10-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-K

(Mark one)

[X] ANNUAL REPORT PURSUANT TO SECTIONS 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2018

OR

[  ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from                      to                     

Commission File No. 0-21714

CSB BANCORP, INC.

(Exact name of registrant as specified in its charter)

Ohio	34-1687530
(State or other jurisdiction of incorporation or organization)	(I.R.S. Employer Identification No.)

91 North Clay Street, Millersburg, Ohio                                              44654

(Address of principal executive offices)                                         (Zip code)

Registrant’s telephone number, including area code 330.674.9015

Securities registered under Section 12(b) of the Act: None

Securities registered under Section 12(g) of the Act:

Common Shares, $6.25 par value

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. (  ) Yes  (X) No  

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. (  ) Yes  (X) No  

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. (X) Yes  (  ) No

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).        (X) Yes    (  ) No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    (  )

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer (  ) Accelerated filer (X) Non-accelerated filer (  ) Smaller reporting company (X) Emerging growth company (  )

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. [  ]

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). (  ) Yes  (X) No  

Indicate by check mark whether the registrant is an emerging growth company as defined in Rule 405 of the Securities Act of 1933 (§230.405 of this chapter) or Rule 12b-2 of the Securities Exchange Act of 1934 (§240.12b-2 of this chapter). Emerging growth company [  ]

At June 30, 2018, the aggregate market value of the voting common equity held by non-affiliates of the registrant, based on a price of $39.00 per common share (such price being the last trade price on such date) was $98.5 million.

At March 15, 2019, there were issued and outstanding 2,742,242 of the registrant’s common shares, $6.25 par value.

DOCUMENTS INCORPORATED BY REFERENCE

Portions of CSB Bancorp Inc.’s 2018 Annual Report to Shareholders, which is filed as Exhibit 13 to this Form 10-K,

are incorporated by reference in Parts I and II of this Form 10-K.

Portions of CSB Bancorp Inc.’s Proxy Statement for the 2019 Annual Meeting of Shareholders are incorporated by

reference in Part III of this Form 10-K.

PART I

ITEM 1. BUSINESS.

General

CSB Bancorp, Inc. (“CSB”), is a registered financial holding company under the Bank Holding Company Act of 1956, as amended, and was incorporated under the laws of the State of Ohio in 1991. The Commercial and Savings Bank of Millersburg, Ohio (the “Bank”), an Ohio banking corporation chartered in 1879, is a wholly-owned subsidiary of CSB. The Bank is a member of the Federal Reserve System, and its deposits are insured up to the maximum amount provided by law by the Federal Deposit Insurance Corporation (“FDIC”). The primary regulators of the Bank are the Federal Reserve Board and the Ohio Division of Financial Institutions. CSB Investment Services, LLC, an Ohio limited liability company (“CSB Investment”), is a wholly owned subsidiary of CSB that is licensed to engage in the business of insurance in the State of Ohio. In this Annual Report on Form 10-K, CSB and its subsidiaries are sometimes collectively referred to as the “Company.”

Cautionary Statement Regarding Forward-Looking Information

Certain statements contained in this Annual Report on Form 10-K, which are not statements of historical fact, constitute forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Words such as “anticipate”, “estimates”, “may”, “feels”, “expects”, “believes”, “plans”, “will”, “would”, “should”, “could” and similar expressions are intended to identify these forward-looking statements but are not the exclusive means of identifying such statements. Examples of forward-looking statements include: (i) projections of income or expense, earnings per share, the payment or non-payment of dividends, capital structure, and other financial items; (ii) statements of plans and objectives of the Company and of its management or Board of Directors, including those relating to products or services; (iii) statements of future economic performance; and (iv) statements of assumptions underlying such statements. Forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially. Factors that could cause or contribute to such differences include, without limitation, risks and uncertainties detailed from time to time in the Company’s filings with the SEC, including without limitation the risk factors disclosed in Item 1A of this Annual Report on Form 10-K.

Other factors not currently anticipated may also materially and adversely affect the Company’s business, financial condition, results of operations, or cash flows. There can be no assurance that future results will meet expectations. While the Company believes that the forward-looking statements in this Annual Report on Form 10-K are reasonable, the reader should not place undue reliance on any forward-looking statement. In addition, these statements speak only as of the date made. The Company does not undertake, and expressly disclaims, any obligation to update or alter any statements whether as a result of new information, future events, or otherwise, except as may be required by applicable law.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for forward-looking statements to encourage companies to provide prospective information so long as those statements are identified as forward-looking and are accompanied by meaningful cautionary statements identifying important factors that could cause actual results to differ materially from those discussed in the forward-looking statements. The Company desires to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995.

Business Overview and Lending Activities

CSB operates primarily through the Bank and CSB Investment, providing a wide range of banking, trust, financial, and brokerage services to corporate, institutional, and individual customers throughout northeast Ohio. The Bank provides retail and commercial banking services to its customers, including checking and savings accounts, time deposits, IRAs, safe deposit facilities, personal loans, commercial loans, real estate mortgage loans, installment loans, night depository facilities, brokerage, and trust services.

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The Bank provides residential real estate, commercial real estate, commercial, and consumer loans to customers located primarily in Holmes, Stark, Tuscarawas, Wayne and portions of surrounding counties in Ohio. The Bank’s market area has historically exhibited relatively stable economic conditions. Economic activity in the Company’s market area has been increasing at a steady pace for the past nine years. Reported unemployment levels at December 2018 in the four primary counties served by the Company ranged between 3.5% and 5.2%. These levels increased slightly from December 2017. Labor markets continued hiring at a softer pace during the year. Wage increases accelerated during 2018. The local housing market continues to improve with supply relatively tight. Elevated costs of building materials have contributed to increased housing construction costs. Consumer confidence in the economy has been a primary driver for the strong housing demand and higher consumer spending.

Certain risks are involved in providing loans, including, but not limited to, the borrowers’ ability and willingness to repay the debt. Before the Bank extends a new loan or renews an existing loan to a customer, these risks are assessed through a review of the borrower’s past and current credit history, the collateral being used to secure the transaction if any, and other factors. For all commercial loan relationships greater than $300,000 the Bank’s internal credit department performs an annual risk rating review. In addition to this review, an independent, outside loan review firm is engaged to review a sample of watch list and adversely classified credits over $250,000 and a sample of commercial loan relationships greater than $250,000. The outside loan review will also assess management’s current credit grades and provide commentary with regard to assigned ratings and the need for a credit to be classified as a troubled debt restructuring, as well as assess management’s specific loan loss reserves for loans included in their sample that are considered to be impaired. In addition, any loan over $100,000 identified as a problem credit by management and/or the external loan review consultants is assigned to the Bank’s “loan watch list,” has a written action plan created, and is subject to ongoing review at least quarterly by the Bank’s credit department and the assigned loan officer to ensure appropriate action is taken if deterioration continues.

Commercial loan rates are variable and fixed, and include operating lines of credit and term loans made to small businesses, primarily based on their ability to repay the loan from the cash flow of the business. Business assets such as equipment, accounts receivable, and inventory typically secure such loans. When the borrower is not an individual, the Bank generally obtains the personal guarantee of the business owner. These loans typically involve larger loan balances, are generally dependent on the cash flow of the business, and thus may be subject to a greater extent to adverse conditions in the general economy or in a specific industry. Management reviews the borrower’s cash flows when deciding whether to grant the credit in order to evaluate whether estimated future cash flows will be adequate to service principal and interest of the new obligation in addition to existing obligations.

Commercial real estate loans are primarily secured by borrower-occupied business real estate and are dependent on the ability of the related business to generate adequate cash flow to service the debt. Commercial real estate loans are generally originated with a loan-to-value ratio of 80% or less. Commercial construction loans are secured by commercial real estate and in most cases the Bank also provides the permanent financing. The Bank monitors advances and the maximum loan to value ratio is typically limited to the lesser of 90% of cost or 80% of appraisal value. Management performs much of the same analysis when deciding whether to grant a commercial real estate loan as when deciding whether to grant a commercial loan.

Residential real estate loans carry both fixed and variable rates and are secured by the borrower’s residence. Such loans are made based on the borrower’s ability to make repayment from employment and other income. Management assesses the borrower’s ability and willingness to repay the debt through review of credit history and ratings, verification of employment and other income, review of debt-to-income ratios, and other measures of repayment ability. The Bank generally makes these loans in amounts of 80% or less of the value of the collateral or up to 95% of collateral value with private mortgage insurance. An appraisal from a qualified real estate appraiser or an evaluation based on comparable market values is obtained for substantially all loans secured by real estate. Residential construction loans are secured by residential real estate that generally will be occupied by the borrower upon completion. The Bank usually makes the permanent loan at the end of the construction phase. Generally, construction loans are made in amounts of 80% or less of the value of the as-completed collateral.

Home equity lines of credit are made to individuals and are secured by second or first mortgages on the borrower’s residence. Loans are based on similar credit and appraisal criteria used for residential real estate loans; however, loans up to 100% of the value of the property may be approved for borrowers with excellent credit histories. These loans typically bear interest at variable rates and require minimum monthly payments of the accrued interest.

Installment loans to individuals include unsecured loans and loans secured by recreational vehicles (“RV’s”), automobiles, and other consumer assets. Consumer loans for the purchase of new RV’s and new automobiles generally do not exceed 125% of Dealer Invoice on RV’s or 110% of the Manufacturer’s Suggested Retail Price

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(MSRP) of an automobile. Loans for used RV’s and automobiles do not exceed 120% of the “clean trade-in value” as reported in the current “NADA” used guides. Overdraft protection loans are unsecured personal lines of credit to individuals who have demonstrated good credit character with reasonably assured sources of income and satisfactory credit histories. Consumer loans generally involve more risk than residential mortgage loans because of the type and nature of collateral and, in certain types of consumer loans, absence of collateral. Since these loans are generally repaid from ordinary income of the individual or family unit, repayment may be adversely affected by job loss, divorce, ill health, or by a general decline in economic conditions. The Bank assesses the borrower’s ability and willingness to repay through a review of credit history, credit ratings, debt-to-income ratios, and other measures of repayment ability.

While CSB’s chief decision-makers monitor the revenue streams of the various financial products and services, operations are managed and financial performance is evaluated on a Company-wide basis. Accordingly, all of the Company’s banking operations are considered by management to be aggregated in one reportable operating segment. For a discussion of the Company’s financial performance for the fiscal year ended December 31, 2018, see the Consolidated Financial Statements and Notes to the Consolidated Financial Statements found in Item 8 of this Annual Report on Form 10-K.

Employees

At December 31, 2018, the Company had 190 employees, 153 of which were employed on a full-time basis. CSB has no separate employees not also employed by the Bank. No employees are covered by collective bargaining agreements. Employees are provided benefit programs, some of which are contributory. Management considers its employee relations to be good.

Competition

The financial services industry is highly competitive. In its primary market area of Holmes, Stark, Tuscarawas, Wayne and surrounding Ohio counties, the Bank competes for new deposit dollars and loans with other commercial banks, including both large regional banks and smaller community banks, as well as savings and loan associations, credit unions, finance companies, insurance companies, brokerage firms, investment companies, and technology-based providers of financial services (sometimes referred to as “fintech” companies).

Competition within the financial service industry continues to increase as a result of mergers between, and expansion of, financial service providers within and outside of the Company’s primary market areas. In addition, securities firms and insurance companies that have elected to become financial holding companies may acquire commercial banks and other financial institutions, which can create additional competitive pressure.

Management believes the primary factors in competing for loans and deposits are interest rates, availability of services, quality of customer service, convenience, and name recognition. Some of the Company’s competitors may have greater resources and as such, higher lending limits, or fewer regulatory constraints and lower cost structures, all of which may adversely affect the Company’s ability to compete.

Investor Relations

The Company’s website address is www.csb1.com. The Company makes available its Annual Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and all amendments to those reports, free of charge on its website as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission (the “SEC”). The Company also makes available through its website, other reports filed with the SEC under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including its proxy statements and reports filed by officers and directors under Section 16(a) of the Exchange Act, as well as the Company’s Code of Ethics. The Company does not intend for information contained in its website to be incorporated by reference into this Annual Report on Form 10-K.

In addition, the Company’s filings are available on the SEC’s website at www.sec.gov free of charge as soon as reasonably practicable after the Company has filed the above referenced reports.

Supervision and Regulation of CSB and the Bank

CSB and the Bank are subject to extensive regulation by federal and state regulatory agencies. The regulation of financial holding companies and their subsidiaries by bank regulatory agencies is intended primarily for the protection of consumers, depositors, federal deposit insurance funds, and the banking system as a whole and not for the protection of shareholders.

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CSB is a bank holding company that has registered with the Federal Reserve Board (“FRB”) as a financial holding company under the Bank Holding Company Act, as amended (the “BHC Act”). Pursuant to the Gramm-Leach-Bliley Act of 1999 (“GLBA”), a bank holding company may become a financial holding company if it meets certain capital requirements and is “well-managed” and each of its subsidiary banks is “well-capitalized” under regulatory “prompt corrective action” provisions, is “well-managed,” and has at least a “satisfactory” rating under the Community Reinvestment Act (“CRA”). CSB has been a financial holding company since 2005. No prior regulatory approval is required for a financial holding company to acquire certain companies, other than banks and savings associations, that are financial in nature as determined by the FRB. The financial holding company and its subsidiaries must continue to meet the above described requirements in order to continue to engage in activities that are financial in nature without being subjected to regulatory actions or restrictions, which could include a requirement to divest of the subsidiary or subsidiaries.

GLBA defines “financial in nature” to include securities underwriting, dealing, and market making; sponsoring mutual funds and investment companies; insurance underwriting and agency activities; merchant banking activities; and activities that the FRB has determined to be closely related to banking. As a financial holding company, CSB is subject to regulation, examination, and supervision by the FRB under the BHC Act. CSB is also subject to the disclosure and regulatory requirements of the Securities Exchange Act of 1933, as amended, the Securities Exchange Act of 1934, as amended, and the regulations promulgated thereunder, as administered by the SEC.

The Bank, as an Ohio state-chartered bank and member of the Federal Reserve System, is subject to regulation, supervision, and examination by the Ohio Division of Financial Institutions and the FRB. Because the FDIC insures its deposits, the Bank is also subject to certain FDIC regulations. The FDIC is an independent federal agency which insures the deposits, up to prescribed statutory limits, of federally-insured banks and savings associations, and safeguards the safety and soundness of the financial institution industry. The Bank’s deposits are insured up to applicable limits by the Deposit Insurance Fund of the FDIC and the Bank is subject to deposit insurance assessments to maintain the Deposit Insurance Fund. In addition, the Bank is subject to regulations promulgated by the Consumer Financial Protection Bureau (the “CFPB”) established by the Dodd-Frank Wall Street Reform and Consumer Protection Act enacted in July 2010 (the “Dodd-Frank Act”).

The earnings, dividends, and other aspects of the operations and activities of CSB and the Bank are affected by state and federal laws and regulations, and by policies of various regulatory authorities. These policies include, for example, statutory maximum lending rates, requirements on maintenance of reserves against deposits, domestic monetary policies of the FRB, United States fiscal and economic policies, international currency regulations, and monetary policies, certain restrictions on relationships with many phases of the securities business, and capital adequacy, and liquidity restraints.

The following information describes selected federal and state statutory and regulatory provisions that have, or could have, a material impact on the Company’s business. This discussion is qualified in its entirety by reference to the full text of the particular statutory or regulatory provisions. These statutes and regulations are continually under review by the United States Congress and state legislatures, and state and federal regulatory agencies. A change in statutes, regulations, or regulatory policies applicable to CSB and its subsidiaries could have a material effect on their respective businesses.

Regulation of Bank Holding Companies

As a financial holding company under GLBA, CSB’s activities are subject to extensive regulation by the FRB. CSB is required to file reports with the FRB and provide such additional information as the FRB may require, and is subject to regular examination and inspection by the FRB.

The FRB has extensive enforcement authority over bank holding companies, including the ability to assess civil money penalties, issue cease and desist orders, and require that a bank holding company divest subsidiaries (including subsidiary banks). The FRB may initiate enforcement actions for violations of laws and regulations, and for unsafe and unsound practices. Under FRB policies, a bank holding company is expected to act as a “source of strength” to its subsidiary banks and to commit resources to support those subsidiary banks. Under this policy, the FRB may require a bank holding company to contribute additional capital to an undercapitalized subsidiary bank.

The BHC Act requires the prior approval of the FRB in cases where a bank holding company proposes to acquire direct or indirect ownership or control of more than 5% of the voting shares of any bank that is not already majority-owned by it, acquire all or substantially all of the assets of another bank or another financial or bank holding company, or merge or consolidate with any other financial or bank holding company.

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The FRB also regulates and provides limitations on transactions between affiliates of a bank holding company, loans to directors and officers of bank affiliates, securities transactions, and liability for losses incurred by commonly controlled banks in certain circumstances.

Economic Growth, Regulatory Relief and Consumer Protection Act

On May 25, 2018, the Economic Growth, Regulatory Relief, and Consumer Protection Act (the “Regulatory Relief Act”) was signed into law. The Regulatory Relief Act was designed to provide regulatory relief for banking organizations, particularly for all but the very largest, those with assets in excess of $250 billion. Bank holding companies with assets of less than $100 billion are no longer subject to enhanced prudential standards, and those with assets between $100 billion and $250 billion will be relieved of those requirements in 18 months, unless the FRB takes action to maintain those standards. Certain regulatory requirements applied only to banks with assets in excess of $50 billion and so did not apply to CSB even before the enactment of the Regulatory Relief Act.

The Regulatory Relief Act also provides that the banking regulators must adopt regulations implementing the provision that banking organizations with assets of less than $10 billion are permitted to satisfy capital standards and be considered “well capitalized” under the prompt corrective action framework if their leverage ratios of tangible assets to average consolidated assets is between 8% and 10%, unless the bank’s federal banking agency determines that the organization’s risk profile warrants a more stringent leverage ratio. The Office of the Comptroller of the Currency (“OCC”), the FRB, and the FDIC have proposed for comment the leverage ratio framework for any banking organization with total consolidated assets of less than $10 billion, limited amounts of certain types of assets and off-balance sheet exposures, and a community bank leverage ratio greater than 9%. The community bank leverage ratio would be calculated as the ratio of tangible equity capital divided by average total consolidated assets. Tangible equity capital would be defined as total bank equity capital or total holding company equity capital, as applicable, prior to including minority interests, and excluding accumulated other comprehensive income, deferred tax assets arising from net operating loss and tax credit carry forwards, goodwill and other intangible assets (other than mortgage servicing assets). Average total assets would be calculated in a manner similar to the current tier 1 leverage ratio denominator in that amounts deducted from the community bank leverage ratio numerator would also be excluded from the community bank leverage ratio denominator.

The OCC, the FRB, and the FDIC also adopted a rule providing banking organizations the option to phase in over a three-year period the day-one adverse effects on regulatory capital that may result from the adoption of new current expected credit loss methodology accounting under U. S. generally accepted accounting principles (“GAAP”).

The Regulatory Relief Act also relieves bank holding companies and banks with assets of less than $100 billion in assets from certain record-keeping, reporting, and disclosure requirements.

Regulatory Capital

The FRB adopted risk-based capital guidelines for bank holding companies and state member banks, designed to absorb losses. The guidelines provide a systematic analytical framework, which makes regulatory capital requirements sensitive to differences in risk profiles among banking organizations, takes off-balance sheet exposures expressly into account in evaluating capital adequacy and minimizes disincentives to holding liquid, low-risk assets. Capital levels as measured by these standards are also used to categorize financial institutions for purposes of certain Prompt Corrective Action regulatory provisions.

Basel III Capital Rules (“Basel III”) became effective on January 1, 2015, and contain a new capital conservation buffer and deductions from common equity capital that phased in from January 1, 2016, through January 1, 2019, and deductions from common equity tier 1 capital that have mostly phased in as of January 1, 2019.

The rules include (a) a new common equity tier 1 capital ratio of at least 4.5%, (b) a minimum tier 1 capital ratio of 6.0%, (c) a minimum capital to risk-weighted assets ratio of 8.0%, and (d) a minimum leverage ratio of 4%.

Common equity for the common equity tier 1 capital ratio includes common stock (plus related surplus) and retained earnings, plus limited amounts of minority interests in the form of common stock, less the majority of certain regulatory deductions.

Tier 1 capital includes common equity as defined for the common equity tier 1 capital ratio, plus certain non-cumulative preferred stock and related surplus, cumulative preferred stock and related surplus, and trust preferred securities that have been grandfathered (but which are not permitted going forward), and limited amounts of minority interests in the form of additional tier 1 capital instruments, less certain deductions.

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Tier 2 capital, which can be included in the total capital ratio, includes certain capital instruments (such as subordinated debt) and limited amounts of the allowance for loan and lease losses, subject to new eligibility criteria, less applicable deductions.

The deductions from common equity tier 1 capital include goodwill and other intangibles, certain deferred tax assets, mortgage-servicing assets above certain levels, gains on sale in connection with a securitization, investments in a banking organization’s own capital instruments, and investments in the capital of unconsolidated financial institutions (above certain levels).

Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets, primarily based on the relative credit risk of the counterparty. The capital amounts and classification are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The rules place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the Company does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter. The capital conservation buffer was phased in beginning January 1, 2016 at 0.625% and is fully phased in at 2.50% effective January 1, 2019. Pursuant to the FRB’s Small Bank Holding Company Policy statement (“SBHC Policy”), a bank holding company with assets of less than $1 billion and meeting certain other requirements is not required to comply with the consolidated capital requirements until such company exceeds $1 billion in assets or is otherwise determined by the FRB not to qualify as a small bank holding company. At December 31, 2018, CSB was deemed to be a small bank holding company under the SBHC Policy and was not required to comply with the FRB’s regulatory capital requirements. The Bank, however, must comply with the new capital requirements.

The implementation of Basel III did not have a material impact on CSB’s or the Bank’s capital ratios.

Prompt Corrective Action

The federal banking agencies have established a system of “prompt corrective action” to resolve certain of the problems of undercapitalized institutions. This system is based on five capital level categories for insured depository institutions: “well capitalized,” “adequately capitalized,” “undercapitalized,” “significantly undercapitalized”, and “critically undercapitalized.”

The federal banking agencies may (or in some cases must) take certain supervisory actions depending upon a bank’s capital level. For example, the banking agencies must appoint a receiver or conservator for a bank within 90 days after it becomes “critically undercapitalized” unless the bank’s primary regulator determines, with the concurrence of the FDIC, that other action would better achieve regulatory purposes. Banking operations otherwise may be significantly affected depending on a bank’s capital category. For example, a bank that is not “well capitalized” generally is prohibited from accepting brokered deposits and offering interest rates on deposits higher than the prevailing rate in its market, and the holding company of any undercapitalized depository institution must guarantee, in part, specific aspects of the bank’s capital plan for the plan to be acceptable.

In order to be “well-capitalized,” a bank must have a minimum common equity tier 1 capital ratio of 6.5%, a total risk-based capital ratio of at least 10%, a tier 1 risk-based capital ratio of at least 8%, and a leverage ratio of at least 5%, and the bank must not be subject to any written agreement, order, capital directive, or prompt corrective action directive to meet and maintain a specific capital level for any capital measure.

As of December 31, 2018, the Bank met the ratio requirements in effect at that date to be deemed “well-capitalized.” See Note 12 of the Notes to Consolidated Financial Statements located on page 51 of CSB’s 2018 Annual Report, which is incorporated herein by reference. Management of the Company believes the Bank also meets the capital requirements to be deemed “well-capitalized” under the new guidelines.

Deposit Insurance

Substantially all of the deposits of the Bank are insured up to applicable limits by the Deposit Insurance Fund of the FDIC, and the Bank is assessed quarterly deposit insurance premiums to maintain the Deposit Insurance Fund. Insurance premiums for each insured institution are determined based upon the institution’s capital level and supervisory rating provided to the FDIC by the institution’s primary federal regulator and other information deemed

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by the FDIC to be relevant to the risk posed to the Deposit Insurance Fund by the institution. The assessment rate is then applied to the amount of the institution’s assessment base to determine the institution’s insurance premium. The deposit insurance assessment base is calculated on average assets less average tangible equity.

The FDIC assesses a quarterly deposit insurance premium on each insured institution based on risk characteristics of the institution and may also impose special assessments in emergency situations. The premiums fund the Deposit Insurance Fund (“DIF”). Pursuant to the Dodd-Frank Act, the FDIC has established 2.0% as the designated reserve ratio (“DRR”), which is the amount in the DIF as a percentage of all DIF insured deposits. In March 2016, the FDIC adopted final rules designed to meet the statutory minimum DRR of 1.35% by September 30, 2020, the deadline imposed by the Dodd-Frank Act. The Dodd-Frank Act requires the FDIC to offset the effect on institutions with assets of less than $10 billion of the increase in the statutory minimum DRR to 1.35% from the former statutory minimum of 1.15%. Although the FDIC’s new rules reduced assessment rates on all banks, they imposed a surcharge on banks with assets of $10 billion or more to be paid until the DRR reaches 1.35%. The DRR reached 1.36% at September 30, 2018. The rules also provide assessment credits to banks with assets of less than $10 billion for the portion of their assessments that contribute to the increase of the DRR to 1.35%. Such credits will be applied when the reserve ratio is at least 1.38%. The rules further changed the method of determining risk-based assessment rates for established banks with less than $10 billion in assets to better ensure that banks taking on greater risks pay more for deposit insurance than banks that take on less risk.

In addition, all FDIC-insured institutions are required to pay assessments to fund interest payments on bonds issued by the Financing Corporation, which was established by the government to recapitalize a predecessor to the DIF. These assessments will continue until the Financing Corporation bonds mature in September of 2019. The Financing Corporation has projected that the last assessment will be collected on the March 29, 2019, FDIC invoice.

As insurer, the FDIC is authorized to conduct examinations of, and to require reporting by, federally-insured institutions. It also may prohibit any federally-insured institution from engaging in any activity the FDIC determines by regulation or order to pose a serious threat to the Deposit Insurance Fund. The FDIC also has the authority to take enforcement actions against insured institutions. Insurance of deposits may be terminated by the FDIC upon a finding that the institution has engaged or is engaging in unsafe and unsound practices, is in an unsafe or unsound condition to continue operations, or has violated any applicable law, regulation, rule, order, or condition imposed by the FDIC or written agreement entered into with the FDIC.

The management of the Bank does not know of any practice, condition, or violation that might lead to termination of deposit insurance.

Fiscal and Monetary Policies

The business and earnings of the Company are affected significantly by the fiscal and monetary policies of the United States Government and its agencies. These policies are used in varying degrees and combinations to directly affect the availability of bank loans and deposits, as well as the interest rates charged on loans and paid on deposits. CSB is particularly affected by the policies of the FRB, which has regulatory authority over the supply of money and credit in the United States.

The monetary policies of the FRB have had a significant effect on the operating results of financial institutions in the past and are expected to continue to have significant effects in the future. In view of the changing conditions in the economy, the money markets, and the activities of monetary and fiscal authorities, the Company can make no definitive predictions as to future changes in interest rates, credit availability, or deposit levels.

Limits on Dividends and Other Payments

There are various legal limitations on the extent to which subsidiary banks may finance or otherwise supply funds to their parent holding companies. Under applicable federal and state laws, subsidiary banks may not, subject to certain limited exceptions, make loans or extensions of credit to, or investments in the securities of, their bank holding companies. Subsidiary banks are also subject to collateral security requirements for any loan or extension of credit permitted by such exceptions.

Payments of dividends by the Bank are limited by applicable state and federal laws and regulations. The ability of CSB to obtain funds for the payment of dividends and for other cash requirements is largely dependent on the amount of dividends that may be declared by the Bank. However, the FRB expects CSB to serve as a source of strength for the Bank and may require CSB to retain capital for further investment in the Bank, rather than pay dividends to CSB shareholders. Payment of dividends by the Bank may be restricted at any time at the discretion of

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its applicable regulatory authorities, if they deem such dividends to constitute an unsafe or unsound banking practice. These provisions could have the effect of limiting CSB’s ability to pay dividends on its common shares.

FRB policy requires CSB to provide notice to the FRB in advance of the payment of a dividend to CSB’s shareholders under certain circumstances and states that insured banks and bank holding companies should generally only pay dividends out of current operating earnings. The FRB may disapprove of a dividend payment if the FRB determines that the payment would be an unsafe or unsound practice.

Consumer Protection Laws and Regulations

Banks are subject to regular examination to ensure compliance with federal statutes and regulations applicable to their business, including consumer protection statutes and implementing regulations. Potential penalties under these laws include, but are not limited to, fines. The Dodd-Frank Act established the CFPB, which has extensive regulatory and enforcement powers over consumer financial products and services. The CFPB has adopted numerous rules with respect to consumer protection laws, amending some existing regulations and adopting new ones, and has commenced enforcement actions. The following are just some of the consumer protection laws applicable to the Bank:

● Community Reinvestment Act of 1977: imposes a continuing and affirmative obligation to fulfill the credit needs of its entire community, including low- and moderate-income neighborhoods.

● Equal Credit Opportunity Act: prohibits discrimination in any credit transaction on the basis of any of various criteria.

● Truth in Lending Act: requires that credit terms are disclosed in a manner that permits a consumer to understand and compare credit terms more readily and knowledgeably.

● Fair Housing Act: makes it unlawful for a lender to discriminate in its housing-related lending activities against any person on the basis of any of certain criteria.

● Home Mortgage Disclosure Act: requires financial institutions to collect data that enables regulatory agencies to determine whether the financial institutions are serving the housing credit needs of the communities in which they are located.

● Real Estate Settlement Procedures Act: requires that lenders provide borrowers with disclosures regarding the nature and cost of real estate settlements and prohibits abusive practices that increase borrowers’ costs.

● Privacy provisions of the Gramm-Leach-Bliley Act: requires financial institutions to establish policies and procedures to restrict the sharing of non-public customer data with non-affiliated parties and to protect customer information from unauthorized access

The banking regulators also use their authority under the Federal Trade Commission Act to take supervisory or enforcement action with respect to unfair or deceptive acts or practices by banks that may not necessarily fall within the scope of specific banking or consumer finance law.

In October 2017, the CFPB issued a final rule (the “Payday Rule”) with respect to certain consumer loans to be effective on January 16, 2018, although compliance with most sections is required starting on August 19, 2019. The first major part of the rule makes it an unfair and abusive practice for a lender to make short-term and longer-term loans with balloon payments (with certain exceptions) without reasonably determining that the borrower has the ability to repay the loan. The second major part of the rule applies to the same types of loans as well as certain other longer-term loans that are repaid directly from the borrower’s account. The rule states that it is an unfair and abusive practice for the lender to withdraw payment from the borrower’s account after two consecutive payment attempts have failed, unless the lender obtains the consumer’s new and specific authorization to make further withdrawals from the account. The rule also requires lenders to provide certain notices to the borrower before attempting to withdraw payment on a covered loan from the borrower’s account.

On February 6, 2019, the CFPB issued two proposals with respect to the Payday Rule. First, the CFPB proposed to delay the compliance date for the mandatory underwriting provisions of the Payday Rule to November 19, 2020. It has requested comments on the proposed delay to be made within 30 days. Second, the CFPB proposed to rescind provisions of the Payday Rule that: (1) provide that it is an unfair and abusive practice for a lender to make a covered short-term or longer-term balloon-payment loan without reasonably determining that the consumer has the ability to repay the loan according to its terms; (2) prescribe mandatory underwriting requirements for making the ability-to-repay determination; (3) provide exemptions of certain loans from the mandatory underwriting requirements; and (4) provide related definitions, reporting and recordkeeping requirements. The CFPB has requested comments to be made within 90 days on this proposal. These proposals do not change the provisions of the Payday Rule that address lender payment practices with respect to covered loans. The CFPB also stated that it

9

will be considering other changes to the Payday Rule in response to requests received for exemptions of certain types of lenders or loan products and may commence separate additional rulemaking initiatives. The Company is evaluating the proposal and believes the types of consumer credit extended by the Company will be excluded or exempted under the Rule.

Customer Privacy

Under the GLBA, federal banking agencies have adopted rules that limit the ability of banks and other financial institutions to disclose non-public information about consumers to nonaffiliated third parties. These limitations require distribution of privacy policies to consumers and, in some circumstances, allow consumers to prevent disclosure of certain personal information to nonaffiliated third parties.

USA Patriot Act

In response to the events of September 11, 2001, the Uniting and Strengthening of America by Providing Appropriate Tools Required to Intercept and Obstruct Terrorism Act of 2001 (the “Patriot Act”) was signed into law in October, 2001. The Patriot Act provides for financial institutions to establish programs and procedures to combat money laundering and terrorist financing. In addition, federal banking agencies are required, when reviewing bank holding company acquisition and bank merger applications, to take into account the effectiveness of the anti-money laundering policies, procedures, and controls of the applicants.

The Bank has established policies and procedures to be compliant with the requirements of the Patriot Act.

Corporate Governance

The Sarbanes-Oxley Act of 2002 (“SOX”) effected broad reforms to areas of financial disclosure and corporate governance. The Board of Directors reviews the Company’s corporate governance practices on a continuing basis. In accordance with section 302(a) of SOX, written certifications by CSB’s Chief Executive Officer and Chief Financial Officer are required to certify that CSB’s quarterly and annual reports filed with the SEC do not contain any untrue statement of a material fact or fail to state a material fact. CSB has also implemented a program designed to comply with Section 404 of SOX, which includes identification of significant processes and accounts, documentation of the design of control effectiveness over process and entity-level controls, and testing of the operating effectiveness of key controls. As of June 30, 2017, the market value of CSB’s common shares held by nonaffiliates exceeded $75 million, as a result of which CSB is required to provide annually an auditor’s attestation and report on management’s assessment of internal control over financial reporting. Management’s assessment of internal controls over financial reporting and the Independent Registered Public Accounting Firm opinion on internal control over financial reporting are located on pages 22 and 23 of CSB’s 2018 Annual Report.

Effect of Environmental Regulation

Compliance with federal, state, and local provisions regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, has not had a material effect upon the capital expenditures, earnings, or competitive position of CSB or its subsidiaries. CSB believes the nature of the operations of its subsidiaries has little, if any, environmental impact. CSB, therefore, anticipates no material capital expenditures for environmental control facilities for its current fiscal year or for the foreseeable future.

CSB believes its primary exposure to environmental risk is through the lending activities of the Bank. In cases where management believes environmental risk potentially exists, the Bank mitigates environmental risk exposure by requiring environmental site assessments at the time of loan origination to confirm collateral quality as to commercial real estate parcels posing higher than normal potential for environmental impact, as determined by reference to present and past uses of the subject property and adjacent sites.

10

Executive and Incentive Compensation

In June 2010, the federal banking agencies issued joint interagency guidance on incentive compensation policies (the “Joint Guidance”) intended to ensure that the incentive compensation policies of banking organizations do not undermine the safety and soundness of such organizations by encouraging excessive risk-taking. This principles-based guidance, which covers all employees that have the ability to materially affect the risk profile of an organization, either individually or as part of a group, is based upon the key principles that a banking organization’s incentive compensation arrangements should: (i) provide incentives that do not encourage risk-taking beyond the organization’s ability to effectively identify and manage risks; (ii) be compatible with effective internal controls and risk management; and (iii) be supported by strong corporate governance, including active and effective oversight by the organization’s board of directors.

Pursuant to the Joint Guidance, the FRB will review as part of a regular, risk-focused examination process, the incentive compensation arrangements of financial institutions such as the Company. Such review will be tailored to each organization based on the scope and complexity of the organization’s activities and the prevalence of incentive compensation arrangements. The findings of the supervisory initiatives will be included in reports of examination and deficiencies will be incorporated into the institution’s supervisory ratings, which can affect the institution’s ability to make acquisitions and take other actions. Enforcement actions may be taken against an institution if its incentive compensation arrangements, or related risk-management control or governance processes, pose a risk to the organization’s safety and soundness and prompt and effective measures are not being taken to correct the deficiencies.

The Company’s board and management believe its policies and procedures related to Executive and Incentive Compensation are compliant with the Joint Guidance.

Future Legislation

Various and significant legislation affecting financial institutions and the financial industry is from time to time adopted by the U.S. Congress and state legislatures, and regulatory agencies frequently adopt or amend regulations. Such legislation and regulation may continue to change banking laws and regulations and the operating environment of CSB and its subsidiaries in substantial and unpredictable ways, and could significantly increase or decrease costs of doing business, limit or expand permissible activities, or affect the competitive balance among financial institutions. The nature and extent of future legislative and regulatory changes affecting financial institutions remains very unpredictable.

11

Statistical Disclosures

The following schedules present, for the periods indicated, certain financial and statistical information of the Company as required under the SEC’s Industry Guide 3 “Statistical Disclosures by Bank Holding Companies,” or a specific reference as to the location of required disclosures in the Company’s 2018 Annual Report.

Distribution of Assets, Liabilities, and Stockholders’ Equity; Interest Rates and Interest Differential

The information set forth under the heading, “Average Balance Sheets and Net Interest Margin Analysis” located on page 10 of the Company’s 2018 Annual Report is incorporated by reference herein.

The information set forth under the heading, “Rate/Volume Analysis of Changes in Income and Expense” located on page 11 of the Company’s 2018 Annual Report is incorporated by reference herein.

Investment Portfolio

The following is a schedule of the fair value of securities at December 31:

(Dollars in thousands)
Securites available-for-sale, at fair value		2018			2017			2016
U.S. Treasury security	$		996	$		998	$		1,001
U.S. Government agencies			7,170			8,229			6,402
Mortgage-backed securities of government agencies			44,901			49,701			55,837
Other mortgage-backed securities			-			-			65
Asset-backed securities of government agencies			1,024			1,169			1,266
State and political subdivisions			23,125			27,141			29,708
Corporate bonds			8,312			10,425			9,516
Total available-for-sale	$		85,528	$		97,663	$		103,795
Securities held-to-maturity, at fair value
U.S. Government agencies	$		9,098	$		9,265	$		9,093
Mortgage-backed securities of government agencies			11,020			11,531			14,351
State and political subdivisions			-			4,695			-
Total held-to-maturity	$		20,118	$		25,491	$		23,444
Equity securities	$		83	$		89	$		80

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The following is a schedule of maturities for each category of debt securities and the related weighted average yield of such securities as of December 31, 2018:

		One Year or Less						After One Year Through Five Years						Maturing After Five Years Through Ten Years						After Ten Years						Total
(Dollars in thousands)		Amortized Cost		Yield				Amortized Cost		Yield				Amortized Cost		Yield				Amortized Cost		Yield				Amortized Cost		Yield
Available-for-sale:
U.S. Treasury	$		997		2.27	%	$		-		-	%	$		-		-	%	$		-		-	%	$		997		2.27		%
U.S. Government agencies			-		-				5,500		2.05				1,850		2.25				-		-				7,350		2.10
Mortgage-backed securities of government agencies			23		2.85				1,997		1.97				4,891		2.59				38,833		2.58				45,744		2.56
Asset-backed securities of government agencies			-		-				-		-				-		-				1,040		3.59				1,040		3.59
State and political subdivisions			1,428		2.54				6,140		2.37				15,714		2.27				-		-				23,282		2.32
Corporate bonds			1,000		2.30				3,674		2.89				3,472		3.48				500		4.00				8,646		3.12
Total	$		3,448		2.40	%	$		17,311		2.33	%	$		25,927		2.49	%	$		40,373		2.63	%	$		87,059		2.52		%
Held-to-maturity:
U.S. Government agencies	$		-		-	%	$		483		2.19	%	$		3,000		2.00	%	$		5,999		2.01	%	$		9,482		2.01	%
Mortgage-backed securities of government agencies			-		-				-		-				-		-				11,206		2.06				11,206		2.06
Total	$		-		-	%	$		483		2.19	%	$		3,000		2.00	%	$		17,205		2.04	%	$		20,688		2.04		%

The weighted average yields are calculated using amortized cost of investments and are based on coupon rates for securities purchased at par value, and on effective interest rates considering amortization or accretion if securities were purchased at a premium or discount. The weighted average yield on tax-exempt obligations is presented on a tax-equivalent basis based on the Company’s marginal federal income tax rate of 21%.

13

Loan Portfolio

Total loans on the balance sheet are comprised of the following classifications at December 31:

(Dollars in thousands)		2018			2017			2016			2015			2014
Commercial	$		146,875	$		140,273	$		134,268	$		123,143	$		123,813
Commercial real estate			183,605			179,663			159,475			148,775			139,695
Residential real estate			167,296			157,172			144,489			125,775			121,684
Construction and land development			31,227			22,886			23,428			15,452			17,446
Consumer			19,402			16,306			13,308			9,268			7,913
Total loans	$		548,405	$		516,300	$		474,968	$		422,413	$		410,551
The following is a schedule of maturities of loans based on contract terms and assuming no amortization or prepayments, excluding residential real estate mortgage and installment loans, as of December 31, 2018:
		Maturing
(Dollars in thousands)		One Year or Less			One Through Five Years			After Five Years			Total
Commercial	$		79,593	$		41,105	$		26,177	$		146,875
Commercial real estate			6,495			14,337			162,773			183,605
Construction and land development			2,321			1,671			27,235			31,227
Total	$		88,409	$		57,113	$		216,185	$		361,707

The following is a schedule of fixed rate and variable rate commercial, commercial real estate and construction and land development loans due after one year from December 31, 2018.

(Dollars in thousands)		Fixed Rate			Variable Rate
Total commercial, commercial real estate and construction and land development loans due after one year	$		43,713	$		229,585

The following schedule summarizes nonaccrual, past due and restructured loans.

(Dollars in thousand)		2018			2017			2016			2015			2014
Loans accounted for on a nonaccural basis	$		3,155	$		6,081	$		1,449	$		1,576	$		3,668
Accruing loans that are contractually past due 90 days or more as to interest or principal payments			174			441			235			105			281
Total	$		3,329	$		6,522	$		1,684	$		1,681	$		3,949

The policy for placing loans on nonaccrual status is to cease accruing interest on loans when management believes that collection of interest is doubtful, when commercial loans are past due as to principal and interest 90 days or more or when mortgage loans are past due as to principal and interest 120 days or more, except that in certain circumstances interest accruals are continued on loans deemed by management to be well-secured and in process of collection. In such cases, loans are individually evaluated in order to determine whether to continue income recognition after 90 days beyond the due date. When loans are placed on nonaccrual, any accrued interest is charged against interest income.

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Information regarding impaired loans at December 31 is as follows:

(Dollars in thousands)		2018			2017			2016
Total recorded investment of impaired loans	$		3,860	$		7,882	$		7,173
Less portion for which no allowance for loan loss is allocated			3,122			5,565			3,326
Portion of impaired loan balance for which an allowance for loan losses is allocated			738			2,317			3,847
Portion of allowance for loan losses allocated to the impaired loan balance at December 31			101			244			729

For the year ended December 31, 2018, interest income recognized on impaired loans amounted to $113 thousand, while $371 thousand would have been recognized had the loans been performing under their contractual terms. For the year ended December 31, 2017, interest income recognized on impaired loans amounted to $123 thousand, while $426 thousand would have been recognized had the loans been performing under their contractual terms. For the year ended December 31, 2016, interest income recognized on impaired loans amounted to $312 thousand while $426 thousand would have been recognized had the loans been performing under their contractual terms.

Impaired loans are comprised of commercial, commercial real estate, and residential real estate loans, and are carried at the present value of expected cash flows discounted at the loan’s effective interest rate or at fair value of the collateral if the loan is collateral dependent. A portion of the allowance for loan losses is allocated to impaired loans.

Smaller-balance homogeneous loans are evaluated for impairment in total. Such loans include residential first-mortgage loans secured by one to four-family residences, residential construction loans, automobile loans, home equity loans, and second-mortgage loans. These consumer loans are included in nonaccrual and past due disclosures above as well as impaired loans when they become nonperforming. Commercial loans and mortgage loans secured by other properties are evaluated individually for impairment. When analysis of borrower operating results and financial condition indicates that underlying cash flows of the borrower’s business are not adequate to meet its debt service requirements, the loan is evaluated for impairment. Impaired loans or portions thereof, are charged-off when deemed uncollectible.

At December 31, 2018, no loans were identified that management had serious doubts about the borrowers’ ability to comply with present loan repayment terms that are not included in the tables set forth above. On a monthly basis, the Company internally classifies certain loans based on various factors. At December 31, 2018, these amounts, including impaired and nonperforming loans, amounted to $29 million of substandard loans and $0 doubtful loans.

As of December 31, 2018, there were no concentrations of loans greater than 10% of total loans that were not otherwise disclosed as a category of loans in the loan portfolio table set forth above.

15

Summary of Loan Loss Experience

The following schedule presents an analysis of the allowance for loan losses, average loan data, and related ratios for the years ended December 31:

(Dollars in thousands)		2018				2017				2016					2015				2014
LOANS
Average loans outstanding during period	$		535,506		$		497,048		$		448,941			$		412,147		$		405,973
ALLOWANCE FOR LOAN LOSSES
Balance at beginning of period	$		5,604		$		5,291		$		4,662			$		4,381		$		5,085
Loans charged-off:
Commercial			823				1,184				297					109				1,005
Commercial real estate			103				-				50					61				379
Residential real estate			37				-				12					132				27
Construction and land development			-				-				-					-				-
Consumer			119				20				59					46				11
Total loans charged-off			1,082				1,204				418					348				1,422
Recoveries of loans previously charged-off:
Commercial			61				361				214					199				28
Commercial real estate			1				-				334					13				8
Residential real estate			3				8				5					18				25
Construction and land development			-				-				-					-				-
Consumer			4				3				1					10				14
Total loans recoveries			69				372				554					240				75
Net loans (recovered) charged-off			1,013				832				(136	)				108				1,347
Provision charged to operating expense			1,316				1,145				493					389				643
Balance at end of period	$		5,907		$		5,604		$		5,291			$		4,662		$		4,381
Ratio of net charge-offs to average loans outstanding for period			0.19	%			0.17	%			(0.03	)	%			0.03	%			0.33	%

The allowance for loan losses balance and provision charged to expense are determined by management based on periodic reviews of the loan portfolio, past loan loss experience, economic conditions, and various other circumstances subject to change over time. In making this judgment, management reviews selected large loans, as well as impaired loans, other delinquent, nonaccrual and problem loans, and loans to industries experiencing economic difficulties. The collectability of these loans is evaluated after considering current operating results and financial position of the borrower, estimated market value of collateral, guarantees and the Company’s collateral position versus other creditors. Judgments, which are necessarily subjective, as to the probability of loss and amount of such loss are formed on these loans, as well as other loans taken together.

16

The following schedule is a breakdown of the allowance for loan losses allocated by type of loan and related ratios. While management’s periodic analysis of the adequacy of the allowance for loan losses may allocate portions of the allowance for specific problem-loan situations, the entire allowance is available for any loan charge-offs that occur.

	Allocation of the Allowance for Loan Losses
	(Dollars in thousands)
	Allowance  Amount		Percentage of Loans in Each Category to Total Loans			Allowance  Amount		Percentage of Loans in Each Category to Total Loans			Allowance  Amount		Percentage of Loans in Each Category to Total Loans			Allowance  Amount		Percentage of Loans in Each Category to Total Loans			Allowance  Amount		Percentage of Loans in Each Category to Total Loans
	December 31, 2018					December 31, 2017					December 31, 2016					December 31, 2015					December 31, 2014
Commercial	$	2,178		26.78	%	$	1,813		27.17	%	$	2,207		28.27	%	$	1,664		29.15	%	$	1,289		30.16	%
Commercial real estate		1,791		33.48			1,735		34.80			1,264		33.58			1,271		35.22			1,524		34.02
Residential real estate		1,245		30.51			1,273		30.44			1,189		30.42			1,086		29.78			1,039		29.64
Construction & land development		258		5.69			237		4.43			178		4.93			123		3.66			142		4.25
Consumer		306		3.54			175		3.16			141		2.80			86		2.19			60		1.93
Unallocated		129					371					312					432					327
Total	$	5,907		100.00	%	$	5,604		100.00	%	$	5,291		100.00	%	$	4,662		100.00	%	$	4,381		100.00	%

17

Deposits

The following is a schedule of average deposit amounts and average rates paid on each category for the periods indicated:

		Average Amounts Outstanding Year ended December 31,								Average Rate Paid Year ended December 31,
(Dollars in thousands)		2018			2017			2016		2018			2017			2016
Noninterest-bearing demand	$		175,439	$		169,803	$		156,287		N/A			N/A			N/A
Interest-bearing demand			117,879			101,081			83,956		0.30	%		0.13	%		0.04	%
Savings deposits			180,718			170,694			163,271		0.37			0.18			0.08
Time deposits			115,610			111,650			116,427		1.18			0.82			0.73
Total deposits	$		589,646	$		553,228	$		519,941

The Bank does not have any material deposits by foreign depositors.

The following is a schedule of maturities of time certificates of deposit in amounts of $100,000 or more, as of December 31, 2018:

(Dollars in thousands)
Three months or less	$	5,229
Over three through six months		6,488
Over six through twelve months		9,937
Over twelve months		26,874
Total	$	48,528

Return on Equity and Assets

	2018			2017			2016
Return on average assets		1.31	%		1.02	%		1.03	%
Return on average shareholders’ equity		12.89			10.33			10.44
Dividend payout ratio		28.57			32.45			31.71
Average shareholders‘ equity to average assets		10.19			9.92			9.91

Short-Term Borrowings

Short-term borrowings consist of securities sold under agreements to repurchase, short-term advances through the Federal Home Loan Bank, and federal funds purchased. Securities sold under agreements to repurchase mature one (1) business day from the transaction date. Federal funds purchased generally have overnight terms. Information concerning short-term borrowings is summarized as follows:

(Dollars in thousands)		2018				2017				2016
Securities sold under agreements to repurchase, federal funds purchased and short-term advances at year-end	$		37,415		$		39,480		$		48,742
Average balance outstanding			41,334				50,445				51,801
Maximum outstanding at any month end during the year			44,155				56,932				55,642
Weighted-average interest rate at year-end			1.01	%			0.39	%			0.16	%
Weighted-average rate during the year			0.81				0.29				0.14

18

ITEM 1A. RISK FACTORS.

Risks Related to the Company’s Business

Consumers may decide not to use banks to complete their financial transactions.

Technology and other changes are allowing parties to utilize alternative methods to complete financial transactions that historically have involved banks. Consumers can now maintain funds in brokerage accounts or mutual funds that would have historically been held as bank deposits. Consumers can also complete transactions such as paying bills and/or transferring funds directly without the assistance of banks. The process of eliminating banks as intermediaries could result in the loss of fee income, as well as the loss of customer deposits and the related income generated from those deposits. The loss of these revenue streams and the lower cost deposits as a source of funds could have a material adverse effect on the Company’s business, financial condition, or results of operations.

Strong competition within the market in which the Company operates could reduce its ability to attract and retain business.

Competition in the financial services industry is intense, as the Company competes with banks, credit unions, savings and loan associations, securities dealers, finance and insurance companies, mortgage brokers, and investment advisors. As a result of their size and ability to achieve economies of scale, certain of the Company’s competitors offer a broader range of products and services, or in some cases a lower cost operating model, than the Company can offer. The OCC has recently announced that it will accept applications for national bank charters from nondepository financial technology companies to engage in banking activities. In addition, the Company’s ability to achieve its financial objectives will depend on its ability to deliver or expand product delivery systems and technology required by customers.

Unauthorized disclosure of sensitive or confidential client or customer information whether through a breach of the Company’s computer systems or otherwise, could severely harm the Company’s business.

As part of the Company’s business, it collects, processes, and retains sensitive and confidential client and customer information on behalf of the Company’s subsidiaries and other third parties. Despite the security measures the Company has in place, its facilities and systems, and those of the Company’s third-party service providers, may be vulnerable to security breaches. Any security breach involving the misappropriation, loss or other unauthorized disclosure of confidential customer information, whether by the Company or by its vendors, could severely damage the Company’s reputation, cause a loss of customer confidence, expose it to risks of litigation and liability, or disrupt the Company’s operations and may have a material adverse effect on the Company’s business.

A failure in or breach of the Company’s technology infrastructure, or those of third parties with whom the Company has relationships, could result in a material adverse effect on the Company’s operations, reputation, cash flows, financial condition, and results of operation.

The Company is very dependent upon the use of technology to operate its business. The Company processes a large number of transactions every day and maintains and transmits confidential client and employee information through its technology systems.

The Company’s dependence upon automated systems to record and process the Bank’s transactions poses the risk that technical system flaws, employee errors, tampering or manipulation of those systems, or attacks by third parties will result in losses and may be difficult to detect. The Company’s inability to use these information systems at critical points in time could unfavorably impact the timeliness and efficiency of its business operations. In recent years, some banks have experienced denial of service attacks in which individuals or organizations flood the bank’s website with extraordinarily high volumes of traffic, with the goal and effect of disrupting the ability of the bank to process transactions. The Company could also be adversely affected if one of its employees causes a significant operational break-down or failure, either as a result of human error or where an individual purposefully sabotages or fraudulently manipulates the Company’s operations or systems. The Company is further exposed to the risk that third-party service providers may be unable to fulfill their contractual obligations or will be affected by the same risks as the Bank has. These disruptions may interfere with service to the Bank’s customers, cause additional regulatory scrutiny, and result in a financial loss or liability. The Company is also at risk of the impact of natural disasters, terrorism, and international hostilities on its systems or for the effects of outages or other failures involving power or communications systems operated by others.

19

Employees could engage in fraudulent, improper or unauthorized activities on behalf of clients, or improper use of confidential information. The Company may not be able to prevent employee errors or misconduct, and the precautions taken to detect this type of activity might not be effective in all cases. Employee errors or misconduct could subject the Company to civil claims for negligence or regulatory enforcement actions, including fines and restrictions on the Company’s business.

In addition, there have been instances where financial institutions have been victims of fraudulent activity in which criminals pose as customers to initiate wire and automated clearinghouse transactions out of customer accounts. The recent massive breach of the systems of a credit bureau presents additional threats as criminals now have more information about a larger portion of the country’s population than past breaches have involved, which could be used by criminals to pose as customers initiating transfers of money from customer accounts. Although the Company has policies and procedures in place to verify the authenticity of the Company’s customers, it cannot assure that such policies and procedures will prevent all fraudulent transfers. Such activity can result in financial liability and harm to the Company’s reputation.

Management cannot be certain that the security controls it has adopted will prevent unauthorized access to its computer systems or those of its third-party service providers, whom it requires to maintain similar controls. A security breach of the computer systems and loss of confidential information, such as customer account numbers or personal information could result in a loss of customers’ confidence and, thus, loss of business. In addition, unauthorized access to or use of sensitive data could subject the Company to litigation and liability and costs to prevent further such occurrences.

Further, the Company may be affected by data breaches at retailers and other third parties who participate in data interchanges with the Company and its customers that involve the theft of customer credit and debit card data, which may include the theft of debit card PIN numbers and commercial card information used to make purchases at such retailers and other third parties. Such data breaches could result in the Company incurring significant expenses to reissue debit cards and cover losses, which could result in a material adverse effect on the Company’s results of operations.

The Company’s assets at risk for cyber-attacks include financial assets and non-public information belonging to customers. The Company uses several third-party vendors who have access to the Company’s assets via electronic media. Certain cyber security risks arise due to this access, including cyber espionage, blackmail, ransom, and theft. As cyber and other data security threats continue to evolve, the Company may be required to expend significant additional resources to continue to modify and enhance its protective measures or to investigate and remediate any security vulnerabilities.

The Company may not be able to attract and retain skilled people.

The Company’s success depends, in large part, on the ability to attract and retain key people. Succession planning includes the continuity of both the Board of Directors and the management team. Competition for the best people in most activities in which the Company engages can be intense, and it may not be able to attract, hire, or retain the people the Company wants or needs. In order to attract and retain qualified employees, the Company must compensate them at market levels. If the Company is unable to continue to attract and retain qualified employees, or do so at rates necessary to maintain the Company’s competitive position, the Company’s performance could suffer, and, in turn, adversely affect the Company’s business, financial condition, or results of operation.

The Company’s exposure to credit risk could adversely affect its earnings and financial condition.

Credit risk is the risk of losing principal and interest income because borrowers fail to repay loans. The Company’s earnings may be negatively impacted if it fails to manage credit risk, as the origination of loans is an integral part of the Company’s business. Factors which may affect the ability of borrowers to repay loans include a slowing of the local economy in which the Company operates, a downturn in one or more business sectors in which the Company’s customers operate, or a rapid increase in interest rates. All of the Company’s loan portfolios, particularly commercial and industrial loans may be affected by the impact of higher interest rates. There has been some price appreciation in the housing market across the Company’s footprint, reflecting improved sales and decreased inventories of houses to be sold. A return to further declines in home values and reduced levels of home sales in the Company’s market may have a negative effect on the Company’s business, financial condition, or results of operation.

20

The Company’s allowance for loan losses may be insufficient.

The Company maintains an allowance for loan losses to cover current, probable loan losses in the Company’s loan portfolio. Management makes various assumptions and judgments about the collectability of its loan portfolio, including the creditworthiness of its borrowers and the value of the real estate and other assets serving as collateral for the repayment of loans. Through a periodic review and consideration of the loan portfolio, management determines the amount of the allowance for loan losses by considering general market conditions, credit quality of the loan portfolio, the collateral supporting the loans, and performance of customers relative to their financial obligations with the Company. The amount of future losses is susceptible to changes in economic, operating and other conditions, including changes in interest rates, which may be beyond the Company’s control and these losses may exceed current estimates. The Company cannot fully predict the amount, timing of losses, or whether the loss allowance will be adequate in the future. If the Company’s assumptions prove to be incorrect, the allowance for loan losses may not be sufficient to cover losses inherent in the Company’s loan portfolio, resulting in additions to the allowance. Excessive loan losses and significant additions to the Company’s allowance for loan losses could have a material adverse impact on the Company’s business, financial condition, and results of operations. Any such increase in the Company’s allowance for loan losses or loan charge-offs as required by these regulatory authorities might have a material adverse effect on the Company’s business, financial condition, or results of operations.

The Financial Accounting Standards board (“FASB”) finalized its guidance eliminating the probable recognition threshold for credit losses on financial assets measured at amortized cost. The Update would require financial assets be presented at the net amount expected to be collected. Under this current expected credit loss model (“CECL”), an entity would record at the time of origination, as an allowance, its estimate of credit losses expected throughout the life of the loan as opposed to the current practice of recording losses when it is probable that a loss event has occurred. The Update for Financial Instruments-Credit Losses is required January 1, 2020. The guidance may require the Company to maintain a larger allowance for loan losses in the future than existing guidance currently requires.

The Company has significant exposure to risks associated with commercial and commercial real estate loans.

As of December 31, 2018, approximately 66% of the Company’s loan portfolio consisted of commercial, commercial real estate, and construction loans. These loans are generally viewed as having more inherent risk of default than residential mortgage or consumer loans. The repayment of these loans often depends on the successful operation of a business. These loans are more likely to be adversely affected by weak conditions in the economy. Also, the commercial loan balance per borrower is typically larger than that of residential mortgage loans and consumer loans, indicating higher potential losses on an individual loan basis. The deterioration of one or a few of these loans could cause a significant increase in nonperforming loans and a reduction in interest income. An increase in nonperforming loans could result in an increase in the provision for loan losses and an increase in loan charge-offs, both of which could have a material adverse effect on the Company’s business, financial condition, and results of operations.

If the Bank forecloses on collateral property and owns the underlying real estate, the Bank may be subject to the increased costs associated with the ownership of real property, resulting in reduced revenue.

The Bank may have to foreclose on collateral property to protect its investment and may thereafter own and operate such property, in which case it will be exposed to the risks inherent in the ownership of real estate. The amount that the Bank, as a mortgagee, may realize after a default is dependent upon factors outside of the Bank’s control, including, but not limited to: (i) general or local economic conditions: (ii) neighborhood values; (iii) interest rates; (iv) real estate tax rates; (v) operating expenses of the mortgaged properties; (vi) supply of and demand for rental units or properties; (vii) ability to obtain and maintain adequate occupancy of the properties; (viii) zoning laws; (ix) governmental rules, regulations and fiscal policies; and (x) acts of God. Certain expenditures associated with the ownership of real estate, principally real estate taxes and maintenance costs, may adversely affect the income from the real estate. Therefore, the cost of operating a real property may exceed the rental income earned from such property, and the Bank may have to advance funds in order to protect its investment, or the Bank may be required to dispose of the real property at a loss. The Bank may also acquire properties with hazardous substances that must be removed or remediated, the costs of which could be substantial, and the Bank may not be able to recover such costs from the responsible parties. The foregoing expenditures and costs could adversely affect the Company’s ability to generate revenues, resulting in reduced levels of profitability.

21

The Company is subject to liquidity risk.

The Company requires liquidity to extend credit and repay liabilities on a timely basis at a reasonable cost. The Company’s access to funding sources in amounts adequate to finance its activities or on terms that are acceptable to it could be impaired by factors that affect it specifically or the financial services industry or general economy. Factors that could reduce its access to liquidity sources include a downturn in the north central Ohio market, difficult credit markets, aggressive competitor actions due to liquidity needs, or adverse regulatory actions. The Company’s access to deposits may also be affected by the liquidity needs of its depositors. The Company’s primary source of liquidity is its supply of deposits from consumer and commercial customers which are payable on demand or upon several days’ notice, while by comparison, a substantial portion of its assets are loans, which cannot be called or sold in the same time frame. The Company historically has been able to replace maturing deposits and advances as necessary, but it might not be able to readily replace such funds in the future, if a large number of its depositors sought to withdraw their accounts, regardless of the reason. A failure to maintain adequate liquidity could have a material adverse effect on the Company’s business, financial condition, or results of operations.

The Company may not be able to successfully implement planned growth as part of its business strategy and may incur expenses and risks related to such growth efforts.

The Company’s ability to grow successfully will depend on a variety of factors, including the continued availability of desirable business opportunities. There can be no assurance when or if such growth opportunities will be available.

During the past decade, the Company’s growth has been accomplished through a combination of organic growth, de novo branching and acquisitions. The Company may acquire other financial institutions or parts of institutions in the future, open new branches, and consider new lines of business and new products or services. Such expansions of its business may involve a number of expenses and risks, generally not attendant with organic growth efforts. Such expenses and risks include:

● The time and costs associated with identifying and evaluating potential acquisitions or new products or services;

● The potential inaccuracy of estimates and judgments used to evaluate credit, operation management and market risk with respect to the target institutions;

● The time and costs of evaluating new markets, hiring local management and opening new offices, and the delay between commencing these activities and the generation of profits from the expansion;

● The Company’s ability to finance an acquisition or other expansion and the possible dilution to the Company’s existing shareholders;

● The diversion of management’s attention to the negotiation of a transaction and the integration of the operations and personnel of the combining businesses;

● Entry into unfamiliar markets;

● The possible failure of the introduction of new products and services into the Company’s existing business;

● The incurrence and possible impartment of goodwill associated with an acquisition and possible adverse short-term effects on the Company’s results of operations; and

● The risk of loss of key employees and customers.

Failure to manage the Company’s growth effectively could have a material adverse effect on its business, future prospects, financial condition, or results of operations and could adversely affect the Company’s ability to successfully implement its business strategy.

22

The Company may need to raise capital in the future, but capital may not be available when needed or at acceptable terms.

Federal and state banking regulators require CSB and the Bank to maintain adequate levels of capital to support its operations. The Company may need to raise additional capital in the future to support its business or to finance acquisitions, if any, or the Company may otherwise elect to raise additional capital in anticipation of future growth opportunities

The Company’s ability to raise additional capital for CSB’s or the Bank’s needs will depend on conditions at that time in the capital markets, overall economic conditions, CSB’s financial performance and condition, and other factors, many of which are outside the Company’s control. There is no assurance that, if needed, CSB will be able to raise additional capital on favorable terms or at all. An inability to raise additional capital may have a material adverse effect on the Company’s ability to expand operations, and on the Company’s financial condition, results of operations, and future prospects.

The Bank may be required to repurchase loans it has sold or indemnify loan purchasers under the terms of the sale agreements, which could adversely affect the Company’s liquidity, results of operations, and financial condition.

When the Bank sells a mortgage loan, it agrees to repurchase or substitute a mortgage loan if it is later found to have breached any representation or warranty the Bank made about the loan or if the borrower is later found to have committed fraud in connection with the origination of the loan. While the Bank has underwriting policies and procedures designed to avoid breaches of representations and warranties as well as borrower fraud, the Bank cannot be sure that no breach or fraud will ever occur. Required repurchases, substitutions, or indemnifications could have an adverse effect on the Company’s liquidity, results of operations, and financial condition.

The trading volume and price of CSB’s common shares can be volatile.

CSB’s common shares are very thinly traded and therefore, susceptible to price swings. CSB’s common shares are traded on the OTC market under the symbol “CSBB;” however, the investment community does not actively follow CSB’s common shares. Given the lower trading volume of CSB’s common shares, significant sales of CSB’s common shares, or the expectation of significant sales, could cause CSB’s share price to fall.

The Company’s organizational documents may have the effect of discouraging a third party from acquiring the Company by means of a tender offer, proxy contest, or otherwise.

The Company’s articles of incorporation contain provisions that make it more difficult for a third party to gain control or acquire the Company without the consent of its board of directors. These provisions also could discourage proxy contests and may make it more difficult for dissident shareholders to elect representatives as directors and take other corporate actions. These provisions of the Company’s governing documents may have the effect of delaying, deferring, or preventing a transaction or a change in control that might be in the best interests of the Company’s shareholders.

23

Risks Relating to Economic and Market Conditions

Difficult market conditions and economic trends could adversely affect the financial services industry and the Company’s business.

The Company’s success depends, to a certain extent, upon local and national economic and political conditions as well as governmental monetary policies. The election of a new United States President in 2016 has resulted in substantial changes in economic and political conditions for the United States, and has impacted global relations in matters such as trade policy. Economic turmoil in Europe and Asia and changes in oil production in the Middle East both affect the economy and stock prices in the United States. The timing and circumstances of the United Kingdom leaving the European Union (Brexit) and their effects on the United States are unknown.

Conditions such as inflation, recession, unemployment, changes in interest rates, money supply, and other factors beyond the Company’s control may adversely affect asset quality, deposit levels, and loan demand and therefore, the Company’s earnings. Because the Company has a significant amount of real estate loans, decreases in real estate values could adversely affect the value of property used as collateral and the Company’s ability to sell the collateral upon foreclosure. Adverse changes in the economy may also have a negative effect on the ability of borrowers to make timely repayments of their loans, which would have an adverse impact on the Company’s earnings. If during a period of reduced real estate values, the Company is required to liquidate the collateral securing loans to satisfy the debt or to increase its allowance for loan losses, it could materially reduce the Company’s profitability and adversely affect its financial condition. The substantial majority of the Company’s loans are to individuals and businesses located in Holmes, Stark, Tuscarawas, Wayne and Counties in Ohio. Consequently, significant declines in north central Ohio real estate values could have a material adverse effect on the Company’s business, financial condition, or results of operations.

Changes in interest rates could adversely affect income and financial condition.

The Company’s results of operation and financial condition are substantially dependent upon net interest income, which is the difference between interest earned from loans and investments and interest paid on interest bearing deposits and borrowings. Market interest rates are largely beyond the Company’s control, and they fluctuate in response to general economic conditions and the policies of various governmental and regulatory agencies, in particular the FRB, as well as competitive factors. Changes in interest rates will influence the origination of loans, the purchase of investments, the level of prepayments on the Company’s loans and investments, and the receipt of payments on mortgage-backed securities, resulting in fluctuations of income and cash flow. Changes in interest rates also can affect the value of loans, securities, mortgage servicing rights, and assets under management. Although fluctuations in market interest rates are neither completely predictable nor controllable, the Company’s Asset Liability Committee (ALCO) meets regularly to monitor the Company’s interest rate sensitivity position and oversee the Company’s financial risk management by establishing policies and operating limits. Rising interest rates may adversely affect the ability of borrowers to pay the principal or interest on loans and may lead to an increase in nonperforming assets and a reduction of interest income recognized. The Board reviews interest rate conditions monthly and management maintains continuous surveillance of interest rate risk exposures. Fixed rate investment securities will lose value during rising rates and certain investment securities, notably mortgage backed securities will experience a decrease in in prepayments of principal and interest, which will extend their maturity. For more information, see Item 7A, Quantitative and Qualitative Disclosures about Market Risk in this Annual Report on Form 10-K, which summarizes the Company’s exposure to interest rate risk.

24

A transition away from LIBOR as a reference rate for financial contracts could negatively affect the Company’s income and expenses and the value of various financial contracts.

LIBOR is used extensively in the U.S. and globally as a benchmark for various commercial and financial contracts, including adjustable rate mortgages, corporate debt, interest rate swaps, and other derivatives. LIBOR is set based on interest rate information reported by certain banks, which may stop reporting such information after 2021. It is uncertain at this time whether LIBOR will change or cease to exist or the extent to which those entering into financial contracts will transition to any other particular benchmark. Other benchmarks may perform differently than LIBOR or alternative benchmarks have performed in the past or have other consequences that cannot currently be anticipated. It is also uncertain what will happen with instruments that rely on LIBOR for future interest rate adjustments and which remain outstanding if LIBOR ceases to exist. The Company has no loans tied to LIBOR and has 5 investment securities tied to LIBOR with a fair market value of $2.7 million held at December 31, 2018. One investment of $566 thousand matures in 2020 and the remaining $2.1 million in investment securities receive principal repayment monthly. The potential transition away from LIBOR is not expected to have a significant direct impact on the Company’s financial statements. However, the extent of indirect impacts from financial market adjustments to the absence of LIBOR are unknown at this time.

Adverse changes in the financial markets may adversely impact the Company’s results of operations.

The capital and credit markets have been experiencing unprecedented levels of volatility since 2008. While the Company generally invests in securities with limited credit risk, certain investment securities the Company holds possess higher credit risk since they represent beneficial interests in structured investments collateralized by residential mortgages. Regardless of the level of credit risk, all investment securities are subject to changes in market value due to changing interest rates and implied credit spreads. Structured investments have at times been subject to significant market volatility due to the uncertainty of credit ratings, deterioration in credit losses occurring within certain types of residential mortgages, changes in prepayments of the underlying collateral, and the lack of transparency related to the investment structures and the collateral underlying the structured investment vehicles.

A default by another larger financial institution could adversely affect financial markets generally.

The commercial soundness of many financial institutions may be closely interrelated as a result of relationships between the institutions. As a result, concerns about, or a default or threatened default by, one institution could lead to significant market-wide liquidity and credit problems, losses or defaults by other institutions. This “systemic risk” may adversely affect the Company’s business.

25

Risks Related to Legal, Regulatory, and Accounting Changes

Legislative, regulatory, or accounting changes or actions could adversely impact the Company or the businesses in which it is engaged.

The Company and its subsidiaries are subject to broad state and federal regulation, supervision, and legislation that govern almost all aspects of its operations. Laws and regulations may change from time to time and are primarily intended for the protection of consumers, depositors, and the Deposit Insurance Fund, and not to benefit the Company’s shareholders. Changes to laws and regulations or other actions by regulatory agencies may negatively impact the Company or its ability to increase the value of its business. Regulatory authorities have extensive discretion in connection with their supervisory and enforcement activities, including the imposition of restrictions on the operation of an institution, the classification of assets by an institution, and the adequacy of an institution’s allowance for loan losses. Additionally, actions by regulatory agencies could cause the Company to devote significant time and resources to defending the Company’s business and may lead to penalties that materially affect the Company and its shareholders.

As discussed earlier, comprehensive revisions to the regulatory capital framework were included in the final rule adopted by the FRB in July 2014 based upon the Basel III capital standards. The final rule specifically revises what qualifies as regulatory capital, raises minimum requirements, and introduces the concept of additional capital buffers. The need to maintain more and higher quality capital as well as greater liquidity going forward could limit the Company’s business activities, including lending, and the Company’s ability to expand, either organically or through acquisitions. In addition, the new liquidity standards could require the Company to increase the Company’s holdings of highly liquid short-term investments, thereby reducing the Company’s ability to invest in longer-term assets even if longer-term assets are more desirable from a balance sheet management perspective.

In addition to laws, regulations, and actions directed at the operations of banks in general, the CFPB has adopted regulations directed at consumer lending in particular. As discussed above, in October 2017, the CFPB issued the Payday Rule with respect to certain consumer loans to be effective on January 16, 2018, although compliance with most sections to be required starting on August 19, 2019. Then, on February 6, 2019, the CFPB issued two proposals with respect to the Payday Rule. These proposals do not change the provisions of the Payday Rule that address lender payment practices with respect to covered loans. The CFPB also stated that it will be considering other changes to the Payday Rule in response to requests received for exemptions of certain types of lenders or loan products and may commence separate additional rulemaking initiatives. The Company is currently assessing the expected effect of this new rule on the Bank’s lending businesses and on the Company’s financial condition and results of operations. The costs of complying with this regulation or a determination to discontinue certain types of consumer lending in light of the expense of compliance could have an adverse effect on the financial conditions and results of operations of the Company. The Company believes its current consumer lending practices will be exempt from the Rule and its proposed amendments.

Changes in tax laws could adversely affect the Company’s financial condition and results of operations.

The Company is subject to extensive federal, state, and local taxes, including income, excise, sales/use, payroll, franchise, withholding, and ad valorem taxes. Changes to the Company’s taxes could have a material adverse effect on our results of operations. In addition, the Company’s customers are subject to a wide variety of federal, state, and local taxes. Changes in taxes paid by the Company’s customers, including changes in the deductibility of mortgage loan related expenses, may adversely affect their ability to purchase homes or consumer products, which could adversely affect their demand for the Company’s loans and deposit products. In addition, such negative effects on the Company’s customers could result in defaults on the loans the Bank has made and decrease the value of mortgage-backed securities in which the Company has invested.

On December 22, 2017, H.R.1, formally known as the “Tax Cuts and Jobs Act,” was enacted into law. This new tax legislation, among other changes, limits the amount of state, federal, and local taxes that taxpayers are permitted to deduct on their individual tax returns and eliminates other deductions in their entirety. Such limits and eliminations may result in customer defaults on loans the Bank has made and decrease the value of mortgage-backed securities in which the Company has invested.

26

Increases in FDIC insurance premiums may have a material adverse effect on the Company’s earnings.

Increased bank failures for several years commencing in 2008 greatly increased resolution costs of the FDIC and depleted the deposit insurance fund. In order to maintain a strong funding position and restore reserve ratios of the deposit insurance fund, the FDIC took a number of actions, including increasing assessment rates of insured institutions, requiring riskier institutions to pay a larger share of premiums by factoring in rate adjustments based on secured liabilities and unsecured debt levels, changing the assessment base and requiring a prepayment of assessments for over three years.

The Company is generally unable to control the amount of premiums that the Bank is required to pay for FDIC insurance. If there are additional financial institution failures, the Bank may be required to pay even higher FDIC premiums. Increases in FDIC insurance premiums may materially adversely affect the Company’s results of operations and its ability to continue to pay dividends on our common shares at the current rate or at all. The FDIC has recently adopted rules revising its assessments in a manner benefitting banks with assets totaling less than $10 billion. There can be no assurance though, that assessments will not be changed in the future.

Changes in accounting standards, policies, estimates, or procedures could impact the Company’s reported financial condition or results of operations.

Entities that set generally applicable accounting standards, such as the FASB, the Securities and Exchange Commission, and other regulatory boards periodically change the financial accounting and reporting standards that govern the preparation of the Company’s consolidated financial statements. These changes can be difficult to predict and can materially affect how the Company records and reports its financial condition and results of operations. In some cases, the Company could be required to apply a new or revised standard retroactively, which would result in the restatement of the Company’s financial statements for prior periods.

In June 2016, FASB issued a new accounting standard for recognizing current expected credit losses, commonly referred to as CECL. CECL will result in earlier recognition of credit losses and requires consideration of not only past and current events but also reasonable and supportable forecasts that affect collectability. The Company will be required to comply with the new standard in the first quarter of 2020. Upon adoption of CECL, credit loss allowances may increase, which would decrease retained earnings and regulatory capital. The federal banking regulators have adopted a regulation that will allow banks to phase in the day-one impact of CECL on regulatory capital over three years. CECL implementation poses operational risk, including the failure to properly transition internal processes or systems, which could lead to call report errors, financial misstatements, or operational losses.

Management’s accounting policies and methods are fundamental to how the Company records and reports its financial condition and results of operations. The Company’s management must exercise judgment in selecting and applying many of these accounting policies and methods in order to ensure that they comply with GAAP and reflect management’s judgment as to the most appropriate manner in which to record and report our financial condition and results of operations. In some cases, management must select the accounting policy or method to apply from two or more alternatives, any of which might be reasonable under the circumstances yet might result in reporting materially different amounts than would have been reported under a different alternative.

Management has identified several accounting policies that are considered significant to the presentation of our financial condition and results of operations because they require management to make particularly subjective and/or complex judgments about matters that are inherently uncertain and because of the likelihood that materially different amounts would be reported under different conditions or using different assumptions. Because of the inherent uncertainty of estimates about these matters, no assurance can be given that the application of alternative policies or methods might not result in the Company reporting materially different amounts.

The Bank’s ability to pay dividends is subject to regulatory limitations which, to the extent the Company requires such dividends in the future, may affect its ability to pay dividends or repurchase its stock.

As a financial holding company, CSB is a separate legal entity from the Bank and does not have significant operations of its own. Dividends from the Bank provide a significant source of capital for CSB. The availability of dividends from the Bank is limited by various statutes and regulations. The FRB or Ohio Division of Financial Institutions, as the Bank’s primary regulators, could assert that the payment of dividends or other payments by the Bank are an unsafe or unsound practice. In the event the Bank is unable to pay dividends to CSB, CSB may not be able to pay its obligations as they become due, repurchase its stock, or pay dividends on its common stock. Consequently, the potential inability to receive dividends from the Bank could adversely affect CSB’s business, financial condition, results of operations, or prospects.

27

Periodic regulatory reviews may affect the Company’s operations and financial condition.

The Company is subject to periodic reviews from state and federal regulators, which may impact our operations and our financial condition. As part of the regulatory review, the loan portfolio and the allowance for loan losses are evaluated. As a result, the incurred loss identified on loans or the assigned loan rating could change and may require us to increase our provision for loan losses or loan charge-offs. In addition, any downgrade in loan ratings could impact our level of impaired loans or classified assets. Any increase in our provision for loan losses or loan charge-offs as required by these regulatory authorities could have a material adverse effect on our financial condition and results of operations. Findings of deficiencies in compliance with regulations could result in restrictions on our activities or even a loss in our financial holding company status.

The Company may be a defendant from time to time in the future in a variety of litigation and other actions, which could have a material adverse effect on its business, financial condition, or results of operations.

The Company may be subject to claims or legal action from customers, employees, or others. Financial institutions are facing a growing number of significant class actions, including those based on the manner or calculation of interest on loans and the assessments of overdraft fees. Future litigation could include claims for substantial compensatory and/or punitive damages or claims for indeterminate amounts of damages. Like other financial institutions, the Company and the Bank are also subject to risk from potential employee misconduct, including non-compliance with policies and improper use or disclosure of confidential information. The Company’s insurance may not cover all claims that may be asserted against it, and any claims asserted against the Company, regardless of merit or eventual outcome, may harm its reputation. Should the ultimate judgments or settlements in any litigation exceed the Company’s insurance coverage, it could have a material adverse effect on the Company’s business, financial condition, or results of operations. In addition, the Company may not be able to obtain appropriate types or levels of insurance in the future, nor may the Company be able to obtain adequate replacement policies with acceptable terms, if at all.

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ITEM 1B. UNRESOLVED STAFF COMMENTS.

Not applicable.

ITEM 2. PROPERTIES.

The Bank operates fifteen banking centers as noted below:

Location	Address	Owned	Leased
Walnut Creek	4980 Old Pump Street, Walnut Creek, Ohio 44687	X
Winesburg	2225 U.S. 62, Winesburg, Ohio 44690	X
Sugarcreek	127 South Broadway, Sugarcreek, Ohio 44681	X
Charm	4440 C.R. 70, Charm, Ohio 44617	X
Clinton Commons	2102 Glen Drive, Millersburg, Ohio 44654		X
Berlin	4587 S.R. 39 Suite B, Berlin, Ohio 44610		X
South Clay	91 South Clay Street, Millersburg, Ohio 44654	X
Shreve	333 West South Street, Shreve, Ohio 44676	X
Orrville	119 West High Street, Orrville, Ohio 44667	X
Gnadenhutten	100 South Walnut Street, Gnadenhutten, Ohio 44629	X
New Philadelphia	635 West High Avenue, New Philadelphia, Ohio 44663	X
North Canton	1210 North Main Street, North Canton, Ohio 44720	X
Wooster	405 East Liberty Street, Wooster, Ohio 44691		X
Wooster	3562 Commerce Parkway, Wooster, Ohio 44691	X
Wooster	350 East Liberty Street	X
Operations Center	91 North Clay Street, Millersburg, Ohio 44654	X

The Bank considers its physical properties to be in good operating condition and suitable for the purposes for which they are being used. All properties owned by the Bank are unencumbered by any mortgage or security interest and in management’s opinion, are adequately insured.

ITEM 3. LEGAL PROCEEDINGS.

In the normal course of business, CSB is subject to pending and threatened legal actions, including claims for which material relief or damages are sought. Although CSB 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, the financial position, or shareholders’ equity of CSB. Further, there are no material legal proceedings in which any director, executive officer, principal shareholder, or affiliate of CSB is a party or has a material interest that is adverse to CSB or the Bank.

ITEM 4. MINE SAFETY DISCLOSURES.

Not applicable.

PART II

ITEM 5. MARKET FOR REGISTRANT’S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.

Information contained in the section captioned “Common Stock and Shareholder Information” on page 21 of the Annual Report is incorporated herein by reference.

29

PERFORMANCE GRAPH

The following graph compares the yearly stock change and the cumulative total shareholder return on CSB’s Common Shares during the five-year period ended December 31, 2018, with the cumulative total return on the Standard and Poor’s 500 Stock Index and the NASDAQ Community Bank Stock Index. The comparison assumes $100 was invested on December 31, 2013 in CSB’s Common Shares and in each of the indicated indices and assumes reinvestment of dividends.

		2013		2014		2015		2016		2017		2018
CSBB	$	100	$	120	$	138	$	180	$	197	$	235
S & P 500		100		114		115		129		157		149
NASDAQ Bank		100		105		115		159		163		139

ISSUER PURCHASES OF EQUITY SECURITIES

On July 7, 2005, CSB filed a Current Report on Form 8-K with the SEC announcing that its Board of Directors approved a Stock Repurchase Program authorizing the repurchase of up to 10% of CSB’s Common Shares then outstanding. Repurchases may be made from time to time as market and business conditions warrant, in the open market, through block purchases and in negotiated private transactions. The Stock Repurchase Program has no scheduled expiration date. CSB did not repurchase any of its Common Shares during 2018.

30

ITEM 6. SELECTED FINANCIAL DATA.

Information contained in the section captioned “Selected Financial Data” on page 8 of the Annual Report is incorporated herein by reference.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS.

Information contained in the section captioned “2018 Financial Review” on pages 7 through 21 of the Annual Report is incorporated herein by reference.

ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

Information contained in the section captioned “Quantitative and Qualitative Disclosures About Market Risk” on pages 17 through 19 of the Annual Report is incorporated herein by reference.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.

Information contained in the Consolidated Financial Statements and related notes and the Report of Independent Registered Public Accounting Firm thereon, on pages 23 through 59 of the Annual Report is incorporated herein by reference.

ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.

None.

ITEM 9A. CONTROLS AND PROCEDURES.

Disclosure Controls And Procedures

With the participation of the Company’s management, including the Company’s Chief Executive Officer and Chief Financial Officer, an evaluation of the effectiveness of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) was performed, as of the end of the period covered by this Annual Report on Form 10-K. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer have concluded that the Company’s disclosure controls and procedures were effective.

Internal Control over Financial Reporting

Information contained in the Report On Management’s Assessment of Internal Control Over Financial Reporting and in the Report of Independent Registered Public Accounting Firm on pages 22 through 24 of the Annual Report is incorporated herein by reference.

Changes In Internal Control Over Financial Reporting

There have been no changes during the quarter ended December 31, 2018, in the Company’s internal controls over financial reporting (as defined in Rules 13a-15(e) and 15d-15(e) of the Securities Exchange Act of 1934) that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9B. Other Information.

None

31

PART III

ITEM 10. DIRECTORS, EXECUTIVE OFFICERS, AND CORPORATE GOVERNANCE.

The information required by Item 401 of Regulation S-K concerning the directors of the Company and the nominees for election as directors of the Company at the Annual Meeting of Shareholders to be held on April 24, 2019 (the “2019 Annual Meeting”), is incorporated herein by reference from the information to be included under the captions “Proposal One – Election of Directors,” “Nominees for Election of Directors,” and “Directors Continuing in Office” in the Company’s definitive proxy statement relating to the 2019 Annual Meeting to be filed with the SEC (the “2019 Proxy Statement”) no later than 120 days after December 31, 2018. The information required by Item 401 of Regulation S-K concerning the executive officers of the Company is incorporated herein by reference from the information to be included under the caption “Executive Officers” in the 2019 Proxy Statement.

Compliance with Section 16(a) of the Securities Exchange Act of 1934, as amended

The information required by Item 405 of Regulation S-K is incorporated herein by reference from the disclosure to be included under the caption, “Section 16(a) Beneficial Ownership Reporting Compliance” in the 2019 Proxy Statement.

Code of Ethics

The Company has adopted a Code of Ethics that applies to its senior financial officers, including the Chief Executive Officer and Chief Financial Officer. The Company has posted its Code of Ethics on its website at www.csb1.com; select Investor Relations/Corporate Profile/Governance Documents. The Company plans to satisfy SEC disclosure requirements regarding any amendments to, or waiver of, the Code of Ethics relating to its Chief Executive Officer or Chief Financial Officer, and persons performing similar functions, by posting such information on the Company’s website or by making any necessary filings with the SEC. Any person may receive a copy of our Code of Ethics free of charge upon request by calling the Company during business hours or by sending a written request.

Procedures for Recommending Director Nominees

Information concerning the procedures by which shareholders may recommend nominees to the Company’s Board of Directors can be found under the caption “Shareholder Recommendations” in the 2019 Proxy Statement. These procedures have not materially changed from those described in the 2018 Proxy Statement.

Audit Committee

The information required by Items 407(d)(4) and (d)(5) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the sections “Membership and Meetings of the Board and its Committees” and the subsection “Committees of the Board of Directors – Audit Committee” in the 2019 Proxy Statement.

ITEM 11. EXECUTIVE COMPENSATION.

The information required by Item 402 of Regulation S-K is incorporated herein by reference from the disclosure to be included under the sections “Discussion of Executive Compensation Programs” and “Executive Compensation and Other Information” and the subsection “Directors’ Compensation” under the section captioned “Membership and Meetings of the Board and its Committees” in the 2019 Proxy Statement.

The information required by Item 407(e)(4) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the section “Compensation Committee Interlocks and Insider Participation” in the 2019 Proxy Statement.

The information required by Item 407(e)(5) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the section “The Compensation Committee Report” in the 2019 Proxy Statement.

32

ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS.

Equity Compensation Plan Information

None.

Security Ownership of Certain Beneficial Owners and Management

The information required by Item 403 of Regulation S-K is incorporated herein by reference from the disclosure to be included under the section “Beneficial Ownership of Management and Certain Beneficial Owners” in the 2019 Proxy Statement.

ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE.

The information required by Item 404 of Regulation S-K is incorporated herein by reference from the disclosure to be included under the section “Certain Relationships and Related Transactions” in the 2019 Proxy Statement.

The information required by Item 407(a) of Regulation S-K is incorporated herein by reference from the disclosure to be included under the section “Membership and Meetings of the Board and its Committees” in the 2019 Proxy Statement.

ITEM 14. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

The information required by this Item 14 is incorporated herein by reference from the disclosure to be included under the section “Independent Registered Public Accounting Firm Fees” and subsection “Audit Committee Procedures for Pre-Approval of Services by the Independent Public Accounting Firm” in the 2019 Proxy Statement.

PART IV

ITEM 15. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

(a)(1) Financial Statements

The Consolidated Financial Statements (and report thereon) listed below are incorporated by reference from CSB Bancorp, Inc.’s 2018 Annual Report as noted:

Report of Independent Registered Public Accounting Firm (S.R. Snodgrass) –pgs. 23-24.

Consolidated Balance Sheets at December 31, 2018 and 2017–pg. 25.

Consolidated Statements of Income for the years ended December 31, 2018, 2017 and 2016–pg. 26.

Consolidated Statements of Comprehensive Income for the years ended December 31, 2018, 2017 and 2016–pg. 27.

Consolidated Statements of Changes in Shareholders’ Equity for the years ended December 31, 2018, 2017 and 2016–pg. 27.

Consolidated Statements of Cash Flows for the years ended December 31, 2018, 2017 and 2016–pgs. 28-29.

Notes to Consolidated Financial Statements–pgs. 30-59.

(a)(2) Financial Statement Schedules

All schedules for which provision is made in the applicable accounting regulation of the Securities and Exchange Commission are not required under the related instructions or are inapplicable and have been omitted.

ITEM 16. FORM 10-K SUMMARY.

None.

33

(a)(3) Exhibits

The documents listed below are filed with this Annual Report on Form 10-K as exhibits or incorporated into this Annual Report on Form 10-K by reference as noted:

Exhibit Number	Description of Document
3.1	Amended Articles of Incorporation of CSB Bancorp, Inc., (incorporated by reference to registrant’s Quarterly Report on Form 10-Q filed August 6, 2004, Exhibit 3.1, file number 000-21714).
3.1.1	Amended form of Article Fourth of Amended Articles of Incorporation, as effective April 9, 1998 (incorporated by reference to registrant’s Annual Report on Form 10-K filed on March 30, 1999, Exhibit 3.1.1, file number 000-21714).
3.2	Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form 10-SB).
3.2.1	Amendment to Article VIII to the Code of Regulations of CSB Bancorp, Inc. (incorporated by reference to registrant’s Form DEF 14A filed on March 25, 2009, Appendix A, file number 000-21714).
4	Form of Certificate of Common Shares of CSB Bancorp, Inc. (incorporated by reference to Registrant’s Form 10-SB)(P).
10.1	CSB Bancorp, Inc. Share Incentive Plan (incorporated by reference to registrant’s Form DEF 14A filing, filed on March 18, 2005, Appendix A, file number 000-21714).
10.2	Employment Agreement between Paula Meiler and the Commercial and Savings Bank of Millersburg, Ohio (incorporated by reference to registrant’s Annual Report on Form 10-K filed on March 25, 2013, Exhibit 10.2, file number 000-21714).
10.3	Amendment to Employment Agreement between Paula Meiler and The Commercial & Savings Bank of Millersburg, Ohio (incorporated by reference to registrant’s Annual Report on Form 10-K filed on March 25, 2013, Exhibit 10.3, file number 000-21714).
10.4	CSB Bancorp, Inc. Annual Incentive Plan (incorporated by reference to registrant’s Annual Report on Form 10-K filed on March 23, 2017, Exhibit 10.4, file number 000-21714).
13	CSB Bancorp, Inc. 2018 Annual Report to Shareholders
21	Subsidiaries of CSB Bancorp, Inc.
23.1	Consent of S.R. Snodgrass, P.C.
31.1	Section 302 Certification of Chief Executive Officer
31.2	Section 302 Certification of Chief Financial Officer
32.1	Section 906 Certification of Chief Executive Officer
32.2	Section 906 Certification of Chief Financial Officer
101	The following materials from CSB’s 2018 Annual Report to Shareholders formatted in XBRL (Extensible Business Reporting Language): (i) Consolidated Balance Sheets (ii) Consolidated Statements of Income (iii) Consolidated Statements of Comprehensive Income (iv) Consolidated Statements of Changes in Shareholders’ Equity (v) Consolidated Statements of Cash Flows and (vi) Notes to Consolidated Financial Statements.

34

SIGNATURES

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	CSB BANCORP, INC.
	/s/ Eddie L. Steiner
Date:  March 15, 2019	Eddie L. Steiner, President and Chief Executive Officer

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 15, 2019.

Signatures	Title
/s/ Eddie L. Steiner	President and Chief Executive Officer
Eddie L. Steiner
/s/ Paula J. Meiler	Senior Vice President and Chief Financial Officer
Paula J. Meiler
/s/ Pamela S. Basinger	Vice President and Principal Accounting Officer
Pamela S. Basinger
/s/ Robert K. Baker	Director
Robert K. Baker
/s/ Vikki G. Briggs	Director
Vikki G. Briggs
/s/ Julian L. Coblentz	Director
Julian L. Coblentz
/s/ Cheryl M. Kirkbride	Director
Cheryl M. Kirkbride
/s/ J. Thomas Lang	Director
J. Thomas Lang
/s/ Jeffery A. Robb, Sr.	Director
Jeffery A. Robb, Sr.
/s/ John R. Waltman	Director
John R. Waltman

35

EX-13

Exhibit 13

TABLE OF CONTENTS
2018 Financial Highlights	3
2018 Letter to Shareholders	4
2018 Financial Review	7
Report on Management’s Assessment of Internal Control Over Financial Reporting	22
Report of Independent Registered Public Accounting Firm	23
Consolidated Balance Sheets	25
Consolidated Statements of Income	26
Consolidated Statements of Comprehensive Income	27
Consolidated Statements of Changes in Shareholders’ Equity	27
Consolidated Statements of Cash Flows	28
Notes to Consolidated Financial Statements	30
Officers of The Commercial and Savings Bank	60
Shareholders and General Inquiries	61
Board of Directors	62
2018 Milestones	63
Banking Center Information	64

2018 FINANCIAL HIGHLIGHTS
For the Year Ended December 31		2018			2017		% CHANGE
(Dollars in thousands, except per share data)
CONSOLIDATED RESULTS
Net interest income	$	26,751		$	24,452		9%
Net interest income – fully taxable-equivalent (FTE) basis		26,913			24,833		8
Noninterest income		4,758			4,340		10
Provision for loan losses		1,316			1,145		15
Noninterest expense		18,518			17,316		7
Net income		9,412			7,101		33
AT YEAR-END
Loans, net	$	543,067		$	511,226		6%
Assets		731,722			707,063		3
Deposits		606,498			583,259		4
Shareholders’ equity		76,536			70,532		9
Cash dividends declared		0.98			0.84		17
Book value		27.91			25.72		9
Tangible book value		26.13			23.90		9
Market price		38.50			33.11		16
Basic and diluted earnings per share		3.43			2.59		32
FINANCIAL PERFORMANCE
Return on average assets		1.31	%		1.02	%
Return on average equity		12.89			10.33
Net interest margin, FTE		3.98			3.80
Efficiency ratio		58.14			58.96
CAPITAL RATIOS
Risk-based capital:
Common equity tier 1		13.43	%		12.70	%
Tier 1		13.43			12.70
Total		14.52			13.78
Leverage		10.07			9 .31

2018 Report to Shareholders  |  CSB Bancorp, Inc.

3

	LETTER TO SHAREHOLDERS DEAR FELLOW SHAREHOLDER: We are pleased to report record earnings for the seventh consecutive year. Net income grew by 33% over the prior year, to $9.4 million. Total assets of $732 million reflect the thirteenth consecutive year of record size for the company. We continue to perform efficiently and effectively, with the combined solid efforts of the entire CSB team producing a return on average equity just shy of 13% in 2018, and a 1.3% return on average assets. We also distributed $2.7 million in cash dividends to shareholders, an increase of 17% over the prior year. This was the fifth consecutive year of increased total cash dividends per share. CSB’s stock price rose 16% during the year; total return exceeded 19% when including reinvestment of dividends. Total stock return over the past three, five, and ten year periods amounts to 70%, 135%, and 270%, respectively. IMPACT OF TAX REFORM On December 22, 2017, Congress passed the most extensive tax reform legislation in more than 30 years. The Tax Cuts and Jobs Act (TCJA) significantly reduced statutory federal tax rates for many individuals and corporations, and created or enhanced some additional allowable deductions. Simultaneously, the new law modified, suspended, or eliminated a number of previously long-standing tax deductions and exemptions. Because of TCJA, CSB’s effective federal income tax rate declined from approximately 30% to about 19% for the past year. Federal income tax amounted to $2.3 million, while it would have been $3.5 million without passage of the tax reform. TCJA boosted earnings per share by $0.46, accounting for 55% of this year’s increase in net income. Without TCJA’s impact, Return on Average Assets would have been a very respectable 1.14%, and Return on Average Equity would have been 11.2%. We anticipate TCJA will continue to have a materially favorable impact to our earnings as long as it remains substantially in its present form. TCJA is currently scheduled to be effective through tax years ending in 2025.
	CORE EARNINGS PERFORMANCE Loan and deposit growth continue to fuel earnings momentum as our emphasis on relationship banking has been successfully deepening market penetration. Average loan balances increased by more than 7% in 2018, and average deposit balances rose 6%. Deposit market share increased in each of the four primary counties in which we operate. Our growth has been enabled in part by solid economic conditions within our primary market area, including a stable employer base and low unemployment. While our market area is not fast growing in population or economic expansion, the diverse economy of the region is fairly resilient. The rising interest rate environment that prevailed for much of 2018 afforded us the opportunity to raise deposit interest rates while at the same time continuing some expansion of net interest margin. The combination of higher loan balances and margin expansion led to 9% growth in net interest income. We remain vigilant for signs of changing credit conditions in the marketplace. We have not relaxed our approach to solid underwriting and disciplined credit management across our lending and investment portfolios. In other words, our risk tolerance has not changed in the past year and we address issues when they emerge. Our loan mix remains about two-thirds commercial and one-third consumer based. Within the commercial portfolio, about 60% of loan balances are secured by commercial real estate (CRE), and approximately one-half of those properties are owner-occupied. The consumer-based portion of our loan portfolio is comprised primarily of home mortgages and home equity lines of credit. We also continue to originate a portion of home mortgages for the secondary market, retaining servicing rights and direct contact with these customers. The above-described mix of loan balances is within our targeted range and has been largely unchanged for more than ten years. We have found it to provide fairly reliable performance through the variabilities of economic cycles. Noninterest income increased 10% during 2018, with key contributions from increased interchange income as customers utilized card transactions more heavily, and revenue growth in trust and brokerage services. Noninterest expenses increased 7%, primarily on higher compensation costs as we continue to add talent and ensure competitive pay and benefits to attract and retain high performing team members. CSB was honored for the second consecutive year in 2018 as one of 99 great workplaces for top talent in northeast Ohio. We believe being an employer of choice for top talent is fundamental to our quest for enduring greatness.
	INVESTMENTS IN BRANCH FACILITIES The new Orrville Banking Center at 119 W. High Street opened on December 11, 2017, and the first full year has been very encouraging. Personal and business deposits, mortgages, business loans, and brokerage and trust accounts have all grown during this first year. We anticipate continuing to increase our market share and value to the greater Orrville community in our second full year at this new, convenient location in downtown Orrville.

4

2018 Report to Shareholders  |  CSB Bancorp, Inc.

LETTER TO SHAREHOLDERS

During April 2018, we purchased property in downtown Wooster at 350 E. Liberty Street for the purpose of constructing a full-service banking center with drive-thru lanes. Construction began in September after completion of the permit process, demolition of several dilapidated buildings on the property, and site preparation. We plan to move across the street from our current leased building and open for business in the new facility in late spring or early summer 2019.

We also refreshed signage at all CSB facilities over the past year. The new look provides higher visibility for our locations and has drawn many compliments.

DIGITAL INFORMATION MANAGEMENT AND CYBERSECURITY

During the past year, we began a major restructuring of the infrastructure related to our information systems. The project will be completed during 2019 and will enhance our information security with multiple offsite data systems backups, as well as providing built-in scalability for continued growth. Organizationally, we also split the vital function of managing information systems and technology into two leadership positions, one overseeing information security and the other overseeing the deployment and operation of technology systems.

Protecting computers, networks, programs, and data from unauthorized access and exploitive attacks has become one of the primary concerns of conducting business in the current age. For some years, we have been resourcing workshops for customers and community organizations on cyber fraud and security. We train extensively within the company as well, conducting tabletop simulations and using other protocols to continually enhance our vigilance and capabilities in defending against cyber threats. To be clear, no internet-connected person or entity is immune from cyberattack. However, properly designed technology systems, constant vigilance, and effective training are the best defenses against a cyber penetration, and being prepared for the ‘unthinkable’ is just as important.

THE MACRO ECONOMY AND FINANCIAL MARKETS

At the end of 2018, the current period of U.S. economic growth reached 9^1/2 years in length. This represents the second longest period of expansion recorded in the United States, behind only the ten year period from 1991 to 2001. However, the current expansion has been markedly different than previous growth periods in several respects. Most notably, the pace of growth has been uncharacteristically slow. Through 2017, none of the first eight expansion years attained annual economic growth of 3% as measured by GDP (Gross Domestic Product). The pace of expansion finally picked up during 2018 and preliminary estimates are for 3.1% GDP growth in the past year. Second, employment has been remarkably steady in recent years, with low unemployment numbers and a record 99 consecutive months of net new jobs created as of the end of 2018. Third, wage growth has been held in check, with very modest average wage increases since the recovery began, although the pace of wage hikes has increased over the course of the past year. Fourth, productivity measurements have been relatively flat until recent months, with substantial excess capacity in many sectors of the economy, perhaps due in part to continued technology advancements over the period. Finally, global economic conditions on the whole have been generally improving and without major global disruptions through much of the eight year period. The combination of all of the above factors has led to multiple years of tame inflation, mostly under the 2% rate that some economists consider to be a “neutral” or balanced condition.

U.S. equity markets began 2018 with pricing multiples that were noticeably higher than historical averages, particularly for large cap stocks. Fueled by anticipated impact of the tax reform, stock prices marched even higher during the first eight months of the year. A reversion toward normalized pricing multiples was a likely eventual occurrence, with only a spark or two needed to trigger a pricing reversal. As summer turned to fall, several factors combined to create increased uncertainty about the economic outlook. A slowdown in housing markets, U.S. trade tariff initiatives, concern over continued interest rate hikes by the Federal Reserve, and slowing economic growth abroad all contributed to concern about where the economy was headed. This resulted in substantial volatility in financial markets and a marked decline in consumer and business confidence. Soon, the combination of a threatened federal government shutdown, disappointing earnings by a number of large technology companies that had provided much of the recent year gains in the broad market indexes, and lack of clarity on trade policies, combined to send market participants scurrying to “derisk” during the fourth quarter. Eventually, a wide-ranging, algorithm-driven selloff kicked into full speed for a couple weeks in December, resulting in enough damage to drop the broad market indexes into loss positions for the full year, albeit followed by a pronounced recovery during the early weeks of 2019.

To be clear, financial markets and the economy are two different things and they exhibit markedly different behavior at times. Financial markets can become volatile, with dramatic swings in relatively short periods of time. The economy, in the macro sense at least, moves much more slowly, and does not tend to reverse direction rapidly. However, both financial markets and the economy exert force on the other in significant ways, and both are influenced by monetary and fiscal policy decisions.

At the time of this writing, most observers expect the Federal Reserve to take a more measured approach in 2019 with fewer or perhaps no rate hikes as inflation is expected to remain in check. Intermediate and long-term interest rates are forecast to remain below historical norms. Some interest rate inversion has been visible between the yields on one to three year U.S. treasuries versus the yield on five year treasuries; however, a significant inversion such as two year yields being higher than ten year yields has yet to materialize. With wage hikes expected to continue their upward trend, consumer spending is forecast to grow at a 3% level. Housing starts and sales are forecast to recover somewhat in the coming year. All-in-all, most economists expect 2019 GDP growth in a solid range of 2.0%–2.5%.

Factors being watched as potential disruptors to another year of stable U.S. economic expansion are largely viewed as international in nature; including uncertainties about the impact of Brexit, slowing growth in China, adverse impacts from trade negotiations, and other

2018 Report to Shareholders  |  CSB Bancorp, Inc.

5

	LETTER TO SHAREHOLDERS geopolitical considerations. Since we are all part of an increasingly global village of economic activity and intertwined well-being, it behooves all sovereign powers, the U.S. included, to ‘first do no harm’ when it comes to global interactions. All in all, while the current period of expansion is reaching somewhat of a ripe old age, rumors of its demise may prove premature for the foreseeable future. On the other hand, financial markets are on edge at the time of this writing, with participants worried about what appears to be a growing set of near-term uncertainties, along with a nagging awareness that the U.S. government’s high and growing debt levels will ultimately need to be reckoned with. Coupled with computer-generated momentum trading by the large fund investors, we can expect to see flare-ups of fairly pronounced volatility until some of the aforementioned uncertainties resolve. A WORD OF APPRECIATION Director John Waltman will be retiring as of this year’s annual shareholder meeting, concluding 18 years of distinguished service on the board of directors. Please note the inset honoring Director Waltman on page 62 of this annual report. CSB’S VALUE PROPOSITION – WHAT WE DELIVER Our business model is built on providing high quality financial products and services to the consumers, businesses, and organizations within our geographic market area. We gather deposits locally, provide safekeeping, competitive rates of interest, and ready access to those depositor funds through various in-person and electronic channels; we timely process monetary transactions for our customers, providing safe, efficient clearing of checks, debit and credit transactions, and wire/ACH movement of funds; we lend out local depositor monies within our footprint, providing needed funds for business operations, expansion and startup, home purchases and improvements, and consumer loans for cash flow needs. All of this activity is performed responsibly and in a way that treats others just like we want to be treated – fairly, with courtesy, and with the best interests of the customer in mind. This activity of collecting, protecting, lending, and processing the flow of funds locally is the very essence of community banking. Without one or more well-run community banks in any given area, the economic well-being of that community is considerably more challenged and in doubt over the long run. In order to meet customer expectations, we must offer efficient and effective services, whether in person or via internet or mobile-based banking. We must also keep our business objectives focused intently on supporting the well-being of the markets we serve. We do all of the above and will continue to strive to do so with excellence. But we also recognize that in order for all of these efforts to succeed, we must continue to deliver a great value proposition to the shareholder. Your investment helps provide the capital needed to enable what we do. Without your continued investment in the stock and in many cases through doing business with the bank, we would lack key support to grow, to enhance our products and services, and to continue to play a vital role in meeting needs of the communities we serve. We extend our appreciation to each shareholder for your continued support. We pledge our best efforts to run a high performing bank, to continue serving the needs of CSB stakeholders, to build stronger communities, and to return compelling value to our shareholders.
	EDDIE STEINER President and Chief Executive Officer	ROBERT “ROC” BAKER Chairman of the Board of Directors

6

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 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 financial holding company. The Company’s wholly-owned subsidiaries are The Commercial and Savings Bank (the “Bank”) and CSB Investment Services, LLC. 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, Stark, Tuscarawas, Wayne, and portions of surrounding counties in Ohio. Economic activity in the Company’s market area is reporting stable demand after strengthening at a steady pace for the past nine years. The expansion has been most prevalent in small to mid-sized manufacturing and across various professional and non-professional service sectors. Reported unemployment levels at December 2018 ranged from 3.5% to 5.2% in the four primary counties served by the Company. These levels increased slightly from December 2017. Labor markets continued hiring at a softer pace during the year. Wage increases accelerated during 2018 for most entry level jobs and to a lesser extent middle-skills jobs in certain sectors such as banking and construction. The local housing market continues to improve with supply still relatively tight. Elevated costs of building materials have contributed to increased housing construction costs. Consumer confidence in the economy has been a primary driver for housing demand and higher consumer spending.
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. 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.

2018 FINANCIAL REVIEW

SELECTED FINANCIAL DATA

The following table sets forth certain selected consolidated financial information:

(Dollars in thousands, except share data)		2018				2017				2016				2015				2014
Statements of income:
Total interest income	$		29,637		$		26,440		$		23,632		$		21,997		$		21,656
Total interest expense			2,886				1,988				1,473				1,567				1,729
Net interest income			26,751				24,452				22,159				20,430				19,927
Provision for loan losses			1,316				1,145				493				389				643
Net interest income after provision for loan losses			25,435				23,307				21,666				20,041				19,284
Noninterest income			4,758				4,340				4,296				4,424				4,250
Noninterest expense			18,518				17,316				16,255				15,796				15,082
Income before income taxes			11,675				10,331				9,707				8,669				8,452
Income tax provision			2,263				3,230				2,969				2,647				2,568
Net income	$		9,412		$		7,101		$		6,738		$		6,022		$		5,884
Per share of common stock:
Basic earnings per share	$		3.43		$		2.59		$		2.46		$		2.20		$		2.15
Diluted earnings per share			3.43				2.59				2.46				2.20				2.15
Dividends			0.98				0.84				0.78				0.76				0.74
Book value			27.91				25.72				23.85				22.35				20.97
Average basic common shares outstanding			2,742,242				2,742,242				2,742,028				2,739,470				2,737,636
Average diluted common shares outstanding			2,742,242				2,742,242				2,742,028				2,742,108				2,739,078
Year-end balances:
Loans, net	$		543,067		$		511,226		$		470,158		$		418,209		$		406,522
Securities			110,913				128,124				132,372				166,402				143,038
Total assets			731,722				707,063				669,978				650,314				620,981
Deposits			606,498				583,259				540,785				525,042				500,075
Borrowings			45,940				50,889				61,127				62,063				61,580
Shareholders’ equity			76,536				70,532				65,415				61,266				57,450
Average balances:
Loans, net	$		529,552		$		491,258		$		443,862		$		407,517		$		400,876
Securities			118,511				131,512				147,649				151,181				145,065
Total assets			716,243				692,859				651,318				633,298				604,605
Deposits			589,646				553,228				519,941				505,913				479,330
Borrowings			51,014				68,255				64,528				65,515				67,657
Shareholders’ equity			73,002				68,738				64,524				59,799				55,529
Select ratios:
Net interest margin, tax equivalent basis			3.98	%			3.80	%			3.67	%			3.48	%			3.56	%
Return on average total assets			1.31				1.02				1.03				0.95				0.97
Return on average shareholders’ equity			12.89				10.33				10.44				10.07				10.60
Average shareholders’ equity as a percent of average total assets			10.19				9.92				9.91				9.44				9.18
Net loan charge-offs as a percent of average loans			0.19				0.17				(0.03	)			0.03				0.33
Allowance for loan losses as a percent of loans at year-end			1.08				1.08				1.11				1.10				1.07
Shareholders’ equity as a percent of total year-end assets			10.46				9.98				9.76				9.42				9.25
Dividend payout ratio			28.57				32.45				31.71				34.55				34.42

8

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 FINANCIAL REVIEW

RESULTS OF OPERATIONS

Net Income

CSB’s 2018 net income was $9.4 million compared to $7.1 million for 2017, an increase of 33%. Total revenue, net interest income plus noninterest income, increased 9% over the prior year to a total of $31.5 million. The provision for income tax declined $967 thousand over the prior year due to the decrease in corporate statutory tax rate. Expense increases included the provision for loan losses of $171 thousand and noninterest expenses of $1.2 million. Basic and diluted earnings per share were $3.43, up 32% from the prior year. The return on average assets was 1.31% in 2018 compared to 1.02% in 2017 and return on average equity was 12.89% in 2018 compared to 10.33% in 2017.

Net income for 2017 was $7.1 million while basic and diluted earnings per share were $2.59 as compared to $6.7 million, or $2.46 per share, for the year ended December 31, 2016. Net income increased 5% during 2017 as compared to 2016 due primarily to a $2.3 million increase in total net interest income partially offset by increases of $652 thousand in the provision for loan losses, $1.1 million in noninterest expenses, and $261 thousand in federal income taxes. Return on average assets was 1.02% in 2017 compared to 1.03% in 2016 and return on average shareholders’ equity was 10.33% in 2017 as compared to 10.44% in 2016.

Net Interest Income

(Dollars in thousands)		2018			2017			2016
Net interest income	$	26,751		$	24,452		$	22,159
Taxable equivalent1		162			381			372
Net interest income, fully taxable equivalent	$	26,913		$	24,833		$	22,531
Net interest margin		3.96	%		3.74	%		3.61	%
Taxable equivalent adjustment1		0.02			0.06			0.06
Net interest margin-taxable equivalent		3.98	%		3.80	%		3.67	%

¹Taxable equivalent adjustments have been computed assuming a 21% tax rate in 2018 and a 34% tax rate in 2017 and 2016.

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, short-term and long-term borrowings). Volumes, interest rates, composition of interest-earning assets, and interest-bearing liabilities affect net interest income.

Net interest income increased $2.3 million, or 9%, in 2018 compared to 2017 primarily due to an 8% increase in average loan balances and an increase of 25 basis points in the average rate earned on loans. The net interest margin increased to 3.98% from 3.80% in 2017.

Net interest income increased $2.3 million, or 10%, in 2017 compared to 2016 primarily due to a 11% increase in average loan balances and an increase of 13 basis points in the average rate earned on loans. The net interest margin increased to 3.80% from 3.67% in 2016.

Interest income increased $3.2 million, or 12%, in 2018 compared to 2017 due to a $38 million increase in average loan balances augmented with an increase in loan interest rates. Following a period of low interest rates, the prime rate increased four times by 25 basis points during 2018.

Interest income increased $2.8 million, or 12%, in 2017 compared to 2016 due to a $39 million increase in average interest-earning balances. The increase in average loan volume throughout the year helped mitigate the low interest rate environment.

Interest expense increased $898 thousand, or 45%, in 2018 as compared to 2017. After a period of low interest rates, many banks were loaned up with depositors demanding more yield as rates began to rise after December 2017.

Interest expense increased $515 thousand, or 35%, in 2017 as compared to 2016 due to rate increases of 7 basis points on deposits and 22 basis points on other borrowed funds. Long term advances of $10 million were borrowed during second quarter 2017 in advance of a December 2017 advance maturity providing a future rate decrease of 148 basis points. Total average time deposits continued to decline as customers anticipate rising interest rates.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

9

2018 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

		2018									2017									2016
(Dollars in thousands)		Average Balance1				Interest		Average Rate2			Average Balance1				Interest		Average Rate2			Average Balance1				Interest		Average Rate2
Interest-earning assets
Federal funds sold	$		530		$		10		1.89%	$		575		$		6		0.96%	$		732		$		3		0.44%
Interest-earning deposits			20,927				411		1.96			23,780				283		1.19			16,946				107		0.63
Securities:
Taxable			92,056				2,371		2.58			99,981				2,374		2.37			119,701				2,598		2.17
Tax exempt4			26,455				771		2.91			31,531				1,030		3.27			27,948				985		3.52
Loans3, 4			535,506				26,236		4.90			497,048				23,128		4.65			448,941				20,311		4.52
Total interest-earning assets			675,474				29,799		4.41%			652,915				26,821		4.11%			614,268				24,004		3.91%
Noninterest-earning assets
Cash and due from banks			14,485									14,677									13,914
Bank premises and equipment, net			9,537									8,817									8,531
Other assets			22,731									22,240									19,684
Allowance for loan losses			(5,984	)								(5,790	)								(5,079	)
Total assets	$		716,243							$		692,859							$		651,318
Interest-bearing liabilities
Demand deposits	$		117,879				351		0.30%	$		101,081				129		0.13%	$		83,956				33		0.04%
Savings deposits			180,718				661		0.37			170,694				302		0.18			163,271				123		0.08
Time deposits			115,610				1,360		1.18			111,650				913		0.82			116,427				850		0.73
Borrowed funds			51,014				514		1.01			68,255				644		0.94			64,528				467		0.72
Total interest-bearing liabilities			465,221				2,886		0.62%			451,680				1,988		0.44%			428,182				1,473		0.34%
Noninterest-bearing liabilities and shareholders’ equity
Demand deposits			175,439									169,803									156,287
Other liabilities			2,581									2,638									2,325
Shareholders’ equity			73,002									68,738									64,524
Total liabilities and equity	$		716,243							$		692,859							$		651,318
Net interest income4					$		26,913							$		24,833							$		22,531
Net interest margin									3.98%									3.80%									3.67%
Net interest spread									3.79%									3.67%									3.57%

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

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

   ³Average loan balances include nonaccrual loans.

   ⁴Interest income is shown on a fully tax-equivalent basis.

10

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 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

		2018 v. 2017										2017 v. 2016
		Net Increase										Net Increase
(Dollars in thousands)			(Decrease)			Volume			Rate				(Decrease)			Volume			Rate
Increase (decrease) in interest income:
Federal funds	$		4		$	(1	)	$	5		$		3		$	(2	)	$	5
Interest-earning deposits			128			(56	)		184				176			82			94
Securities:
Taxable			(3	)		(204	)		201				(224	)		(469	)		245
Tax exempt			(259	)		(148	)		(111	)			45			117			(72	)
Loans			3,108			1,883			1,225				2,817			2,245			572
Total interest income change			2,978			1,474			1,504				2,817			1,973			844
Increase (decrease) in interest expense:
Demand deposits			222			50			172				96			22			74
Savings deposits			359			37			322				179			13			166
Time deposits			447			47			400				63			(39	)		102
Other borrowed funds			(130	)		(174	)		44				177			35			142
Total interest expense change			898			(40	)		938				515			31			484
Net interest income change	$		2,080		$	1,514		$	566		$		2,302		$	1,942		$	360

¹Changes 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 $1.3 million in 2018, $1.1 million in 2017, and $493 thousand in 2016. Higher provision expense in 2018 and 2017 reflects an increasing volume in the loan portfolio and higher loan losses. Nonperforming loans have declined from 2017 to 2018. See “Financial Condition – Allowance for Loan Losses” for additional discussion and information relative to the provision for loan losses.

Noninterest Income

		YEAR ENDED DECEMBER 31
	Change from 2017										Change from 2016
(Dollars in thousands)		2018		Amount		%			2017			Amount		%			2016
Service charges on deposit accounts	$	1,182	$	49		4.3	%	$	1,133	$		(33	)	(2.8	)%	$	1,166
Trust services		863		176		25.6			687			(174	)	(20.2	)		861
Debit card interchange fees		1,316		123		10.3			1,193			106		9.8			1,087
Gain on sale of loans, including MSRs		307		11		3.7			296			(13	)	(4.2	)		309
Earnings on bank-owned life insurance		336		(21	)	(5.9	)		357			81		29.3			276
Securities gains		–		–		–			–			(1	)	(100.0	)		1
Other		754		80		11.9			674			78		13.1			596
Total noninterest income	$	4,758	$	418		9.6	%	$	4,340	$		44		1.0	%	$	4,296

2018 Report to Shareholders  |  CSB Bancorp, Inc.

11

2018 FINANCIAL REVIEW

Noninterest income increased $418 thousand, or 10%, in 2018 compared to the same period in 2017. Trust and brokerage service fees increased 26% reflecting a normalization of the departments. Debit card interchange fees increased 10% in 2018 compared to 2017 due to increased volume. Service charges on deposits, which are primarily customer overdraft fees, increased 4% in 2018. Gains on sales of mortgage loans including MSRs increased 4% as customers opted into thirty year fixed rate mortgages that continue to have low historical rates. The Bank originated and sold $11 million in mortgage loans in 2018 and 2017.

Noninterest income increased $44 thousand, or 1%, in 2017 compared to the same period in 2016. Gains on sales of mortgage loans including mortgage servicing rights (“MSRs”) decreased 4% due to decreasing sales of real estate mortgage loans into the secondary market and customers opting into variable rate mortgages that have been retained by the Bank. The Bank originated and sold $11 million in mortgage loans in 2017 as compared to the sale of $11 million of loans in 2016. Service charges on deposits, which are primarily customer overdraft fees, decreased 3% in 2017. Debit card interchange fees increased 10% in 2017 compared to 2016 due to volume increases. Earnings on bank owned life insurance increased $81 thousand with the addition of $2.5 million in policy values in 2017. Trust and brokerage services decreased 20% as a reorganization of the departments was completed with fees declining through third quarter 2017 and then stabilizing in fourth quarter 2017 over fourth quarter 2016.

Noninterest Expenses

		YEAR ENDED DECEMBER 31
					Change from 2017										Change from 2016
(Dollars in thousands)		2018			Amount			%				2017			Amount			%				2016
Salaries and employee benefits	$		10,895	$		886			8.9	%	$		10,009	$		655			7.0	%	$		9,354
Occupancy expense			833			(36	)		(4.1	)			869			(104	)		(10.7	)			973
Equipment expense			597			(68	)		(10.2	)			665			(14	)		(2.1	)			679
Professional and director fees			1,029			66			6.9				963			131			15.7				832
Financial institutions tax			564			41			7.8				523			96			22.5				427
Marketing and public relations			508			107			26.7				401			(14	)		(3.4	)			415
Software expense			893			14			1.6				879			80			10.0				799
Debit card expense			537			1			0.2				536			91			20.4				445
FDIC insurance			276			51			22.7				225			(57	)		(20.2	)			282
Amortization of intangible assets			101			(15	)		(12.9	)			116			(5	)		(4.1	)			121
Other			2,285			155			7.3				2,130			202			10.5				1,928
Total noninterest expenses	$		18,518	$		1,202			6.9	%	$		17,316	$		1,061			6.5	%	$		16,255

Noninterest expense increased $1.2 million, or 7%, in 2018 compared to 2017. Salaries and employee benefits increased $886 thousand due to base compensation increasing $579 thousand as a result of additional full time employees and annual adjustments. Following the Tax Cuts and Jobs Act, the 401k plan match was increased with 2018 expense rising $202 thousand. Marketing and public relations expense increased $107 thousand, or 27%, primarily due to increased expenses related to brand recognition and community support in the Company’s footprint in 2018. The capitalization of employee costs of loan originations contributed to an increase in salary expense of $75 thousand. An increase in the Ohio financial institutions tax was recognized as capital increased. Equipment expense decreased $68 thousand in 2018, as compared to 2017. The FDIC insurance assessment increased $51 thousand, or 23%, due to increased assets. Occupancy expense decreased primarily with a reduction of branch facility costs, which included the construction of a branch office that had combined two leased branches in the same city.

Noninterest expense increased $1.1 million, or 7%, in 2017 compared to 2016. Salaries and employee benefits increased $655 thousand due to base compensation increasing $432 thousand as a result of additional full time employees and annual adjustments. Increases in 2017 include retirement benefits and incentive compensation of $112 thousand, medical and dental expense rising $41 thousand, and employment taxes rising $11 thousand. The capitalization of employee costs of loan originations contributed to an increase in salary expense of $54 thousand. Professional and director fees increased $131 thousand primarily due increased accounting and audit fees of $145 thousand due to the outsourcing of internal audit and initial expenses for the first year internal control audit required under Section 404(b) of the Sarbanes-Oxley Act. Debit card expense increased $90 thousand in 2017. At the end of 2017, all customers had been issued debit cards with embedded chips that protect cardholder data. An increase in the Ohio financial institutions tax was recognized as capital increased. Equipment expense decreased $14 thousand in 2017, as compared to 2016, due to a decline in depreciation expense of $66 thousand partially offset by increases in maintenance, repair, and small equipment replacement. The FDIC insurance assessment decreased $57 thousand, or 20%, due to a rate reduction that started July 1, 2016. Occupancy expense continued to decrease primarily with a reduction of branch facility costs, which included a full year savings on branch relocation. Other expenses increased $203 thousand including an increase of $64 thousand start-up costs for an employee wellness program, $37 thousand in fraud check losses, and $22 thousand in paper and printing costs.

12

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 FINANCIAL REVIEW

Income Taxes

The provision for income taxes amounted to $2.3 million in 2018, $3.2 million in 2017, and $3.0 million in 2016. The decrease in 2018 resulted from the Tax Cuts and Jobs Act (“TCJA”) reducing the corporate statutory tax rate from 34% to 21%. The effective tax rate in 2018 approximates 19%. The provision increase in 2017 included the TCJA income tax increase adjustment of $101 thousand resulting from the write down of a deferred tax asset of $109 thousand related to unrealized losses on securities, as the valuation rate on this future tax deduction was reduced from 34% to 21% in accordance with the TCJA.

FINANCIAL CONDITION

Total assets of the Company were $732 million at December 31, 2018, compared to $707 million at December 31, 2017 representing an increase of $25 million, or 4%. Net loans increased $32 million, or 6%, while investment securities decreased $17 million, or 13%, and total cash and cash equivalents increased $9 million. Deposits increased $23 million and short-term borrowings decreased $2 million, while other borrowings from the Federal Home Loan Bank (“FHLB”) decreased by $3 million, or 25%.

Securities

Total investment securities decreased $17 million, or 13%, to $111 million at year-end 2018. CSB’s portfolio is primarily comprised of agency mortgage-backed securities, obligations of state and political subdivisions, other government agencies’ debt, and corporate bonds. Restricted securities consist primarily of FHLB stock.

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, 2018, 89% held an S&P or Moody’s investment grade rating and 11%, were non-rated. The municipal portfolio includes a broad spectrum of counties, towns, universities, and school districts with 84% of the portfolio originating in Ohio, and 16% in Pennsylvania. Gross unrealized security losses within the portfolio were 2% of total securities at December 31, 2018, reflecting interest rate fluctuations, not credit downgrades.

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 track the Company’s liquidity needs and asset/liability management requirements.

Loans

Total loans increased $32 million, or 6%, during 2018 with increases in all loan categories. Volume increases were recognized as follows: residential real estate loans increased $10 million, or 6%, commercial loans increased $7 million, or 5%, construction loans increased $8 million, or 36%, and commercial real estate loans increased $4 million, or 2%. Although interest rates increased in 2018, business expansion and consumer borrowing continued to increase throughout the year.

The Company originated $29 million of portfolio mortgage loans, which were predominately variable rate, in both 2018 and 2017. Attractive interest rates in the secondary market also continued to drive consumer demand for longer-term 1-4 family fixed rate residential mortgages as the Company sold $11 million of originated mortgages into the secondary market in both 2018 and 2017. Demand for home equity loans improved in 2018, with balances increasing $2 million. Installment lending continued to improve with consumer loans increasing 19% on a year-over-year basis to $20 million at December 31, 2018. This growth is primarily from RV finance loans, originated in northeast Ohio.

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, in aggregate, comprise approximately 60% and 62% of the total loan portfolio at year-end 2018 and 2017, respectively. Residential real estate loans remained stable at approximately 30% of the total loan portfolio. Construction and land development loans increased to 6% of the total portfolio at December 31, 2018. 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, Stark, Tuscarawas and Wayne 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, 2018, included $40 million, or 7%, of total loans to lessors of non-residential buildings or dwellings; $34 million, or 6%, of total loans to borrowers in the hotel, motel, and lodging business; $25 million, or 4%, of total loans to logging, sawmills, and timber tract operations; and $21 million, or 4%, of total loans to lessors of residential real estate. These loans are generally secured by real property and equipment, with repayment expected from operational cash flow. Credit evaluation is based on a review of cash flow coverage of principal, interest payments, and the adequacy of the collateral received.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

13

2018 FINANCIAL REVIEW

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.

The decrease in nonperforming loans year-over-year is primarily due to the liquidation of two lending relationships comprised of several loans. Approximately $1.1 million of the nonperforming loan total is guaranteed by either the USDA or the SBA.

NONPERFORMING ASSETS	DECEMBER 31
(Dollars in thousands)		2018				2017
Nonaccrual loans
Commercial	$		157		$		1,152
Commercial real estate			2,131				4,384
Residential real estate			807				487
Construction & land development			–				–
Consumer			60				58
Loans past due 90 days or more and still accruing
Commercial			–				–
Commercial real estate			–				40
Residential real estate			174				401
Construction & land development			–				–
Total nonperforming loans			3,329				6,522
Other real estate owned			99				–
Total nonperforming assets	$		3,428		$		6,522
Nonperforming assets as a percentage of loans plus other real estate			0.61	%			1.26	%

Allowance for Loan Losses

The allowance for loan losses is maintained at a level considered by management to be 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.

14

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 FINANCIAL REVIEW

ALLOWANCE FOR LOAN LOSSES	FOR THE YEAR ENDED
(Dollars in thousands)	2018				2017
Beginning balance of allowance for loan losses	$	5,604		$	5,291
Provision for loan losses		1,316			1,145
Charge-offs:
Commercial		823			1,184
Commercial real estate		103			—
Residential real estate & home equity		37			—
Construction & land development		–			–
Consumer		119			20
Total charge-offs		1,082			1,204
Recoveries:
Commercial		61			361
Commercial real estate		1			–
Residential real estate & home equity		3			8
Construction & land development		–			–
Consumer		4			3
Total recoveries		69			372
Net charge-offs		1,013			832
Ending balance of allowance for loan losses	$	5,907		$	5,604
Net charge-offs as a percentage of average total loans		0.19	%		0.17	%
Allowance for loan losses as a percentage of total loans		1.08			1.08
Allowance for loan losses to total nonperforming loans		1.77	x		0.86	x
Components of the allowance for loan losses:
General reserves	$	5,806		$	5,360
Specific reserve allocations		101			244
Total allowance for loan losses	$	5,907		$	5,604

The allowance for loan losses totaled $5.9 million, or 1.08%, of total loans at year-end 2018 as compared to $5.6 million, or 1.08%, of total loans at year-end 2017. The Bank had net charge-offs of $1 million for 2018 as compared to net charge-offs of $832 thousand in 2017.

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 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 0.61%, of loans at year-end 2018 as compared to $6.5 million, or 1.26% of loans at year-end 2017. Impaired loans were $3.9 million at year-end 2018 as compared to $7.9 million at year-end 2017. Management has assigned loss allocations to absorb the estimated losses on impaired loans. These allocations are included in the total allowance for loan losses balance.

Other Assets

Net premises and equipment increased $717 thousand to $10.0 million at year-end 2018 primarily because of the acquisition of land for an owned facility under construction in 2019 and payment completion on a branch facility that consolidated two previously leased facilities. Other real estate owned at December 31, 2018 was $99 thousand. There was no other real estate owned at December 31, 2017. The Company recognized a net deferred tax asset of $446 thousand at December 31, 2018 as compared to a net deferred tax asset of $162 thousand at December 31, 2017.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

15

2018 FINANCIAL REVIEW

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 2018, due to focused retail and business banking strategies to obtain more account relationships as well as customers reflecting their preference for shorter maturities. Customers with larger deposit balances of greater than $250 thousand are seeking additional rate on their balances with the increase in market rates during the year.

	December 31				Change from 2017
(Dollars in thousands)	2018		2017		Amount			%
Noninterest-bearing demand	$	185,871	$	173,671	$	12,200			7.0	%
Interest-bearing demand		120,424		119,579		845			0.7
Traditional savings		113,814		108,468		5,346			4.9
Money market savings		69,898		71,749		(1,851	)		(2.6	)
Time deposits in excess of $250,000		17,951		12,026		5,925			49.3
Other time deposits		98,540		97,766		774			0.8
Total deposits	$	606,498	$	583,259	$	23,239			4.0	%

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, consisting of securities sold under repurchase agreements, decreased $2 million. During 2017, a new corporate overnight cash management product was established within interest-bearing checking. At December 31, 2018 the product had balances of $23.2 million as compared to $21.8 million at December 31, 2017. Other borrowings, consisting of FHLB advances, decreased $2.9 million as the result of maturities and principal repayments. All FHLB borrowings at December 31, 2018 have long term maturities with monthly amortizing payments.

CAPITAL RESOURCES

Total shareholders’ equity increased to $76.5 million at December 31, 2018, as compared to $70.5 million at December 31, 2017. This increase was primarily due to $9.4 million of net income which was partially offset by the payment of $2.7 million of cash dividends in 2018. The Board of Directors approved a Stock Repurchase Program on July 7, 2005 that allowed the repurchase of up to 10% of the Company’s then-outstanding common shares. Repurchased shares are to be held as treasury stock and are available for general corporate purposes. At December 31, 2018, approximately 41 thousand shares could still be repurchased under the current authorized program. No shares were repurchased in 2018 or 2017.

Effective January 1, 2015, the Federal Reserve adopted final rules implementing Basel III and regulatory capital changes required by the Dodd-Frank Act. The rules apply to both the Company and the Bank. The rules established minimum risk-based and leverage capital requirements for all banking organizations.

The rules include: (a) a common equity tier 1 capital ratio of at least 4.5%, (b) a tier 1 capital ratio of at least 6.0%, (c) a minimum total capital ratio of at least 8.0%, and (d) a minimum leverage ratio of 4%.

Under the guidelines, capital is compared to the relative risk related to the balance sheet. To derive the risk included in the balance sheet, one of several risk weights is applied to different balance sheet and off-balance sheet assets primarily based on the relative credit risk of the counterparty. The capital amounts and classifications are also subject to qualitative judgments by the regulators about components, risk weightings, and other factors.

The rules also place restrictions on the payment of capital distributions, including dividends, and certain discretionary bonus payments to executive officers if the company does not hold a capital conservation buffer of greater than 2.5% composed of common equity tier 1 capital above its minimum risk-based capital requirements, or if its eligible retained income is negative in that quarter and its capital conservation buffer ratio was less than 2.5% at the beginning of the quarter. The capital conservation buffer on January 1, 2019, is 2.5%. The Company and Bank’s actual and required capital amounts are disclosed in Note 12 to the consolidated financial statements.

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.

16

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 FINANCIAL REVIEW

LIQUIDITY

				December 31
(Dollars in millions)	2018				2017			Change from 2017
Cash and cash equivalents	$	46			$	36		$	10
Unused lines of credit		89				82			7
Unpledged securities at fair market value		39				31			8
	$	174			$	149		$	25
Net deposits and short-term liabilities	$	599			$	557		$	42
Liquidity ratio		29.1	%			26.8	%
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. Liquidity is monitored by CSB’s Asset Liability Committee. The Company was within all Board-approved limits at December 31, 2018 and 2017. Additional sources of liquidity include net income, loan repayments, the availability of borrowings, 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 2018 included net loan originations of $33 million, securities purchases of $7 million, offset by maturities and repayment of securities totaling $23 million. The Company’s financing activities included a $23 million increase in deposits, $3 million in cash dividends paid, and a $3 million net decrease in FHLB advances.

QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

The most significant market risk the Company is exposed to 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 periodically to review 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 2018 and 2017. Interest rate risk policy limits are tested by measuring the anticipated change in net interest income over a two year period. The tests assume a quarterly ramped 100, 200, 300, and 400 basis point increase and a 100 and 200 basis point decreases in 2018 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.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

17

2018 FINANCIAL REVIEW

Net Interest Income at Risk

				December 31, 2018
	Change In  Interest Rates  (Basis Points)		Net  Interest  Income		Dollar        Change			Percentage Change			Board           Policy           Limits
(Dollars in thousands)		+  400	$	30,114	$	931			3.2	%		±  25	%
		+  300		29,922		739			2.5			±  15
		+  200		29,701		518			1.8			±  10
		+  100		29,436		253			0.9			±    5
		0		29,183		–			–
		–  100		28,831		(352	)		(1.2	)		±    5
		–  200		27,880		(1,303	)		(4.5	)		±  10
		December 31, 2017
		+  400	$	28,329	$	1,666			6.2	%		±  25	%
		+  300		27,944		1,281			4.8			±  15
		+  200		27,552		889			3.3			±  10
		+  100		27,123		460			1.7			±    5
		0		26,663		–			–
		–  100		25,996		(667	)		(2.5	)		±    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, 2018 and 2017. Economic Value of Equity at Risk
						December 31, 2018
	Change In Interest Rates (Basis Points)				Percentage                           Change						Board           Policy           Limits
		+  400				22.8%						± 35%
		+  300				18.6						± 30
		+  200				13.7						± 20
		+  100				7.4						± 15
		–  100				(9.7)						± 15
		–  200				(20.9)						± 20
			December 31, 2017
		+  400				20.0%						± 35%
		+  300				16.2						± 30
		+  200				11.9						± 20
		+  100				6.6						± 15
		–  100				(8.1)						± 15

18

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 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. Then 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, 2018, the market value of equity as a percent of base in a 400 basis point rising rate environment indicates increases of 22.8% and 20.0% as of December 31, 2018 and 2017, respectively. The Company was within all Board-approved limits at December 31, 2017 and is slightly outside the Board-approved 20% limit for a 200 basis point decrease in interest rates at December 31, 2018. The variance is due to the increase in overnight cash held by the Bank at year-end 2018.

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 this should not be relied upon as being indicative of actual results. Further, the analysis does not 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, 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. Most 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: 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 conditions 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, leading to 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, 2018 and 2017 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, 2018:

		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	$	100,295	$	94,863	$	534	$	138	$	4,760
Real estate lines of credit		59,363		1,727		5,401		7,672		44,563
Consumer lines of credit		755		755		–		–		–
Credit cards lines of credit		4,762		4,762		–		–		–
Overdraft privilege		7,082		7,082		–		–		–
Commercial real estate loan commitments		–		–		–		–		–
Letters of credit		1,045		889		35		121		–
Total commitments	$	173,302	$	110,078	$	5,970	$	7,931	$	49,323

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 property. It is anticipated that a significant portion of these lines will expire without being drawn upon.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

19

2018 FINANCIAL REVIEW

The following table summarizes the Company’s other contractual obligations, exclusive of interest, as of December 31, 2018:

	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	$	116,491	$	54,123	$	51,598	$	10,770	$	–
Short-term borrowings		37,415		37,415		–		–		–
Other borrowings		8,525		2,195		2,923		1,653		1,754
Operating leases		199		91		108		–		–
Total obligations	$	162,630	$	93,824	$	54,629	$	12,423	$	1,754

The other borrowings noted in the preceding table represent borrowings from the FHLB. The notes require payment of interest on a monthly basis with principal due in monthly installments. 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 2018 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 other-than-temporary impairment of securities, allowance for loan losses, goodwill, 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 an 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.

The Company 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 Assets.

The Company groups financial assets and financial liabilities measured at fair value in three levels based on the markets in which the assets and liabilities are traded and the reliability of the assumptions used to determine fair value. Level I valuations are obtained from readily available pricing sources for market transactions involving identical assets or liabilities. Level II valuations are for instruments that trade in less active dealer or broker markets and incorporate values obtained for identical or comparable instruments. Level III valuations are derived from other valuation methodologies, including discounted cash flow models and similar techniques, and not based on market exchange, dealer, or broker traded transactions. Level III valuations incorporate certain assumptions and projections in determining the fair value assigned to each instrument.

20

2018 Report to Shareholders  |  CSB Bancorp, Inc.

2018 FINANCIAL REVIEW

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. 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 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 OTC market 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, mark-down, or commission and may not represent actual transactions. The table specifies cash dividends declared by the Company to its shareholders during 2018 and 2017. 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.

Quarterly Common Stock Price and Dividend Data

Quarter Ended	High			Low			Dividends Declared Per Share		Dividends   Declared
March 31, 2018		$	36.50		$	32.55		$  0.24		$  658,138
June 30, 2018			44.00			35.90		0.24		658,138
September 30, 2018			44.99			38.98		0.24		658,138
December 31, 2018			41.50			38.50		0.26		712,983
March 31, 2017		$	32.70		$	26.00		$0.20		$548,449
June 30, 2017			34.50			29.55		0.20		548,449
September 30, 2017			30.60			28.04		0.22		603,293
December 31, 2017			34.66			30.00		0.22		603,293

As of December 31, 2018, the Company had 1,170 shareholders of record and 2,742,242 outstanding shares of common stock.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

21

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 as defined in Rules 13a-15(f) and 15d-15(f) of the Securities Exchange Act of 1934, as amended. The Company’s internal control over financial reporting is designed to provide reasonable assurance that our published financial statements are fairly presented, in all material respects, in conformity with generally accepted accounting principles.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Management conducted the required assessment of the effectiveness of the Company’s internal control over financial reporting as of December 31, 2018. Management’s assessment did not identify any material weaknesses in the Company’s internal control over financial reporting. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in the 2013 Internal Control-Integrated Framework. Based upon this assessment, management believes that the Company’s internal control over financial reporting is effective as of December 31, 2018.

The Company’s internal control over financial reporting as of December 31, 2018 has been audited by S.R. Snodgrass, P.C. an independent registered public accounting firm, as stated in their report appearing on the next page.

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

22

2018 Report to Shareholders  |  CSB Bancorp, Inc.

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors

of CSB Bancorp, Inc.

Opinion on Internal Control over Financial Reporting

We have audited CSB Bancorp, Inc. and subsidiaries’ (the “Company”) internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2018 and 2017, 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, 2018, of the Company and our report dated February 26, 2019, expressed an unqualified opinion.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Report on Management’s Assessment of Internal Control over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Cranberry Township, Pennsylvania

February 26, 2019

2018 Report to Shareholders  |  CSB Bancorp, Inc.

23

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

To the Shareholders and the Board of Directors

of CSB Bancorp, Inc.

Opinion on the Financial Statements

We have audited the accompanying consolidated balance sheets of CSB Bancorp, Inc. and subsidiaries (the “Company”) as of December 31, 2018 and 2017; 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, 2018; and the related notes to the consolidated financial statements (collectively, the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2018 and 2017, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2018, in conformity with accounting principles generally accepted in the United States of America.

We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2018, based on criteria established in Internal Control – Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report dated February 26, 2019, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting.

Basis for Opinion

These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

We have served as the Company’s auditor since 2005.

Cranberry Township, Pennsylvania

February 26, 2019

24

2018 Report to Shareholders  |  CSB Bancorp, Inc.

CONSOLIDATED BALANCE SHEETS

December 31, 2018 and 2017

(Dollars in thousands, except share data)		2018				2017
ASSETS
Cash and cash equivalents
Cash and due from banks	$		23,214		$		17,255
Interest-earning deposits in other banks			22,350				19,165
Total cash and cash equivalents			45,564				36,420
Securities
Available-for-sale, at fair value			85,528				97,663
Held-to-maturity; fair value of $20,118 in 2018 and $25,491 in 2017			20,688				25,758
Equity securities			83				89
Restricted stock, at cost			4,614				4,614
Total securities			110,913				128,124
Loans held for sale			108				246
Loans			548,974				516,830
Less allowance for loan losses			5,907				5,604
Net loans			543,067				511,226
Premises and equipment, net			9,961				9,244
Core deposit intangible			167				268
Goodwill			4,728				4,728
Bank-owned life insurance			13,554				13,218
Accrued interest receivable and other assets			3,660				3,589
TOTAL ASSETS	$		731,722		$		707,063
LIABILITIES AND SHAREHOLDERS’ EQUITY
LIABILITIES
Deposits
Noninterest-bearing	$		185,871		$		173,671
Interest-bearing			420,627				409,588
Total deposits			606,498				583,259
Short-term borrowings			37,415				39,480
Other borrowings			8,525				11,409
Accrued interest payable and other liabilities			2,748				2,383
Total liabilities			655,186				636,531
SHAREHOLDERS’ EQUITY
Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; and outstanding 2,742,242 shares in 2018 and 2017			18,629				18,629
Additional paid-in capital			9,815				9,815
Retained earnings			54,288				47,535
Treasury stock at cost: 238,360 shares in 2018 and 2017			(4,784	)			(4,784	)
Accumulated other comprehensive loss			(1,412	)			(663	)
Total shareholders’ equity			76,536				70,532
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$		731,722		$		707,063

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

2018 Report to Shareholders  |  CSB Bancorp, Inc.

25

CONSOLIDATED STATEMENTS OF INCOME

Years Ended December 31, 2018, 2017, and 2016

(Dollars in thousands, except per share data)		2018				2017			2016
INTEREST AND DIVIDEND INCOME
Loans, including fees	$		26,237		$		23,097	$		20,278
Taxable securities			2,371				2,374			2,598
Nontaxable securities			608				680			646
Other			421				289			110
Total interest and dividend income			29,637				26,440			23,632
INTEREST EXPENSE
Deposits			2,372				1,344			1,006
Short-term borrowings			333				149			73
Other borrowings			181				495			394
Total interest expense			2,886				1,988			1,473
NET INTEREST INCOME			26,751				24,452			22,159
PROVISION FOR LOAN LOSSES			1,316				1,145			493
Net interest income, after provision for loan losses			25,435				23,307			21,666
NONINTEREST INCOME
Service charges on deposit accounts			1,182				1,133			1,166
Trust services			863				687			861
Debit card interchange fees			1,316				1,193			1,087
Securities gains			–				–			1
Gain on sale of loans, net			307				296			309
Earnings on bank owned life insurance			336				357			276
Unrealized loss on equity securities			(6	)			–			–
Other income			760				674			596
Total noninterest income			4,758				4,340			4,296
NONINTEREST EXPENSES
Salaries and employee benefits			10,895				10,009			9,354
Occupancy expense			833				869			973
Equipment expense			597				665			679
Professional and director fees			1,029				963			832
Financial institutions and franchise tax			564				523			427
Marketing and public relations			508				401			415
Software expense			893				879			799
Debit card expense			537				535			445
Amortization of intangible assets			101				116			121
FDIC insurance expense			276				225			282
Other expenses			2,285				2,131			1,928
Total noninterest expenses			18,518				17,316			16,255
INCOME BEFORE INCOME TAXES			11,675				10,331			9,707
FEDERAL INCOME TAX PROVISION			2,263				3,230			2,969
NET INCOME	$		9,412		$		7,101	$		6,738
EARNING PER SHARE
Basic and diluted	$		3.43		$		2.59	$		2.46

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

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2018 Report to Shareholders  |  CSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

Years Ended December 31, 2018, 2017, and 2016

(Dollars in thousands)		2018				2017				2016
Net income
Other comprehensive income (loss)	$		9,412		$		7,101		$		6,738
Unrealized gains (losses) arising during the period			(989	)			376				(1,221	)
Amounts reclassified from accumulated other comprehensive income, held-to-maturity			78				108				530
Income tax effect at 21% in 2018, 34% in 2017, 2016			191				(164	)			235
Reclassification adjustment for gains on available-for-sale securities included in net income			–				–				(1	)
Income tax effect			–				–				–
Other comprehensive income (loss)			(720	)			320				(457	)
Total comprehensive income	$		8,692		$		7,421		$		6,281

CONSOLIDATED STATEMENTS OF CHANGES IN

SHAREHOLDERS’ EQUITY

Years Ended December 31, 2018, 2017, and 2016

(Dollars in thousands)		Common Stock			Additional Paid-In Capital				Retained Earnings					Treasury Stock				Accumulated Other Comprehensive Loss				Total
BALANCE AT DECEMBER 31, 2015	$		18,629	$		9,846		$		38,030			$		(4,822)		$		(417	)	$			61,266
Net income			–			–				6,738					–				–					6,738
Other comprehensive loss			–			–				–					–				(457	)				(457	)
Stock options issued, 1,246 shares			–			(31	)			–					38				–					7
Cash dividends declared, $0.78 per share			–			–				(2,139	)				–				–					(2,139	)
BALANCE AT DECEMBER 31, 2016	$		18,629	$		9,815		$		42,629		$			(4,784	)	$		(874	)			$	65,415
Net income			–			–				7,101					–				–					7,101
Reclassification of tax effect from			–			–				109					–				(109	)				–
AOCI to retained earnings
Other comprehensive income			–			–				–					–				320					320
Cash dividends declared, $0.84 per share			–			–				(2,304	)				–				–					(2,304	)
BALANCE AT DECEMBER 31, 2017	$		18,629	$		9,815		$		47,535		$			(4,784	)	$		(663	)	$			70,532
Net income			–			–				9,412					–				–					9,412
Other comprehensive loss			–			–				–					–				(720	)				(720	)
Cumulative effect adjustment equity securities, related to ASU 2016-01			–			–				29					–				(29	)				–
Cash dividends declared, $0.98 per share			–			–				(2,688	)				–				–					(2,688	)
BALANCE AT DECEMBER 31, 2018	$		18,629	$		9,815		$		54,288		$			(4,784)		$		(1,412	)	$			76,536

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

2018 Report to Shareholders  |  CSB Bancorp, Inc.

27

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2018, 2017, and 2016

(Dollars in thousands)	2018			2017			2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	9,412		$	7,101		$	6,738
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises, equipment and software		799			865			905
Deferred income taxes		93			(167	)		(4	)
Provision for loan losses		1,316			1,145			493
Gain on sale of loans, net		(307	)		(296	)		(309	)
Securities gains		–			–			(1	)
Gain on sale of other real estate		(10	)		–			–
Security amortization, net of accretion		480			556			802
Secondary market loan sale proceeds		10,749			10,790			10,985
Originations of secondary market loans held-for-sale		(10,356	)		(10,793	)		(10,682	)
Bank-owned life insurance		(336	)		(357	)		(276	)
Effects of changes in operating assets and liabilities:
Net deferred loan (fees) costs		(22	)		(57	)		(262	)
Accrued interest receivable		(36	)		(135	)		103
Accrued interest payable		(2	)		14			(4	)
Other assets and liabilities		508			289			(1,521	)
Net cash provided by operating activities	$	12,288		$	8,955		$	6,967
CASH FLOWS FROM INVESTING ACTIVITIES
Securities:
Proceeds from repayments, available-for-sale	$	15,713		$	19,019		$	49,870
Proceeds from repayments, held-to-maturity		7,137			2,885			19,404
Purchases, available-for-sale		(5,007	)		(13,028	)		(27,741	)
Purchases, held-to-maturity		(2,029	)		(4,700	)		(8,998	)
Proceeds from sale of securities		–			–			1
Loan originations, net of repayments		(33,253	)		(42,156	)		(52,213	)
Proceeds from sale of other real estate		30			–			26
Property, equipment, and software acquisitions		(1,337	)		(1,325	)		(1,418	)
Net cash used in investing activities	$	(18,746	)	$	(39,305	)	$	(21,069	)

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

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2018 Report to Shareholders  |  CSB Bancorp, Inc.

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended December 31, 2018, 2017, and 2016

(Dollars in thousands)	2018			2017			2016
CASH FLOWS FROM
FINANCING ACTIVITIES
Net change in deposits	$	23,239		$	42,474		$	15,743
Net change in short-term borrowings		(2,065	)		(9,262	)		144
Proceeds from other borrowings		–			10,000			–
Repayment of other borrowings		(2,884	)		(10,976	)		(1,080	)
Cash dividends paid		(2,688	)		(2,304	)		(2,139	)
Net cash provided by financing activities	$	15,602		$	29,932		$	12,668
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS		9,144			(418	)		(1,434	)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF YEAR		36,420			36,838			38,272
CASH AND CASH EQUIVALENTS AT
END OF YEAR	$	45,564		$	36,420		$	36,838
SUPPLEMENTAL DISCLOSURES
Cash paid during the year for:
Interest	$	2,888		$	1,973		$	1,477
Income taxes		2,375			3,320			2,650
Noncash investing activities:
Transfer of loans to other real estate owned		119			–			72
Purchase of bank-owned life insurance		–			2,500			–

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

2018 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. 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 fifteen Banking Centers located in Holmes, Stark, Tuscarawas and Wayne counties. These communities are the source of a substantial majority of the Bank’s 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. 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 with 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 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 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 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 generally 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. The required reserve balances were $846 thousand and $929 thousand as of December 31, 2018 and 2017, respectively.

SECURITIES

At the time of purchase all debt securities are evaluated and designated as available-for-sale or held-to-maturity. 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 or loss. Held-to-maturity securities are carried at their fair value on the date of transfer or at amortized cost if security purchases are designated as held-to-maturity. At December 31, 2018, 19% of the total investment portfolio was classified as held-to-maturity. Equity securities are held at fair value. Holding gains and losses are recorded in income. Dividends on equity securities are recognized as income when earned.

The amortized cost of debt securities is adjusted for the accretion of discounts to maturity and the amortization of premiums to the earlier of a bond’s call date or 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. 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 noninterest income in the Consolidated Statements of Income.

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2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments in 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.

LOANS

Loans that management has the intent and ability to hold for the foreseeable future, 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 recognizes 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 uncollectibility 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, construction loans, and troubled debt restructurings 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 residential real estate or 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 noninterest expenses, as well as expenses related to maintenance of the properties. Gains or losses upon sale are recorded through noninterest income. Other real estate owned amounted to $99 thousand and $0 at December 31, 2018 and 2017, respectively.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation and, amortization. Land is carried at cost. 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. Leasehold improvements are amortized over the useful life of the asset, or lease term, whichever is shorter. Expenses for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

31

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS

Goodwill is not amortized, but is tested for impairment at least annually in the fourth quarter or more frequently if indicators of impairment are present. The evaluation for impairment involves comparing the current fair value of the reporting unit to its carrying value, including goodwill. If the current fair value of a reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. The Company 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 2018 or 2017.

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 the Company. 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, adjusted to reflect current, and anticipated market conditions.

BANK-OWNED LIFE INSURANCE

The cash surrender value of bank-owned life insurance 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 individual insured 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 secure those obligations. 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 $215 thousand, $168 thousand, and $215 thousand for the years ended 2018, 2017, and 2016, 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 respective 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 carry forwards. 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.

STOCK-BASED COMPENSATION

The Company previously sponsored a stock-based compensation plan that expired in 2013. All outstanding awards at December 31, 2015 were exercised during the first quarter of 2016. There were no stock options outstanding at December 31, 2018. The Company recorded no stock-based compensation expense for 2018, 2017, or 2016.

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.

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2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

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 earnings per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted earnings per 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:

	2018			2017			2016
Weighted average common shares		2,980,602			2,980,602			2,980,602
Average treasury shares		(238,360	)		(238,360	)		(238,574	)
Total weighted average common shares outstanding (basic)		2,742,242			2,742,242			2,742,028
Dilutive effect of assumed exercise of stock options		–			–			–
Weighted average common shares outstanding (diluted)		2,742,242			2,742,242			2,742,028

There were no stock options outstanding at December 31, 2018, 2017, and 2016.

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ASU 2014-09 – Revenue from Contracts with Customers – Topic 606 and all subsequent ASUs that modified ASC 606. Effective January 1, 2018 the Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts at the date of adoption. The adoption of this guidance did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustments were recorded.

Management determined that the primary sources of revenue emanating from interest and dividend income on loans and securities along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans, commitment fees, fees from financial guarantees, certain credit cards fees, and income on bank-owned life insurance are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue, which cumulatively comprise 88 percent of the total revenue of the Company. Services within the scope of ASC 606 include income from fiduciary activities, brokerage fees, service charges on deposit accounts, other service income, ATM fees, interchange fees, and gain on sale of OREO, net. For these accounts, fees are related to specific customer transactions are attributable to specific performance obligations of the Bank where the revenue is recognized at a defined point in time, completion of the requested service/transaction.

ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities. This Update and subsequent ASU’s set forth targeted improvements to GAAP including, but not limited to, requiring an entity to recognize the changes in fair value of equity investments in the income statement, requiring public business entities to use the exit price when measuring the fair value of financial instruments for financial statement disclosure purposes, eliminating certain disclosures required by existing GAAP, and providing for additional disclosures. The Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon adoption on January 1, 2018, the Company made a one-time cumulative effect adjustment from accumulated other comprehensive income to retained earnings of $29 thousand related to the change in accounting for equity securities as presented in the Consolidated Statement of Changes in Shareholders’ Equity. A loss of $6 thousand was recorded in 2018 on the Consolidated Statements of Income, as a result of changes to the accounting for equity securities. We have included the new disclosure requirements in Note 15 related to the measurement of the fair value of financial instruments on a prospective basis.

ASU 2016-02 – Leases. This Update and all subsequent ASU’s that modified Topic 842 set forth a new lease accounting model for lessors and lessees. For lessees, virtually all leases will be required to be recognized on the balance sheet by recording a right-of-use asset. Subsequent accounting for leases varies depending on whether the lease is an operating lease or a finance lease. The accounting provided by a lessor is largely unchanged from that applied under the existing guidance. The ASU requires additional qualitative and quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Update is effective for fiscal years beginning after December 15, 2018, with early application permitted. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a 1 percent increase in assets and liabilities. This Update is not expected to have a significant impact on the Company’s financial statements.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

33

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

ASU 2016-13 – Financial Instruments – Credit Losses. The Update requires that financial assets be presented at the net amount expected to be collected (i.e. net of expected credit losses), eliminating the probable recognition threshold for credit losses on financial assets measured at amortized cost. The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Update is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. We expect the Update will result in an increase in the allowance for credit losses for the estimated life of the financial asset, including an estimate for debt securities. The amount of any increase will be impacted by the portfolio composition and quality at the adoption date, as well as economic conditions and forecasts at that time. A cumulative-effect adjustment to retained earnings is required as of the beginning of the year of adoption. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

ASU 2017-04 – Simplifying the Test for Goodwill Impairment. The Update simplifies the goodwill impairment test. Under the new guidance, Step 2 of the goodwill impairment process that requires an entity to determine the implied fair value of its goodwill by assigning fair value to all its assets and liabilities is eliminated. Instead, the entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance is effective for annual and interim goodwill tests performed in fiscal years beginning after December 15, 2019. Early adoption is permitted. This Update is not expected to have a material impact on the Company’s financial statements.

ASU 2018-13 – Fair Value Measurement – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software. This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

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

2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 2 – SECURITIES

Securities consisted of the following at December 31:

(Dollars in thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
2018
Available-for-sale
U.S. Treasury security	$		997	$	–	$	1	$	996
U.S. Government agencies			7,350		–		180		7,170
Mortgage-backed securities of government agencies			45,744		41		884		44,901
Asset-backed securities of government agencies			1,040		–		16		1,024
State and political subdivisions			23,282		49		206		23,125
Corporate bonds			8,646		–		334		8,312
Total available-for-sale			87,059		90		1,621		85,528
Held-to-maturity
U.S. Government agencies			9,482		6		390		9,098
Mortgage-backed securities of government agencies			11,206		28		214		11,020
Total held-to-maturity			20,688		34		604		20,118
Equity securities			53		30		–		83
Restricted stock			4,614		–		–		4,614
Total securities	$		112,414	$	154	$	2,225	$	110,343
2017
Available-for-sale
U.S. Treasury security	$		999	$	–	$	1	$	998
U.S. Government agencies			8,350		–		121		8,229
Mortgage-backed securities of government agencies			50,136		146		581		49,701
Asset-backed securities of government agencies			1,168		1		–		1,169
State and political subdivisions			27,020		224		103		27,141
Corporate bonds			10,532		35		142		10,425
Total available-for-sale			98,205		406		948		97,663
Held-to-maturity
U.S. Government agencies			9,477		16		228		9,265
Mortgage-backed securities of government agencies			11,581		95		145		11,531
State and political subdivisions			4,700		–		5		4,695
Total held-to-maturity			25,758		111		378		25,491
Equity securities			53		36		–		89
Restricted stock			4,614		–		–		4,614
Total securities	$		128,630	$	553	$	1,326	$	127,857

2018 Report to Shareholders  |  CSB Bancorp, Inc.

35

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE 2 – SECURITIES (CONTINUED)

The amortized cost and fair value of debt securities at December 31, 2018, 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	$		3,448	$		3,448
Due after one through five years			17,311			17,084
Due after five through ten years			25,927			25,485
Due after ten years			40,373			39,511
Total debt securities available-for-sale	$		87,059	$		85,528
Held-to-maturity
Due after one through five years			483			489
Due after five through ten years			3,000			2,852
Due after ten years			17,205			16,777
Total debt securities held-to-maturity	$		20,688	$		20,118

Securities with a carrying value of approximately $83.4 million and $94.0 million were pledged at December 31, 2018 and 2017 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 $4.1 million at December 31, 2018 and 2017, respectively. Federal Reserve Bank stock was $471 thousand at December 31, 2018 and 2017.

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 2016. There were no sales of securities in 2018 or 2017.

(Dollars in thousands)		2016
Proceeds	$	1
Realized gains	$	1
Realized losses		–
Net securities gains	$	1

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2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS  

NOTE 2 – SECURITIES (CONTINUED)

The following table presents gross unrealized losses, 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:

		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
2018
Available-for-sale
U.S. Treasury security	$		1	$		996	$		–	$		–	$		1	$		996
U.S. Government agencies			–			–			180			7,170			180			7,170
Mortgage-backed securities of government agencies			33			4,206			851			35,188			884			39,394
Asset-backed securities of government agencies			16			1,024			–			–			16			1,024
State and political subdivisions			9			3,326			197			8,626			206			11,952
Corporate bonds			131			5,014			203			3,298			334			8,312
Held-to-maturity
U.S. Government agencies			–			–			390			8,609			390			8,609
Mortgage-backed securities of government agencies			72			3,404			142			3,360			214			6,764
Total temporarily impaired securities	$		262	$		17,970	$		1,963	$		66,251	$		2,225	$		84,221
2017
Available-for-sale
U.S. Treasury security			1			998			–			–			1			998
U.S. Government agencies			46			3,804			75			4,425			121			8,229
Mortgage-backed securities of government agencies			145			16,872			436			17,259			581			34,131
State and political subdivisions			26			4,400			77			3,752			103			8,152
Corporate bonds			2			2,912			140			2,360			142			5,272
Held-to-maturity
U.S. Government agencies			15			1,985			213			6,785			228			8,770
Mortgage-backed securities of government agencies			18			1,818			127			3,116			145			4,934
State and political subdivisions			5			4,695			–			–			5			4,695
Total temporarily impaired securities	$		258	$		37,484	$		1,068	$		37,697	$		1,326	$		75,181

There were 103 securities in an unrealized loss position at December 31, 2018, seventy-three (73) 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, and 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, 2018.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

37

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS

Loans consisted of the following at December 31:

(Dollars in thousands)		2018			2017
Commercial	$		146,875	$		140,273
Commercial real estate			183,605			179,663
Residential real estate			167,296			157,172
Construction & land development			31,227			22,886
Consumer			19,402			16,306
Total loans before deferred costs			548,405			516,300
Deferred loan costs			569			530
Total loans	$		548,974	$		516,830

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 the Board of Directors 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 their 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.

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, lease rates, and financial analysis of 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 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 permanent financing from the Company. 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.

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

The Company engages an independent loan review vendor that reviews and validates the credit risk program on a periodic basis.Results of these reviews are presented to management and the Audit Committee. 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.

38

2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

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. See concentration of credit discussion included in the 2018 Financial Review.

Allowance for Loan Losses

The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2018, 2017, and 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

During 2018, the increase in the provision for loan losses related to commercial loans was predominantly due to the $5.9 million increase of loans classified as substandard, as well as charge-offs, and loan volume increases. The increase in the provision related to consumer loans was due to an increase in charge-offs and delinquencies. The increase related to commercial real estate loans was primarily related to the $5 million increase of loans classified as substandard.

During 2017, the increase in the provision for loan losses related to commercial loans was primarily due to the net charge-offs of loans in this category. The increase related to commercial real estate loans was due to the increase of nonperforming loans in this category, as well as the increase in the specific allocation to one commercial real estate loan. The increase in the provision amounts allocated to the remaining loan categories, primarily relate to loan growth.

During 2016, the largest increase in the provision for loan losses occurred in the commercial loan category. The increase was primarily due to the specific allocation related to one loan relationship along with charge-offs of loans in this category. The increase in the provision amounts allocated to the remaining loan categories, primarily relate to loan growth. The decrease in the provision amount allocated to the commercial real estate category is primarily due to the recovery of prior loan charge-offs.

Summary of Allowance for Loan Losses

(Dollars in thousands)		Commercial				Commercial Real Estate				Residential Real Estate				Construction & Land Development			Consumer				Unallocated				Total
December 31, 2018
Beginning balance	$		1,813		$		1,735		$		1,273		$		237	$		175		$		371		$		5,604
Provision for loan losses			1,127				158				6				21			246				(242	)			1,316
Charge-offs			(823	)			(103	)			(37	)			–			(119	)							(1,082	)
Recoveries			61				1				3				–			4								69
Net charge-offs			(762	)			(102	)			(34	)			–			(115	)							(1,013	)
Ending balance	$		2,178		$		1,791		$		1,245		$		258	$		306		$		129		$		5,907
December 31, 2017
Beginning balance	$		2,207		$		1,264		$		1,189		$		178	$		141		$		312		$		5,291
Provision for loan losses			429				471				76				59			51				59				1,145
Charge-offs			(1,184	)			–				–				–			(20	)							(1,204	)
Recoveries			361				–				8				–			3								372
Net charge-offs			(823	)			–				8				–			(17	)							(832	)
Ending balance	$		1,813		$		1,735		$		1,273		$		237	$		175		$		371		$		5,604
December 31, 2016
Beginning balance	$		1,664		$		1,271		$		1,086		$		123	$		86		$		432		$		4,662
Provision for loan losses			626				(291	)			110				55			113				(120	)			493
Charge-offs			(297	)			(50	)			(12	)			–			(59	)							(418	)
Recoveries			214				334				5				–			1								554
Net charge-offs			(83	)			284				(7	)			–			(58	)							136
Ending balance	$		2,207		$		1,264		$		1,189		$		178	$		141		$		312		$		5,291

2018 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
2018
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$		36	$		64	$		1	$		–	$		–	$		–	$		101
Collectively evaluated for impairment			2,142			1,727			1,244			258			306			129			5,806
Total ending allowance balance	$		2,178	$		1,791	$		1,245	$		258	$		306	$		129	$		5,907
Loans:
Loans individually evaluated for impairment	$		419	$		2,403	$		1,030	$		–	$		–				$		3,852
Loans collectively evaluated for impairment			146,456			181,202			166,266			31,227			19,402						544,553
Total ending loans balance	$		146,875	$		183,605	$		167,296	$		31,227	$		19,402				$		548,405
2017
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$		74	$		151	$		19	$		–	$		–	$		–	$		244
Collectively evaluated for impairment			1,739			1,584			1,254			237			175			371			5,360
Total ending allowance balance	$		1,813	$		1,735	$		1,273	$		237	$		175	$		371	$		5,604
Loans:
Loans individually evaluated for impairment	$		1,726	$		4,686	$		1,470	$		–	$		–				$		7,882
Loans collectively evaluated for impairment			138,547			174,977			155,702			22,886			16,306						508,418
Total ending loans balance	$		140,273	$		179,663	$		157,172	$		22,886	$		16,306				$		516,300

40

2018 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 Investment1		Related Allowance		Average Recorded Investment		Interest Income Recognized
2018
Commercial	$	815	$	383	$	36	$	419	$	36	$	1,511	$	37
Commercial real estate		2,616		1,976		433		2,409		64		3,531		19
Residential real estate		1,190		763		269		1,032		1		1,327		57
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	4,621	$	3,122	$	738	$	3,860	$	101	$	6,369	$	113
2017
Commercial	$	3,352	$	1,329	$	399	$	1,728	$	74	$	2,884	$	52
Commercial real estate		4,826		3,117		1,566		4,683		151		3,213		14
Residential real estate		1,654		1,119		352		1,471		19		1,476		57
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	9,832	$	5,565	$	2,317	$	7,882	$	244	$	7,573	$	123
2016
Commercial	$	5,476	$	1,690	$	3,354	$	5,044	$	705	$	6,609	$	241
Commercial real estate		796		600		21		621		–		786		10
Residential real estate		1,681		1,036		472		1,508		24		1,507		61
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	7,953	$	3,326	$	3,847	$	7,173	$	729	$	8,902	$	312

¹Includes principal, accrued interest, unearned fees, and origination costs.

2018 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
2018
Commercial	$		146,431	$		253	$		34	$		–	$		157	$		444	$		146,875
Commercial real estate			181,388			86			–			–			2,131			2,217			183,605
Residential real estate			165,837			265			213			174			807			1,459			167,296
Construction & land development			31,169			58			–			–			–			58			31,227
Consumer			18,965			291			86			–			60			437			19,402
Total loans	$		543,790	$		953	$		333	$		174	$		3,155	$		4,615	$		548,405
2017
Commercial	$		138,908	$		148	$		65	$		–	$		1,152	$		1,365	$		140,273
Commercial real estate			175,062			177			–			40			4,384			4,601			179,663
Residential real estate			155,488			757			38			401			488			1,684			157,172
Construction & land development			22,886			–			–			–			–			–			22,886
Consumer			16,048			193			8			–			57			258			16,306
Total loans	$		508,392	$		1,275	$		111	$		441	$		6,081	$		7,908	$		516,300

Troubled Debt Restructurings

The Company had troubled debt restructurings (“TDRs”) of $1.5 million as of December 31, 2018, with $17 thousand of specific reserves allocated to customers whose loan terms have been modified in TDRs. As of December 31, 2017, the Company had TDRs of $2.9 million, with $38 thousand of specific reserves allocated. At December 31, 2018, $1.4 million of the loans classified as TDRs were performing in accordance with their modified terms. The remaining $117 thousand were classified as nonaccrual.

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

(Dollars in thousands)	Number Of Loans Restructured		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
2018
Commercial		1		$      200		$      200
Residential real estate		2		27		27
Total restructured loans		3		$      227		$      227
2017
Commercial		2		$      150		$      150
Commercial real estate		4		288		288
Residential real estate		2		52		52
Total restructured loans		8		$      490		$      490
2016
Commercial		4		$    3,607		$    3,607
Residential real estate		1		101		101
Total restructured loans		5		$    3,708		$  3,708

42

2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 – LOANS (CONTINUED)

The loans restructured were modified by changing the monthly payment to interest only and extending the maturity dates. No principal reductions were made. None of the loans restructured in 2017 have subsequently defaulted in 2018. There was one commercial loan in the amount of $3.3 million that was restructured in the fourth quarter of 2016 that defaulted in 2017.

Real Estate Loans in Foreclosure

Other real estate owned amounted to one property at $99 thousand as of December 31, 2018. There was no other real estate owned at December 31, 2017. Mortgage loans in the process of foreclosure were $57 thousand at December 31, 2018, and $114 thousand at December 31, 2017.

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 $300 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, 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 $300 thousand or are included in groups of homogeneous loans. Based on the most recent analysis performed, the risk category of loans by class was as follows at December 31:

(Dollars in thousands)		Pass			Special Mention			Substandard			Doubtful			Not Rated			Total
2018
Commercial	$		125,840	$		5,383	$		14,775	$		–	$		877	$		146,875
Commercial real estate			163,261			5,582			13,578			–			1,184			183,605
Residential real estate			194			–			637			–			166,465			167,296
Construction & land development			27,540			–			–			–			3,687			31,227
Consumer			–			–			60			–			19,342			19,402
Total	$		316,835	$		10,965	$		29,050	$		–	$		191,555	$		548,405
2017
Commercial	$		116,833	$		13,685	$		8,841	$		–	$		914	$		140,273
Commercial real estate			162,012			8,220			8,620			–			811			179,663
Residential real estate			205			–			470			–			156,497			157,172
Construction & land development			18,493			880			–			–			3,513			22,886
Consumer			–			–			57			–			16,249			16,306
Total	$		297,543	$		22,785	$		17,988	$		–	$		177,984	$		516,300

2018 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 that have not been risk rated. The following table presents loans that are not rated, by class of loans as of December 31:

(Dollars in thousands)		Performing		Nonperforming				Total
2018
Commercial	$		877		$	–	$		877
Commercial real estate			1,184			–			1,184
Residential real estate			166,122			343			166,465
Construction & land development			3,687			–			3,687
Consumer			19,342			–			19,342
Total	$		191,212		$	343	$		191,555
2017
Commercial	$		914		$	–	$		914
Commercial real estate			811			–			811
Residential real estate			155,608			419			156,497
Construction & land development			3,513			–			3,513
Consumer			16,249			–			16,249
Total	$		177,095		$	419	$		177,984

Mortgage Servicing Rights

For the years ended December 31, 2018 and 2017, the Company had outstanding MSRs of $281 thousand and $270 thousand, respectively. No valuation allowance was recorded at December 31, 2018 or 2017, as the fair value of the MSRs exceeded their carrying value. On December 31, 2018, the Company had $66.8 million residential mortgage loans with servicing retained as compared to $64.7 million with servicing retained at December 31, 2017.

Total loans serviced for others approximated $92.3 million and $82.7 million at December 31, 2018 and 2017, respectively.

44

2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 4 – PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at December 31:

(Dollars in thousands)		2018			2017
Land and improvements	$		2,384	$		1,925
Buildings and improvements			11,268			11,206
Furniture and equipment			6,265			6,121
Leasehold improvements			99			99
		20,016			19,351
Accumulated depreciation			10,055			10,107
Premises and equipment, net	$		9,961	$		9,244

Depreciation expense amounted to $598 thousand, $652 thousand, and $690 thousand for the years ended December 31, 2018, 2017, and 2016, respectively.

The Bank leases certain office locations. Total rental expense under these leases approximated $104 thousand, $158 thousand, and $191 thousand in 2018, 2017, and 2016, respectively.

Future minimum lease payments at December 31, 2018 were as follows:

(Dollars in thousands)
2019	$	91
2020		71
2021		37
Total	$	199

NOTE 5 – CORE DEPOSIT INTANGIBLE ASSETS

Core Deposit Intangible

No additional core deposit intangible was recorded in 2018, 2017, or 2016. 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 $101 thousand, $116 thousand, and $121 thousand in 2018, 2017, and 2016, respectively. The following table shows the core deposit intangible and the related accumulated amortization as of December 31:

(Dollars in thousands)		2018				2017				2016
Gross carrying amount	$		1,251		$		1,251		$		1,251
Accumulated amortization			(1,084	)			(983	)			(868	)
Net carrying amount	$		167		$		268		$		383

2018 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, 2018 was as follows:

(Dollars in thousands)		Core Deposit Amortization
2019	$		63
2020			60
2021			44
	$		167

NOTE 6 – INTEREST-BEARING DEPOSITS

Interest-bearing deposits at December 31 were as follows:

(Dollars in thousands)		2018			2017
Demand	$		120,424	$		119,579
Savings			183,712			180,217
Time deposits:
In excess of $250,000			17,951			12,026
Other			98,540			97,766
Total interest-bearing deposits	$		420,627	$		409,588
At December 31, 2018, stated maturities of time deposits were as follows:
(Dollars in thousands)
2019	$		54,123
2020			28,270
2021			23,328
2022			8,566
2023			2,204
Total	$		116,491

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2018 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)	2018			2017
Balance at year-end	$	37,415		$	39,480
Average balance outstanding		41,334			50,445
Maximum month-end balance		44,155			56,932
Weighted-average rate at year-end		1.01	%		0.39	%
Weighted-average rate during the year		0.81			0.29

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

The following table provides additional detail regarding repurchase agreements accounted for as secured borrowings:

	Remaining Contractual Maturity Overnight and Continuous
(Dollars in thousands)	December 31, 2018		December 31, 2017
Securities of U.S. Government agencies and mortgage-backed securities of government agencies pledged, fair value		$   37,574		$   39,637
Repurchase agreements		37,415		39,480

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			2018		2017
Fixed-rate amortizing		4/1/24		6/1/37		1.87	%		1.16	%		2.01	%	$	8,525	$	11,409

Maturities of other borrowings at December 31, 2018, are summarized as follows for the years ended December 31:

(Dollars in thousands)		Amount		Weighted Average Rate
2019	$		2,195		1.83	%
2020			1,665		1.84
2021			1,258		1.85
2022			946		1.86
2023 and beyond			2,461		1.94
	$		8,525		1.87	%

Monthly principal and interest payments, as well as 10% – 20% principal curtailments on the borrowings’ anniversary dates are due on the fixed-rate amortizing borrowings. FHLB borrowings are secured by a blanket collateral agreement. At December 31, 2018 the Company had the capacity to borrow an additional $89.4 million from the FHLB.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

47

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 – INCOME TAXES

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

(Dollars in thousands)		2018				2017				2016
Current	$		2,170		$		3,296		$		2,973
Deferred			93				(167	)			(4	)
Change in corporate tax rate			–				101				–
Total income tax provision	$		2,263		$		3,230		$		2,969
The Tax Cuts and Jobs Act, enacted on December 22, 2017, lowered the federal income tax rate from 34% to 21% effective January 1, 2018. As a result, the carrying value of net deferred tax assets was reduced, which increased income tax expense by $101 thousand in 2017. The income tax provision attributable to income from operations differed from the amounts computed by applying the statutory federal income tax rate of 21% in 2018 and 34% for years 2017 and 2016 to income before income taxes as follows:
(Dollars in thousands)		2018				2017				2016
Expected provision using statutory federal income tax rate	$		2,452		$		3,513		$		3,300
Effect of bond and loan tax-exempt income			(128	)			(251	)			(241	)
Interest expense associated with carrying certain tax exempt bonds and loans			5				6				5
Bank owned life insurance income			(71	)			(121	)			(94	)
Other			5				83				(1	)
Total income tax provision	$		2,263		$		3,230		$		2,969
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 were as follows:
(Dollars in thousands)		2018				2017
Allowance for loan losses	$		1,338		$		1,275
Unrealized loss on securities available-for-sale			367				176
Other			30				50
Deferred tax assets			1,735				1,501
Premises and equipment			(311	)			(363	)
Federal Home Loan Bank stock dividends			(376	)			(376	)
Deferred loan fees			(240	)			(232	)
Prepaid expenses			(76	)			(89	)
Other			(286	)			(279	)
Deferred tax liabilities			(1,289	)			(1,339	)
Net deferred tax asset	$		446		$		162

There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statements of Income. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years prior to 2015.

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2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

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 3% in 2018, 2017, and 2016 of each eligible participant’s compensation. Beginning in 2018, the Plan provides for a 100% Company match up to a maximum of 4% of each participant’s annual compensation. For years 2017 and 2016, the Plan provided 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 $565 thousand, $363 thousand, and $338 thousand for 2018, 2017, and 2016, respectively.

There were no stock options outstanding at December 31, 2018, 2017 and 2016.

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)	2018		2017
Commitments to extend credit	$	172,257	$	177,354
Letters of credit		1,045		849

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. Consumer commitments generally have fixed expiration dates and commercial commitments are generally due on demand 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 residential real estate, 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. 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.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

49

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 11 – RELATED-PARTY TRANSACTIONS

In the ordinary course of business, loans are made by the Bank 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 years ended December 31:

(Dollars in thousands)		2018		2017
Balance at beginning of year	$	505	$	321
New loans and advances		114		478
Repayments, including loans sold		203		294
Changes in related parties1		714		–
Balance at end of year	$	1,130	$	505

¹The adjustment made in 2018 relates to the retirement of a director and the addition of two new directors.

Deposits from executive officers, directors, and their related business interests at December 31, 2018 and 2017 were approximately $2.3 million and $2.1 million.

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 performance. 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 capital, Tier 1 capital and Common equity 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, 2018 and 2017, the Company and Bank met or exceeded all capital adequacy requirements to which they are subject.

As of December 31, 2018, 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, Common equity Tier 1, 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.

50

2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 12 – REGULATORY MATTERS (CONTINUED)

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

	Actual				Minimum Required For Capital Adequacy Purposes				Minimum Required To Be Well Capitalized Under Prompt Corrective Action
(Dollars in thousands)		Amount	Ratio			Amount	Ratio			Amount	Ratio
2018
Total capital to risk-weighted assets
Consolidated	$	78,968	14.5	%	$	43,500	8.0	%	$	54,375	10.0	%
Bank		77,854	14.3			43,488	8.0			54,361	10.0
Tier 1 capital to risk-weighted assets
Consolidated		73,053	13.4			32,625	6.0			43,500	8.0
Bank		71,939	13.2			32,616	6.0			43,488	8.0
Common equity tier 1 capital to risk-weighted assets
Consolidated		73,053	13.4			24,469	4.5			35,344	6.5
Bank		71,939	13.2			24,462	4.5			35,334	6.5
Tier 1 capital to average assets
Consolidated		73,053	10.1			29,031	4.0			36,288	5.0
Bank		71,939	9.9			29,025	4.0			36,281	5.0
2017
Total capital to risk-weighted assets
Consolidated	$	71,815	13.8	%	$	41,693	8.0	%	$	52,116	10.0	%
Bank		70,672	13.6			41,684	8.0			52,105	10.0
Tier 1 capital to risk-weighted assets
Consolidated		66,203	12.7			31,270	6.0			41,693	8.0
Bank		65,060	12.5			31,263	6.0			41,684	8.0
Common equity tier 1 capital to risk-weighted assets
Consolidated		66,203	12.7			23,452	4.5			33,876	6.5
Bank		65,060	12.5			23,447	4.5			33,868	6.5
Tier 1 capital to average assets
Consolidated		66,203	9.3			28,437	4.0			35,546	5.0
Bank		65,060	9.2			28,432	4.0			35,541	5.0

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, 2019, the Bank could dividend $11.6 million to the Company. The Company does not anticipate the financial need to obtain regulatory approval to pay dividends. 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.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

51

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – CONDENSED PARENT COMPANY FINANCIAL INFORMATION

A summary of condensed financial information of the parent company as of December 31, 2018 and 2017, and for each of the three years in the period ended December 31, 2018 follows:

(Dollars in thousands)		2018				2017
CONDENSED BALANCE SHEETS
ASSETS
Cash deposited with subsidiary bank	$		969		$		1,007
Investment in subsidiary bank			75,422				69,309
Securities available-for-sale			83				90
Other assets			144				177
TOTAL ASSETS	$		76,618		$		70,583
LIABILITIES AND SHAREHOLDERS’ EQUITY
Total liabilities	$		82		$		51
Total shareholders’ equity			76,536				70,532
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$		76,618		$		70,583
(Dollars in thousands)		2018				2017				2016
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
Interest on securities	$		2		$		2		$		2
Dividends from subsidiary			2,865				2,600				2,450
Unrealized loss on equity securities			(6	)			–				–
Total income			2,861				2,602				2,452
Operating expenses			357				348				384
Income before taxes and undistributed equity income of subsidiary			2,504				2,254				2,068
Income tax benefit			(76	)			(123	)			(131	)
Equity earnings in subsidiary, net of dividends			6,832				4,724				4,539
NET INCOME	$		9,412		$		7,101		$		6,738
COMPREHENSIVE INCOME	$		8,692		$		7,421		$		6,281

52

2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 13 – CONDENSED PARENT COMPANY FINANCIAL INFORMATION (CONTINUED)

(Dollars in thousands)		2018				2017				2016
CONDENSED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income	$		9,412		$		7,101			$	6,738
Adjustments to reconcile net income to cash provided by operations:
Equity earnings in subsidiary, net of dividends			(6,832	)			(4,724	)			(4,539	)
Change in other assets, liabilities			70				13				71
Net cash provided by operating activities			2,650				2,390				2,270
Cash flows from financing activities:
Cash dividends paid			(2,688	)			(2,304	)			(2,139	)
Net cash used in financing activities			(2,688	)			(2,304	)			(2,139	)
Increase (decrease) in cash			(38	)			86				131
Cash at beginning of year			1,007				921				790
Cash at end of year	$		969		$		1,007		$		921

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.

2018 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 on a recurring basis as of December 31, 2018 and December 31, 2017, by level within the fair value hierarchy. No liabilities were 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, 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
Assets:				December 31, 2018
Securities available-for-sale
U.S. Treasury security	$	996	$	–	$	–	$	996
U.S. Government agencies		–		7,170		–		7,170
Mortgage-backed securities of government agencies		–		44,901		–		44,901
Asset-backed securities of government agencies		–		1,024		–		1,024
State and political subdivisions		–		23,125		–		23,125
Corporate bonds		–		8,312		–		8,312
Total available-for-sale securities	$	996	$	84,532	$	–	$	85,528
Equity securities	$	37	$	–	$	46	$	83
Assets:				December 31, 2017
Securities available-for-sale
U.S. Treasury security	$	998	$	–	$	–	$	998
U.S. Government agencies		–		8,229		–		8,229
Mortgage-backed securities of government agencies		–		49,701		–		49,701
Asset-backed securities of government agencies		–		1,169		–		1,169
State and political subdivisions		–		27,141		–		27,141
Corporate bonds		–		10,425		–		10,425
Total available-for-sale securities	$	998	$	96,665	$	–	$	97,663
Equity securities	$	43	$	–	$	46	$	89

54

2018 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, 2018 and December 31, 2017, by level within the fair value hierarchy. Impaired loans 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.

(Dollars in thousands)	Level I	Level II		Level III	Total
Assets measured on a nonrecurring basis		December 31, 2018
Impaired loans	$  –	$  –	$	636	$     636
Other real estate owned	–	–		99	99
Assets measured on a nonrecurring basis		December 31, 2017
Impaired loans	$  –	$  –	$	2,073	$  2,073

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

	Fair Value	Valuation	Unobservable	Range
(Dollars in thousands)	Estimate	Techniques	Input	(Weighted Average)
			December 31, 2018
		Discounted	Remaining term	1.2 yrs to 26.5 yrs / (10.9 yrs)
Impaired loans	$    636	cash flow	Discount rate	5.1% to 7.5% / (5.9%)
		Appraisal of	Appraisal adjustments2	–33%
Other real estate owned	99	collateral1	Liquidation expense2	–10%
			December 31, 2017
		Discounted	Remaining term	4 mos to 24.5 yrs / (20.3 mos)
Impaired loans	$    551	cash flow	Discount rate	4.4% to 7.5% / (5.3%)
		Appraisal of	Appraisal adjustments2	0% to –25% (–6.8%)
	1,522	collateral1	Liquidation expense2	–10%

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.

2018 Report to Shareholders  |  CSB Bancorp, Inc.

55

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS

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

					2018
	Carrying								Total Fair
(Dollars in thousands)		Value		Level I		Level II		Level III		Value
Financial assets
Cash and cash equivalents	$	45,564	$	45,464	$	–	$	–	$	45,464
Securities available-for-sale		85,528		996		84,532		–		85,528
Securities held-to-maturity		20,688		–		20,118		–		20,118
Equity securities		83		37		–		46		83
Restricted stock		4,614		N/A		N/A		N/A		N/A
Loans held for sale		108		108		–		–		108
Net loans		543,067		–		–		543,076		543,076
Bank-owned life insurance		13,554		13,554		–		–		13,554
Accrued interest receivable		1,581		1,581		–		–		1,581
Mortgage servicing rights		281		–		–		281		281
Financial liabilities
Deposits	$	606,498	$	490,007	$	–	$	114,434	$	604,441
Short-term borrowings		37,415		37,415		–		–		37,415
Other borrowings		8,525		–		–		8,251		8,251
Accrued interest payable		88		88		–		–		88
					2017
	Carrying								Total Fair
(Dollars in thousands)		Value		Level I		Level II		Level III		Value
Financial assets
Cash and cash equivalents	$	36,420	$	36,420	$	–	$	–	$	36,420
Securities available-for-sale		97,752		998		96,665		–		97,663
Securities held-to-maturity		25,758		–		25,491		–		25,491
Equity securities		89		43		–		46		89
Restricted stock		4,614		N/A		N/A		N/A		N/A
Loans held for sale		246		246		–		–		246
Net loans		511,226		–		–		513,106		513,106
Bank-owned life insurance		13,218		13,218		–		–		13,218
Accrued interest receivable		1,545		1,545		–		–		1,545
Mortgage servicing rights		270		–		–		270		270
Financial liabilities
Deposits	$	583,259	$	473,467	$	–	$	110,224	$	583,691
Short-term borrowings		39,480		39,480		–		–		39,480
Other borrowings		11,409		–		–		10,365		10,365
Accrued interest payable		90		90		–		–		90

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

Cash and cash equivalents; Loans held for sale; Accrued interest receivable; Short-term borrowings, and Accrued interest payable

The fair value of the above instruments is considered to be carrying value, classified as Level I in the fair value hierarchy.

56

2018 Report to Shareholders  |  CSB Bancorp, Inc.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

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.

Equity securities with a readily determinable value are classified as Level I and equity securities without a readily determinable value are classified as Level III. The following table presents the carry amount of equity securities without readily determinable fair values, the cumulative amount of impairment, and the cumulative amount of observable price changes for orderly transactions for the identical or a similar investment of the same issuer. There have been no known transactions for the equity securities in 2018.

(Dollars in thousands)	December 31, 2018 Life-to-Date
Amortized cost	$	44
Impairment		–
Observable price changes		2
Carrying value	$	46

Net loans

Effective first quarter 2018 the fair value of loans were determined using an exit price methodology as prescribed by ASU 2016-01. The exit price estimation of fair value is based on the future value of expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a current market rate based on the relative credit risk of the loan. In addition, an incremental liquidity discount is applied. In comparison, loan fair values as of December 31, 2017 were estimated based on an entrance price methodology. As a result the fair value adjustments as of December 31, 2018 and December 31, 2017 and not comparable, 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.

Mortgage servicing rights

The fair value of mortgage servicing rights 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, classified as Level III.

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.

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 had unrecognized financial instruments at December 31, 2018 and 2017. These financial instruments relate to commitments to extend credit and letters of credit. The aggregate contract amount of such financial instruments was approximately $173.3 million at December 31, 2018 and $178.2 million at December 31, 2017. 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

2018 Report to Shareholders  |  CSB Bancorp, Inc.

57

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS (CONTINUED)

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, 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, 2018, 2017, and 2016:

(Dollars in thousands)		Pretax				Tax Effect				After-Tax			Affected Line Item In The Consolidated Statements Of Income
Balance as of December 31, 2017	$		(839	)	$		176		$		(663	)
Unrealized holding loss on available-for-sale securities arising during the period			(989	)			208				(781	)
Amortization of held-to-maturity discount resulting from transfer			78				(17	)			61
Total other comprehensive income			(911	)			191				(720	)
Reclassify equity AOCI gain to retained earnings			(36	)			7				(29	)
BALANCE AS OF
DECEMBER 31, 2018	$		(1,786	)	$		374		$		(1,412	)
Balance as of December 31, 2016	$		(1,323	)	$		449		$		(874	)
Unrealized holding gain on available-for-sale securities arising during the period			376				(128	)			248
Amortization of held-to-maturity discount resulting from transfer			108				(36	)			72
Total other comprehensive income			484				(164	)			320
Deferred tax reclassification from retained earnings			—				(109	)			(109	)		(a	)
Total other comprehensive income (loss) after reclassification			484				(273	)			211
BALANCE AS OF
DECEMBER 31, 2017	$		(839	)	$		176		$		(663	)
Balance as of December 31, 2015	$		(631	)	$		214		$		(417	)
Unrealized holding loss on available-for-sale securities arising during the period			(1,221	)			415				(806	)
Amount reclassified for net gains included in net income			(1	)			—				(1	)		(b	)
Amortization of held-to-maturity discount resulting from transfer			530				(180	)			350
Total other comprehensive income (loss)			(692	)			235				(457	)
BALANCE AS OF
DECEMBER 31, 2016	$		(1,323	)	$		449		$		(874	)

(a) Federal income tax provision.

(b) Securities gain.

58

2018 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
2018
First quarter		$  6,949		$  6,389		$  2,164		$  0.79		$  0.79
Second quarter		7,344		6,652		2,324		0.85		0.85
Third quarter		7,572		6,801		2,432		0.88		0.88
Fourth quarter		7,772		6,909		2,492		0.91		0.91
2017
First quarter		$  6,247		$  5,862		$  1,730		$  0.63		$  0.63
Second quarter		6,413		5,950		1,726		0.63		0.63
Third quarter		6,766		6,204		1,866		0.68		0.68
Fourth quarter		7,014		6,436		1,779		0.65		0.65
2016
First quarter		$  5,661		$  5,285		$  1,480		$  0.54		$  0.54
Second quarter		5,813		5,446		1,611		0.59		0.59
Third quarter		5,863		5,497		1,694		0.61		0.61
Fourth quarter		6,295		5,931		1,953		0.72		0.72

2018 Report to Shareholders  |  CSB Bancorp, Inc.

59

OFFICERS OF THE COMMERCIAL AND SAVINGS BANK

JEFF M. AGNES Officer, Systems Administrator   PAMELA S. BASINGER Vice President, Financial Officer   DEBORAH S. BERNER Vice President, Retail Services Manager   LES A. BERTSCHY Officer, Banking Center Manager   SARAH B. BIRCHFIELD Vice President, Commercial Banker   PAMELA L. BROMUND Assistant Vice President, Loan Operations Supervisor   WENDY D. BROWN Assistant Vice President, Project Manager   C. DAWN BUTLER Vice President, Regional Bank Manager   BEVERLY A. CARR Officer, Bank Operations Manager   COLBY M. CHAMBERLIN Vice President, Commercial Banker   PEGGY L. CONN Corporate Secretary   JENNIFER L. DEAM Officer, Electronic Services Manager   CHRISTOPHER J. DELATORE Vice President, Commercial Banker   DAVID J. DOLAN Vice President, Retail Lending Manager   LORI S. FRANTZ Assistant Vice President, Banking Center Manager   BRETT A. GALLION Senior Vice President, Chief Operations Officer, Chief Information Officer JASON A. GASKELL Assistant Vice President, Commercial Banker   CARRIE A. GERBER Credit Officer   ERIC S. GERBER Vice President, Commercial Banker   RYAN A. GROSSCHMIDT Officer, Banking Center Manager   AMI K. HAMMOND Assistant Vice President, Banking Center Manager   MARC R. HARVEY Vice President, Organizational Development   JACKIE S. HAZEL Vice President, Trust Operations   BENJAMIN J. HERSHBERGER Assistant Vice President, Banking Center Manager   MARIE HULL-GREEN Vice President, Trust Officer   RANDALL S. JANSON Assistant Vice President, Banking Center Manager   JULIE A. JONES Vice President, Director Of Human Resources   STEPHEN G. KARAPASHA Compliance Officer   STEPHEN K. KILPATRICK First Vice President, Senior Credit Officer   WENDY K. LOWE Officer Internal Auditor   GINA K. MARSHALL Officer, Customer Service Center Manager   BROC A. MARTIN Officer, BSA & AML, Compliance Officer KEVIN J. MCALLISTER Vice President, Director of Wealth Management   ROBYN E. MCCLINTOCK Vice President, Regional Bank Manager   PAULA J. MEILER Senior Vice President, Chief Financial Officer   ANDREA R. MILEY Senior Vice President, Senior Risk Officer   EDWARD J. MILLER Vice President, Operation Services Manager, Security   MOLLY M. MOHR Assistant Vice President, Banking Center Manager   DANIEL L. MUSE Operations Officer     JASON O. MYERS Vice President, Trust Officer   TODD R. NICOLAS Vice President, Commercial Banker   SHAWN E. OSWALD Vice President, Information Technology Director, OFAC Officer   AMY R. PATTERSON Assistant Vice President, Mortgage & Consumer Loan Services Manager   MELANIE S. RABER Officer, Commercial Loan Documentation Supervisor   KATHY M. RINGWALT Officer, Mortgage Underwriter   REBECCA J. SHULTZ Assistant Vice President, Loan Officer   A. CLAY SINNETT Assistant Vice President, Commercial Banker HARLAND L. STEBBINS III Senior Vice President, Senior Loan Officer   CHERYL J. STEINER Assistant Vice President, Investment Representative   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   WILLIAM R. TINLIN Vice President, Recovery, Right To Financial Privacy Officer   JEANETTE M. TROYER Assistant Vice President, Banking Center Manager   ASHLEY E. VAUGHN Assistant Vice President, Cash Management, CRA Officer   ALICIA R. WALLACE Vice President, Commercial Banker   ALYSSA A. WALLER Assistant Vice President, Marketing Manager   BARRY A. WATTS Vice President, Information Systems Director   MICHAEL D. WORKMAN Vice President, Mortgage Loan Officer, Small Business Lender   CRYSTAL R. YODER Operations Officer

60

2018 Report to Shareholders  |  CSB Bancorp, Inc.

SHAREHOLDERS AND GENERAL INQUIRIES

CORPORATE OFFICE
91 North Clay Street, P.O. Box 232, Millersburg, Ohio	330.674.9015 or 800.654.9015

If you have questions regarding your CSB Bancorp, Inc. stock, please contact:

COMPUTERSHARE

Shareholder Services

462 South Fourth Street, Suite 1600

Louisville, Kentucky 40202

800.368.5948 www.computershare.com/investor

PEGGY L. CONN

Corporate Secretary

CSB Bancorp, Inc.

91 North Clay Street

P. O. Box 232

Millersburg, Ohio 44654

330.674.9015

800.654.9015

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

CHERYL J. STEINER

Assistant Vice President,

Investment Adviser Representative

330.674.2397

Direct 330.763.2853

cheryl.steiner@ceterais.com

SWENEY CARTWRIGHT & CO.

17 South High Street, Suite 300 Columbus, Ohio 43215

800.334.7481

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 available on 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

P. O. Box 232

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

2018 Report to Shareholders  |  CSB Bancorp, Inc.

61

WOOSTER BANKING CENTER OPENING

We are in the process of a new building construction in the heart of downtown Wooster to allow room for growth. We purchased property at 350 E. Liberty Street for the purpose of constructing a full-service banking center with drive-thru lanes. Construction began in September, with plans to move across the street from our current leased building and open for business in the new facility in late spring or early summer 2019. Our Wooster Milltown Banking Center will remain open. You can see additional renderings of the building at https://www.csb1.com/csb-wooster-downtown.

CSB CORPORATE HEADQUARTERS

91 North Clay Street, P.O. Box 232, Millersburg, OH 44654

The Commercial & Savings Bank

BANKING CENTERS:

1.800.654.9015

HOLMES COUNTY

MILLERSBURG SOUTH CLAY

91 South Clay Street, P.O. Box 232, Millersburg, OH 44654

MILLERSBURG CLINTON COMMONS 2102 Glen Drive, P.O. Box 232, Millersburg, OH 44654

BERLIN 4587 State Route 39, P.O. Box 420, Berlin, OH 44610

CHARM 4440 County Road 70, P.O. Box 136, Charm, OH 44617

WALNUT CREEK 4980 Olde Pump Street, P.O. Box 146, Walnut Creek, OH 44687

WINESBURG 225 U.S. Route 62, P.O. Box 51, Winesburg, OH 44690

TUSCARAWAS COUNTY

SUGARCREEK 127 South Broadway, P.O. Box 369, Sugarcreek, OH 44681

NEW PHILADELPHIA 635 West High Avenue, New Philadelphia, OH 44663

GNADENHUTTEN 100 South Walnut Street, P.O. Box 830, Gnadenhutten, OH 44629

WAYNE COUNTY

ORRVILLE 119 West High Street, P.O. Box 635, Orrville, OH 44667

SHREVE 333 West South Street, P.O. Box 551, Shreve, OH 44676

WOOSTER DOWNTOWN 405 East Liberty Street, Wooster, OH 44691

WOOSTER MILLTOWN 3562 Commerce Parkway, Wooster, OH 44691

COMING SOON – 350 East Liberty Street, Wooster, OH 44691

STARK COUNTY

NORTH CANTON 1210 North Main Street, North Canton, OH 44720

CASH MANAGEMENT, CSB BANCORP, INC.

& ADMINISTRATION LOCATION

91 North Clay Street, P.O. Box 232, Millersburg, OH 44654

EX-21

EXHIBIT 21

SUBSIDIARIES OF CSB BANCORP, INC.

The Commercial and Savings Bank of Millersburg, Ohio, an Ohio-chartered commercial bank (100% owned).

CSB Investment Services, LLC, an Ohio limited liability company (100% owned).

EX-23.1

EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We consent to the incorporation by reference in the Registration Statement File No. 333-130082 on Form S-8 of CSB Bancorp, Inc. and in the Registration Statement on Form S-8 of The Commercial & Savings Bank 401(k) Retirement Plan of our report dated February 26, 2019 relating to our audit of the consolidated financial statements and internal control over financial reporting, which is incorporated included in the Annual Report on Form 10-K of CSB Bancorp, Inc. for the year ended December 31, 2018.

/s/ S.R. Snodgrass P.C.

Cranberry Township, Pennsylvania

March 15, 2019

EX-31.1

EXHIBIT 31.1

SECTION 302 CERTIFICATION

Chief Executive Officer

I, Eddie L. Steiner, certify that:

1. I have reviewed this annual report on Form 10-K of CSB Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2019

/s/ Eddie L. Steiner

Eddie L. Steiner

President and Chief Executive Officer

EX-31.2

EXHIBIT 31.2

SECTION 302 CERTIFICATION

Senior Vice President and Chief Financial Officer

I, Paula J. Meiler, certify that:

1. I have reviewed this annual report on Form 10-K of CSB Bancorp, Inc.;

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this annual report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this annual report;

4. The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined by Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:

a) Designed such disclosure controls and procedures or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date: March 15, 2019

/s/ Paula J. Meiler               

Paula J. Meiler

Senior Vice President and

Chief Financial Officer

EX-32.1

EXHIBIT 32.1

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of CSB Bancorp, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Eddie L. Steiner, Chief Executive Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Eddie L. Steiner                                        

Eddie L. Steiner

President and Chief Executive Officer

March 15, 2019

EX-32.2

EXHIBIT 32.2

Certification Pursuant to

18 U.S.C. Section 1350,

As Adopted Pursuant to

Section 906 of the Sarbanes-Oxley Act of 2002

In connection with the Annual Report of CSB Bancorp, Inc. (the “Company”) on Form 10-K for the fiscal year ended December 31, 2018, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paula J. Meiler, Senior Vice President and Chief Financial Officer of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to the best of my knowledge:

(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934, and

(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Paula J. Meiler                

Paula J. Meiler

Senior Vice President and

Chief Financial Officer

March 15, 2019

XML

Document and Entity Information - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Mar. 15, 2019	Jun. 30, 2018
Document And Entity Information [Abstract]
Document Type	10-K
Amendment Flag	false
Document Period End Date	Dec. 31, 2018
Document Fiscal Year Focus	2018
Document Fiscal Period Focus	FY
Trading Symbol	CSBB
Entity Registrant Name	CSB BANCORP INC /OH
Entity Central Index Key	0000880417
Current Fiscal Year End Date	--12-31
Entity Well-known Seasoned Issuer	No
Entity Current Reporting Status	Yes
Entity Voluntary Filers	No
Entity Filer Category	Accelerated Filer
Entity Shell Company	false
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Common Stock, Shares Outstanding		2,742,242
Entity Public Float			$ 98.5

XML

Consolidated Balance Sheets - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Cash and cash equivalents
Cash and due from banks	$ 23,214	$ 17,255
Interest-earning deposits in other banks	22,350	19,165
Total cash and cash equivalents	45,564	36,420
Securities
Available-for-sale, at fair value	85,528	97,663
Held-to-maturity; fair value of $20,118 in 2018 and $25,491 in 2017	20,688	25,758
Equity securities	83	89
Restricted stock, at cost	4,614	4,614
Total securities	110,913	128,124
Loans held for sale	108	246
Loans	548,974	516,830
Less allowance for loan losses	5,907	5,604
Net loans	543,067	511,226
Premises and equipment, net	9,961	9,244
Core deposit intangible	167	268
Goodwill	4,728	4,728
Bank-owned life insurance	13,554	13,218
Accrued interest receivable and other assets	3,660	3,589
TOTAL ASSETS	731,722	707,063
Deposits
Noninterest-bearing	185,871	173,671
Interest-bearing	420,627	409,588
Total deposits	606,498	583,259
Short-term borrowings	37,415	39,480
Other borrowings	8,525	11,409
Accrued interest payable and other liabilities	2,748	2,383
Total liabilities	655,186	636,531
SHAREHOLDERS' EQUITY
Common stock, $6.25 par value. Authorized 9,000,000 shares; issued 2,980,602 shares; and outstanding 2,742,242 shares in 2018 and 2017	18,629	18,629
Additional paid-in capital	9,815	9,815
Retained earnings	54,288	47,535
Treasury stock at cost: 238,360 shares in 2018 and 2017	(4,784)	(4,784)
Accumulated other comprehensive loss	(1,412)	(663)
Total shareholders' equity	76,536	70,532
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 731,722	$ 707,063

XML

Consolidated Balance Sheets (Parenthetical) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Statement of Financial Position [Abstract]
Held-to-maturity, fair value	$ 20,118	$ 25,491
Common stock, par value	$ 6.25	$ 6.25
Common stock, authorized shares	9,000,000	9,000,000
Common stock, shares issued	2,980,602	2,980,602
Common stock, shares outstanding	2,742,242	2,742,242
Treasury stock, at cost	238,360	238,360

XML

Consolidated Statements of Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
INTEREST AND DIVIDEND INCOME
Loans, including fees	$ 26,237	$ 23,097	$ 20,278
Taxable securities	2,371	2,374	2,598
Nontaxable securities	608	680	646
Other	421	289	110
Total interest and dividend income	29,637	26,440	23,632
INTEREST EXPENSE
Deposits	2,372	1,344	1,006
Short-term borrowings	333	149	73
Other borrowings	181	495	394
Total interest expense	2,886	1,988	1,473
NET INTEREST INCOME	26,751	24,452	22,159
Provision for loan losses	1,316	1,145	493
Net interest income, after provision for loan losses	25,435	23,307	21,666
NONINTEREST INCOME
Securities gains			1
Gain on sale of loans, net	307	296	309
Earnings on bank owned life insurance	336	357	276
Unrealized loss on equity securities	(6)
Other income	760	674	596
Total noninterest income	4,758	4,340	4,296
NONINTEREST EXPENSES
Salaries and employee benefits	10,895	10,009	9,354
Occupancy expense	833	869	973
Equipment expense	597	665	679
Professional and director fees	1,029	963	832
Financial institutions and franchise tax	564	523	427
Marketing and public relations	508	401	415
Software expense	893	879	799
Debit card expense	537	535	445
Amortization of intangible assets	101	116	121
FDIC insurance expense	276	225	282
Other expenses	2,285	2,131	1,928
Total noninterest expenses	18,518	17,316	16,255
INCOME BEFORE INCOME TAXES	11,675	10,331	9,707
FEDERAL INCOME TAX PROVISION	2,263	3,230	2,969
NET INCOME	$ 9,412	$ 7,101	$ 6,738
EARNING PER SHARE
Basic and diluted	$ 3.43	$ 2.59	$ 2.46
Deposit Account [Member]
NONINTEREST INCOME
Noninterest income	$ 1,182	$ 1,133	$ 1,166
Fiduciary and Trust [Member]
NONINTEREST INCOME
Noninterest income	863	687	861
Debit Card [Member]
NONINTEREST INCOME
Noninterest income	$ 1,316	$ 1,193	$ 1,087

XML

Consolidated Statements of Comprehensive Income - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Net income	$ 9,412	$ 7,101	$ 6,738
Other comprehensive income (loss)
Unrealized gains (losses) arising during the period	(989)	376	(1,221)
Amounts reclassified from accumulated other comprehensive income, held-to-maturity	78	108	530
Income tax effect at 21% in 2018, 34% in 2017, 2016	191	(164)	235
Reclassification adjustment for gains on available-for-sale securities included in net income			(1)
Income tax effect	0	0	0
Other comprehensive income (loss)	(720)	320	(457)
Total comprehensive income	$ 8,692	$ 7,421	$ 6,281

XML

Consolidated Statements of Comprehensive Income (Parenthetical)		12 Months Ended
	Dec. 22, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Comprehensive Income [Abstract]
Income tax rate	34.00%	21.00%	34.00%	34.00%

XML

Consolidated Statements of Changes in Shareholders' Equity - USD ($) $ in Thousands	Total	Common Stock [Member]	Additional Paid-In Capital [Member]	Retained Earnings [Member]	Treasury Stock [Member]	Accumulated Other Comprehensive Loss [Member]
Balance at beginning of period at Dec. 31, 2015	$ 61,266	$ 18,629	$ 9,846	$ 38,030	$ (4,822)	$ (417)
Net income	6,738			6,738
Other comprehensive income (loss)	(457)					(457)
Stock options issued	7		(31)		38
Cash dividends declared	(2,139)			(2,139)
Balance at end of period at Dec. 31, 2016	65,415	18,629	9,815	42,629	(4,784)	(874)
Net income	7,101			7,101
Reclassification of tax effect from AOCI to retained earnings				109		(109)
Other comprehensive income (loss)	320					320
Cash dividends declared	(2,304)			(2,304)
Balance at end of period at Dec. 31, 2017	70,532	18,629	9,815	47,535	(4,784)	(663)
Net income	9,412			9,412
Other comprehensive income (loss)	(720)					(720)
Cumulative effect adjustment equity securities, related to ASU 2016-01				29		(29)
Cash dividends declared	(2,688)			(2,688)
Balance at end of period at Dec. 31, 2018	$ 76,536	$ 18,629	$ 9,815	$ 54,288	$ (4,784)	$ (1,412)

XML

Consolidated Statements of Changes in Shareholders' Equity (Parenthetical) - $ / shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Statement of Stockholders' Equity [Abstract]
Stock options issued, shares			1,246
Cash dividends declared per share	$ 0.98	$ 0.84	$ 0.78

XML

Consolidated Statements of Cash Flows - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$ 9,412	$ 7,101	$ 6,738
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization of premises, equipment and software	799	865	905
Deferred income taxes	93	(167)	(4)
Provision for loan losses	1,316	1,145	493
Gain on sale of loans, net	(307)	(296)	(309)
Securities gains			(1)
Gain on sale of other real estate	(10)
Security amortization, net of accretion	480	556	802
Secondary market loan sale proceeds	10,749	10,790	10,985
Originations of secondary market loans held-for-sale	(10,356)	(10,793)	(10,682)
Bank-owned life insurance	(336)	(357)	(276)
Effects of changes in operating assets and liabilities:
Net deferred loan (fees) costs	(22)	(57)	(262)
Accrued interest receivable	(36)	(135)	103
Accrued interest payable	(2)	14	(4)
Other assets and liabilities	508	289	(1,521)
Net cash provided by operating activities	12,288	8,955	6,967
Securities:
Proceeds from repayments, available-for-sale	15,713	19,019	49,870
Proceeds from repayments, held-to-maturity	7,137	2,885	19,404
Purchases, available-for-sale	(5,007)	(13,028)	(27,741)
Purchases, held-to-maturity	(2,029)	(4,700)	(8,998)
Proceeds from sale of securities			1
Loan originations, net of repayments	(33,253)	(42,156)	(52,213)
Proceeds from sale of other real estate	30		26
Property, equipment, and software acquisitions	(1,337)	(1,325)	(1,418)
Net cash used in investing activities	(18,746)	(39,305)	(21,069)
CASH FLOWS FROM FINANCING ACTIVITIES
Net change in deposits	23,239	42,474	15,743
Net change in short-term borrowings	(2,065)	(9,262)	144
Proceeds from other borrowings		10,000
Repayment of other borrowings	(2,884)	(10,976)	(1,080)
Cash dividends paid	(2,688)	(2,304)	(2,139)
Net cash provided by financing activities	15,602	29,932	12,668
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS	9,144	(418)	(1,434)
CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR	36,420	36,838	38,272
CASH AND CASH EQUIVALENTS AT END OF YEAR	45,564	36,420	36,838
Cash paid during the year for:
Interest	2,888	1,973	1,477
Income taxes	2,375	3,320	2,650
Noncash investing activities:
Transfer of loans to other real estate owned	$ 119		$ 72
Purchase of bank-owned life insurance		$ 2,500

XML

Summary of Significant Accounting Policies

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Summary of Significant Accounting Policies

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. 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 fifteen Banking Centers located in Holmes, Stark, Tuscarawas and Wayne counties. These communities are the source of a substantial majority of the Bank’s 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. 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 with 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 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 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 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 generally 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. The required reserve balances were $846 thousand and $929 thousand as of December 31, 2018 and 2017, respectively.

SECURITIES

At the time of purchase all debt securities are evaluated and designated as available-for-sale or held-to-maturity. 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 or loss. Held-to-maturity securities are carried at their fair value on the date of transfer or at amortized cost if security purchases are designated as held-to-maturity. At December 31, 2018, 19% of the total investment portfolio was classified as held-to-maturity. Equity securities are held at fair value. Holding gains and losses are recorded in income. Dividends on equity securities are recognized as income when earned.

The amortized cost of debt securities is adjusted for the accretion of discounts to maturity and the amortization of premiums to the earlier of a bond’s call date or 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. 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 noninterest income in the Consolidated Statements of Income.

Investments in 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.

LOANS

Loans that management has the intent and ability to hold for the foreseeable future, 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 recognizes 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 uncollectibility 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, construction loans, and troubled debt restructurings 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 residential real estate or 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 noninterest expenses, as well as expenses related to maintenance of the properties. Gains or losses upon sale are recorded through noninterest income. Other real estate owned amounted to $99 thousand and $0 at December 31, 2018 and 2017, respectively.

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation and, amortization. Land is carried at cost. 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. Leasehold improvements are amortized over the useful life of the asset, or lease term, whichever is shorter. Expenses for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS

Goodwill is not amortized, but is tested for impairment at least annually in the fourth quarter or more frequently if indicators of impairment are present. The evaluation for impairment involves comparing the current fair value of the reporting unit to its carrying value, including goodwill. If the current fair value of a reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. The Company 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 2018 or 2017.

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 the Company. 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, adjusted to reflect current, and anticipated market conditions.

BANK-OWNED LIFE INSURANCE

The cash surrender value of bank-owned life insurance 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 individual insured 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 secure those obligations. 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 $215 thousand, $168 thousand, and $215 thousand for the years ended 2018, 2017, and 2016, 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 respective 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 carry forwards. 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.

STOCK-BASED COMPENSATION

The Company previously sponsored a stock-based compensation plan that expired in 2013. All outstanding awards at December 31, 2015 were exercised during the first quarter of 2016. There were no stock options outstanding at December 31, 2018. The Company recorded no stock-based compensation expense for 2018, 2017, or 2016.

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 earnings per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted earnings per 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:

	2018			2017			2016
Weighted average common shares		2,980,602			2,980,602			2,980,602
Average treasury shares		(238,360	)		(238,360	)		(238,574	)
Total weighted average common shares outstanding (basic)		2,742,242			2,742,242			2,742,028
Dilutive effect of assumed exercise of stock options		–			–			–
Weighted average common shares outstanding (diluted)		2,742,242			2,742,242			2,742,028

There were no stock options outstanding at December 31, 2018, 2017, and 2016.

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

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ASU 2014-09 – Revenue from Contracts with Customers – Topic 606 and all subsequent ASUs that modified ASC 606. Effective January 1, 2018 the Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts at the date of adoption. The adoption of this guidance did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustments were recorded.

Management determined that the primary sources of revenue emanating from interest and dividend income on loans and securities along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans, commitment fees, fees from financial guarantees, certain credit cards fees, and income on bank-owned life insurance are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue, which cumulatively comprise 88 percent of the total revenue of the Company. Services within the scope of ASC 606 include income from fiduciary activities, brokerage fees, service charges on deposit accounts, other service income, ATM fees, interchange fees, and gain on sale of OREO, net. For these accounts, fees are related to specific customer transactions are attributable to specific performance obligations of the Bank where the revenue is recognized at a defined point in time, completion of the requested service/transaction.

ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities. This Update and subsequent ASU’s set forth targeted improvements to GAAP including, but not limited to, requiring an entity to recognize the changes in fair value of equity investments in the income statement, requiring public business entities to use the exit price when measuring the fair value of financial instruments for financial statement disclosure purposes, eliminating certain disclosures required by existing GAAP, and providing for additional disclosures. The Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon adoption on January 1, 2018, the Company made a one-time cumulative effect adjustment from accumulated other comprehensive income to retained earnings of $29 thousand related to the change in accounting for equity securities as presented in the Consolidated Statement of Changes in Shareholders’ Equity. A loss of $6 thousand was recorded in 2018 on the Consolidated Statements of Income, as a result of changes to the accounting for equity securities. We have included the new disclosure requirements in Note 15 related to the measurement of the fair value of financial instruments on a prospective basis.

ASU 2016-02 – Leases. This Update and all subsequent ASU’s that modified Topic 842 set forth a new lease accounting model for lessors and lessees. For lessees, virtually all leases will be required to be recognized on the balance sheet by recording a right-of-use asset. Subsequent accounting for leases varies depending on whether the lease is an operating lease or a finance lease. The accounting provided by a lessor is largely unchanged from that applied under the existing guidance. The ASU requires additional qualitative and quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Update is effective for fiscal years beginning after December 15, 2018, with early application permitted. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a 1 percent increase in assets and liabilities. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2016-13 – Financial Instruments – Credit Losses. The Update requires that financial assets be presented at the net amount expected to be collected (i.e. net of expected credit losses), eliminating the probable recognition threshold for credit losses on financial assets measured at amortized cost. The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Update is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. We expect the Update will result in an increase in the allowance for credit losses for the estimated life of the financial asset, including an estimate for debt securities. The amount of any increase will be impacted by the portfolio composition and quality at the adoption date, as well as economic conditions and forecasts at that time. A cumulative-effect adjustment to retained earnings is required as of the beginning of the year of adoption. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

ASU 2017-04 – Simplifying the Test for Goodwill Impairment. The Update simplifies the goodwill impairment test. Under the new guidance, Step 2 of the goodwill impairment process that requires an entity to determine the implied fair value of its goodwill by assigning fair value to all its assets and liabilities is eliminated. Instead, the entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance is effective for annual and interim goodwill tests performed in fiscal years beginning after December 15, 2019. Early adoption is permitted. This Update is not expected to have a material impact on the Company’s financial statements.

ASU 2018-13 – Fair Value Measurement – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software. This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

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.

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Securities

12 Months Ended

Dec. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Securities

NOTE 2 – SECURITIES

Securities consisted of the following at December 31:

(Dollars in thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
2018
Available-for-sale
U.S. Treasury security	$		997	$	–	$	1	$	996
U.S. Government agencies			7,350		–		180		7,170
Mortgage-backed securities of government agencies			45,744		41		884		44,901
Asset-backed securities of government agencies			1,040		–		16		1,024
State and political subdivisions			23,282		49		206		23,125
Corporate bonds			8,646		–		334		8,312
Total available-for-sale			87,059		90		1,621		85,528
Held-to-maturity
U.S. Government agencies			9,482		6		390		9,098
Mortgage-backed securities of government agencies			11,206		28		214		11,020
Total held-to-maturity			20,688		34		604		20,118
Equity securities			53		30		–		83
Restricted stock			4,614		–		–		4,614
Total securities	$		112,414	$	154	$	2,225	$	110,343
2017
Available-for-sale
U.S. Treasury security	$		999	$	–	$	1	$	998
U.S. Government agencies			8,350		–		121		8,229
Mortgage-backed securities of government agencies			50,136		146		581		49,701
Asset-backed securities of government agencies			1,168		1		–		1,169
State and political subdivisions			27,020		224		103		27,141
Corporate bonds			10,532		35		142		10,425
Total available-for-sale			98,205		406		948		97,663
Held-to-maturity
U.S. Government agencies			9,477		16		228		9,265
Mortgage-backed securities of government agencies			11,581		95		145		11,531
State and political subdivisions			4,700		–		5		4,695
Total held-to-maturity			25,758		111		378		25,491
Equity securities			53		36		–		89
Restricted stock			4,614		–		–		4,614
Total securities	$		128,630	$	553	$	1,326	$	127,857

The amortized cost and fair value of debt securities at December 31, 2018, 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	$		3,448	$		3,448
Due after one through five years			17,311			17,084
Due after five through ten years			25,927			25,485
Due after ten years			40,373			39,511
Total debt securities available-for-sale	$		87,059	$		85,528
Held-to-maturity
Due after one through five years			483			489
Due after five through ten years			3,000			2,852
Due after ten years			17,205			16,777
Total debt securities held-to-maturity	$		20,688	$		20,118

Securities with a carrying value of approximately $83.4 million and $94.0 million were pledged at December 31, 2018 and 2017 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 $4.1 million at December 31, 2018 and 2017, respectively. Federal Reserve Bank stock was $471 thousand at December 31, 2018 and 2017.

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 2016. There were no sales of securities in 2018 or 2017.

(Dollars in thousands)		2016
Proceeds	$	1
Realized gains	$	1
Realized losses		–
Net securities gains	$	1

The following table presents gross unrealized losses, 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:

		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
2018
Available-for-sale
U.S. Treasury security	$		1	$		996	$		–	$		–	$		1	$		996
U.S. Government agencies			–			–			180			7,170			180			7,170
Mortgage-backed securities of government agencies			33			4,206			851			35,188			884			39,394
Asset-backed securities of government agencies			16			1,024			–			–			16			1,024
State and political subdivisions			9			3,326			197			8,626			206			11,952
Corporate bonds			131			5,014			203			3,298			334			8,312
Held-to-maturity
U.S. Government agencies			–			–			390			8,609			390			8,609
Mortgage-backed securities of government agencies			72			3,404			142			3,360			214			6,764
Total temporarily impaired securities	$		262	$		17,970	$		1,963	$		66,251	$		2,225	$		84,221
2017
Available-for-sale
U.S. Treasury security			1			998			–			–			1			998
U.S. Government agencies			46			3,804			75			4,425			121			8,229
Mortgage-backed securities of government agencies			145			16,872			436			17,259			581			34,131
State and political subdivisions			26			4,400			77			3,752			103			8,152
Corporate bonds			2			2,912			140			2,360			142			5,272
Held-to-maturity
U.S. Government agencies			15			1,985			213			6,785			228			8,770
Mortgage-backed securities of government agencies			18			1,818			127			3,116			145			4,934
State and political subdivisions			5			4,695			–			–			5			4,695
Total temporarily impaired securities	$		258	$		37,484	$		1,068	$		37,697	$		1,326	$		75,181

There were 103 securities in an unrealized loss position at December 31, 2018, seventy-three (73) 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, and 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, 2018.

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Loans

12 Months Ended

Dec. 31, 2018

Receivables [Abstract]

Loans

NOTE 3 – LOANS

Loans consisted of the following at December 31:

(Dollars in thousands)		2018			2017
Commercial	$		146,875	$		140,273
Commercial real estate			183,605			179,663
Residential real estate			167,296			157,172
Construction & land development			31,227			22,886
Consumer			19,402			16,306
Total loans before deferred costs			548,405			516,300
Deferred loan costs			569			530
Total loans	$		548,974	$		516,830

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 the Board of Directors 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 their 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.

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, lease rates, and financial analysis of 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 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 permanent financing from the Company. 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.

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

The Company engages an independent loan review vendor that reviews and validates the credit risk program on a periodic basis.Results of these reviews are presented to management and the Audit Committee. 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. See concentration of credit discussion included in the 2018 Financial Review.

Allowance for Loan Losses

The following table details activity in the allowance for loan losses by portfolio segment for the years ended December 31, 2018, 2017, and 2016. Allocation of a portion of the allowance to one category of loans does not preclude its availability to absorb losses in other categories.

During 2018, the increase in the provision for loan losses related to commercial loans was predominantly due to the $5.9 million increase of loans classified as substandard, as well as charge-offs, and loan volume increases. The increase in the provision related to consumer loans was due to an increase in charge-offs and delinquencies. The increase related to commercial real estate loans was primarily related to the $5 million increase of loans classified as substandard.

During 2017, the increase in the provision for loan losses related to commercial loans was primarily due to the net charge-offs of loans in this category. The increase related to commercial real estate loans was due to the increase of nonperforming loans in this category, as well as the increase in the specific allocation to one commercial real estate loan. The increase in the provision amounts allocated to the remaining loan categories, primarily relate to loan growth.

During 2016, the largest increase in the provision for loan losses occurred in the commercial loan category. The increase was primarily due to the specific allocation related to one loan relationship along with charge-offs of loans in this category. The increase in the provision amounts allocated to the remaining loan categories, primarily relate to loan growth. The decrease in the provision amount allocated to the commercial real estate category is primarily due to the recovery of prior loan charge-offs.

Summary of Allowance for Loan Losses

(Dollars in thousands)		Commercial				Commercial Real Estate				Residential Real Estate				Construction & Land Development			Consumer				Unallocated				Total
December 31, 2018
Beginning balance	$		1,813		$		1,735		$		1,273		$		237	$		175		$		371		$		5,604
Provision for loan losses			1,127				158				6				21			246				(242	)			1,316
Charge-offs			(823	)			(103	)			(37	)			–			(119	)							(1,082	)
Recoveries			61				1				3				–			4								69
Net charge-offs			(762	)			(102	)			(34	)			–			(115	)							(1,013	)
Ending balance	$		2,178		$		1,791		$		1,245		$		258	$		306		$		129		$		5,907
December 31, 2017
Beginning balance	$		2,207		$		1,264		$		1,189		$		178	$		141		$		312		$		5,291
Provision for loan losses			429				471				76				59			51				59				1,145
Charge-offs			(1,184	)			–				–				–			(20	)							(1,204	)
Recoveries			361				–				8				–			3								372
Net charge-offs			(823	)			–				8				–			(17	)							(832	)
Ending balance	$		1,813		$		1,735		$		1,273		$		237	$		175		$		371		$		5,604
December 31, 2016
Beginning balance	$		1,664		$		1,271		$		1,086		$		123	$		86		$		432		$		4,662
Provision for loan losses			626				(291	)			110				55			113				(120	)			493
Charge-offs			(297	)			(50	)			(12	)			–			(59	)							(418	)
Recoveries			214				334				5				–			1								554
Net charge-offs			(83	)			284				(7	)			–			(58	)							136
Ending balance	$		2,207		$		1,264		$		1,189		$		178	$		141		$		312		$		5,291

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
2018
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$		36	$		64	$		1	$		–	$		–	$		–	$		101
Collectively evaluated for impairment			2,142			1,727			1,244			258			306			129			5,806
Total ending allowance balance	$		2,178	$		1,791	$		1,245	$		258	$		306	$		129	$		5,907
Loans:
Loans individually evaluated for impairment	$		419	$		2,403	$		1,030	$		–	$		–				$		3,852
Loans collectively evaluated for impairment			146,456			181,202			166,266			31,227			19,402						544,553
Total ending loans balance	$		146,875	$		183,605	$		167,296	$		31,227	$		19,402				$		548,405
2017
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$		74	$		151	$		19	$		–	$		–	$		–	$		244
Collectively evaluated for impairment			1,739			1,584			1,254			237			175			371			5,360
Total ending allowance balance	$		1,813	$		1,735	$		1,273	$		237	$		175	$		371	$		5,604
Loans:
Loans individually evaluated for impairment	$		1,726	$		4,686	$		1,470	$		–	$		–				$		7,882
Loans collectively evaluated for impairment			138,547			174,977			155,702			22,886			16,306						508,418
Total ending loans balance	$		140,273	$		179,663	$		157,172	$		22,886	$		16,306				$		516,300

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 Investment1		Related Allowance		Average Recorded Investment		Interest Income Recognized
2018
Commercial	$	815	$	383	$	36	$	419	$	36	$	1,511	$	37
Commercial real estate		2,616		1,976		433		2,409		64		3,531		19
Residential real estate		1,190		763		269		1,032		1		1,327		57
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	4,621	$	3,122	$	738	$	3,860	$	101	$	6,369	$	113
2017
Commercial	$	3,352	$	1,329	$	399	$	1,728	$	74	$	2,884	$	52
Commercial real estate		4,826		3,117		1,566		4,683		151		3,213		14
Residential real estate		1,654		1,119		352		1,471		19		1,476		57
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	9,832	$	5,565	$	2,317	$	7,882	$	244	$	7,573	$	123
2016
Commercial	$	5,476	$	1,690	$	3,354	$	5,044	$	705	$	6,609	$	241
Commercial real estate		796		600		21		621		–		786		10
Residential real estate		1,681		1,036		472		1,508		24		1,507		61
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	7,953	$	3,326	$	3,847	$	7,173	$	729	$	8,902	$	312

¹Includes principal, accrued interest, unearned fees, and origination costs.

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
2018
Commercial	$		146,431	$		253	$		34	$		–	$		157	$		444	$		146,875
Commercial real estate			181,388			86			–			–			2,131			2,217			183,605
Residential real estate			165,837			265			213			174			807			1,459			167,296
Construction & land development			31,169			58			–			–			–			58			31,227
Consumer			18,965			291			86			–			60			437			19,402
Total loans	$		543,790	$		953	$		333	$		174	$		3,155	$		4,615	$		548,405
2017
Commercial	$		138,908	$		148	$		65	$		–	$		1,152	$		1,365	$		140,273
Commercial real estate			175,062			177			–			40			4,384			4,601			179,663
Residential real estate			155,488			757			38			401			488			1,684			157,172
Construction & land development			22,886			–			–			–			–			–			22,886
Consumer			16,048			193			8			–			57			258			16,306
Total loans	$		508,392	$		1,275	$		111	$		441	$		6,081	$		7,908	$		516,300

Troubled Debt Restructurings

The Company had troubled debt restructurings (“TDRs”) of $1.5 million as of December 31, 2018, with $17 thousand of specific reserves allocated to customers whose loan terms have been modified in TDRs. As of December 31, 2017, the Company had TDRs of $2.9 million, with $38 thousand of specific reserves allocated. At December 31, 2018, $1.4 million of the loans classified as TDRs were performing in accordance with their modified terms. The remaining $117 thousand were classified as nonaccrual.

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

(Dollars in thousands)	Number Of Loans Restructured		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
2018
Commercial		1		$      200		$      200
Residential real estate		2		27		27
Total restructured loans		3		$      227		$      227
2017
Commercial		2		$      150		$      150
Commercial real estate		4		288		288
Residential real estate		2		52		52
Total restructured loans		8		$      490		$      490
2016
Commercial		4		$    3,607		$    3,607
Residential real estate		1		101		101
Total restructured loans		5		$    3,708		$  3,708

The loans restructured were modified by changing the monthly payment to interest only and extending the maturity dates. No principal reductions were made. None of the loans restructured in 2017 have subsequently defaulted in 2018. There was one commercial loan in the amount of $3.3 million that was restructured in the fourth quarter of 2016 that defaulted in 2017.

Real Estate Loans in Foreclosure

Other real estate owned amounted to one property at $99 thousand as of December 31, 2018. There was no other real estate owned at December 31, 2017. Mortgage loans in the process of foreclosure were $57 thousand at December 31, 2018, and $114 thousand at December 31, 2017.

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 $300 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, 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 $300 thousand or are included in groups of homogeneous loans. Based on the most recent analysis performed, the risk category of loans by class was as follows at December 31:

(Dollars in thousands)		Pass			Special Mention			Substandard			Doubtful			Not Rated			Total
2018
Commercial	$		125,840	$		5,383	$		14,775	$		–	$		877	$		146,875
Commercial real estate			163,261			5,582			13,578			–			1,184			183,605
Residential real estate			194			–			637			–			166,465			167,296
Construction & land development			27,540			–			–			–			3,687			31,227
Consumer			–			–			60			–			19,342			19,402
Total	$		316,835	$		10,965	$		29,050	$		–	$		191,555	$		548,405
2017
Commercial	$		116,833	$		13,685	$		8,841	$		–	$		914	$		140,273
Commercial real estate			162,012			8,220			8,620			–			811			179,663
Residential real estate			205			–			470			–			156,497			157,172
Construction & land development			18,493			880			–			–			3,513			22,886
Consumer			–			–			57			–			16,249			16,306
Total	$		297,543	$		22,785	$		17,988	$		–	$		177,984	$		516,300

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

(Dollars in thousands)		Performing		Nonperforming				Total
2018
Commercial	$		877		$	–	$		877
Commercial real estate			1,184			–			1,184
Residential real estate			166,122			343			166,465
Construction & land development			3,687			–			3,687
Consumer			19,342			–			19,342
Total	$		191,212		$	343	$		191,555
2017
Commercial	$		914		$	–	$		914
Commercial real estate			811			–			811
Residential real estate			155,608			419			156,497
Construction & land development			3,513			–			3,513
Consumer			16,249			–			16,249
Total	$		177,095		$	419	$		177,984

Mortgage Servicing Rights

For the years ended December 31, 2018 and 2017, the Company had outstanding MSRs of $281 thousand and $270 thousand, respectively. No valuation allowance was recorded at December 31, 2018 or 2017, as the fair value of the MSRs exceeded their carrying value. On December 31, 2018, the Company had $66.8 million residential mortgage loans with servicing retained as compared to $64.7 million with servicing retained at December 31, 2017.

Total loans serviced for others approximated $92.3 million and $82.7 million at December 31, 2018 and 2017, respectively.

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Premises and Equipment

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment [Abstract]

Premises and Equipment

NOTE 4 – PREMISES AND EQUIPMENT

Premises and equipment consisted of the following at December 31:

(Dollars in thousands)		2018			2017
Land and improvements	$		2,384	$		1,925
Buildings and improvements			11,268			11,206
Furniture and equipment			6,265			6,121
Leasehold improvements			99			99
		20,016			19,351
Accumulated depreciation			10,055			10,107
Premises and equipment, net	$		9,961	$		9,244

Depreciation expense amounted to $598 thousand, $652 thousand, and $690 thousand for the years ended December 31, 2018, 2017, and 2016, respectively.

The Bank leases certain office locations. Total rental expense under these leases approximated $104 thousand, $158 thousand, and $191 thousand in 2018, 2017, and 2016, respectively.

Future minimum lease payments at December 31, 2018 were as follows:

(Dollars in thousands)
2019	$	91
2020		71
2021		37
Total	$	199

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Core Deposit Intangible Assets

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Core Deposit Intangible Assets

NOTE 5 – CORE DEPOSIT INTANGIBLE ASSETS

Core Deposit Intangible

No additional core deposit intangible was recorded in 2018, 2017, or 2016. 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 $101 thousand, $116 thousand, and $121 thousand in 2018, 2017, and 2016, respectively. The following table shows the core deposit intangible and the related accumulated amortization as of December 31:

(Dollars in thousands)		2018				2017				2016
Gross carrying amount	$		1,251		$		1,251		$		1,251
Accumulated amortization			(1,084	)			(983	)			(868	)
Net carrying amount	$		167		$		268		$		383

The estimated aggregate future amortization expense for the core deposit assets remaining as of December 31, 2018 was as follows:

(Dollars in thousands)		Core Deposit Amortization
2019	$		63
2020			60
2021			44
	$		167

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Interest-Bearing Deposits

12 Months Ended

Dec. 31, 2018

Banking and Thrift [Abstract]

Interest-Bearing Deposits

NOTE 6 – INTEREST-BEARING DEPOSITS

Interest-bearing deposits at December 31 were as follows:

(Dollars in thousands)		2018			2017
Demand	$		120,424	$		119,579
Savings			183,712			180,217
Time deposits:
In excess of $250,000			17,951			12,026
Other			98,540			97,766
Total interest-bearing deposits	$		420,627	$		409,588
At December 31, 2018, stated maturities of time deposits were as follows:
(Dollars in thousands)
2019	$		54,123
2020			28,270
2021			23,328
2022			8,566
2023			2,204
Total	$		116,491

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Borrowings

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Borrowings

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)	2018			2017
Balance at year-end	$	37,415		$	39,480
Average balance outstanding		41,334			50,445
Maximum month-end balance		44,155			56,932
Weighted-average rate at year-end		1.01	%		0.39	%
Weighted-average rate during the year		0.81			0.29

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

The following table provides additional detail regarding repurchase agreements accounted for as secured borrowings:

	Remaining Contractual Maturity Overnight and Continuous
(Dollars in thousands)	December 31, 2018		December 31, 2017
Securities of U.S. Government agencies and mortgage-backed securities of government agencies pledged, fair value		$   37,574		$   39,637
Repurchase agreements		37,415		39,480

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			2018		2017
Fixed-rate amortizing		4/1/24		6/1/37		1.87	%		1.16	%		2.01	%	$	8,525	$	11,409

Maturities of other borrowings at December 31, 2018, are summarized as follows for the years ended December 31:

(Dollars in thousands)		Amount		Weighted Average Rate
2019	$		2,195		1.83	%
2020			1,665		1.84
2021			1,258		1.85
2022			946		1.86
2023 and beyond			2,461		1.94
	$		8,525		1.87	%

Monthly principal and interest payments, as well as 10% – 20% principal curtailments on the borrowings’ anniversary dates are due on the fixed-rate amortizing borrowings. FHLB borrowings are secured by a blanket collateral agreement. At December 31, 2018 the Company had the capacity to borrow an additional $89.4 million from the FHLB.

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Income Taxes

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Income Taxes

NOTE 8 – INCOME TAXES

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

(Dollars in thousands)		2018				2017				2016
Current	$		2,170		$		3,296		$		2,973
Deferred			93				(167	)			(4	)
Change in corporate tax rate			–				101				–
Total income tax provision	$		2,263		$		3,230		$		2,969
The Tax Cuts and Jobs Act, enacted on December 22, 2017, lowered the federal income tax rate from 34% to 21% effective January 1, 2018. As a result, the carrying value of net deferred tax assets was reduced, which increased income tax expense by $101 thousand in 2017. The income tax provision attributable to income from operations differed from the amounts computed by applying the statutory federal income tax rate of 21% in 2018 and 34% for years 2017 and 2016 to income before income taxes as follows:
(Dollars in thousands)		2018				2017				2016
Expected provision using statutory federal income tax rate	$		2,452		$		3,513		$		3,300
Effect of bond and loan tax-exempt income			(128	)			(251	)			(241	)
Interest expense associated with carrying certain tax exempt bonds and loans			5				6				5
Bank owned life insurance income			(71	)			(121	)			(94	)
Other			5				83				(1	)
Total income tax provision	$		2,263		$		3,230		$		2,969
The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 were as follows:
(Dollars in thousands)		2018				2017
Allowance for loan losses	$		1,338		$		1,275
Unrealized loss on securities available-for-sale			367				176
Other			30				50
Deferred tax assets			1,735				1,501
Premises and equipment			(311	)			(363	)
Federal Home Loan Bank stock dividends			(376	)			(376	)
Deferred loan fees			(240	)			(232	)
Prepaid expenses			(76	)			(89	)
Other			(286	)			(279	)
Deferred tax liabilities			(1,289	)			(1,339	)
Net deferred tax asset	$		446		$		162

There is currently no liability for uncertain tax positions and no known unrecognized tax benefits. The Company recognizes, when applicable, interest and penalties related to unrecognized tax benefits in the provision for income taxes in the Consolidated Statements of Income. With few exceptions, the Company is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years prior to 2015.

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Employee Benefits

12 Months Ended

Dec. 31, 2018

Postemployment Benefits [Abstract]

Employee Benefits

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 3% in 2018, 2017, and 2016 of each eligible participant’s compensation. Beginning in 2018, the Plan provides for a 100% Company match up to a maximum of 4% of each participant’s annual compensation. For years 2017 and 2016, the Plan provided 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 $565 thousand, $363 thousand, and $338 thousand for 2018, 2017, and 2016, respectively.

There were no stock options outstanding at December 31, 2018, 2017 and 2016.

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Financial Instruments with Off-Balance Sheet Risk

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Financial Instruments with Off-Balance Sheet Risk

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)	2018		2017
Commitments to extend credit	$	172,257	$	177,354
Letters of credit		1,045		849

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. Consumer commitments generally have fixed expiration dates and commercial commitments are generally due on demand 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 residential real estate, 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. 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.

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Related-Party Transactions

12 Months Ended

Dec. 31, 2018

Related Party Transactions [Abstract]

Related-Party Transactions

NOTE 11 – RELATED-PARTY TRANSACTIONS

In the ordinary course of business, loans are made by the Bank 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 years ended December 31:

(Dollars in thousands)		2018		2017
Balance at beginning of year	$	505	$	321
New loans and advances		114		478
Repayments, including loans sold		203		294
Changes in related parties1		714		–
Balance at end of year	$	1,130	$	505

¹The adjustment made in 2018 relates to the retirement of a director and the addition of two new directors.

Deposits from executive officers, directors, and their related business interests at December 31, 2018 and 2017 were approximately $2.3 million and $2.1 million.

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Regulatory Matters

12 Months Ended

Dec. 31, 2018

Banking and Thrift [Abstract]

Regulatory Matters

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 performance. 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 capital, Tier 1 capital and Common equity 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, 2018 and 2017, the Company and Bank met or exceeded all capital adequacy requirements to which they are subject.

As of December 31, 2018, 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, Common equity Tier 1, 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:

	Actual				Minimum Required For Capital Adequacy Purposes				Minimum Required To Be Well Capitalized Under Prompt Corrective Action
(Dollars in thousands)		Amount	Ratio			Amount	Ratio			Amount	Ratio
2018
Total capital to risk-weighted assets
Consolidated	$	78,968	14.5	%	$	43,500	8.0	%	$	54,375	10.0	%
Bank		77,854	14.3			43,488	8.0			54,361	10.0
Tier 1 capital to risk-weighted assets
Consolidated		73,053	13.4			32,625	6.0			43,500	8.0
Bank		71,939	13.2			32,616	6.0			43,488	8.0
Common equity tier 1 capital to risk-weighted assets
Consolidated		73,053	13.4			24,469	4.5			35,344	6.5
Bank		71,939	13.2			24,462	4.5			35,334	6.5
Tier 1 capital to average assets
Consolidated		73,053	10.1			29,031	4.0			36,288	5.0
Bank		71,939	9.9			29,025	4.0			36,281	5.0
2017
Total capital to risk-weighted assets
Consolidated	$	71,815	13.8	%	$	41,693	8.0	%	$	52,116	10.0	%
Bank		70,672	13.6			41,684	8.0			52,105	10.0
Tier 1 capital to risk-weighted assets
Consolidated		66,203	12.7			31,270	6.0			41,693	8.0
Bank		65,060	12.5			31,263	6.0			41,684	8.0
Common equity tier 1 capital to risk-weighted assets
Consolidated		66,203	12.7			23,452	4.5			33,876	6.5
Bank		65,060	12.5			23,447	4.5			33,868	6.5
Tier 1 capital to average assets
Consolidated		66,203	9.3			28,437	4.0			35,546	5.0
Bank		65,060	9.2			28,432	4.0			35,541	5.0

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, 2019, the Bank could dividend $11.6 million to the Company. The Company does not anticipate the financial need to obtain regulatory approval to pay dividends. 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.

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Condensed Parent Company Financial Information

12 Months Ended

Dec. 31, 2018

Condensed Financial Information Disclosure [Abstract]

Condensed Parent Company Financial Information

NOTE 13 – CONDENSED PARENT COMPANY FINANCIAL INFORMATION

A summary of condensed financial information of the parent company as of December 31, 2018 and 2017, and for each of the three years in the period ended December 31, 2018 follows:

(Dollars in thousands)		2018				2017
CONDENSED BALANCE SHEETS
ASSETS
Cash deposited with subsidiary bank	$		969		$		1,007
Investment in subsidiary bank			75,422				69,309
Securities available-for-sale			83				90
Other assets			144				177
TOTAL ASSETS	$		76,618		$		70,583
LIABILITIES AND SHAREHOLDERS’ EQUITY
Total liabilities	$		82		$		51
Total shareholders’ equity			76,536				70,532
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$		76,618		$		70,583
(Dollars in thousands)		2018				2017				2016
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
Interest on securities	$		2		$		2		$		2
Dividends from subsidiary			2,865				2,600				2,450
Unrealized loss on equity securities			(6	)			–				–
Total income			2,861				2,602				2,452
Operating expenses			357				348				384
Income before taxes and undistributed equity income of subsidiary			2,504				2,254				2,068
Income tax benefit			(76	)			(123	)			(131	)
Equity earnings in subsidiary, net of dividends			6,832				4,724				4,539
NET INCOME	$		9,412		$		7,101		$		6,738
COMPREHENSIVE INCOME	$		8,692		$		7,421		$		6,281

(Dollars in thousands)		2018				2017				2016
CONDENSED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income	$		9,412		$		7,101			$	6,738
Adjustments to reconcile net income to cash provided by operations:
Equity earnings in subsidiary, net of dividends			(6,832	)			(4,724	)			(4,539	)
Change in other assets, liabilities			70				13				71
Net cash provided by operating activities			2,650				2,390				2,270
Cash flows from financing activities:
Cash dividends paid			(2,688	)			(2,304	)			(2,139	)
Net cash used in financing activities			(2,688	)			(2,304	)			(2,139	)
Increase (decrease) in cash			(38	)			86				131
Cash at beginning of year			1,007				921				790
Cash at end of year	$		969		$		1,007		$		921

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Fair Value Measurements

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Fair Value Measurements

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.

The following table presents the assets reported on the consolidated statements of financial condition at their fair value on a recurring basis as of December 31, 2018 and December 31, 2017, by level within the fair value hierarchy. No liabilities were 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, 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
Assets:				December 31, 2018
Securities available-for-sale
U.S. Treasury security	$	996	$	–	$	–	$	996
U.S. Government agencies		–		7,170		–		7,170
Mortgage-backed securities of government agencies		–		44,901		–		44,901
Asset-backed securities of government agencies		–		1,024		–		1,024
State and political subdivisions		–		23,125		–		23,125
Corporate bonds		–		8,312		–		8,312
Total available-for-sale securities	$	996	$	84,532	$	–	$	85,528
Equity securities	$	37	$	–	$	46	$	83
Assets:				December 31, 2017
Securities available-for-sale
U.S. Treasury security	$	998	$	–	$	–	$	998
U.S. Government agencies		–		8,229		–		8,229
Mortgage-backed securities of government agencies		–		49,701		–		49,701
Asset-backed securities of government agencies		–		1,169		–		1,169
State and political subdivisions		–		27,141		–		27,141
Corporate bonds		–		10,425		–		10,425
Total available-for-sale securities	$	998	$	96,665	$	–	$	97,663
Equity securities	$	43	$	–	$	46	$	89

The following table presents the assets measured on a nonrecurring basis on the consolidated balance sheets at their fair value as of December 31, 2018 and December 31, 2017, by level within the fair value hierarchy. Impaired loans 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.

(Dollars in thousands)	Level I	Level II		Level III	Total
Assets measured on a nonrecurring basis		December 31, 2018
Impaired loans	$  –	$  –	$	636	$     636
Other real estate owned	–	–		99	99
Assets measured on a nonrecurring basis		December 31, 2017
Impaired loans	$  –	$  –	$	2,073	$  2,073

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

	Fair Value	Valuation	Unobservable	Range
(Dollars in thousands)	Estimate	Techniques	Input	(Weighted Average)
			December 31, 2018
		Discounted	Remaining term	1.2 yrs to 26.5 yrs / (10.9 yrs)
Impaired loans	$    636	cash flow	Discount rate	5.1% to 7.5% / (5.9%)
		Appraisal of	Appraisal adjustments2	–33%
Other real estate owned	99	collateral1	Liquidation expense2	–10%
			December 31, 2017
		Discounted	Remaining term	4 mos to 24.5 yrs / (20.3 mos)
Impaired loans	$    551	cash flow	Discount rate	4.4% to 7.5% / (5.3%)
		Appraisal of	Appraisal adjustments2	0% to –25% (–6.8%)
	1,522	collateral1	Liquidation expense2	–10%

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.

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Fair Values of Financial Instruments

12 Months Ended

Dec. 31, 2018

Investments, All Other Investments [Abstract]

Fair Values of Financial Instruments

NOTE 15 – FAIR VALUES OF FINANCIAL INSTRUMENTS

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

					2018
	Carrying								Total Fair
(Dollars in thousands)		Value		Level I		Level II		Level III		Value
Financial assets
Cash and cash equivalents	$	45,564	$	45,464	$	–	$	–	$	45,464
Securities available-for-sale		85,528		996		84,532		–		85,528
Securities held-to-maturity		20,688		–		20,118		–		20,118
Equity securities		83		37		–		46		83
Restricted stock		4,614		N/A		N/A		N/A		N/A
Loans held for sale		108		108		–		–		108
Net loans		543,067		–		–		543,076		543,076
Bank-owned life insurance		13,554		13,554		–		–		13,554
Accrued interest receivable		1,581		1,581		–		–		1,581
Mortgage servicing rights		281		–		–		281		281
Financial liabilities
Deposits	$	606,498	$	490,007	$	–	$	114,434	$	604,441
Short-term borrowings		37,415		37,415		–		–		37,415
Other borrowings		8,525		–		–		8,251		8,251
Accrued interest payable		88		88		–		–		88
					2017
	Carrying								Total Fair
(Dollars in thousands)		Value		Level I		Level II		Level III		Value
Financial assets
Cash and cash equivalents	$	36,420	$	36,420	$	–	$	–	$	36,420
Securities available-for-sale		97,752		998		96,665		–		97,663
Securities held-to-maturity		25,758		–		25,491		–		25,491
Equity securities		89		43		–		46		89
Restricted stock		4,614		N/A		N/A		N/A		N/A
Loans held for sale		246		246		–		–		246
Net loans		511,226		–		–		513,106		513,106
Bank-owned life insurance		13,218		13,218		–		–		13,218
Accrued interest receivable		1,545		1,545		–		–		1,545
Mortgage servicing rights		270		–		–		270		270
Financial liabilities
Deposits	$	583,259	$	473,467	$	–	$	110,224	$	583,691
Short-term borrowings		39,480		39,480		–		–		39,480
Other borrowings		11,409		–		–		10,365		10,365
Accrued interest payable		90		90		–		–		90

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

Cash and cash equivalents; Loans held for sale; Accrued interest receivable; Short-term borrowings, and Accrued interest payable

The fair value of the above instruments is considered to be carrying value, classified as Level I in the fair value hierarchy.

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.

Equity securities with a readily determinable value are classified as Level I and equity securities without a readily determinable value are classified as Level III. The following table presents the carry amount of equity securities without readily determinable fair values, the cumulative amount of impairment, and the cumulative amount of observable price changes for orderly transactions for the identical or a similar investment of the same issuer. There have been no known transactions for the equity securities in 2018.

(Dollars in thousands)	December 31, 2018 Life-to-Date
Amortized cost	$	44
Impairment		–
Observable price changes		2
Carrying value	$	46

Net loans

Effective first quarter 2018 the fair value of loans were determined using an exit price methodology as prescribed by ASU 2016-01. The exit price estimation of fair value is based on the future value of expected cash flows. The projected cash flows are based on the contractual terms of the loans, adjusted for prepayments and use of a current market rate based on the relative credit risk of the loan. In addition, an incremental liquidity discount is applied. In comparison, loan fair values as of December 31, 2017 were estimated based on an entrance price methodology. As a result the fair value adjustments as of December 31, 2018 and December 31, 2017 and not comparable, 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.

Mortgage servicing rights

The fair value of mortgage servicing rights 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, classified as Level III.

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.

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 had unrecognized financial instruments at December 31, 2018 and 2017. These financial instruments relate to commitments to extend credit and letters of credit. The aggregate contract amount of such financial instruments was approximately $173.3 million at December 31, 2018 and $178.2 million at December 31, 2017. 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, involve uncertainties and matters of significant judgment and therefore, cannot be determined with precision. Changes in assumptions could significantly affect these estimates.

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Accumulated Other Comprehensive Income

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Accumulated Other Comprehensive Income

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, 2018, 2017, and 2016:

(Dollars in thousands)		Pretax				Tax Effect				After-Tax			Affected Line Item In The Consolidated Statements Of Income
Balance as of December 31, 2017	$		(839	)	$		176		$		(663	)
Unrealized holding loss on available-for-sale securities arising during the period			(989	)			208				(781	)
Amortization of held-to-maturity discount resulting from transfer			78				(17	)			61
Total other comprehensive income			(911	)			191				(720	)
Reclassify equity AOCI gain to retained earnings			(36	)			7				(29	)
BALANCE AS OF
DECEMBER 31, 2018	$		(1,786	)	$		374		$		(1,412	)
Balance as of December 31, 2016	$		(1,323	)	$		449		$		(874	)
Unrealized holding gain on available-for-sale securities arising during the period			376				(128	)			248
Amortization of held-to-maturity discount resulting from transfer			108				(36	)			72
Total other comprehensive income			484				(164	)			320
Deferred tax reclassification from retained earnings			—				(109	)			(109	)		(a	)
Total other comprehensive income (loss) after reclassification			484				(273	)			211
BALANCE AS OF
DECEMBER 31, 2017	$		(839	)	$		176		$		(663	)
Balance as of December 31, 2015	$		(631	)	$		214		$		(417	)
Unrealized holding loss on available-for-sale securities arising during the period			(1,221	)			415				(806	)
Amount reclassified for net gains included in net income			(1	)			—				(1	)		(b	)
Amortization of held-to-maturity discount resulting from transfer			530				(180	)			350
Total other comprehensive income (loss)			(692	)			235				(457	)
BALANCE AS OF
DECEMBER 31, 2016	$		(1,323	)	$		449		$		(874	)

(a) Federal income tax provision.

(b) Securities gain.

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Contingent Liabilities

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Contingent Liabilities

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.

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Quarterly Financial Data (Unaudited)

12 Months Ended

Dec. 31, 2018

Quarterly Financial Information Disclosure [Abstract]

Quarterly Financial Data (Unaudited)

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
2018
First quarter		$  6,949		$  6,389		$  2,164		$  0.79		$  0.79
Second quarter		7,344		6,652		2,324		0.85		0.85
Third quarter		7,572		6,801		2,432		0.88		0.88
Fourth quarter		7,772		6,909		2,492		0.91		0.91
2017
First quarter		$  6,247		$  5,862		$  1,730		$  0.63		$  0.63
Second quarter		6,413		5,950		1,726		0.63		0.63
Third quarter		6,766		6,204		1,866		0.68		0.68
Fourth quarter		7,014		6,436		1,779		0.65		0.65
2016
First quarter		$  5,661		$  5,285		$  1,480		$  0.54		$  0.54
Second quarter		5,813		5,446		1,611		0.59		0.59
Third quarter		5,863		5,497		1,694		0.61		0.61
Fourth quarter		6,295		5,931		1,953		0.72		0.72

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Summary of Significant Accounting Policies (Policies)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Use of Estimates in Preparing Financial Statements

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 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

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 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

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

CASH RESERVE REQUIREMENTS

The Bank generally 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. The required reserve balances were $846 thousand and $929 thousand as of December 31, 2018 and 2017, respectively.

Securities

SECURITIES

At the time of purchase all debt securities are evaluated and designated as available-for-sale or held-to-maturity. 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 or loss. Held-to-maturity securities are carried at their fair value on the date of transfer or at amortized cost if security purchases are designated as held-to-maturity. At December 31, 2018, 19% of the total investment portfolio was classified as held-to-maturity. Equity securities are held at fair value. Holding gains and losses are recorded in income. Dividends on equity securities are recognized as income when earned.

The amortized cost of debt securities is adjusted for the accretion of discounts to maturity and the amortization of premiums to the earlier of a bond’s call date or 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. 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 noninterest income in the Consolidated Statements of Income.

Investments in 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.

Loans

LOANS

Loans that management has the intent and ability to hold for the foreseeable future, 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 recognizes gains and losses on sales of the loans held for sale when the sale is completed.

Allowance for Loan Losses

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 uncollectibility 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, construction loans, and troubled debt restructurings 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 residential real estate or consumer loans for impairment disclosures.

Other Real Estate Owned

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 noninterest expenses, as well as expenses related to maintenance of the properties. Gains or losses upon sale are recorded through noninterest income. Other real estate owned amounted to $99 thousand and $0 at December 31, 2018 and 2017, respectively.

Premises and Equipment

PREMISES AND EQUIPMENT

Premises and equipment are stated at cost, less accumulated depreciation and, amortization. Land is carried at cost. 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. Leasehold improvements are amortized over the useful life of the asset, or lease term, whichever is shorter. Expenses for maintenance and repairs are charged against income as incurred. Costs of major additions and improvements are capitalized.

Goodwill and Core Deposit in Intangible Assets

GOODWILL AND CORE DEPOSIT INTANGIBLE ASSETS

Goodwill is not amortized, but is tested for impairment at least annually in the fourth quarter or more frequently if indicators of impairment are present. The evaluation for impairment involves comparing the current fair value of the reporting unit to its carrying value, including goodwill. If the current fair value of a reporting unit exceeds its carrying value, no additional testing is required and an impairment loss is not recorded. The Company 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 2018 or 2017.

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

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 the Company. 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, adjusted to reflect current, and anticipated market conditions.

Bank-owned Life Insurance

BANK-OWNED LIFE INSURANCE

The cash surrender value of bank-owned life insurance 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 individual insured under these policies, the Company would receive a death benefit, which would be recorded as noninterest income.

Repurchase Agreements

REPURCHASE AGREEMENTS

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

Advertising Costs

ADVERTISING COSTS

All advertising costs are expensed as incurred. Advertising expenses amounted to $215 thousand, $168 thousand, and $215 thousand for the years ended 2018, 2017, and 2016, respectively.

Federal Income Taxes

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 respective 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 carry forwards. 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.

Stock-based Compensation

STOCK-BASED COMPENSATION

The Company previously sponsored a stock-based compensation plan that expired in 2013. All outstanding awards at December 31, 2015 were exercised during the first quarter of 2016. There were no stock options outstanding at December 31, 2018. The Company recorded no stock-based compensation expense for 2018, 2017, or 2016.

Comprehensive Income

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

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

PER SHARE DATA

Basic earnings per share is computed based on the weighted average number of shares of common stock outstanding during each year. Diluted earnings per 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:

	2018			2017			2016
Weighted average common shares		2,980,602			2,980,602			2,980,602
Average treasury shares		(238,360	)		(238,360	)		(238,574	)
Total weighted average common shares outstanding (basic)		2,742,242			2,742,242			2,742,028
Dilutive effect of assumed exercise of stock options		–			–			–
Weighted average common shares outstanding (diluted)		2,742,242			2,742,242			2,742,028

There were no stock options outstanding at December 31, 2018, 2017, and 2016.

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

Recently Issued Accounting Pronouncements

RECENTLY ISSUED ACCOUNTING PRONOUNCEMENTS

ASU 2014-09 – Revenue from Contracts with Customers – Topic 606 and all subsequent ASUs that modified ASC 606. Effective January 1, 2018 the Company has elected to apply the standard utilizing the modified retrospective approach with a cumulative effect of adoption for the impact from uncompleted contracts at the date of adoption. The adoption of this guidance did not result in a change to the accounting for any of the in-scope revenue streams; as such, no cumulative effect adjustments were recorded.

Management determined that the primary sources of revenue emanating from interest and dividend income on loans and securities along with noninterest revenue resulting from investment security gains, loan servicing, gains on the sale of loans, commitment fees, fees from financial guarantees, certain credit cards fees, and income on bank-owned life insurance are not within the scope of ASC 606. As a result, no changes were made during the period related to these sources of revenue, which cumulatively comprise 88 percent of the total revenue of the Company. Services within the scope of ASC 606 include income from fiduciary activities, brokerage fees, service charges on deposit accounts, other service income, ATM fees, interchange fees, and gain on sale of OREO, net. For these accounts, fees are related to specific customer transactions are attributable to specific performance obligations of the Bank where the revenue is recognized at a defined point in time, completion of the requested service/transaction.

ASU 2016-01 – Recognition and Measurement of Financial Assets and Financial Liabilities. This Update and subsequent ASU’s set forth targeted improvements to GAAP including, but not limited to, requiring an entity to recognize the changes in fair value of equity investments in the income statement, requiring public business entities to use the exit price when measuring the fair value of financial instruments for financial statement disclosure purposes, eliminating certain disclosures required by existing GAAP, and providing for additional disclosures. The Update is effective for fiscal years beginning after December 15, 2017, including interim periods within those fiscal years. Upon adoption on January 1, 2018, the Company made a one-time cumulative effect adjustment from accumulated other comprehensive income to retained earnings of $29 thousand related to the change in accounting for equity securities as presented in the Consolidated Statement of Changes in Shareholders’ Equity. A loss of $6 thousand was recorded in 2018 on the Consolidated Statements of Income, as a result of changes to the accounting for equity securities. We have included the new disclosure requirements in Note 15 related to the measurement of the fair value of financial instruments on a prospective basis.

ASU 2016-02 – Leases. This Update and all subsequent ASU’s that modified Topic 842 set forth a new lease accounting model for lessors and lessees. For lessees, virtually all leases will be required to be recognized on the balance sheet by recording a right-of-use asset. Subsequent accounting for leases varies depending on whether the lease is an operating lease or a finance lease. The accounting provided by a lessor is largely unchanged from that applied under the existing guidance. The ASU requires additional qualitative and quantitative disclosures with the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. The Update is effective for fiscal years beginning after December 15, 2018, with early application permitted. Based on the Company’s preliminary analysis of its current portfolio, the impact to the Company’s balance sheet is estimated to result in less than a 1 percent increase in assets and liabilities. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2016-13 – Financial Instruments – Credit Losses. The Update requires that financial assets be presented at the net amount expected to be collected (i.e. net of expected credit losses), eliminating the probable recognition threshold for credit losses on financial assets measured at amortized cost. The measurement of expected credit losses should be based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. The Update is effective for annual and interim periods beginning after December 15, 2019. Early adoption is permitted for annual and interim periods beginning after December 15, 2018. We expect the Update will result in an increase in the allowance for credit losses for the estimated life of the financial asset, including an estimate for debt securities. The amount of any increase will be impacted by the portfolio composition and quality at the adoption date, as well as economic conditions and forecasts at that time. A cumulative-effect adjustment to retained earnings is required as of the beginning of the year of adoption. The Company expects to recognize a one-time cumulative effect adjustment to the allowance for loan losses, but cannot yet determine the magnitude of any such one-time adjustment or the overall impact of the new guidance on the consolidated financial statements.

ASU 2017-04 – Simplifying the Test for Goodwill Impairment. The Update simplifies the goodwill impairment test. Under the new guidance, Step 2 of the goodwill impairment process that requires an entity to determine the implied fair value of its goodwill by assigning fair value to all its assets and liabilities is eliminated. Instead, the entity should recognize an impairment charge for the amount by which the carrying amount exceeds the reporting unit’s fair value. An entity still has the option to perform the qualitative assessment for a reporting unit to determine if the quantitative impairment test is necessary. The new guidance is effective for annual and interim goodwill tests performed in fiscal years beginning after December 15, 2019. Early adoption is permitted. This Update is not expected to have a material impact on the Company’s financial statements.

ASU 2018-13 – Fair Value Measurement – Changes the Disclosure Requirements for Fair Value Measurements. The Update removes the requirement to disclose the amount of and reasons for transfers between Level I and Level II of the fair value hierarchy; the policy for timing of transfers between levels; and the valuation processes for Level III fair value measurements. The Update requires disclosure of changes in unrealized gains and losses for the period included in other comprehensive income (loss) for recurring Level III fair value measurements held at the end of the reporting period and the range and weighted average of significant unobservable inputs used to develop Level III fair value measurements. This Update is effective for all entities for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2019. This Update is not expected to have a significant impact on the Company’s financial statements.

ASU 2018-15 – Intangibles – Goodwill and Other – Internal-Use Software. This Update addresses customers’ accounting for implementation costs incurred in a cloud computing arrangement that is a service contract and also adds certain disclosure requirements related to implementation costs incurred for internal-use software and cloud computing arrangements. The amendment aligns the requirements for capitalizing implementation costs incurred in a hosting arrangement that is a service contract with the requirements for capitalizing implementation costs incurred to develop or obtain internal-use software (and hosting arrangements that include an internal-use software license). This Update is effective for public business entities for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years, with early adoption permitted. The amendments in this Update can be applied either retrospectively or prospectively to all implementation costs incurred after the date of adoption. This Update is not expected to have a significant impact on the Company’s financial statements.

Reclassification of Comparative Amounts

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.

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Summary of Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2018

Accounting Policies [Abstract]

Computation of Weighted Average Number of Common Shares Outstanding for Basic and Diluted Earnings Per Share

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

	2018			2017			2016
Weighted average common shares		2,980,602			2,980,602			2,980,602
Average treasury shares		(238,360	)		(238,360	)		(238,574	)
Total weighted average common shares outstanding (basic)		2,742,242			2,742,242			2,742,028
Dilutive effect of assumed exercise of stock options		–			–			–
Weighted average common shares outstanding (diluted)		2,742,242			2,742,242			2,742,028

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Securities (Tables)

12 Months Ended

Dec. 31, 2018

Investments, Debt and Equity Securities [Abstract]

Summary of Securities Available-for-Sale and Restricted Stock

Securities consisted of the following at December 31:

(Dollars in thousands)		Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Fair Value
2018
Available-for-sale
U.S. Treasury security	$		997	$	–	$	1	$	996
U.S. Government agencies			7,350		–		180		7,170
Mortgage-backed securities of government agencies			45,744		41		884		44,901
Asset-backed securities of government agencies			1,040		–		16		1,024
State and political subdivisions			23,282		49		206		23,125
Corporate bonds			8,646		–		334		8,312
Total available-for-sale			87,059		90		1,621		85,528
Held-to-maturity
U.S. Government agencies			9,482		6		390		9,098
Mortgage-backed securities of government agencies			11,206		28		214		11,020
Total held-to-maturity			20,688		34		604		20,118
Equity securities			53		30		–		83
Restricted stock			4,614		–		–		4,614
Total securities	$		112,414	$	154	$	2,225	$	110,343
2017
Available-for-sale
U.S. Treasury security	$		999	$	–	$	1	$	998
U.S. Government agencies			8,350		–		121		8,229
Mortgage-backed securities of government agencies			50,136		146		581		49,701
Asset-backed securities of government agencies			1,168		1		–		1,169
State and political subdivisions			27,020		224		103		27,141
Corporate bonds			10,532		35		142		10,425
Total available-for-sale			98,205		406		948		97,663
Held-to-maturity
U.S. Government agencies			9,477		16		228		9,265
Mortgage-backed securities of government agencies			11,581		95		145		11,531
State and political subdivisions			4,700		–		5		4,695
Total held-to-maturity			25,758		111		378		25,491
Equity securities			53		36		–		89
Restricted stock			4,614		–		–		4,614
Total securities	$		128,630	$	553	$	1,326	$	127,857

Summary of Amortized Cost and Fair Value of Debt Securities

The amortized cost and fair value of debt securities at December 31, 2018, 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	$		3,448	$		3,448
Due after one through five years			17,311			17,084
Due after five through ten years			25,927			25,485
Due after ten years			40,373			39,511
Total debt securities available-for-sale	$		87,059	$		85,528
Held-to-maturity
Due after one through five years			483			489
Due after five through ten years			3,000			2,852
Due after ten years			17,205			16,777
Total debt securities held-to-maturity	$		20,688	$		20,118

Summary of Proceeds and Gains and Losses from Sales of Available-for-Sale Securities

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 2016. There were no sales of securities in 2018 or 2017.

(Dollars in thousands)		2016
Proceeds	$	1
Realized gains	$	1
Realized losses		–
Net securities gains	$	1

Summary of Gross Unrealized Losses and Fair Value of Available for Sale Securities

The following table presents gross unrealized losses, 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:

		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
2018
Available-for-sale
U.S. Treasury security	$		1	$		996	$		–	$		–	$		1	$		996
U.S. Government agencies			–			–			180			7,170			180			7,170
Mortgage-backed securities of government agencies			33			4,206			851			35,188			884			39,394
Asset-backed securities of government agencies			16			1,024			–			–			16			1,024
State and political subdivisions			9			3,326			197			8,626			206			11,952
Corporate bonds			131			5,014			203			3,298			334			8,312
Held-to-maturity
U.S. Government agencies			–			–			390			8,609			390			8,609
Mortgage-backed securities of government agencies			72			3,404			142			3,360			214			6,764
Total temporarily impaired securities	$		262	$		17,970	$		1,963	$		66,251	$		2,225	$		84,221
2017
Available-for-sale
U.S. Treasury security			1			998			–			–			1			998
U.S. Government agencies			46			3,804			75			4,425			121			8,229
Mortgage-backed securities of government agencies			145			16,872			436			17,259			581			34,131
State and political subdivisions			26			4,400			77			3,752			103			8,152
Corporate bonds			2			2,912			140			2,360			142			5,272
Held-to-maturity
U.S. Government agencies			15			1,985			213			6,785			228			8,770
Mortgage-backed securities of government agencies			18			1,818			127			3,116			145			4,934
State and political subdivisions			5			4,695			–			–			5			4,695
Total temporarily impaired securities	$		258	$		37,484	$		1,068	$		37,697	$		1,326	$		75,181

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Loans (Tables)

12 Months Ended

Dec. 31, 2018

Receivables [Abstract]

Summary of Loans

Loans consisted of the following at December 31:

(Dollars in thousands)		2018			2017
Commercial	$		146,875	$		140,273
Commercial real estate			183,605			179,663
Residential real estate			167,296			157,172
Construction & land development			31,227			22,886
Consumer			19,402			16,306
Total loans before deferred costs			548,405			516,300
Deferred loan costs			569			530
Total loans	$		548,974	$		516,830

Summary of Allowance for Loan Losses

Summary of Allowance for Loan Losses

(Dollars in thousands)		Commercial				Commercial Real Estate				Residential Real Estate				Construction & Land Development			Consumer				Unallocated				Total
December 31, 2018
Beginning balance	$		1,813		$		1,735		$		1,273		$		237	$		175		$		371		$		5,604
Provision for loan losses			1,127				158				6				21			246				(242	)			1,316
Charge-offs			(823	)			(103	)			(37	)			–			(119	)							(1,082	)
Recoveries			61				1				3				–			4								69
Net charge-offs			(762	)			(102	)			(34	)			–			(115	)							(1,013	)
Ending balance	$		2,178		$		1,791		$		1,245		$		258	$		306		$		129		$		5,907
December 31, 2017
Beginning balance	$		2,207		$		1,264		$		1,189		$		178	$		141		$		312		$		5,291
Provision for loan losses			429				471				76				59			51				59				1,145
Charge-offs			(1,184	)			–				–				–			(20	)							(1,204	)
Recoveries			361				–				8				–			3								372
Net charge-offs			(823	)			–				8				–			(17	)							(832	)
Ending balance	$		1,813		$		1,735		$		1,273		$		237	$		175		$		371		$		5,604
December 31, 2016
Beginning balance	$		1,664		$		1,271		$		1,086		$		123	$		86		$		432		$		4,662
Provision for loan losses			626				(291	)			110				55			113				(120	)			493
Charge-offs			(297	)			(50	)			(12	)			–			(59	)							(418	)
Recoveries			214				334				5				–			1								554
Net charge-offs			(83	)			284				(7	)			–			(58	)							136
Ending balance	$		2,207		$		1,264		$		1,189		$		178	$		141		$		312		$		5,291

Allowances for Loan Losses and Ending Balances by Portfolio Segment and Impairment Method

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
2018
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$		36	$		64	$		1	$		–	$		–	$		–	$		101
Collectively evaluated for impairment			2,142			1,727			1,244			258			306			129			5,806
Total ending allowance balance	$		2,178	$		1,791	$		1,245	$		258	$		306	$		129	$		5,907
Loans:
Loans individually evaluated for impairment	$		419	$		2,403	$		1,030	$		–	$		–				$		3,852
Loans collectively evaluated for impairment			146,456			181,202			166,266			31,227			19,402						544,553
Total ending loans balance	$		146,875	$		183,605	$		167,296	$		31,227	$		19,402				$		548,405
2017
Allowance for loan losses:
Ending allowance balances attributable to loans:
Individually evaluated for impairment	$		74	$		151	$		19	$		–	$		–	$		–	$		244
Collectively evaluated for impairment			1,739			1,584			1,254			237			175			371			5,360
Total ending allowance balance	$		1,813	$		1,735	$		1,273	$		237	$		175	$		371	$		5,604
Loans:
Loans individually evaluated for impairment	$		1,726	$		4,686	$		1,470	$		–	$		–				$		7,882
Loans collectively evaluated for impairment			138,547			174,977			155,702			22,886			16,306						508,418
Total ending loans balance	$		140,273	$		179,663	$		157,172	$		22,886	$		16,306				$		516,300

Schedule of Impairment by Class of Loans

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 Investment1		Related Allowance		Average Recorded Investment		Interest Income Recognized
2018
Commercial	$	815	$	383	$	36	$	419	$	36	$	1,511	$	37
Commercial real estate		2,616		1,976		433		2,409		64		3,531		19
Residential real estate		1,190		763		269		1,032		1		1,327		57
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	4,621	$	3,122	$	738	$	3,860	$	101	$	6,369	$	113
2017
Commercial	$	3,352	$	1,329	$	399	$	1,728	$	74	$	2,884	$	52
Commercial real estate		4,826		3,117		1,566		4,683		151		3,213		14
Residential real estate		1,654		1,119		352		1,471		19		1,476		57
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	9,832	$	5,565	$	2,317	$	7,882	$	244	$	7,573	$	123
2016
Commercial	$	5,476	$	1,690	$	3,354	$	5,044	$	705	$	6,609	$	241
Commercial real estate		796		600		21		621		–		786		10
Residential real estate		1,681		1,036		472		1,508		24		1,507		61
Construction & land development		–		–		–		–		–		–		–
Total impaired loans	$	7,953	$	3,326	$	3,847	$	7,173	$	729	$	8,902	$	312

Schedule of Aging of Past Due and Nonaccrual Loans

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
2018
Commercial	$		146,431	$		253	$		34	$		–	$		157	$		444	$		146,875
Commercial real estate			181,388			86			–			–			2,131			2,217			183,605
Residential real estate			165,837			265			213			174			807			1,459			167,296
Construction & land development			31,169			58			–			–			–			58			31,227
Consumer			18,965			291			86			–			60			437			19,402
Total loans	$		543,790	$		953	$		333	$		174	$		3,155	$		4,615	$		548,405
2017
Commercial	$		138,908	$		148	$		65	$		–	$		1,152	$		1,365	$		140,273
Commercial real estate			175,062			177			–			40			4,384			4,601			179,663
Residential real estate			155,488			757			38			401			488			1,684			157,172
Construction & land development			22,886			–			–			–			–			–			22,886
Consumer			16,048			193			8			–			57			258			16,306
Total loans	$		508,392	$		1,275	$		111	$		441	$		6,081	$		7,908	$		516,300

Summary of Troubled Debt Restructurings

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

(Dollars in thousands)	Number Of Loans Restructured		Pre-Modification Recorded Investment		Post-Modification Recorded Investment
2018
Commercial		1		$      200		$      200
Residential real estate		2		27		27
Total restructured loans		3		$      227		$      227
2017
Commercial		2		$      150		$      150
Commercial real estate		4		288		288
Residential real estate		2		52		52
Total restructured loans		8		$      490		$      490
2016
Commercial		4		$    3,607		$    3,607
Residential real estate		1		101		101
Total restructured loans		5		$    3,708		$  3,708

Summary of Loans by Credit Quality Indicator

Based on the most recent analysis performed, the risk category of loans by class was as follows at December 31:

(Dollars in thousands)		Pass			Special Mention			Substandard			Doubtful			Not Rated			Total
2018
Commercial	$		125,840	$		5,383	$		14,775	$		–	$		877	$		146,875
Commercial real estate			163,261			5,582			13,578			–			1,184			183,605
Residential real estate			194			–			637			–			166,465			167,296
Construction & land development			27,540			–			–			–			3,687			31,227
Consumer			–			–			60			–			19,342			19,402
Total	$		316,835	$		10,965	$		29,050	$		–	$		191,555	$		548,405
2017
Commercial	$		116,833	$		13,685	$		8,841	$		–	$		914	$		140,273
Commercial real estate			162,012			8,220			8,620			–			811			179,663
Residential real estate			205			–			470			–			156,497			157,172
Construction & land development			18,493			880			–			–			3,513			22,886
Consumer			–			–			57			–			16,249			16,306
Total	$		297,543	$		22,785	$		17,988	$		–	$		177,984	$		516,300

Schedule of Loans Not Rated by Class of Loans

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

(Dollars in thousands)		Performing		Nonperforming				Total
2018
Commercial	$		877		$	–	$		877
Commercial real estate			1,184			–			1,184
Residential real estate			166,122			343			166,465
Construction & land development			3,687			–			3,687
Consumer			19,342			–			19,342
Total	$		191,212		$	343	$		191,555
2017
Commercial	$		914		$	–	$		914
Commercial real estate			811			–			811
Residential real estate			155,608			419			156,497
Construction & land development			3,513			–			3,513
Consumer			16,249			–			16,249
Total	$		177,095		$	419	$		177,984

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Premises and Equipment (Tables)

12 Months Ended

Dec. 31, 2018

Property, Plant and Equipment [Abstract]

Components of Premises and Equipment

Premises and equipment consisted of the following at December 31:

(Dollars in thousands)		2018			2017
Land and improvements	$		2,384	$		1,925
Buildings and improvements			11,268			11,206
Furniture and equipment			6,265			6,121
Leasehold improvements			99			99
		20,016			19,351
Accumulated depreciation			10,055			10,107
Premises and equipment, net	$		9,961	$		9,244

Summary of Future Minimum Lease Payments

Future minimum lease payments at December 31, 2018 were as follows:

(Dollars in thousands)
2019	$	91
2020		71
2021		37
Total	$	199

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Core Deposit Intangible Assets (Tables)

12 Months Ended

Dec. 31, 2018

Goodwill and Intangible Assets Disclosure [Abstract]

Core Deposit Intangible and Related Accumulated Amortization

The following table shows the core deposit intangible and the related accumulated amortization as of December 31:

(Dollars in thousands)		2018				2017				2016
Gross carrying amount	$		1,251		$		1,251		$		1,251
Accumulated amortization			(1,084	)			(983	)			(868	)
Net carrying amount	$		167		$		268		$		383

Future Amortization Expense for Core Deposit Asset

The estimated aggregate future amortization expense for the core deposit assets remaining as of December 31, 2018 was as follows:

(Dollars in thousands)		Core Deposit Amortization
2019	$		63
2020			60
2021			44
	$		167

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Interest-Bearing Deposits (Tables)

12 Months Ended

Dec. 31, 2018

Banking and Thrift [Abstract]

Summary of Interest - Bearing Deposits

Interest-bearing deposits at December 31 were as follows:

(Dollars in thousands)		2018			2017
Demand	$		120,424	$		119,579
Savings			183,712			180,217
Time deposits:
In excess of $250,000			17,951			12,026
Other			98,540			97,766
Total interest-bearing deposits	$		420,627	$		409,588

Stated Maturities of Time Deposits

At December 31, 2018, stated maturities of time deposits were as follows:
(Dollars in thousands)
2019	$	54,123
2020		28,270
2021		23,328
2022		8,566
2023		2,204
Total	$	116,491

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Borrowings (Tables)

12 Months Ended

Dec. 31, 2018

Debt Disclosure [Abstract]

Short-Term Borrowings

The outstanding balances and related information for short-term borrowings are summarized as follows:

(Dollars in thousands)	2018			2017
Balance at year-end	$	37,415		$	39,480
Average balance outstanding		41,334			50,445
Maximum month-end balance		44,155			56,932
Weighted-average rate at year-end		1.01	%		0.39	%
Weighted-average rate during the year		0.81			0.29

Summary of Repurchase Agreements Accounted for as Secured Borrowings

The following table provides additional detail regarding repurchase agreements accounted for as secured borrowings:

	Remaining Contractual Maturity Overnight and Continuous
(Dollars in thousands)	December 31, 2018		December 31, 2017
Securities of U.S. Government agencies and mortgage-backed securities of government agencies pledged, fair value		$   37,574		$   39,637
Repurchase agreements		37,415		39,480

Concerning of 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			2018		2017
Fixed-rate amortizing		4/1/24		6/1/37		1.87	%		1.16	%		2.01	%	$	8,525	$	11,409

Schedule of Maturities Other Borrowings

Maturities of other borrowings at December 31, 2018, are summarized as follows for the years ended December 31:

(Dollars in thousands)		Amount		Weighted Average Rate
2019	$		2,195		1.83	%
2020			1,665		1.84
2021			1,258		1.85
2022			946		1.86
2023 and beyond			2,461		1.94
	$		8,525		1.87	%

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Income Taxes (Tables)

12 Months Ended

Dec. 31, 2018

Income Tax Disclosure [Abstract]

Provision for Income Taxes

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

(Dollars in thousands)		2018			2017				2016
Current	$		2,170	$		3,296		$		2,973
Deferred			93			(167	)			(4	)
Change in corporate tax rate			–			101				–
Total income tax provision	$		2,263	$		3,230		$		2,969

Income Tax Provision Attributable to Income from Operations

The income tax provision attributable to income from operations differed from the amounts computed by applying the statutory federal income tax rate of 21% in 2018 and 34% for years 2017 and 2016 to income before income taxes as follows:
(Dollars in thousands)		2018				2017				2016
Expected provision using statutory federal income tax rate	$		2,452		$		3,513		$		3,300
Effect of bond and loan tax-exempt income			(128	)			(251	)			(241	)
Interest expense associated with carrying certain tax exempt bonds and loans			5				6				5
Bank owned life insurance income			(71	)			(121	)			(94	)
Other			5				83				(1	)
Total income tax provision	$		2,263		$		3,230		$		2,969

Tax Effects of Temporary Differences of Deferred Tax Assets and Deferred Tax Liabilities

The tax effects of temporary differences that give rise to deferred tax assets and deferred tax liabilities at December 31 were as follows:
(Dollars in thousands)		2018				2017
Allowance for loan losses	$		1,338		$		1,275
Unrealized loss on securities available-for-sale			367				176
Other			30				50
Deferred tax assets			1,735				1,501
Premises and equipment			(311	)			(363	)
Federal Home Loan Bank stock dividends			(376	)			(376	)
Deferred loan fees			(240	)			(232	)
Prepaid expenses			(76	)			(89	)
Other			(286	)			(279	)
Deferred tax liabilities			(1,289	)			(1,339	)
Net deferred tax asset	$		446		$		162

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Financial Instruments with Off-Balance Sheet Risk (Tables)

12 Months Ended

Dec. 31, 2018

Commitments and Contingencies Disclosure [Abstract]

Summary of Financial Instruments whose Contract Amount Represents Credit Risk

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

(Dollars in thousands)	2018		2017
Commitments to extend credit	$	172,257	$	177,354
Letters of credit		1,045		849

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Related-Party Transactions (Tables)

12 Months Ended

Dec. 31, 2018

Related Party Transactions [Abstract]

Summary of Analysis of Activity of Related-Party Loans

The following is an analysis of activity of related-party loans for the years ended December 31:

(Dollars in thousands)		2018		2017
Balance at beginning of year	$	505	$	321
New loans and advances		114		478
Repayments, including loans sold		203		294
Changes in related parties1		714		–
Balance at end of year	$	1,130	$	505

¹The adjustment made in 2018 relates to the retirement of a director and the addition of two new directors.

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Regulatory Matters (Tables)

12 Months Ended

Dec. 31, 2018

Banking and Thrift [Abstract]

Summary of Actual Capital Amounts and Ratios of Company and Bank

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

	Actual				Minimum Required For Capital Adequacy Purposes				Minimum Required To Be Well Capitalized Under Prompt Corrective Action
(Dollars in thousands)		Amount	Ratio			Amount	Ratio			Amount	Ratio
2018
Total capital to risk-weighted assets
Consolidated	$	78,968	14.5	%	$	43,500	8.0	%	$	54,375	10.0	%
Bank		77,854	14.3			43,488	8.0			54,361	10.0
Tier 1 capital to risk-weighted assets
Consolidated		73,053	13.4			32,625	6.0			43,500	8.0
Bank		71,939	13.2			32,616	6.0			43,488	8.0
Common equity tier 1 capital to risk-weighted assets
Consolidated		73,053	13.4			24,469	4.5			35,344	6.5
Bank		71,939	13.2			24,462	4.5			35,334	6.5
Tier 1 capital to average assets
Consolidated		73,053	10.1			29,031	4.0			36,288	5.0
Bank		71,939	9.9			29,025	4.0			36,281	5.0
2017
Total capital to risk-weighted assets
Consolidated	$	71,815	13.8	%	$	41,693	8.0	%	$	52,116	10.0	%
Bank		70,672	13.6			41,684	8.0			52,105	10.0
Tier 1 capital to risk-weighted assets
Consolidated		66,203	12.7			31,270	6.0			41,693	8.0
Bank		65,060	12.5			31,263	6.0			41,684	8.0
Common equity tier 1 capital to risk-weighted assets
Consolidated		66,203	12.7			23,452	4.5			33,876	6.5
Bank		65,060	12.5			23,447	4.5			33,868	6.5
Tier 1 capital to average assets
Consolidated		66,203	9.3			28,437	4.0			35,546	5.0
Bank		65,060	9.2			28,432	4.0			35,541	5.0

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Condensed Parent Company Financial Information (Tables)

12 Months Ended

Dec. 31, 2018

Condensed Financial Information Disclosure [Abstract]

Summary of Condensed Financial Information

A summary of condensed financial information of the parent company as of December 31, 2018 and 2017, and for each of the three years in the period ended December 31, 2018 follows:

(Dollars in thousands)		2018			2017
CONDENSED BALANCE SHEETS
ASSETS
Cash deposited with subsidiary bank	$		969	$		1,007
Investment in subsidiary bank			75,422			69,309
Securities available-for-sale			83			90
Other assets			144			177
TOTAL ASSETS	$		76,618	$		70,583
LIABILITIES AND SHAREHOLDERS’ EQUITY
Total liabilities	$		82	$		51
Total shareholders’ equity			76,536			70,532
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY	$		76,618	$		70,583

Summary of Condensed Statements of Comprehensive Income

(Dollars in thousands)		2018				2017				2016
CONDENSED STATEMENTS OF COMPREHENSIVE INCOME
Interest on securities	$		2		$		2		$		2
Dividends from subsidiary			2,865				2,600				2,450
Unrealized loss on equity securities			(6	)			–				–
Total income			2,861				2,602				2,452
Operating expenses			357				348				384
Income before taxes and undistributed equity income of subsidiary			2,504				2,254				2,068
Income tax benefit			(76	)			(123	)			(131	)
Equity earnings in subsidiary, net of dividends			6,832				4,724				4,539
NET INCOME	$		9,412		$		7,101		$		6,738
COMPREHENSIVE INCOME	$		8,692		$		7,421		$		6,281

Summary of Condensed Statements of Cash Flows

(Dollars in thousands)		2018				2017				2016
CONDENSED STATEMENTS OF CASH FLOWS
Cash flows from operating activities:
Net income	$		9,412		$		7,101			$	6,738
Adjustments to reconcile net income to cash provided by operations:
Equity earnings in subsidiary, net of dividends			(6,832	)			(4,724	)			(4,539	)
Change in other assets, liabilities			70				13				71
Net cash provided by operating activities			2,650				2,390				2,270
Cash flows from financing activities:
Cash dividends paid			(2,688	)			(2,304	)			(2,139	)
Net cash used in financing activities			(2,688	)			(2,304	)			(2,139	)
Increase (decrease) in cash			(38	)			86				131
Cash at beginning of year			1,007				921				790
Cash at end of year	$		969		$		1,007		$		921

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Fair Value Measurements (Tables)

12 Months Ended

Dec. 31, 2018

Fair Value Disclosures [Abstract]

Schedule of Fair Value of Assets Measured on Recurring Basis

The following table presents the assets reported on the consolidated statements of financial condition at their fair value on a recurring basis as of December 31, 2018 and December 31, 2017, by level within the fair value hierarchy. No liabilities were 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, 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
Assets:				December 31, 2018
Securities available-for-sale
U.S. Treasury security	$	996	$	–	$	–	$	996
U.S. Government agencies		–		7,170		–		7,170
Mortgage-backed securities of government agencies		–		44,901		–		44,901
Asset-backed securities of government agencies		–		1,024		–		1,024
State and political subdivisions		–		23,125		–		23,125
Corporate bonds		–		8,312		–		8,312
Total available-for-sale securities	$	996	$	84,532	$	–	$	85,528
Equity securities	$	37	$	–	$	46	$	83
Assets:				December 31, 2017
Securities available-for-sale
U.S. Treasury security	$	998	$	–	$	–	$	998
U.S. Government agencies		–		8,229		–		8,229
Mortgage-backed securities of government agencies		–		49,701		–		49,701
Asset-backed securities of government agencies		–		1,169		–		1,169
State and political subdivisions		–		27,141		–		27,141
Corporate bonds		–		10,425		–		10,425
Total available-for-sale securities	$	998	$	96,665	$	–	$	97,663
Equity securities	$	43	$	–	$	46	$	89

Schedule of Fair Value of Assets Measured on Nonrecurring Basis

The following table presents the assets measured on a nonrecurring basis on the consolidated balance sheets at their fair value as of December 31, 2018 and December 31, 2017, by level within the fair value hierarchy. Impaired loans 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.

(Dollars in thousands)	Level I	Level II		Level III	Total
Assets measured on a nonrecurring basis		December 31, 2018
Impaired loans	$  –	$  –	$	636	$     636
Other real estate owned	–	–		99	99
Assets measured on a nonrecurring basis		December 31, 2017
Impaired loans	$  –	$  –	$	2,073	$  2,073

Schedule of Quantitative Information of Assets Measured at Fair Value on Nonrecurring Basis

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

	Fair Value	Valuation	Unobservable	Range
(Dollars in thousands)	Estimate	Techniques	Input	(Weighted Average)
			December 31, 2018
		Discounted	Remaining term	1.2 yrs to 26.5 yrs / (10.9 yrs)
Impaired loans	$    636	cash flow	Discount rate	5.1% to 7.5% / (5.9%)
		Appraisal of	Appraisal adjustments2	–33%
Other real estate owned	99	collateral1	Liquidation expense2	–10%
			December 31, 2017
		Discounted	Remaining term	4 mos to 24.5 yrs / (20.3 mos)
Impaired loans	$    551	cash flow	Discount rate	4.4% to 7.5% / (5.3%)
		Appraisal of	Appraisal adjustments2	0% to –25% (–6.8%)
	1,522	collateral1	Liquidation expense2	–10%

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.

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Fair Values of Financial Instruments (Tables)

12 Months Ended

Dec. 31, 2018

Investments, All Other Investments [Abstract]

Schedule of Estimated Fair Values of Recognized Financial Instruments

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

					2018
	Carrying								Total Fair
(Dollars in thousands)		Value		Level I		Level II		Level III		Value
Financial assets
Cash and cash equivalents	$	45,564	$	45,464	$	–	$	–	$	45,464
Securities available-for-sale		85,528		996		84,532		–		85,528
Securities held-to-maturity		20,688		–		20,118		–		20,118
Equity securities		83		37		–		46		83
Restricted stock		4,614		N/A		N/A		N/A		N/A
Loans held for sale		108		108		–		–		108
Net loans		543,067		–		–		543,076		543,076
Bank-owned life insurance		13,554		13,554		–		–		13,554
Accrued interest receivable		1,581		1,581		–		–		1,581
Mortgage servicing rights		281		–		–		281		281
Financial liabilities
Deposits	$	606,498	$	490,007	$	–	$	114,434	$	604,441
Short-term borrowings		37,415		37,415		–		–		37,415
Other borrowings		8,525		–		–		8,251		8,251
Accrued interest payable		88		88		–		–		88
					2017
	Carrying								Total Fair
(Dollars in thousands)		Value		Level I		Level II		Level III		Value
Financial assets
Cash and cash equivalents	$	36,420	$	36,420	$	–	$	–	$	36,420
Securities available-for-sale		97,752		998		96,665		–		97,663
Securities held-to-maturity		25,758		–		25,491		–		25,491
Equity securities		89		43		–		46		89
Restricted stock		4,614		N/A		N/A		N/A		N/A
Loans held for sale		246		246		–		–		246
Net loans		511,226		–		–		513,106		513,106
Bank-owned life insurance		13,218		13,218		–		–		13,218
Accrued interest receivable		1,545		1,545		–		–		1,545
Mortgage servicing rights		270		–		–		270		270
Financial liabilities
Deposits	$	583,259	$	473,467	$	–	$	110,224	$	583,691
Short-term borrowings		39,480		39,480		–		–		39,480
Other borrowings		11,409		–		–		10,365		10,365
Accrued interest payable		90		90		–		–		90

Summary of Equity Securities

The following table presents the carry amount of equity securities without readily determinable fair values, the cumulative amount of impairment, and the cumulative amount of observable price changes for orderly transactions for the identical or a similar investment of the same issuer. There have been no known transactions for the equity securities in 2018.

(Dollars in thousands)	December 31, 2018 Life-to-Date
Amortized cost	$	44
Impairment		–
Observable price changes		2
Carrying value	$	46

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Accumulated Other Comprehensive Income (Tables)

12 Months Ended

Dec. 31, 2018

Equity [Abstract]

Schedule of Changes in Accumulated Other Comprehensive (Loss) Income by Component Net of Tax

The following table presents the changes in accumulated other comprehensive (loss) income by component net of tax for the years ended December 31, 2018, 2017, and 2016:

(Dollars in thousands)		Pretax				Tax Effect				After-Tax			Affected Line Item In The Consolidated Statements Of Income
Balance as of December 31, 2017	$		(839	)	$		176		$		(663	)
Unrealized holding loss on available-for-sale securities arising during the period			(989	)			208				(781	)
Amortization of held-to-maturity discount resulting from transfer			78				(17	)			61
Total other comprehensive income			(911	)			191				(720	)
Reclassify equity AOCI gain to retained earnings			(36	)			7				(29	)
BALANCE AS OF
DECEMBER 31, 2018	$		(1,786	)	$		374		$		(1,412	)
Balance as of December 31, 2016	$		(1,323	)	$		449		$		(874	)
Unrealized holding gain on available-for-sale securities arising during the period			376				(128	)			248
Amortization of held-to-maturity discount resulting from transfer			108				(36	)			72
Total other comprehensive income			484				(164	)			320
Deferred tax reclassification from retained earnings			—				(109	)			(109	)		(a	)
Total other comprehensive income (loss) after reclassification			484				(273	)			211
BALANCE AS OF
DECEMBER 31, 2017	$		(839	)	$		176		$		(663	)
Balance as of December 31, 2015	$		(631	)	$		214		$		(417	)
Unrealized holding loss on available-for-sale securities arising during the period			(1,221	)			415				(806	)
Amount reclassified for net gains included in net income			(1	)			—				(1	)		(b	)
Amortization of held-to-maturity discount resulting from transfer			530				(180	)			350
Total other comprehensive income (loss)			(692	)			235				(457	)
BALANCE AS OF
DECEMBER 31, 2016	$		(1,323	)	$		449		$		(874	)

(a) Federal income tax provision.

(b) Securities gain.

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Quarterly Financial Data (Unaudited) (Tables)

12 Months Ended

Dec. 31, 2018

Quarterly Financial Information Disclosure [Abstract]

Summary of Quarterly Financial Data

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
2018
First quarter		$  6,949		$  6,389		$  2,164		$  0.79		$  0.79
Second quarter		7,344		6,652		2,324		0.85		0.85
Third quarter		7,572		6,801		2,432		0.88		0.88
Fourth quarter		7,772		6,909		2,492		0.91		0.91
2017
First quarter		$  6,247		$  5,862		$  1,730		$  0.63		$  0.63
Second quarter		6,413		5,950		1,726		0.63		0.63
Third quarter		6,766		6,204		1,866		0.68		0.68
Fourth quarter		7,014		6,436		1,779		0.65		0.65
2016
First quarter		$  5,661		$  5,285		$  1,480		$  0.54		$  0.54
Second quarter		5,813		5,446		1,611		0.59		0.59
Third quarter		5,863		5,497		1,694		0.61		0.61
Fourth quarter		6,295		5,931		1,953		0.72		0.72

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Summary of Significant Accounting Policies - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2018 USD ($) Segment BankingCenters shares	Dec. 31, 2017 USD ($) shares	Dec. 31, 2016 USD ($) shares	Jan. 01, 2018 USD ($)
Summary Of Significant Accounting Policies [Line Items]
Number of operating industry segment | Segment	1
Number of banking centers | BankingCenters	15
Cash reserve requirement	$ 846,000	$ 929,000
Loan held for sale maximum period	3 days
Amount of other real state owned	$ 99,000	0
Impairment on goodwill	0	0
Advertising expenses	215,000	168,000	$ 215,000
Stock options outstanding	0
Stock-based compensation expenses	$ 0	$ 0	$ 0
Stock options outstanding | shares	0	0	0
Percentage allocation on source of revenue	88.00%
Prior Period Reclassification Adjustment Effect	$ 0
Accounting Standards Update 2016-01 [Member]
Summary Of Significant Accounting Policies [Line Items]
Loss recorded as a result of changes to the accounting for equity investments	$ (6,000)
Accounting Standards Update 2016-01 [Member] | Retained Earnings [Member]
Summary Of Significant Accounting Policies [Line Items]
Cumulative effect adjustment from accumulated other comprehensive income to retained earnings				$ 29,000
Held-to-Maturity Securities [Member]
Summary Of Significant Accounting Policies [Line Items]
Total investment portfolio classified as held-to-maturity	19.00%
Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Cash and cash equivalents, amounts due from banks and federal fund sold, maturity period	1 day
Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Cash and cash equivalents, amounts due from banks and federal fund sold, maturity period	90 days
Buildings [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful life of individual assets	20 years
Buildings [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful life of individual assets	40 years
Equipment [Member] | Minimum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful life of individual assets	3 years
Equipment [Member] | Maximum [Member]
Summary Of Significant Accounting Policies [Line Items]
Estimated useful life of individual assets	10 years

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Summary of Significant Accounting Policies - Computation of Weighted Average Number of Common Shares Outstanding for Basic and Diluted Earnings Per Share (Detail) - shares	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Weighted Average Number of Shares Outstanding, Diluted [Abstract]
Weighted average common shares	2,980,602	2,980,602	2,980,602
Average treasury shares	(238,360)	(238,360)	(238,574)
Total weighted average common shares outstanding (basic)	2,742,242	2,742,242	2,742,028
Dilutive effect of assumed exercise of stock options	0	0	0
Weighted average common shares outstanding (diluted)	2,742,242	2,742,242	2,742,028

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Securities - Summary of Securities Available-for-Sale and Restricted Stock (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Schedule of Trading Securities and Other Trading Assets [Line Items]
Gross Unrealized Gains, Equity securities	$ 6
Fair Value, Equity securities	83	$ 89
Amortized Cost, Available-for-sale	87,059	98,205
Gross Unrealized Gains, Available-for-sale	90	406
Gross Unrealized Losses, Available-for-sale	1,621	948
Fair Value, Available-for-sale	85,528	97,663
Amortized Cost, Held to maturity	20,688	25,758
Gross Unrealized Gains, Held to maturity	34	111
Gross Unrealized Losses, Held to maturity	604	378
Fair Value, Held to maturity	20,118	25,491
Amortized Cost	112,414	128,630
Gross Unrealized Gains	154	553
Gross Unrealized Losses	2,225	1,326
Fair Value	110,343	127,857
Equity Securities [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Equity securities	53	53
Gross Unrealized Gains, Equity securities	30	36
Gross Unrealized Losses, Equity securities	0	0
Fair Value, Equity securities	83	89
U.S. Treasury Security [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available-for-sale	997	999
Gross Unrealized Losses, Available-for-sale	1	1
Fair Value, Available-for-sale	996	998
U.S. Government Agencies [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available-for-sale	7,350	8,350
Gross Unrealized Losses, Available-for-sale	180	121
Fair Value, Available-for-sale	7,170	8,229
Amortized Cost, Held to maturity	9,482	9,477
Gross Unrealized Gains, Held to maturity	6	16
Gross Unrealized Losses, Held to maturity	390	228
Fair Value, Held to maturity	9,098	9,265
Mortgage-Backed Securities of Government Agencies [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available-for-sale	45,744	50,136
Gross Unrealized Gains, Available-for-sale	41	146
Gross Unrealized Losses, Available-for-sale	884	581
Fair Value, Available-for-sale	44,901	49,701
Amortized Cost, Held to maturity	11,206	11,581
Gross Unrealized Gains, Held to maturity	28	95
Gross Unrealized Losses, Held to maturity	214	145
Fair Value, Held to maturity	11,020	11,531
Asset-Backed Securities of Government Agencies [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available-for-sale	1,040	1,168
Gross Unrealized Gains, Available-for-sale		1
Gross Unrealized Losses, Available-for-sale	16
Fair Value, Available-for-sale	1,024	1,169
State and Political Subdivisions [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available-for-sale	23,282	27,020
Gross Unrealized Gains, Available-for-sale	49	224
Gross Unrealized Losses, Available-for-sale	206	103
Fair Value, Available-for-sale	23,125	27,141
Amortized Cost, Held to maturity		4,700
Gross Unrealized Losses, Held to maturity		5
Fair Value, Held to maturity		4,695
Corporate Bonds [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost, Available-for-sale	8,646	10,532
Gross Unrealized Gains, Available-for-sale		35
Gross Unrealized Losses, Available-for-sale	334	142
Fair Value, Available-for-sale	8,312	10,425
Restricted Stock [Member]
Schedule of Trading Securities and Other Trading Assets [Line Items]
Amortized Cost	4,614	4,614
Fair Value	$ 4,614	$ 4,614

XML

Securities - Summary of Amortized Cost and Fair Value of Debt Securities (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Available-for-sale
Due in one year or less, Amortized Cost	$ 3,448
Due after one through five years, Amortized Cost	17,311
Due after five through ten years, Amortized Cost	25,927
Due after ten years, Amortized Cost	40,373
Total debt securities available-for-sale, Amortized Cost	87,059
Due in one year or less, Fair Value	3,448
Due after one through five years, Fair Value	17,084
Due after five through ten years, Fair Value	25,485
Due after ten years, Fair Value	39,511
Total debt securities available-for-sale, Fair Value	85,528
Held-to-maturity
Due after one through five years, Amortized Cost	483
Due after five through ten years, Amortized Cost	3,000
Due after ten years, Amortized Cost	17,205
Amortized Cost, Held to maturity	20,688	$ 25,758
Due after one through five years, Fair Value	489
Due after five through ten years, Fair Value	2,852
Due after ten years, Fair Value	16,777
Total debt securities held-to-maturity, Fair Value	$ 20,118	$ 25,491

XML

Securities - Additional Information (Detail) $ in Thousands	3 Months Ended
	Dec. 31, 2018 USD ($) Securities	Dec. 31, 2017 USD ($)
Investments, Debt and Equity Securities [Abstract]
Fair value of pledged securities	$ 83,400	$ 94,000
Restricted stock investment in FHLB stock	4,100	4,100
Federal Reserve Bank stock	$ 471	$ 471
Number of securities in an unrealized loss position, Total | Securities	103
Number of securities in continuous unrealized loss position, 12 months or more | Securities	73

XML

Securities - Summary of Proceeds and Gains and Losses from Sales of Available-for-Sale Securities (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2016 USD ($)
Investments, Debt and Equity Securities [Abstract]
Proceeds	$ 1
Realized gains	1
Realized losses	0
Net securities gains	$ 1

XML

Securities - Summary of Gross Unrealized Losses and Fair Value of Available for Sale Securities (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity, Gross Unrealized Losses, Total	$ 604	$ 378
Gross Unrealized Losses, Total	1,621	948
Gross Unrealized Losses, Less Than 12 Months	262	258
Fair Value, Less Than 12 Months	17,970	37,484
Gross Unrealized Losses, 12 Months Or More	1,963	1,068
Fair Value, 12 Months Or More	66,251	37,697
Gross Unrealized Losses, Total	2,225	1,326
Fair Value, Total	84,221	75,181
U.S. Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity, Gross Unrealized Losses, Less Than 12 Months		15
Held-to-maturity, Fair Value, Less Than 12 Months		1,985
Held-to-maturity, Gross Unrealized Losses, 12 Months Or More	390	213
Held-to-maturity, Fair Value, 12 Months Or More	8,609	6,785
Held-to-maturity, Gross Unrealized Losses, Total	390	228
Held-to-maturity, Fair Value, Total	8,609	8,770
Gross Unrealized Losses, Less Than 12 Months		46
Fair Value, Less Than 12 Months		3,804
Gross Unrealized Losses, 12 Months Or More	180	75
Fair Value, 12 Months Or More	7,170	4,425
Gross Unrealized Losses, Total	180	121
Fair Value, Total	7,170	8,229
Mortgage-Backed Securities of Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity, Gross Unrealized Losses, Less Than 12 Months	72	18
Held-to-maturity, Fair Value, Less Than 12 Months	3,404	1,818
Held-to-maturity, Gross Unrealized Losses, 12 Months Or More	142	127
Held-to-maturity, Fair Value, 12 Months Or More	3,360	3,116
Held-to-maturity, Gross Unrealized Losses, Total	214	145
Held-to-maturity, Fair Value, Total	6,764	4,934
Gross Unrealized Losses, Less Than 12 Months	33	145
Fair Value, Less Than 12 Months	4,206	16,872
Gross Unrealized Losses, 12 Months Or More	851	436
Fair Value, 12 Months Or More	35,188	17,259
Gross Unrealized Losses, Total	884	581
Fair Value, Total	39,394	34,131
State and Political Subdivisions [Member]
Schedule of Available-for-sale Securities [Line Items]
Held-to-maturity, Gross Unrealized Losses, Less Than 12 Months		5
Held-to-maturity, Fair Value, Less Than 12 Months		4,695
Held-to-maturity, Gross Unrealized Losses, Total		5
Held-to-maturity, Fair Value, Total		4,695
Gross Unrealized Losses, Less Than 12 Months	9	26
Fair Value, Less Than 12 Months	3,326	4,400
Gross Unrealized Losses, 12 Months Or More	197	77
Fair Value, 12 Months Or More	8,626	3,752
Gross Unrealized Losses, Total	206	103
Fair Value, Total	11,952	8,152
U.S. Treasury Security [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than 12 Months	1	1
Fair Value, Less Than 12 Months	996	998
Gross Unrealized Losses, Total	1	1
Fair Value, Total	996	998
Asset-Backed Securities of Government Agencies [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than 12 Months	16
Fair Value, Less Than 12 Months	1,024
Gross Unrealized Losses, Total	16
Fair Value, Total	1,024
Corporate Bonds [Member]
Schedule of Available-for-sale Securities [Line Items]
Gross Unrealized Losses, Less Than 12 Months	131	2
Fair Value, Less Than 12 Months	5,014	2,912
Gross Unrealized Losses, 12 Months Or More	203	140
Fair Value, 12 Months Or More	3,298	2,360
Gross Unrealized Losses, Total	334	142
Fair Value, Total	$ 8,312	$ 5,272

XML

Loans - Summary of Loans (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans before deferred costs	$ 548,405	$ 516,300
Deferred loan costs	569	530
Total loans	548,974	516,830
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans before deferred costs	146,875	140,273
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans before deferred costs	183,605	179,663
Residential Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans before deferred costs	167,296	157,172
Construction & Land Development [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans before deferred costs	31,227	22,886
Consumer [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Total loans before deferred costs	$ 19,402	$ 16,306

XML

Loans - Additional Information (Detail)	3 Months Ended	12 Months Ended
	Dec. 31, 2016 USD ($) Contract	Dec. 31, 2018 USD ($) Property	Dec. 31, 2017 USD ($)	Dec. 31, 2016 Contract
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans classified as troubled debt restructurings		$ 1,500,000	$ 2,900,000
Reserves allocated to customers whose loan terms are modified in troubled debt restructurings		17,000	38,000
Loans payable in nonaccrual of interest status		$ 117,000
Loans restructured, subsequently defaulted | Contract				0
Number of properties acquired | Property		1
Other real estate real estate acquired through foreclosure		$ 99,000	0
Mortgage loans in process of foreclosure amount		57,000	114,000
Outstanding balance of commercial loans classified under credit risk, minimum amount		300,000
Loans listed as not rated under risk category, maximum amount		300,000
Loans serviced for others		92,300,000	82,700,000
Commercial [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses related to commercial loans		5,900,000
Loans restructured, subsequently defaulted | Contract	1
Loans restructured, subsequently defaulted	$ 3,300,000
Commercial Real Estate [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Allowance for loan losses related to commercial loans		5,000,000
Mortgage Servicing Rights [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Mortgage servicing rights		281,000,000	270,000,000
Valuation allowance		0	0
Residential Mortgage [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Residential Mortgage Loans with servicing retained		66,800,000	$ 64,700,000
Performing [Member]
Accounts, Notes, Loans and Financing Receivable [Line Items]
Loans classified as troubled debt restructurings		$ 1,400,000

XML

Loans - Schedule of Allowances for Loan Losses by Portfolio Segment (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	$ 5,604	$ 5,291	$ 4,662
Provision for loan losses	1,316	1,145	493
Charge-offs	(1,082)	(1,204)	(418)
Recoveries	69	372	554
Net charge-offs	(1,013)	(832)	136
Ending balance	5,907	5,604	5,291
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,813	2,207	1,664
Provision for loan losses	1,127	429	626
Charge-offs	(823)	(1,184)	(297)
Recoveries	61	361	214
Net charge-offs	(762)	(823)	(83)
Ending balance	2,178	1,813	2,207
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,735	1,264	1,271
Provision for loan losses	158	471	(291)
Charge-offs	(103)		(50)
Recoveries	1		334
Net charge-offs	(102)		284
Ending balance	1,791	1,735	1,264
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	1,273	1,189	1,086
Provision for loan losses	6	76	110
Charge-offs	(37)		(12)
Recoveries	3	8	5
Net charge-offs	(34)	8	(7)
Ending balance	1,245	1,273	1,189
Construction & Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	237	178	123
Provision for loan losses	21	59	55
Ending balance	258	237	178
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	175	141	86
Provision for loan losses	246	51	113
Charge-offs	(119)	(20)	(59)
Recoveries	4	3	1
Net charge-offs	(115)	(17)	(58)
Ending balance	306	175	141
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Beginning balance	371	312	432
Provision for loan losses	(242)	59	(120)
Ending balance	$ 129	$ 371	$ 312

XML

Loans - Allowances for Loan Losses and Ending Balances by Portfolio Segment and Impairment Method (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	$ 101	$ 244
Collectively evaluated for impairment	5,806	5,360
Total ending allowance balance	5,907	5,604	$ 5,291	$ 4,662
Loans:
Loans individually evaluated for impairment	3,852	7,882
Loans collectively evaluated for impairment	544,553	508,418
Total ending loans balance	548,405	516,300
Commercial [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	36	74
Collectively evaluated for impairment	2,142	1,739
Total ending allowance balance	2,178	1,813	2,207	1,664
Loans:
Loans individually evaluated for impairment	419	1,726
Loans collectively evaluated for impairment	146,456	138,547
Total ending loans balance	146,875	140,273
Commercial Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	64	151
Collectively evaluated for impairment	1,727	1,584
Total ending allowance balance	1,791	1,735	1,264	1,271
Loans:
Loans individually evaluated for impairment	2,403	4,686
Loans collectively evaluated for impairment	181,202	174,977
Total ending loans balance	183,605	179,663
Residential Real Estate [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Individually evaluated for impairment	1	19
Collectively evaluated for impairment	1,244	1,254
Total ending allowance balance	1,245	1,273	1,189	1,086
Loans:
Loans individually evaluated for impairment	1,030	1,470
Loans collectively evaluated for impairment	166,266	155,702
Total ending loans balance	167,296	157,172
Construction & Land Development [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	258	237
Total ending allowance balance	258	237	178	123
Loans:
Loans collectively evaluated for impairment	31,227	22,886
Total ending loans balance	31,227	22,886
Consumer [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	306	175
Total ending allowance balance	306	175	141	86
Loans:
Loans collectively evaluated for impairment	19,402	16,306
Total ending loans balance	19,402	16,306
Unallocated [Member]
Financing Receivable, Allowance for Credit Losses [Line Items]
Collectively evaluated for impairment	129	371
Total ending allowance balance	$ 129	$ 371	$ 312	$ 432

XML

Loans - Schedule of Impairment by Class of Loans (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	$ 4,621	$ 9,832	$ 7,953
Recorded Investment with no Allowance	3,122	5,565	3,326
Recorded Investment with Allowance	738	2,317	3,847
Total Recorded Investment	3,860	7,882	7,173
Related Allowance	101	244	729
Average Recorded Investment	6,369	7,573	8,902
Interest Income Recognized	113	123	312
Commercial [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	815	3,352	5,476
Recorded Investment with no Allowance	383	1,329	1,690
Recorded Investment with Allowance	36	399	3,354
Total Recorded Investment	419	1,728	5,044
Related Allowance	36	74	705
Average Recorded Investment	1,511	2,884	6,609
Interest Income Recognized	37	52	241
Commercial Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	2,616	4,826	796
Recorded Investment with no Allowance	1,976	3,117	600
Recorded Investment with Allowance	433	1,566	21
Total Recorded Investment	2,409	4,683	621
Related Allowance	64	151
Average Recorded Investment	3,531	3,213	786
Interest Income Recognized	19	14	10
Residential Real Estate [Member]
Financing Receivable, Impaired [Line Items]
Unpaid Principal Balance	1,190	1,654	1,681
Recorded Investment with no Allowance	763	1,119	1,036
Recorded Investment with Allowance	269	352	472
Total Recorded Investment	1,032	1,471	1,508
Related Allowance	1	19	24
Average Recorded Investment	1,327	1,476	1,507
Interest Income Recognized	$ 57	$ 57	$ 61

XML

Loans - Schedule of Aging of Past Due and Nonaccrual Loans (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	$ 543,790	$ 508,392
Non-accrual	3,155	6,081
Total past due and non-accrual	4,615	7,908
Total ending loans balance	548,405	516,300
30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	953	1,275
60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	333	111
90 Days Plus Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	174	441
Commercial [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	146,431	138,908
Non-accrual	157	1,152
Total past due and non-accrual	444	1,365
Total ending loans balance	146,875	140,273
Commercial [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	253	148
Commercial [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	34	65
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	181,388	175,062
Non-accrual	2,131	4,384
Total past due and non-accrual	2,217	4,601
Total ending loans balance	183,605	179,663
Commercial Real Estate [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	86	177
Commercial Real Estate [Member] | 90 Days Plus Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due		40
Residential Real Estate [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	165,837	155,488
Non-accrual	807	488
Total past due and non-accrual	1,459	1,684
Total ending loans balance	167,296	157,172
Residential Real Estate [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	265	757
Residential Real Estate [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	213	38
Residential Real Estate [Member] | 90 Days Plus Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	174	401
Construction & Land Development [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	31,169	22,886
Total past due and non-accrual	58
Total ending loans balance	31,227	22,886
Construction & Land Development [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	58
Consumer [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Current	18,965	16,048
Non-accrual	60	57
Total past due and non-accrual	437	258
Total ending loans balance	19,402	16,306
Consumer [Member] | 30 to 59 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	291	193
Consumer [Member] | 60 to 89 Days Past Due [Member]
Financing Receivable, Recorded Investment, Past Due [Line Items]
Total Past Due	$ 86	$ 8

XML

Loans - Summary of Troubled Debt Restructurings (Detail) $ in Thousands	12 Months Ended
	Dec. 31, 2018 USD ($) Contract	Dec. 31, 2017 USD ($) Contract	Dec. 31, 2016 USD ($) Contract
Financing Receivable, Modifications [Line Items]
Number of Loans Restructured | Contract	3	8	5
Pre-Modification Recorded Investment	$ 227	$ 490	$ 3,708
Post-Modification Recorded Investment	$ 227	$ 490	$ 3,708
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans Restructured | Contract	1	2	4
Pre-Modification Recorded Investment	$ 200	$ 150	$ 3,607
Post-Modification Recorded Investment	$ 200	$ 150	$ 3,607
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans Restructured | Contract		4
Pre-Modification Recorded Investment		$ 288
Post-Modification Recorded Investment		$ 288
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Number of Loans Restructured | Contract	2	2	1
Pre-Modification Recorded Investment	$ 27	$ 52	$ 101
Post-Modification Recorded Investment	$ 27	$ 52	$ 101

XML

Loans - Summary of Loans by Credit Quality Indicator (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 548,405	$ 516,300
Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	146,875	140,273
Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	183,605	179,663
Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	167,296	157,172
Construction & Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	31,227	22,886
Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	19,402	16,306
Pass [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	316,835	297,543
Pass [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	125,840	116,833
Pass [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	163,261	162,012
Pass [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	194	205
Pass [Member] | Construction & Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	27,540	18,493
Special Mention [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	10,965	22,785
Special Mention [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	5,383	13,685
Special Mention [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	5,582	8,220
Special Mention [Member] | Construction & Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans		880
Substandard [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	29,050	17,988
Substandard [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	14,775	8,841
Substandard [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	13,578	8,620
Substandard [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	637	470
Substandard [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	60	57
Not Rated [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	191,555	177,984
Not Rated [Member] | Commercial [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	877	914
Not Rated [Member] | Commercial Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	1,184	811
Not Rated [Member] | Residential Real Estate [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	166,465	156,497
Not Rated [Member] | Construction & Land Development [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	3,687	3,513
Not Rated [Member] | Consumer [Member]
Financing Receivable, Recorded Investment [Line Items]
Total Loans	$ 19,342	$ 16,249

XML

Loans - Schedule of Loans Not Rated by Class of Loans (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	$ 191,555	$ 177,984
Commercial [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	877	914
Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	1,184	811
Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	166,465	156,497
Construction & Land Development [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	3,687	3,513
Consumer [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	19,342	16,249
Performing [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	191,212	177,095
Performing [Member] | Commercial [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	877	914
Performing [Member] | Commercial Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	1,184	811
Performing [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	166,122	155,608
Performing [Member] | Construction & Land Development [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	3,687	3,513
Performing [Member] | Consumer [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	19,342	16,249
Nonperforming [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	343	419
Nonperforming [Member] | Residential Real Estate [Member]
Financing Receivable, Modifications [Line Items]
Loans not rated by class of loans	$ 343	$ 419

XML

Premises and Equipment - Components of Premises and Equipment (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 20,016	$ 19,351
Accumulated depreciation	10,055	10,107
Premises and equipment, net	9,961	9,244
Land and Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	2,384	1,925
Buildings and Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	11,268	11,206
Furniture and Equipment [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	6,265	6,121
Leasehold Improvements [Member]
Property, Plant and Equipment [Line Items]
Premises and equipment, gross	$ 99	$ 99

XML

Premises and Equipment - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Property, Plant and Equipment [Abstract]
Rental Expenses	$ 104	$ 158	$ 191
Depreciation	$ 598	$ 652	$ 690

XML

Premises and Equipment - Summary of Future Minimum Lease Payments (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Operating Leases, Future Minimum Payments Due, Fiscal Year Maturity [Abstract]
2019	$ 91
2020	71
2021	37
Total	$ 199

XML

Core Deposit Intangible Assets - Additional Information (Detail) - USD ($)	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Amortization Expense [Line Items]
Amortization Expenses	$ 101,000	$ 116,000	$ 121,000
Core deposit intangible	0	0	0
Core Deposits [Member]
Amortization Expense [Line Items]
Amortization Expenses	$ 101,000	$ 116,000	$ 121,000
Asset Amortized over an estimated life	10 years

XML

Core Deposit Intangible Assets - Core Deposit Intangible and Related Accumulated Amortization (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Goodwill And Core Deposit Intangibles [Line Items]
Net carrying amount	$ 167
Core Deposits [Member]
Goodwill And Core Deposit Intangibles [Line Items]
Gross carrying amount	1,251	$ 1,251	$ 1,251
Accumulated amortization	(1,084)	(983)	(868)
Net carrying amount	$ 167	$ 268	$ 383

XML

Core Deposit Intangible Assets - Future Amortization Expense for Core Deposit Asset (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Goodwill and Intangible Assets Disclosure [Abstract]
2019	$ 63
2020	60
2021	44
Net carrying amount	$ 167

XML

Interest-Bearing Deposits - Summary of Interest - Bearing Deposits (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Interest Bearing Deposits [Line Items]
Total interest-bearing deposits	$ 420,627	$ 409,588
Interest-bearing Deposits [Member]
Interest Bearing Deposits [Line Items]
Demand	120,424	119,579
Savings	183,712	180,217
In excess of $250,000	17,951	12,026
Other	98,540	97,766
Total interest-bearing deposits	$ 420,627	$ 409,588

XML

Interest-Bearing Deposits - Stated Maturities of Time Deposits (Detail) $ in Thousands	Dec. 31, 2018 USD ($)
Banking and Thrift [Abstract]
2019	$ 54,123
2020	28,270
2021	23,328
2022	8,566
2023	2,204
Total	$ 116,491

XML

Borrowings - Short-Term Borrowings (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Equity Method Investments And Cost Method Investments [Abstract]
Balance at year-end	$ 37,415	$ 39,480
Average balance outstanding	41,334	50,445
Maximum month-end balance	$ 44,155	$ 56,932
Weighted-average rate at year-end	1.01%	0.39%
Weighted-average rate during the year	0.81%	0.29%

XML

Borrowings - Summary of Repurchase Agreements Accounted for as Secured Borrowings (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Short-term Debt [Abstract]
Securities of U.S. Government agencies and mortgage-backed securities of government agencies pledged, fair value	$ 37,574	$ 39,637
Repurchase agreements	$ 37,415	$ 39,480

XML

Borrowings - Concerning of Other Borrowings (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Debt Instrument [Line Items]
Other borrowings	$ 8,525	$ 11,409
Fixed Rate Amortizing Borrowing [Member]
Debt Instrument [Line Items]
Maturity date Range, From	Apr. 01, 2024
Maturity date Range, To	Jun. 01, 2037
Weighted Average Interest Rate	1.87%
Other borrowings	$ 8,525	$ 11,409
Fixed Rate Amortizing Borrowing [Member] | Minimum [Member]
Debt Instrument [Line Items]
Stated Interest Rate Range	1.16%
Fixed Rate Amortizing Borrowing [Member] | Maximum [Member]
Debt Instrument [Line Items]
Stated Interest Rate Range	2.01%

XML

Borrowings - Schedule of Maturities Other Borrowings (Detail) - Other Borrowings [Member] $ in Thousands	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
2019	$ 2,195
2020	1,665
2021	1,258
2022	946
2023 and beyond	2,461
Long term Debt, Total	$ 8,525
Weighted Average Interest Rate, 2019	1.83%
Weighted Average Interest Rate, 2020	1.84%
Weighted Average Interest Rate, 2021	1.85%
Weighted Average Interest Rate, 2022	1.86%
Weighted Average Interest Rate, 2023 and beyond	1.94%
Total	1.87%

XML

Borrowings - Additional Information (Detail) $ in Millions	Dec. 31, 2018 USD ($)
Debt Instrument [Line Items]
Additional borrowing capacity	$ 81.8
Minimum [Member]
Debt Instrument [Line Items]
Principal curtailment is due on borrowings	10.00%
Maximum [Member]
Debt Instrument [Line Items]
Principal curtailment is due on borrowings	20.00%

XML

Income Taxes - Provision for Income Taxes (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Tax Expense (Benefit), Continuing Operations [Abstract]
Current	$ 2,170	$ 3,296	$ 2,973
Deferred	93	(167)	(4)
Change in corporate tax rate		101
Total income tax provision	$ 2,263	$ 3,230	$ 2,969

XML

Income Taxes - Additional Information (Detail) - USD ($)		12 Months Ended
	Dec. 22, 2017	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Income Tax Disclosure [Abstract]
Effective tax rate	34.00%	21.00%	34.00%	34.00%
Tax expense (benefit) due to Tax Cuts and Jobs Act			$ 101,000
Liability for uncertain tax position		$ 0
Unrecognized tax benefits		$ 0

XML

Income Taxes - Income Tax Provision Attributable to Income from Operations (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Effective Income Tax Rate Reconciliation, Amount [Abstract]
Expected provision using statutory federal income tax rate	$ 2,452	$ 3,513	$ 3,300
Effect of bond and loan tax-exempt income	(128)	(251)	(241)
Interest expense associated with carrying certain tax exempt bonds and loans	5	6	5
Bank owned life insurance income	(71)	(121)	(94)
Other	5	83	(1)
Total income tax provision	$ 2,263	$ 3,230	$ 2,969

XML

Income Taxes - Tax Effects of Temporary Differences of Deferred Tax Assets and Deferred Tax Liabilities (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Components of Deferred Tax Assets and Liabilities [Abstract]
Allowance for loan losses	$ 1,338	$ 1,275
Unrealized loss on securities available-for-sale	367	176
Other	30	50
Deferred tax assets	1,735	1,501
Premises and equipment	(311)	(363)
Federal Home Loan Bank stock dividends	(376)	(376)
Deferred loan fees	(240)	(232)
Prepaid expenses	(76)	(89)
Other	(286)	(279)
Deferred tax liabilities	(1,289)	(1,339)
Net deferred tax asset	$ 446	$ 162

XML

Employee Benefits - Additional Information (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Jan. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Disclosure of Compensation Related Costs, Share-based Payments [Abstract]
Profit sharing contribution	3.00%		3.00%	3.00%
Company match of participant contributions		100.00%	50.00%	50.00%
Maximum annual compensation contribution	2.00%	4.00%	2.00%	2.00%
Expense under plan	$ 565		$ 363	$ 338
Options outstanding	0		0	0

XML

Financial Instruments with Off-Balance Sheet Risk - Summary of Financial Instruments whose Contract Amount Represents Credit Risk (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Off Balance Sheet Financing [Line Items]
Fair value of financial instruments	$ 1,045	$ 849
Commitments to Extend Credit [Member]
Off Balance Sheet Financing [Line Items]
Fair value of financial instruments	$ 172,257	$ 177,354

XML

Related-Party Transactions - Summary of Analysis of Activity of Related-Party Loans (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017
Related Party Transactions [Abstract]
Balance at beginning of year	$ 505	$ 321
New loans and advances	114	478
Repayments, including loans sold	203	294
Changes in related parties	714
Balance at end of year	$ 1,130	$ 505

XML

Related-Party Transactions - Summary of Analysis of Activity of Related-Party Loans (Parenthetical) (Detail)	Dec. 31, 2018 Director
Related Party Transactions [Abstract]
Number of new directors retired	2

XML

Related-Party Transactions - Additional Information (Detail) - USD ($) $ in Millions	Dec. 31, 2018	Dec. 31, 2017
Related Party Transactions [Abstract]
Deposits from executive officers, directors and their related business interests	$ 2.3	$ 2.1

XML

Regulatory Matters - Summary of Actual Capital Amounts and Ratios of Company and Bank (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Bank [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital to risk-weighted assets, Actual Amount	$ 77,854	$ 70,672
Tier 1 capital to risk-weighted assets, Actual Amount	71,939	65,060
Common equity tier 1 capital to risk-weighted assets, Actual Amount	71,939	65,060
Tier 1 capital to average assets, Actual Amount	$ 71,939	$ 65,060
Total capital to risk-weighted assets, Actual Ratio	14.30%	13.60%
Tier 1 capital to risk-weighted assets, Actual Ratio	13.20%	12.50%
Common equity tier 1 capital to risk-weighted assets, Actual Ratio	13.20%	12.50%
Tier 1 capital to average assets, Actual Ratio	9.90%	9.20%
Total capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Amount	$ 43,488	$ 41,684
Tier 1 capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Amount	32,616	31,263
Common equity tier I capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Amount	24,462	23,447
Tier 1 capital to average assets, Minimum Required for Capital Adequacy Purposes Amount	$ 29,025	$ 28,432
Total capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Ratio	8.00%	8.00%
Tier 1 capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Ratio	6.00%	6.00%
Common equity tier I capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Ratio	4.50%	4.50%
Tier 1 capital to average assets, Minimum Required for Capital Adequacy Purposes Ratio	4.00%	4.00%
Total capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	$ 54,361	$ 52,105
Tier 1 capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	43,488	41,684
Common equity tier I capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	35,334	33,868
Tier 1 capital to average assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	$ 36,281	$ 35,541
Total capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	10.00%	10.00%
Tier 1 capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	8.00%	8.00%
Common equity tier I capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	6.50%	6.50%
Tier 1 capital to average assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	5.00%	5.00%
Consolidated [Member]
Compliance with Regulatory Capital Requirements under Banking Regulations [Line Items]
Total capital to risk-weighted assets, Actual Amount	$ 78,968	$ 71,815
Tier 1 capital to risk-weighted assets, Actual Amount	73,053	66,203
Common equity tier 1 capital to risk-weighted assets, Actual Amount	73,053	66,203
Tier 1 capital to average assets, Actual Amount	$ 73,053	$ 66,203
Total capital to risk-weighted assets, Actual Ratio	14.50%	13.80%
Tier 1 capital to risk-weighted assets, Actual Ratio	13.40%	12.70%
Common equity tier 1 capital to risk-weighted assets, Actual Ratio	13.40%	12.70%
Tier 1 capital to average assets, Actual Ratio	10.10%	9.30%
Total capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Amount	$ 43,500	$ 41,693
Tier 1 capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Amount	32,625	31,270
Common equity tier I capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Amount	24,469	23,452
Tier 1 capital to average assets, Minimum Required for Capital Adequacy Purposes Amount	$ 29,031	$ 28,437
Total capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Ratio	8.00%	8.00%
Tier 1 capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Ratio	6.00%	6.00%
Common equity tier I capital to risk-weighted assets, Minimum Required for Capital Adequacy Purposes Ratio	4.50%	4.50%
Tier 1 capital to average assets, Minimum Required for Capital Adequacy Purposes Ratio	4.00%	4.00%
Total capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	$ 54,375	$ 52,116
Tier 1 capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	43,500	41,693
Common equity tier I capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	35,344	33,876
Tier 1 capital to average assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Amount	$ 36,288	$ 35,546
Total capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	10.00%	10.00%
Tier 1 capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	8.00%	8.00%
Common equity tier I capital to risk-weighted assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	6.50%	6.50%
Tier 1 capital to average assets, Minimum Required to be Well Capitalized Under Prompt Corrective Action Ratio	5.00%	5.00%

XML

Regulatory Matters - Additional Information (Detail) - USD ($) $ in Millions	12 Months Ended
	Dec. 31, 2018	Jan. 01, 2019
Schedule Of Regulatory Assets And Liabilities [Line Items]
Period of Retained Earnings For Restriction of Dividend	2 years
Maximum percentage of secured loans of Bank's common stock and capital surplus	10.00%
Subsequent Event [Member]
Schedule Of Regulatory Assets And Liabilities [Line Items]
Provision for dividend to the Company		$ 11.6

XML

Condensed Parent Company Financial Information - Summary of Condensed Financial Information (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016	Dec. 31, 2015
ASSETS
Cash deposited with subsidiary bank	$ 23,214	$ 17,255
Securities available-for-sale	85,528	97,663
TOTAL ASSETS	731,722	707,063
LIABILITIES AND SHAREHOLDERS' EQUITY
Total liabilities	655,186	636,531
Total shareholders' equity	76,536	70,532	$ 65,415	$ 61,266
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	731,722	707,063
Parent Company [Member]
ASSETS
Cash deposited with subsidiary bank	969	1,007
Investment in subsidiary bank	75,422	69,309
Securities available-for-sale	83	90
Other assets	144	177
TOTAL ASSETS	76,618	70,583
LIABILITIES AND SHAREHOLDERS' EQUITY
Total liabilities	82	51
Total shareholders' equity	76,536	70,532
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY	$ 76,618	$ 70,583

XML

Condensed Parent Company Financial Information - Summary of Condensed Statements of Comprehensive Income (Detail) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Interest on securities	$ 7,772	$ 7,572	$ 7,344	$ 6,949	$ 7,014	$ 6,766	$ 6,413	$ 6,247	$ 6,295	$ 5,863	$ 5,813	$ 5,661	$ 29,637	$ 26,440	$ 23,632
Unrealized loss on equity securities													(6)
NET INCOME	$ 2,492	$ 2,432	$ 2,324	$ 2,164	$ 1,779	$ 1,866	$ 1,726	$ 1,730	$ 1,953	$ 1,694	$ 1,611	$ 1,480	9,412	7,101	6,738
COMPREHENSIVE INCOME													8,692	7,421	6,281
Parent Company [Member]
Interest on securities													2	2	2
Dividends from subsidiary													2,865	2,600	2,450
Unrealized loss on equity securities													(6)
Total income													2,861	2,602	2,452
Operating expenses													357	348	384
Income before taxes and undistributed equity income of subsidiary													2,504	2,254	2,068
Income tax benefit													(76)	(123)	(131)
Equity earnings in subsidiary, net of dividends													6,832	4,724	4,539
NET INCOME													9,412	7,101	6,738
COMPREHENSIVE INCOME													$ 8,692	$ 7,421	$ 6,281

XML

Condensed Parent Company Financial Information - Summary of Condensed Statements of Cash Flows (Detail) - USD ($) $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Cash flows from operating activities:
Net income	$ 2,492	$ 2,432	$ 2,324	$ 2,164	$ 1,779	$ 1,866	$ 1,726	$ 1,730	$ 1,953	$ 1,694	$ 1,611	$ 1,480	$ 9,412	$ 7,101	$ 6,738
Adjustments to reconcile net income to cash provided by operations:
Change in other assets, liabilities													508	289	(1,521)
Cash flows from financing activities:
Cash dividends paid													(2,688)	(2,304)	(2,139)
Parent Company [Member]
Cash flows from operating activities:
Net income													9,412	7,101	6,738
Adjustments to reconcile net income to cash provided by operations:
Equity earnings in subsidiary, net of dividends													(6,832)	(4,724)	(4,539)
Change in other assets, liabilities													70	13	71
Net cash provided by operating activities													2,650	2,390	2,270
Cash flows from financing activities:
Cash dividends paid													(2,688)	(2,304)	(2,139)
Net cash used in financing activities													(2,688)	(2,304)	(2,139)
Increase (decrease) in cash													(38)	86	131
Cash at beginning of year				$ 1,007				$ 921				$ 790	1,007	921	790
Cash at end of year	$ 969				$ 1,007				$ 921				$ 969	$ 1,007	$ 921

XML

Fair Value Measurements - Additional Information (Detail) - USD ($)	Dec. 31, 2018	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Liabilities carried at fair value	$ 0	$ 0

XML

Fair Value Measurements - Schedule of Fair Value of Assets Measured on Recurring Basis (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	$ 85,528
Equity securities	83	$ 89
Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	85,528	97,663
Equity securities	83	89
Fair Value, Measurements, Recurring [Member] | U.S. Treasury Security [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	996	998
Fair Value, Measurements, Recurring [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	7,170	8,229
Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities of Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	44,901	49,701
Fair Value, Measurements, Recurring [Member] | Asset-Backed Securities of Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	1,024	1,169
Fair Value, Measurements, Recurring [Member] | State and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	23,125	27,141
Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	8,312	10,425
Level I [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	996	998
Equity securities	37	43
Level I [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Treasury Security [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	996	998
Level II [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	84,532	96,665
Level II [Member] | Fair Value, Measurements, Recurring [Member] | U.S. Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	7,170	8,229
Level II [Member] | Fair Value, Measurements, Recurring [Member] | Mortgage-Backed Securities of Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	44,901	49,701
Level II [Member] | Fair Value, Measurements, Recurring [Member] | Asset-Backed Securities of Government Agencies [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	1,024	1,169
Level II [Member] | Fair Value, Measurements, Recurring [Member] | State and Political Subdivisions [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	23,125	27,141
Level II [Member] | Fair Value, Measurements, Recurring [Member] | Corporate Bonds [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total available-for-sale securities	8,312	10,425
Level III [Member] | Fair Value, Measurements, Recurring [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Equity securities	$ 46	$ 46

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Fair Value Measurements - Schedule of Fair Value of Assets Measured on Nonrecurring Basis (Detail) - Fair Value, Measurements, Nonrecurring [Member] - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets	$ 636	$ 2,073
Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets	99
Level III [Member] | Impaired Loans [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets	636	$ 2,073
Level III [Member] | Other Real Estate Owned [Member]
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total Assets	$ 99

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Fair Value Measurements - Schedule of Quantitative Information of Assets Measured at Fair Value on Nonrecurring Basis (Detail) - Level III [Member] $ in Thousands	Dec. 31, 2018 USD ($) yr	Dec. 31, 2017 USD ($) yr mo
Valuation Technique, Discounted Cash Flow [Member] | Impaired Loans [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value Estimate	$ 636	$ 551
Valuation Technique, Discounted Cash Flow [Member] | Minimum [Member] | Impaired Loans [Member] | Measurement Input, Expected Term [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input	1.2	4.0
Impaired loan, measurement input	1.2	4.0
Valuation Technique, Discounted Cash Flow [Member] | Minimum [Member] | Impaired Loans [Member] | Measurement Input, Discount Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input	0.051	0.044
Impaired loan, measurement input	0.051	0.044
Valuation Technique, Discounted Cash Flow [Member] | Maximum [Member] | Impaired Loans [Member] | Measurement Input, Expected Term [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input | yr	26.5	24.5
Impaired loan, measurement input | yr	26.5	24.5
Valuation Technique, Discounted Cash Flow [Member] | Maximum [Member] | Impaired Loans [Member] | Measurement Input, Discount Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input	0.075	0.075
Impaired loan, measurement input	0.075	0.075
Valuation Technique, Discounted Cash Flow [Member] | Weighted Average [Member] | Impaired Loans [Member] | Measurement Input, Expected Term [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input	10.9	20.3
Impaired loan, measurement input	10.9	20.3
Valuation Technique, Discounted Cash Flow [Member] | Weighted Average [Member] | Impaired Loans [Member] | Measurement Input, Discount Rate [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input	0.059	0.053
Impaired loan, measurement input	0.059	0.053
Appraisal of Collateral [Member] | Impaired Loans [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value Estimate		$ 1,522
Impaired loan, measurement input		(0.100)
Impaired loan, measurement input		(0.100)
Appraisal of Collateral [Member] | Other Real Estate Owned [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Fair Value Estimate	$ 99
Impaired loan, measurement input	(0.10)
Impaired loan, measurement input	(0.10)
Appraisal of Collateral [Member] | Minimum [Member] | Impaired Loans [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input		0.000
Impaired loan, measurement input		0.000
Appraisal of Collateral [Member] | Maximum [Member] | Impaired Loans [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input		(0.250)
Impaired loan, measurement input		(0.250)
Appraisal of Collateral [Member] | Weighted Average [Member] | Impaired Loans [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input		(0.068)
Impaired loan, measurement input		(0.068)
Appraisal of Collateral [Member] | Weighted Average [Member] | Other Real Estate Owned [Member]
Fair Value Measurement Inputs and Valuation Techniques [Line Items]
Impaired loan, measurement input	(0.33)
Impaired loan, measurement input	(0.33)

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Fair Values of Financial Instruments - Schedule of Estimated Fair Values of Recognized Financial Instruments (Detail) - USD ($) $ in Thousands	Dec. 31, 2018	Dec. 31, 2017
Financial assets
Securities available-for-sale	$ 85,528	$ 97,663
Securities held-to-maturity	20,118	25,491
Equity securities	83	89
Loans held for sale	108	246
Bank-owned life insurance	13,554	13,218
Mortgage Servicing Rights [Member]
Financial assets
Mortgage servicing rights	281,000	270,000
Carrying Value [Member]
Financial assets
Cash and cash equivalents	45,564	36,420
Securities available-for-sale	85,528	97,752
Securities held-to-maturity	20,688	25,758
Equity securities	83	89
Restricted stock	4,614	4,614
Loans held for sale	108	246
Net loans	543,067	511,226
Bank-owned life insurance	13,554	13,218
Accrued interest receivable	1,581	1,545
Financial liabilities
Deposits	606,498	583,259
Short-term borrowings	37,415	39,480
Other borrowings	8,525	11,409
Accrued interest payable	88	90
Carrying Value [Member] | Mortgage Servicing Rights [Member]
Financial assets
Mortgage servicing rights	281	270
Fair Value [Member]
Financial assets
Cash and cash equivalents	45,464	36,420
Securities available-for-sale	85,528	97,663
Securities held-to-maturity	20,118	25,491
Equity securities	83	89
Loans held for sale	108	246
Net loans	543,076	513,106
Bank-owned life insurance	13,554	13,218
Accrued interest receivable	1,581	1,545
Financial liabilities
Deposits	604,441	583,691
Short-term borrowings	37,415	39,480
Other borrowings	8,251	10,365
Accrued interest payable	88	90
Fair Value [Member] | Mortgage Servicing Rights [Member]
Financial assets
Mortgage servicing rights	281	270
Fair Value [Member] | Level I [Member]
Financial assets
Cash and cash equivalents	45,464	36,420
Securities available-for-sale	996	998
Equity securities	37	43
Loans held for sale	108	246
Bank-owned life insurance	13,554	13,218
Accrued interest receivable	1,581	1,545
Financial liabilities
Deposits	490,007	473,467
Short-term borrowings	37,415	39,480
Accrued interest payable	88	90
Fair Value [Member] | Level II [Member]
Financial assets
Securities available-for-sale	84,532	96,665
Securities held-to-maturity	20,118	25,491
Fair Value [Member] | Level III [Member]
Financial assets
Equity securities	46	46
Net loans	543,076	513,106
Financial liabilities
Deposits	114,434	110,224
Other borrowings	8,251	10,365
Fair Value [Member] | Level III [Member] | Mortgage Servicing Rights [Member]
Financial assets
Mortgage servicing rights	$ 281	$ 270

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Fair Values of Financial Instruments - Summary of Equity Securities (Detail) - Life To Date [Member] $ in Thousands	Dec. 31, 2018 USD ($)
Schedule of Equity Method Investments [Line Items]
Amortized cost	$ 44
Impairment	0
Observable price changes	2
Carrying value	$ 46

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Fair Values of Financial Instruments - Additional Information (Detail) - USD ($) $ in Millions	Dec. 31, 2018	Dec. 31, 2017
Fair Value Disclosures [Abstract]
Commitments to extend credit and letters of credit	$ 173.3	$ 178.2

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Accumulated Other Comprehensive Income - Schedule of Changes in Accumulated Other Comprehensive (Loss) Income by Component Net of Tax (Detail) - USD ($) $ in Thousands	12 Months Ended
	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Accumulated Other Comprehensive Income (Loss) [Line Items]
Unrealized holding gain (loss) on available-for-sale securities arising during the period, Pretax	$ (989)	$ 376	$ (1,221)
Amount reclassified for net gains included in net income, Pretax			(1)
Unrealized holding gain (loss) on available-for-sale securities arising during the period, Tax Effect	191	(164)	235
Amount reclassified for net gains included in net income, Tax Effect	0	0	0
Beginning balance, After-tax	(663)
Other comprehensive income (loss)	(720)	320	(457)
Ending Balance, After-tax	(1,412)	(663)
Accumulated Net Unrealized Investment Gain (Loss) [Member]
Accumulated Other Comprehensive Income (Loss) [Line Items]
Beginning balance, Pretax	(839)	(1,323)	(631)
Unrealized holding gain (loss) on available-for-sale securities arising during the period, Pretax	(989)	376	(1,221)
Amount reclassified for net gains included in net income, Pretax			(1)
Amortization of held-to-maturity discount resulting from transfer, Pretax	78	108	530
Total other comprehensive income (loss), Pretax	(911)	484	(692)
Deferred tax reclassification from retained earnings, Pretax		0
Reclassify equity AOCI gain to retained earnings, Pretax	(36)
Total other comprehensive income (loss) after reclassification, Pretax		484
Ending balance, Pretax	(1,786)	(839)	(1,323)
Beginning balance, Tax Effect	176	449	214
Unrealized holding gain (loss) on available-for-sale securities arising during the period, Tax Effect	208	(128)	415
Amount reclassified for net gains included in net income, Tax Effect			0
Amortization of held-to-maturity discount resulting from transfer, Tax Effect	(17)	(36)	(180)
Total other comprehensive income (loss), Tax Effect	191	(164)	235
Deferred tax reclassification from retained earnings, Tax Effect		(109)
Reclassify equity AOCI gain to retained earnings, Tax Effect	7
Total other comprehensive income (loss)after reclassification, Tax Effect		(273)
Ending Balance, Tax Effect	374	176	449
Beginning balance, After-tax	(663)	(874)	(417)
Unrealized holding gain (loss) on available-for-sale securities arising during the period, After-tax	(781)	248	(806)
Amount reclassified for net gains included in net income, After Tax			(1)
Amortization of held-to-maturity discount resulting from transfer, After-tax	61	72	350
Other comprehensive income (loss)	(720)	320	(457)
Deferred tax reclassification from retained earnings, After-tax		(109)
Reclassify equity AOCI gain to retained earnings, After-tax	(29)
Total other comprehensive income (loss) after reclassification, After-tax		211
Ending Balance, After-tax	$ (1,412)	$ (663)	$ (874)

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Contingent Liabilities - Additional Information (Detail)	12 Months Ended
	Dec. 31, 2018
Commitments and Contingencies Disclosure [Abstract]
Period of termination	2 years

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Quarterly Financial Data (Unaudited) - Summary of Quarterly Financial Data (Detail) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended												12 Months Ended
	Dec. 31, 2018	Sep. 30, 2018	Jun. 30, 2018	Mar. 31, 2018	Dec. 31, 2017	Sep. 30, 2017	Jun. 30, 2017	Mar. 31, 2017	Dec. 31, 2016	Sep. 30, 2016	Jun. 30, 2016	Mar. 31, 2016	Dec. 31, 2018	Dec. 31, 2017	Dec. 31, 2016
Quarterly Financial Information Disclosure [Abstract]
Interest Income	$ 7,772	$ 7,572	$ 7,344	$ 6,949	$ 7,014	$ 6,766	$ 6,413	$ 6,247	$ 6,295	$ 5,863	$ 5,813	$ 5,661	$ 29,637	$ 26,440	$ 23,632
Net Interest Income	6,909	6,801	6,652	6,389	6,436	6,204	5,950	5,862	5,931	5,497	5,446	5,285	26,751	24,452	22,159
Net income	$ 2,492	$ 2,432	$ 2,324	$ 2,164	$ 1,779	$ 1,866	$ 1,726	$ 1,730	$ 1,953	$ 1,694	$ 1,611	$ 1,480	$ 9,412	$ 7,101	$ 6,738
Basic Earnings Per Share	$ 0.91	$ 0.88	$ 0.85	$ 0.79	$ 0.65	$ 0.68	$ 0.63	$ 0.63	$ 0.72	$ 0.61	$ 0.59	$ 0.54
Diluted Earnings Per Share	$ 0.91	$ 0.88	$ 0.85	$ 0.79	$ 0.65	$ 0.68	$ 0.63	$ 0.63	$ 0.72	$ 0.61	$ 0.59	$ 0.54