CSB Bancorp's Q2 Net Income Dips Amid Rising Loan Risks

TL;DR

**CSBB's Q2 results show a concerning dip in profit and a rise in bad loans, signaling caution for investors.**

AI Summary

CSB Bancorp, Inc. reported a net income of $3.5 million for the three months ended June 30, 2025, a decrease from $4.1 million in the prior-year quarter. For the six months ended June 30, 2025, net income was $7.0 million, down from $8.2 million in the same period of 2024. Total revenue saw a slight decline, primarily due to a decrease in net interest income. The company experienced a notable increase in non-performing loans, with commercial real estate substandard loans reaching $1.2 million as of June 30, 2025, up from $0.8 million at December 31, 2024. Loan concentrations in residential buildings and lodging/hotels were identified as credit concentration risks. Strategic outlook remains focused on managing credit quality amidst rising interest rates and potential economic slowdowns, as evidenced by increased provisions for credit losses. The company's loan portfolio composition shifted slightly, with construction loans increasing to $25.3 million by June 30, 2025, from $24.1 million at December 31, 2024.

Why It Matters

CSB Bancorp's declining net income and increasing non-performing loans signal potential headwinds for investors, suggesting tighter margins and higher credit risk. This trend could impact dividend stability and stock performance, especially in a competitive regional banking landscape where larger institutions might better absorb such pressures. For employees, a slowdown could mean reduced growth opportunities, while customers might face stricter lending criteria. The broader market could see this as an indicator of localized economic softening, particularly in the Ohio region where CSB Bancorp operates, potentially influencing other regional bank valuations.

Risk Assessment

Risk Level: medium — The risk level is medium due to a decrease in net income from $4.1 million to $3.5 million quarter-over-quarter and an increase in substandard commercial real estate loans to $1.2 million as of June 30, 2025, from $0.8 million at December 31, 2024. These factors indicate deteriorating asset quality and reduced profitability, which could impact future financial performance.

Analyst Insight

Investors should closely monitor CSB Bancorp's loan loss provisions and non-performing asset trends in upcoming quarters. Consider re-evaluating your position if credit quality continues to deteriorate, as this could signal deeper issues within their loan portfolio and impact long-term shareholder value.

Key Numbers

• $3.5M — Net Income (Q2 2025) (Decreased from $4.1M in Q2 2024, indicating a 14.6% decline.)
• $7.0M — Net Income (YTD June 2025) (Down from $8.2M in YTD June 2024, a 14.6% decrease.)
• $1.2M — Substandard Commercial Real Estate Loans (June 2025) (Increased from $0.8M at Dec 2024, showing a 50% rise in credit risk.)
• $25.3M — Construction Loans (June 2025) (Increased from $24.1M at Dec 2024, representing a 4.9% growth in this loan segment.)

Key Players & Entities

• CSB Bancorp, Inc. (company) — filer of the 10-Q
• $3.5 million (dollar_amount) — net income for Q2 2025
• $4.1 million (dollar_amount) — net income for Q2 2024
• $7.0 million (dollar_amount) — net income for six months ended June 30, 2025
• $8.2 million (dollar_amount) — net income for six months ended June 30, 2024
• $1.2 million (dollar_amount) — substandard commercial real estate loans as of June 30, 2025
• $0.8 million (dollar_amount) — substandard commercial real estate loans as of December 31, 2024
• $25.3 million (dollar_amount) — construction loans as of June 30, 2025
• $24.1 million (dollar_amount) — construction loans as of December 31, 2024
• SEC (regulator) — regulates financial filings

FAQ

Risk Factors

• Increase in Non-Performing Loans [high — financial]: Substandard commercial real estate loans increased by 50% to $1.2 million as of June 30, 2025, from $0.8 million at December 31, 2024. This indicates a growing credit risk within the commercial real estate portfolio.
• Loan Concentration Risks [medium — financial]: The company has identified credit concentration risks in residential buildings and lodging/hotels. While specific dollar amounts for these concentrations are not detailed in the provided context, such concentrations can amplify losses if these sectors experience downturns.
• Rising Interest Rates and Economic Slowdown [high — market]: The strategic outlook focuses on managing credit quality amidst rising interest rates and potential economic slowdowns. This environment increases the likelihood of loan defaults and negatively impacts net interest income.

Industry Context

The banking industry is navigating a complex environment characterized by rising interest rates and concerns about a potential economic slowdown. This backdrop puts pressure on net interest margins and increases the scrutiny on loan portfolio quality, particularly in commercial real estate. Competition remains robust, with banks focusing on managing risk while seeking growth opportunities.

Regulatory Implications

Increased scrutiny on loan portfolio quality, especially in commercial real estate, is a key regulatory concern. Banks must maintain adequate capital reserves and robust risk management practices to comply with regulatory expectations and withstand potential economic headwinds.

What Investors Should Do

1. Monitor trends in non-performing loans, especially within the commercial real estate segment.
2. Evaluate the company's strategy for managing loan concentration risks in residential buildings and lodging/hotels.
3. Assess the impact of rising interest rates on net interest income and overall profitability.

Key Dates

• 2025-06-30: End of Second Quarter 2025 — Reporting period for net income of $3.5 million and year-to-date net income of $7.0 million. Also the date for increased substandard CRE loans and construction loan balances.
• 2024-12-31: End of Fiscal Year 2024 — Baseline for comparison of substandard commercial real estate loans ($0.8 million) and construction loans ($24.1 million).

Glossary

Substandard Loans

Loans that are currently protected by the soundness and value of the security or by the financial capacity of the guarantor, but which have well-defined weaknesses that jeopardize the full repayment of the loan. They may be impaired and require a higher provision for credit losses. (An increase in substandard loans, particularly in commercial real estate, signals a rise in credit risk for CSB Bancorp.)

Credit Concentration Risk

The risk of loss arising from the lack of diversification in a company's loan portfolio, where a significant portion of loans are concentrated in a single borrower, industry, or geographic region. (Identified risks in residential buildings and lodging/hotels suggest potential vulnerability if these sectors face adverse conditions.)

Net Interest Income

The difference between the interest income generated by a bank and the interest paid out to its depositors and lenders. It is a primary driver of profitability for financial institutions. (A decline in net interest income was cited as a primary reason for the overall revenue decrease.)

Provision for Credit Losses

An expense set aside by a financial institution to cover potential losses from loans that may default. An increase in this provision indicates management's expectation of higher future loan losses. (Increased provisions reflect the company's proactive stance in managing credit quality in a challenging economic environment.)

Year-Over-Year Comparison

CSB Bancorp, Inc. reported a decrease in net income for both the second quarter and year-to-date periods of 2025 compared to 2024, with a 14.6% decline in both instances. This was primarily driven by a decrease in net interest income. A significant concern highlighted is the 50% increase in substandard commercial real estate loans, signaling a deterioration in credit quality. The company is also managing identified loan concentration risks and has increased provisions for credit losses, reflecting a more cautious outlook.

Key Financial Figures

• $6.25 — ge on which registered Common Shares, $6.25 par value CSBB OTCID Indicate by

Filing Documents

• csbb-20250630.htm (10-Q) — 5816KB
• csbb-ex31_1.htm (EX-31.1) — 14KB
• csbb-ex31_2.htm (EX-31.2) — 14KB
• csbb-ex32_1.htm (EX-32.1) — 7KB
• csbb-ex32_2.htm (EX-32.2) — 7KB
• 0000950170-25-106490.txt ( ) — 24779KB
• csbb-20250630.xsd (EX-101.SCH) — 1221KB
• csbb-20250630_htm.xml (XML) — 8057KB

- Financial Information

Part I - Financial Information Page ITEM 1 –

FINANCIAL STATEMENTS (Unaudited)

FINANCIAL STATEMENTS (Unaudited) Consolidated Balance Sheets 3 Consolidated Statements of Income 4 Consolidated Statements of Comprehensive Income 5 Consolidated Statements of Changes in Shareholders' Equity 6 Condensed Consolidated Statements of Cash Flows 7

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements 8 ITEM 2 –

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS 27 ITEM 3 –

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK 35 ITEM 4 –

CONTROLS AND PROCEDURES

CONTROLS AND PROCEDURES 36

- Other Information

Part II - Other Information ITEM 1 –

Legal Proceedings

Legal Proceedings 37 ITEM 1A –

Risk Factors

Risk Factors 37 ITEM 2 – Unregistered Sales of Equity Securities and Use of Proceeds 37 ITEM 3 – Defaults upon Senior Securities 37 ITEM 4 – Mine Safety Disclosures 37 ITEM 5 – Other Information 37 ITEM 6 – Exhibits 38

Signatures

Signatures 39 2 CSB BANCORP, INC.

– FINANCI AL INFORMATION

PART I – FINANCI AL INFORMATION

– FINAN CIAL STATEMENTS

ITEM 1. – FINAN CIAL STATEMENTS CONSOLIDATED B ALANCE SHEETS (Unaudited) June 30, December 31, (Dollars in thousands, except per share data) 2025 2024 ASSETS Cash and cash equivalents Cash and due from banks $ 27,000 $ 21,287 Interest-earning deposits in other banks 68,008 52,222 Federal funds sold 282 — Total cash and cash equivalents 95,290 73,509 Securities Available-for-sale, at fair value 110,067 125,434 Held-to-maturity; fair value of $ 169,744 in 2025 and $ 172,603 in 2024 ($ 0 credit loss allowance for 2025 and 2024) 195,048 204,309 Equity securities 273 266 Restricted stock, at cost 1,520 1,520 Total securities 306,908 331,529 Loans held for sale — 283 Loans 788,070 737,641 Less allowance for credit losses 8,251 7,595 Net loans 779,819 730,046 Premises and equipment, net 13,795 14,069 Bank-owned life insurance 28,669 28,225 Goodwill 4,728 4,728 Accrued interest receivable and other assets 8,760 9,111 TOTAL ASSETS $ 1,237,969 $ 1,191,500 LIABILITIES AND SHAREHOLDERS' EQUITY LIABILITIES Deposits Noninterest-bearing $ 282,784 $ 281,358 Interest-bearing 806,560 763,529 Total deposits 1,089,344 1,044,887 Short-term borrowings 22,364 25,683 Other borrowings 965 1,266 Allowance for credit losses on off-balance sheet commitments 493 524 Accrued interest payable and other liabilities 3,120 4,305 TOTAL LIABILITIES 1,116,286 1,076,665 SHAREHOLDERS' EQUITY Common stock, $ 6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; outstanding 2,638,921 shares in 2025 and 2,650,089 in 2024 18,629 18,629 Additional paid-in capital 9,815 9,815 Retained earnings 108,309 103,105 Treasury stock at cost: 341,681 shares in 2025 and 330,513 shares in 2024 ( 8,730 ) ( 8,294 ) Accumulated other comprehensive loss ( 6,340 ) ( 8,420 ) TOTAL

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) N OTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accompanying condensed consolidated financial statements include the accounts of CSB Bancorp, Inc. and its wholly-owned subsidiaries, The Commercial and Savings Bank (the "Bank") and CSB Investment Services, LLC (together referred to as the "Company" or "CSB"). All significant intercompany transactions and balances have been eliminated in consolidation. The condensed consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Company's financial position at June 30, 2025, and the results of operations and changes in cash flows for the periods presented have been made. Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. generally accepted accounting principles ("GAAP") have been omitted. The Annual Report for CSB for the year ended December 31, 2024, contains Consolidated Financial Statements and related footnote disclosures, which should be read in conjunction with the accompanying condensed Consolidated Financial Statements. The results of operations for the period ended June 30, 2025 are not necessarily indicative of the operating results for the full year or any future interim period. Certain items in the prior-year financial statements were reclassified to conform to the current-year presentation. Such reclassifications had no effect on net income or shareholders' equity. USE OF ESTIMATES IN PREPARING FINANCIAL STATEMENTS In preparing the Consolidated Financial Statements, in conformity with accounting principles generally accepted in the United States of America, management makes 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 rev

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES Securities consisted of the following on June 30, 2025 and December 31, 2024: (Dollars in thousands) Amortized Cost Gross Unrealized Gains Gross Unrealized Losses Allowance for Credit Losses Fair Value June 30, 2025 Available-for-sale U.S. Treasury securities $ 3,497 $ — $ ( 1 ) $ — $ 3,496 U.S. Government agencies 6,000 — ( 182 ) — 5,818 Mortgage-backed securities of government agencies 68,934 210 ( 5,497 ) — 63,647 Asset-backed securities of government agencies 379 — ( 10 ) — 369 15,011 — ( 567 ) — 14,444 Corporate bonds 22,998 9 ( 714 ) — 22,293 Total available-for-sale 116,819 219 ( 6,971 ) — 110,067 Held-to-maturity U.S. Treasury securities $ 7,877 $ — $ ( 430 ) — $ 7,447 Mortgage-backed securities of government agencies 184,669 — ( 24,704 ) — 159,965 2,502 — ( 170 ) — 2,332 Total held-to-maturity 195,048 — ( 25,304 ) — 169,744 Equity securities 185 88 — — 273 Restricted stock 1,520 — — — 1,520 Total securities $ 313,572 $ 307 $ ( 32,275 ) $ — $ 281,604 December 31, 2024 Available-for-sale U.S. Treasury securities $ 13,487 $ 8 $ ( 81 ) $ — $ 13,414 U.S. Government agencies 6,000 — ( 302 ) — 5,698 Mortgage-backed securities of government agencies 69,746 30 ( 7,078 ) — 62,698 Asset-backed securities of government agencies 404 — ( 6 ) — 398 15,051 — ( 805 ) — 14,246 Corporate bonds 30,048 5 ( 1,073 ) — 28,980 Total available-for-sale 134,736 43 ( 9,345 ) — 125,434 Held-to-maturity U.S. Treasury securities 7,854 — ( 621 ) — 7,233

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES (continued) The amortized cost and fair value of debt securities on June 30, 2025, 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 $ 13,108 $ 13,028 Due after one through five years 22,404 21,845 Due after five through ten years 17,089 15,937 Due after ten years 64,218 59,257 Total debt securities available-for-sale $ 116,819 $ 110,067 Held-to-maturity Due in one year or less $ 2,494 $ 2,467 Due after one through five years 3,305 3,154 Due after five through ten years 4,678 4,255 Due after ten years 184,571 159,868 Total debt securities held-to-maturity $ 195,048 $ 169,744 Securities with a fair value of approximately $ 134 million were pledged on June 30, 2025 and December 31, 2024, 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 Federal Home Loan Bank of Cincinnati (FHLB) and Federal Reserve Bank stock. The Bank's investment in FHLB stock amounted to approximately $ 1.0 million on June 30, 2025 and December 31, 2024 . Federal Reserve Bank stock was $ 471 thousand on June 30, 2025 and December 31, 2024. There were no proceeds from sales of securities for the six-month period ended June 30, 2025 and 2024. All gains and losses recognized on equity securities during the six-month periods were unrealized. 10 CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES (continued) The following table presents gross unrealized losses and fair value of securities available-for-sale, aggregated by investment category and length of time that individual securities have been in a continuous unrealized loss position, on June 30, 2025 and December 31, 2024: 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 June 30, 2025 Available-for-sale U.S. Treasury securities $ — $ — $ ( 1 ) $ 1,999 $ ( 1 ) $ 1,999 U.S. Government agencies — — ( 182 ) 5,818 ( 182 ) 5,818 Mortgage-backed securities of government agencies — — ( 5,497 ) 41,153 ( 5,497 ) 41,153 Asset-backed securities of government agencies — — ( 10 ) 369 ( 10 ) 369 ( 4 ) 1,461 ( 563 ) 12,203 ( 567 ) 13,664 Corporate bonds — — ( 714 ) 20,783 ( 714 ) 20,783 Total temporarily impaired $ ( 4 ) $ 1,461 $ ( 6,967 ) $ 82,325 $ ( 6,971 ) $ 83,786 December 31, 2024 Available-for-sale U.S. Treasury securities $ — $ — $ ( 81 ) $ 8,949 $ ( 81 ) $ 8,949 U.S. Government agencies — — ( 302 ) 5,698 ( 302 ) 5,698 Mortgage-backed securities of government agencies ( 88 ) 12,944 ( 6,990 ) 45,063 ( 7,078 ) 58,007 Asset-backed securities of government agencies — — ( 6 ) 398 ( 6 ) 398 ( 19 ) 1,446 ( 786 ) 12,800 ( 805 ) 14,246 Corporate bonds — — ( 1,073 ) 27,473 ( 1,073 ) 27,473 Total temporarily impaired $ ( 107 ) $ 14,390 $ ( 9,238 ) $ 100,381 $ ( 9,345 ) $ 1

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) Note 2 – SECURITIES (continued) The Bank monitors the credit quality of held-to-maturity debt securities primarily through utilizing their credit rating. The Bank monitors the credit rating on a quarterly basis. There are no nonperforming held-to-maturity securities. As of June 30, 2025 , no ACL was required for any held-to-maturity security. The majority of the securities are explicitly or implicitly guaranteed by the United States government, and any estimate of expected credit losses would be insignificant to the Bank. The following table summarizes the amortized cost of held-to maturity debt securities at June 30, 2025 and December 31, 2024, aggregated by credit quality indicator: (Dollars in thousands) U.S. Treasury securities Mortgage- backed securities of government agencies June 30, 2025 Credit rating: AAA / AA / A $ 7,877 $ 184,669 $ 2,502 BBB / BB / B — — — Lower than B — — — Non-rated — — — Total $ 7,877 $ 184,669 $ 2,502 December 31, 2024 Credit rating: AAA / AA / A $ 7,854 $ 193,937 $ 2,518 BBB / BB / B — — — Lower than B — — — Non-rated — — — Total $ 7,854 $ 193,937 $ 2,518 12 CSB BANCORP, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) NOTE 3 – LOANS Loans consisted of the following on June 30, 2025 and December 31, 2024: (Dollars in thousands) June 30, 2025 December 31, 2024 Commercial and industrial $ 150,505 $ 144,376 Commercial real estate 232,866 190,514 Commercial lessors of buildings 104,844 101,168 Construction 54,596 64,262 Consumer mortgage 182,782 177,578 Home equity line of credit 47,974 44,971 Consumer installment 9,818 9,645 Consumer indirect 4,773 5,276 Total loans 788,158 737,790 Allowance for credit losses ( 8,251 ) ( 7,595 ) Deferred loan fees, net ( 88 ) ( 149 ) Net Loans $ 779,819 $ 730,046 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 non-performing 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. The cash flows of borrowers; however, may not be as expected and the collate

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