10-Q

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

Quarterly Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the Quarterly Period ended September 30, 2012. Commission File Number 000-27894

COMMERCIAL BANCSHARES, INC.

(Exact name of registrant as specified in its charter)

OHIO	34-1787239
(State or other jurisdiction of	(IRS Employer
incorporation or organization)	Identification No.)

118 S. Sandusky Avenue, Upper Sandusky, Ohio 43351

(Address of principal executive offices including zip code)

Registrant’s telephone number, including area code: (419) 294-5781

N/A

(Former Name, Former Address and Former Fiscal Year,

if Changed Since Last Report)

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, and (2) has been subject to such filing requirements for the past 90 days. Yes þ No ¨

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). Yes þ No ¨

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

Large accelerated filer ¨      Accelerated filer ¨

Non-accelerated filer ¨        Smaller Reporting Company þ

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

As of November 13, 2012, the latest practicable date, there were 1,169,840 outstanding of the registrant’s common stock, no par value.

COMMERCIAL BANCSHARES, INC.

INDEX

		Page
PART I - FINANCIAL INFORMATION
Item 1.	Financial Statements (unaudited)
	Consolidated Balance Sheets	3
	Consolidated Statements of Income	4
	Consolidated Statements of Comprehensive Income	5
	Condensed Consolidated Statements of Changes in Shareholders’ Equity	6
	Condensed Consolidated Statements of Cash Flows	7
	Notes to Consolidated Financial Statements	8
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
Item 3.	Quantitative and Qualitative Disclosures about Market Risk	37
Item 4.	Controls and Procedures	37
Part II - Other Information
Item 1.	Legal Proceedings	38
Item 2.	Unregistered Sales of Securities and Use of Proceeds	38
Item 3.	Defaults upon Senior Securities	38
Item 4.	Mine Safety Disclosures	38
Item 5.	Other Information	38
Item 6.	Exhibits	39
SIGNATURES		40
EXHIBIT:	13a-14(a) 302 Certification	41
	13a-14(a) 906 Certification	43

2.

COMMERCIAL BANCSHARES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)

	(Unaudited)
	September 30,			December 31,
	2012			2011
ASSETS
Cash and cash equivalents	$	5,480		$	5,435
Federal funds sold		12,954			5,288
Cash equivalents and federal funds sold		18,434			10,723
Securities available for sale		18,117			24,852
Other investment securities		2,259			2,259
Total loans		244,971			234,873
Allowance for loan losses		(4,250	)		(3,779	)
Loans, net		240,721			231,094
Premises and equipment, net		7,263			7,406
Accrued interest receivable		1,392			1,275
Other assets		9,991			10,170
Total assets	$	298,177		$	287,779
LIABILITIES
Deposits
Noninterest-bearing demand	$	40,616		$	38,189
Interest-bearing demand		115,621			103,774
Savings and time deposits		83,283			86,918
Time deposits $100,000 and greater		26,230			30,247
Total deposits		265,750			259,128
FHLB advances		1,950			0
Accrued interest payable		109			106
Other liabilities		1,594			1,546
Total liabilities		269,403			260,780
SHAREHOLDERS' EQUITY
Common stock, no par value; 4,000,000 shares authorized, 1,186,638 shares issued in 2012 and 2011		11,737			11,621
Retained earnings		17,696			16,058
Unearned compensation		(88	)		(76	)
Deferred compensation plan shares; at cost, 46,510 shares in 2012 and 41,606 shares in 2011		(811	)		(717	)
Treasury stock; 17,170 shares in 2012 and 23,913 shares in 2011		(469	)		(654	)
Accumulated other comprehensive income		709			767
Total shareholders' equity		28,774			26,999
Total liabilities and shareholders' equity	$	298,177		$	287,779

See notes to the consolidated financial statements.

3.

COMMERCIAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited)

(Dollars in thousands, except per share data)

	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2012		2011		2012		2011
Interest income
Interest and fees on loans	$	3,328	$	3,550	$	10,022	$	10,412
Interest on investment securities:
Taxable		72		127		242		411
Tax-exempt		128		153		397		469
Federal funds sold		11		4		35		22
Total interest income		3,539		3,834		10,696		11,314
Interest expense
Interest on deposits		362		515		1,115		1,700
Interest on borrowings		9		0		9		0
Total interest expense		371		515		1,124		1,700
Net interest income		3,168		3,319		9,572		9,614
Provision for loan losses		408		229		648		754
Net interest income after provision for loan losses		2,760		3,090		8,924		8,860
Noninterest income
Service fees and overdraft charges		371		399		1,107		1,152
Other income		207		146		589		459
Total noninterest income		578		545		1,696		1,611
Noninterest expense
Salaries and employee benefits		1,403		1,409		4,246		4,143
Premises and equipment		317		312		950		980
OREO and miscellaneous loan expense		46		69		141		198
Professional fees		94		135		327		410
Data processing		52		51		152		149
Software maintenance		109		88		306		271
Advertising and promotional		69		69		186		182
FDIC deposit insurance		68		16		179		238
Franchise tax		83		79		244		236
Losses on other repossessed asset sales, net		11		28		13		55
Other operating expense		292		282		905		838
Total noninterest expense		2,544		2,538		7,649		7,700
Income before income taxes		794		1,097		2,971		2,771
Income tax expense		214		303		835		733
Net income	$	580	$	794	$	2,136	$	2,038
Basic earnings per common share	$	0.50	$	0.68	$	1.83	$	1.76
Diluted earnings per common share	$	0.49	$	0.68	$	1.81	$	1.75

See notes to the consolidated financial statements.

4.

COMMERCIAL BANCSHARES, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

(Unaudited)

(Dollars in thousands)

	Three Months Ended
	September 30,
	2012			2011
Net Income	$	580		$	794
Unrealized holding gain (loss) on securities:
Net gain (loss) arising during period		(4	)		339
Reclassification to net income of net realized loss		0			0
Net securities gain (loss) during the period		(4	)		339
Tax effect		(1	)		115
Other comprehensive income (loss), net of tax		(3	)		224
Comprehensive income, net of tax	$	577		$	1,018

	Nine Months Ended
	September 30,
	2012			2011
Net Income	$	2,136		$	2,038
Unrealized holding gain (loss) on securities:
Net gain (loss) arising during period		(87	)		519
Reclassification to net income of net realized loss		0			0
Net securities gain (loss) during the period		(87	)		519
Tax effect		(29	)		176
Other comprehensive income (loss), net of tax		(58	)		343
Comprehensive income, net of tax	$	2,078		$	2,381

See notes to the consolidated financial statements.

5.

COMMERCIAL BANCSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CHANGES

IN SHAREHOLDERS’ EQUITY

(Unaudited)

(Dollars in thousands, except per share data)

	Nine Months Ended
	September 30,
	2012			2011
Balance at beginning of period	$	26,999		$	24,389
Comprehensive income
Net income		2,136			2,038
Change in net unrealized gain (loss) on securities available for sale, net of reclassification and tax effects		(58	)		343
Total comprehensive income		2,078			2,381
Stock-based compensation		52			33
Issuance of treasury stock under stock option plans		3			10
Deferred compensation plan activity		79			77
Dividends paid ($0.375 and $0.360 per share in 2012 and 2011)		(437	)		(416	)
Balance at end of period	$	28,774		$	26,474

See notes to the consolidated financial statements.

6.

COMMERCIAL BANCSHARES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

	Nine Months Ended
	September 30,
	2012			2011
	($ in thousands)
Cash flows from operating activities
Net income	$	2,136		$	2,038
Adjustments		1,256			(203	)
Net cash from operating activities		3,392			1,835
Cash flows from investing activities
Securities available for sale:
Purchases		0			(4,149	)
Maturities, calls and repayments		6,550			8,427
Net change in loans		(10,207	)		6,162
Proceeds from sale of OREO and other repossessed assets		113			187
Bank premises and equipment expenditures		(354	)		(337	)
Net cash from investing activities		(3,898	)		10,290
Cash flows from financing activities
Net change in deposits		6,622			(15,793	)
Advances from FHLB		1,950			0
Cash dividends paid		(437	)		(416	)
Issuance of treasury stock under stock option plans		3			10
Deferred compensation plan activity		79			77
Net cash from financing activities		8,217			(16,122	)
Net change in cash equivalents and federal funds sold		7,711			(3,997	)
Cash equivalents and federal funds sold at beginning of period		10,723			22,080
Cash equivalents and federal funds sold at end of period	$	18,434		$	18,083
Supplemental disclosures
Cash paid for interest	$	1,121		$	1,742
Cash paid for income taxes		675			1,310
Non-cash transfer of loans to foreclosed and other repossessed assets		162			424

See notes to the consolidated financial statements.

7.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Commercial Bancshares, Inc. (the “Corporation”) and its wholly owned subsidiaries, Commercial Financial and Insurance Agency, LTD (“Commercial Financial”) and The Commercial Savings Bank (the “Bank”). The Bank also owns a 49.9% interest in Beck Title Agency, Ltd., which is accounted for by using the equity method of accounting. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Corporation’s financial position at September 30, 2012, and the results of operations and changes in cash flows for the periods presented have been made.

Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. generally accepted principles have been omitted. The Annual Report for the year ended December 31, 2011, contains consolidated financial statements and related footnote disclosures which should be read in conjunction with the accompanying consolidated financial statements. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for any future periods or for the year ending December 31, 2012.

NOTE 2 EARNINGS PER SHARE

Weighted average shares used in determining basic and diluted earnings per share for the three months ended September 30:

	2012		2011
Weighted average shares outstanding during the period		1,168,262		1,158,882
Dilutive effect of stock options		10,648		8,220
Weighted average shares considering dilutive effect		1,178,910		1,167,102
Anti-dilutive stock options not considered in computing diluted earnings per share		2,130		2,130

Weighted average shares used in determining basic and diluted earnings per share for the nine months ended September 30:

	2012		2011
Weighted average shares outstanding during the period		1,165,870		1,155,828
Dilutive effect of stock options		11,322		7,820
Weighted average shares considering dilutive effect		1,177,192		1,163,648
Anti-dilutive stock options not considered in computing diluted earnings per share		2,130		2,130

8.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 3 INVESTMENT SECURITIES

The amortized cost and estimated fair value of securities available for sale at the dates indicated are presented in the following table:

	September 30, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
State and political subdivisions	$	12,457	$	779	$	(12	)	$	13,224
Mortgage-backed securities		4,585		308		0			4,893
Total securities available for sale	$	17,042	$	1,087	$	(12	)	$	18,117

	December 31, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
U.S. Government and federal agencies	$	4,057	$	9	$	0		$	4,066
State and political subdivisions		13,578		798		(4	)		14,372
Mortgage-backed securities		6,054		360		0			6,414
Total securities available for sale	$	23,689	$	1,167	$	(4	)	$	24,852

At September 30, 2012 and December 31, 2011, investment securities with a carrying value of $15,793,000 and $18,219,000, respectively, were pledged to secure public deposits and other deposits and liabilities as required or permitted by law.

The estimated fair values of investment securities (in thousands) at September 30, 2012, by contractual maturity are shown below. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Fair Value
Due less than one year	$	809
Due after one year through five years		5,385
Due after five years through ten years		6,111
Due after ten years		919
Mortgage-backed securities		4,893
Total securities available for sale	$	18,117

Gross unrealized losses on securities and the estimated fair value of the related securities aggregated by security category and length of time the individual securities have been in continuous loss positions at September 30, 2012 and December 31, 2011 are as follows:

	Less Than Twelve Months					Over Twelve Months
(Dollars in thousands)	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
September 30, 2012	Losses			Value		Losses			Value
State and political subdivisions	$	(5	)	$	681	$	(7	)	$	807
Mortgage-backed securities		0			0		0			0
Total available for sale	$	(5	)	$	681	$	(7	)	$	807

9.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Less Than Twelve Months					Over Twelve Months
(Dollars in thousands)	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
December 31, 2011	Losses			Value		Losses			Value
U.S. Government and federal agencies	$	0		$	0	$	0		$	0
State and political subdivisions		(3	)		880		(1	)		310
Mortgage-backed securities		0			0		0			0
Total available for sale	$	(3	)	$	880	$	(1	)	$	310

At September 30, 2012, three individual securities had been in a continuous loss position for more than twelve months with three securities in a continuous loss position for less than twelve months. At December 31, 2011, three individual securities had been in a continuous loss position for more than twelve months with one security in a continuous loss position for less than twelve months.

The unrealized losses are primarily due to the changes in market interest rates subsequent to purchase. The Corporation does not consider these investments to be other-than-temporarily impaired at September 30, 2012 and December 31, 2011 since the decline in market value is primarily attributable to changes in interest rates and not credit quality. In addition, the Corporation does not intend to sell and does not believe that it is more likely than not that the Corporation will be required to sell these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result no impairment loss was recognized during the nine months ended September 30, 2012 or for the year ended December 31, 2011.

Other investment securities are carried at cost and consist principally of stock in the Federal Home Loan Bank of Cincinnati.

NOTE 4 ALLOWANCE FOR LOAN LOSSES

The following tables provide information on the activity in the allowance for loan losses by the respective loan portfolio segment for the period indicated:

	For the Three Months Ended September 30, 2012
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – July 1, 2012	$	2,998		$	302		$	610		$	3,910
Charge-offs		(20	)		(32	)		(28	)		(80	)
Recoveries		3			0			9			12
Net (charge-offs) recoveries		(17	)		(32	)		(19	)		(68	)
Provision for loan losses		370			37			1			408
Ending balance – September 30, 2012	$	3,351		$	307		$	592		$	4,250

	For the Nine Months Ended September 30, 2012
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – January 1, 2012	$	2,849		$	278		$	652		$	3,779
Charge-offs		(45	)		(48	)		(127	)		(220	)
Recoveries		8			0			35			43
Net (charge-offs) recoveries		(37	)		(48	)		(92	)		(177	)
Provision for loan losses		539			77			32			648
Ending balance – September 30, 2012	$	3,351		$	307		$	592		$	4,250

10.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	For the Three Months Ended September 30, 2011
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – July 1, 2011	$	2,543		$	277		$	716		$	3,536
Charge-offs		(56	)		0			(15	)		(71	)
Recoveries		5			0			1			6
Net (charge-offs) recoveries		(51	)		0			(14	)		(65	)
Provision for loan losses		251			(1	)		(21	)		229
Ending balance – September 30, 2011	$	2,743		$	276		$	681		$	3,700

	For the Nine Months Ended September 30, 2011
(Dollars in thousands)	Commercial			Real Estate		Consumer			Total
Beginning balance – January 1, 2011	$	2,307		$	182	$	709		$	3,198
Charge-offs		(237	)		0		(116	)		(353	)
Recoveries		14			0		87			101
Net (charge-offs) recoveries		(223	)		0		(29	)		(252	)
Provision for loan losses		659			94		1			754
Ending balance – September 30, 2011	$	2,743		$	276	$	681		$	3,700

The following tables present the recorded investment with respect to impaired loans and the related allowance by portfolio segment at the dates indicated.

	Collectively Evaluated				Individually Evaluated				Total
	Allowance		Recorded		Allowance		Recorded		Allowance		Recorded
	for loan		investment		for loan		investment		for loan		investment
(Dollars in thousands)	losses		in loans		losses		in loans		losses		in loans
September 30, 2012
Commercial	$	2,606	$	177,858	$	745	$	11,620	$	3,351	$	189,478
Real estate		307		16,920		0		0		307		16,920
Consumer		592		38,573		0		0		592		38,573
Total	$	3,505	$	233,351	$	745	$	11,620	$	4,250	$	244,971
December 31, 2011
Commercial	$	2,398	$	170,002	$	451	$	7,400	$	2,849	$	177,402
Real estate		278		15,456		0		0		278		15,456
Consumer		652		42,015		0		0		652		42,015
Total	$	3,328	$	227,473	$	451	$	7,400	$	3,779	$	234,873

11.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 5 CREDIT QUALITY INDICATORS

As part of its monitoring process, the Corporation utilizes a risk rating system which quantifies the risk the Corporation estimates it has assumed when entering into a loan transaction and during the life of that loan. The system rates the strength of the borrower and the transaction and is designed to provide a program for risk management and early detection of problems. Loans are graded on a scale of 1 through 9, with a grade of 5 or below classified as “Pass” rated credits. Following is a description of the general characteristics of risk grades 6 through 9:

6 – Special Mention	The weighted overall risk associated with this credit is considered higher than normal (but still acceptable) or the loan possesses deficiencies which corrective action by the Bank would remedy, thereby reducing risk.
7 – Substandard	The weighted overall risk associated with this credit (based on each of the Bank’s creditworthiness criteria) is considered undesirable, the credit demonstrates a well-defined weakness or the Bank is inadequately protected and there exists the distinct possibility of sustaining some loss if not corrected.
8 – Doubtful	Weakness makes collection or liquidation in full (based on currently existing facts) improbable.
9 – Loss	This credit is of little value and not warranted as a bankable asset.  Accordingly, the Bank does not carry any loans on the books that are graded 9 – loss, instead these loans are charged-off.

The Corporation’s strategy for credit risk management includes ongoing credit examinations and management reviews of loans exhibiting deterioration of credit quality. A deteriorating credit indicates an elevated likelihood of delinquency. When a loan becomes delinquent, its credit grade is reviewed and changed accordingly. Each downgrade to a classified credit results in a higher percentage of reserve to reflect the increased likelihood of loss for similarly graded credits. Further deterioration could result in a certain credit being deemed impaired resulting in a collateral valuation for purposes of establishing a specific reserve which reflects the possible extent of such loss for that credit.

The following tables present the risk category of loans by class of loans based on the most recent analysis performed at September 30, 2012 and December 31, 2011.

Commercial Credit Exposure (Dollars in thousands)

Credit risk profile by credit worthiness category

									Commercial				Commercial
	Commercial				Commercial				Real Estate				Real Estate
	Operating				Agricultural				1-4 Family				Other
Category	09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	25,250	$	25,323	$	31,133	$	27,650	$	37,343	$	33,854	$	75,315	$	71,921
6		89		1,234		0		320		81		608		4,913		4,452
7		1,385		873		0		0		3,296		1,386		10,673		9,781
8		0		0		0		0		0		0		0		0
Total	$	26,724	$	27,430	$	31,133	$	27,970	$	40,720	$	35,848	$	90,901	$	86,154

Consumer Credit Exposure (Dollars in thousands)

Credit risk by credit worthiness category

	Residential				Residential
	Real Estate, Construction				Real Estate, Other
Category	09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	3,599	$	3,437	$	11,681	$	10,434
6		0		0		164		205
7		72		73		1,404		1,307
8		0		0		0		0
Total	$	3,671	$	3,510	$	13,249	$	11,946

12.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Consumer Credit Exposure (Dollars in thousands)

Credit risk by credit worthiness category

	Consumer - Equity				Consumer - Auto				Consumer - Other
Category	09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	19,030	$	19,565	$	6,715	$	8,365	$	12,510	$	13,673
6		32		68		0		2		5		6
7		190		185		17		46		74		105
8		0		0		0		0		0		0
Total	$	19,252	$	19,818	$	6,732	$	8,413	$	12,589	$	13,784

NOTE 6 SUMMARY OF IMPAIRED LOANS

Loans evaluated for impairment include loans classified as troubled debt restructurings and non-performing multi-family, commercial and construction loans. The following tables set forth certain information regarding the Corporation’s impaired loans (in thousands), segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2012 and December 31, 2011.

			Unpaid
	Recorded		Principal		Related
September 30, 2012	Investment		Balance		Allowance
With no related allowance recorded:
Commercial
Operating	$	137	$	137	$	0
Real estate, other		5,482		5,482		0
With an allowance recorded:
Commercial
Operating		142		142		48
Real estate, 1-4 family		1,764		1,764		248
Real estate, other		4,095		4,095		449
Total	$	11,620	$	11,620	$	745

			Unpaid
	Recorded		Principal		Related
December 31, 2011	Investment		Balance		Allowance
With no related allowance recorded:
Commercial
Operating	$	149	$	181	$	0
Real estate, other		3,668		3,668		0
With an allowance recorded:
Commercial
Operating		177		177		94
Real estate, 1-4 family		283		283		200
Real estate, other		3,123		3,123		157
Total	$	7,400	$	7,432	$	451

Impaired loans with no related allowance recorded at September 30, 2012, increased 47.21% or $1,802,000 from year-end 2011, primarily due to one large hotel loan, while impaired loans with a specified reserve increased 67.49% or $2,418,000, principally due to a large commercial real estate credit in which the borrower filed bankruptcy. The specified reserve related to impaired loans totaled $745,000 at September 30, 2012, an increase of 65.19% or $294,000 from specified reserves of $451,000 at December 31, 2011.

13.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following tables present the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class for the three and nine months ended September 30, 2012 and 2011.

	For the Three Months				For the Three Months
	Ended September 30, 2012				Ended September 30, 2011
	Average		Total interest		Average		Total interest
	recorded		income		recorded		income
(Dollars in thousands) investment	investment		recognized		investment		recognized
With no related allowance recorded:
Commercial operating	$	137	$	2	$	320	$	2
Commercial real estate, other		5,495		69		232		4
With an allowance recorded:
Commercial operating		144		0		0		0
Commercial real estate, 1-4 family		1,778		39		302		0
Commercial real estate, other		4,107		15		3,175		58
Total	$	11,661	$	125	$	4,029	$	64

	For the Nine Months				For the Nine Months
	Ended September 30, 2012				Ended September 30, 2011
	Average		Total interest		Average		Total interest
	recorded		income		recorded		income
(Dollars in thousands)	investment		recognized		investment		recognized
With no related allowance recorded:
Commercial
Operating	$	138	$	7	$	325	$	13
Real estate, other		4,670		221		233		12
With an allowance recorded:
Commercial
Operating		151		0		0		0
Real estate, 1-4 family		774		39		314		11
Real estate, other		3,735		57		2,093		132
Total	$	9,468	$	324	$	2,965	$	168

NOTE 7 TROUBLED DEBT RESTRUCTURINGS

The following table summarizes information relative to loan modifications determined to be troubled debt restructurings during the three and nine months ended September 30, 2012 and 2011.

	For the Three Months				For the Three Months
	Ended September 30, 2012				Ended September 30, 2011
	Number		Recorded		Number		Recorded
(Dollars in thousands)	Of TDRs		Investment		of TDRs		Investment
Commercial operating		0	$	0		2	$	198
Commercial real estate, 1-4 family		2		1,523		1		297
Commercial real estate, other		0		0		0		0
Total		2	$	1,523		3	$	495

14.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	For the Nine Months				For the Nine Months
	Ended September 30, 2012				Ended September 30, 2011
	Number		Recorded		Number		Recorded
(Dollars in thousands)	Of TDRs		Investment		of TDRs		Investment
Commercial operating		0	$	0		2	$	198
Commercial real estate, 1-4 family		2		1,523		1		297
Commercial real estate, other		1		2,041		1		1,379
Total		3	$	3,564		4	$	1,874

A modification of a loan constitutes a troubled debt restructuring when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Corporation offers various types of concessions when modifying a loan. Loan terms that may be modified due to a borrower’s financial situation include, but are not limited to, a reduction in the stated interest rate, a reduction in the face amount of the debt, a reduction of the accrued interest, temporary interest-only payments, or re-aging, extensions, deferrals, renewals and rewrites. In mitigation, additional collateral, a co-borrower or a guarantor may be requested.

During the nine months ended September 30, 2012, the Corporation restructured three loans totaling $3,564,000. Loan modifications during 2012 consisted primarily of interest rate reductions and no modifications resulted in the reduction of the recorded investment in the associated loan balances. Restructured loans are subject to periodic credit reviews to determine the necessity and adequacy of a specific loan loss allowance based on the collectability of the recorded investment in the restructured loan. Loans restructured during 2012 increased the allowance for loan losses by $191,000. During the nine months ended September 30, 2011, the Corporation restructured four loans totaling $1,874,000. Loan modifications during 2011 consisted primarily of temporary interest-only payments and no modifications resulted in the reduction of the recorded investment in the associated loan balances. Loans restructured during 2011 increased the allowance for loan losses by $324,000. There have been no financing receivables modified as troubled debt restructurings within the previous twelve months that have subsequently defaulted during the three and nine months ended September 30, 2012.

Loans modified in a troubled debt restructuring may already be on nonaccrual status and partial charge-offs may have in some cases been taken against the outstanding loan balance. The allowance for impaired loans that have been modified in a troubled debt restructuring is measured based on the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent or on the present value of expected future cash flows discounted at the loan’s effective interest rate, if the loan is not collateral dependent. Management exercises significant judgment in developing these determinations.

15.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 8 AGE ANALYSIS OF PAST DUE FINANCING RECEIVABLES

The following table presents the loan portfolio summarized (in thousands) by aging categories at September 30, 2012 and December 31, 2011.

													Recorded
	30-59		60-89		>90						Total		Investment
	Days		Days		Days		Total				Financing		> 90 Days
September 30, 2012	Past Due		Past Due		Past Due		Past Due		Current		Receivables		and Accruing
Commercial
Operating	$	106	$	0	$	0	$	106	$	26,618	$	26,724	$	0
Agricultural		0		0		0		0		31,133		31,133		0
Real estate, 1-4 family		97		0		1,962		2,059		38,661		40,720		0
Real estate, other		4,360		0		309		4,669		86,232		90,901		0
Residential real estate
Construction		0		75		0		75		3,596		3,671		0
Other		0		28		178		206		13,043		13,249		0
Consumer
Equity		25		0		0		25		19,227		19,252		0
Auto		18		0		0		18		6,714		6,732		0
Other		14		16		0		30		12,559		12,589		0
Total	$	4,620	$	119	$	2,449	$	7,188	$	237,783	$	244,971	$	0

													Recorded
	30-59		60-89		>90						Total		Investment
	Days		Days		Days		Total				Financing		> 90 Days
December 31, 2011	Past Due		Past Due		Past Due		Past Due		Current		Receivables		and Accruing
Commercial
Operating	$	14	$	93	$	15	$	122	$	27,308	$	27,430	$	0
Agricultural		0		0		0		0		27,970		27,970		0
Real estate, 1-4 family		45		1		0		46		35,802		35,848		0
Real estate, other		121		0		309		430		85,724		86,154		0
Residential real estate
Construction		0		0		0		0		3,510		3,510		0
Other		28		0		0		28		11,918		11,946		0
Consumer
Equity		27		0		0		27		19,791		19,818		0
Auto		17		0		19		36		8,377		8,413		0
Other		20		5		35		60		13,724		13,784		0
Total	$	272	$	99	$	378	$	749	$	234,124	$	234,873	$	0

NOTE 9 FINANCING RECEIVABLES ON NONACCRUAL STATUS

The following table summarizes loans (in thousands) on nonaccrual status at September 30, 2012 and December 31, 2011.

	September 30, 2012		December 31, 2011
Commercial
Operating	$	352	$	433
Real estate, 1-4 family		2,296		384
Real estate, other		3,881		761
Residential real estate
Other		189		192
Consumer
Equity		0		12
Auto		9		30
Other		16		40
Total	$	6,743	$	1,852

16.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

NOTE 10 FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS

The Corporation groups its assets and liabilities measured at fair value into a three-level hierarchy for valuation techniques used to measure assets and liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:

· Level 1 – Quoted prices in active markets for identical assets or liabilities.

· Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Corporation’s assessment of the significance of particular inputs to these fair value measurements requires significant management judgment or estimation and considers factors specific to each asset or liability.

U.S. Government and federal agencies and mortgage-backed securities

Valuations are based on active market data and use of evaluated broker pricing models that vary based by asset class and includes available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, descriptive terms and conditions databases coupled with extensive quality control programs. Multiple quality control evaluation processes review available market, credit and deal level information to support the evaluation of the security. If there is a lack of objectively verifiable information available to support the valuation, the evaluation of the security is discontinued. Additionally, proprietary models and pricing systems, mathematical tools, actual transacted prices, integration of market developments and experienced evaluators are used to determine the value of a security based on a hierarchy of market information regarding a security or securities with similar characteristics. Management reviews the data and assumptions used in pricing the securities by its third party provider to ensure the highest level of significant inputs are derived from market observable data.

State and political subdivisions

Proprietary valuation matrices are used for valuing all tax-exempt municipals that can incorporate changes in the municipal market as they occur. Market evaluation models include the ability to value bank qualified municipals and general market municipals that can be broken down further according to insurer, credit support, state of issuance and rating to incorporate additional spreads and municipal curves. Taxable municipals are valued using a third party model that incorporates a methodology that captures the trading nuances associated with these bonds.

The following table presents information about the Corporation’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, and the valuation techniques used by the Corporation to determine those fair values.

Assets and liabilities, (in thousands) measured at fair value on a recurring basis for the periods indicated:

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Unobservable
	For Identical		Inputs		Inputs
September 30, 2012	Assets (Level 1)		(Level 2)		(Level 3)		Balance
Securities available for sale
State and political subdivisions		0		13,224		0		13,224
Mortgage-backed securities		0		4,893		0		4,893
Total Assets	$	0	$	18,117	$	0	$	18,117
Liabilities	$	0	$	0	$	0	$	0

17.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Unobservable
	For Identical		Inputs		Inputs
December 31, 2011	Assets (Level 1)		(Level 2)		(Level 3)		Balance
Securities available for sale
U.S. Government and federal agencies	$	0	$	4,066	$	0	$	4,066
State and political subdivisions		0		14,372		0		14,372
Mortgage-backed securities		0		6,414		0		6,414
Total Assets	$	0	$	24,852	$	0	$	24,852
Liabilities	$	0	$	0	$	0	$	0

Securities characterized as having Level 2 inputs generally consist of obligations of U.S. Government and federal agencies, government-sponsored organizations and obligations of state and political subdivisions. There were no transfers in and out of Levels 1 and 2 for the period ended September 30, 2012.

The Corporation also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At September 30, 2012, such assets consist primarily of impaired loans and other real estate owned. The Corporation has estimated the fair values of these assets using Level 3 inputs. Management considers third party appraisals as well as independent fair market value assessments from realtors or persons involved in selling OREO when determining the fair value of particular properties.

The following table presents financial assets and liabilities measured on a nonrecurring basis:

Fair Value Measurements at Reporting Date Using

	Balance at
(Dollars in thousands)	September 30, 2012		Level 1		Level 2		Level 3
Impaired loans	$	11,620	$	0	$	0	$	11,620
Real estate acquired through foreclosure		0		0		0		0

	Balance at
(Dollars in thousands)	December 31, 2011		Level 1		Level 2		Level 3
Impaired loans	$	7,400	$	0	$	0	$	7,400
Real estate acquired through foreclosure		0		0		0		0

A loan is considered impaired when, based on current information and events it is probable the Corporation will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. Loan impairment is measured using the present value of expected cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral (less selling costs) if the loan is collateral dependent. Collateral may be real estate and/or business assets including equipment, inventory and accounts receivable. The value of business equipment, inventory and accounts receivable collateral is based on net book value on the business’ financial statements and, if necessary, discounted based on management’s review and analysis. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and the client’s business. Impaired loans are subject to nonrecurring fair value adjustments to reflect (1) partial write-downs that are based on the observable market price or current appraised value of the collateral, or (2) the full charge-off of the loan carrying value.

18.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

 Other real estate owned (“OREO”) acquired through or instead of loan foreclosure is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value. The estimated fair value for other real estate owned is determined by independent market based appraisals and other available market information. Accordingly, the valuations of OREO and other repossessed assets are subject to significant judgment. If the fair value of the collateral deteriorates subsequent to initial recognition, a valuation allowance is recorded through expense. Additionally, any operating costs incurred after acquisition are also expensed.

The estimated fair values of the Corporation’s financial instruments at the dates indicated are presented in the following tables:

	September 30, 2012
							Quoted Prices			Significant
							In Active			Other			Significant
							Markets for			Observable			Unobservable
	Carrying			Estimated			Identical Assets			Inputs			Inputs
(Dollars in thousands)	Amount			Fair Value			(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash equivalents and federal funds sold	$	18,434		$	18,434		$	18,434		$	0		$	0
Securities available for sale		18,117			18,117			0			18,117			0
Other investment securities		2,259			2,259			0			0			2,259
Loans, net of allowance for loan loss		240,721			237,135			0			0			237,135
Accrued interest receivable		1,392			1,392			0			0			1,392
Financial Liabilities:
Noninterest-bearing deposits	$	(40,616	)	$	(40,616	)	$	(40,616	)	$	0		$	0
Interest-bearing deposits		(136,774	)		(136,774	)		0			(136,774	)		0
Time deposits		(88,360	)		(87,272	)		0			(87,272	)		0
FHLB Advances		(1,950	)		(1,914	)		0			(1,914	)		0
Accrued interest payable		(109	)		(109	)		0			0			(109	)

	December 31, 2011
	Carrying			Estimated
(Dollars in thousands)	Amount			Fair Value
Financial assets
Cash equivalents and federal funds sold	$	10,723		$	10,723
Securities available for sale		24,852			24,852
Other investment securities		2,259			2,259
Loans, net of allowance for loan loss		231,094			224,230
Accrued interest receivable		1,275			1,275
Financial liabilities
Noninterest-bearing deposits	$	(38,189	)	$	(38,189	)
Interest-bearing deposits		(122,437	)		(122,437	)
Time deposits		(98,502	)		(97,712	)
Accrued interest payable		(106	)		(106	)

19.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following describes the valuation methodologies used by management to measure financial assets and liabilities at fair value. Where appropriate, the description includes information about the valuation models and key inputs to those models.

· Cash equivalents and federal funds sold – The carrying value of cash, amounts due from banks and federal funds sold assumed to approximate fair value.

· Investment securities – Fair value is based on quoted market prices in active markets for identical assets or similar assets in active markets. If quoted market prices are not available, with the assistance of an independent pricing service, management’s fair value measurements consider observable data which may include market maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.

· Other investment securities – principally consists of investments in Federal Home Loan Bank stock, which has limited marketability and is carried at cost.

· Loans – The loan portfolio includes adjustable and fixed-rate loans, the fair value of which is estimated using discounted cash flow analyses. To calculate discounted cash flows, the loans are aggregated into pools of similar types and expected repayment terms. Expected cash flows were based on historical prepayment experiences and estimated credit losses for non-performing loans and were discounted using current rates at which similar loans would be made to borrowers with similar credit ratings and similar remaining maturities. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

· Accrued interest receivable – The carrying value of accrued interest receivable approximates fair value due to the short-term duration.

· Noninterest-bearing deposits – The fair value of noninterest-bearing demand deposits, which have no stated maturity, were considered equal to their carrying amount, representing the amount payable on demand.

· Interest-bearing deposits – The fair value of demand, money market and savings deposits, which have no stated maturity, were considered equal to their carrying amount, representing the amount payable on demand.

· Time deposits – The fair value for fixed-rate time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for time deposits with similar terms and similar remaining maturities.

· FHLB advances – The fair value of long-term debt was estimated using a discounted cash flow calculation which utilizes the interest rates currently offered for borrowings of similar remaining maturities.

· Accrued interest payable – The carrying value of accrued interest payable approximates fair value due to the short-term duration.

Off-Balance Sheet Financial Instruments – Fair values for off-balance sheet, credit related financial instruments are based on fees currently charged to enter into similar arrangements, taking into account the remaining terms of the agreements and the counter parties credit rating.

NOTE 11 STOCK-BASED COMPENSATION

At September 30, 2012, the Corporation had two share-based compensation plans in existence, the 1997 Stock Option Plan (expired but having outstanding options that may still be exercised) and the 2009 Incentive Stock Option Plan, which is described below.

20.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The Corporation’s 2009 Incentive Stock Option Plan, is a shareholder approved plan that permits the granting of stock options, restricted stock and certain other stock-based awards to selected key employees on a periodic basis at the discretion of the board. The plan authorizes the issuance of up to 150,000 shares of common stock of which 86,200 are available for issuance at September 30, 2012. Option awards are granted with an exercise price equal to the market price of the Corporation’s common stock at the date of grant and have an expiration period of ten years.

The fair value of each option award is estimated on the date of grant using an option-pricing model that uses the assumptions noted in the table below. Expected volatilities are based on several factors including historical volatility of the Corporation’s common stock, implied volatility determined from traded options and other factors. The Corporation uses historical data to estimate option exercises and employee terminations to estimate the expected life of options. The risk-free interest rate for the expected term of the options is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected dividend yield is based on the Corporation’s expected dividend yield over the life of the options.

The fair value of options granted in 2012 and 2011 was determined using the following weighted-average assumptions as of the date of grant:

	2012			2011
	Assumptions			Assumptions
Dividend yield		3.25	%		3.32	%
Risk-free interest rate		1.15	%		1.65	%
Expected volatility		23.62	%		24.14	%
Weighted average expected life		8 years			8 years
Weighted average per share fair value of options	$	3.01		$	2.94

In the third quarter of 2012, 15,200 stock options were granted, subject to a three year vesting period with one third of the options vesting each year on the anniversary date of the grant.

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. At September 30, 2012, the aggregate intrinsic value of stock options outstanding and exercisable was $201,000 and $167,000, respectively, compared to an aggregate intrinsic value of $165,000 and $85,000 at December 31, 2011.

The fair value of options granted is amortized as compensation expense, recognized on a straight-line basis over the vesting period of the respective stock option grant. Compensation expense related to employees is included in personnel expense while compensation expense related to directors is included in other operating expense. The Corporation recognized compensation expense of $8,000 and $22,000 for the three and nine month periods ended September 30, 2012, respectively, related to the awards of nonrestricted stock options compared to $7,000 and $17,000 for the same periods in 2011. The total of unrecognized compensation cost related to nonrestricted stock options was approximately $67,000 at September 30, 2012. That cost is expected to be recognized over a weighted average period of approximately 28.5 months. The fair value of nonrestricted stock options vesting during the nine months ended September 30, 2012 was $178,000.

The following table summarizes stock option activity for the nine months ended September 30, 2012:

				Weighted
	Number			Average		Number
	Of			Exercise		of Options
Stock Options	Options			Price		Exercisable
Outstanding options at January 1, 2012		40,330		$	14.45		17,105
Granted		15,200			19.28
Exercised		(300	)		12.30
Forfeited		(300	)		12.30
Expired		0			0
Outstanding options at September 30, 2012		54,930		$	15.81		29,499

21.

COMMERCIAL BANCSHARES, INC.

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

The following is a summary of outstanding and exercisable stock options at September 30, 2012.

			Weighted Average
		Number	Remaining
Exercise Price		of Shares	Contractual Life
$	22.75	1,130	0.25	years
$	26.75	1,000	3.25	years
$	12.30	16,700	6.87	years
$	13.25	11,100	7.87	years
$	17.40	9,800	8.87	years
$	19.28	15,200	9.78	years
Total		54,930	8.03	years

The following table summarizes information about the Corporation’s nonvested stock option activity for the nine months ended September 30, 2012:

	Number			Weighted
	Of			Average
Nonvested Options	Options			Price
Nonvested options at January 1, 2012		23,225		$	14.75
Granted		15,200			19.28
Vested		(12,828	)		13.87
Forfeited		(166	)		12.30
Nonvested options at September 30, 2012		25,431		$	17.92

In the third quarter of 2012, the Corporation granted 2,200 shares of restricted stock awards with a total grant date fair value of $42,000. The fair value of restricted stock is equal to the fair market value of the Corporation’s common stock on the date of grant. Restricted stock awards are recorded as unearned compensation, a component of shareholders’ equity, and amortized to compensation expense over the vesting period. The Corporation recognized compensation expense related to restricted stock grants of $10,000 and $30,000 for the three and nine months ended September 30, 2012, respectively, compared to compensation expense of $8,000 and $16,000 for the same periods in 2011. At September 30, 2012 the Corporation had $87,000 of unrecognized compensation expense, relating to restricted stock awards. This remaining cost is expected to be recognized over a weighted average period of approximately 26.6 months.

The table below summarizes restricted stock activity for the nine months ended September 30, 2012:

				Weighted
	Nonvested			Average
	Number of			Grant Date
Restricted Stock	Shares			Fair Value
Nonvested balance at January 1, 2012		7,700		$	15.01
Granted		2,200			19.28
Vested		(2,100	)		12.30
Forfeited/expired		0			0.00
Nonvested balance at September 30, 2012		7,800		$	16.95

22.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations

INTRODUCTION

The following review presents management’s discussion and analysis of the consolidated financial condition of Commercial Bancshares, Inc. and its wholly owned subsidiaries, Commercial Savings Bank and Commercial Financial and Insurance Agency, LTD at September 30, 2012, compared to December 31, 2011, and the consolidated results of operations for the three and nine-month periods ended September 30, 2012 compared to the same periods in 2011. The purpose of this discussion is to provide the reader with a more thorough understanding of the consolidated financial statements and related footnotes.

Net income for the nine months ended September 30, 2012 was $2,136,000 or $1.81 per diluted share compared to $2,038,000 or $1.75 per diluted share for the nine months ended September 30, 2011. These results reflect the following events:

· Total loans at September 30, 2012, increased 4.30% or $10,098,000 to $244,971,000 from $234,873,000 at December 31, 2011; commercial loans increased 6.81% or $12,076,000 and consumer real estate loans increased 9.47% or $1,464,000, while installment loans and home equity loans decreased 12.96% or $2,876,000 and 2.86% or $566,000, respectively.

· Total deposits at September 30, 2012, increased 2.56% or $6,622,000 to $265,750,000 from $259,128,000 at December 31, 2011. Noninterest-bearing and interest-bearing demand deposit accounts increased 6.36% or $2,427,000 and 11.42% or $11,847,000, respectively, while savings deposits increased 13.34% or $2,490,000. Time deposits declined 10.30% or $10,142,000, primarily reflecting management’s decision to restrain deposit growth.

· Net interest margin, on a fully taxable equivalent basis, was 4.74% for the nine months ended September 30, 2012, down slightly from 4.83% for the nine months ended September 30, 2011, resulting from the decline in yields on earning assets exceeding the decline in the cost of funds.

· The Corporation’s return on average equity and return on average assets for nine months ended September 30, 2012 was 10.13% and 0.95%, respectively, compared to 10.67% and 0.92% for the same period in 2011.

· The Corporation’s efficiency ratio, on a fully taxable equivalent basis, was 66.61% for the nine months ended September 30, 2012, a slight improvement from 67.00% for the same period in 2011. The efficiency ratio measures the amount of expense incurred to generate a dollar of revenue and is calculated by dividing noninterest expense by the sum of taxable equivalent net interest income before provision and other noninterest income, excluding net gains (losses) on sales of investment securities and net gains (losses) on sales of fixed assets.

· The capital position of the Corporation remained strong with all regulatory capital ratios significantly exceeding the “well capitalized” thresholds established by regulators. The Corporation’s leverage and risk-based capital ratios at September 30, 2012 were 9.23% and 12.35%, respectively, compared to leverage and risk-based capital ratios of 8.48% and 12.12% at September 30, 2011.

The Corporation is designated as a financial holding company by the Federal Reserve Bank of Cleveland. This status can help the Corporation take advantage of changes in existing law made by the Financial Modernization Act of 1999. As a result of being a financial holding company, the Corporation may be able to engage in an expanded array of activities determined to be financial in nature. This will help the Corporation remain competitive in the future with other financial service providers in the markets in which the Corporation does business. There are more stringent capital requirements associated with being a financial holding company. The Corporation intends to maintain its categorization as a “well capitalized” bank, as defined by regulatory capital requirements.

Management believes there have been no changes with respect to its determinations regarding the Corporation’s critical accounting policies as disclosed in the Corporation’s annual report on Form 10-K for the fiscal year ended December 31, 2011.

23.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report that are not historical facts are forward-looking statements that are subject to certain risks and uncertainties. When used herein, the terms “anticipates,” “plans,” “expects,” “believes” and similar expressions as they relate to the Corporation or its management are intended to identify such forward-looking statements. The Corporation’s actual results, performance or achievements may materially differ from those expressed or implied in the forward-looking statements. Risks and uncertainties that could cause or contribute to such material differences include, but are not limited to, general economic conditions, interest rate environment, competitive conditions in the financial services industry, changes in law, government policies and regulations, and rapidly changing technology affecting financial services.

FINANCIAL CONDITION

The Corporation’s total assets were $298,177,000 at September 30, 2012, increasing $10,398,000 or 3.61% during the nine months of 2012. Interest-earning assets increased $10,558,000 to $274,051,000 at September 30, 2012 compared to December 31, 2011. Asset growth, which is reflected primarily in increases in the loan portfolio and cash equivalents and federal funds sold, was funded in part, by increases in customer deposits and borrowed funds.

Cash and cash equivalents include working cash funds, due from banks, interest-bearing deposits in other banks, items in process of collection and federal funds sold. Cash and cash equivalents totaled $18,434,000 at September 30, 2012, compared to $10,723,000 at December 31, 2012. Management believes the current level of cash and cash equivalents is sufficient to meet the Corporation’s liquidity and performance needs. Total cash and cash equivalents fluctuate on a daily basis due to transactions in process and corresponding liquidity sources and uses. Management believes the Corporation’s liquidity needs in the near term will be satisfied by the current level of cash and cash equivalents, readily available access to traditional and non-traditional funding sources and the portions of the investment and loan portfolios that will mature within one year, allowing the Corporation to meet cash obligations as they come due.

Investment securities, consisting of available-for-sale and other equity securities declined 24.84% or $6,735,000 to $20,376,000 at September 30, 2012 from $27,111,000 at December 31, 2011. Available-for-sale securities are carried at fair value, with unrealized gains or losses based on the difference between amortized cost and fair value, reported net of deferred tax, as accumulated other comprehensive income (loss), a separate component of shareholders’ equity. Declines in the fair value of individual available-for-sale securities below their cost that are other-than temporary result in write-downs of the individual securities to their fair values. At September 30, 2012, the investment portfolio consisted primarily of state and municipal securities and mortgage-backed securities. The decline in investment securities was predominantly due to the call of $5,100,000 in U.S. government-sponsored agencies and municipal securities along with principal pay downs and prepayments of mortgage-backed securities of $1,450,000.

Loans, net of unearned income and deferred costs, increased $10,098,000 or 4.30% to $244,971,000 at September 30, 2012, from $234,873,000 at December 31, 2011, predominantly in commercial real estate and agricultural loans, up $8,913,000 and $3,163,000, respectively. Contributing factors to the increase in commercial loan demand is the stabilization in the regional economy in which the Corporation operates as well as the efforts of the Corporation’s experienced loan officers in developing new loan relationships combined with the support of existing customers. Consumer real estate loans increased $1,464,000 or 9.47% while installment and home equity loans decreased $2,876,000 and $566,000, respectively.

24.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Corporation’s loan portfolio represents its largest and highest yielding assets. The fundamental lending business of the Corporation is based on understanding, measuring and controlling the credit risk inherent in the loan portfolio. The Corporation’s loan portfolio is subject to varying degrees of credit risk. Credit risk entails both general risks, which are inherent in the process of lending, and risk specific to individual borrowers. The Corporation’s credit risk is mitigated through portfolio diversification, which limits exposure to any single customer, industry or collateral type. Typically, each consumer and residential lending product has a generally predictable level of credit losses based on historical loss experience. Home mortgage and home equity loans and lines generally have the lowest credit loss experience. Loans secured by personal property, such as auto loans, generally experience medium credit losses. Credit risk in commercial lending can vary significantly, as losses as a percentage of outstanding loans can shift widely during economic cycles and are particularly sensitive to changing economic conditions. Generally, improving economic conditions result in improved operating results on the part of commercial customers, enhancing their ability to meet their particular debt service requirements. Improvements, if any, in operating cash flows can be offset by the impact of rising interest rates that may occur during improved economic times. Declining economic conditions have an adverse affect on the operating results of commercial customers, reducing their ability to meet debt service obligations.

To control and manage credit risk, management has a credit process in place to ensure credit standards are maintained along with strong oversight and review procedures. The primary purpose of loan underwriting is the evaluation of specific lending risks and involves the analysis of the borrower’s ability to service the debt as well as the assessment of the value of the underlying collateral. Oversight and review procedures include the monitoring of portfolio credit quality, early identification of potential problem credits and the aggressive management of problem credits. Executive management has implemented the following measures to proactively manage credit risk in the loan portfolios:

1) Reviewed all underwriting guidelines for various loan portfolios and have strengthened underwriting guidelines where needed.

2) Evaluated outside loan review parameters, engaging the services of a well-established firm to continue with such loan review, addressing not only specific loans but underwriting analysis, documentation, credit evaluation and risk identification.

3) Increased the frequency of internal reviews of past due and delinquent loans to assess probable credit risks early in the delinquency process to minimize losses.

4) Aggressively seeks ownership and control, when appropriate, of real estate properties, which would otherwise go through time–consuming and costly foreclosure proceedings to effectively control the disposition of such collateral.

5) Aggressively obtaining updated financial information on commercial credits and performing analytical reviews to determine debt source capacities in business performance trends.

6) Engaged a well-established auditing firm to analyze the Corporation’s loan loss reserve methodology and documentation.

As part of the oversight and review process, the Corporation maintains an allowance for loan losses to absorb estimated and probable losses inherent in the loan portfolio at the balance sheet date. The allowance is based on two basic principles of accounting: (1) the requirement that a loss be accrued when it is probable that the loss has occurred at the date of the financial statements and the amount of the loss can be reasonably estimated and (2) the requirement that losses, if any, be accrued when it is probable that the Corporation will not collect all principal and interest payments according to the loan’s contractual terms.

The Corporation’s allowance for loan losses has two basic components: a general reserve reflecting historical losses by loan category and loan classification, as adjusted by several factors whose effects are not reflected in historical loss ratios, and specific allowances for individually indentified loans. General reserves are based upon historical loss experience by portfolio segment measured and supplemented to address various risk characteristics of the Corporation’s loan portfolio including:

· Trends in delinquencies and other non-performing loans

· Changes in the risk profile related to large loans in the portfolio

· Changes in the categories of loans comprising the loan portfolio

· Concentrations of loans to specific industry segments

· Changes in economic conditions on both a local and a national level

· Changes in the Corporation’s credit administration and loan portfolio management processes

· Quality of the Corporation’s credit risk identification process

25.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The portion of the reserve representing specific allowances is derived by accumulating the specific allowances established on individually impaired loans that have significant conditions or circumstances that indicate that a loss may be probable. Specific reserves are calculated on individually impaired loans and are established based on the Corporation’s calculation of the probable losses inherent in an individual loan. For loans on which the Corporation has not elected to use the collateral value as a basis to establish the measure of impairment, the Corporation measures impairment based on the present value of expected future cash flows discounted at the loan’s effective interest rate. In determining the cash flows to be included in the discount calculation the Corporation considers a number of factors, that combined is used to estimate the probability and severity of potential losses.

· The borrower’s overall financial condition

· Resources and payment record

· Support available from financial guarantors

The general reserve comprised 82% of the total allowance at September 30, 2012 compared to 88% at December 31, 2011 while the specific allowance accounted for 18% of the total allowance at September 30, 2012 compared to 12% at December 31, 2011. The severity of estimated losses on impaired loans can differ substantially from actual losses. The general reserve is calculated in two parts based on an internal risk classification of loans within each portfolio segment. Reserves on loans considered to be “classified” under regulatory guidance are calculated separately from loans considered to be “pass” rated under the same guidance. This segregation allows the Corporation to monitor the reserves related to higher risk loans separate from the remainder of the portfolio in order to better manage risk and ensure the sufficiency of reserves.

The allowance for loan losses is increased by charges to income through the provision for loan losses and decreased by charge-offs, net of recoveries. The allowance is established and maintained at a level management deems adequate to cover losses inherent in the portfolio as of the balance sheet date and is based on management’s evaluation of the risks in the loan portfolio and changes in the nature and volume of loan activity. There are risks inherent in all loans, so an allowance is maintained for loans to absorb probable losses on existing loans that may become uncollectable. The allowance is established and maintained as losses are estimated to have occurred through a provision for loan losses charged to earnings, which increases the balance of the allowance. Loan losses for all segments are charged against the allowance when management believes the uncollectability of a loan is confirmed, which decreases the balance of the allowance. Subsequent recoveries of principal, if any, are credited back 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, nature and volume of the loan portfolio, adverse situations that may affect the borrower’s 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.

The allowance for loan losses totaled $4,250,000 at September 30, 2012, an increase of $471,000 from $3,779,000 at December 31, 2011. The ratio of annualized net charge-offs to average outstanding loans was 0.10% at September 30, 2012, compared to 0.18% at year-end 2011. The ratio of the allowance for loan losses to total loans was 1.73% at September 30, 2012, compared to 1.61% at year-end 2011. The Corporation provided $648,000 to the allowance for loan losses during the nine months ended September 30, 2012 to maintain the balance at an adequate level following net charge-offs of $177,000.

Before loans are charged off, they typically go through a phase of non-performing status. Various stages exist when dealing with such non-performance. The first stage is simple delinquency, where customers consistently start paying late, 30, 60, 90 days at a time. These accounts may then be put on a list of loans to “watch” as they continue to under-perform according to original terms. Loans are placed on nonaccrual status when management believes the collection of the principal and interest is doubtful. A delinquent loan is generally placed on nonaccrual status when principal and/or interest is past due 90 days or more or if the financial strength of the borrower has declined, collateral value has declined or other facts would make the repayment of the loan suspect, unless the loan is well-secured or in the process of collection. When a loan is placed on nonaccrual, all interest which has been accrued is charged back against current earnings as a reduction in interest income, which adversely affects the yield on loans in the period of reversal. No additional interest is accrued on the loan balance until collection of both principal and interest becomes reasonably certain. Loans placed on nonaccrual status may be returned to accrual status after payments are received for a minimum of six consecutive months in accordance with the loan documents, and any doubt as to the loan’s full collectability has been removed or the troubled loan is restructured and evidenced by a credit evaluation of the borrower’s financial condition and the prospects for full payment.

26.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Corporation’s methodology for evaluating whether a loan is impaired begins with risk-rating credits on an individual basis. Loans with a pass rating represent those not classified on the Corporation’s rating scale for problem credits, as minimal credit risk has been identified. Loans classified as special mention have potential weaknesses that deserve management’s close attention. If uncorrected, the potential weaknesses may result in deterioration of the repayment prospects. Loans classified as substandard have a well-defined weakness that jeopardizes the liquidation of the debt. Loans classified doubtful have all the weaknesses inherent in loans classified substandard with the added characteristic that collection or liquidation in full, on the basis of current conditions and facts, is highly improbable. Loans rated as doubtful in whole, or in part, are placed in nonaccrual status.

During the nine months ended September 30, 2012, total classified loans increased $3,355,000 or 24.39% from year-end 2011, primarily reflecting the downgrade of three commercial real estate credits. Management regularly reviews the updated financial position of all such loans in its portfolio and any deterioration in such position can result in a credit being downgraded.

Loans are placed on nonaccrual status when management believes the collection of principal and interest is doubtful, or when loans are past due as to principal and interest 90 days or more, except in certain circumstances when interest accruals are continued on loans deemed by management to be fully collateralized and in the process of being collected. At September 30, 2012 and December 31, 2011, there were no 90 day delinquent loans that were on accrual status. In such cases, the loans are individually evaluated in order to determine whether to continue income recognition after 90 days beyond the due dates. When loans are charged off, any accrued interest recorded in the current fiscal year is charged against interest income. The remaining balance is treated as a loan charged-off.

Management considers a loan to be impaired when, based on current information and events, it is determined that the Corporation will not be able to collect all amounts due according to the contractual terms of the loan agreement, including scheduled interest payments. When management identifies a loan as impaired, the impairment is measured based on the present value of expected future cash flows discounted at the loan’s effective interest rate or the observable market price of the loan, except when the sole (remaining) source of repayment for the loan is the liquidation of the collateral. In these cases, management uses the current fair value of the collateral, less selling costs when foreclosure is probable, instead of discounted cash flows. If management determines the value of the impaired loan is less than the recorded investment in the loan (net of previous charge-offs and deferred loan fees or costs), impairment is recognized through an allowance estimate or a charge-off to the allowance. When management determines an impaired loan is a confirmed loss, the estimated impairment is directly charged-off to the loan rather than creating a specific reserve for inclusion in the allowance for loan losses. However, not all impaired loans are in nonaccrual status because they may be current with regards to the payment terms. Their determination as an impaired loan is based on some inherent weakness in the credit that may, if certain circumstances occur or arise, result in an inability to comply with the loan agreement’s contractual terms. Impaired loans exclude large groups of smaller-homogeneous loans that are collectively evaluated for impairment such as consumer real estate and installment loans.

The allowance for loan losses, specifically related to impaired loans at September 30, 2012 and December 31, 2011 was $745,000 and $451,000, respectively, related to loans with principal balances of $6,001,000 and $3,583,000. The increase in impaired loans with specified reserves was primarily due to the addition of two commercial real estate credits. Impaired loans with no related allowance recorded at September 30, 2012 was $5,619,000, compared to $3,817,000 at December 31, 2011, representing the addition of one commercial real estate credit. The Corporation’s financial statements are prepared on the accrual basis of accounting, including the recognition of interest income on the loan portfolio, unless a loan is placed on nonaccrual status. Amounts received on nonaccrual loans generally are applied first to principal and then to interest only after all principal has been collected. For the three and nine months ended September 30, 2012, the Corporation received interest payments related to impaired loans of $39,000 and $55,000, respectively, compared to interest payments of $7,000 and $28,000 for the three and nine months ended September 30, 2011.

27.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Management has taken what it believes to be a proactive position on identifying problems with credits and their ultimate collectability using both internal and external portfolio loan reviews, and believes any potential losses which may be incurred on these credits in the future are incorporated into its analysis of the adequacy of the Corporation’s allowance for loan losses.

Loans may have their terms restructured in circumstances that provide payment relief to a borrower experiencing financial difficulty. From time to time, the Corporation may extend, restructure, or otherwise modify the terms of existing loans, on a case-by-case basis, to remain competitive and retain certain customers, as well as assist other customers who may be experiencing financial difficulties. If the borrower is experiencing financial difficulties and a concession has been made at the time of such modification, the loan is classified as a troubled debt restructured loan (“TDR”). All such restructured loans are considered impaired loans and may either be in accruing or nonaccruing status. If the borrower has demonstrated performance under the previous terms and the Corporation’s underwriting process shows the borrower has the capacity to continue to perform under the restructured terms, the loan will continue to accrue interest.

Performing TDRs (not reported as nonaccrual) decreased $1,435,000 to $3,738,000 at September 30, 2012 from $5,173,000 at December 31, 2011, primarily due to the payoff of one commercial real estate credit. Non-performing TDRs increased $3,486,000 to $4,255,000 at September 30, 2012 from $769,000 at December 31, 2011, primarily due to the addition of three commercial real estate credits. The $7,993,000 in modified loans represents 10 credit relationships in which economic concessions were granted to borrowers to better align the terms of their loans with their current ability to pay. Of this total, $5,417,000 represents 3 hotel loans. All three borrowers began experiencing financial difficulties primarily relating to occupancy problems common in the industry. There are no commitments to lend additional amounts to borrowers with loans that are classified as troubled debt restructurings as of September 30, 2012.

Non-performing loans, which are comprised of loans on nonaccrual status along with loans that are contractually past due 90 days or more but have not been classified as nonaccrual, totaled $6,743,000 at September 30, 2012, compared to $1,852,000 at December 31, 2011. The increase in non-performing loans was primarily due to three large commercial real estate credits totaling $4,851,000. Management evaluated non-performing loans for impairment at September 30, 2012. Based on this impairment analysis, a specified reserve of $634,000 was recorded. Non-performing loans to total loans was 2.75% at September 30, 2012 and 0.79% at December 31, 2011. Non-performing loans represented 2.26% of total assets at September 30, 2012 compared to 0.64% at December 31, 2011.

Other assets totaled $18,646,000 at September 30, 2012, a decrease of $205,000 or 1.09% from $18,851,000 at December 31, 2011, primarily reflecting decreases of $460,000 in accounts receivable and $143,000 in premises and equipment. The decrease in accounts receivable from year-end pertains to health insurance costs due from the insurance company relating to participants exceeding the stop/gap limits during 2011. Offsetting the decrease in other assets is the increase of $202,000 in the cash surrender value of Bank-owned life insurance, an increase of $117,000 in accrued interest receivable, an increase of $58,000 in prepaid expenses and an increase of $23,000 in other repossessed assets.

OREO is comprised of properties acquired by the Corporation in partial or total satisfaction of problem loans. OREO and other repossessed assets are initially recorded at fair value on the date of acquisition less estimated costs of disposal (net realizable value). Losses existing at the time of acquisition of such properties are charged against the allowance for loan losses. Subsequent write-downs that may be required are expensed as incurred. Gains and losses realized from the sale of OREO and other repossessed assets, as well as valuation adjustments, are included in noninterest expense as well as expenses of operation. There were no properties held in OREO at September 30, 2012 or at December 31, 2011. Other repossessed assets totaled $69,000 at September 30, 2012 compared to $47,000 at December 31, 2011.

Deposits at September 30, 2012, totaled $265,750,000, representing an increase of 2.56% or $6,622,000 compared to December 31, 2011. The growth in deposits was largely driven by an increase of $11,847,000 or 11.42% in interest-bearing demand account balances and, to a lesser extent, increases of $2,490,000 and $2,427,000 in savings and noninterest-bearing demand account balances, respectively. The increase in demand deposits appear to reflect customer preference for the liquidity these types of deposits provide over the rates currently offered on certificates of deposits as these balances decreased $10,142,000 or 10.30% to $88,360,000 at September 30, 2012 from $98,502,000 at December 31, 2011.

28.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Shareholders’ equity increased $1,775,000 or 6.57% to $28,774,000 at September 30, 2012 from $26,999,000 at December 31, 2011. The increase in shareholders’ equity for 2012 represents current earnings of $2,136,000 plus adjustments related to employee compensation costs, deferred compensation plan and treasury stock activity of $134,000, less dividends of $437,000. Included in shareholders’ equity is accumulated other comprehensive income which includes the net after-tax impact of unrealized gains on investment securities classified as available for sale which decreased $58,000 during 2012. Such unrealized gains or losses are generally due to changes in interest rates and represent the difference, net of applicable income tax effect, between the estimated fair value and amortized cost of investment securities classified as available for sale. During the nine months of 2012, the Corporation returned 20.46% of earnings through dividends of $437,000 at $0.375 per share compared to a return on earnings of 20.41% through dividends of $416,000 at $0.360 per share for the nine months ended September 30, 2011. Average shareholders’ equity to average total assets was 9.41% for the nine months ended September 30, 2012 compared to 8.60% for the nine months ended September 30, 2011.

RESULTS OF OPERATIONS

Net income, after taxes for the three months ended September 30, 2012 was $580,000, or $0.49 per diluted share, a decrease of $214,000 or 26.95% compared to $794,000 or $0.68 per diluted share for the same period in 2011. The decrease in net income between periods is largely due to a decrease in net interest income of $151,000 and an increase in the provision for loan losses of $179,000, offset by a decrease in income tax expense of $89,000 and an increase in noninterest income of $33,000. Net income, after taxes for the nine months ended September 30, 2012 was $2,136,000, or $1.81 per diluted share, an increase of $98,000 or 4.81% compared to $2,038,000 or $1.75 per diluted share for the same period in 2011. The increase in net income between periods is primarily due to a decrease in net interest income of $42,000 and a decrease in the provision for loan losses of $106,000, offset by an increase in noninterest income of $85,000, a decrease in noninterest expense of $51,000 and an increase in income tax expense of $102,000.

The largest source of the Corporation’s operating revenue is net interest income, which is the difference between the interest earned on interest-earning assets and the interest paid on interest-bearing liabilities. The level of net interest income is dependent upon the interest rate environment and the volume and composition of interest-earning assets and interest-bearing liabilities. For purposes of this discussion and analysis, net interest income is presented on a taxable equivalent basis to facilitate performance comparisons among various taxable and tax-exempt assets, such as certain state and municipal securities. A tax rate of 34% was used in adjusting interest on tax-exempt assets to a fully taxable equivalent basis. The Corporation also generates revenue through fees earned on the various services and products offered to its customers and through sales of assets, such as investments or OREO and other repossessed assets. Offsetting these revenue sources are provisions for loan losses, operating expenses and income taxes.

The Corporation’s net interest margin, which is net interest income on a tax-equivalent basis divided by average earning assets, annualized, was 4.67% for the three months ended September 30, 2012, a decrease of 38 basis points from 5.05% for the same period in 2011. Net interest spread, which is the average yield on interest-earning assets minus the average rate paid on interest-bearing liabilities, decreased 37 basis points between quarters, from 4.93% to 4.56%. During the preceding five quarters, net interest margin ranged from 5.07% to 4.67%. Even if new assets do not continue to price downward, the average yield on assets may continue to decline as older, higher-yielding assets continue to mature and pay off at a faster rate than newer, lower-yielding assets. The Corporation may continue to experience some margin compression in upcoming periods as the average yield on assets may decline at a slightly higher rate than the average cost of funds.

29.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The table that follows presents the Corporation’s (i) average assets, liabilities and shareholders’ equity, (ii) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (iii) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (iv) interest rate spread (the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities), and (v) net interest margin (net interest income as a percentage of total average interest-earning assets).

TABLE 1 YIELD ANALYSIS

For the three-month period ended September 30, 2012 and 2011.

(In thousands)

	Three Months Ended September 30,
	2012							2011
			Interest							Interest
	Average		Income/		Yield/			Average		Income/		Yield/
	balance		Expense		Rate			balance		Expense		Rate
Federal funds sold	$	19,079	$	11		0.23	%	$	9,115	$	4		0.17	%
Investment securities:
Taxable securities (1)		8,594		72		3.33			19,828		127		2.54
Tax-exempt securities (1)		13,248		191		5.74			15,714		228		5.76
Loans (2) (3)		234,702		3,331		5.65			222,087		3,553		6.35
Earning assets		275,623		3,605		5.20	%		266,744		3,912		5.82	%
Other assets		23,913							24,064
Total assets	$	299,536						$	290,808
Interest-bearing demand deposits	$	117,124		29		0.10	%	$	104,710		31		0.12	%
Savings deposits		20,717		3		0.06			18,338		4		0.09
Time deposits		89,658		330		1.46			107,004		480		1.78
Borrowed funds		1,601		9		2.24			2		0		0.00
Interest-bearing liabilities	$	229,100		371		0.64	%	$	230,054		515		0.89	%
Noninterest-bearing demand deposits		40,000							32,762
Other liabilities		1,701							1,731
Shareholders’ equity		28,735							26,261
Total liabilities and
shareholders’ equity	$	299,536						$	290,808
Net interest income			$	3,234						$	3,397
Interest rate spread						4.56	%						4.93	%
Net interest margin (4)						4.67	%						5.05	%

⁽¹⁾ Average yields on all securities have been computed based on amortized cost. Income on tax-exempt securities has been computed on a taxable-equivalent basis using a 34% federal tax rate and a 20% disallowance of interest expense deductibility under TEFRA rules. The amount of such adjustment was $66,000 and $78,000 for the three months ended September 30, 2012 and 2011, respectively.

⁽²⁾ Average balance is net of deferred loan fees of $371,000 and $183,000 for the three months ended September 30, 2012 and 2011, respectively.

⁽³⁾ Interest income includes loan fees of $122,000 and $135,000 for the three-month period ended September 30, 2012 and 2011, respectively, as well as $53,000 and $50,000 of deferred dealer reserve expense for the same years.

⁽⁴⁾ Net interest margin is the ratio of annualized tax-equivalent net interest income to average earning assets.

⁽⁵⁾ Average loan balances include nonaccruing loans.

30.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The table that follows presents the Corporation’s (i) average assets, liabilities and shareholders’ equity, (ii) interest income earned on interest-earning assets and interest expense paid on interest-bearing liabilities, (iii) average yields earned on interest-earning assets and average rates paid on interest-bearing liabilities, (iv) interest rate spread (the difference between the average yield earned on interest-earning assets and the average rate paid on interest-bearing liabilities), and (v) net interest margin (net interest income as a percentage of total average interest-earning assets).

TABLE 2 YIELD ANALYSIS

For the nine-month period ended September 30, 2012 and 2011.

(In thousands)

	Nine Months Ended September 30,
	2012							2011
			Interest		Interest
	Average		Income/		Yield/			Average		Income/		Yield/
	balance		Expense		Rate			balance		Expense		Rate
Federal funds sold	$	20,577	$	35		0.23	%	$	14,887	$	22		0.20	%
Investment securities:
Taxable securities (1)		10,106		242		3.20			20,702		411		2.65
Tax-exempt securities (1)		13,677		596		5.82			15,836		699		5.90
Loans (2) (3)		231,014		10,031		5.80			221,455		10,421		6.29
Earning assets		275,374		10,904		5.29	%		272,880		11,553		5.66	%
Other assets		23,814							24,003
Total assets	$	299,188						$	296,883
Interest-bearing demand deposits	$	115,622		87		0.10	%	$	105,227		102		0.13	%
Savings deposits		20,407		8		0.05			17,857		15		0.11
Time deposits		93,006		1,020		1.46			113,992		1,583		1.86
Borrowed funds		545		9		2.21			1		0		0.00
Interest-bearing liabilities	$	229,580		1,124		0.65	%	$	237,077		1,700		0.96	%
Noninterest-bearing demand deposits		39,809							32,187
Other liabilities		1,637							2,079
Shareholders’ equity		28,162							25,540
Total liabilities and
shareholders’ equity	$	299,188						$	296,883
Net interest income			$	9,780						$	9,853
Interest rate spread						4.64	%						4.70	%
Net interest margin (4)						4.74	%						4.83	%

⁽¹⁾ Average yields on all securities have been computed based on amortized cost. Income on tax-exempt securities has been computed on a taxable-equivalent basis using a 34% federal tax rate and a 20% disallowance of interest expense deductibility under TEFRA rules. The amount of such adjustment was $208,000 and $239,000 for the nine months ended September 30, 2012 and 2011, respectively.

⁽²⁾ Average balance is net of deferred loan fees of $329,000 and $138,000 for the nine months ended September 30, 2012 and 2011, respectively. Unearned income was fully amortized at September 30, 2012 compared to a remaining balance of $1,000 at September 30, 2011.

⁽³⁾ Interest income includes loan fees of $376,000 and $370,000 for the nine-month period ended September 30, 2012 and 2011, respectively, as well as $170,000 and $163,000 of deferred dealer reserve expense for the same years.

⁽⁴⁾ Net interest margin is the ratio of annualized tax-equivalent net interest income to average earning assets.

⁽⁵⁾ Average loan balances include nonaccruing loans.

31.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Net interest income, on a tax-equivalent basis, was $3,234,000 for the three months ended September 30, 2012, a decrease of $163,000 or 4.80% from $3,397,000 reported for the same period in 2011. Average earning assets for the three months ended September 30, 2012 was $275,623,000, an increase of $8,879,000 or 3.33% from $266,744,000 for the same period in 2011. The average tax-equivalent yield on interest-earning assets was 5.20% for the three months ended September 30, 2012, a decrease of 62 basis points from 5.82% for the three months ended September 30, 2011. The average cost of funds for the three months ended September 30, 2012 was 0.64%, a decrease of 25 basis points from 0.89% for the same period in 2011. The continued downward repricing of the Corporation’s variable rate loans as well as carrying a significantly higher balance in low yielding federal funds sold combined with the repricing of interest-bearing assets in a lower interest rate environment decreased interest income to a greater degree than it decreased interest expense.

Interest and fee income for the third quarter of 2012 totaled $3,605,000, a decrease of $307,000 or 7.85% from $3,912,000 for the third quarter in 2011. Average net loans, comprising 85.15% and 83.26% of average earning assets at September 30, 2012 and 2011, respectively, increased $12,615,000 or 5.68%, while the average tax-equivalent yield earned decreased 70 basis points. The decline in interest income on loans was largely due to the downward repricing of variable rate loans and new loans originated at lower market rates as well as maturities and repayments of loans with higher rates. Average federal funds sold, comprising 6.92% and 3.42% of average earning assets at September 30, 2012 and 2011, respectively, increased $9,964,000 or 109.31%, while the average yield earned increased 6 basis points. Average investment securities, comprising 7.92% and 13.32% of average earning assets at September 30, 2012 and 2011, respectively, decreased $13,700,000 or 38.55%, while the average tax-equivalent yield earned increased 83 basis points.

Interest expense for the third quarter of 2012 totaled $371,000, a decrease of $144,000 or 27.96%, from $515,000 for the third quarter in 2011. Average interest-bearing demand deposits, comprising 51.12% and 44.52% of average interest-bearing liabilities at September 30, 2012 and 2011, respectively, increased $12,414,000 or 11.86%, while the average rate paid decreased 2 basis points. Average time deposits, comprising 39.13% and 46.51% of average interest-bearing liabilities at September 30, 2012 and 2011, respectively, decreased $17,346,000 or 16.21%, while the average rate paid decreased 32 basis points. The decrease in interest expense between quarters is primarily the result of a favorable shift in the deposit mix as well as the repricing of time deposits to lower rates.

The Corporation’s net interest margin, on a tax-equivalent basis, for the nine months ended September 30, 2012 was 4.74%, a decrease of 9 basis points from 4.83% for the same period in 2011. Net interest income, on a tax-equivalent basis, was $9,780,000 for the nine months ended September 30, 2012, a decrease of $73,000 or 0.74% from $9,853,000 reported for the same period in 2011. Average earning assets for the nine months ended September 30, 2012 was $275,374,000, an increase of $2,494,000 or 0.91% from $272,880,000 for the same period in 2011. The average tax-equivalent yield on interest-earning assets was 5.29% for the nine-month period ended September 30, 2012, a decrease of 37 basis points from 5.66% for the same period in 2011. The average cost of funds for the nine months ended September 30, 2012 was 0.65%, a decrease of 31 basis points from 0.96% for the same period in 2011.

Interest and fee income for the nine months ended September 30, 2012 was $10,904,000, a decrease of $649,000 or 5.62%, from $11,553,000 for the nine months ended September 30, 2011. Average net loans, comprising 83.89% and 81.15%, of average earning assets at September 30, 2012 and 2011, respectively, increased $9,559,000 or 4.32%, while the average tax-equivalent yield earned decreased 49 basis points, resulting from the downward repricing of variable rate loans and new loans originated at lower market rates as well as maturities and repayments of loans with higher rates. Average fed funds sold, comprising 7.47% and 5.46% of average earning assets at September 30, 2012 and 2011, respectively, increased $5,690,000 or 38.22%, while the average yield earned increased 3 basis points. Average investment securities, comprising 8.64% and 13.39% of average earning assets at September 30, 2012 and 2011, respectively, decreased $12,755,000 or 34.91%, while the average tax-equivalent yield earned increased 65 basis points.

32.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Interest expense for the nine months ended September 30, 2012 was $1,124,000, a decrease of $576,000 or 33.88%, from $1,700,000 for the nine months ended September 30, 2011. Average interest-bearing demand deposits, comprising 50.36% and 44.39% of average interest-bearing liabilities at September 30, 2012 and 2011, respectively, increased 10,395,000 or 9.88%, while the average rate paid decreased 3 basis points. Average time deposits, comprising 40.51% and 48.08% of average interest-bearing liabilities at September 30, 2012 and 2011, respectively, decreased $20,986,000 or 18.41%, while the average rate paid decreased 40 basis points. Deposit activity for the nine-month period ended September 30, 2012 continued to be affected by the slow and uneven economic recovery as customers redeployed maturing certificates of deposits into short-term instruments to preserve liquidity. Additionally, management continued to manage its net interest margin by strategic declines in deposits as it reduced its rates on deposits.

Through the provision for loan losses, an allowance is maintained that reflects management’s best estimate of probable incurred loan losses related to specifically identified loans as well as the inherent risk of loss related to the remaining portfolio. In evaluating the allowance for loan losses, management considers factors that include loan growth, composition, diversification, or conversely, concentrations by industry, geography or collateral within the portfolio, historical loan loss experience, current delinquency levels, the estimated value of the underlying collateral, prevailing economic conditions and other relevant factors. Loan charge-offs are recorded to this allowance when loans are deemed uncollectible, in whole or in part. Impacting the provision for loan losses in any accounting period are several factors including the amount of loan growth during the period, broken down by loan type, the level of charge-offs during the period, the changes in the amount of impaired loans, changes in risk ratings assigned to loans, specific loan impairments, credit quality, and ultimately, the results of management’s assessment of the inherent risks of the loan portfolio.

Provision for loan losses for the three and nine months ended September 30, 2012, was $408,000 and $648,000, respectively, compared to $229,000 and $754,000 for the three and nine months ended September 30, 2011. The increase in the loan loss provision for the current quarter was largely driven by loan growth, an increase in nonaccrual loans as well as impairment charges on troubled debt restructured loans. Management considers the allowance for loan losses at September 30, 2012 adequate to cover loan losses based on its assessment of various factors affecting the loan portfolio, including the level of problem loans, overall delinquencies, business conditions, estimated collateral values and loss experience. A further decline in local and national economic conditions, or other factors, could result in a material increase in the allowance for loan losses which could adversely affect the Corporation’s financial condition and results of operations. Further information relating to factors affecting the allowance for loan losses is discussed under Financial Condition.

Noninterest income consists primarily of fees and commissions earned on services that are provided to the Corporation’s banking customers and, to a lesser extent, gains on sales of OREO and other repossessed assets and other miscellaneous income. Noninterest income for the three and nine months ended September 30, 2012 was $578,000 and $1,696,000, respectively, an increase of $33,000 and $85,000 when compared to $545,000 and $1,611,000 for the three and nine months ended September 30, 2011. Following are some of the more significant factors affecting noninterest income in 2012:

· A decrease of $46,000 and $117,000 in overdraft charges, for the three and nine-month periods, respectively, primarily due to a decline in the volume of insufficient funds (“NSF”) activity. Management believes part of this decrease is the impact of Regulation E rules relating to overdraft charges as well as customers more diligently monitoring their personal accounts and the increased usage of debit cards, which do not typically generate NSF fees. Debit card transactions for which customers do not have available funds are declined at the point of sale instead of posting to the account and generating NSF charges.

33.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

· An increase of $19,000 and $46,000 in ATM income for the three and nine-month periods, respectively, reflecting higher non customer usage.

· An increase of $60,000 and $126,000 in third-party origination fees for the three and nine-month periods, respectively, primarily reflecting a higher level of residential mortgage production.

Noninterest expense consists primarily of personnel, occupancy, equipment and other expenses. Noninterest expense for the three and nine months ended September 30, 2012 totaled $2,544,000 and $7,649,000, respectively, an increase of $6,000 for the quarter and a year-to-date decrease of $51,000 when compared to $2,538,000 and $7,700,000 for the three and nine months ended September 30, 2011. Following are some of the more significant factors affecting noninterest expense in 2012:

· An increase of $12,000 and $80,000 in wages for the three and nine-month periods, respectively, primarily reflecting annual merit increases.

· A decrease of $23,000 and $57,000 in OREO and miscellaneous loan expense for the three and nine-month periods, respectively, primarily due to the decline in OREO and repossessed balances in 2012 compared to a year ago. Average OREO and repossessed assets for the nine months ended September 30, 2012 totaled $63,000 compared to $157,000 for the nine months ended September 30, 2011.

· A decrease of $41,000 and $83,000 in professional fees for the three and nine-month periods, respectively, primarily reflecting a decrease in legal fees relating to loan workouts.

· An increase of $52,000 in FDIC assessments for the quarter, primarily relating to changes made by the FDIC in the method of calculating the assessment beginning with the third quarter payment in 2011. This change resulted in a $61,000 credit adjustment to the FDIC insurance expensed during the third quarter in 2011 to adjust the year-to-date expense to actual. A year-to-date decrease of $59,000 in FDIC assessments is the result of a decrease in the rate used to calculate the assessment.

The Corporation recorded a provision for income taxes of $214,000 and $835,000 for the three and nine months ended September 30, 2012, respectively, a decrease of $89,000 for the quarter and a year-to-date increase of $102,000, when compared to $303,000 and $733,000 for the three and nine months ended September 30, 2011. The Corporation’s effective tax rate was 26.95% and 28.11% for the three and nine months ended September 30, 2012, respectively, compared to $27.62% and 26.45% for the same periods in 2011. The difference between the Corporation’s effective tax rate and the statutory rate is primarily attributable to the Corporation’s tax-exempt income. Tax-exempt income includes income earned on certain municipal investments that qualify for state and/or federal income tax exemption and the Corporation’s earnings on Bank-owned life insurance policies, which are exempt from federal taxation.

LIQUIDITY

Liquidity is the ability to satisfy demands for deposit withdrawals, lending commitments and other corporate needs. The Corporation’s liquidity primarily represented by cash equivalents and federal funds sold, is a result of its operating, investing and financing activities, which are summarized in the Condensed Consolidated Statements of Cash Flows. Primary sources of funds are deposits, prepayments and maturities of outstanding loans and securities. While scheduled payments from the amortization of loans and securities are relatively predictable sources of funds, deposit flows and loan prepayments are greatly influenced by general interest rates, economic conditions and competition. Funds are primarily used to meet ongoing commitments, satisfy operational expenses, payout maturing certificates of deposit and savings withdrawals and fund loan demand, with excess funds being invested in short-term interest-earning assets. Additional funds are generated through Federal Home Loan Bank advances, overnight borrowings and other sources.

34.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

The Corporation’s liquidity ratio at September 30, 2012 was 7.11% compared to 6.42% at year-end 2011. Another measure of liquidity is the relationship of net loans to deposits and borrowed funds with lower ratios indicating greater liquidity. At September 30, 2012, the ratio of net loans to deposits and borrowed funds was 89.92% compared to 89.18% at December 31, 2011. Management believes its sources of liquidity are adequate to meet the needs of the Corporation.

The Corporation’s cash flows are derived from operating activities, investing activities and financing activities as reported in the Consolidated Statement of Cash Flows. Net cash flows resulted in an increase of $7,711,000 in cash equivalents and federal funds sold for the nine-month period ended September 30, 2012 compared to a decrease in cash equivalents and federal funds sold of $3,997,000 for the nine-month period ended September 30, 2011. In 2012, total cash from operating activities of $3,392,000, proceeds from maturities and repayments of securities of $6,550,000, an increase in deposit balances of $6,622,000, proceeds from OREO and other repossessed asset sales of $113,000 as well as an increase in deferred compensation plan activity of $79,000, was utilized to fund loan growth of $10,207,000, fund capital expenditures of $354,000 and pay dividends of $437,000.

In 2011, total cash from operating activities of $1,835,000, proceeds from maturities and repayments of securities of $8,427,000, net cash repayments received on loans of $6,162,000, proceeds from OREO and other repossessed asset sales of $187,000 and an increase in deferred compensation activity of $77,000, was used to fund security purchases of $4,149,000, pay dividends of $416,000, satisfy deposit withdrawals of $15,793,000 and fund capital expenditures of $337,000.

CAPITAL RESOURCES

Banking regulations have established minimum capital requirements for banks including risk-based capital ratios and leverage ratios. Regulations require all banks to have a minimum total risk-based capital ratio of 8.0%, with half of the capital composed of core capital. Minimum leverage ratio requirements range from 3.0% to 5.0% of total assets. Conceptually, risk-based capital requirements assess the riskiness of a financial institution’s balance sheet and off-balance sheet commitments in relation to its capital. Core capital, or Tier 1 capital, includes common equity, perpetual preferred stock and minority interests that are held by others in consolidated subsidiaries minus intangible assets. Supplementary capital, or Tier 2 capital, includes core capital and such items as mandatory convertible securities, subordinated debt and the allowance for loan and lease losses, subject to certain limitations. Qualified Tier 2 capital can equal up to 100% of an institution’s Tier 1 capital with certain limitations in meeting the total risk-based capital requirements.

The Bank’s leverage and risk-based capital ratios at September 30, 2012 were 9.2% and 12.4% respectively, compared to leverage and risk-based capital ratios of 8.9% and 12.0% at year-end 2011. The Bank exceeded minimum regulatory requirements to be considered well capitalized for both periods. Should it become necessary to raise capital to expand the activities of the Corporation, there are sufficient un-issued shares to effect a merger, or solicit new investors.

35.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

TABLE 3 CONTRACTUAL OBLIGATIONS AND COMMITMENTS

The Corporation has certain obligations and commitments to make future payments under contract. The following table presents the Corporation’s contractual obligations and commitments (in thousands) at September 30, 2012:

Contractual obligations

	Payments Due by Period
			Less Than						After
	Total		One Year		1-3 Years		3-5 Years		5 Years
Time deposits and certificates of deposit	$	88,360	$	45,204	$	30,771	$	6,956	$	5,429
Borrowed funds		1,950		0		0		0		1,950
Total contractual obligations	$	90,310	$	45,204	$	30,771	$	6,956	$	7,379

Other commitments

	Amount of Commitment – Expiration by Period
			Less Than						After
	Total		One Year		1-3 Years		3-5 Years		5 Years
Commitments to extend commercial credit	$	17,360	$	9,700	$	3,113	$	21	$	4,526
Commitments to extend consumer credit		11,709		1,833		2,336		4,156		3,384
Standby letters of credit		107		97		10		0		0
Total other commitments	$	29,176	$	11,630	$	5,459	$	4,177	$	7,910

Other obligations and commitments include the deferred compensation plan, index plan reserve and split dollar life insurance. The timing of payments for these plans is unknown. See Note 1 of the 2011 Annual Report for additional details.

Items reported under “Contractual Obligations” represent standard bank financing activity under normal terms and practices. Such funds normally rollover or are replaced by like items depending on the then-current financing needs. Items reported under “Other Commitments” also represent standard bank activity, but for extending credit to bank customers. Commercial credits generally represent lines of credit or approved loans with drawable funds still available under the contract terms. On an on-going basis, approximately half of these amounts are expected to be drawn. Consumer credits generally represent amounts drawable under revolving home equity lines or credit card programs. Such amounts are usually deemed less likely to be drawn upon in total as consumers tend not to draw down all amounts on such lines. Utilization rates tend to be fairly constant over time. Standby letters of credit represent guarantees to finance specific projects whose primary source of financing comes from other sources. In the unlikely event of the other source’s failure to provide sufficient financing, the bank would be called upon to fill the need. The Corporation is also continually engaged in the process of approving new loans in a bidding competition with other banks. Management and Board committees approve the terms of these potential new loans with conditions and/or counter terms made to the applicant customers. Customers may accept the terms, make a counter proposal, or accept terms from a competitor. These loans are not yet under contract, but offers have been tendered, and would be required to be funded if accepted. Such agreements represent approximately $5,466,000 at September 30, 2012 in varying maturity terms.

36.

COMMERCIAL BANCSHARES, INC.

MANAGEMENT’S DISCUSSION AND ANALYSIS OF

FINANCIAL CONDITION AND RESULTS OF OPERATIONS

Item 3. Quantitative and Qualitative Disclosures about Market Risk

Market risk refers to the risk of loss arising from adverse changes in interest rates, foreign currency exchange rates, commodity prices, and other relevant market rates and prices. Management seeks to reduce fluctuations in its net interest margin and to optimize net interest income with acceptable levels of risk through periods of changing interest rates. Accordingly, the Corporation’s interest rate sensitivity and liquidity are monitored on an ongoing basis by its Asset and Liability Committee (“ALCO”). ALCO establishes risk measures, limits and policy guidelines for managing the amount of interest rate risk and its effect on net interest income and capital. A variety of measures are used to provide for a comprehensive view of the magnitude of interest rate risk, the distribution of risk, the level of risk over time and the exposure to changes in certain interest rate relationships. ALCO continuously monitors and manages the balance between interest rate sensitive assets and liabilities. The objective is to manage the impact of fluctuating market rates on net interest income within acceptable levels. In order to meet this objective, management may lengthen or shorten the duration of assets or liabilities. Management considers market interest rate risk to be one of the Corporation’s most significant ongoing business risk considerations.

The two primary methods to monitor and manage interest rate risk are rate-sensitivity gap analysis and review of the effects of various interest rate shock scenarios. Based upon ALCO’s review, there has been no significant change in the interest rate risk of the Corporation since year-end 2011. (See Quantitative and Qualitative Disclosures about Market Risk in the Annual Report to Shareholders for the year ended December 31, 2011.)

Item 4. Controls and Procedures

Under the supervision and with the participation of management, including the Chief Executive Officer and Chief Financial Officer, the Corporation conducted an evaluation of its disclosure controls and procedures, pursuant to Securities Exchange Act of 1934. Based on this evaluation, the Chief Executive Officer and Chief Financial Officer concluded that the Corporation’s disclosure controls and procedures were effective as of the end of the period covered by this report.

There was no change in the Corporation’s internal control over financial reporting that occurred during the Corporation’s fiscal quarter ended September 30, 2012 that has materially affected, or is reasonably likely to materially affect, the Corporation’s internal control over financial reporting.

37.

COMMERCIAL BANCSHARES, INC.

FORM 10-Q

Quarter ended September 30, 2012

PART II – OTHER INFORMATION

Item 1	Legal Proceedings
	There are no matters required to be reported under this item.
Item 1A	Risk Factors
	There have been no material changes from risk factors as previously disclosed in Part 1, Item 1.A. of Commercial Bancshares, Inc.’s 10-K filed on March 19, 2012.
Item 2	Unregistered Sales of Securities and Use of Proceeds
	For the three months ended September 30, 2012, a total of 1,477 shares were issued from treasury to the Commercial Bancshares, Inc., Deferred Compensation Plan (the “Plan”) at a total cost of $40,366.  For the nine months ended September 30, 2012, a total of 4,243 shares were issued from treasury to the Plan at a total cost of $115,974.  These transactions were not registered, but were made in reliance upon the exemption from registration contained in Section 4(2) of the Securities Act of 1933.
	Additionally, the Corporation delivered 544 shares totaling $9,395 under the Plan to various members of the Board for the nine months ended September 30, 2012.
	The following table reflects shares repurchased by the Corporation during the quarter ended September 30, 2012, including any shares purchased as part of a repurchase program approved by the Corporation’s Board of Directors in June 2009.

Period	Total Number  of Shares Purchased	Average Price  Paid  per Share	Total Number of Shares  Purchased as  Part of Publicly Announced Plans or Programs	Maximum Number (or Approximate  Dollar Value)  of Shares that May  Yet be Purchased  Under the Plans or Programs
07/01/12 - 07/31/12	-0-	n/a	-0-		23,548
08/01/12 - 08/31/12	-0-	n/a	-0-		23,548
09/01/12 - 09/30/12	-0-	n/a	-0-		23,548
Total	-0-	n/a	-0-		23,548

Item 3	Defaults upon Senior Securities
	There are no matters required to be reported under this item.
Item 4	Mine Safety Disclosures
	Not applicable
Item 5	Other Information
	There are no matters required to be reported under this item.

38.

COMMERCIAL BANCSHARES, INC.

FORM 10-Q

Quarter ended September 30, 2012

PART II – OTHER INFORMATION

Item 6           Exhibits:

Exhibit
Number	Description of Document
3.1.a.	Amended Articles of Incorporation of the Corporation
	(incorporated by reference to Registrant’s Form 8-K dated April 27, 1995)
3.1.b.	Amendment to the Corporation’s Amended Articles of Incorporation to increase the number of shares authorized for the issuance to 4,000,000 common shares, no par value (incorporated by reference to Appendix I to Registrant’s Definitive Proxy Statement filed March 13, 1997)
3.2	Code of Regulations of the Corporation
	(incorporated by reference to Registrant’s Form 8-K dated April 27, 1995)
4	Form of Certificate of Common Shares of the Corporation
	(incorporated by reference to Registrant’s Form 8-K dated April 27, 1995)
11	Statement re computation of per share earnings (reference is hereby made to Note 2 of the Consolidated Financial Statements on page 7 hereof)
31.1	Certification by CEO Pursuant to Sarbanes Oxley Section 302
31.2	Certification by CFO Pursuant to Sarbanes Oxley Section 302
32.1	Certification by CEO Pursuant to Sarbanes Oxley Section 906
32.2	Certification by CFO Pursuant to Sarbanes Oxley Section 906
101 **	The following material from the Corporation’s Form 10-Q Report for the quarterly period ended September 30, 2012, formatted in XBRL:  (1) Unaudited Condensed Consolidated Balance Sheets, (2) Unaudited Consolidated Statements of Income, (3) Unaudited Consolidated Statements of Comprehensive Income, (4) Unaudited Condensed Consolidated Statements of Changes in Shareholders’ Equity, (5) Unaudited Condensed Consolidated Statements of Cash Flows, and (6) the Notes to Unaudited Condensed Consolidated Financial Statements.

** Users of this data are advised that, pursuant to Rule 406T of Regulation S-T, these interactive data files are deemed not filed or part of a registration statement or prospectus for purposes of Sections 11 or 12 of the Securities Act of 1933 or Section 18 of the Securities Exchange Act of 1934, and are otherwise not subject to liability under these sections.

39.

COMMERCIAL BANCSHARES, INC.

SIGNATURES

Pursuant to the requirements 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.

		COMMERCIAL BANCSHARES, INC.
		(Registrant)
Date:	November 13, 2012	/s/ Robert E. Beach
		(Signature)
		Robert E. Beach
		President and Chief Executive Officer

Date:	November 13, 2012	/s/ Scott A. Oboy
		(Signature)
		Scott A. Oboy
		Executive Vice President and Chief Financial Officer

40.

EX-31.1

COMMERCIAL BANCSHARES, INC.

EXHIBIT 31.1

SARBANES-OXLEY ACT SECTION 302

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

I, Robert E. Beach, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Commercial Bancshares, 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 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 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 in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 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:	11/13/2012
/s/ Robert E. Beach
[Signature]
Robert E. Beach
President and Chief Executive Officer

EX-31.2

COMMERCIAL BANCSHARES, INC.

EXHIBIT 31.2

SARBANES-OXLEY ACT SECTION 302

CERTIFICATION OF CHIEF FINANCIAL OFFICER

I, Scott A. Oboy, certify that:

1) I have reviewed this quarterly report on Form 10-Q of Commercial Bancshares, 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 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 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 in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we 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 the end of the period covered by this report based on such evaluations; 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 (the registrant’s fourth fiscal quarter in the case of an annual report) 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 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:	11/13/2012
/s/ Scott A. Oboy
[Signature]
Scott A. Oboy
Executive Vice President and Chief Financial Officer

EX-32.1

COMMERCIAL BANCSHARES, INC.

EXHIBIT 32.1

SARBANES-OXLEY ACT SECTION 906

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350

I, Robert E. Beach, the Chief Executive Officer of Commercial Bancshares, Inc. (the “Company”), certify that (i) the Quarterly Report on Form 10-Q for the Company for the quarter ended September 30, 2012 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Robert E. Beach

President and Chief Executive Officer

Dated:  November 13, 2012

EX-32.2

COMMERCIAL BANCSHARES, INC.

EXHIBIT 32.2

SARBANES-OXLEY ACT SECTION 906

CERTIFICATION OF CHIEF FINANCIAL OFFICER

CERTIFICATION PURSUANT TO 18 U.S.C. § 1350

I, Scott A. Oboy, the Chief Financial Officer of Commercial Bancshares, Inc. (the “Company”), certify that (i) the Quarterly Report on Form 10-Q for the Company for the quarter ended September 30, 2012 (the “Report”), fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934 and (ii) the information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.

/s/ Scott A. Oboy

Chief Financial Officer

Dated:  November 13, 2012

XML

CREDIT QUALITY INDICATORS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Total Financing Receivables	$ 244,971	$ 234,873
Commercial Loan [Member]
Total Financing Receivables	189,478	177,402
Commercial Loan [Member] | Operating [Member]
Total Financing Receivables	26,724	27,430
Commercial Loan [Member] | Operating [Member] | Pass [Member]
Total Financing Receivables	25,250	25,323
Commercial Loan [Member] | Operating [Member] | Special Mention [Member]
Total Financing Receivables	89	1,234
Commercial Loan [Member] | Operating [Member] | Substandard [Member]
Total Financing Receivables	1,385	873
Commercial Loan [Member] | Operating [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Commercial Loan [Member] | Agricultural [Member]
Total Financing Receivables	31,133	27,970
Commercial Loan [Member] | Agricultural [Member] | Pass [Member]
Total Financing Receivables	31,133	27,650
Commercial Loan [Member] | Agricultural [Member] | Special Mention [Member]
Total Financing Receivables	0	320
Commercial Loan [Member] | Agricultural [Member] | Substandard [Member]
Total Financing Receivables	0	0
Commercial Loan [Member] | Agricultural [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Commercial Loan [Member] | Real Estate 1-4 Family [Member]
Total Financing Receivables	40,720	35,848
Commercial Loan [Member] | Real Estate 1-4 Family [Member] | Pass [Member]
Total Financing Receivables	37,343	33,854
Commercial Loan [Member] | Real Estate 1-4 Family [Member] | Special Mention [Member]
Total Financing Receivables	81	608
Commercial Loan [Member] | Real Estate 1-4 Family [Member] | Substandard [Member]
Total Financing Receivables	3,296	1,386
Commercial Loan [Member] | Real Estate 1-4 Family [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Commercial Loan [Member] | Real Estate Other [Member]
Total Financing Receivables	90,901	86,154
Commercial Loan [Member] | Real Estate Other [Member] | Pass [Member]
Total Financing Receivables	75,315	71,921
Commercial Loan [Member] | Real Estate Other [Member] | Special Mention [Member]
Total Financing Receivables	4,913	4,452
Commercial Loan [Member] | Real Estate Other [Member] | Substandard [Member]
Total Financing Receivables	10,673	9,781
Commercial Loan [Member] | Real Estate Other [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Residential Real Estate [Member] | Construction Loans [Member]
Total Financing Receivables	3,671	3,510
Residential Real Estate [Member] | Construction Loans [Member] | Pass [Member]
Total Financing Receivables	3,599	3,437
Residential Real Estate [Member] | Construction Loans [Member] | Special Mention [Member]
Total Financing Receivables	0	0
Residential Real Estate [Member] | Construction Loans [Member] | Substandard [Member]
Total Financing Receivables	72	73
Residential Real Estate [Member] | Construction Loans [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Residential Real Estate [Member] | Residential Real Estate Other [Member]
Total Financing Receivables	13,249	11,946
Residential Real Estate [Member] | Residential Real Estate Other [Member] | Pass [Member]
Total Financing Receivables	11,681	10,434
Residential Real Estate [Member] | Residential Real Estate Other [Member] | Special Mention [Member]
Total Financing Receivables	164	205
Residential Real Estate [Member] | Residential Real Estate Other [Member] | Substandard [Member]
Total Financing Receivables	1,404	1,307
Residential Real Estate [Member] | Residential Real Estate Other [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Consumer Loan [Member]
Total Financing Receivables	38,573	42,015
Consumer Loan [Member] | Equity [Member]
Total Financing Receivables	19,252	19,818
Consumer Loan [Member] | Equity [Member] | Pass [Member]
Total Financing Receivables	19,030	19,565
Consumer Loan [Member] | Equity [Member] | Special Mention [Member]
Total Financing Receivables	32	68
Consumer Loan [Member] | Equity [Member] | Substandard [Member]
Total Financing Receivables	190	185
Consumer Loan [Member] | Equity [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Consumer Loan [Member] | Collateralized Auto Loans [Member]
Total Financing Receivables	6,732	8,413
Consumer Loan [Member] | Collateralized Auto Loans [Member] | Pass [Member]
Total Financing Receivables	6,715	8,365
Consumer Loan [Member] | Collateralized Auto Loans [Member] | Special Mention [Member]
Total Financing Receivables	0	2
Consumer Loan [Member] | Collateralized Auto Loans [Member] | Substandard [Member]
Total Financing Receivables	17	46
Consumer Loan [Member] | Collateralized Auto Loans [Member] | Doubtful [Member]
Total Financing Receivables	0	0
Consumer Loan [Member] | Consumer Other Financing Receivable [Member]
Total Financing Receivables	12,589	13,784
Consumer Loan [Member] | Consumer Other Financing Receivable [Member] | Pass [Member]
Total Financing Receivables	12,510	13,673
Consumer Loan [Member] | Consumer Other Financing Receivable [Member] | Special Mention [Member]
Total Financing Receivables	5	6
Consumer Loan [Member] | Consumer Other Financing Receivable [Member] | Substandard [Member]
Total Financing Receivables	74	105
Consumer Loan [Member] | Consumer Other Financing Receivable [Member] | Doubtful [Member]
Total Financing Receivables	$ 0	$ 0

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STOCK-BASED COMPENSATION (Details 4) (USD $)	9 Months Ended
	Sep. 30, 2012
Restricted Stock Nonvested balance at January 1, 2012 Number of Shares	7,700
Restricted Stock Granted Nonvested Number of Shares	2,200
Restricted Stock Vested Number of Shares	(2,100)
Restricted Stock Forfeited/expired Restricted Stock Number of Shares	0
Restricted Stock Nonvested balance at September 30, 2012 Number of Shares	7,800
Restricted Stock Nonvested balance at January 1, 2012 Weighted Average Grant Date Fair Value	$ 15.01
Restricted Stock Granted Weighted Average Grant Date Fair Value	$ 19.28
Restricted Stock Vested Weighted Average Grant Date Fair Value	$ 12.30
Restricted Stock Forfeited/expired Weighted Average Grant Date Fair Value	$ 0.00
Restricted Stock Nonvested balance at September 30, 2012 Weighted Average Grant Date Fair Value	$ 16.95

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FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Impaired loans	$ 11,620	$ 7,400
Real estate acquired through foreclosure	0	0
Fair Value, Inputs, Level 1 [Member]
Impaired loans	0	0
Real estate acquired through foreclosure	0	0
Fair Value, Inputs, Level 2 [Member]
Impaired loans	0	0
Real estate acquired through foreclosure	0	0
Fair Value, Inputs, Level 3 [Member]
Impaired loans	11,620	7,400
Real estate acquired through foreclosure	$ 0	$ 0

XML

STOCK-BASED COMPENSATION (Details Textual) (USD $)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Granted Number Of Options	52,000		15,200
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Intrinsic Value	$ 201,000	$ 165,000	$ 201,000	$ 165,000
Share-based Compensation Arrangement by Share-based Payment Award, Options, Exercisable, Intrinsic Value	167,000	85,000	167,000	85,000
Restricted Stock or Unit Expense	10,000	8,000	30,000	16,000
Stock Options [Member]
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Authorized	150,000		150,000
Share-based Compensation Arrangement by Share-based Payment Award, Number of Shares Available for Grant	86,200		86,200
Restricted Stock [Member]
Granted Number Of Options	2,200
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options	87,000		87,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition			26 months 18 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Grants in Period, Weighted Average Grant Date Fair Value	$ 42,000
Non Restricted Stock Options [Member]
Allocated Share-based Compensation Expense	8,000	7,000	22,000	17,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Stock Options	67,000		67,000
Employee Service Share-based Compensation, Nonvested Awards, Total Compensation Cost Not yet Recognized, Period for Recognition			28 months 15 days
Share-based Compensation Arrangement by Share-based Payment Award, Options, Vested in Period, Fair Value			$ 178,000

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FINANCING RECEIVABLES ON NONACCRUAL STATUS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Total	$ 6,743	$ 1,852
Commercial Loan [Member] | Operating [Member]
Total	352	433
Commercial Loan [Member] | Real Estate 1-4 Family [Member]
Total	2,296	384
Commercial Loan [Member] | Real Estate Other [Member]
Total	3,881	761
Residential Real Estate [Member] | Residential Real Estate Other [Member]
Total	189	192
Consumer Loan [Member] | Equity [Member]
Total	0	12
Consumer Loan [Member] | Collateralized Auto Loans [Member]
Total	9	30
Consumer Loan [Member] | Consumer Other Financing Receivable [Member]
Total	$ 16	$ 40

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INVESTMENT SECURITIES (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Amortized Cost	$ 17,042	$ 23,689
Gross Unrealized Gains	1,087	1,167
Gross Unrealized Losses	(12)	(4)
Fair Value	18,117	24,852
Us States and Political Subdivisions Debt Securities [Member]
Amortized Cost	12,457	13,578
Gross Unrealized Gains	779	798
Gross Unrealized Losses	(12)	(4)
Fair Value	13,224	14,372
Commercial Mortgage Backed Securities [Member]
Amortized Cost	4,585	6,054
Gross Unrealized Gains	308	360
Gross Unrealized Losses	0	0
Fair Value	4,893	6,414
Us Government Agencies Debt Securities [Member]
Amortized Cost		4,057
Gross Unrealized Gains		9
Gross Unrealized Losses		0
Fair Value		$ 4,066

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SUMMARY OF IMPAIRED LOANS (Tables)

9 Months Ended

Sep. 30, 2012

Summary Of Impaired Loans [Abstract]

Schedule Of Impaired Loans Receivable [Text Block]

The following tables set forth certain information regarding the Corporation’s impaired loans (in thousands), segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2012 and December 31, 2011.

			Unpaid
	Recorded		Principal		Related
September 30, 2012	Investment		Balance		Allowance
With no related allowance recorded:
Commercial
Operating	$	137	$	137	$	0
Real estate, other		5,482		5,482		0
With an allowance recorded:
Commercial
Operating		142		142		48
Real estate, 1-4 family		1,764		1,764		248
Real estate, other		4,095		4,095		449
Total	$	11,620	$	11,620	$	745

			Unpaid
	Recorded		Principal		Related
December 31, 2011	Investment		Balance		Allowance
With no related allowance recorded:
Commercial
Operating	$	149	$	181	$	0
Real estate, other		3,668		3,668		0
With an allowance recorded:
Commercial
Operating		177		177		94
Real estate, 1-4 family		283		283		200
Real estate, other		3,123		3,123		157
Total	$	7,400	$	7,432	$	451

Schdule Of Impairment Loans Of Avearge and Interest Income Recognised [Table Text Block]

The following tables present the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class for the three and nine months ended September 30, 2012 and 2011.

	For the Three Months				For the Three Months
	Ended September 30, 2012				Ended September 30, 2011
	Average		Total interest		Average		Total interest
	recorded		income		recorded		income
(Dollars in thousands) investment	investment		recognized		investment		recognized
With no related allowance recorded:
Commercial operating	$	137	$	2	$	320	$	2
Commercial real estate, other		5,495		69		232		4
With an allowance recorded:
Commercial operating		144		0		0		0
Commercial real estate, 1-4 family		1,778		39		302		0
Commercial real estate, other		4,107		15		3,175		58
Total	$	11,661	$	125	$	4,029	$	64

	For the Nine Months				For the Nine Months
	Ended September 30, 2012				Ended September 30, 2011
	Average		Total interest		Average		Total interest
	recorded		income		recorded		income
(Dollars in thousands)	investment		recognized		investment		recognized
With no related allowance recorded:
Commercial
Operating	$	138	$	7	$	325	$	13
Real estate, other		4,670		221		233		12
With an allowance recorded:
Commercial
Operating		151		0		0		0
Real estate, 1-4 family		774		39		314		11
Real estate, other		3,735		57		2,093		132
Total	$	9,468	$	324	$	2,965	$	168

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STOCK-BASED COMPENSATION (Details)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Dividend yield	3.25%	3.32%
Risk-free interest rate	1.15%	1.65%
Expected volatility	23.62%	24.14%
Weighted average expected life	8 years	8 years
Weighted average per share fair value of options	3.01	2.94

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SUMMARY OF IMPAIRED LOANS (Details Textual) (USD $)	9 Months Ended
	Sep. 30, 2012	Dec. 31, 2011
Impaired Loans With No Related Allowance Increase During Period Percentage	47.21%
Impaired Loans With No Related Allowance Increase During Period Amount	$ 1,802,000
Impaired Loans With Specified Reserve Increase Percentage	67.49%
Impaired Loans With Specified Reserve Increase Amount	2,418,000
Reserve For Loan Losses	745,000	451,000
Increase In Specific Reserve Percentage	65.19%
Increase In Specific Reserve	$ 294,000

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ALLOWANCE FOR LOAN LOSSES (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Beginning balance	$ 3,910	$ 3,536	$ 3,779	$ 3,198
Charge-offs	(80)	(71)	(220)	(353)
Recoveries	12	6	43	101
Net (charge-offs) recoveries	(68)	(65)	(177)	(252)
Provision for loan losses	408	229	648	754
Ending balance	4,250	3,700	4,250	3,700
Commercial Loan [Member]
Beginning balance	2,998	2,543	2,849	2,307
Charge-offs	(20)	(56)	(45)	(237)
Recoveries	3	5	8	14
Net (charge-offs) recoveries	(17)	(51)	(37)	(223)
Provision for loan losses	370	251	539	659
Ending balance	3,351	2,743	3,351	2,743
Real Estate [Member]
Beginning balance	302	277	278	182
Charge-offs	(32)	0	(48)	0
Recoveries	0	0	0	0
Net (charge-offs) recoveries	(32)	0	(48)	0
Provision for loan losses	37	(1)	77	94
Ending balance	307	276	307	276
Consumer Loan [Member]
Beginning balance	610	716	652	709
Charge-offs	(28)	(15)	(127)	(116)
Recoveries	9	1	35	87
Net (charge-offs) recoveries	(19)	(14)	(92)	(29)
Provision for loan losses	1	(21)	32	1
Ending balance	$ 592	$ 681	$ 592	$ 681

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STOCK-BASED COMPENSATION (Details 2) (USD $)	9 Months Ended
	Sep. 30, 2012
Number of Shares	54,930
Weighted Average Remaining Contractual Life	8 years 11 days
Plan One [Member]
Exercise Price	22.75
Number of Shares	1,130
Weighted Average Remaining Contractual Life	3 months
Plan Two [Member]
Exercise Price	26.75
Number of Shares	1,000
Weighted Average Remaining Contractual Life	3 years 3 months
Plan Three [Member]
Exercise Price	12.30
Number of Shares	16,700
Weighted Average Remaining Contractual Life	6 years 10 months 13 days
Plan Four [Member]
Exercise Price	13.25
Number of Shares	11,100
Weighted Average Remaining Contractual Life	7 years 10 months 13 days
Plan Five [Member]
Exercise Price	17.40
Number of Shares	9,800
Weighted Average Remaining Contractual Life	8 years 10 months 13 days
Plan Six [Member]
Exercise Price	19.28
Number of Shares	15,200
Weighted Average Remaining Contractual Life	9 years 9 months 11 days

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FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Available-For-Sale Securities	$ 18,117	$ 24,852
Liabilities	0	0
Us Government Corporations and Agencies Securities [Member]
Available-For-Sale Securities		4,066
Us States and Political Subdivisions Debt Securities [Member]
Available-For-Sale Securities	13,224	14,372
Collateralized Mortgage Backed Securities [Member]
Available-For-Sale Securities	4,893	6,414
Fair Value, Inputs, Level 1 [Member]
Available-For-Sale Securities	0	0
Liabilities	0	0
Fair Value, Inputs, Level 1 [Member] | Us Government Corporations and Agencies Securities [Member]
Available-For-Sale Securities		0
Fair Value, Inputs, Level 1 [Member] | Us States and Political Subdivisions Debt Securities [Member]
Available-For-Sale Securities	0	0
Fair Value, Inputs, Level 1 [Member] | Collateralized Mortgage Backed Securities [Member]
Available-For-Sale Securities	0	0
Fair Value, Inputs, Level 2 [Member]
Available-For-Sale Securities	18,117	24,852
Liabilities	0	0
Fair Value, Inputs, Level 2 [Member] | Us Government Corporations and Agencies Securities [Member]
Available-For-Sale Securities		4,066
Fair Value, Inputs, Level 2 [Member] | Us States and Political Subdivisions Debt Securities [Member]
Available-For-Sale Securities	13,224	14,372
Fair Value, Inputs, Level 2 [Member] | Collateralized Mortgage Backed Securities [Member]
Available-For-Sale Securities	4,893	6,414
Fair Value, Inputs, Level 3 [Member]
Available-For-Sale Securities	0	0
Liabilities	0	0
Fair Value, Inputs, Level 3 [Member] | Us Government Corporations and Agencies Securities [Member]
Available-For-Sale Securities		0
Fair Value, Inputs, Level 3 [Member] | Us States and Political Subdivisions Debt Securities [Member]
Available-For-Sale Securities	0	0
Fair Value, Inputs, Level 3 [Member] | Collateralized Mortgage Backed Securities [Member]
Available-For-Sale Securities	$ 0	$ 0

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Significant Accounting Policies [Text Block]

NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Commercial Bancshares, Inc. (the “Corporation”) and its wholly owned subsidiaries, Commercial Financial and Insurance Agency, LTD (“Commercial Financial”) and The Commercial Savings Bank (the “Bank”). The Bank also owns a 49.9% interest in Beck Title Agency, Ltd., which is accounted for by using the equity method of accounting. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Corporation’s financial position at September 30, 2012, and the results of operations and changes in cash flows for the periods presented have been made.

Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. generally accepted principles have been omitted. The Annual Report for the year ended December 31, 2011, contains consolidated financial statements and related footnote disclosures which should be read in conjunction with the accompanying consolidated financial statements. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for any future periods or for the year ending December 31, 2012.

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TROUBLED DEBT RESTRUCTURINGS (Details) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Number of TDRS	2	3	3	4
Recorded Investment	$ 1,523	$ 495	$ 3,564	$ 1,874
Commercial Loan [Member] | Operating [Member]
Number of TDRS	0	2	0	2
Recorded Investment	0	198	0	198
Commercial Loan [Member] | Real Estate 1-4 Family [Member]
Number of TDRS	2	1	2	1
Recorded Investment	1,523	297	1,523	297
Commercial Loan [Member] | Real Estate Other [Member]
Number of TDRS	0	0	1	1
Recorded Investment	$ 0	$ 0	$ 2,041	$ 1,379

XML

FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS (Tables)

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value, by Balance Sheet Grouping [Table Text Block]

The following table presents information about the Corporation’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, and the valuation techniques used by the Corporation to determine those fair values.

Assets and liabilities, (in thousands) measured at fair value on a recurring basis for the periods indicated:

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Unobservable
	For Identical		Inputs		Inputs
September 30, 2012	Assets (Level 1)		(Level 2)		(Level 3)		Balance
Securities available for sale
State and political subdivisions		0		13,224		0		13,224
Mortgage-backed securities		0		4,893		0		4,893
Total Assets	$	0	$	18,117	$	0	$	18,117
Liabilities	$	0	$	0	$	0	$	0

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Unobservable
	For Identical		Inputs		Inputs
December 31, 2011	Assets (Level 1)		(Level 2)		(Level 3)		Balance
Securities available for sale
U.S. Government and federal agencies	$	0	$	4,066	$	0	$	4,066
State and political subdivisions		0		14,372		0		14,372
Mortgage-backed securities		0		6,414		0		6,414
Total Assets	$	0	$	24,852	$	0	$	24,852
Liabilities	$	0	$	0	$	0	$	0

Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis, Valuation Techniques [Table Text Block]

The following table presents financial assets and liabilities measured on a nonrecurring basis:

Fair Value Measurements at Reporting Date Using

	Balance at
(Dollars in thousands)	September 30, 2012		Level 1		Level 2		Level 3
Impaired loans	$	11,620	$	0	$	0	$	11,620
Real estate acquired through foreclosure		0		0		0		0

	Balance at
(Dollars in thousands)	December 31, 2011		Level 1		Level 2		Level 3
Impaired loans	$	7,400	$	0	$	0	$	7,400
Real estate acquired through foreclosure		0		0		0		0

Schedule Of Carrying Amount and Fair Values Of Financial Instruments [Table Text Block]

The estimated fair values of the Corporation’s financial instruments at the dates indicated are presented in the following tables:

	September 30, 2012
							Quoted Prices			Significant
							In Active			Other			Significant
							Markets for			Observable			Unobservable
	Carrying			Estimated			Identical Assets			Inputs			Inputs
(Dollars in thousands)	Amount			Fair Value			(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash equivalents and federal funds sold	$	18,434		$	18,434		$	18,434		$	0		$	0
Securities available for sale		18,117			18,117			0			18,117			0
Other investment securities		2,259			2,259			0			0			2,259
Loans, net of allowance for loan loss		240,721			237,135			0			0			237,135
Accrued interest receivable		1,392			1,392			0			0			1,392
Financial Liabilities:
Noninterest-bearing deposits	$	(40,616	)	$	(40,616	)	$	(40,616	)	$	0		$	0
Interest-bearing deposits		(136,774	)		(136,774	)		0			(136,774	)		0
Time deposits		(88,360	)		(87,272	)		0			(87,272	)		0
FHLB Advances		(1,950	)		(1,914	)		0			(1,914	)		0
Accrued interest payable		(109	)		(109	)		0			0			(109	)

	December 31, 2011
	Carrying			Estimated
(Dollars in thousands)	Amount			Fair Value
Financial assets
Cash equivalents and federal funds sold	$	10,723		$	10,723
Securities available for sale		24,852			24,852
Other investment securities		2,259			2,259
Loans, net of allowance for loan loss		231,094			224,230
Accrued interest receivable		1,275			1,275
Financial liabilities
Noninterest-bearing deposits	$	(38,189	)	$	(38,189	)
Interest-bearing deposits		(122,437	)		(122,437	)
Time deposits		(98,502	)		(97,712	)
Accrued interest payable		(106	)		(106	)

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FINANCING RECEIVABLES ON NONACCRUAL STATUS (Tables)

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Schedule of Financing Receivables, Non Accrual Status [Table Text Block]

The following table summarizes loans (in thousands) on nonaccrual status at September 30, 2012 and December 31, 2011.

	September 30, 2012		December 31, 2011
Commercial
Operating	$	352	$	433
Real estate, 1-4 family		2,296		384
Real estate, other		3,881		761
Residential real estate
Other		189		192
Consumer
Equity		0		12
Auto		9		30
Other		16		40
Total	$	6,743	$	1,852

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TROUBLED DEBT RESTRUCTURINGS (Details Textual) (USD $)	Sep. 30, 2012	Dec. 31, 2011
Recorded Investment	$ 3,564,000	$ 1,874,000
Allowance for Credit Losses, Change in Method of Calculating Impairment	$ 191,000	$ 324,000

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STOCK-BASED COMPENSATION (Tables)

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Schedule of Share-based Payment Award, Stock Options, Valuation Assumptions [Table Text Block]

The fair value of options granted in 2012 and 2011 was determined using the following weighted-average assumptions as of the date of grant:

	2012			2011
	Assumptions			Assumptions
Dividend yield		3.25	%		3.32	%
Risk-free interest rate		1.15	%		1.65	%
Expected volatility		23.62	%		24.14	%
Weighted average expected life		8 years			8 years
Weighted average per share fair value of options	$	3.01		$	2.94

Schedule of Share-based Compensation, Stock Options, Activity [Table Text Block]

The following table summarizes stock option activity for the nine months ended September 30, 2012:

				Weighted
	Number			Average		Number
	Of			Exercise		of Options
Stock Options	Options			Price		Exercisable
Outstanding options at January 1, 2012		40,330		$	14.45		17,105
Granted		15,200			19.28
Exercised		(300	)		12.30
Forfeited		(300	)		12.30
Expired		0			0
Outstanding options at September 30, 2012		54,930		$	15.81		29,499

Schedule of Share-based Compensation, Shares Authorized under Stock Option Plans, by Exercise Price Range [Table Text Block]

The following is a summary of outstanding and exercisable stock options at September 30, 2012.

			Weighted Average
		Number	Remaining
Exercise Price		of Shares	Contractual Life
$	22.75	1,130	0.25	years
$	26.75	1,000	3.25	years
$	12.30	16,700	6.87	years
$	13.25	11,100	7.87	years
$	17.40	9,800	8.87	years
$	19.28	15,200	9.78	years
Total		54,930	8.03	years

Schedule of Nonvested Share Activity [Table Text Block]

The following table summarizes information about the Corporation’s nonvested stock option activity for the nine months ended September 30, 2012:

	Number			Weighted
	Of			Average
Nonvested Options	Options			Price
Nonvested options at January 1, 2012		23,225		$	14.75
Granted		15,200			19.28
Vested		(12,828	)		13.87
Forfeited		(166	)		12.30
Nonvested options at September 30, 2012		25,431		$	17.92

Schedule of Nonvested Restricted Stock Units Activity [Table Text Block]

The table below summarizes restricted stock activity for the nine months ended September 30, 2012:

				Weighted
	Nonvested			Average
	Number of			Grant Date
Restricted Stock	Shares			Fair Value
Nonvested balance at January 1, 2012		7,700		$	15.01
Granted		2,200			19.28
Vested		(2,100	)		12.30
Forfeited/expired		0			0.00
Nonvested balance at September 30, 2012		7,800		$	16.95

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Details Textual)	Sep. 30, 2012
Equity Method Investment, Ownership Percentage	49.90%

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CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Cash flows from operating activities
Net income	$ 2,136	$ 2,038
Adjustments	1,256	(203)
Net cash from operating activities	3,392	1,835
Cash flows from investing activities
Securities available for sale: Purchases	0	(4,149)
Securities available for sale: Maturities, calls and repayments	6,550	8,427
Net change in loans	(10,207)	6,162
Proceeds from sale of OREO and other repossessed assets	113	187
Bank premises and equipment expenditures	(354)	(337)
Net cash from investing activities	(3,898)	10,290
Cash flows from financing activities
Net change in deposits	6,622	(15,793)
Advances from FHLB	1,950	0
Cash dividends paid	(437)	(416)
Issuance of treasury stock under stock option plans	3	10
Deferred compensation plan activity	79	77
Net cash from financing activities	8,217	(16,122)
Net change in cash equivalents and federal funds sold	7,711	(3,997)
Cash equivalents and federal funds sold at beginning of period	10,723	22,080
Cash equivalents and federal funds sold at end of period	18,434	18,083
Supplemental disclosures
Cash paid for interest	1,121	1,742
Cash paid for income taxes	675	1,310
Non-cash transfer of loans to foreclosed and other repossessed assets	$ 162	$ 424

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EARNINGS PER SHARE (Details)	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Weighted average shares outstanding during the period	1,168,262	1,158,882	1,165,870	1,155,828
Dilutive effect of stock options	10,648	8,220	11,322	7,820
Weighted average shares considering dilutive effect	1,178,910	1,167,102	1,177,192	1,163,648
Anti-dilutive stock options not considered in computing diluted earnings per share	2,130	2,130	2,130	2,130

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SUMMARY OF IMPAIRED LOANS (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Recorded Investment	$ 11,620	$ 7,400
Unpaid Principal Balance	11,620	7,432
Related Allowance With an allowance recorded	745	451
Commercial Loan [Member] | Operating [Member]
Recorded Investment With no related allowance recorded	137	149
Unpaid Principal Balance With no related allowance recorded	137	181
Recorded Investment With an allowance recorded	142	177
Unpaid Principal Balance With an allowance recorded	142	177
Related Allowance With an allowance recorded	48	94
Commercial Loan [Member] | Real Estate 1-4 Family [Member]
Recorded Investment With an allowance recorded	1,764	283
Unpaid Principal Balance With an allowance recorded	1,764	283
Related Allowance With an allowance recorded	248	200
Commercial Loan [Member] | Real Estate Other [Member]
Recorded Investment With no related allowance recorded	5,482	3,668
Unpaid Principal Balance With no related allowance recorded	5,482	3,668
Recorded Investment With an allowance recorded	4,095	3,123
Unpaid Principal Balance With an allowance recorded	4,095	3,123
Related Allowance With an allowance recorded	$ 449	$ 157

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STOCK-BASED COMPENSATION (Details 3)	9 Months Ended
	Sep. 30, 2012
Nonvested options at January 1, 2012 Number Of Options	23,225
Granted Number Of Options	15,200
Vested Number Of Options	(12,828)
Forfeited Number Of Options	(166)
Nonvested options at September 30, 2012 Number Of Options	25,431
Nonvested options at January 1, 2012 Weighted Average Price	14.75
Granted Weighted Average Price	19.28
Vested Weighted Average Price	13.87
Forfeited Weighted Average Price	12.30
Nonvested options at September 30, 2012 Weighted Average Price	17.92

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CONSOLIDATED BALANCE SHEETS (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
ASSETS
Cash and cash equivalents	$ 5,480	$ 5,435
Federal funds sold	12,954	5,288
Cash equivalents and federal funds sold	18,434	10,723
Securities available for sale	18,117	24,852
Other investment securities	2,259	2,259
Total loans	244,971	234,873
Allowance for loan losses	(4,250)	(3,779)
Loans, net	240,721	231,094
Premises and equipment, net	7,263	7,406
Accrued interest receivable	1,392	1,275
Other assets	9,991	10,170
Total assets	298,177	287,779
LIABILITIES
Noninterest-bearing demand	40,616	38,189
Interest-bearing demand	115,621	103,774
Savings and time deposits	83,283	86,918
Time deposits $100,000 and greater	26,230	30,247
Total deposits	265,750	259,128
FHLB advances	1,950	0
Accrued interest payable	109	106
Other liabilities	1,594	1,546
Total liabilities	269,403	260,780
SHAREHOLDERS' EQUITY
Common stock, no par value; 4,000,000 shares authorized, 1,186,638 shares issued in 2012 and 2011	11,737	11,621
Retained earnings	17,696	16,058
Unearned compensation	(88)	(76)
Deferred compensation plan shares; at cost, 46,510 shares in 2012 and 41,606 shares in 2011	(811)	(717)
Treasury stock; 17,170 shares in 2012 and 23,913 shares in 2011	(469)	(654)
Accumulated other comprehensive income	709	767
Total shareholders' equity	28,774	26,999
Total liabilities and shareholders' equity	$ 298,177	$ 287,779

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AGE ANALYSIS OF PAST DUE FINANCING RECEIVABLES (Details) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
30-59 Days Past Due	$ 4,620	$ 272
60-89 Days Past Due	119	99
>90 Days Past Due	2,449	378
Total Past Due	7,188	749
Current	237,783	234,124
Total Financing Receivables	244,971	234,873
Recorded Investment > 90 Days and Accruing	0	0
Commercial Loan [Member]
Total Financing Receivables	189,478	177,402
Commercial Loan [Member] | Operating [Member]
30-59 Days Past Due	106	14
60-89 Days Past Due	0	93
>90 Days Past Due	0	15
Total Past Due	106	122
Current	26,618	27,308
Total Financing Receivables	26,724	27,430
Recorded Investment > 90 Days and Accruing	0	0
Commercial Loan [Member] | Agricultural [Member]
30-59 Days Past Due	0	0
60-89 Days Past Due	0	0
>90 Days Past Due	0	0
Total Past Due	0	0
Current	31,133	27,970
Total Financing Receivables	31,133	27,970
Recorded Investment > 90 Days and Accruing	0	0
Commercial Loan [Member] | Real Estate 1-4 Family [Member]
30-59 Days Past Due	97	45
60-89 Days Past Due	0	1
>90 Days Past Due	1,962	0
Total Past Due	2,059	46
Current	38,661	35,802
Total Financing Receivables	40,720	35,848
Recorded Investment > 90 Days and Accruing	0	0
Commercial Loan [Member] | Real Estate Other [Member]
30-59 Days Past Due	4,360	121
60-89 Days Past Due	0	0
>90 Days Past Due	309	309
Total Past Due	4,669	430
Current	86,232	85,724
Total Financing Receivables	90,901	86,154
Recorded Investment > 90 Days and Accruing	0	0
Residential Real Estate [Member] | Construction Loans [Member]
30-59 Days Past Due	0	0
60-89 Days Past Due	75	0
>90 Days Past Due	0	0
Total Past Due	75	0
Current	3,596	3,510
Total Financing Receivables	3,671	3,510
Recorded Investment > 90 Days and Accruing	0	0
Residential Real Estate [Member] | Residential Real Estate Other [Member]
30-59 Days Past Due	0	28
60-89 Days Past Due	28	0
>90 Days Past Due	178	0
Total Past Due	206	28
Current	130,431	11,918
Total Financing Receivables	13,249	11,946
Recorded Investment > 90 Days and Accruing	0	0
Consumer Loan [Member]
Total Financing Receivables	38,573	42,015
Consumer Loan [Member] | Equity [Member]
30-59 Days Past Due	25	27
60-89 Days Past Due	0	0
>90 Days Past Due	0	0
Total Past Due	25	27
Current	19,227	19,791
Total Financing Receivables	19,252	19,818
Recorded Investment > 90 Days and Accruing	0	0
Consumer Loan [Member] | Collateralized Auto Loans [Member]
30-59 Days Past Due	18	17
60-89 Days Past Due	0	0
>90 Days Past Due	0	19
Total Past Due	18	36
Current	6,714	8,377
Total Financing Receivables	6,732	8,413
Recorded Investment > 90 Days and Accruing	0	0
Consumer Loan [Member] | Consumer Other Financing Receivable [Member]
30-59 Days Past Due	14	20
60-89 Days Past Due	16	5
>90 Days Past Due	0	35
Total Past Due	30	60
Current	12,559	13,724
Total Financing Receivables	12,589	13,784
Recorded Investment > 90 Days and Accruing	$ 0	$ 0

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY (USD $) In Thousands, unless otherwise specified	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Balance at beginning of period	$ 26,999	$ 24,389
Comprehensive income
Net income	2,136	2,038
Change in net unrealized gain (loss) on securities available for sale, net of reclassification and tax effects	(58)	343
Total comprehensive income	2,078	2,381
Stock-based compensation	52	33
Issuance of treasury stock under stock option plans	3	10
Deferred compensation plan activity	79	77
Dividends paid ($0.375 and $0.360 per share in 2012 and 2011)	(437)	(416)
Balance at end of period	$ 28,774	$ 26,474

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INVESTMENT SECURITIES (Details2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Gross Unrealized Losses Less Than Twelve Months	$ (5)	$ (3)
Fair Value Less Than Twelve Months	681	880
Gross Unrealized Losses Over Twelve Months	(7)	(1)
Fair Value Over Twelve Months	807	310
Us States and Political Subdivisions Debt Securities [Member]
Gross Unrealized Losses Less Than Twelve Months	(5)	(3)
Fair Value Less Than Twelve Months	681	880
Gross Unrealized Losses Over Twelve Months	(7)	(1)
Fair Value Over Twelve Months	807	310
Commercial Mortgage Backed Securities [Member]
Gross Unrealized Losses Less Than Twelve Months	0	0
Fair Value Less Than Twelve Months	0	0
Gross Unrealized Losses Over Twelve Months	0	0
Fair Value Over Twelve Months	0	0
Us Government Agencies Debt Securities [Member]
Gross Unrealized Losses Less Than Twelve Months		0
Fair Value Less Than Twelve Months		0
Gross Unrealized Losses Over Twelve Months		0
Fair Value Over Twelve Months		$ 0

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INVESTMENT SECURITIES (Tables)

9 Months Ended

Sep. 30, 2012

Schedule Of Investments [Abstract]

Available-for-sale Securities [Table Text Block]

The amortized cost and estimated fair value of securities available for sale at the dates indicated are presented in the following table:

	September 30, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
State and political subdivisions	$	12,457	$	779	$	(12	)	$	13,224
Mortgage-backed securities		4,585		308		0			4,893
Total securities available for sale	$	17,042	$	1,087	$	(12	)	$	18,117

	December 31, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
U.S. Government and federal agencies	$	4,057	$	9	$	0		$	4,066
State and political subdivisions		13,578		798		(4	)		14,372
Mortgage-backed securities		6,054		360		0			6,414
Total securities available for sale	$	23,689	$	1,167	$	(4	)	$	24,852

Schedule Of Contractual Maturity Of Debt Securities [Text Block]

The estimated fair values of investment securities (in thousands) at September 30, 2012, by contractual maturity are shown below. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Fair Value
Due less than one year	$	809
Due after one year through five years		5,385
Due after five years through ten years		6,111
Due after ten years		919
Mortgage-backed securities		4,893
Total securities available for sale	$	18,117

Schedule Of Gross Unrealized Losses and Estimated Fair Value Of Securities By Security Category [Table Text Block]

Gross unrealized losses on securities and the estimated fair value of the related securities aggregated by security category and length of time the individual securities have been in continuous loss positions at September 30, 2012 and December 31, 2011 are as follows:

	Less Than Twelve Months					Over Twelve Months
(Dollars in thousands)	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
September 30, 2012	Losses			Value		Losses			Value
State and political subdivisions	$	(5	)	$	681	$	(7	)	$	807
Mortgage-backed securities		0			0		0			0
Total available for sale	$	(5	)	$	681	$	(7	)	$	807

	Less Than Twelve Months					Over Twelve Months
(Dollars in thousands)	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
December 31, 2011	Losses			Value		Losses			Value
U.S. Government and federal agencies	$	0		$	0	$	0		$	0
State and political subdivisions		(3	)		880		(1	)		310
Mortgage-backed securities		0			0		0			0
Total available for sale	$	(3	)	$	880	$	(1	)	$	310

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INVESTMENT SECURITIES (Details Textual) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Trading Securities Pledged as Collateral	$ 15,793	$ 18,219

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CREDIT QUALITY INDICATORS (Tables)

9 Months Ended

Sep. 30, 2012

Credit Quality Indicators [Abstract]

Financing Receivable Credit Quality Indicators [Table Text Block]

The following tables present the risk category of loans by class of loans based on the most recent analysis performed at September 30, 2012 and December 31, 2011.

Commercial Credit Exposure (Dollars in thousands)

Credit risk profile by credit worthiness category

									Commercial				Commercial
	Commercial				Commercial				Real Estate				Real Estate
	Operating				Agricultural				1-4 Family				Other
Category	09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	25,250	$	25,323	$	31,133	$	27,650	$	37,343	$	33,854	$	75,315	$	71,921
6		89		1,234		0		320		81		608		4,913		4,452
7		1,385		873		0		0		3,296		1,386		10,673		9,781
8		0		0		0		0		0		0		0		0
Total	$	26,724	$	27,430	$	31,133	$	27,970	$	40,720	$	35,848	$	90,901	$	86,154

Consumer Credit Exposure (Dollars in thousands)

Credit risk by credit worthiness category

	Residential				Residential
	Real Estate, Construction				Real Estate, Other
Category	09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	3,599	$	3,437	$	11,681	$	10,434
6		0		0		164		205
7		72		73		1,404		1,307
8		0		0		0		0
Total	$	3,671	$	3,510	$	13,249	$	11,946

Consumer Credit Exposure (Dollars in thousands)

Credit risk by credit worthiness category

	Consumer - Equity				Consumer - Auto				Consumer - Other
Category	09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	19,030	$	19,565	$	6,715	$	8,365	$	12,510	$	13,673
6		32		68		0		2		5		6
7		190		185		17		46		74		105
8		0		0		0		0		0		0
Total	$	19,252	$	19,818	$	6,732	$	8,413	$	12,589	$	13,784

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CONDENSED CONSOLIDATED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY [Parenthetical] (USD $)	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011
Dividend paid per share (in dollars per share)	$ 0.375	$ 0.360

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CONSOLIDATED BALANCE SHEETS [Parenthetical]	Sep. 30, 2012	Dec. 31, 2011
Common stock, shares authorized	4,000,000	4,000,000
Common stock, shares issued	1,186,638	1,186,638
Deferred compensation plan, shares issued	46,510	41,606
Treasury stock, shares	17,170	23,913

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FINANCING RECEIVABLES ON NONACCRUAL STATUS

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Financing Receivables [Text Block]

NOTE 9 FINANCING RECEIVABLES ON NONACCRUAL STATUS

The following table summarizes loans (in thousands) on nonaccrual status at September 30, 2012 and December 31, 2011.

	September 30, 2012		December 31, 2011
Commercial
Operating	$	352	$	433
Real estate, 1-4 family		2,296		384
Real estate, other		3,881		761
Residential real estate
Other		189		192
Consumer
Equity		0		12
Auto		9		30
Other		16		40
Total	$	6,743	$	1,852

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DOCUMENT AND ENTITY INFORMATION	9 Months Ended
	Sep. 30, 2012	Nov. 13, 2012
Entity Registrant Name	COMMERCIAL BANCSHARES INC \OH\
Entity Central Index Key	0001009976
Current Fiscal Year End Date	--12-31
Entity Filer Category	Smaller Reporting Company
Trading Symbol	cmoh
Entity Common Stock, Shares Outstanding		1,169,840
Document Type	10-Q
Amendment Flag	false
Document Period End Date	Sep. 30, 2012
Document Fiscal Period Focus	Q3
Document Fiscal Year Focus	2012

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FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS

9 Months Ended

Sep. 30, 2012

Fair Value Disclosures [Abstract]

Fair Value Disclosures [Text Block]

NOTE 10 FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS

The Corporation groups its assets and liabilities measured at fair value into a three-level hierarchy for valuation techniques used to measure assets and liabilities at fair value. This hierarchy is based on whether the valuation inputs are observable or unobservable. These levels are:

· Level 1 – Quoted prices in active markets for identical assets or liabilities.

· Level 2 – Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities in active markets, and other inputs such as interest rates and yield curves that are observable at commonly quoted intervals.

· Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In instances where inputs used to measure fair value fall into different levels in the above fair value hierarchy, fair value measurements in their entirety are categorized based on the lowest level input that is significant to the valuation. The Corporation’s assessment of the significance of particular inputs to these fair value measurements requires significant management judgment or estimation and considers factors specific to each asset or liability.

U.S. Government and federal agencies and mortgage-backed securities

Valuations are based on active market data and use of evaluated broker pricing models that vary based by asset class and includes available trade, bid, and other market information. Generally, the methodology includes broker quotes, proprietary models, descriptive terms and conditions databases coupled with extensive quality control programs. Multiple quality control evaluation processes review available market, credit and deal level information to support the evaluation of the security. If there is a lack of objectively verifiable information available to support the valuation, the evaluation of the security is discontinued. Additionally, proprietary models and pricing systems, mathematical tools, actual transacted prices, integration of market developments and experienced evaluators are used to determine the value of a security based on a hierarchy of market information regarding a security or securities with similar characteristics. Management reviews the data and assumptions used in pricing the securities by its third party provider to ensure the highest level of significant inputs are derived from market observable data.

State and political subdivisions

Proprietary valuation matrices are used for valuing all tax-exempt municipals that can incorporate changes in the municipal market as they occur. Market evaluation models include the ability to value bank qualified municipals and general market municipals that can be broken down further according to insurer, credit support, state of issuance and rating to incorporate additional spreads and municipal curves. Taxable municipals are valued using a third party model that incorporates a methodology that captures the trading nuances associated with these bonds.

The following table presents information about the Corporation’s assets and liabilities measured at fair value on a recurring basis as of September 30, 2012 and December 31, 2011, and the valuation techniques used by the Corporation to determine those fair values.

Assets and liabilities, (in thousands) measured at fair value on a recurring basis for the periods indicated:

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Unobservable
	For Identical		Inputs		Inputs
September 30, 2012	Assets (Level 1)		(Level 2)		(Level 3)		Balance
Securities available for sale
State and political subdivisions		0		13,224		0		13,224
Mortgage-backed securities		0		4,893		0		4,893
Total Assets	$	0	$	18,117	$	0	$	18,117
Liabilities	$	0	$	0	$	0	$	0

	Quoted Prices in		Significant		Significant
	Active Markets		Observable		Unobservable
	For Identical		Inputs		Inputs
December 31, 2011	Assets (Level 1)		(Level 2)		(Level 3)		Balance
Securities available for sale
U.S. Government and federal agencies	$	0	$	4,066	$	0	$	4,066
State and political subdivisions		0		14,372		0		14,372
Mortgage-backed securities		0		6,414		0		6,414
Total Assets	$	0	$	24,852	$	0	$	24,852
Liabilities	$	0	$	0	$	0	$	0

Securities characterized as having Level 2 inputs generally consist of obligations of U.S. Government and federal agencies, government-sponsored organizations and obligations of state and political subdivisions. There were no transfers in and out of Levels 1 and 2 for the period ended September 30, 2012.

The Corporation also has assets that, under certain conditions, are subject to measurement at fair value on a non-recurring basis. At September 30, 2012, such assets consist primarily of impaired loans and other real estate owned. The Corporation has estimated the fair values of these assets using Level 3 inputs. Management considers third party appraisals as well as independent fair market value assessments from realtors or persons involved in selling OREO when determining the fair value of particular properties.

The following table presents financial assets and liabilities measured on a nonrecurring basis:

Fair Value Measurements at Reporting Date Using

	Balance at
(Dollars in thousands)	September 30, 2012		Level 1		Level 2		Level 3
Impaired loans	$	11,620	$	0	$	0	$	11,620
Real estate acquired through foreclosure		0		0		0		0

	Balance at
(Dollars in thousands)	December 31, 2011		Level 1		Level 2		Level 3
Impaired loans	$	7,400	$	0	$	0	$	7,400
Real estate acquired through foreclosure		0		0		0		0

A loan is considered impaired when, based on current information and events it is probable the Corporation will be unable to collect all amounts due (both interest and principal) according to the contractual terms of the loan agreement. Loan impairment is measured using the present value of expected cash flows discounted at the loan’s effective interest rate, the loan’s observable market price or the fair value of the collateral (less selling costs) if the loan is collateral dependent. Collateral may be real estate and/or business assets including equipment, inventory and accounts receivable. The value of business equipment, inventory and accounts receivable collateral is based on net book value on the business’ financial statements and, if necessary, discounted based on management’s review and analysis. Appraised and reported values may be discounted based on management’s historical knowledge, changes in market conditions from the time of valuation, and/or management’s expertise and knowledge of the client and the client’s business. Impaired loans are subject to nonrecurring fair value adjustments to reflect (1) partial write-downs that are based on the observable market price or current appraised value of the collateral, or (2) the full charge-off of the loan carrying value.

 Other real estate owned (“OREO”) acquired through or instead of loan foreclosure is adjusted to fair value upon transfer of the loans to OREO. Subsequently, OREO is carried at the lower of carrying value or fair value. The estimated fair value for other real estate owned is determined by independent market based appraisals and other available market information. Accordingly, the valuations of OREO and other repossessed assets are subject to significant judgment. If the fair value of the collateral deteriorates subsequent to initial recognition, a valuation allowance is recorded through expense. Additionally, any operating costs incurred after acquisition are also expensed.

The estimated fair values of the Corporation’s financial instruments at the dates indicated are presented in the following tables:

	September 30, 2012
							Quoted Prices			Significant
							In Active			Other			Significant
							Markets for			Observable			Unobservable
	Carrying			Estimated			Identical Assets			Inputs			Inputs
(Dollars in thousands)	Amount			Fair Value			(Level 1)			(Level 2)			(Level 3)
Financial Assets:
Cash equivalents and federal funds sold	$	18,434		$	18,434		$	18,434		$	0		$	0
Securities available for sale		18,117			18,117			0			18,117			0
Other investment securities		2,259			2,259			0			0			2,259
Loans, net of allowance for loan loss		240,721			237,135			0			0			237,135
Accrued interest receivable		1,392			1,392			0			0			1,392
Financial Liabilities:
Noninterest-bearing deposits	$	(40,616	)	$	(40,616	)	$	(40,616	)	$	0		$	0
Interest-bearing deposits		(136,774	)		(136,774	)		0			(136,774	)		0
Time deposits		(88,360	)		(87,272	)		0			(87,272	)		0
FHLB Advances		(1,950	)		(1,914	)		0			(1,914	)		0
Accrued interest payable		(109	)		(109	)		0			0			(109	)

	December 31, 2011
	Carrying			Estimated
(Dollars in thousands)	Amount			Fair Value
Financial assets
Cash equivalents and federal funds sold	$	10,723		$	10,723
Securities available for sale		24,852			24,852
Other investment securities		2,259			2,259
Loans, net of allowance for loan loss		231,094			224,230
Accrued interest receivable		1,275			1,275
Financial liabilities
Noninterest-bearing deposits	$	(38,189	)	$	(38,189	)
Interest-bearing deposits		(122,437	)		(122,437	)
Time deposits		(98,502	)		(97,712	)
Accrued interest payable		(106	)		(106	)

The following describes the valuation methodologies used by management to measure financial assets and liabilities at fair value. Where appropriate, the description includes information about the valuation models and key inputs to those models.

· Cash equivalents and federal funds sold – The carrying value of cash, amounts due from banks and federal funds sold assumed to approximate fair value.

· Investment securities – Fair value is based on quoted market prices in active markets for identical assets or similar assets in active markets. If quoted market prices are not available, with the assistance of an independent pricing service, management’s fair value measurements consider observable data which may include market maker bids, quotes and pricing models. Inputs to the pricing models include recent trades, benchmark interest rates, spreads and actual and projected cash flows.

· Other investment securities – principally consists of investments in Federal Home Loan Bank stock, which has limited marketability and is carried at cost.

· Loans – The loan portfolio includes adjustable and fixed-rate loans, the fair value of which is estimated using discounted cash flow analyses. To calculate discounted cash flows, the loans are aggregated into pools of similar types and expected repayment terms. Expected cash flows were based on historical prepayment experiences and estimated credit losses for non-performing loans and were discounted using current rates at which similar loans would be made to borrowers with similar credit ratings and similar remaining maturities. Fair values for impaired loans are estimated using discounted cash flow analyses or underlying collateral values, where applicable.

· Accrued interest receivable – The carrying value of accrued interest receivable approximates fair value due to the short-term duration.

· Noninterest-bearing deposits – The fair value of noninterest-bearing demand deposits, which have no stated maturity, were considered equal to their carrying amount, representing the amount payable on demand.

· Interest-bearing deposits – The fair value of demand, money market and savings deposits, which have no stated maturity, were considered equal to their carrying amount, representing the amount payable on demand.

· Time deposits – The fair value for fixed-rate time deposits is estimated using a discounted cash flow calculation that applies interest rates currently being offered for time deposits with similar terms and similar remaining maturities.

· FHLB advances – The fair value of long-term debt was estimated using a discounted cash flow calculation which utilizes the interest rates currently offered for borrowings of similar remaining maturities.

· Accrued interest payable – The carrying value of accrued interest payable approximates fair value due to the short-term duration.

Off-Balance Sheet Financial Instruments – Fair values for off-balance sheet, credit related financial instruments are based on fees currently charged to enter into similar arrangements, taking into account the remaining terms of the agreements and the counter parties credit rating.

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CONSOLIDATED STATEMENTS OF INCOME (USD $) In Thousands, except Per Share data, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Interest income
Interest and fees on loans	$ 3,328	$ 3,550	$ 10,022	$ 10,412
Interest on investment securities:
Taxable	72	127	242	411
Tax-exempt	128	153	397	469
Federal funds sold	11	4	35	22
Total interest income	3,539	3,834	10,696	11,314
Interest expense
Interest on deposits	362	515	1,115	1,700
Interest on borrowings	9	0	9	0
Total interest expense	371	515	1,124	1,700
Net interest income	3,168	3,319	9,572	9,614
Provision for loan losses	408	229	648	754
Net interest income after provision for loan losses	2,760	3,090	8,924	8,860
Noninterest income
Service fees and overdraft charges	371	399	1,107	1,152
Other income	207	146	589	459
Total noninterest income	578	545	1,696	1,611
Noninterest expense
Salaries and employee benefits	1,403	1,409	4,246	4,143
Premises and equipment	317	312	950	980
OREO and miscellaneous loan expense	46	69	141	198
Professional fees	94	135	327	410
Data processing	52	51	152	149
Software maintenance	109	88	306	271
Advertising and promotional	69	69	186	182
FDIC deposit insurance	68	16	179	238
Franchise tax	83	79	244	236
Losses on other repossessed asset sales, net	11	28	13	55
Other operating expense	292	282	905	838
Total noninterest expense	2,544	2,538	7,649	7,700
Income before income taxes	794	1,097	2,971	2,771
Income tax expense	214	303	835	733
Net income	$ 580	$ 794	$ 2,136	$ 2,038
Basic earnings per common share	$ 0.50	$ 0.68	$ 1.83	$ 1.76
Diluted earnings per common share	$ 0.49	$ 0.68	$ 1.81	$ 1.75

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ALLOWANCE FOR LOAN LOSSES

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Allowance for Credit Losses [Text Block]

NOTE 4 ALLOWANCE FOR LOAN LOSSES

The following tables provide information on the activity in the allowance for loan losses by the respective loan portfolio segment for the period indicated:

	For the Three Months Ended September 30, 2012
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – July 1, 2012	$	2,998		$	302		$	610		$	3,910
Charge-offs		(20	)		(32	)		(28	)		(80	)
Recoveries		3			0			9			12
Net (charge-offs) recoveries		(17	)		(32	)		(19	)		(68	)
Provision for loan losses		370			37			1			408
Ending balance – September 30, 2012	$	3,351		$	307		$	592		$	4,250

	For the Nine Months Ended September 30, 2012
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – January 1, 2012	$	2,849		$	278		$	652		$	3,779
Charge-offs		(45	)		(48	)		(127	)		(220	)
Recoveries		8			0			35			43
Net (charge-offs) recoveries		(37	)		(48	)		(92	)		(177	)
Provision for loan losses		539			77			32			648
Ending balance – September 30, 2012	$	3,351		$	307		$	592		$	4,250

	For the Three Months Ended September 30, 2011
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – July 1, 2011	$	2,543		$	277		$	716		$	3,536
Charge-offs		(56	)		0			(15	)		(71	)
Recoveries		5			0			1			6
Net (charge-offs) recoveries		(51	)		0			(14	)		(65	)
Provision for loan losses		251			(1	)		(21	)		229
Ending balance – September 30, 2011	$	2,743		$	276		$	681		$	3,700

	For the Nine Months Ended September 30, 2011
(Dollars in thousands)	Commercial			Real Estate		Consumer			Total
Beginning balance – January 1, 2011	$	2,307		$	182	$	709		$	3,198
Charge-offs		(237	)		0		(116	)		(353	)
Recoveries		14			0		87			101
Net (charge-offs) recoveries		(223	)		0		(29	)		(252	)
Provision for loan losses		659			94		1			754
Ending balance – September 30, 2011	$	2,743		$	276	$	681		$	3,700

The following tables present the recorded investment with respect to impaired loans and the related allowance by portfolio segment at the dates indicated.

	Collectively Evaluated				Individually Evaluated				Total
	Allowance		Recorded		Allowance		Recorded		Allowance		Recorded
	for loan		investment		for loan		investment		for loan		investment
(Dollars in thousands)	losses		in loans		losses		in loans		losses		in loans
September 30, 2012
Commercial	$	2,606	$	177,858	$	745	$	11,620	$	3,351	$	189,478
Real estate		307		16,920		0		0		307		16,920
Consumer		592		38,573		0		0		592		38,573
Total	$	3,505	$	233,351	$	745	$	11,620	$	4,250	$	244,971
December 31, 2011
Commercial	$	2,398	$	170,002	$	451	$	7,400	$	2,849	$	177,402
Real estate		278		15,456		0		0		278		15,456
Consumer		652		42,015		0		0		652		42,015
Total	$	3,328	$	227,473	$	451	$	7,400	$	3,779	$	234,873

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INVESTMENT SECURITIES

9 Months Ended

Sep. 30, 2012

Schedule Of Investments [Abstract]

Investment [Text Block]

NOTE 3 INVESTMENT SECURITIES

The amortized cost and estimated fair value of securities available for sale at the dates indicated are presented in the following table:

	September 30, 2012
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
State and political subdivisions	$	12,457	$	779	$	(12	)	$	13,224
Mortgage-backed securities		4,585		308		0			4,893
Total securities available for sale	$	17,042	$	1,087	$	(12	)	$	18,117

	December 31, 2011
			Gross		Gross
	Amortized		Unrealized		Unrealized			Fair
(Dollars in thousands)	Cost		Gains		Losses			Value
U.S. Government and federal agencies	$	4,057	$	9	$	0		$	4,066
State and political subdivisions		13,578		798		(4	)		14,372
Mortgage-backed securities		6,054		360		0			6,414
Total securities available for sale	$	23,689	$	1,167	$	(4	)	$	24,852

At September 30, 2012 and December 31, 2011, investment securities with a carrying value of $15,793,000 and $18,219,000, respectively, were pledged to secure public deposits and other deposits and liabilities as required or permitted by law.

The estimated fair values of investment securities (in thousands) at September 30, 2012, by contractual maturity are shown below. Securities not due at a single maturity date, primarily mortgage-backed securities, are shown separately.

	Fair Value
Due less than one year	$	809
Due after one year through five years		5,385
Due after five years through ten years		6,111
Due after ten years		919
Mortgage-backed securities		4,893
Total securities available for sale	$	18,117

Gross unrealized losses on securities and the estimated fair value of the related securities aggregated by security category and length of time the individual securities have been in continuous loss positions at September 30, 2012 and December 31, 2011 are as follows:

	Less Than Twelve Months					Over Twelve Months
(Dollars in thousands)	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
September 30, 2012	Losses			Value		Losses			Value
State and political subdivisions	$	(5	)	$	681	$	(7	)	$	807
Mortgage-backed securities		0			0		0			0
Total available for sale	$	(5	)	$	681	$	(7	)	$	807

	Less Than Twelve Months					Over Twelve Months
(Dollars in thousands)	Gross					Gross
	Unrealized			Fair		Unrealized			Fair
December 31, 2011	Losses			Value		Losses			Value
U.S. Government and federal agencies	$	0		$	0	$	0		$	0
State and political subdivisions		(3	)		880		(1	)		310
Mortgage-backed securities		0			0		0			0
Total available for sale	$	(3	)	$	880	$	(1	)	$	310

At September 30, 2012, three individual securities had been in a continuous loss position for more than twelve months with three securities in a continuous loss position for less than twelve months. At December 31, 2011, three individual securities had been in a continuous loss position for more than twelve months with one security in a continuous loss position for less than twelve months.

The unrealized losses are primarily due to the changes in market interest rates subsequent to purchase. The Corporation does not consider these investments to be other-than-temporarily impaired at September 30, 2012 and December 31, 2011 since the decline in market value is primarily attributable to changes in interest rates and not credit quality. In addition, the Corporation does not intend to sell and does not believe that it is more likely than not that the Corporation will be required to sell these investments until there is a full recovery of the unrealized loss, which may be at maturity. As a result no impairment loss was recognized during the nine months ended September 30, 2012 or for the year ended December 31, 2011.

Other investment securities are carried at cost and consist principally of stock in the Federal Home Loan Bank of Cincinnati.

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ALLOWANCE FOR LOAN LOSSES (Tables)

9 Months Ended

Sep. 30, 2012

Receivables [Abstract]

Allowance for Credit Losses on Financing Receivables [Table Text Block]

The following tables provide information on the activity in the allowance for loan losses by the respective loan portfolio segment for the period indicated:

	For the Three Months Ended September 30, 2012
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – July 1, 2012	$	2,998		$	302		$	610		$	3,910
Charge-offs		(20	)		(32	)		(28	)		(80	)
Recoveries		3			0			9			12
Net (charge-offs) recoveries		(17	)		(32	)		(19	)		(68	)
Provision for loan losses		370			37			1			408
Ending balance – September 30, 2012	$	3,351		$	307		$	592		$	4,250

	For the Nine Months Ended September 30, 2012
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – January 1, 2012	$	2,849		$	278		$	652		$	3,779
Charge-offs		(45	)		(48	)		(127	)		(220	)
Recoveries		8			0			35			43
Net (charge-offs) recoveries		(37	)		(48	)		(92	)		(177	)
Provision for loan losses		539			77			32			648
Ending balance – September 30, 2012	$	3,351		$	307		$	592		$	4,250

	For the Three Months Ended September 30, 2011
(Dollars in thousands)	Commercial			Real Estate			Consumer			Total
Beginning balance – July 1, 2011	$	2,543		$	277		$	716		$	3,536
Charge-offs		(56	)		0			(15	)		(71	)
Recoveries		5			0			1			6
Net (charge-offs) recoveries		(51	)		0			(14	)		(65	)
Provision for loan losses		251			(1	)		(21	)		229
Ending balance – September 30, 2011	$	2,743		$	276		$	681		$	3,700

	For the Nine Months Ended September 30, 2011
(Dollars in thousands)	Commercial			Real Estate		Consumer			Total
Beginning balance – January 1, 2011	$	2,307		$	182	$	709		$	3,198
Charge-offs		(237	)		0		(116	)		(353	)
Recoveries		14			0		87			101
Net (charge-offs) recoveries		(223	)		0		(29	)		(252	)
Provision for loan losses		659			94		1			754
Ending balance – September 30, 2011	$	2,743		$	276	$	681		$	3,700

Troubled Debt Restructurings on Financing Receivables [Table Text Block]

The following tables present the recorded investment with respect to impaired loans and the related allowance by portfolio segment at the dates indicated.

	Collectively Evaluated				Individually Evaluated				Total
	Allowance		Recorded		Allowance		Recorded		Allowance		Recorded
	for loan		investment		for loan		investment		for loan		investment
(Dollars in thousands)	losses		in loans		losses		in loans		losses		in loans
September 30, 2012
Commercial	$	2,606	$	177,858	$	745	$	11,620	$	3,351	$	189,478
Real estate		307		16,920		0		0		307		16,920
Consumer		592		38,573		0		0		592		38,573
Total	$	3,505	$	233,351	$	745	$	11,620	$	4,250	$	244,971
December 31, 2011
Commercial	$	2,398	$	170,002	$	451	$	7,400	$	2,849	$	177,402
Real estate		278		15,456		0		0		278		15,456
Consumer		652		42,015		0		0		652		42,015
Total	$	3,328	$	227,473	$	451	$	7,400	$	3,779	$	234,873

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STOCK-BASED COMPENSATION

9 Months Ended

Sep. 30, 2012

Disclosure Of Compensation Related Costs, Share-Based Payments [Abstract]

Disclosure of Compensation Related Costs, Share-based Payments [Text Block]

NOTE 11 STOCK-BASED COMPENSATION

At September 30, 2012, the Corporation had two share-based compensation plans in existence, the 1997 Stock Option Plan (expired but having outstanding options that may still be exercised) and the 2009 Incentive Stock Option Plan, which is described below.

The Corporation’s 2009 Incentive Stock Option Plan, is a shareholder approved plan that permits the granting of stock options, restricted stock and certain other stock-based awards to selected key employees on a periodic basis at the discretion of the board. The plan authorizes the issuance of up to 150,000 shares of common stock of which 86,200 are available for issuance at September 30, 2012. Option awards are granted with an exercise price equal to the market price of the Corporation’s common stock at the date of grant and have an expiration period of ten years.

The fair value of each option award is estimated on the date of grant using an option-pricing model that uses the assumptions noted in the table below. Expected volatilities are based on several factors including historical volatility of the Corporation’s common stock, implied volatility determined from traded options and other factors. The Corporation uses historical data to estimate option exercises and employee terminations to estimate the expected life of options. The risk-free interest rate for the expected term of the options is based on the U.S. Treasury yield curve in effect at the time of the grant. The expected dividend yield is based on the Corporation’s expected dividend yield over the life of the options.

The fair value of options granted in 2012 and 2011 was determined using the following weighted-average assumptions as of the date of grant:

	2012			2011
	Assumptions			Assumptions
Dividend yield		3.25	%		3.32	%
Risk-free interest rate		1.15	%		1.65	%
Expected volatility		23.62	%		24.14	%
Weighted average expected life		8 years			8 years
Weighted average per share fair value of options	$	3.01		$	2.94

In the third quarter of 2012, 15,200 stock options were granted, subject to a three year vesting period with one third of the options vesting each year on the anniversary date of the grant.

Intrinsic value represents the amount by which the fair market value of the underlying stock exceeds the exercise price of the stock option. At September 30, 2012, the aggregate intrinsic value of stock options outstanding and exercisable was $201,000 and $167,000, respectively, compared to an aggregate intrinsic value of $165,000 and $85,000 at December 31, 2011.
 

The fair value of options granted is amortized as compensation expense, recognized on a straight-line basis over the vesting period of the respective stock option grant. Compensation expense related to employees is included in personnel expense while compensation expense related to directors is included in other operating expense. The Corporation recognized compensation expense of $8,000 and $22,000 for the three and nine month periods ended September 30, 2012, respectively, related to the awards of nonrestricted stock options compared to $7,000 and $17,000 for the same periods in 2011. The total of unrecognized compensation cost related to nonrestricted stock options was approximately $67,000 at September 30, 2012. That cost is expected to be recognized over a weighted average period of approximately 28.5 months. The fair value of nonrestricted stock options vesting during the nine months ended September 30, 2012 was $178,000.

The following table summarizes stock option activity for the nine months ended September 30, 2012:

				Weighted
	Number			Average		Number
	Of			Exercise		of Options
Stock Options	Options			Price		Exercisable
Outstanding options at January 1, 2012		40,330		$	14.45		17,105
Granted		15,200			19.28
Exercised		(300	)		12.30
Forfeited		(300	)		12.30
Expired		0			0
Outstanding options at September 30, 2012		54,930		$	15.81		29,499

The following is a summary of outstanding and exercisable stock options at September 30, 2012.

			Weighted Average
		Number	Remaining
Exercise Price		of Shares	Contractual Life
$	22.75	1,130	0.25	years
$	26.75	1,000	3.25	years
$	12.30	16,700	6.87	years
$	13.25	11,100	7.87	years
$	17.40	9,800	8.87	years
$	19.28	15,200	9.78	years
Total		54,930	8.03	years

The following table summarizes information about the Corporation’s nonvested stock option activity for the nine months ended September 30, 2012:

	Number			Weighted
	Of			Average
Nonvested Options	Options			Price
Nonvested options at January 1, 2012		23,225		$	14.75
Granted		15,200			19.28
Vested		(12,828	)		13.87
Forfeited		(166	)		12.30
Nonvested options at September 30, 2012		25,431		$	17.92

In the third quarter of 2012, the Corporation granted 2,200 shares of restricted stock awards with a total grant date fair value of $42,000. The fair value of restricted stock is equal to the fair market value of the Corporation’s common stock on the date of grant. Restricted stock awards are recorded as unearned compensation, a component of shareholders’ equity, and amortized to compensation expense over the vesting period. The Corporation recognized compensation expense related to restricted stock grants of $10,000 and $30,000 for the three and nine months ended September 30, 2012, respectively, compared to compensation expense of $8,000 and $16,000 for the same periods in 2011. At September 30, 2012 the Corporation had $87,000 of unrecognized compensation expense, relating to restricted stock awards. This remaining cost is expected to be recognized over a weighted average period of approximately 26.6 months.

The table below summarizes restricted stock activity for the nine months ended September 30, 2012:

				Weighted
	Nonvested			Average
	Number of			Grant Date
Restricted Stock	Shares			Fair Value
Nonvested balance at January 1, 2012		7,700		$	15.01
Granted		2,200			19.28
Vested		(2,100	)		12.30
Forfeited/expired		0			0.00
Nonvested balance at September 30, 2012		7,800		$	16.95

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TROUBLED DEBT RESTRUCTURINGS

9 Months Ended

Sep. 30, 2012

Troubled Debt Restructuring, Debtor, Current Period [Abstract]

Troubled Debt Restructuring [Text Block]

NOTE 7 TROUBLED DEBT RESTRUCTURINGS

The following table summarizes information relative to loan modifications determined to be troubled debt restructurings during the three and nine months ended September 30, 2012 and 2011.

	For the Three Months				For the Three Months
	Ended September 30, 2012				Ended September 30, 2011
	Number		Recorded		Number		Recorded
(Dollars in thousands)	Of TDRs		Investment		of TDRs		Investment
Commercial operating		0	$	0		2	$	198
Commercial real estate, 1-4 family		2		1,523		1		297
Commercial real estate, other		0		0		0		0
Total		2	$	1,523		3	$	495

	For the Nine Months				For the Nine Months
	Ended September 30, 2012				Ended September 30, 2011
	Number		Recorded		Number		Recorded
(Dollars in thousands)	Of TDRs		Investment		of TDRs		Investment
Commercial operating		0	$	0		2	$	198
Commercial real estate, 1-4 family		2		1,523		1		297
Commercial real estate, other		1		2,041		1		1,379
Total		3	$	3,564		4	$	1,874

A modification of a loan constitutes a troubled debt restructuring when a borrower is experiencing financial difficulty and the modification constitutes a concession. The Corporation offers various types of concessions when modifying a loan. Loan terms that may be modified due to a borrower’s financial situation include, but are not limited to, a reduction in the stated interest rate, a reduction in the face amount of the debt, a reduction of the accrued interest, temporary interest-only payments, or re-aging, extensions, deferrals, renewals and rewrites. In mitigation, additional collateral, a co-borrower or a guarantor may be requested.

During the nine months ended September 30, 2012, the Corporation restructured three loans totaling $3,564,000. Loan modifications during 2012 consisted primarily of interest rate reductions and no modifications resulted in the reduction of the recorded investment in the associated loan balances. Restructured loans are subject to periodic credit reviews to determine the necessity and adequacy of a specific loan loss allowance based on the collectability of the recorded investment in the restructured loan. Loans restructured during 2012 increased the allowance for loan losses by $191,000. During the nine months ended September 30, 2011, the Corporation restructured four loans totaling $1,874,000. Loan modifications during 2011 consisted primarily of temporary interest-only payments and no modifications resulted in the reduction of the recorded investment in the associated loan balances. Loans restructured during 2011 increased the allowance for loan losses by $324,000. There have been no financing receivables modified as troubled debt restructurings within the previous twelve months that have subsequently defaulted during the three and nine months ended September 30, 2012.

Loans modified in a troubled debt restructuring may already be on nonaccrual status and partial charge-offs may have in some cases been taken against the outstanding loan balance. The allowance for impaired loans that have been modified in a troubled debt restructuring is measured based on the estimated fair value of the collateral, less any selling costs, if the loan is collateral dependent or on the present value of expected future cash flows discounted at the loan’s effective interest rate. Management exercises significant judgment in developing these determinations.

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CREDIT QUALITY INDICATORS

9 Months Ended

Sep. 30, 2012

Credit Quality Indicators [Abstract]

Credit Quality Indicators [Text Block]

NOTE 5 CREDIT QUALITY INDICATORS

As part of its monitoring process, the Corporation utilizes a risk rating system which quantifies the risk the Corporation estimates it has assumed when entering into a loan transaction and during the life of that loan. The system rates the strength of the borrower and the transaction and is designed to provide a program for risk management and early detection of problems. Loans are graded on a scale of 1 through 9, with a grade of 5 or below classified as “Pass” rated credits. Following is a description of the general characteristics of risk grades 6 through 9:

6 – Special Mention	The weighted overall risk associated with this credit is considered higher than normal (but still acceptable) or the loan possesses deficiencies which corrective action by the Bank would remedy, thereby reducing risk.
7 – Substandard	The weighted overall risk associated with this credit (based on each of the Bank’s creditworthiness criteria) is considered undesirable, the credit demonstrates a well-defined weakness or the Bank is inadequately protected and there exists the distinct possibility of sustaining some loss if not corrected.
8 – Doubtful	Weakness makes collection or liquidation in full (based on currently existing facts) improbable.
9 – Loss	This credit is of little value and not warranted as a bankable asset.  Accordingly, the Bank does not carry any loans on the books that are graded 9 – loss, instead these loans are charged-off.

The Corporation’s strategy for credit risk management includes ongoing credit examinations and management reviews of loans exhibiting deterioration of credit quality. A deteriorating credit indicates an elevated likelihood of delinquency. When a loan becomes delinquent, its credit grade is reviewed and changed accordingly. Each downgrade to a classified credit results in a higher percentage of reserve to reflect the increased likelihood of loss for similarly graded credits. Further deterioration could result in a certain credit being deemed impaired resulting in a collateral valuation for purposes of establishing a specific reserve which reflects the possible extent of such loss for that credit.

The following tables present the risk category of loans by class of loans based on the most recent analysis performed at September 30, 2012 and December 31, 2011.

Commercial Credit Exposure (Dollars in thousands)

Credit risk profile by credit worthiness category

									Commercial				Commercial
	Commercial				Commercial				Real Estate				Real Estate
	Operating				Agricultural				1-4 Family				Other
Category	09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	25,250	$	25,323	$	31,133	$	27,650	$	37,343	$	33,854	$	75,315	$	71,921
6		89		1,234		0		320		81		608		4,913		4,452
7		1,385		873		0		0		3,296		1,386		10,673		9,781
8		0		0		0		0		0		0		0		0
Total	$	26,724	$	27,430	$	31,133	$	27,970	$	40,720	$	35,848	$	90,901	$	86,154

Consumer Credit Exposure (Dollars in thousands)

Credit risk by credit worthiness category

	Residential				Residential
	Real Estate, Construction				Real Estate, Other
Category	09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	3,599	$	3,437	$	11,681	$	10,434
6		0		0		164		205
7		72		73		1,404		1,307
8		0		0		0		0
Total	$	3,671	$	3,510	$	13,249	$	11,946

Consumer Credit Exposure (Dollars in thousands)

Credit risk by credit worthiness category

	Consumer - Equity				Consumer - Auto				Consumer - Other
Category	09/30/12		12/31/11		09/30/12		12/31/11		09/30/12		12/31/11
Pass	$	19,030	$	19,565	$	6,715	$	8,365	$	12,510	$	13,673
6		32		68		0		2		5		6
7		190		185		17		46		74		105
8		0		0		0		0		0		0
Total	$	19,252	$	19,818	$	6,732	$	8,413	$	12,589	$	13,784

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SUMMARY OF IMPAIRED LOANS

9 Months Ended

Sep. 30, 2012

Summary Of Impaired Loans [Abstract]

Summary Of Impaired Loans [Text Block]

NOTE 6 SUMMARY OF IMPAIRED LOANS

Loans evaluated for impairment include loans classified as troubled debt restructurings and non-performing multi-family, commercial and construction loans. The following tables set forth certain information regarding the Corporation’s impaired loans (in thousands), segregated by those for which a specific allowance was required and those for which a specific allowance was not necessary as of September 30, 2012 and December 31, 2011.

			Unpaid
	Recorded		Principal		Related
September 30, 2012	Investment		Balance		Allowance
With no related allowance recorded:
Commercial
Operating	$	137	$	137	$	0
Real estate, other		5,482		5,482		0
With an allowance recorded:
Commercial
Operating		142		142		48
Real estate, 1-4 family		1,764		1,764		248
Real estate, other		4,095		4,095		449
Total	$	11,620	$	11,620	$	745

			Unpaid
	Recorded		Principal		Related
December 31, 2011	Investment		Balance		Allowance
With no related allowance recorded:
Commercial
Operating	$	149	$	181	$	0
Real estate, other		3,668		3,668		0
With an allowance recorded:
Commercial
Operating		177		177		94
Real estate, 1-4 family		283		283		200
Real estate, other		3,123		3,123		157
Total	$	7,400	$	7,432	$	451

Impaired loans with no related allowance recorded at September 30, 2012, increased 47.21% or $1,802,000 from year-end 2011, primarily due to one large hotel loan, while impaired loans with a specified reserve increased 67.49% or $2,418,000, principally due to a large commercial real estate credit in which the borrower filed bankruptcy. The specified reserve related to impaired loans totaled $745,000 at September 30, 2012, an increase of 65.19% or $294,000 from specified reserves of $451,000 at December 31, 2011.

The following tables present the average recorded investment in impaired loans and the amount of interest income recognized on impaired loans after impairment by portfolio segment and class for the three and nine months ended September 30, 2012 and 2011.

	For the Three Months				For the Three Months
	Ended September 30, 2012				Ended September 30, 2011
	Average		Total interest		Average		Total interest
	recorded		income		recorded		income
(Dollars in thousands) investment	investment		recognized		investment		recognized
With no related allowance recorded:
Commercial operating	$	137	$	2	$	320	$	2
Commercial real estate, other		5,495		69		232		4
With an allowance recorded:
Commercial operating		144		0		0		0
Commercial real estate, 1-4 family		1,778		39		302		0
Commercial real estate, other		4,107		15		3,175		58
Total	$	11,661	$	125	$	4,029	$	64

	For the Nine Months				For the Nine Months
	Ended September 30, 2012				Ended September 30, 2011
	Average		Total interest		Average		Total interest
	recorded		income		recorded		income
(Dollars in thousands)	investment		recognized		investment		recognized
With no related allowance recorded:
Commercial
Operating	$	138	$	7	$	325	$	13
Real estate, other		4,670		221		233		12
With an allowance recorded:
Commercial
Operating		151		0		0		0
Real estate, 1-4 family		774		39		314		11
Real estate, other		3,735		57		2,093		132
Total	$	9,468	$	324	$	2,965	$	168

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AGE ANALYSIS OF PAST DUE FINANCING RECEIVABLES

9 Months Ended

Sep. 30, 2012

Past Due Financing Receivables [Abstract]

Past Due Financing Receivables [Text Block]

NOTE 8 AGE ANALYSIS OF PAST DUE FINANCING RECEIVABLES

The following table presents the loan portfolio summarized (in thousands) by aging categories at September 30, 2012 and December 31, 2011.

													Recorded
	30-59		60-89		>90						Total		Investment
	Days		Days		Days		Total				Financing		> 90 Days
September 30, 2012	Past Due		Past Due		Past Due		Past Due		Current		Receivables		and Accruing
Commercial
Operating	$	106	$	0	$	0	$	106	$	26,618	$	26,724	$	0
Agricultural		0		0		0		0		31,133		31,133		0
Real estate, 1-4 family		97		0		1,962		2,059		38,661		40,720		0
Real estate, other		4,360		0		309		4,669		86,232		90,901		0
Residential real estate
Construction		0		75		0		75		3,596		3,671		0
Other		0		28		178		206		13,043		13,249		0
Consumer
Equity		25		0		0		25		19,227		19,252		0
Auto		18		0		0		18		6,714		6,732		0
Other		14		16		0		30		12,559		12,589		0
Total	$	4,620	$	119	$	2,449	$	7,188	$	237,783	$	244,971	$	0

													Recorded
	30-59		60-89		>90						Total		Investment
	Days		Days		Days		Total				Financing		> 90 Days
December 31, 2011	Past Due		Past Due		Past Due		Past Due		Current		Receivables		and Accruing
Commercial
Operating	$	14	$	93	$	15	$	122	$	27,308	$	27,430	$	0
Agricultural		0		0		0		0		27,970		27,970		0
Real estate, 1-4 family		45		1		0		46		35,802		35,848		0
Real estate, other		121		0		309		430		85,724		86,154		0
Residential real estate
Construction		0		0		0		0		3,510		3,510		0
Other		28		0		0		28		11,918		11,946		0
Consumer
Equity		27		0		0		27		19,791		19,818		0
Auto		17		0		19		36		8,377		8,413		0
Other		20		5		35		60		13,724		13,784		0
Total	$	272	$	99	$	378	$	749	$	234,124	$	234,873	$	0

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INVESTMENT SECURITIES (Details1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011
Due less than one year	$ 809
Due after one year through five years	5,385
Due after five years through ten years	6,111
Due after ten years	919
Mortgage-backed securities	4,893
Total securities available for sale	$ 18,117	$ 24,852

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STOCK-BASED COMPENSATION (Details 1) (USD $)	3 Months Ended	9 Months Ended
	Sep. 30, 2012	Sep. 30, 2012
Outstanding options at January 1, 2012 Number Of Options		40,330
Granted Number Of Options	52,000	15,200
Exercised Number Of Options		(300)
Forfeited Number Of Options		(300)
Expired Number Of Options		0
Outstanding options at September 30, 2012 Number Of Options	54,930	54,930
Outstanding options at January 1, 2012 Weighted Average Exercise Price		$ 14.45
Granted Weighted Average Exercise Price		$ 19.28
Exercised Weighted Average Exercise Price		$ 12.30
Forfeited Weighted Average Exercise Price		$ 12.30
Expired Weighted Average Exercise Price		$ 0.00
Outstanding options at September 30, 2012 Weighted Average Exercise Price	$ 15.81	$ 15.81
Outstanding options at January 1, 2012 Number of Options Exercisable		17,105
Outstanding options at September 30, 2012 Number of Options Exercisable	29,499	29,499

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EARNINGS PER SHARE (Tables)

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Schedule of Earnings Per Share, Basic and Diluted [Table Text Block]

Weighted average shares used in determining basic and diluted earnings per share for the three months ended September 30:

	2012		2011
Weighted average shares outstanding during the period		1,168,262		1,158,882
Dilutive effect of stock options		10,648		8,220
Weighted average shares considering dilutive effect		1,178,910		1,167,102
Anti-dilutive stock options not considered in computing diluted earnings per share		2,130		2,130

Weighted average shares used in determining basic and diluted earnings per share for the nine months ended September 30:

	2012		2011
Weighted average shares outstanding during the period		1,165,870		1,155,828
Dilutive effect of stock options		11,322		7,820
Weighted average shares considering dilutive effect		1,177,192		1,163,648
Anti-dilutive stock options not considered in computing diluted earnings per share		2,130		2,130

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TROUBLED DEBT RESTRUCTURINGS (Tables)

9 Months Ended

Sep. 30, 2012

Troubled Debt Restructuring, Debtor, Current Period [Abstract]

Troubled Debt Restructurings On Financing Receivables Modifications [Table Text Block]

The following table summarizes information relative to loan modifications determined to be troubled debt restructurings during the three and nine months ended September 30, 2012 and 2011.

	For the Three Months				For the Three Months
	Ended September 30, 2012				Ended September 30, 2011
	Number		Recorded		Number		Recorded
(Dollars in thousands)	Of TDRs		Investment		of TDRs		Investment
Commercial operating		0	$	0		2	$	198
Commercial real estate, 1-4 family		2		1,523		1		297
Commercial real estate, other		0		0		0		0
Total		2	$	1,523		3	$	495

	For the Nine Months				For the Nine Months
	Ended September 30, 2012				Ended September 30, 2011
	Number		Recorded		Number		Recorded
(Dollars in thousands)	Of TDRs		Investment		of TDRs		Investment
Commercial operating		0	$	0		2	$	198
Commercial real estate, 1-4 family		2		1,523		1		297
Commercial real estate, other		1		2,041		1		1,379
Total		3	$	3,564		4	$	1,874

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FAIR VALUES AND MEASUREMENTS OF FINANCIAL INSTRUMENTS (Details 2) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Dec. 31, 2010
Cash equivalents and federal funds sold, Carrying Amount	$ 18,434	$ 10,723	$ 18,083	$ 22,080
Securities available for sale, Carrying Amount	18,117	24,852
Other investment securities, Carrying Amount	2,259	2,259
Loans, net of allowance for loan loss, Carrying Amount	240,721	231,094
Accrued interest receivable, Carrying Amount	1,392	1,275
Noninterest-bearing deposits, Carrying Amount	(40,616)	(38,189)
Interest-bearing deposits, Carrying Amount	(136,774)	(122,437)
Time deposits, Carrying Amount	(88,360)	(98,502)
FHLB advances	1,950	0
Accrued interest payable, Carrying Amount	(109)	(106)
Cash equivalents and federal funds sold, Fair Value	18,434	10,723
Securities available for sale, Fair Value	18,117	24,852
Other investment securities, Fair Value	2,259	2,259
Loans, net of allowance for loan loss, Fair Value	237,135	224,230
Accrued interest receivable, Fair Value	1,392	1,275
Noninterest-bearing deposits, Fair Value	(40,616)	(38,189)
Interest-bearing deposits, Fair Value	(136,774)	(122,437)
Time deposits, Fair Value	(87,272)	(97,712)
FHLB Advances Fair Value	(1,914)
Accrued interest payable, Fair Value	(109)	(106)
Fair Value, Inputs, Level 1 [Member]
Securities available for sale, Carrying Amount	0	0
Cash equivalents and federal funds sold, Fair Value	18,434
Securities available for sale, Fair Value	0	0
Other investment securities, Fair Value	0
Loans, net of allowance for loan loss, Fair Value	0
Accrued interest receivable, Fair Value	0
Noninterest-bearing deposits, Fair Value	(40,616)
Interest-bearing deposits, Fair Value	0
Time deposits, Fair Value	0
FHLB Advances Fair Value	0
Accrued interest payable, Fair Value	0
Fair Value, Inputs, Level 2 [Member]
Securities available for sale, Carrying Amount	18,117	24,852
Cash equivalents and federal funds sold, Fair Value	0
Securities available for sale, Fair Value	18,117	24,852
Other investment securities, Fair Value	0
Loans, net of allowance for loan loss, Fair Value	0
Accrued interest receivable, Fair Value	0
Noninterest-bearing deposits, Fair Value	0
Interest-bearing deposits, Fair Value	(136,774)
Time deposits, Fair Value	(87,272)
FHLB Advances Fair Value	(1,914)
Accrued interest payable, Fair Value	0
Fair Value, Inputs, Level 3 [Member]
Securities available for sale, Carrying Amount	0	0
Cash equivalents and federal funds sold, Fair Value	0
Securities available for sale, Fair Value	0	0
Other investment securities, Fair Value	2,259
Loans, net of allowance for loan loss, Fair Value	237,135
Accrued interest receivable, Fair Value	1,392
Noninterest-bearing deposits, Fair Value	0
Interest-bearing deposits, Fair Value	0
Time deposits, Fair Value	0
FHLB Advances Fair Value	0
Accrued interest payable, Fair Value	$ (109)

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SUMMARY OF IMPAIRED LOANS (Details 1) (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Average recorded investment Total	$ 11,661	$ 4,029	$ 9,468	$ 2,965
Total Interest Income recognized Total	125	64	324	168
Commercial Loan [Member] | Operating [Member]
Average recorded investment With no related allowance recorded	137	320	138	325
Total interest income recognized With no related allowance recorded	2	2	7	13
Average recorded investment With an allowance recorded	144	0	151	0
Total Interest Income recognized With an allowance recorded	0	0	0	0
Commercial Loan [Member] | Real Estate 1-4 Family [Member]
Average recorded investment With an allowance recorded	1,778	302	774	314
Total Interest Income recognized With an allowance recorded	39	0	39	11
Commercial Loan [Member] | Real Estate Other [Member]
Average recorded investment With no related allowance recorded	5,495	232	4,670	233
Total interest income recognized With no related allowance recorded	69	4	221	12
Average recorded investment With an allowance recorded	4,107	3,175	3,735	2,093
Total Interest Income recognized With an allowance recorded	$ 15	$ 58	$ 57	$ 132

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CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (USD $) In Thousands, unless otherwise specified	3 Months Ended		9 Months Ended
	Sep. 30, 2012	Sep. 30, 2011	Sep. 30, 2012	Sep. 30, 2011
Net Income	$ 580	$ 794	$ 2,136	$ 2,038
Unrealized holding gain (loss) on securities:
Net gain (loss) arising during period	(4)	339	(87)	519
Reclassification to net income of net realized loss	0	0	0	0
Net securities gain (loss) during the period	(4)	339	(87)	519
Tax effect	(1)	115	(29)	176
Other comprehensive income (loss), net of tax	(3)	224	(58)	343
Comprehensive income, net of tax	$ 577	$ 1,018	$ 2,078	$ 2,381

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EARNINGS PER SHARE

9 Months Ended

Sep. 30, 2012

Earnings Per Share [Abstract]

Earnings Per Share [Text Block]

NOTE 2 EARNINGS PER SHARE

Weighted average shares used in determining basic and diluted earnings per share for the three months ended September 30:

	2012		2011
Weighted average shares outstanding during the period		1,168,262		1,158,882
Dilutive effect of stock options		10,648		8,220
Weighted average shares considering dilutive effect		1,178,910		1,167,102
Anti-dilutive stock options not considered in computing diluted earnings per share		2,130		2,130

Weighted average shares used in determining basic and diluted earnings per share for the nine months ended September 30:

	2012		2011
Weighted average shares outstanding during the period		1,165,870		1,155,828
Dilutive effect of stock options		11,322		7,820
Weighted average shares considering dilutive effect		1,177,192		1,163,648
Anti-dilutive stock options not considered in computing diluted earnings per share		2,130		2,130

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AGE ANALYSIS OF PAST DUE FINANCING RECEIVABLES (Tables)

9 Months Ended

Sep. 30, 2012

Past Due Financing Receivables [Abstract]

Past Due Financing Receivables [Table Text Block]

The following table presents the loan portfolio summarized (in thousands) by aging categories at September 30, 2012 and December 31, 2011.

													Recorded
	30-59		60-89		>90						Total		Investment
	Days		Days		Days		Total				Financing		> 90 Days
September 30, 2012	Past Due		Past Due		Past Due		Past Due		Current		Receivables		and Accruing
Commercial
Operating	$	106	$	0	$	0	$	106	$	26,618	$	26,724	$	0
Agricultural		0		0		0		0		31,133		31,133		0
Real estate, 1-4 family		97		0		1,962		2,059		38,661		40,720		0
Real estate, other		4,360		0		309		4,669		86,232		90,901		0
Residential real estate
Construction		0		75		0		75		3,596		3,671		0
Other		0		28		178		206		13,043		13,249		0
Consumer
Equity		25		0		0		25		19,227		19,252		0
Auto		18		0		0		18		6,714		6,732		0
Other		14		16		0		30		12,559		12,589		0
Total	$	4,620	$	119	$	2,449	$	7,188	$	237,783	$	244,971	$	0

													Recorded
	30-59		60-89		>90						Total		Investment
	Days		Days		Days		Total				Financing		> 90 Days
December 31, 2011	Past Due		Past Due		Past Due		Past Due		Current		Receivables		and Accruing
Commercial
Operating	$	14	$	93	$	15	$	122	$	27,308	$	27,430	$	0
Agricultural		0		0		0		0		27,970		27,970		0
Real estate, 1-4 family		45		1		0		46		35,802		35,848		0
Real estate, other		121		0		309		430		85,724		86,154		0
Residential real estate
Construction		0		0		0		0		3,510		3,510		0
Other		28		0		0		28		11,918		11,946		0
Consumer
Equity		27		0		0		27		19,791		19,818		0
Auto		17		0		19		36		8,377		8,413		0
Other		20		5		35		60		13,724		13,784		0
Total	$	272	$	99	$	378	$	749	$	234,124	$	234,873	$	0

XML

ALLOWANCE FOR LOAN LOSSES (Details 1) (USD $) In Thousands, unless otherwise specified	Sep. 30, 2012	Jun. 30, 2012	Dec. 31, 2011	Sep. 30, 2011	Jun. 30, 2011	Dec. 31, 2010
Collectively Evaluated Allowance for loan losses	$ 3,505		$ 3,328
Collectively Evaluated Recorded investment in loans	233,351		227,473
Individually Evaluated Allowance for Loan Losses	745		451
Individually Evaluated Recorded investment in loans	11,620		7,400
Total Allowance for loan losses	4,250	3,910	3,779	3,700	3,536	3,198
Total Recorded investment in loans	244,971		234,873
Commercial Loan [Member]
Collectively Evaluated Allowance for loan losses	2,606		2,398
Collectively Evaluated Recorded investment in loans	177,858		170,002
Individually Evaluated Allowance for Loan Losses	745		451
Individually Evaluated Recorded investment in loans	11,620		7,400
Total Allowance for loan losses	3,351	2,998	2,849	2,743	2,543	2,307
Total Recorded investment in loans	189,478		177,402
Real Estate [Member]
Collectively Evaluated Allowance for loan losses	307		278
Collectively Evaluated Recorded investment in loans	16,920		15,456
Individually Evaluated Allowance for Loan Losses	0		0
Individually Evaluated Recorded investment in loans	0		0
Total Allowance for loan losses	307	302	278	276	277	182
Total Recorded investment in loans	16,920		15,456
Consumer Loan [Member]
Collectively Evaluated Allowance for loan losses	592		652
Collectively Evaluated Recorded investment in loans	38,573		42,015
Individually Evaluated Allowance for Loan Losses	0		0
Individually Evaluated Recorded investment in loans	0		0
Total Allowance for loan losses	592	610	652	681	716	709
Total Recorded investment in loans	$ 38,573		$ 42,015

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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Policies)

9 Months Ended

Sep. 30, 2012

Accounting Policies [Abstract]

Consolidation, Policy [Policy Text Block]

Principles of Consolidation: The accompanying consolidated financial statements include the accounts of Commercial Bancshares, Inc. (the “Corporation”) and its wholly owned subsidiaries, Commercial Financial and Insurance Agency, LTD (“Commercial Financial”) and The Commercial Savings Bank (the “Bank”). The Bank also owns a 49.9% interest in Beck Title Agency, Ltd., which is accounted for by using the equity method of accounting. All significant intercompany balances and transactions have been eliminated in consolidation.

The condensed consolidated financial statements have been prepared without audit. In the opinion of management, all adjustments (which include normal recurring adjustments) necessary to present fairly the Corporation’s financial position at September 30, 2012, and the results of operations and changes in cash flows for the periods presented have been made.

Certain information and footnote disclosures typically included in financial statements prepared in accordance with U.S. generally accepted principles have been omitted. The Annual Report for the year ended December 31, 2011, contains consolidated financial statements and related footnote disclosures which should be read in conjunction with the accompanying consolidated financial statements. Operating results for the nine months ended September 30, 2012 are not necessarily indicative of the results that may be expected for any future periods or for the year ending December 31, 2012.