(55,693	)		(82,382	)		(95,542	)
Purchases, held-to-maturity		(8,135	)		—			—
Proceeds from sale of securities, available-for-sale		4,309			—			3,244
Loan originations, net of repayments		(14,666	)		(40,842	)		(1,065	)
Net cash from acquisition		—			—			60,872
Proceeds from sale of other real estate		18			26			883
Property, equipment and software acquisitions		(1,526	)		(953	)		(586	)
Purchase of bank-owned life insurance		(1,000	)		(5,000	)		—
Net cash provided by (used in) investing activities	$	(39,282	)	$	(52,931	)	$	13,138

These consolidated financial statements should be read in connection with the accompanying summary of significant accounting policies and notes to the consolidated financial statements.

28        2013 Report to Shareholders  |  CSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2013, 2012 and 2011

(Dollars in thousands)	2013			2012			2011
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	$	5,550		$	32,021		$	15,648
Net change in short-term borrowings		4,679			6,919			5,055
Repayment of other borrowings		(213	)		(6,489	)		(3,748	)
Cash dividends paid		(1,970	)		(1,969	)		(1,969	)
Proceeds from stock options exercised		8			5			—
Net cash provided by financing activities	$	8,054		$	30,487		$	14,986
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS		(24,279	)		(15,380	)		33,898
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR		66,878			82,258			48,360
CASH AND CASH EQUIVALENTS AT END OF YEAR	$	42,599		$	66,878		$	82,258
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest	$	2,356		$	3,155		$	3,769
Income taxes		2,335			1,690			1,525
Acquisition of noncash assets and liabilities:
Assets acquired		—			—			13,631
Liabilities assumed		—			—			74,503
Noncash investing activities:
Transfer of loans to other real estate owned		—			56			814
Transfer of securities from available-for-sale to held-to-maturity		38,930			—			—

These consolidated financial statements should be read in connection with the accompanying summary of significant accounting policies and notes to the consolidated financial statements.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        29

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

CSB Bancorp, Inc. (the “Company” or “CSB”) was incorporated in 1991 in the State of Ohio, and is a registered bank holding company. The Company’s wholly-owned subsidiaries are The Commercial and Savings Bank of Millersburg, Ohio (the “Bank”) and CSB Investment Services, LLC., inactive. The Company, through its subsidiaries, operates in one industry segment; the commercial banking industry.

The Bank, an Ohio-chartered bank organized in 1879, provides financial services through its sixteen Banking Centers located in Holmes, Tuscarawas, Wayne and Stark Counties in Ohio and nearby communities. These communities are the source of substantially all deposit, loan and trust activities. The majority of the Bank’s income is derived from commercial and retail lending activities and investments in securities. Its primary deposit products are checking, savings, and term certificate accounts, and its primary lending products are residential real estate, commercial real estate, commercial and installment loans. Substantially, all loans are secured by specific items of collateral including business assets, consumer assets and real estate. Commercial loans are expected to be repaid from cash flow from business operations. Real estate loans are secured by both residential and commercial real estate.

Significant accounting policies followed by the Company are presented below:

USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS

In preparing Consolidated Financial Statements in conformity with U.S. generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the date of the Consolidated Balance Sheets and reported amounts of revenues and expenses during each reporting period. Actual results could differ from those estimates. The most significant estimates susceptible to change in the near term relate to management’s determination of the allowance for loan losses and the fair value of financial instruments.

PRINCIPLES OF CONSOLIDATION

The Consolidated Financial Statements include the accounts of the Company and its wholly-owned subsidiaries. All significant inter-company balances and transactions have been eliminated in consolidation.

The Bank has established a trust department and the assets held by the Bank in fiduciary or agency capacities for its customers are not included in the Consolidated Balance Sheets as such items are not assets of the Bank.

CASH AND CASH EQUIVALENTS

For purposes of the Consolidated Statements of Cash Flows, cash and cash equivalents include cash on hand and amounts due from banks which mature overnight or within ninety days.

CASH RESERVE REQUIREMENTS

The Bank is required by the Federal Reserve to maintain reserves consisting of cash on hand and noninterest-earning balances on deposit with the Federal Reserve Bank. There was no required reserve balance at December 31, 2013 and 2012.

SECURITIES

Securities designated as available-for-sale are carried at fair value with unrealized gains and losses on such securities, net of applicable income taxes, recognized as other comprehensive income (loss). During 2013, approximately $39 million par value U.S. Government agencies and mortgage-backed securities of government agencies were transferred from available-for-sale to held-to-maturity. At year end, 28% of the total investment portfolio was classified as held-to-maturity. The volatility in interest rates that has occurred recently does not have as much impact on other comprehensive income as if the entire portfolio was included in the available-for-sale category. The held-to-maturity securities are carried at their fair value on the date of transfer or at purchase value if security purchases are designated as held-to-maturity.

The amortized cost of debt securities is adjusted for amortization of premiums and accretion of discounts to maturity based on the interest method. Such amortization and accretion is included in interest and dividends on securities.

Gains and losses on sales of securities are accounted for on a trade date basis, using the specific identification method, and are included in noninterest income. Securities are periodically reviewed for other-than-temporary impairment based upon a number of factors, including, but not limited to, the length of time and extent to which the market value has been less than cost, the financial condition of the underlying issuer, the receipt of principal and interest according to the contractual terms, the ability of the issuer to meet contractual obligations, the likelihood of the security’s ability to recover any decline in its market value and management’s intent and ability to hold the security for a period of time sufficient to allow for a recovery in market value. Among the factors that are considered in determining management’s intent and ability to hold the security is a review of the Company’s capital adequacy, interest rate risk position and liquidity.

30        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

The assessment of a security’s ability to recover any decline in market value, the ability of the issuer to meet contractual obligations and management’s intent and ability to hold the security requires considerable judgment. A decline in value that is considered to be other-than-temporary is recorded as a loss within non-interest income in the Consolidated Statements of Income.

Investments in Federal Home Loan Bank of Cincinnati (“FHLB”) and Federal Reserve Bank stock are classified as restricted stock, carried at cost, and evaluated for impairment. The Bank is required to maintain an investment in common stock of the FHLB and Federal Reserve Bank because the Bank is a member of the FHLB and the Federal Reserve System. We consider these stocks to be nonmarketable equity securities.

Federal Home Loan Bank of Cincinnati reported profits for 2013 and 2012, remains in compliance with regulatory capital and liquidity requirements, continues to pay dividends on the stock and redeems its stock at par value. With consideration given to these factors, management concluded that the stock was not impaired at December 31, 2013 or 2012.

LOANS

Loans that management has the intent and ability to hold for the foreseeable future, or until maturity or pay-off, generally are stated at their outstanding principal amount, adjusted for charge-offs, the allowance for loan losses and any deferred loan fees or costs on originated loans. Interest is accrued based upon the daily outstanding principal balance. Loan origination fees and certain direct origination costs are capitalized and recognized as an adjustment of the yield over the life of the related loan.

Interest income is not reported when full repayment is in doubt, typically when the loan is impaired or payments are past due over 90 days. All interest accrued but not collected for loans that are placed on nonaccrual or charged-off is reversed against interest income. The interest on these loans is accounted for on the cash-basis or cost-recovery method, until qualifying for return to accrual. Loans are returned to accrual status when all the principal and interest amounts contractually due are brought current and future payments are reasonably assured.

At origination, a determination is made whether a loan will be held in the Bank’s portfolio or is intended for sale in the secondary market. Mortgage loans held for sale are recorded at the lower of the aggregate cost or fair value. Generally these loans are held for sale for less than three days. The Bank includes gains and losses on sales of the loans held for sale when the sale is completed.

ALLOWANCE FOR LOAN LOSSES

The allowance for loan losses is established as losses are estimated to have occurred through a provision for loan losses charged to income. Loan losses are charged against the allowance when management believes the uncollectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance.

The allowance for loan losses is evaluated on a regular basis by management and is based upon management’s periodic review of the collectability of the loans in light of historical experience, the nature and volume of the loan portfolio, adverse situations that may affect borrowers’ ability to repay, estimated value of any underlying collateral and prevailing economic conditions. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available.

A loan is considered impaired when, based on current information and events, it is probable that the Company will be unable to collect the scheduled payments of principal or interest when due according to the contractual terms of the loan agreement. Factors considered by management in determining impairment include payment status, collateral value and the probability of collecting scheduled principal and interest payments when due. Loans that experience insignificant payment delays and payment shortfalls generally are not classified as impaired. Management determines the significance of payment delays and payment shortfalls on a case-by-case basis, taking into consideration all of the circumstances surrounding the loan and the borrower, including the length of the delay, the reasons for the delay, the borrower’s prior payment record and the amount of the shortfall in relation to the principal and interest owed. Impairment is measured on a loan-by-loan basis for commercial, commercial real estate, and construction loans by either the present value of expected future cash flows discounted at the loan’s effective interest rate, the loan’s obtainable market price, or the fair value of the collateral if the loan is collateral dependent.

Large groups of smaller balance homogeneous loans are collectively evaluated for impairment. Accordingly, the Company does not separately identify individual consumer loans for impairment disclosures.

OTHER REAL ESTATE OWNED

Other real estate acquired through or in lieu of foreclosure is initially recorded at fair value, less estimated costs to sell, and any loan balance in excess of fair value is charged to the allowance for loan losses. Subsequent valuations are periodically performed and write-downs are included in other operating expense, as are gains or losses upon sale and expenses related to maintenance of the properties. Other real estate owned amounted to $0 and $25 thousand at December 31, 2013 and 2012, respectively.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

PREMISES AND EQUIPMENT

Premises and equipment is stated at cost less accumulated depreciation and amortization. Upon the sale or disposition of the assets, the difference between the depreciated cost and proceeds is charged or credited to income. Depreciation and amortization is determined based on the estimated useful lives of the individual assets (typically 20 to 40 years for buildings and 3 to 10 years for equipment) and is computed using the straight-line method.

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS

Goodwill is not amortized, but is tested at least annually for impairment in the fourth quarter or more frequently if indicators of impairment are present. The evaluation for impairment involves comparing the estimated current fair value of the reporting unit to its carrying value, including goodwill. If the estimated current fair value of a reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. CSB uses market capitalization and multiples of tangible book value methods to determine the estimated current fair value of its reporting unit. Based on this analysis no impairment was recorded in 2013 or 2012.

The core deposit intangible assets are assigned useful lives, which are amortized on an accelerated basis over their weighted average lives. The Company periodically reviews the intangible asset for impairment as events or changes in circumstances indicate that the carrying amount of such assets may not be recoverable.

MORTGAGE SERVICING RIGHTS

Mortgage servicing rights (“MSRs”) represent the right to service loans for third party investors. MSRs are recognized as a separate asset upon the sale of mortgage loans to a third party investor with the servicing rights retained by CSB. Originated MSRs are recorded at allocated fair value at the time of the sale of the loans to the third party investor. MSRs are amortized in proportion to and over the estimated period of net servicing income. MSRs are carried at amortized cost, less a valuation allowance for impairment, if any. MSRs are evaluated on a discounted earnings basis to determine the present value of future earnings of the underlying serviced mortgages. All assumptions are reviewed annually or more frequently, if necessary, and adjusted to reflect current and anticipated market conditions.

BANK-OWNED LIFE INSURANCE

The cash surrender value of these policies is included as an asset on the Consolidated Balance Sheets and any increases in the cash surrender value are recorded as noninterest income on the Consolidated Statements of Income. In the event of the death of an insured individual under these policies, the Company would receive a death benefit, which would be recorded as noninterest income.

REPURCHASE AGREEMENTS

Substantially all securities sold under repurchase agreements represent amounts advanced by various customers. Securities owned by the Bank are pledged to cover those obligations. These repurchase agreements are not deposits and are not covered by federal deposit insurance.

ADVERTISING COSTS

All advertising costs are expensed as incurred. Advertising expenses amounted to $175 thousand, $190 thousand and $175 thousand for the years ended 2013, 2012 and 2011 respectively.

FEDERAL INCOME TAXES

The Company and its subsidiaries file a consolidated tax return. Deferred income taxes are provided on temporary differences between financial statement and income tax reporting. Temporary differences are differences between the amounts of assets and liabilities reported for financial statement purposes and their tax bases. Deferred tax assets are recognized for temporary differences that will be deductible in future years’ tax returns and for operating loss and tax credit carryforwards. Deferred tax assets are reduced by a valuation allowance if it is deemed more likely than not that some or all of the deferred tax assets will not be realized. Deferred tax liabilities are recognized for temporary differences that will be taxable in future years’ tax returns.

The Bank, domiciled in Ohio, is not currently subject to state and local income taxes.

32        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

STOCK-BASED COMPENSATION

The Company sponsored a stock-based compensation plan, administered by a committee. The incentive stock option plan expired in 2012. The Company recorded no stock-based compensation expense for 2013, 2012 or 2011. There was no income tax benefit recognized in the accompanying Consolidated Statements of Income related to stock-based compensation in 2013, 2012 or 2011. Shares issued in connection with stock option exercises were issued from available treasury shares in 2013.

As of December 31, 2013, there was no unrecognized compensation cost related to unvested share-based compensation awards outstanding. All shares are vested.

The fair value of each option is amortized into compensation expense on a straight-line basis between the grant date for the option and each vesting date. CSB estimates the fair value of stock options on the date of the grant using the Black-Scholes option pricing model. The model requires the use of numerous assumptions, many of which are highly subjective in nature. There were no option grants for the years ended December 31, 2013 and 2012.

COMPREHENSIVE INCOME

The Company includes recognized revenue, expenses, gains and losses in net income. Although certain changes in assets and liabilities such as unrealized gains and losses on available-for-sale securities are reported as a separate component of the equity section of the Consolidated Balance Sheets, these items along with net income are components of comprehensive income.

TRANSFERS OF FINANCIAL ASSETS

Transfers of financial assets are accounted for as sales when control over the assets has been surrendered. Control over transferred assets is deemed to be surrendered when (1) the assets have been isolated from the Company, (2) the transferee obtains the right (free of conditions that constrain it from taking advantage of that right) to pledge or exchange the transferred assets, and (3) the Company does not maintain effective control over the transferred assets through an agreement to repurchase them before their maturity.

PER SHARE DATA

Basic net income per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted income per common share includes the dilutive effect of additional potential common shares issuable under stock options.

The weighted average number of common shares outstanding for basic and diluted earnings per share computations was as follows:

	2013			2012			2011
Weighted average common shares		2,980,602			2,980,602			2,980,602
Average treasury shares		(244,129	)		(245,713	)		(245,803	)
Total weighted average common shares outstanding (basic)		2,736,473			2,734,889			2,734,799
Dilutive effect of assumed exercise of stock options		2,004			252			39
Weighted average common shares outstanding (diluted)		2,738,477			2,735,141			2,734,838

Dividends per share are based on the number of shares outstanding at the declaration date.

There were no stock options that were antidilutive at December 31, 2013. Options to purchase an aggregate of 29,760 common shares at $18.00 per share were outstanding at December 31, 2012 and 2011 and were antidilutive.

ACCOUNTING DEVELOPMENTS

In February 2013, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) 2013-02,Reporting of Amounts Reclassified Out of Accumulated Other Comprehensive Income. The standard requires that companies present either in a single note or parenthetically on the face of the financial statements, the effect of significant amounts reclassified from each component of accumulated other comprehensive income based on its source and the income statement line items affected by the reclassification. The new requirements took effect for public companies in fiscal years, and interim periods within those years, beginning after December 15, 2012. The Company adopted this standard on January 1, 2013. The effect of adopting this standard increased our disclosure surrounding reclassification items out of accumulated other comprehensive income.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

In July 2013, the FASB issued ASU 2013-11,Income Taxes (Topic 740):Presentation of an Unrecognized Tax Benefit When a Net Operating Loss Carryforward, a Similar Tax Loss, or a Tax Credit Carryforward Exists. This Update applies to all entities that have unrecognized tax benefits when a net operating loss carryforward, a similar tax loss, or a tax credit carryforward exists at the reporting date. An unrecognized tax benefit, or a portion of an unrecognized tax benefit, should be presented in the financial statements as a reduction to a deferred tax asset for a net operating loss carryforward, a similar tax loss, or a tax credit carryforward, except as follows. To the extent a net operating loss carryforward, a similar tax loss, or a tax credit carryforward is not available at the reporting date under the tax law of the applicable jurisdiction to settle any additional income taxes that would result from the disallowance of a tax position or the tax law of the applicable jurisdiction does not require the entity to use, and the entity does not intend to use, the deferred tax asset for such purpose, the unrecognized tax benefit should be presented in the financial statements as a liability and should not be combined with deferred tax assets. The assessment of whether a deferred tax asset is available is based on the unrecognized tax benefit and deferred tax asset that exist at the reporting date and should be made presuming disallowance of the tax position at the reporting date. The amendments in this Update are effective for fiscal years, and interim periods within those years, beginning after December 15, 2013. The amendments should be applied prospectively to all unrecognized tax benefits that exist at the effective date. Retrospective application is permitted. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

In January 2014, the FASB issued ASU 2014-04,Receivables – Troubled Debt Restructurings by Creditors (Subtopic 310-40): Reclassification of Residential Real Estate Collateralized Consumer Mortgage Loans upon Foreclosure. The amendments in this Update clarify that an in substance repossession or foreclosure occurs, and a creditor is considered to have received physical possession of residential real estate property collateralizing a consumer mortgage loan, upon either (1) the creditor obtaining legal title to the residential real estate property upon completion of a foreclosure or (2) the borrower conveying all interest in the residential real estate property to the creditor to satisfy that loan through completion of a deed in lieu of foreclosure or through a similar legal agreement. Additionally, the amendments require interim and annual disclosure of both (1) the amount of foreclosed residential real estate property held by the creditor and (2) the recorded investment in consumer mortgage loans collateralized by residential real estate property that are in the process of foreclosure according to local requirements of the applicable jurisdiction. The amendments in this Update are effective for public business entities for annual periods, and interim periods within those annual periods, beginning after December 15, 2014. An entity can elect to adopt the amendments in this Update using either a modified retrospective transition method or a prospective transition method. The Company is currently evaluating the impact the adoption of the standard will have on the Company’s financial position or results of operations.

RECLASSIFICATION OF COMPARATIVE AMOUNTS

Certain comparative amounts from the prior years have been reclassified to conform to current year classifications. Such classifications had no effect on net income or shareholders’ equity.

34        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SECURITIES

Securities consist of the following at December 31:

(Dollars in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
2013
Available-for-sale:
U.S. Treasury security	$	1,005	$	—	$	8	$	997
U.S. Government agencies		22,999		8		706		22,301
Mortgage-backed securities of government agencies		54,455		536		691		54,300
Other mortgage-backed securities		230		5		—		235
Asset-backed securities of government agencies		2,739		36		—		2,775
State and political subdivisions		16,219		371		143		16,447
Corporate bonds		4,500		44		5		4,539
Equity securities		106		23		1		128
Total available-for-sale		102,253		1,023		1,554		101,722
Held-to-maturity securities
U.S. Government agencies		19,186		—		828		18,358
Mortgage-backed securities of government agencies		25,164		—		879		24,285
Total held-to-maturity		44,350		—		1,707		42,643
Restricted stock		5,463		—		—		5,463
Total securities	$	152,066	$	1,023	$	3,261	$	149,828
2012
Available-for-sale:
U.S. Treasury security	$	100	$	—	$	—	$	100
U.S. Government agencies		35,996		27		43		35,980
Mortgage-backed securities of government agencies		66,588		2,107		—		68,695
Other mortgage-backed securities		345		—		1		344
Asset-backed securities of government agencies		2,862		—		39		2,823
State and political subdivisions		16,194		701		12		16,883
Corporate bonds		4,313		112		28		4,397
Equity securities		69		9		9		69
Total available-for-sale		126,467		2,956		132		129,291
Restricted stock		5,463		—		—		5,463
Total securities	$	131,930	$	2,956	$	132	$	134,754

2013 Report to Shareholders  |  CSB Bancorp, Inc.        35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SECURITIES (CONTINUED)

The amortized cost and fair value of securities at December 31, 2013, by contractual maturity, are shown below. Actual maturities may differ from contractual maturities because borrowers may have the right to call or prepay obligations with or without call or prepayment penalties.

(Dollars in thousands)	Amortized Cost		Fair Value
Available-for-sale:
Due in one year or less	$	855	$	875
Due after one through five years		17,354		17,500
Due after five through ten years		22,455		22,033
Due after ten years		61,483		61,186
Total debt securities available-for-sale	$	102,147	$	101,594
Held-to-maturity:
Due in one year or less	$	—	$	—
Due after one through five years		—		—
Due after five through ten years		7,717		7,568
Due after ten years		36,633		35,075
Total debt securities held-to-maturity	$	44,350	$	42,643

Securities with a market value of approximately $87.9 million and $79.2 million were pledged at December 31, 2013 and 2012, respectively, to secure public deposits, as well as other deposits and borrowings as required or permitted by law.

Restricted stock primarily consists of investments in FHLB and Federal Reserve Bank stock. The Bank’s investment in FHLB stock amounted to $5.0 million at December 31, 2013 and 2012. Federal Reserve Bank stock was $471 thousand at December 31, 2013 and 2012.

The following table shows the proceeds from sales of available-for-sale securities and the gross realized gains and losses on the sales of those securities that have been included in earnings as a result of the sales in 2013 and 2011. There were no securities sold during 2012.

(Dollars in thousands)	2013		2011
Proceeds	$	4,309	$	3,244
Realized gains	$	159	$	237
Realized losses		—		—
Impairment losses		—		—
Net securities gains	$	159	$	237

The income tax provision applicable to realized gains amounted to $54 thousand in 2013 and $81 thousand in 2011. There were no tax benefits recognized from gross realized losses in 2013, 2012 or 2011.

36        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SECURITIES (CONTINUED)

The following table presents gross unrealized losses and fair value of securities, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, at December 31:

	Securities in a Continuous Unrealized Loss Position
	Less Than 12 Months				12 Months Or More				Total
(Dollars in thousands)	Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value
2013
Available-for-sale
U.S. Treasury security	$	8	$	997	$	—	$	—	$	8	$	997
U.S. Government agencies		590		15,409		116		1,884		706		17,293
Mortgage-backed securities of government agencies		691		29,938		—		—		691		29,938
State and political subdivisions		122		3,522		21		233		143		3,755
Corporate bonds		4		1,163		1		499		5		1,662
Equity securities		—		—		1		1		1		1
Held-to-maturity
U.S. Government agencies		771		14,559		57		1,799		828		16,358
Mortgage-backed securities of government agencies		879		20,149		—		—		879		20,149
Total temporarily impaired securities	$	3,065	$	85,737	$	196	$	4,416	$	3,261	$	90,153
2012
Available-for-sale
U.S. Government agencies	$	43	$	15,957	$	—	$	—	$	43	$	15,957
Other mortgage-backed securities		1		344		—		—		1		344
Asset-backed securities of government agencies		39		1,833		—		—		39		1,833
State and political subdivisions		12		1,737		—		—		12		1,737
Corporate bonds		4		366		24		975		28		1,341
Total debt securities		99		20,237		24		975		123		21,212
Equity securities		—		—		9		45		9		45
Total temporarily impaired securities	$	99	$	20,237	$	33	$	1,020	$	132	$	21,257

There were seventy-three (73) securities in an unrealized loss position at December 31, 2013, seven (7) of which were in a continuous loss position for twelve or more months. At least quarterly, the Company conducts a comprehensive security-level impairment assessment. The assessments are based on the nature of the securities, the extent and duration of the securities, the extent and duration of the loss, management’s intent to sell or if it is more likely than not that management will be required to sell a security before recovery of its amortized cost basis, which may be maturity. Management believes the Company will fully recover the cost of these securities and it does not intend to sell these securities and likely will not be required to sell them before the anticipated recovery of the remaining amortized cost basis, which may be maturity. As a result, management concluded that these securities were not other-than-temporarily impaired at December 31, 2013.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS

Loans consist of the following at December 31:

(Dollars in thousands)	2013		2012
Commercial	$	117,478	$	104,899
Commercial real estate		129,828		119,192
Residential real estate		111,445		110,412
Construction & land development		13,444		23,358
Consumer		6,687		6,480
Total loans before deferred costs		378,882		364,341
Deferred loan costs		243		239
Total loans	$	379,125	$	364,580

Loan Origination/Risk Management

The Company has certain lending policies and procedures in place that are designed to maximize loan income within an acceptable level of risk. Management reviews and approves these policies and procedures on a regular basis. A reporting system supplements the review process by providing management with frequent reports related to loan production, loan quality, concentrations of credit, loan delinquencies and nonperforming and potential problem loans. Diversification in the loan portfolio is a means of managing risk associated with fluctuations in economic conditions.

Commercial loans are underwritten after evaluating and understanding the borrower’s ability to operate profitably and prudently expand its business. Underwriting standards are designed to promote relationship banking rather than transactional banking. The Company’s management examines current and occasionally projected cash flows to determine the ability of the borrower to repay their obligations as agreed. Commercial loans are primarily made based on the identified cash flows of the borrower and secondarily on the underlying collateral provided by the borrower. However, the cash flows of borrowers may not be as expected and the collateral securing these loans may fluctuate in value. Most commercial loans are secured by the assets being financed or other business assets such as accounts receivable or inventory and may incorporate a personal guarantee; however, some short-term loans may be made on an unsecured basis. In the case of loans secured by accounts receivable, the availability of funds for the repayment of these loans may be substantially dependent on the ability of the borrower to collect amounts due from its customers.

Commercial real estate loans are subject to underwriting standards and processes similar to commercial loans, in addition to those of real estate loans. These loans are viewed primarily as cash flow loans and secondarily as loans secured by real estate. Commercial real estate lending typically involves higher loan principal amounts and the repayment of these loans is largely dependent on the successful operation of the property securing the loan or the business conducted on the property securing the loan. Commercial real estate loans may be adversely affected by conditions in the real estate markets or in the general economy. The properties securing the Company’s commercial real estate portfolio are diverse in terms of type. This diversity helps reduce the Company’s exposure to adverse economic events that affect any single industry. Management monitors and evaluates commercial real estate loans based on collateral, geography and risk grade criteria. In addition, management tracks the level of owner-occupied commercial real estate loans versus non-owner occupied loans. At December 31, 2013 and 2012, approximately 77% and 81%, respectively of the outstanding principal balance of the Company’s commercial real estate loans were secured by owner-occupied properties.

With respect to loans to developers and builders that are secured by non-owner occupied properties, the Company generally requires the borrower to have had an existing relationship with the Company and have a proven record of success. Construction and land development loans are underwritten utilizing independent appraisal reviews, sensitivity analysis of absorption and lease rates, and financial analysis of the developers and property owners. Construction and land development loans are generally based upon estimates of costs and value associated with the completed project. These estimates may be inaccurate. Construction and land development loans often involve the disbursement of substantial funds with repayment substantially dependent on the success of the ultimate project. Sources of repayment for these types of loans may be pre-committed permanent loans from approved long-term lenders, sales of developed property or an interim loan commitment from the Company until permanent financing is obtained. These loans are closely monitored by on-site inspections and are considered to have higher risk than other real estate loans due to their ultimate repayment being sensitive to interest rate changes, governmental regulation of real property, general economic conditions and the availability of long-term financing.

38        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

The Company originates consumer loans utilizing a judgmental underwriting process. To monitor and manage consumer loan risk, policies and procedures are developed and modified, as needed, jointly by line and staff personnel. This activity, coupled with relatively small loan amounts that are spread across many individual borrowers, minimizes risk.

The Company maintains an independent loan review department that reviews and validates the credit risk program on a periodic basis. Results of these reviews are presented to management. The loan review process complements and reinforces the risk identification and assessment decisions made by lenders and credit personnel, as well as the Company’s policies and procedures.

Concentrations of Credit

Nearly all of the Company’s lending activity occurs within the State of Ohio, including the four counties of Holmes, Stark, Tuscarawas and Wayne, as well as other markets. The majority of the Company’s loan portfolio consists of commercial and industrial and commercial real estate loans. As of December 31, 2013 and 2012, there were no concentrations of loans greater than 7% related to any single industry.

Allowance for Loan Losses

The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2013, 2012 and 2011. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

(Dollars in thousands)	Commercial			Commercial Real Estate			Residential Real Estate			Construction & Land Development			Consumer			Unallocated			Total
December 31, 2013
Beginning balance	$	933		$	1,902		$	1,096		$	253		$	76		$	320		$	4,580
Provision for loan losses		451			78			173			(75	)		13			200			840
Charge-offs		(190	)		(108	)		(82	)		—			(48	)					(428	)
Recoveries		25			—			18			—			50						93
Net charge-offs		(165)			(108)			(64)			—			2						(335)
Ending balance	$	1,219		$	1,872		$	1,205		$	178		$	91		$	520		$	5,085
December 31, 2012
Beginning balance	$	1,024		$	1,673		$	894		$	180		$	78		$	233		$	4,082
Provision for loan losses		(78	)		512			206			73			23			87			823
Charge-offs		(29	)		(283	)		(106	)		—			(89	)					(507	)
Recoveries		16			—			102			—			64						182
Net charge-offs		(13)			(283)			(4)			—			(25)						(325)
Ending balance	$	933		$	1,902		$	1,096		$	253		$	76		$	320		$	4,580
December 31, 2011
Beginning balance	$	1,179		$	1,183		$	1,057		$	213		$	80		$	319		$	4,031
Provision for loan losses		294			558			115			8			61			(86	)		950
Charge-offs		(487	)		(68	)		(297	)		(41	)		(121	)					(1,014	)
Recoveries		38			—			19			—			58						115
Net charge-offs		(449)			(68)			(278)			(41)			(63)						(899)
Ending balance	$	1,024		$	1,673		$	894		$	180		$	78		$	233		$	4,082

2013 Report to Shareholders  |  CSB Bancorp, Inc.        39

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

The following table presents the balance in the allowance for loan losses and the ending loan balances by portfolio segment and impairment method as of December 31:

(Dollars in thousands)	Commercial		Commercial Real Estate		Residential Real  Estate		Construction & Land Development		Consumer		Unallocated		Total
2013
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$	241	$	331	$	212	$	—	$	—	$	—	$	784
Collectively evaluated for impairment		978		1,541		993		178		91		520		4,301
Total ending allowance balance	$	1,219	$	1,872	$	1,205	$	178	$	91	$	520	$	5,085
Loans:
Loans individually evaluated for impairment	$	5,576	$	3,220	$	1,844	$	—	$	—			$	10,640
Loans collectively evaluated for impairment		111,902		126,608		109,601		13,444		6,687				368,242
Total ending loans balance	$	117,478	$	129,828	$	111,445	$	13,444	$	6,687			$	378,882
2012
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$	85	$	522	$	172	$	—	$	—	$	—	$	779
Collectively evaluated for impairment		848		1,380		924		253		76		320		3,801
Total ending allowance balance	$	933	$	1,902	$	1,096	$	253	$	76	$	320	$	4,580
Loans:
Loans individually evaluated for impairment	$	4,315	$	4,573	$	1,137	$	166	$	—			$	10,191
Loans collectively evaluated for impairment		100,584		114,619		109,275		23,192		6,480				354,150
Total ending loans balance	$	104,899	$	119,192	$	110,412	$	23,358	$	6,480			$	364,341

40        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

The following table presents loans individually evaluated for impairment by class of loans as of December 31:

(Dollars in thousands)	Unpaid Principal Balance		Recorded Investment With No Allowance		Recorded Investment With Allowance		Total Recorded Investment		Related Allowance		Average Recorded Investment		Interest Income Recognized
2013
Commercial	$	5,595	$	7	$	5,580	$	5,587	$	241	$	4,185	$	182
Commercial real estate		3,540		563		2,658		3,221		331		3,650		163
Residential real estate		2,001		337		1,510		1,847		212		1,315		41
Construction & land development		—		—		—		—		—		21		2
Total impaired loans	$	11,136	$	907	$	9,748	$	10,655	$	784	$	9,171	$	388
2012
Commercial	$	4,315	$	—	$	4,329	$	4,329	$	85	$	4,123	$	167
Commercial real estate		4,906		1,723		2,849		4,572		522		4,396		152
Residential real estate		1,223		86		1,057		1,143		172		770		18
Construction & land development		173		166		—		166		—		167		—
Total impaired loans	$	10,617	$	1,975	$	8,235	$	10,210	$	779	$	9,456	$	337
2011
Commercial	$	4,605	$	—	$	4,605	$	4,605	$	165	$	2,890	$	91
Commercial real estate		2,621		—		2,476		2,476		304		2,924		78
Residential real estate		182		—		182		182		53		103		—
Construction & land development		—		—		—		—		—		—		—
Total impaired loans	$	7,408	$	—	$	7,263	$	7,263	$	522	$	5,917	$	169

2013 Report to Shareholders  |  CSB Bancorp, Inc.        41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

The following table presents the aging of past due and nonaccrual loans by class of loans as of December 31:

(Dollars in thousands)	Current		30-59 Days Past Due		60-89 Days Past Due		90 Days + Past Due		Nonaccrual		Total Past Due and Nonaccrual		Total Loans
2013
Commercial	$	117,342	$	15	$	37	$	—	$	84	$	136	$	117,478
Commercial real estate		128,462		111		107		40		1,108		1,366		129,828
Residential real estate		109,274		616		467		46		1,042		2,171		111,445
Construction & land development		12,494		—		—		950		—		950		13,444
Consumer		6,524		123		40		—		—		163		6,687
Total loans	$	374,096	$	865	$	651	$	1,036	$	2,234	$	4,786	$	378,882
2012
Commercial	$	104,348	$	60	$	8	$	—	$	483	$	551	$	104,899
Commercial real estate		117,372		41		34		—		1,745		1,820		119,192
Residential real estate		108,574		472		430		131		805		1,838		110,412
Construction & land development		23,180		—		5		—		173		178		23,358
Consumer		6,325		132		23		—		—		155		6,480
Total loans	$	359,799	$	705	$	500	$	131	$	3,206	$	4,542	$	364,341

Troubled Debt Restructurings

The Company had troubled debt restructurings (“TDRs”) of $8.6 million as of December 31, 2013, with $583 thousand of specific reserves allocated to customers whose loan terms have been modified in troubled debt restructurings. As of December 31, 2012, the Company had TDRs of $8.7 million, with $718 thousand of specific reserves allocated. At December 31, 2013, $7.8 million of the loans classified as TDRs were performing in accordance with their modified terms. Of the remaining $719 thousand, all were in nonaccrual of interest status.

None of the loans that were restructured in 2012 have defaulted in 2013. Of the loans that were restructured in 2011, one loan in the amount of $54 thousand subsequently defaulted in 2012. All of the loan modifications include extensions of the loan maturity dates.

Loan modifications that are considered TDRs completed during the year ended December 31:

(Dollars in thousands)	Number Of Loans Restructured		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
2013
Commercial		3	$	83	$	83
Residential real estate		3		264		264
Total restructured loans		6	$	347	$	347
2012
Commercial real estate		2	$	177	$	177
Residential real estate		9		798		798
Total restructured loans		11	$	975	$	975

42        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

Credit Quality Indicators

The Company categorizes loans into risk categories based on relevant information about the ability of borrowers to service their debt such as: current financial information, historical payment experience, credit documentation, public information and current economic trends, among other factors. The Company analyzes commercial loans individually by classifying the loans as to credit risk. This analysis includes commercial loans with an outstanding balance greater than $275 thousand. This analysis is performed on an annual basis. The Company uses the following definitions for risk ratings:

Pass. Loans classified as pass (Acceptable, Low Acceptable or Pass Watch) may exhibit a wide array of characteristics but at a minimum represent an acceptable risk to the Bank. Borrowers in this rating may have leveraged but acceptable balance sheet positions, satisfactory asset quality, stable to favorable sales and earnings trends, acceptable liquidity and adequate cash flow. Loans are considered fully collectible and require an average amount of administration. While generally adhering to credit policy, these loans may exhibit occasional exceptions that do not result in undue risk to the Bank. Borrowers are generally capable of absorbing setbacks, financial and otherwise, without the threat of failure.

Special Mention. Loans classified as special mention have a material weakness that deserves management’s close attention. If left uncorrected, these weaknesses may result in deterioration of the repayment prospects for the loan or of the Bank’s credit position at some future date.

Substandard.Loans classified as substandard are inadequately protected by the current net worth and paying capacity of the obligor or of the collateral pledged, if any. Loans so classified have a well-defined weakness or weaknesses that jeopardize the liquidation of the debt. They are characterized by the distinct possibility that the Bank will sustain some loss if the deficiencies are not corrected.

Doubtful. Loans classified as doubtful have all the weaknesses inherent in those classified as substandard, with the added characteristic that the weaknesses make collection or liquidation in full, on the basis of currently existing facts, conditions and values, highly questionable and improbable.

Loans not meeting the criteria above that are analyzed individually as part of the above described process are considered to be pass rated loans. Loans listed as not rated are either less than $275 thousand or are included in groups of homogeneous loans. Based on the most recent analysis performed, the risk category of loans by class is as follows at December 31:

(Dollars in thousands)	Pass		Special Mention		Substandard		Doubtful		Not Rated		Total
2013
Commercial	$	101,195	$	10,352	$	5,066	$	—	$	865	$	117,478
Commercial real estate		115,265		9,076		4,041		—		1,446		129,828
Residential real estate		237		—		47		—		111,161		111,445
Construction & land development		9,470		587		1,884		—		1,503		13,444
Consumer		—		—		—		—		6,687		6,687
Total	$	226,167	$	20,015	$	11,038	$	—	$	121,662	$	378,882
2012
Commercial	$	92,123	$	5,854	$	6,637	$	—	$	285	$	104,899
Commercial real estate		102,602		5,671		8,459		—		2,460		119,192
Residential real estate		200		—		53		—		110,159		110,412
Construction & land development		18,063		2,750		1,244		—		1,301		23,358
Consumer		—		—		—		—		6,480		6,480
Total	$	212,988	$	14,275	$	16,393	$	—	$	120,685	$	364,341

2013 Report to Shareholders  |  CSB Bancorp, Inc.        43

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

Nonperforming loans include loans past due 90 days and greater and loans on nonaccrual of interest status. The following table presents loans that are not rated, by class of loans as of December 31:

(Dollars in thousands)	Performing		Nonperforming		Total
2013
Commercial	$	865	$	—	$	865
Commercial real estate		1,446		—		1,446
Residential real estate		110,119		1,042		111,161
Construction & land development		1,503		—		1,503
Consumer		6,687		—		6,687
Total	$	120,620	$	1,042	$	121,662
2012
Commercial	$	285	$	—	$	285
Commercial real estate		2,460		—		2,460
Residential real estate		109,276		883		110,159
Construction & land development		1,294		7		1,301
Consumer		6,480		—		6,480
Total	$	119,795	$	890	$	120,685

Mortgage Servicing Rights

For the years ended December 31, 2013 and 2012, the Company had outstanding mortgage servicing rights (“MSRs”) of $225 thousand and $214 thousand, respectively. No valuation allowance was recorded at December 31, 2013 or 2012 as the fair value of the MSRs exceeded their carrying value. On December 31, 2013, the Company had $56.9 million residential mortgage loans with servicing retained as compared to $52.7 million with servicing retained at December 31, 2012.

Total loans serviced for others approximated $70.2 million and $60.2 million at December 31, 2013 and 2012, respectively.

44        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – PREMISES AND EQUIPMENT

Premises and equipment consist of the following at December 31:

(Dollars in thousands)	2013		2012
Land and improvements	$	1,489	$	1,489
Buildings and improvements		9,656		9,422
Furniture and equipment		7,327		6,763
Leasehold improvements		260		260
		18,732		17,934
Accumulated depreciation		10,042		9,459
Premises and equipment, net	$	8,690	$	8,475

The Bank leases certain office locations. Total rental expense under these leases approximated $299 thousand, $298 thousand, and $187 thousand in 2013, 2012 and 2011, respectively. Depreciation expense amounted to $625 thousand, $567 thousand and $530 thousand for the years ended December 31, 2013, 2012 and 2011, respectively.

Future minimum lease payments at December 31, 2013 were as follows:

(Dollars in thousands)
2014	$	299
2015		294
2016		172
2017		32
Total	$	797

NOTE 5 – CORE DEPOSIT INTANGIBLE ASSETS

Core Deposit Intangible

No additional core deposit intangible was recorded in 2013 or 2012, with $706 thousand recorded as a result of the acquisition of two branches in Wooster, Ohio in 2011. The core deposit intangible asset will be amortized over an estimated life of ten years. Amortization expense related to the core deposit intangible asset totaled $135 thousand, $140 thousand and $78 thousand in 2013, 2012 and 2011, respectively. The following table shows the core deposit intangible and the related accumulated amortization as of December 31:

(Dollars in thousands)	2013			2012			2011
Gross carrying amount	$	1,251		$	1,251		$	1,251
Accumulated amortization		(492	)		(357	)		(217	)
Net carrying amount	$	759		$	894		$	1,034

2013 Report to Shareholders  |  CSB Bancorp, Inc.        45

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 – CORE DEPOSIT INTANGIBLE ASSETS (CONTINUED)

The estimated aggregate future amortization expense for the core deposit assets remaining as of December 31, 2013 is as follows:

(Dollars in thousands)	Core Deposit Amortization
2014	$	129
2015		125
2016		121
2017		116
2018		101
Thereafter		167
	$	759

NOTE 6 – INTEREST-BEARING DEPOSITS

Interest-bearing deposits at December 31 are as follows:

(Dollars in thousands)	2013		2012
Demand	$	76,327	$	74,429
Savings		149,937		138,794
Time deposits:
In excess of $100,000		42,562		54,163
Other		91,782		103,910
Total interest-bearing deposits	$	360,608	$	371,296

At December 31, 2013, stated maturities of time deposits were as follows:

(Dollars in thousands)
2014	$	75,051
2015		25,282
2016		18,791
2017		8,271
2018		6,902
2019 and beyond		47
Total	$	134,344

46        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 7 – BORROWINGS

Short-term borrowings

Short-term borrowings include overnight repurchase agreements, federal funds purchased and short-term advances through the FHLB. The outstanding balances and related information for short-term borrowings are summarized as follows:

(Dollars in thousands)	2013			2012
Balance at year-end	$	48,671		$	43,992
Average balance outstanding		45,330			40,893
Maximum month-end balance		48,671			43,992
Weighted-average rate at year-end		0.15	%		0.20	%
Weighted-average rate during the year		0.15			0.22

Average balances outstanding during the year represent daily average balances, and average interest rates represent interest expenses divided by the related average balances.

Other borrowings

The following table sets forth information concerning other borrowings:

	Maturity Range				Weighted Average Interest			Stated Interest Rate Range						At December 31,
(Dollars in thousands)	From		To		Rate			From			To			2013		2012
Fixed rate		10/2/14		12/21/17		3.62	%		3.48	%		3.73	%	$	12,000	$	12,000
Fixed rate amortizing		1/1/14		3/1/17		5.99			4.80			7.15			459		672
														$	12,459	$	12,672

Maturities of other borrowings at December 31, 2013, are summarized as follows for the years ended December 31:

(Dollars in thousands)	Amount		Weighted Average Rate
2014	$	2,190		3.91	%
2015		169		6.01
2016		97		5.84
2017		10,003		3.61
	$	12,459		3.71	%

Monthly principal and interest payments are due on the fixed rate amortizing borrowings; additionally a 10% principal curtailment is due on the borrowing’s anniversary date. FHLB borrowings are secured by a blanket collateral agreement. At December 31, 2013 the Company has the capacity to borrow an additional $42.1 million from the FHLB.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – INCOME TAXES

The provision for income taxes consists of the following for the years ended December 31:

(Dollars in thousands)	2013		2012			2011
Current	$	2,196	$	2,040		$	1,257
Deferred		77		(50	)		345
Total income tax provision	$	2,273	$	1,990		$	1,602

The income tax provision attributable to income from operations differs from the amounts computed by applying the statutory federal income tax rate of 34% to income before income taxes as follows:

(Dollars in thousands)	2013			2012			2011
Expected provision using statutory federal income tax rate	$	2,554		$	2,223		$	1,798
Tax-exempt income on state and municipal securities and political subdivision loans		(203	)		(269	)		(169	)
Interest expense associated with carrying certain state and municipal securities and political subdivision loans		6			6			8
Tax-exempt income on bank owned life insurance		(86	)		(78	)		(36	)
Other		2			108			1
Total income tax provision	$	2,273		$	1,990		$	1,602

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 are as follows:

(Dollars in thousands)	2013			2012
Allowance for loan losses	$	1,887		$	1,470
Net operating loss carryforward		470			598
Capital loss carryforward		35			35
Unrealized loss on securities available-for-sale		750			—
Other		37			109
		3,179			2,212
Valuation allowance on deferred tax assets		(35)			(35)
Deferred tax assets		3,144			2,177
Premises and equipment		(443	)		(399	)
Federal Home Loan Bank stock dividends		(736	)		(736	)
Deferred loan fees		(226	)		(173	)
Unrealized gain on securities available-for-sale		—			(960	)
Prepaid expenses		(120	)		(120	)
Other		(462	)		(265	)
Deferred tax liabilities		(1,987	)		(2,653	)
Net deferred tax asset (liability)	$	1,157		$	(476	)

48        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – INCOME TAXES (CONTINUED)

The Company has a net operating loss tax carryforward of approximately $1.4 million, as of December 31, 2013. The net operating loss carryforward can be used to offset future taxable income and will begin to expire in tax year 2026.

The Company believes it is more likely than not that the benefit of deferred tax assets will be realized with the possible exception of the capital loss carryforward due to expire in 2014. A valuation allowance for the capital loss carryforward is reflected at December 31, 2013 and 2012. No additional valuation allowance is deemed necessary in view of certain tax strategies, coupled with the anticipated future taxable income as evidenced by the Company’s earnings.

There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. CSB recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statement of Income. With few exceptions, CSB is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years prior to 2010.

NOTE 9 – EMPLOYEE BENEFITS

The Company sponsors a contributory 401(k) profit-sharing plan (the “Plan”) covering substantially all employees who meet certain age and service requirements. The Plan permits investment in the Company’s common stock subject to various limitations and provides for discretionary profit sharing and matching contributions. The discretionary profit sharing contribution is determined annually by the Board of Directors and amounted to 2.75% of each eligible participant’s compensation in 2013 and 2.5% of each eligible participant’s compensation for 2012 and 2011, respectively. The Plan also provides for a 50% Company match of participant contributions up to a maximum of 2% of each participant’s annual compensation. Expense under the Plan amounted to approximately $284 thousand, $270 thousand and $242 thousand for 2013, 2012 and 2011, respectively.

The Company maintains a stock option plan. No stock options were granted during the three years presented.

The following summarizes stock options activity for the years ended December 31:

	2013						2012						2011
	Shares			Weighted Average Exercise Price			Shares			Weighted Average Exercise Price			Shares			Weighted Average Exercise Price
Outstanding at beginning of year		31,760		$	17.85			39,620		$	17.49			39,945		$	17.48
Granted		—			—			—			—			—			—
Exercised		(1,000	)		(16.10	)		(4,650	)		(16.05	)		—			—
Forfeited		—						(3,210	)		(16.06	)		(325	)		(16.05	)
Outstanding at end of year		30,760			17.90			31,760			17.85			39,620			17.49
Options exercisable at year-end		30,760		$	17.90			31,760		$	17.85			39,620		$	17.49
Weighted-average fair value of options granted during year					N/A						N/A						N/A

Options outstanding at December 31, 2013 were as follows:

	Outstanding
Range Of Exercise Prices	Number		Weighted Average Remaining Contractual Life (Years)		Number		Weighted Average Exercise Price
$ 15.00		1,000		0.60		1,000	$	15.00
18.00		29,760		2.22		29,760		18.00
Outstanding at year-end		30,760		2.17		30,760	$	17.90

2013 Report to Shareholders  |  CSB Bancorp, Inc.        49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 9 – EMPLOYEE BENEFITS (CONTINUED)

The total intrinsic value of outstanding in-the-money stock options and outstanding in-the-money exercisable stock options was $34 thousand and $4 thousand at December 31, 2013 and 2012, respectively. There were 1,000 and 4,650 stock options exercised in 2013 and 2012, respectively and no stock options exercised in 2011. There were no share awards vested in 2013 or 2012.

NOTE 10 – FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK

The Bank is party to financial instruments with off-balance sheet risk in the normal course of business to meet the financing needs of its customers. These financial instruments are primarily loan commitments to extend credit and letters of credit. These instruments involve, to varying degrees, elements of credit risk in excess of the amounts recognized in the Consolidated Balance Sheets. The contract amount of these instruments reflects the extent of involvement the Bank has in these financial instruments. The Bank’s exposure to credit loss in the event of the nonperformance by the other party to the financial instruments for loan commitments to extend credit and letters of credit is represented by the contractual amounts of these instruments. The Bank uses the same credit policies in making loan commitments as it does for on-balance sheet loans.

The following financial instruments whose contract amount represents credit risk were outstanding at December 31:

(Dollars in thousands)	2013		2012
Commitments to extend credit	$	119,571	$	105,829
Letters of credit	$	679	$	1,539

Commitments to extend credit are agreements to lend to a customer as long as there is no violation of any condition established in the contract. Commitments generally have fixed expiration dates or other termination clauses and may require payment of a fee. Since many of the commitments are expected to expire without being drawn upon, the total commitment amount does not necessarily represent future cash requirements. The Company evaluates each customer’s credit worthiness on a case-by-case basis. The amount of collateral, obtained if deemed necessary by the Company upon extension of credit, is based on management’s credit evaluation of the customer. Collateral held varies but may include accounts receivable, recognized inventory, property, plant and equipment, and income-producing commercial properties.

Letters of credit are written conditional commitments issued by the Company to guarantee the performance of a customer to a third party and are reviewed for renewal at expiration. All letters of credit outstanding at December 31, 2013 are due on demand or expire in 2014. The credit risk involved in issuing letters of credit is essentially the same as that involved in extending loans to customers. The Company requires collateral supporting these commitments when deemed appropriate.

NOTE 11 – RELATED-PARTY TRANSACTIONS

In the ordinary course of business, loans are granted by the Company to executive officers, directors and their related business interests consistent with Federal Reserve Regulation O. The following is an analysis of activity of related-party loans for the year end December 31, 2013:

(Dollars in thousands)
Balance at beginning of year	$	6,218
New loans and advances		315
Repayments, including loans sold		1,441
Balance at end of year	$	5,092

Deposits from executive officers, directors and their related business interests at both December 31, 2013 and 2012 were approximately $10.4 million and $10.5 million.

50        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – REGULATORY MATTERS

The Company (on a consolidated basis) and Bank are subject to various regulatory capital requirements administered by the federal and state banking agencies. Failure to meet minimum capital requirements can initiate certain mandatory and possibly additional discretionary actions by regulators that, if undertaken, could have a direct material effect on the Company’s and Bank’s financial statements. Under capital adequacy guidelines and the regulatory framework for prompt corrective action, the Company and Bank must meet specific capital guidelines that involve quantitative measures of the assets, liabilities and certain off-balance-sheet items as calculated under regulatory accounting practices. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings and other factors.

Quantitative measures established by regulation to ensure capital adequacy require the Company and Bank to maintain minimum amounts and ratios (set forth in the following table) of Total and Tier 1 capital (as defined in the regulations) to risk-weighted assets (as defined), and of Tier 1 capital to average assets (as defined). Management believes, as of December 31, 2013 and 2012, that the Company and Bank met or exceeded all capital adequacy requirements to which they are subject.

As of December 31, 2013, the most recent notification from federal and state banking agencies categorized the Bank as “well capitalized” under the regulatory framework for prompt corrective action. To be categorized as “well capitalized” an institution must maintain minimum Total risk-based, Tier 1 risk-based and Tier 1 leverage ratios as set forth in the following tables. There are no known conditions or events since that notification that Management believes have changed the Bank’s category.

The actual capital amounts and ratios of the Company and Bank as of December 31, are presented in the following tables:

						Minimum					Minimum Required
						Required For					To Be Well Capitalized
						Capital Adequacy					Under Prompt
	Actual					Purposes					Corrective Action
(Dollars in thousands)	Amount		Ratio			Amount		Ratio			Amount		Ratio
2013
Total capital (to risk-weighted assets)
Consolidated	$	53,268		13.6	%	$	31,416		8.0	%	$	39,270		10.0	%
Bank		52,458		13.4			31,392		8.0			39,240		10.0
Tier I capital (to risk-weighted assets)
Consolidated		48,357		12.3			15,708		4.0			23,562		6.0
Bank		47,558		12.1			15,696		4.0			23,544		6.0
Tier I capital (to average assets)
Consolidated		48,357		8.2			23,550		4.0			29,438		5.0
Bank		47,558		8.1			23,544		4.0			29,430		5.0
2012
Total capital (to risk-weighted assets)
Consolidated	$	49,534		13.3	%	$	29,707		8.0	%	$	37,134		10.0	%
Bank		48,940		13.2			29,695		8.0			37,118		10.0
Tier I capital (to risk-weighted assets)
Consolidated		44,946		12.1			14,854		4.0			22,280		6.0
Bank		44,352		12.0			14,847		4.0			22,271		6.0
Tier I capital (to average assets)
Consolidated		44,946		7.9			22,794		4.0			28,493		5.0
Bank		44,352		7.8			22,788		4.0			28,485		5.0

2013 Report to Shareholders  |  CSB Bancorp, Inc.        51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – REGULATORY MATTERS (CONTINUED)

The Company’s primary source of funds with which to pay dividends are dividends received from the Bank. The payment of dividends by the Bank to the Company is subject to restrictions by its regulatory agencies. These restrictions generally limit dividends to current year net income and prior two-years’ net retained earnings. Also, dividends may not reduce capital levels below the minimum regulatory requirements disclosed in the prior table. Under these provisions, at January 1, 2014, the Bank could dividend $7.5 million to the Company. The Company does not anticipate the financial need to obtain regulatory approval due to its current cash balances and ability to access the credit markets. Federal law prevents the Company from borrowing from the Bank unless loans are secured by specific obligations. Further, such secured loans are limited to an amount not exceeding ten percent of the Bank’s common stock and capital surplus.

NOTE 13 – CONDENSED PARENT COMPANY FINANCIAL INFORMATION

A summary of condensed financial information of the parent company as of December 31, 2013 and 2012 and for each of the three years in the period ended December 31, 2013 follows:

(Dollars in thousands)	2013		2012
CONDENSED BALANCE SHEETS
ASSETS
Cash deposited with subsidiary bank	$	598	$	388
Investment in subsidiary bank		51,596		51,858
Securities available-for-sale		128		69
Other assets		192		207
TOTAL ASSETS	$	52,514	$	52,522
LIABILITIES AND SHAREHOLDERS’ EQUITY
Total liabilities	$	103	$	69
Total shareholders’ equity		52,411		52,453
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$	52,514	$	52,522

(Dollars in thousands)	2013			2012			2011
CONDENSED STATEMENTS OF INCOME
Interest on securities	$	2		$	2		$	1
Dividends from subsidiary		2,400			2,000			2,300
Total income		2,402			2,002			2,301
Operating expenses		356			354			336
Income before taxes and undistributed equity income of subsidiary		2,046			1,648			1,965
Income tax benefit		(121	)		(120	)		(115	)
Equity earnings in subsidiary, net of dividends		3,073			2,779			1,607
NET INCOME	$	5,240		$	4,547		$	3,687
COMPREHENSIVE INCOME	$	1,920		$	4,981		$	4,244

52        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – CONDENSED PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

(Dollars in thousands)	2013			2012			2011
CONDENSED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income	$	5,240		$	4,547		$	3,687
Adjustments to reconcile net income to cash provided by operations:
Equity earnings in subsidiary, net of dividends		(3,073	)		(2,779	)		(1,607	)
Change in other assets, liabilities		42			49			48
Net cash provided by operating activities		2,209			1,817			2,128
Cash flows from investing activities:
Purchase of investment securities		(37	)		—			—
Net cash used in investing activities		(37	)		—			—
Cash flows from financing activities:
Cash dividends paid		(1,970	)		(1,969	)		(1,969	)
Cash received from exercise of stock options		8			5			—
Net cash used in financing activities		(1,962	)		(1,964	)		(1,969	)
Increase (decrease) in cash		210			(147	)		159
Cash at beginning of year		388			535			376
Cash at end of year	$	598		$	388		$	535

NOTE 14 – FAIR VALUE MEASUREMENTS

The Company provides disclosures about assets and liabilities carried at fair value. The framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities and lowest priority to unobservable inputs. The three broad levels of the fair value hierarchy are described below:

Level I: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Company has the ability to access.

Level II: Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by or other means including certified appraisals. If the asset or liability has a specified (contractual) term, the Level II input must be observable for substantially the full term of the asset or liability.

Level III: Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        53

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – FAIR VALUE MEASUREMENTS (CONTINUED)

The following table presents the assets reported on the consolidated statements of financial condition at their fair value as of December 31, 2013 and December 31, 2012, by level within the fair value hierarchy. No liabilities are carried at fair value. As required by the accounting standards, financial assets and liabilities are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. Equity securities and U.S. Treasury Notes are valued at the closing price reported on the active market on which the individual securities are traded. Obligations of U.S. Government corporations and agencies, mortgage-backed securities, asset-backed securities and obligations of states and political subdivisions are valued at observable market data for similar assets.

(Dollars in thousands)	Level I		Level II		Level III		Total
	December 31, 2013
Assets:
Securities available-for-sale
U.S. Treasury security	$	997	$	—	$	—	$	997
U.S. Government agencies		—		22,301		—		22,301
Mortgage-backed securities of government agencies		—		54,535		—		54,535
Asset-backed securities of government agencies		—		2,775		—		2,775
State and political subdivisions		—		16,447		—		16,447
Corporate bonds		—		4,539		—		4,539
Total debt securities		997		100,597		—		101,594
Equity securities		128		—		—		128
Total available-for-sale securities	$	1,125	$	100,597	$	—	$	101,722
	December 31, 2012
Assets:
Securities available-for-sale
U.S. Treasury security	$	100	$	—	$	—	$	100
U.S. Government agencies		—		35,980		—		35,980
Mortgage-backed securities of government agencies		—		69,039		—		69,039
Asset-backed securities of government agencies		—		2,823		—		2,823
State and political subdivisions		—		16,883		—		16,883
Corporate bonds		—		4,397		—		4,397
Total debt securities		100		129,122		—		129,222
Equity securities		69		—		—		69
Total available-for-sale securities	$	169	$	129,122	$	—	$	129,291

54        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – FAIR VALUE MEASUREMENTS (CONTINUED)

The following table presents the assets measured on a nonrecurring basis on the consolidated balance sheets at their fair value as of December 31, 2013 and December 31, 2012, by level within the fair value hierarchy. Impaired loans and other real estate that are collateral dependent are written down to fair value through the establishment of specific reserves. Techniques used to value the collateral securing the impaired loans include: quoted market prices for identical assets classified as Level I inputs; observable inputs, employed by certified appraisers, for similar assets classified as Level II inputs. In cases where valuation techniques included inputs that are unobservable and are based on estimates and assumptions developed by management based on the best information available under each circumstance, the asset valuation is classified as Level III inputs.

The fair value of MSRs is based on a valuation model that calculates the present value of estimated net servicing income. The valuation model incorporates discounted cash flow and repayment assumptions based on management’s best judgment. As a result, these rights are measured at fair value on a nonrecurring basis and are classified within Level III of the fair value hierarchy.

(Dollars in thousands)	Level I		Level II		Level III		Total
	December 31, 2013
Assets measured on a nonrecurring basis:
Impaired loans	$	—	$	—	$	9,856	$	9,856
Mortgage servicing rights		—		—		225		225
	December 31, 2012
Assets measured on a nonrecurring basis:
Impaired loans	$	—	$	—	$	9,412	$	9,412
Other real estate owned		—		—		25		25
Mortgage servicing rights		—		—		214		214

The following table presents additional quantitative information about assets measured at fair value on a nonrecurring basis and for which the Company has utilized Level III inputs to determine fair value:

	Quantitative Information about Level III Fair Value  Measurements
(Dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	December 31, 2013
Impaired loans	$	8,663	Discounted cash flow	Remaining term Discount rate	3 mos to 29 yrs / (62 mos) 7.1% to 12% / (7.5%)
		1,193	Appraisal of collateral1,3	Appraisal  adjustments2 Liquidation expense2	–20% to –25% –10%
Mortgage servicing rights		225	Discounted cash flow	Remaining term Discount rate	12 mos to 30 yrs / (244 mos) 1.5% / (1.5%)

2013 Report to Shareholders  |  CSB Bancorp, Inc.        55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 14 – FAIR VALUE MEASUREMENTS (CONTINUED)

	Quantitative Information about Level III Fair Value Measurements
(Dollars in thousands)	Fair Value Estimate		Valuation Techniques	Unobservable Input	Range (Weighted Average)
	December 31, 2012
Impaired loans	$	7,260	Discounted cash flow	Remaining term Discount rate	4 mos to 29 yrs / (74 mos) 7.5% to 12% / (7.8%)
		2,152	Appraisal of collateral1,3	Appraisal  adjustments2 Liquidation expense2	–20% to –35% –10%
Other real estate owned		25	Appraisal of collateral1,3	Management discount for property type3	0% to –67%
Mortgage servicing rights		214	Discounted cash flow	Remaining term Discount rate	24 mos to 30 yrs / (244 mos) 1.5% / (1.5%)

¹  Fair value is generally determined through independent appraisals of the underlying collateral, which generally include various inputs which are not identifiable.

²  Appraisals may be adjusted by management for qualitative factors such as estimated liquidation expenses. The range of liquidation expenses and other appraisal adjustments are presented as a percent of the appraisal.

³  Includes qualitative adjustments by management and estimated liquidation expenses.

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS

The estimated fair values of recognized financial instruments as of December 31 are as follows:

	2013
	Carrying								Total Fair
(Dollars in thousands)	Value		Level I		Level II		Level III		Value
Financial assets:
Cash and cash equivalents	$	42,599	$	42,599	$	—	$	—	$	42,599
Securities available-for-sale		101,722		1,125		100,597		—		101,722
Securities held-to-maturity		44,350		—		42,643		—		42,643
Restricted stock		5,463		—		5,463		—		5,463
Net loans		374,040		—		—		375,055		375,055
Bank-owned life insurance		9,551		9,551		—		—		9,551
Accrued interest receivable		1,374		1,374		—		—		1,374
Financial liabilities:
Deposits	$	480,933	$	346,589	$	—	$	135,106	$	481,695
Short-term borrowings		48,671		48,671		—		—		48,671
Other borrowings		12,459		—		—		12,559		12,559
Accrued interest payable		96		96		—		—		96

56        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

	2012
	Carrying								Total Fair
(Dollars in thousands)	Value		Level I		Level II		Level III		Value
Financial assets:
Cash and cash equivalents	$	66,878	$	66,878	$	—	$	—	$	66,878
Securities available-for-sale		129,291		169		129,122		—		129,291
Restricted stock		5,463		—		5,463		—		5,463
Net loans		360,000		—		—		367,028		367,028
Bank-owned life insurance		8,298		8,298		—		—		8,298
Accrued interest receivable		1,317		1,317		—		—		1,317
Financial liabilities:
Deposits	$	475,443	$	317,369	$	—	$	159,573	$	476,942
Short-term borrowings		43,992		43,992		—		—		43,992
Other borrowings		12,672		—		—		13,772		13,772
Accrued interest payable		135		135		—		—		135

For purposes of the above disclosures of estimated fair value, the following assumptions are used:

Cash and cash equivalents; Accrued interest receivable; Short-term borrowings, and Accrued interest payable

The fair value of the above instruments is considered to be carrying value.

Securities

The fair value of securities available-for-sale and securities held-to-maturity which are measured on a recurring basis are determined primarily by obtaining quoted prices on nationally recognized securities exchanges or matrix pricing, which is a mathematical technique used widely in the industry to value debt securities without relying exclusively on quoted prices for the specific securities but rather by relying on securities’ relationship to other similar securities. Classified as Level I or Level II in the fair value hierarchy.

Net loans

The fair value for loans is estimated by discounting future cash flows using current market inputs at which loans with similar terms and qualities would be made to borrowers of similar credit quality. Where quoted market prices were available, primarily for certain residential mortgage loans, such market rates were utilized as estimates for fair value. Fair value of nonaccrual loans is based on carrying value, classified as Level III.

Bank-owned life insurance

The carrying amount of bank-owned life insurance is based on the cash surrender value of the policies and is a reasonable estimate of fair value, classified as Level I.

Restricted stock

Restricted stock includes FHLB Stock and Federal Reserve Bank Stock. It is not practicable to determine the fair value of regulatory equity securities due to restrictions placed on their transferability. Fair value is based on carrying value, classified as Level II.

Deposits

The fair value of certificates of deposit is based on the discounted value of contractual cash flows. The discount rates are estimated using market rates currently offered for similar instruments with similar remaining maturities, resulting in a Level III classification. Demand, savings, and money market deposit accounts are valued at the amount payable on demand as of quarter end, resulting in a Level I classification.

2013 Report to Shareholders  |  CSB Bancorp, Inc.        57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

Other borrowings

The fair value of FHLB advances are estimated using a discounted cash flow analysis based on the current borrowing rates for similar types of borrowings, resulting in a Level III classification.

The Company also has unrecognized financial instruments at December 31, 2013 and 2012. These financial instruments relate to commitments to extend credit and letters of credit. The aggregated contract amount of such financial instruments was approximately $120.3 million at December 31, 2013 and $107.4 million at December 31, 2012. Such amounts are also considered to be the estimated fair values.

The fair value estimates of financial instruments are made at a specific point in time based on relevant market information. These estimates do not reflect any premium or discount that could result from offering for sale at one time the entire holdings of a particular financial instrument over the value of anticipated future business and the value of assets and liabilities that are not considered financial instruments. Since no ready market exists for a significant portion of the financial instruments, fair value estimates are largely based on judgments after considering such factors as future expected credit losses, current economic conditions, risk characteristics of various financial instruments, and other factors. These estimates are subjective in nature and involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

NOTE 16 – ACCUMULATED OTHER COMPREHENSIVE INCOME

The following table presents the changes in accumulated other comprehensive (loss) income by component net of tax for the years ended December 31, 2013 and 2012.

(Dollars in thousands)	Pretax			Tax Effect			After-tax			Affected Line Item in the Consolidated Statements of Income
Balance as of December 31, 2012	$	2,823		$	(959	)	$	1,864
Unrealized holding loss on available-for-sale securities arising during the period		(3,195	)		1,086			(2,109	)
Amount reclassified for net gains included in net income		(159	)		54			(105	)	(a) (b)
Unrealized loss on securities transferred from available-for-sale to held-to-maturity		(1,931	)		657			(1,274	)
Amortization of held-to-maturity discount resulting from transfer		255			(87	)		168
Total other comprehensive loss		(5,030	)		1,710			(3,320	)
BALANCE AS OF DECEMBER 31, 2013	$	(2,207	)	$	751		$	(1,456	)
Balance as of December 31, 2011	$	2,166		$	(736	)	$	1,430
Unrealized holding gain on available-for-sale securities arising during the period		657			(223	)		434
Total other comprehensive income		657			(223	)		434
BALANCE AS OF DECEMBER 31, 2012	$	2,823		$	(959	)	$	1,864

(a) Securities gain, net.

(b) Federal income tax provision.

58        2013 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 17 – CONTINGENT LIABILITIES

In the normal course of business, the Company is subject to pending and threatened legal actions. Although, the Company is not able to predict the outcome of such actions, after reviewing pending and threatened actions, management believes that the outcome of any or all such actions will not have a material adverse effect on the results of operations or shareholders’ equity of the Company.

The Company has an employment agreement with an officer. Upon the occurrence of certain types of termination of employment, the Company may be required to make specified severance payments if termination occurs within a specified period of time, generally two years from the date of the agreement, or pursuant to certain change in control transactions.

NOTE 18 – QUARTERLY FINANCIAL DATA (UNAUDITED)

The following is a summary of selected quarterly financial data (unaudited) for the years ended December 31:

(Dollars in thousands, except per share data)	Interest Income		Net Interest Income		Net Income		Basic Earnings Per Share		Diluted Earnings Per Share
2013
First quarter	$	5,300	$	4,692	$	1,362	$	0.50	$	0.50
Second quarter		5,173		4,592		1,247		0.45		0.45
Third quarter		5,235		4,677		1,407		0.51		0.51
Fourth quarter		5,430		4,922		1,224		0.45		0.45
2012
First quarter	$	5,132	$	4,313	$	1,055	$	0.39	$	0.39
Second quarter		5,151		4,397		1,141		0.41		0.41
Third quarter		5,148		4,426		1,231		0.45		0.45
Fourth quarter		5,153		4,470		1,120		0.41		0.41

2013 Report to Shareholders  |  CSB Bancorp, Inc.        59

OFFICERS OF THE COMMERCIAL AND SAVINGS BANK

STEVEN R. BAILEY

Executive Vice President,

Chief Operations Officer,

Chief Information Officer

PAMELA S. BASINGER

Vice President,

Financial Officer

DEBORAH S. BERNER

Vice President,

Retail Services Manager,

Marketing & Public Relations

PAMELA L. BROMUND

Assistant Vice President,

Loan Operations Supervisor

WENDY D. BROWN

Assistant Vice President,

Bank Operations Manager

C. DAWN BUTLER

Vice President,

Regional Bank Manager

BEVERLY A. CARR

Operations Officer,

Bank Operations

COLBY CHAMBERLIN

Vice President,

Commercial Banker

DALE J. CLINTON

Vice President,

Internal Auditor

G. GAIL COCHRAN

Assistant Vice President,

Executive Loan Secretary

PEGGY L. CONN

Corporate Secretary

MARIANNE DAVIS

Assistant Vice President,

Banking Center Manager

CHRISTOPHER J. DELATORE

Vice President,

Commercial Banker

DAVID J. DOLAN

Assistant Vice President,

Mortgage Services Manager

CYNTHIA A. FERRY

Assistant Vice President,

Banking Center Manager

PAULA S. FOY

Vice President,

Compliance Officer/BSA Officer

LORI S. FRANTZ

Assistant Vice President,

Banking Center Manager

BRETT A. GALLION

Assistant Vice President,

Project Manager

CARRIE A. GERBER

Credit Officer

ERIC S. GERBER

Assistant Vice President,

Commercial Banker

MARC R. HARVEY

Officer,

Training Manager

BENJAMIN J. HERSHBERGER

Officer,

Banking Center Manager

JASON B. HUMMEL

Vice President,

Commercial Banker

JULIE A. JONES

Vice President,

Director of Human Resources

STEPHEN K. KILPATRICK

First Vice President,

Senior Credit Officer

KEVIN J. MCALLISTER

Vice President,

Trust Officer

ROBYN E. MCCLINTOCK

Vice President,

Regional Bank Manager

JASON R. MCCULLOCH

Vice President,

Brokerage Manager

SHERRY A. MCROBIE

Assistant Vice President,

Banking Center Manager

PAULA J. MEILER

Senior Vice President,

Chief Financial Officer

A. LEE MILLER

Vice President,

Cash Management & Special

Projects, CRA Officer

EDWARD J. MILLER

Vice President,

Operation Services Manager,

Security

MOLLY M. MOHR

Officer,

Banking Center Manager

DANIEL L. MUSE

Operations Officer

SHAWN E. OSWALD

Vice President,

Information System Director,

OFAC Officer

AMY R. PATTERSON

Assistant Vice President,

Loan Officer

ERICA S. PIATT

Assistant Vice President,

Banking Center Manager

THOMAS S. RUMBAUGH

Vice President,

Trust Officer

LISA M. SCHONAUER

Assistant Vice President,

Banking Center Manager

REBECCA J. SHULTZ

Assistant Vice President,

Loan Officer

BUD STEBBINS

First Vice President,

Senior Loan Officer

EDDIE L. STEINER

Chairman,

President,

Chief Executive Officer

STEVEN J. STIFFLER

Vice President,

Commercial Banker

ERIC D. STROUSE

Vice President,

Commercial Banker

ELAINE A. TEDROW

Assistant Vice President,

Banking Center Manager

JENNIFER M. THORPE

Assistant Vice President,

Senior Credit Analyst

WILLIAM R. TINLIN

Vice President,

Recovery, Right to Financial

Privacy Officer

BRIAN D. TROYER

Assistant Vice President,

Trust Officer

ALICIA R. WALLACE

Vice President,

Commercial Banker

JANE C. WHITMER

Officer,

Assistant Banking Center

Manager

MICHAEL D. WORKMAN

Vice President,

Mortgage Loan Officer,

Small Business Lender

CRYSTAL R. YODER

Operations Officer

60        2013 Report to Shareholders  |  CSB Bancorp, Inc.

SHAREHOLDERS AND GENERAL INQUIRIES

Stock Listing Common Symbol: CSBB

CORPORATE OFFICE
91 North Clay Street, Millersburg, Ohio	330-674-9015or 800-654-9015

If you have questions regarding your

CSB Bancorp, Inc. stock, please contact:

REGISTRAR AND TRANSFER COMPANY

Attn: Investor Relations

10 Commerce Drive

Cranford, New Jersey 07016

800-368-5948

www.rtco.com

PEGGY L. CONN

Corporate Secretary

CSB Bancorp, Inc.

91 North Clay Street

Millersburg, Ohio 44654

330-674-9015

800-654-9015

LEGAL COUNSEL

Vorys, Sater, Seymour and Pease LLP

52 East Gay Street

P.O. Box 1008

Columbus, Ohio 43216

If you are interested in purchasing shares of CSB Bancorp, Inc., you may contact your local broker or one of the following:

JAY MCCULLOCH

Investment Executive

CSB Investment Services

Located at:

The Commercial and Savings Bank

91 South Clay Street

P.O. Box 50

Millersburg, Ohio 44654

330-674-2397

800-654-9015

GEORGE GEISSBUHLER

Sweney Cartwright & Co.

17 South High Street, Suite 300 Columbus, Ohio 43215

800-334-7481

NICOLAS “NICK” P. BICKING

Boenning & Scattergood

9916 Brewster Lane

Powell, Ohio 43065

866-326-8113

The annual meeting of shareholders is currently scheduled to be held on Wednesday, April 23, 2014 at 7:00 p.m. at the Carlisle Inn in Walnut Creek, Ohio.

CSB Bancorp, Inc. is required to file an annual report on Form 10-K annually with the Securities and Exchange Commission. A copy of our Annual Report on Form 10-K is made available through our website after it is filed with the SEC. Copies of the Form 10-K Annual Report and the Company’s quarterly reports will be furnished, free of charge, to shareholders by written request to:

PAULA J. MEILER

Chief Financial Officer

CSB Bancorp, Inc.

91 North Clay Street

Millersburg, Ohio 44654

330-674-9015

800-654-9015

2013 Report to Shareholders  |  CSB Bancorp, Inc.        61

62        2013 Report to Shareholders  |  CSB Bancorp, Inc.